-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QDfLjNIOw4BGlarXRmdrLyZZ0znr2PhTYOJMImy0o+5XduVn7GjWTXVHvf4KAiU2 aDJXuCbB9yDhcl3PYnGnUA== 0000891020-94-000059.txt : 19940420 0000891020-94-000059.hdr.sgml : 19940420 ACCESSION NUMBER: 0000891020-94-000059 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940418 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLUM CREEK TIMBER CO L P CENTRAL INDEX KEY: 0000849213 STANDARD INDUSTRIAL CLASSIFICATION: 2421 IRS NUMBER: 911443693 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10239 FILM NUMBER: 94523167 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 10-K/A 1 FORM 10-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A AMENDMENT TO APPLICATION OR REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 PLUM CREEK TIMBER COMPANY, L.P. AMENDMENT NO. 1 The undersigned Registrant hereby amends the following items of its Annual Report for 1993 on Form 10-K as set forth in the pages attached hereto: Cover Page Disclosure of Delinquent Filers Item 10 Directors and Executive Officers of the Registrant Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners and Management Item 13 Certain Relationships and Related Transactions Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its General Partner Date: April 14, 1994 By: DIANE M. IRVINE ------------------------------------ Diane M. Irvine, Vice President and Chief Financial Officer 2 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, 1993 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 I.R.S. Employer State of Delaware 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 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. [ ] DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: None. 3 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS OF THE GENERAL PARTNER OF THE REGISTRANT The following seven persons are currently Directors of PC Advisory Corp. I ("Corp. I"), a Delaware corporation and the indirect general partner of Plum Creek Management Company, L.P. (the "General Partner"), a Delaware limited partnership, which is the general partner of the Registrant. The seven were elected by unanimous written consent of the stockholders of Corp. I to hold office until the Annual Meeting of Stockholders in 1994 and until their successors are duly elected and qualified. Ian B. Davidson (Age 62) -- Mr. Davidson was elected a Director of Corp. I in December 1992 and is a member of both the Audit Committee and the Compensation Committee and is Chairman of the Conflicts Committee of the Board of Directors. Since 1970, Mr. Davidson has been Chairman and Chief Executive Officer of D. A. Davidson & Co. Mr. Davidson also serves as a Director of Energy West, Great Falls Capital Corp., the DADCO Companies, and on the Board of Governors of the Pacific Stock Exchange. George M. Dennison (Age 58) -- Dr. Dennison was elected a Director of Corp. I effective February 22, 1994. Since 1990, Dr. Dennison has been President and Professor of History at The University of Montana. From 1987 to 1990, Dr. Dennison was Provost and Vice President for Academic Affairs and Professor of History at Western Michigan University. Rick R. Holley (Age 42) -- Mr. Holley was elected a Director of Corp. I effective January 1, 1994. Mr. Holley became President and Chief Executive Officer of the General Partner on January 1, 1994. Mr. Holley was Vice President and Chief Financial Officer of the General Partner from December 1992 to December 1993 and was Vice President and Chief Financial Officer of the former general partner of the Registrant, Plum Creek Management Company, from April 1989 to December 1992. From September 1985 to June 1989, Mr. Holley was Vice President of Finance and Planning for the Registrant's predecessor, Plum Creek Timber Company, Inc. David D. Leland (Age 58) -- Mr. Leland became a Director and Chairman of the Board of Directors of Corp. I in December 1992 and is a member of the Compensation Committee of the Board of Directors. Mr. Leland was President and Chief Executive Officer of the General Partner from December 1992 to December 1993. Mr. Leland was a Director and President and Chief Executive Officer of the former general partner of the Registrant, Plum Creek Management Company, from April 1989 to December 1992. From May 1983 to June 1989, Mr. Leland was President and Chief Executive Officer and a Director of the Registrant's predecessor, Plum Creek Timber Company, Inc. 2 4 William E. Oberndorf (Age 40) -- Mr. Oberndorf was elected a Director of Corp. I in November 1992 and is Chairman of the Compensation Committee of the Board of Directors. Mr. Oberndorf is Vice President and Treasurer of Corp. I. Since 1991, Mr. Oberndorf's principal occupation has been as a Managing Director of SPO Partners & Co., an affiliate of the Registrant. From 1982 to 1991, Mr. Oberndorf was a general partner of San Francisco Partners II, L.P. Mr. Oberndorf serves as a Director for Bell & Howell Holdings Company. William J. Patterson (Age 32) -- Mr. Patterson became a Director of Corp. I in November 1992 and is Chairman of the Audit Committee and a member of the Compensation Committee of the Board of Directors. Mr. Patterson is a Vice President of Corp. I. Since 1991, Mr. Patterson's principal occupation has been as a Managing Director of SPO Partners & Co., an affiliate of the Registrant. From 1989 to 1991, Mr. Patterson was an associate with San Francisco Partners II, L.P. From 1987 to 1989, Mr. Patterson was a student at the Graduate School of Business at Stanford University. John H. Scully (Age 49) -- Mr. Scully was elected a Director of Corp. I in November 1992 and is a member of the Compensation Committee of the Board of Directors. Mr. Scully is President of Corp. I. Since 1991, Mr. Scully's principal occupation has been as a Managing Director of SPO Partners & Co., an affiliate of the Registrant. From 1969 to 1991, Mr. Scully was a general partner of San Francisco Partners II, L.P. Mr. Scully serves as a Director for Bell & Howell Holdings Company. EXECUTIVE OFFICERS OF THE GENERAL PARTNER OF THE REGISTRANT The names, ages, offices and periods of service as executive officers of the General Partner are listed below. There are no family relationships among them.
OFFICER NAME AGE OFFICE SINCE(d) - ---- ---- ------ -------- Rick R. Holley (a)(b) 42 President and Chief Executive Officer 1989 Charles P. Grenier (a) 44 Executive Vice President 1989 Robert E. Manne(a) 49 Executive Vice President 1989 Diane M. Irvine(c) 35 Vice President and Chief Financial Officer 1994 James A. Kraft (e) 39 Vice President, Law 1989 Keith B. Sletten (a) 51 Vice President, Human Resources 1989
(a) Served during the past five years in managerial or executive capacity with the Registrant's predecessor, Plum Creek Timber Company, Inc., the General Partner's predecessor, Plum Creek Management Company, and the General Partner. (b) During 1993, Mr. Holley was Vice President and Chief Financial Officer of the General Partner. On January 1, 1994, Mr. Holley became President and Chief Executive Officer of the General Partner. 3 5 (c) On February 7, 1994, Ms. Irvine became Vice President and Chief Financial Officer of the General Partner. Ms. Irvine was a Partner with Coopers & Lybrand from October 1993 to February 1994 and was a Manager with Coopers & Lybrand from July 1987 to September 1993. (d) Includes periods of time as an executive officer with the General Partner and with the former general partner of Registrant, Plum Creek Management Company. (e) Served during the past five years in managerial or executive capacity with the parent of the Registrant's former general partner, Burlington Resources Inc. ("BR"), the General Partner's predecessor, Plum Creek Management Company, and the General Partner. Executive officers of the General Partner are appointed annually at the second quarterly meeting of the Board of Directors of Corp. I. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT William E. Oberndorf, a Director of Corp. I, failed to report in a timely manner on a Form 5 for 1993 the acquisition by him on June 24, 1993 of 450 Units, on a pre-split basis, of the Registrant. The Units were acquired by Mr. Oberndorf through the expiration by its terms of a trust established by the will of a relative and at no time prior to June 24, 1993 did Mr. Oberndorf have investment power over the 450 Units. The Units were reported on a Form 5 by Mr. Oberndorf on March 1, 1994. Other than the one late reporting noted above, the Registrant is not aware of any reporting violations regarding Section 16(a). 4 6 ITEM 11. EXECUTIVE COMPENSATION The following table sets forth a summary of compensation for the three fiscal years ended December 31, 1993 for the President and Chief Executive Officer and the four other most highly compensated executive officers of the Registrant for services rendered in all capacities. Compensation amounts are on an accrual basis and include amounts deferred at the officer's election. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION ----------------------------------- (b)(c) (b)(d)(e)(f)(g) OTHER ANNUAL ALL OTHER NAME & PRINCIPAL COMPENSATION COMPENSATION POSITION (a) YEAR SALARY ($) BONUS ($) ($) ($) - ---------------- ---- ---------- --------- ----------- ----------- David D. Leland 1993 $287,500 $300,000 $ 32 $557,735 President & Chief Executive 1992 $270,000 $270,000 $237 $367,713 Officer 1991 $261,667 $270,000 Robert E. Manne 1993 $152,717 $ 92,430 $102 $366,531 Vice President, 1992 $145,000 $ 87,630 $192 $316,112 Corporate Marketing 1991 $138,625 $ 83,850 and Cascades Region Rick R. Holley 1993 $149,733 $ 90,840 $ 10 $377,470 Vice President and 1992 $139,567 $ 84,840 $111 $331,784 Chief Financial Officer 1991 $129,233 $ 78,240 Charles P. Grenier 1993 $148,433 $ 90,060 $ 20 $366,131 Vice President, Rocky 1992 $139,083 $ 84,060 $249 $315,335 Mountain Region 1991 $132,833 $ 80,400 James A. Kraft 1993 $123,633 $ 62,650 $ 37 $279,232 Vice President, Law 1992 $114,467 $ 57,650 $ 15 $283,332 and Corporate Affairs 1991 $109,500 $ 55,150
- -------------- (a) Principal position as of December 31, 1993. (b) In accordance with the transitional provisions applicable to the revised rules on executive officer and director compensation disclosure adopted by the Securities and Exchange Commission, as formally interpreted by the Commission's Staff, amounts for Other Annual Compensation and All Other Compensation are excluded for fiscal year 1991. 5 7 (c) Other Annual Compensation represents interest on deferred compensation which exceeds 120% of the applicable federal long-term rate. (d) All Other Compensation includes participation in the Incentive Sharing Plan ("IS Plan"). The IS Plan provided for cash incentive payments by the General Partner to eligible key employees of the General Partner and the Registrant and its subsidiaries. The incentive payments were made from a pool consisting of an amount between 25% and 50% of the incentive cash distributions paid by the Registrant to the General Partner during any year. Payments made by the General Partner to IS Plan participants were not reimbursed by the Registrant. Compensation in 1993 from the IS Plan to Messrs. Leland, Manne, Holley, Grenier, and Kraft totalled $474,153, $331,907, $331,907, $331,907 and $252,882, respectively. (e) All Other Compensation includes matching thrift contributions in the Plum Creek Thrift and Profit Sharing Plan for Messrs. Leland, Manne, Holley, Grenier, and Kraft totaling $10,613, $10,613, $9,413, $10,613, and $10,613, respectively, and includes matching thrift contributions in the Plum Creek Supplemental Benefits Plan for Messrs. Leland, Manne, Holley, Grenier, and Kraft totaling $72,969, $24,011, $36,150, $23,611, and $15,737, respectively. (f) No restricted depositary units ("Units") were awarded in 1993. As of December 31, 1993, restricted Units which had been awarded but had yet to vest for Messrs. Manne, Holley, Grenier, and Kraft totaled 43,200, 43,200, 43,200, and 25,200, respectively, and were valued as of December 31, 1993 at $1,128,600, $1,128,600, $1,128,600, and $658,350, respectively. Mr. Leland had no restricted Units as of December 31, 1993, "See Employment Contracts." Participants are entitled to cash payments, equal to cash distributions paid on the Registrant's publicly traded Units, with respect to non-vested Unit awards. (g) LONG-TERM INCENTIVE PLAN AWARDS IN 1993
PERFORMANCE PERIOD NAME NUMBER OF UARS UNTIL MATURATION ---- -------------- ------------------ Rick R. Holley 525,000 December 31, 1998 Robert E. Manne 375,000 December 31, 1998 Charles P. Grenier 375,000 December 31, 1998 James A. Kraft 225,000 December 31, 1998
Effective October 1, 1993, the Board of Directors of Corp. I approved a long-term incentive plan ("LTIP"). The LTIP will be administered by a committee of the Board of Directors ("Committee"). Pursuant to the determination of the Committee, Unit 6 8 Appreciation Rights ("UARs") were granted to four senior executives effective October 31, 1993. The terms of the UARs granted provide for five Unit Value targets with the first Unit Value target set at 115% of a base Unit value of $20 (the approximate market price of the Units at the time the LTIP was initiated) and each subsequent Unit Value target at 115% of the previous target. Consequently, the five Unit Value targets are $23.00, $26.45, $30.42, $34.98, and $40.23, respectively. A Unit Value target is attained when the Unit Value (defined as the sum of the current market price of a Unit and all cash distributions paid by the Registrant on or after January 1, 1994) equals or exceeds the Unit Value target for 75 calendar days during any 90 consecutive calendar day period. Upon attaining each Unit Value target prior to December 31, 1998, (the "Performance Period") a percentage of the UARs are triggered equal, respectively in turn, to 10%, 15%, 20%, 25%, and 30% of the UARs awarded to a participant. Upon attaining each Unit Value target prior to the end of the Performance Period, a participant's account will be credited with a number of Shadow Units determined by multiplying the number of UARs triggered by approximately 0.503. Once Shadow Units have been credited to a participant's account, additional Shadow Units will be credited to the participant's account with respect to subsequent cash distributions made by the Registrant. The number of additional Shadow Units to be so credited is equal to the per Unit distribution amount multiplied by the number of Shadow Units currently credited to the participant's account divided by the market price of the Units on the distribution date. Each Shadow Unit credited to a participant's account represents the participant's right to receive an actual Unit upon the occurrence of a realization event which is defined as the earliest of the expiration of the Performance Period, a change in control or the participant's termination of employment either involuntarily without cause or voluntarily with good reason or as a result of permanent disability or the participant's death. If the participant's employment is terminated either voluntarily without good reason or involuntarily for cause prior to the occurrence of a realization event, the participant forfeits any Shadow Units credited to his or her account and any UARs granted to the participant under the LTIP. 7 9 PENSION PLAN Estimated annual benefit levels under the supplemental, non-qualified pension plan of the Registrant ("Pension Plan"), based on earnings and years of credited service at age 65, are as follows: PENSION PLAN TABLE
---------------------YEARS OF SERVICE---------------------- REMUNERATION 15 20 25 30 - ------------ -- -- -- -- $ 100,000 $ 22,485 $ 29,980 $ 37,475 $ 44,970 $ 300,000 $ 70,485 $ 93,980 $117,475 $140,970 $ 500,000 $118,485 $157,980 $197,475 $236,970 $ 700,000 $166,485 $221,980 $277,475 $332,970 $ 900,000 $214,485 $285,980 $357,475 $428,970 $1,100,000 $262,485 $349,980 $437,475 $524,970 $1,300,000 $310,485 $413,980 $517,475 $620,970 $1,500,000 $358,485 $477,980 $597,475 $716,970
Years of service under the Pension Plan as of December 31, 1993 for Messrs. Leland, Manne, Holley, Grenier, and Kraft were 11, 8, 11, 7, and 10, respectively. Benefit accruals under the Pension Plan are based on the gross amount of earnings, including incentive bonuses and IS Plan payments, but excluding all commissions and other extra or added compensation or benefits of any kind or nature. The Pension Plan formula for retirement at age 65 is 1.1% of the highest five-year average earnings, plus .5% of the highest five-year average earnings in excess of one-third of the FICA taxable wage base in effect during the year of termination, times the number of years of credited service up to a maximum of 30 years. An early retirement supplement equal to 1% of the highest five-year average earnings up to one- third of the FICA taxable wage base in effect in the year of termination, times the number of years of credited service up to a maximum of 30 years, is payable until age 62. Both the basic benefit and the supplement are reduced by 2% for each year the employee's actual retirement date precedes the date the employee would have attained age 65, or the date the employee could have retired after attaining age 60 with 30 years of credited service, if earlier. In addition, the basic benefit and the supplemental benefit will be reduced by any previously accrued and distributed benefits, increased for an assumed interest factor, under the BR Pension Plan, under which participation was terminated on December 31, 1992 for the officers of the general partner of the Registrant. Years of service under the Pension Plan at age 65 for Messrs. Leland, Manne, Holley, Grenier, and Kraft would be 17, 24, 30, 27, and 30, respectively. 8 10 EMPLOYMENT CONTRACTS Mr. Leland has an agreement providing for employment ("Primary Agreement") with the General Partner until May 31, 1994 at a minimum annual salary of $270,000. In addition, Mr. Leland has an agreement to repay the Registrant 90,000 Units valued at $14.17 per Unit in the event of voluntary termination of employment prior to June 1, 1994. Originally awarded in 1989 and scheduled to vest in 1993 and 1994, the vesting of 105,000 of Mr. Leland's restricted Units was accelerated in December 1992. Mr. Holley has an agreement providing for employment as an executive officer of the General Partner until May 31, 1994 at a minimum annual salary of $141,400. Mr. Manne has an agreement providing for employment as an executive officer of the General Partner until May 31, 1994 at a minimum annual salary of $146,050. Mr. Grenier has an agreement providing for employment as an executive officer of the General Partner until May 31, 1994 at a minimum annual salary of $140,100. Mr. Kraft has an agreement providing for employment as an executive officer of the General Partner until May 31, 1994 at a minimum annual salary of $115,300. Mr. Leland's Primary Agreement and the agreements for Messrs. Manne, Holley, Grenier, and Kraft include provisions that in the event of termination of employment prior to May 31, 1994 for reasons other than cause, death, permanent disability, or voluntarily without good reason, the participant is entitled to receive within 10 days: (1) current base salary from the date of termination through May 31, 1994, and (2) a lump-sum pension benefit determined under the BR Pension Plan and the BR Supplemental Benefits Plan in effect on December 31, 1992, calculated as though the employee were 60 years of age on the date of determination, had 30 years of credited service under the plans, and had received 6% salary increases through age 60. The pension benefit so calculated to be actuarially reduced based on the employee's actual age on the date of determination and to be reduced by any previously accrued and distributed benefits plus assumed interest. Certain other rights under the Primary Agreement and agreements were waived by Messrs. Manne, Holley, Grenier, and Kraft as a condition to (i) the grant of UARs under the LTIP, and (ii) the designation of said executives as participants in the Registrant's new annual Management Incentive Plan that went into effect January 1, 1994. DIRECTOR COMPENSATION Directors of Corp. I receive an annual retainer of $30,000 plus $1,000 for each Board of Directors meeting and committee meeting attended. The chairmen of the Audit Committee, the Compensation Committee, and the Conflicts Committee of the Board of Directors each receive an additional annual retainer of $5,000. Directors may defer all or part of their compensation. 9 11 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 1993, Mr. Leland served as President and Chief Executive Officer of the General Partner and as a Director on the Board of Directors of Corp I. As a Director, Mr. Leland served on the Compensation Committee of the Board of Directors. 10 12 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT BENEFICIAL OWNERSHIP To the knowledge of the Registrant, there were no beneficial owners of more than five percent of the Registrant's Units outstanding on March 31, 1994. SECURITY OWNERSHIP OF MANAGEMENT The following table shows the total number of Units held by the directors of Corp. I, the executive officers of the General Partner, and all directors of Corp. I and executive officers of the General Partner as a group, in each case, as of March 31, 1994.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF NAME OF INDIVIDUAL OR IDENTITY OF GROUP DEPOSITARY UNITS PERCENT OF CLASS --------------------------------------- ---------------- ---------------- Directors Ian B. Davidson 17,406 0.04% George M. Dennison 0 0.00% Rick R. Holley(a) 135,681(f) 0.33% David D. Leland(b) 135,975 0.33% William E. Oberndorf 778,356(c) 1.92% William J. Patterson 0(d) 0.00% John H. Scully 825,300(e) 2.03% Executive Officers Charles P. Grenier 121,772(f) 0.30% James A. Kraft 57,823(f) 0.14% Robert E. Manne 117,932(f) 0.29% 12 Executive Officers & Directors as a Group 1,302,945 3.21% ========= =====
- -------------- (a) Mr. Holley became President and Chief Executive Officer of the General Partner on January 1, 1994. (b) During all of 1993, Mr. Leland was President and Chief Executive Officer of the General Partner. 11 13 (c) Includes 415,083 Units owned by Main Street Partners, L.P., 155,217 Units owned by San Francisco Partners II, L.P., and 180,000 Units owned by the General Partner as to which Mr. Oberndorf has shared voting and dispositive power. Mr. Oberndorf shares control of and has an indirect pecuniary interest in the General Partner's 2% interest in the Registrant. Mr. Oberndorf disclaims beneficial ownership of the 180,000 Units owned by the General Partner and disclaims that the General Partner's 2% interest in the Partnership constitutes a security. (d) Mr. Patterson has an indirect pecuniary interest in the General Partner's 2% interest in the Registrant. Mr. Patterson disclaims that the General Partner's 2% interest in the Registrant constitutes a security. (e) Includes 415,083 Units owned by Main Street Partners, L.P., 155,217 Units owned by San Francisco Partners II, L.P., and 180,000 Units owned by the General Partner as to which Mr. Scully has shared voting and dispositive power. Mr. Scully shares control of and has an indirect pecuniary interest in the General Partner's 2% interest in the Registrant. Mr. Scully disclaims beneficial ownership of the 180,000 Units owned by the General Partner and disclaims that the General Partner's 2% interest in the Registrant constitutes a security. (f) Includes non-vested restricted Units granted to such person under the General Partners' Unit Awards Plan and Shadow Units credited to participant's accounts under the terms of the LTIP. Upon vesting, the participants are entitled to receive one Unit for each restricted Unit that vests and one Unit for each Shadow Unit that vests. Non-vested restricted Units for Messrs. Holley, Grenier, Kraft, and Manne totaled 43,200, 43,200, 25,200, and 43,200, respectively, and non-vested Shadow Units under the terms of the LTIP credited to the participant's accounts for Messrs. Holley, Grenier, Kraft, and Manne totaled 66,321, 47,372, 28,423, and 47,372, respectively. Messrs. Holley, Grenier, Kraft, and Manne disclaim beneficial ownership of both the non-vested restricted Units and the non-vested Shadow Units under the LTIP. CHANGES IN CONTROL On December 31, 1992, BR disposed of its controlling interest in the Registrant. On that date, the previous general partner of the Registrant, which was indirectly owned by BR, was merged into the General Partner, which became the successor general partner of the Registrant. As a result of the merger, Corp. I, a Delaware corporation controlled by Messrs. Scully and Oberndorf and the sole general partner of PC Advisory Partners I, L.P. ("Advisory I"), a Delaware limited partnership, which is the managing general partner of the General Partner, acquired indirect control of the Registrant. The limited partner interests in the General Partner are owned directly and indirectly by certain limited partnerships (the "Upper Tier Partnerships"), the general partner or managing general partner of which (as the case may be) is also Advisory I. 12 14 Under a Distribution Support Agreement dated as of June 8, 1989 (the "Distribution Support Agreement") by and between BR and the Registrant, BR agreed with the Registrant that it would make cash contributions to the Registrant for the quarterly periods ending on or prior to June 30, 1994 to generally permit the Registrant to distribute quarterly a minimum level of cash to the Registrant's Unitholders. In connection with the above-mentioned merger certain of the Upper Tier Partnerships and certain other affiliates of the General Partner agreed to indemnify BR against its obligations to make the above-described payments and granted a subordinated security interest to BR. In addition, certain of the Upper Tier Partnerships have granted to BR the right to purchase their economic interests in the General Partner if the indemnitors should fail to perform on their indemnities to BR. Accordingly, if BR were required to advance funds to the Registrant under the Distribution Support Agreement and the indemnitors were to fail to reimburse BR for such advance, the exercise by BR of its remedies might result in a further change of control of the Registrant. 13 15 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On April 8, 1993, the Board of Directors of Corp. I approved a proposal for the Registrant to purchase, on a pre December 6, 1993 three for one Unit split basis, 1,250,000 Deferred Participation Interests ("DPIs") of the Registrant. Messrs. Oberndorf, Patterson, and Scully had an indirect beneficial ownership of, and an indirect pecuniary interest in, the DPIs. The proposal was subject to a number of conditions including approval by an independent committee of the Board of Directors, Unitholder approval and the negotiation of a final binding agreement. On August 12, 1993, the Registrant held a special meeting of the Unitholders to approve the proposal to redeem the 1,250,000 DPIs. Approval was obtained and on August 30, 1993, the Registrant redeemed the 1,250,000 DPIs for $49.50 per DPI, plus direct costs associated with redeeming the DPIs. 14 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (2) Financial Statement Schedules The following schedules are filed as a part of this Form 10-K/A: Schedule V. Property, Plant and Equipment Page 16 Schedule VI. Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment Page 17 Schedule X. Supplementary Income Statement Information Page 18 Report of Independent Accountants Page 19
(3) List of Exhibits Each exhibit set forth below and 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. 15 17 SCHEDULE V PLUM CREEK TIMBER COMPANY, L.P. PROPERTY, PLANT AND EQUIPMENT (In Thousands)
Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Balance at Balance Beginning Additions at End Classification of Year at Cost Retirements Other of Year --------------------------------------- -------- -------- ----------- ----- ------- Year Ended December 31, 1993 Timber and Logging Roads - $263,264 $241,361 $ 791 ($21,659)(1) $482,175 Net............................... 26,554 18,135 102 0 44,587 -------- -------- ------ ------- -------- Timberlands......................... $289,818 $259,496 $ 893 ($21,659) $526,762 ======== ======== ====== ======= ======== Property, Plant and Equipment: Land, Building and Improvements... $ 41,876 $ 1,289 $ 8 (2) $ 43,173 Machinery and Equipment........... 174,684 23,827 1,150 (8)(3) 197,353 -------- -------- ------ ------- -------- $216,560 $ 25,116 $1,150 $ 0 $240,526 ======== ======== ====== ======= ======== Year Ended December 31, 1992 Timber And Logging Roads - Net...... $283,130 $ 5,277 $2,554 ($22,589)(4) $263,264 Timberlands......................... 25,932 2,085 1,383 (80)(5) 26,554 -------- -------- ------ ------- -------- $309,062 $ 7,362 $3,937 ($22,669) $289,818 ======== ======== ====== ======= ======== Property, Plant and Equipment: Land, Building and Improvements... $ 41,207 $ 390 $1,781 $ 2,060 (6) $ 41,876 Machinery and Equipment........... 162,420 17,863 3,559 (2,040)(7) 174,684 -------- -------- ------ ------- -------- $203,627 $ 18,253 $5,340 $ 20 $216,560 ======== ======== ====== ======= ======== Year Ended December 31, 1991 Timber and Logging Roads - Net...... $306,176 $ 5,926 $1,162 ($27,810)(8) $283,130 Timberlands......................... 25,893 163 124 0 25,932 -------- -------- ------ ------- -------- $332,069 $ 6,089 $1,286 ($27,810) $309,062 ======== ======== ====== ======= ======== Property, Plant and Equipment: Land, Building and Improvements... $ 43,759 $ 277 $ 270 ($ 2,559)(9) $ 41,207 Machinery and Equipment........... 157,323 5,032 421 486 (10) 162,420 -------- -------- ------ ------- -------- $201,082 $ 5,309 $ 691 ($ 2,073) $203,627 ======== ======== ====== ======= ========
(1) Includes depletion based on stumpage volumes for the year. (2) Includes a category reclass of $8. (3) Includes a category reclass of ($8). (4) Includes depletion based on stumpage volumes for the year and a category reclassification of $80 and adjustment of $12. (5) Includes a category reclass of ($80). (6) Includes a category reclass of $2,200 for a Manufacturing facility sale and ($140) category reclassification. (7) Includes a category reclass of ($2,200) for a Manufacturing facility sale and $160 category reclassification. (8) Includes depletion based on stumpage volumes for the period. (9) Includes ($2,200) reserve for the anticipated sale of a Manufacturing facility and ($359) category reclassification. (10) Includes a $359 category reclassification and $127 in adjustments. 16 18 SCHEDULE VI PLUM CREEK TIMBER COMPANY, L.P. ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (In Thousands)
Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Balance at Additions Balance Beginning Charged to at End Classification of Year Expenses Retirements Other of Year -------------------------- ------- -------- ----------- ----- ------- Year Ended December 31, 1993 Property, Plant and Equipment: Land, Building and Improvements....... $ 5,351 $ 1,419 $ 0 $0 $ 6,770 Machinery and Equipment............... 56,565 15,692 1,134 0 71,123 ------- ------- ------ -- ------- $61,916 $17,111 $1,134 $0 $77,893 ======= ======= ====== == ======= Year Ended December 31, 1992 Property, Plant and Equipment: Land, Building and Improvements....... $ 4,134 $ 1,430 $ 213 $0 $ 5,351 Machinery and Equipment............... 43,589 14,896 1,920 0 56,565 ------- ------- ------ -- ------- $47,723 $16,326 $ 2,133 $0 $61,916 ======= ======= ======= == ======= Year Ended December 31, 1991 Property, Plant and Equipment: Land, Building and Improvements....... $ 2,769 $ 1,437 $ 72 $0 $ 4,134 Machinery and Equipment............... 29,949 13,739 99 0 43,589 ------- ------- ------ -- ------- $32,718 $15,176 $ 171 $0 $47,723 ======= ======= ====== == =======
17 19 SCHEDULE X PLUM CREEK TIMBER COMPANY, L.P. SUPPLEMENTARY INCOME STATEMENT INFORMATION (In Thousands)
Column A Column B -------- -------- Charged to Costs and Expenses -------- Year Ended December 31, 1993 Maintenance and repairs............................................................... $24,440 Taxes, other than payroll and income taxes Property............................................................................ $ 5,267 Other............................................................................... $ 1,043 Year Ended December 31, 1992 Maintenance and repairs............................................................... $21,793 Taxes, other than payroll and income taxes Property............................................................................ $ 4,084 Other............................................................................... $ 3,561 Year Ended December 31, 1991 Maintenance and repairs............................................................... $19,251 Taxes, other than payroll and income taxes Property............................................................................ $ 4,158 Other............................................................................... $ 4,141
18 20 REPORT OF INDEPENDENT ACCOUNTANTS To the Unitholders and Directors of the General Partner of Plum Creek Timber Company, L.P. Our report on the combined financial statements of Plum Creek Timber Company, L.P. as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993 is included in its 1993 Annual Report on Form 10-K. In connection with our audits of such financial statements, we have also audited the related combined financial statement schedules listed in the Index of the Form 10-K/A, Amendment No. 1 to the aforementioned Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND Seattle, Washington January 28, 1994 19 21
Exhibit Designation Nature of Exhibit - ----------- ----------------- 3.A* Amended and Restated Agreement of Limited Partnership of Plum Creek Timber Company, L.P. dated June 8, 1989, as amended to date (conformed composite version). See Attached Exhibit. 3.B.1 Certificate of Limited Partnership of Plum Creek Limited Partnership, 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). 3.B.2 Certificate of Limited Partnership of Plum Creek Manufacturing, L.P. as filed with the Secretary of State of the state of Delaware on December 27, 1990. 4.A 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.B Form of Transfer Application (Form S-1, Regis. No. 33-28094, filed May, 1989). 4.C.1* 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, filed August, 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, filed April 1991). Amendment No. 2, consent and waiver dated September 1, 1993 to the Senior Note Agreement. See attached Exhibit. 4.C.2* 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, filed August, 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, filed April 1991). Amendment No. 2, consent and waiver dated September 1, 1993 to the Mortgage Note Agreement. See attached Exhibit. 4.C.3* Reducing Revolving Line of Credit, dated October 28, 1993, due November 1, 2001, Plum Creek Timber Company, L.P. See attached Exhibit. 10.B Form of Distribution Agreement dated May, 1989 by and between Burlington Resources and Plum Creek Timber Company, L.P. (Form S-1, Regis. No. 33- 28094, filed May, 1989). 10.C.1+ Employment Agreement, as modified by waiver and agreement dated June 9, 1989 with David D. Leland. (Form 10-Q, No. 1- 10239, filed August, 1989). 10.C.2*+ Employment Agreement dated June 9, 1989 with Charles P. Grenier. (Form 10- Q, No. 1-10239, filed August, 1989). Amendment No.1, Release and Waiver of Rights dated January 28, 1994. See attached exhibit. 10.C.3*+ Employment Agreement dated June 9, 1989 with Rick R. Holley. (Form 10-Q, No. 1- 10239, filed August, 1989). Amendment No. 1, Release and Waiver of Rights, dated January 28, 1994. See attached exhibit.
20 22 10.C.4*+ Employment Agreement dated August 3, 1989 with James A. Kraft. (Form 10-Q, No. 1- 10239, filed August, 1989). Amendment No. 1, Release and Waiver of Rights, dated January 28, 1994. See attached exhibit. 10.C.5*+ Employment Agreement dated June 9, 1989 with Robert E. Manne. (Form 10-Q, No. 1- 10239, filed August, 1989). Amendment No. 1. Release and Waiver of Rights, dated January 28, 1994. See attached exhibit. 10.D.1* $15 million Revolving Credit Agreement by and between Plum Creek Timber Company, L.P. and Algemene Bank Nederland N.V. as agent, dated as of November 22, 1989. (Form 10-K, No. 1-10239, filed March, 1990). Amendment dated January 1, 1991 to $15 million Revolving Credit Agreement by and between Plum Creek Timber Company, L.P. and Algemene Bank Nederland N.V. as agent, dated as of November 22, 1989. (Form 8 Amendment No. 1, filed April 1991). Amendment No. 2 dated September 1, 1993. See attached exhibit. 10.D.2 $20 million Revolving Credit Agreement by and between Plum Creek Manufacturing Company, Inc. and Algemene Bank Nederland N.V. as agent, dated as of November 22, 1989. (Form 10-K, No. 1-10239, filed March, 1990) Amendment dated January 1, 1991 to $20 million Revolving Credit Agreement by and between Plum Creek Manufacturing, Inc., now Plum Creek Manufacturing, L.P., and Algemene Bank Nederland N.V. as agent, dated as of November 22, 1989. (Form 8 Amendment No. 1, filed April 1991). 10.D.3 $20 million Revolving Credit Agreement by and between Plum Creek Manufacturing Company, Inc. and Plum Creek Timber Company, L.P., dated as of December 1, 1989. (Form 10-K, No. 1-10239, filed March, 1990). Amendment dated January 1, 1991 to $20 million Revolving Credit Agreement by and between Plum Creek Manufacturing, Inc., now Plum Creek Manufacturing, L.P., and Plum Creek Timber Company, L.P., dated as of December 1, 1989. (Form 8 Amendment No. 1, filed April 1991). 10.E.1+ 1988 Stock Option Incentive Plan, Burlington Northern Inc. (Form S-8, No. 33-22493, filed June 15, 1988). Appendix A, 1988 Stock Option Incentive Plan, Burlington Northern Inc. (filed November 29, 1989). 10.E.2+ Incentive Sharing Plan, Plum Creek Management Company. (Form 10-K, No. 1-10239, filed March, 1990). Amendment number 1, dated April 1991, Incentive Sharing Plan, Plum Creek Management Company. (Form 10-Q, No. 1-10239, filed May, 1991). 10.E.3+ Unit Awards Plan, PCTC, Inc. (Form 10-K, No. 1-10239, filed March, 1990). Amendment number 1, dated April 1991, to Unit Awards Plan, PCTC, Inc. (Form 10-Q, No. 1-10239, filed May, 1991). 10.E.4+ Incentive Compensation Plan, Plum Creek Management Company. (Form 8 Amendment No. 1, filed April, 1990). Amendment dated January 1, 1991 to Incentive Compensation Plan, Plum Creek Management Company. (Form 8 Amendment No. 1, filed April 1991). 10.E.5+ Retirement Plan for Directors, Plum Creek Management Company. (Form 8 Amendment No. 1, filed April 1991). 10.E.6*+ Long-term Incentive Plan, Plum Creek Management Company, L.P. See attached exhibit. 10.E.7*+ Management Incentive Plan, Plum Creek Management Company, L.P. See attached exhibit.
21 23 21 Subsidiaries of the Registrant. (Form 8 Amendment No. 1, filed April 1991). 24 Power of Attorney (Form S-1, Regis. No. 33-28094, filed May,1989).
22 EX-3.A 2 EXHIBIT 3.A 1 EXHIBIT 3.A ANNEX B TO PROXY STATEMENT COPY OF THE PARTNERSHIP AGREEMENT THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of June 8, 1989, is entered into by and among Plum Creek Management Company, a Delaware corporation, as the General Partner and David D. Leland as the Organizational Limited Partner, together with any other Persons who become Partners in the Partnership as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I ORGANIZATIONAL MATTERS 1.1 Formation and Continuation. The General Partner and the Organizational Limited Partner have previously formed the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and hereby amend and restate the original Agreement of Limited Partnership in its entirety. Subject to the provisions of this Agreement, the General Partner and the Organizational Limited Partner hereby continue the Partnership as a limited partnership pursuant to the provisions of the Delaware Act. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. The Partnership Interest of each Partner shall be personal property for all purposes. 1.2 Name. The name of the Partnership shall be "Plum Creek Timber Company, L.P." The Partnership's business may be conducted under any other name or names deemed advisable by the General Partner, including the name of the General Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be included in the Partnership's name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The General Partner in its sole discretion may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to Limited Partners, provided, however, that without the consent of the holders of 66 2/3% of the outstanding Units, the General Partner shall not cease to use the name, "Plum Creek". 1.3 Registered Office; Principal Office. The address of the registered office of the Partnership in the State of Delaware shall be located at The Corporation Trust Center, 1209 Orange Street, New Castle County, Wilmington, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership shall be 999 Third Avenue, Seattle, Washington 98104 or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner deems advisable. 1.4 Power of Attorney. (a) Each Limited Partner and each Assignee hereby constitutes and appoints each of the General Partner and, if a Liquidator shall have been selected pursuant to Section 14.3 hereof, the Liquidator severally (and any successor to either thereof by merger, transfer, assignment, election or otherwise) and authorized officers and attorneys-in-fact of each, with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to: (i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate of Limited Partnership and all amendments or restatements thereof) that the General Partner or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of, the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all instruments that the General Partner or the Liquidator deems B-1 2 appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement or the Deposit Agreement in accordance with their respective terms; (C) all conveyances and other instruments or documents that the General Partner or the Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; (D) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article XI, XII, XIII or XIV hereof or the Capital Contribution of any Partner; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Units or other securities issued pursuant to Section 4.4 hereof; and (F) all agreements and other instruments (including, without limitation, a certificate of merger) relating to a merger or consolidation of the Partnership pursuant to Article XVI hereof; (ii) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the sole discretion of the General Partner or the Liquidator, to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Partners hereunder or is consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of the General Partner or the Liquidator, to effectuate the terms or intent of this Agreement; provided, that when required by Section 15.3 hereof or any other provision of this Agreement which establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner or the Liquidator may exercise the power of attorney made in this subsection (ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series; and (iii) on behalf of the Limited Partners and the Assignees, enter into the Deposit Agreement and to deposit Certificates in the Deposit Account pursuant to the Deposit Agreement. Nothing contained herein shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XV hereof or as may be otherwise expressly provided for in this Agreement. (b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner's or Assignee's Partnership Interest and shall extend to such Limited Partner's or Assignee's heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or the Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator, taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the General Partner's or the Liquidator's request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator deems necessary to effectuate this Agreement and the purposes of the Partnership. 1.5 Term. The Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until the close of Partnership business on December 31, 2047, or until the earlier termination of the Partnership in accordance with the provisions of Article XIV hereof. 1.6 Possible Restrictions on Transfer. Notwithstanding anything to the contrary contained herein, in the event of (i) the enactment (or imminent enactment) of any legislation, (ii) the publication of any temporary or final regulation by the Treasury Department, (iii) any ruling by the Internal Revenue Service or (iv) any judicial decision, that, in any such case, in the Opinion of Counsel, would result in the taxation of the Partnership for federal income tax purposes as a corporation or as an association taxable as a corporation, then, either (a) the General Partner may impose such restrictions on the transfer of Units or Partnership Interests as may be required, in the Opinion of Counsel, to prevent the taxation of the Partnership for federal income tax purposes as a corporation or as an association taxable as a corporation, including making any amendments B-2 3 to this Agreement as the General Partner in its sole discretion may determine to be necessary or appropriate in order to impose such restrictions, provided, that any such amendment to this Agreement which would result in the delisting or suspension of trading of any class of Units on any National Securities Exchange on which such class of Units is then traded must be approved by the holders of at least 66 2/3% of the outstanding Units of such class (excluding for purposes of such determination any Units of such class owned by the General Partner and its Affiliates) or (b) upon the recommendation of the General Partner and the approval by the holders of at least 66 2/3% of the outstanding Units (excluding for purposes of such determination any Units owned by the General Partner and its Affiliates), the Partnership may be converted into and reconstituted as a trust or any other type of legal entity (the "New Entity") in the manner and on other terms so recommended and approved. In such event, the business of the Partnership shall be continued by the New Entity and the Units shall be converted into equity interests of the New Entity in the manner and on the terms so recommended and approved. Notwithstanding the foregoing, no such reconstitution shall take place unless the Partnership shall have received an Opinion of Counsel to the effect that the liability of the Limited Partners for the debts and obligations of the New Entity shall not, unless such Limited Partners take part in the control of the business of the New Entity, exceed that which otherwise had been applicable to such Limited Partners as limited partners of the Partnership under the Delaware Act. ARTICLE II DEFINITIONS The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement. "Additional Limited Partner" means a Person admitted to the Partnership as a Limited Partner pursuant to Section 12.4 hereof and who is shown as such on the books and records of the Partnership. "Adjusted Capital Account" shall mean the Capital Account maintained for each Partner as of the end of each fiscal year of the Partnership (a) increased by any amounts which such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5)) and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such fiscal year, are reasonably expected to be allocated to such Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of such fiscal year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases pursuant to a minimum gain chargeback pursuant to Sections 5.1(d)(i) or 5.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 4.6(d)(i) or (d)(ii) hereof. Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination thereof pursuant to Section 708 of the Code, such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is further adjusted pursuant to Section 4.6(d)(i) or (d)(ii) hereof. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, the Person in question. As used herein, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Agreed Allocation" shall mean any allocation, other than a Required Allocation, of an item of income, gain, deduction or loss pursuant to the provisions of Section 5.1, including a Curative Allocation (if appropriate to the context in which the term "Agreed Allocations" is used). B-3 4 "Agreed Value" of any Contributed Property means the fair market value of such property or other consideration at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the Agreed Value of any property deemed contributed to the Partnership for federal income tax purposes upon termination and reconstitution thereof pursuant to Section 708 of the Code shall be determined in accordance with Section 4.6(c)(i) hereof. Subject to Section 4.6(c)(i) hereof, the General Partner shall, in its sole discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties contributed to the Partnership in a single or integrated transaction among each separate property on a basis proportional to their fair market values. "Agreement" means this Amended and Restated Agreement of Limited Partnership, as it may be amended, supplemented or restated from time to time. "Assignee" means a Non-citizen Assignee or a Person to whom one or more Units have been transferred in a manner permitted under this Agreement and who has executed and delivered a Transfer Application as required by this Agreement, but who has not become a Substituted Limited Partner. "Available Cash" means, with respect to any calendar quarter, (a) the sum of: (i) the Partnership'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 (less noncash credits) utilized in determining net income of the Partnership for such quarter, (iii) the amount of any reduction in reserves of the Partnership of the types referred to in (b)(v) below, (iv) proceeds received by the Partnership from the sale of any of the Designated Acres, and (v) any Cash from Capital Transactions received by the Partnership 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 any of the two prior quarters, less (b) the sum of: (i) all payments of principal on Debt made by the Partnership in such quarter (excluding any payments of principal on Debt made with Cash from Capital Transactions received by the Partnership during such quarter or the immediately preceding four quarters), (ii) capital expenditures made by the Partnership during such quarter (excluding any capital expenditures for such quarter made with Cash from Capital Transactions received by the Partnership during such quarter or the immediately preceding four quarters, and capital expenditures which the General Partner anticipates will be financed with Cash from Capital Transactions to be received by the Partnership prior to the end of the next succeeding quarter), (iii) the amount of any capital expenditures, or investments as specified in clause (b)(iv) below, made by the Partnership in the immediately preceding quarter which was anticipated would be financed from Cash from Capital Transactions but which have not been financed from such source prior to the end of the quarter succeeding the quarter in which any such capital expenditure or investment was made, (iv) investments in any Subsidiary, Affiliate or any such other entity to the extent that such investments are not otherwise included under clauses (b)(i), (ii) or (iii) above (excluding any such investments made with Cash from Capital Transactions received by the Partnership during such quarter or the immediately preceding four quarters, or which the General Partner anticipates will be made, with Cash from Capital Transactions to be received by the Partnership prior to the end of the next succeeding quarter); (v) the amount of any reserves of the Partnership 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. B-4 5 provided, however (i) net proceeds to the Partnership from the issuance of SPUs 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 Partnership after the last day of such quarter, and (ii) any disbursements made of the types described in clauses (b)(i)-(iii), or reserves established, in accordance with clause (b)(v), 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 Partnership. In determining "Available Cash", (i) all items under clauses (a)(i)-(v) above and all items under clauses (b)(i)-(v) above shall be calculated on a combined basis with any Subsidiary of the Partnership whose income is accounted for on a combined basis with the Partnership and, in accordance therewith, "Available Cash" shall include a percentage of each such item of each such Subsidiary equal to the Partnership's percentage ownership interest in such Subsidiary, provided, however, that the items under clauses (a)(i)-(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 Partnership 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 Partnership, by the General Partner in accordance with generally accepted accounting principles 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 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)(v) above shall be determined, with respect to the Partnership, by the General Partner in its sole discretion as it deems appropriate 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 sole discretion as it deems appropriate 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 clauses (b)(ii) and (b)(iv) above shall be made, with respect to the Partnership, by the General Partner in its sole discretion as it deems appropriate 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 sole discretion as it deems appropriate. "Base Quarterly Deficiency" means, with respect to any Unit and as to any calendar quarter within the Support Period, the excess, if any, of (a) the Minimum Quarterly Amount, determined with respect to such calendar quarter, over (b) the amount of any Available Cash, distributed with respect to such calendar quarter, to the holder of such Unit pursuant to Section 5.4(a) hereof. "Book-Tax Disparity" shall mean with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Section 4.6 and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. "Burlington" means Burlington Resources Inc., a Delaware corporation. "Business Day" means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States or the State of New York shall not be regarded as a Business Day. "Capital Account" means the capital account maintained for a Partner, Assignee or Special Limited Partner pursuant to Section 4.6 hereof. B-5 6 "Capital Asset" means any asset on the Partnership's or Facilities 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 Contribution" means any cash, cash equivalents or the Net Agreed Value of Contributed Property which a Partner contributes to the Partnership pursuant to Section 4.1, 4.3, 4.4, 4.6(c)(i), or 13.3(c) hereof. "Capital Transactions" means (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 Partnership, (ii) sales of equity interests by the Partnership (other than sales of SPUs) and (iii) sales or other voluntary or involuntary dispositions of any assets of the Partnership (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 Partnership provided, that in determining "Cash from Capital Transactions", items (i)-(iii) above shall include, with respect to each Subsidiary of the Partnership whose income is accounted for on a consolidated or combined basis with the Partnership, a percentage of each such item of such Subsidiary equal to the Partnership's percentage ownership interest in such Subsidiary. "Carrying Value" means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, depletion (computed as a separate item of deduction), amortization and cost recovery deductions charged to the Partners' Capital Accounts, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Sections 4.6(d)(i) and 4.6(d)(ii) hereof, and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner. "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 Partnership from or by reason of a Capital Transaction. "Certificate" means a certificate issued by the Partnership evidencing ownership of one or more Partnership Interests. "Certificate of Limited Partnership" means the Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 6.2 hereof, as such Certificate may be amended and/or restated from time to time. "Citizenship Certification" means a properly completed certificate in such form as may be specified by the General Partner by which an Assignee or a Limited Partner certifies that he (and if he is a nominee holding for the account of another Person, that to the best of his knowledge such other Person) is an Eligible Citizen. "Closing Date" means the first date on which Units are sold by the Partnership to the Underwriters pursuant to the provisions of the Underwriting Agreement. "Closing Price" for any day means the last sale price on such day, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices on such day, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Units of a class are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal National Securities Exchange on which the Units of such class are listed or admitted to trading or, if the Units of a class are not listed or admitted to trading on any National Securities Exchange, the last quoted price on such day or, if not so quoted, the average of the high bid and low asked prices on such day in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use, or, if on any such day the Units of a class are not quoted by any such organization, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in the Units of such class B-6 7 selected by the Board of Directors of the General Partner, or, if on any such day no market maker is making a market in the Units of such class, the fair value of such Units on such day as determined reasonably and in good faith by the Board of Directors of the General Partner using any reasonable method of valuation. "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law. "Contributed Property" means each property or other asset, in such form as may be permitted by the Delaware Act, but excluding cash, contributed to the Partnership (or deemed contributed to the Partnership on termination and reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.6(d)(i) hereof, such property shall no longer constitute a Contributed Property for purposes of Section 5.1 hereof, but shall be deemed an Adjusted Property for such purposes. "Contributing Partner" means each Partner contributing (or deemed to have contributed on termination and reconstitution of the Partnership pursuant to Section 708 of the Code or otherwise) a Contributed Property. "Conversion Date" means with respect to each Deferred Participation Interest, the date on which such Deferred Participation Interest is converted, in accordance with the provisions of Section 5.7, into Units. "Cumulative Base Deficiency" means an amount, attributable to any Unit and determined with respect to all preceding calendar quarters, which equals the excess of (a) the sum resulting from adding together the Base Quarterly Deficiency, if any, as to such Unit for each of such preceding calendar quarters within the Support Period, over (b) the sum of any distributions made to the holder of such Unit (or his predecessors) with respect to any preceding calendar quarters pursuant to Section 5.4(b) hereof. "Curative Allocation" shall mean any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 5.1(d)(xi). "Current Market Price" shall have the meaning assigned to such term in Section 17.1(a) hereof. "Debt" means, as to any Person, as of any date of determination, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) 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, (c) 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, (d) lease obligations of such Person which, in accordance with generally accepted accounting principles, should be capitalized, and (e) such other obligations of such Person as the General Partner may determine in its sole discretion are appropriate. "Deferred Participation Interest" means, a Partnership Interest issued pursuant to Section 4.3(a) which Partnership Interest confers upon the holder thereof only the rights and obligations specifically provided in Section 5.7 of this Agreement. "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. 17-101, et seq., as it may be amended from time to time, and any successor to such statute. "Departing Partner" means a former General Partner, as of the effective date of any withdrawal or removal of such former General Partner pursuant to Section 13.1 hereof. "Deposit Account" means the account established by the Depositary pursuant to the Deposit Agreement. "Deposit Agreement" means the Deposit Agreement among the General Partner, in its capacity both as General Partner and as attorney-in-fact for the Limited Partners, the Partnership and the Depositary, as it may be amended or restated from time to time. "Depositary" means the bank or other institution appointed by the General Partner in its sole discretion to act as depositary for the Depositary Units pursuant to the Deposit Agreement, or any successor to it as depositary. B-7 8 "Depositary Receipt" means a depositary receipt, issued by the Depositary or agents appointed by the Depositary in accordance with the Deposit Agreement, evidencing ownership of one or more Depositary Units. "Depositary Unit" means a depositary unit representing a Unit on deposit with the Depositary pursuant to the Deposit Agreement. "Designated Acres" means up to an aggregate of 150,000 acres of property owned by the Partnership which may be 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 the Partnership). "Distribution Support Agreement" means the agreement, dated as of the Closing Date, between Burlington and the Partnership relating to the purchase of SPUs. "Economic Risk of Loss" shall have the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(1). "Eligible Citizen" means a Person qualified to own interests in real property in jurisdictions in which the Partnership does business or proposes to do business from time to time, and whose status as a Limited Partner or Assignee does not or would not subject the Partnership to a substantial risk of cancellation or forfeiture of any of their property or any interest therein. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor to such statute. "Facilities Subsidiary" means Plum Creek Manufacturing, Inc., a Delaware corporation, 95% of the common stock of which is held by the Partnership on the Closing Date and 5% of the common stock of which is held by the General Partner on the Closing Date. "First Liquidation Target Amount" means an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the Unrecovered Capital, if any, attributable to such Unit, plus (b) the Cumulative Base Deficiency, if any, attributable to such Unit, plus (c) the First Target Amount, with respect to the calendar quarter as to which such determination is made. "First Target Amount" means $0.65 per Unit (or, with respect to the period commencing on the Closing Date and ending on June 30, 1989, the product of $0.65 multiplied by a fraction the numerator of which is the number of days in such period and the denominator of which is 91), subject to adjustment in accordance with Sections 5.6 and 9.6 hereof. "Fourth Liquidation Target Amount" means an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the Third Liquidation Target Amount, if any, attributable to such Unit, plus (b) the excess, if any, of the Fourth Target Amount over the Third Target Amount, determined with respect to the calendar quarter as to which such determination is made. "Fourth Target Amount" means $0.85 per Unit (or, with respect to the period commencing on the Closing Date and ending on June 30, 1989, the product of $0.85 multiplied by a fraction the numerator of which is the number of days in such period and the denominator of which is 91), subject to adjustment in accordance with Sections 5.6 and 9.6 hereof. "General Partner" means Plum Creek Management Company, a Delaware corporation, and its successors as general partner of the Partnership. "General Partner Equity Value" means, as of any date of determination, the fair market value of the General Partner's Partnership Interest, as determined by the General Partner using whatever reasonable method of valuation it may adopt; provided, however, if any such valuation occurs at a time that the General Partner or an Affiliate of the General Partner holds Management Units, Deferred Participation Interests or Units, such Partnership Interests must be taken into account in determining the General Partner Equity Value. "Incentive Distribution" means any amount of cash distributed to the General Partner in its capacity as general partner, pursuant to Sections 5.4(e), 5.4(f), 5.4(g) or 5.4(h) which exceeds that amount equal to 2% of the aggregate amount of cash then being distributed pursuant to such provisions. B-8 9 "Indemnitee" means the General Partner, any Departing Partner, any Person who is or was an Affiliate of the General Partner or any Departing Partner, any Person who is or was an officer, director, employee, agent or trustee of the General Partner or any Departing Partner or any Affiliate of the General Partner or Departing Partner, or any Person who is or was serving at the request of the General Partner or any Departing Partner or any Affiliate of the General Partner or Departing Partner as a director, officer, employee, agent or trustee of another Person, including any Subsidiary. "Initial Limited Partners" means PCTC and the Underwriters upon being admitted to the Partnership in accordance with Section 4.3 hereof. "Initial Offering" means the initial offering of Depositary Units to the public, as described in the Registration Statement. "Initial Unit Price" means the initial price per Unit at which the Underwriters will offer the Units to the public for sale as set forth on the cover page of the prospectus first issued at or after the time the Registration Statement filed in connection with the sale of Units contemplated by the Underwriting Agreement first became effective. "Issue Price" means the price at which a Unit is purchased from the Partnership, less any sales commission or underwriting discount charged to the Partnership. "Limited Partner" means each Initial Limited Partner, each Substituted Limited Partner, each Additional Limited Partner and any Departing Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 13.3 hereof and, solely for purposes of Articles IV, V and VI hereof and Sections 14.3 and 14.4 hereof, shall include an Assignee and, solely for purposes of Article VII hereof, shall include a Special Limited Partner and holders of Deferred Participation Interests. "Limited Partner Equity Value" means, as of any date of determination, the amount equal to the product of (a) the total number of Units outstanding (immediately prior to an issuance of Units or distribution of cash or Partnership property), other than Units held by the General Partner or an Affiliate of the General Partner, multiplied by (b) (i) in the case of a valuation required by Section 4.6(d)(i) (other than valuations caused by sales of a de minimis quantity of Units) the Issue Price or (ii) in the case of a valuation required by Section 4.6(d)(ii) (or a valuation required by Section 4.6(d)(i) caused by sales of a de minimis quantity of Units) the Closing Price. "Liquidator" means the General Partner or other Person approved pursuant to Section 14.3 hereof who performs the functions described therein. "Management Unit" means a Unit issued pursuant to Section 4.3(a) which Unit confers upon the holder thereof all of the rights and obligations of a Limited Partner, provided, however, that such Unit will be subject to the provisions of Section 4.6(c)(ii) hereof if it also constitutes a Restricted Interest. "Minimum Gain Attributable to Partner Nonrecourse Debt" means that amount determined in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(6). "Minimum Quarterly Amount" means $0.60 per Unit per calendar quarter (or, with respect to the period commencing on the Closing Date and ending on June 30, 1989, the product of $0.60 multiplied by a fraction, the numerator of which is the number of days in such period and the denominator of which is 91), subject to adjustment in accordance with Sections 5.6 and 9.6 hereof. "MQA" means Minimum Quarterly Amount. "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotation System. "National Securities Exchange" means an exchange registered with the Securities and Exchange Commission under Section 6(a) of the Exchange Act. "Net Agreed Value" means (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed and (b) in the case of any property distributed to a Partner or Assignee B-9 10 by the Partnership, the Partnership's Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code. "Net Income" shall mean, for any taxable period, the excess, if any, of the Partnership's items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership's items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Income shall be determined in accordance with Section 4.6(b) and shall not include any items specially allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Income is subjected to a Required Allocation or a Curative Allocation, Net Income or the resulting Net Loss, whichever the case may be, shall be recomputed without regard to such item. "Net Loss" shall mean, for any taxable period, the excess, if any, of the Partnership's items of loss and deduction (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period over the Partnership's items of income and gain (other than those items attributable to dispositions constituting Termination Capital Transactions) for such taxable period. The items included in the calculation of Net Loss shall be determined in accordance with Section 4.6(b) and shall not include any items specially allocated under Section 5.1(d). Once an item of income, gain, loss or deduction that has been included in the initial computation of Net Loss is subjected to a Required Allocation or a Curative Allocation, Net Loss or the resulting Net Income, whichever the case may be, shall be recomputed without regard to such item. "Net Termination Gain" shall mean, for any taxable period, the sum, if positive, of all items of income, gain or loss recognized by the Partnership from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Gain shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss specially allocated under Section 5.1(d). Once an item of income, gain or loss that has been included in the initial computation of Net Termination Gain is subjected to a Required Allocation or a Curative Allocation, Net Termination Gain or the resulting Net Termination Loss, whichever the case may be, shall be recomputed without regard to such item. "Net Termination Loss" shall mean, for any taxable period, the sum, if negative, of all items of income, gain or loss recognized by the Partnership from Termination Capital Transactions occurring in such taxable period. The items included in the determination of Net Termination Loss shall be determined in accordance with Section 4.6(b) and shall not include any items of income, gain or loss specially allocated under Section 5.1(d). Once an item of gain or loss that has been included in the initial computation of Net Termination Loss is subjected to a Required Allocation or a Curative Allocation, Net Termination Loss or the resulting Net Termination Gain, whichever the case may be, shall be recomputed without regard to such item. "Non-citizen Assignee" means a Person who the General Partner has determined in its sole discretion does not constitute an Eligible Citizen and as to whose Partnership Interest the General Partner has become the Substituted Limited Partner, pursuant to Section 11.5 hereof. "Nonrecourse Built-in Gain" shall mean with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or negative pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Sections 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iv) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration. "Nonrecourse Deductions" shall mean any and all items of loss, deduction or expenditures (described in Section 705 (a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(b), are attributable to a Nonrecourse Liability. "Nonrecourse Liability" shall have the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(3). B-10 11 "Notice of Election to Purchase" has the meaning assigned to such term in Section 17.1(b) hereof. "Opinion of Counsel" means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner) in form and substance acceptable to the General Partner. "Organizational Limited Partner" means David D. Leland in his capacity as the organizational limited partner of the Partnership pursuant to this Agreement. "outstanding" means all Units or other Partnership Securities, including Deferred Participation Interests, that are issued by the Partnership and reflected as outstanding on the Partnership's books and records as of the date of determination. "Partner" means a General Partner, a Limited Partner or a Special Limited Partner and solely for purposes of Articles IV, V and VI hereof and Sections 14.3 and 14.4 hereof shall include an Assignee. "Partner Nonrecourse Debt" shall have the meaning set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(4). "Partner Nonrecourse Deductions" shall mean any and all items of loss, deduction or expenditure (described in Section 705(a)(2)(B) of the Code) in accordance with the principles of Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(3), are attributable to a Partner Nonrecourse Debt. "Partnership" means the limited partnership heretofore formed and continued pursuant to this Agreement, and any successor thereto. "Partnership Interest" means the interest of a Partner in the Partnership which, in the case of a Special Limited Partner, a Limited Partner or Assignee, shall include Units, SPUs or Deferred Participation Interests, whichever the case may be. "Partnership Minimum Gain" shall mean that amount determined in accordance with the principles of Treasury Regulation Sections 1.704-1T(b)(4)(iv)(a) and 1.704-1T(b)(4)(iv)(c). "Partnership Securities" has the meaning assigned to such term in Section 4.4(a) hereof. "Partnership Year" means the fiscal year of the Partnership, which shall be the calendar year. "PCTC" means Plum Creek Timber Company, Inc., a Delaware corporation and a wholly-owned Subsidiary of Burlington. "Per Unit Capital Amount" means, as of any date of determination, the Capital Account, stated on a per Unit basis, underlying any Unit held by a Public Unitholder. "Percentage Interest" means, as of the date of such determination, (a) as to the General Partner in its capacity as such, 2%, (b) as to any Limited Partner or Assignee holding Units, the product of (i) 98% multiplied by (ii) the quotient of the number of Units held by such Limited Partner or Assignee divided by the total number of all Units then outstanding; provided, however, that following any issuance of additional Units by the Partnership pursuant to Section 4.4 hereof, proper adjustment shall be made to the Percentage Interest represented by each Unit to reflect such issuance. "Person" means an individual or a corporation, partnership, trust, unincorporated organization, association or other entity. "Public Unitholder" means a Person other than the General Partner or any Affiliate of the General Partner who holds Units. "Purchase Date" means the date determined by the General Partner as the date for purchase of all outstanding Units (other than Units owned by the General Partner and its Affiliates) pursuant to Section 17.1(b) hereof. "Recapture Income" means any gain recognized by the Partnership (computed without regard to any adjustment required by Sections 734 or 743 of the Code) upon the disposition of any property or asset of the B-11 12 Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Record Date" means the date established by the General Partner for determining (a) the identity of Limited Partners (or Assignees, if applicable) entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot or give approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any other lawful action of Limited Partners, or (b) the identity of Record Holders entitled to receive any report or distribution. "Record Holder" means the Person in whose name a Unit is registered on the books of the Transfer Agent, as of the opening of business on a particular Business Day. "Redeemable Units" means any Units for which a redemption notice has been given and has not been withdrawn, under Section 11.6 hereof. "Registration Statement" means the Registration Statement on Form S-1 (Registration No. 33-28094), as it has been or as it may be amended or supplemented from time to time, filed by the Partnership with the Securities and Exchange Commission under the Securities Act to register the offering and sale of the Units in the Initial Offering. "Required Allocations" shall mean any allocation (or limitation imposed on any allocation) of an item of income, gain, deduction or loss pursuant to (a) the proviso-clauses of Sections 5.1(b)(ii), 5.1(b)(iii) and 5.1(b)(iv) or (b) Sections 5.1(d)(i), 5.1(d)(ii), 5.1(d)(iv), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii) and 5.1(d)(ix), such allocations (or limitations thereon) being directly or indirectly required by the Treasury regulations promulgated under Section 704(b) of the Code. "Residual Gain" or "Residual Loss" shall mean any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to the first sentence of Sections 5.2(b)(i)(A) or 5.2(b)(ii)(A) to eliminate Book-Tax Disparities. "Restricted Interest" means any Management Unit and any Deferred Participation Interest, prior to its conversion to a Unit pursuant to Section 5.7(b), which is held by a Person who holds both such Management Units and such Deferred Participation Interests. Once any such Unit is transferred and no longer held by a Person who holds both such Management Units and such Deferred Participation Interests, it will no longer constitute a Restricted Interest. "Second Liquidation Target Amount" means an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the First Liquidation Target Amount, if any, attributable to such Unit, plus (b) the excess, if any, of the Second Target Amount over the First Target Amount, with respect to the calendar quarter as to which such determination is made. "Second Target Amount" means $0.70 per Unit (or, with respect to the period commencing on the Closing Date and ending on June 30, 1989, the product of $0.70 multiplied by a fraction, of which the numerator is equal to the number of days in such period and of which the denominator is 91), subject to adjustment in accordance with Sections 5.6 and 9.6 hereof. "Securities Act" means the Securities Act of 1933, as amended, and any successor to such statute. "Special Limited Partner" shall mean Burlington or an Affiliate of Burlington upon being issued SPUs by the Partnership or upon transfer of such SPUs to Burlington or such Affiliate of Burlington prior to redemption of all such SPUs issued. "Special Limited Partner Book Capital" means, as of any date of determination, the amount equal to the sum of the balances of the Capital Accounts of all Special Limited Partners, determined pursuant to Section 4.6 (prior to any adjustment pursuant to Section 4.6(d) arising upon the present event requiring a valuation of the Partnership's assets). B-12 13 "SPU" means a Partnership Interest issued pursuant to Section 4.4 hereof and in accordance with the Distribution Support Agreement, which Partnership Interest shall confer upon the holder thereof only the rights and obligations specifically provided in this Agreement with respect to SPUs (and no other rights otherwise available to holders of a Partnership Interest) and the Distribution Support Agreement. "Subsidiary" means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person, and, with respect to the Partnership, shall include the Facilities Subsidiary. "Substituted Limited Partner" means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 12.2 hereof in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership. "Support Period" means the period commencing on the Closing Date and ending on the earlier of June 30, 1994 or such earlier date of termination as provided for in the Distribution Support Agreement. "Termination Capital Transaction" shall mean any sale, transfer or other disposition of any Partnership property occurring upon or incident to the liquidation and winding-up of the Partnership pursuant to Article XIV. "Third Liquidation Target Amount" means an amount, determined with respect to any Unit, which equals, as of the date of its determination, the sum of (a) the Second Liquidation Target Amount, if any, attributable to such Unit, plus (b) the excess, if any, of the Third Target Amount over the Second Target Amount, determined with respect to the calendar quarter as to which such determination is made. "Third Target Amount" means $0.75 per Unit (or, with respect to the period commencing on the Closing Date and ending on June 30, 1989, the product of $0.75 multiplied by a fraction, of which the numerator is equal to the number of days in such period and of which the denominator is 91), subject to adjustment in accordance with Sections 5.6 and 9.6 hereof. "Timberlands Conveyance and Assumption Agreement" means the conveyance agreement between the Partnership and PCTC (or its successors) wherein, among other things, PCTC is to contribute to the Partnership undivided interests in certain timberlands and other assets in exchange for a limited partner interest in the Partnership consisting of 150,000 Management Units and 1,250,000 Deferred Participation Interests. "Trading Day" has the meaning assigned to such term in Section 17.1(a) hereof. "Transfer Agent" means the Depositary or any bank, trust company or other Person appointed by the Partnership to act as transfer agent for the Units. "Transfer Application" means an application and agreement for transfer of Depositary Units in the form set forth on the back of a Depositary Receipt or in a form substantially to the same effect in a separate instrument. "Underwriter" means each Person named as an underwriter in the Underwriting Agreement who purchases Units pursuant thereto. "Underwriting Agreement" means the Underwriting Agreement among the Underwriters, the Partnership, the General Partner, the Facilities Subsidiary, Plum Creek Timber Company, Inc. and Burlington. "Unit" means a Partnership Interest of a Limited Partner or Assignee in the Partnership (not including SPUs and, prior to the termination of the Support Period, not including a Deferred Participation Interest) representing a fractional part of the Partnership Interests of all Limited Partners and Assignees; provided, however, that in the event any class or series of Units issued pursuant to Section 4.4 hereof shall have designations, preferences or special rights such that a Unit of such class or series shall represent a greater or lesser part of the Partnership Interests of all Limited Partners or Assignees than a Unit of any other class or series of Units, the Partnership Interest represented by such class or series of Units shall be determined in B-13 14 accordance with such designations, preferences or special rights. Unless otherwise specifically indicated to the contrary, "Units" includes Depositary Units. "Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property (as determined under Section 4.6(d) hereof) as of such date, over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.6(d) hereof) as of such date. "Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.6(d) hereof) as of such date, over (b) the fair market value of such property (as determined under Section 4.6(d) hereof) as of such date. "Unrecovered Capital" means, at any time, (a) with respect to a Unit, the Initial Unit Price, less the sum of all distributions theretofore made in respect of such Unit constituting, and which for purposes of determining the priority of such distribution is treated as constituting, Cash from Capital Transactions, (b) with respect to a SPU, the excess, if any, of (i) the cash amount of the Capital Contribution made pursuant to Section 4.4 in exchange for such SPU, over (ii) any amount previously distributed pursuant to Section 5.4(d) or 13.4 towards the redemption of such SPU and (c) with respect to a Deferred Participation Interest, prior to its conversion into a Unit pursuant to Section 5.7(b), the excess, if any, of (i) the Net Agreed Value of the undivided interest in the Contributed Property conveyed to the Partnership pursuant to Section 4.3(a) in exchange for such Deferred Participation Interest, over (ii) any amount previously distributed pursuant to Section 13.4 towards the redemption of such Deferred Participation Interest. ARTICLE III PURPOSE 3.1 Purpose and Business. The purpose and nature of the business to be conducted by the Partnership shall be (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Delaware Act, including, without limitation, the acquisition, development, ownership, management, operation, leasing and disposition of timberlands and the production and sale of forest products, (ii) to enter into any partnership, joint venture or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged in any of the foregoing, including the ownership of common stock of the Facilities Subsidiary, and (iii) to do anything necessary or incidental to the foregoing (including, without limitation, the making of capital contributions or loans to the Facilities Subsidiary). 3.2 Powers. The Partnership shall be empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Partnership. ARTICLE IV CAPITAL CONTRIBUTIONS 4.1 Initial Contributions. In order to form the Partnership under the Delaware Act, the General Partner has made an initial Capital Contribution to the Partnership in the amount of $20 and the General Partner has accepted a Capital Contribution to the Partnership in the amount of $980 from the Organizational Limited Partner for an interest in the Partnership, and the Organizational Limited Partner has been admitted as a limited partner of the Partnership. 4.2 Return of Initial Contribution. As of the Closing Date, after giving effect to the transactions contemplated by Section 4.3 hereof, the interest in the Partnership of the Organizational Limited Partner shall be terminated, the Capital Contribution by the Organizational Limited Partner as an initial Capital Contribution shall be refunded and the Organizational Limited Partner shall withdraw as a limited partner of the Partnership. 98% of any interest or other profit which may have resulted from the investment or other use B-14 15 of such initial Capital Contributions shall be allocated and distributed to the Organizational Limited Partner, the balance thereof shall be allocated and distributed to the General Partner. 4.3 Initial Limited Partners. (a) Prior to the Closing Date, PCTC shall contribute to the Partnership undivided interests in those assets described in the Timberlands Conveyance and Assumption Agreement in exchange for 150,000 Management Units and 1,250,000 Deferred Participation Interests and, as of the Closing Date, PCTC shall be admitted to the Partnership as an Initial Limited Partner in respect of such Management Units and Deferred Participation Interests. (b) On the Closing Date, and as will then be required by the Underwriting Agreement, each Underwriter shall contribute to the Partnership, in exchange for the number of Units then specified in the Underwriting Agreement to be purchased by such Underwriter at such Time of Delivery, an amount in cash equal to the Issue Price for such Units (as then specified in the Underwriting Agreement) multiplied by such number of Units being so purchased. Upon receipt of such Capital Contribution, each Underwriter shall be admitted to the Partnership as an Initial Limited Partner in respect of the Units so issued to it. 4.4 Issuances of Additional Units and Other Securities. (a) The General Partner is hereby authorized to cause the Partnership to issue, in addition to the Units issued pursuant to Section 4.3 hereof, such additional Units, or classes or series thereof, or options, rights, warrants or appreciation rights relating thereto, or SPUs or any other type of equity security that the Partnership may lawfully issue, any unsecured or secured debt obligations of the Partnership or debt obligations of the Partnership convertible into any class or series of equity securities of the Partnership (collectively, "Partnership Securities"), for any Partnership purpose, at any time or from time to time, to the Partners or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole discretion, all without the approval of any Limited Partners. The General Partner shall have sole discretion, subject to the guidelines set forth in this Section 4.4 and the requirements of the Delaware Act, in determining the consideration and terms and conditions with respect to any future issuance of Partnership Securities. (b) Notwithstanding any provision of this Agreement to the contrary, additional Partnership Securities to be issued by the Partnership pursuant to this Section 4.4 shall be issuable from time to time in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to existing classes and series of Partnership Securities, all as shall be fixed by the General Partner in the exercise of its sole and complete discretion, subject to Delaware law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such class or series of Partnership Securities; (ii) the right of each such class or series of Partnership Securities to share in Partnership distributions; (iii) the rights of each such class or series of Partnership Securities upon dissolution and liquidation of the Partnership; (iv) whether such class or series of additional Partnership Securities is redeemable by the Partnership and, if so, the price at which, and the terms and conditions upon which, such class or series of additional Partnership Securities may be redeemed by the Partnership; (v) whether such class or series of additional Partnership Securities is issued with the privilege of conversion and, if so, the rate at which, and the terms and conditions upon which, such class or series of Partnership Securities may be converted into any other class or series of Partnership Securities; (vi) the terms and conditions upon which each such class or series of Partnership Securities will be issued, deposited with the Depositary, evidenced by Depositary Receipts and assigned or transferred; and (vii) the right, if any, of each such class or series of Partnership Securities to vote on Partnership matters, including matters relating to the relative rights, preferences and privileges of each such class or series. (c) Notwithstanding the terms of Sections 4.4(a) and 4.4(b) hereof, during the Support Period, the Partnership shall not issue an aggregate of more than 3,750,000 additional Units (excluding for purposes of such determination Units issued pursuant to the Underwriter's over-allotment option) or other Partnership Securities on a parity with the Units with respect to distributions, income, losses or upon liquidation nor shall the Partnership issue any other Partnership Securities having rights to distributions or in liquidation ranking prior or senior to the Units, without the prior approval of a majority of the outstanding Units (excluding Units held by the General Partner and its Affiliates). After the Support Period, the Partnership shall not issue any B-15 16 other Partnership Securities having rights to distributions or in liquidation ranking prior or senior to the Units, without the prior approval of a majority of the outstanding Units (excluding Units held by the General Partner and its Affiliates). (d) The General Partner is hereby authorized and directed to take all actions which it deems appropriate or necessary in connection with each issuance of Units, SPUs or other Partnership Securities pursuant to Section 4.4(a) hereof and to amend this Agreement in any manner which it deems appropriate or necessary to provide for each such issuance, to admit Additional Limited Partners in connection therewith and to specify the relative rights, powers and duties of the holders of the Partnership Securities being so issued. (e) The General Partner shall do all things necessary to comply with the Delaware Act and is authorized and directed to do all things it deems to be necessary or advisable in connection with any future issuance of Partnership Securities, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any National Securities Exchange on which the Depositary Units or other Partnership Securities are listed for trading. 4.5 No Preemptive Rights. No Person shall have any preemptive, preferential or other similar right with respect to (a) additional Capital Contributions; (b) issuance or sale of any class or series of Units, SPUs or other Partnership Securities, whether unissued, held in the treasury or hereafter created; (c) issuance of any obligations, evidences of indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any such Units or Partnership Securities; (d) issuance of any right of subscription to or right to receive, or any warrant or option for the purchase of, any such Units or Partnership Securities; or (e) issuance or sale of any other securities that may be issued or sold by the Partnership. 4.6 Capital Accounts. (a) The Partnership shall maintain for each Partner owning Units or Deferred Participation Interests a separate Capital Account with respect to such Units or Deferred Participation Interests, in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Units or Deferred Participation Interests pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 4.6(b) hereof and allocated with respect to such Units or Deferred Participation Interests pursuant to Section 5.1 hereof, and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Units or Deferred Participation Interests pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) hereof and allocated with respect to such Units or Deferred Participation Interests pursuant to Section 5.1 hereof. The Partnership shall maintain for the General Partner a separate Capital Account with respect to its Partnership Interest, held in its capacity as a general partner, in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Partnership Interest pursuant to this Agreement and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 4.6(b) hereof and allocated with respect to such Partnership Interest pursuant to Section 5.1 hereof, and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Partnership Interest pursuant to this Agreement and (y) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) hereof and allocated with respect to such Partnership Interest pursuant to Section 5.1. The Partnership shall maintain a separate Capital Account with respect to SPUs issued to any Special Limited Partner in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) all Capital Contributions made to the Partnership by such Special Limited Partner in exchange for such SPUs and (ii) all items of Partnership income and gain (including income and gain exempt from tax) computed in accordance with Section 4.6(b) hereof and allocated to such Partner pursuant to Section 5.1 hereof, and decreased by (x) the amount of cash or the Net Agreed Value of any property distributed by the Partnership to such Special Limited Partner in redemption of such SPUs, and B-16 17 (y) all items of Partnership deduction and loss computed in accordance with Section 4.6(b) and allocated to such Special Limited Partner pursuant to Section 5.1. (b) For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including any method of depreciation, cost recovery or amortization used for that purpose), provided, that: (i) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section 5.1 hereof. (ii) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. (iii) Any income, gain or loss attributable to the taxable disposition of any Partnership property (including any disposition of a timber interest) shall be determined as if the adjusted basis of such property (or, in the case of certain timber dispositions, the "adjusted depletion basis" of such timber) as of such date of disposition were equal in amount to the Partnership's Carrying Value with respect to such property as of such date. The adjusted basis or adjusted depletion basis, whichever the case may be, determined upon sales or other dispositions of timber units included in a timber account shall not, in the aggregate, exceed the Partnership's total Carrying Value with respect to all of the timber units included in such timber account. (iv) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined as if the adjusted basis of such property as of the date it was acquired by the Partnership was equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 4.6(d) hereof to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, however, that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt. (v) Any depletion deductions separately determined, in accordance with the principles of Section 611 of the Code, with respect to a separate timber account shall be computed as if the aggregate adjusted basis of the timber units included in such timber account on the date of such determination was equal in amount to the Partnership's Carrying Value with respect to such timber account as of such date. The depletion allowance separately determined with respect to a timber account shall not, in the aggregate, exceed the Partnership's total Carrying Value with respect to all of the timber units included in such timber account. This provision shall only apply to depletion separately stated as an item of deduction, as opposed to depletion amounts treated as a reduction of amounts realized or included as a cost of goods sold (which depletion amounts are the subject of Section 4.6(b)(iii)). (vi) If the Partnership's adjusted basis in a depreciable or cost recovery property is reduced for federal income tax purposes pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction shall solely for purposes hereof be deemed to be an additional depreciation or cost recovery deduction in the year such property is placed in service and shall be allocated among the Partners B-17 18 pursuant to Section 5.1 hereof. Any restoration of such basis pursuant to Section 48(q)(2) of the Code shall, to the extent possible, be allocated in the same manner to the Partners to whom such deemed deduction was allocated. (c)(i) Except as otherwise provided in Sections 4.6(c)(ii) and 4.6(c)(iii), a transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred; provided, however, that, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including the transferee of a Partnership Interest) pursuant to Sections 14.3 and 14.4 and recontributed by such Partners in reconstitution of the Partnership. In such event, the Carrying Values of the Partnership properties shall be adjusted immediately prior to such deemed distribution pursuant to Section 4.6(d)(ii) hereof and such adjusted Carrying Values shall then constitute the Agreed Values of such properties upon such deemed contribution to the reconstituted Partnership. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.6. (ii) Immediately prior to the sale, exchange or other disposition of a Restricted Unit by the General Partner or an Affiliate of the General Partner, the Capital Account maintained with respect to such Restricted Units for such Person shall be allocated between the Restricted Units transferred and the Restricted Units retained by such Person in the manner provided herein below: (A) In the case of a transfer, to either an unaffiliated third party or an Affiliate, of Deferred Participation Interests which constitute Restricted Units to the transferor, the Capital Account maintained with respect to the transferor's Restricted Units will (1) first, be allocated to the Management Units retained, if any, in an amount equal to the product of (a) the number of such Management Units retained and (b) the Per Unit Capital Amount, (2) second, be allocated to the Deferred Participation Interests transferred in an amount equal to the product of (a) the number of such Deferred Participation Interests transferred and (b) the Per Unit Capital Amount and (3) third, any remaining balance in the Capital Account will be allocated to the Deferred Participation Interests retained. Following any such allocation, the transferor's Capital Account, if any, will have a balance equal to the sum of the amounts allocated under clauses (1) and (3) hereinabove, and the transferee's Capital Account established with respect to the transferred Deferred Participation Interests will have a balance equal to the amount allocated under clause (2) hereinabove. (B) In the case of a transfer, to either an unaffiliated third party or an Affiliate, of Management Units which constitute Restricted Units to the transferor, the Capital Account maintained with respect to the transferor's Restricted Units will (1) first, be allocated to the Management Units transferred in an amount equal to the product of (a) the number of such Management Units transferred and (b) the Per Unit Capital Amount, and (2) second, any remaining balance in the Capital Account will be allocated to the Restricted Units retained. Following any such allocation, the transferor's Capital Account, if any, will have a balance equal to the amount allocated under clause (2) hereinabove and the transferee's Capital Account established with respect to the transferred Management Units will have a balance equal to the amount allocated under clause (1) hereinabove. (iii) Immediately prior to the sale, exchange or other disposition of a Deferred Participation Interest (not otherwise constituting a Restricted Unit) by the General Partner or an Affiliate of the General Partner, the Capital Account maintained for such Person with respect to such Units will (1) first, be allocated to the Deferred Participation Interests transferred in an amount equal to the product of (a) the number of such Deferred Participation Interests transferred and (b) the Per Unit Capital Amount, and (2) second, any remaining balance in such Capital Account will be retained by the transferor, regardless of whether it has retained any Deferred Participation Interests. Following any such allocation, the transferor's Capital Account, if any, maintained with respect to the retained Deferred Participation Interests, if any, will have a balance equal to the amount allocated under clause (2) hereinabove, and the transferee's Capital Account established with respect to the transferred Deferred Participation Interests will have a balance equal to the amount allocated under clause (1) hereinabove. B-18 19 (d)(i) Consistent with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Units for cash or Contributed Property or the conversion of the General Partner's Partnership Interest to Units pursuant to Section 13.3(b), the Capital Accounts of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 5.1 hereof. In determining such Unrealized Gain or Unrealized Loss the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) immediately prior to the issuance of Partnership Interests shall be determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, the General Partner, in arriving at such valuation, must take fully into account the Limited Partner Equity Value, the General Partner Equity Value, and the Special Limited Partner Book Capital, at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines in its sole discretion to be reasonable) to arrive at a fair market value for individual properties. (ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Carrying Value of such Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of each such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 5.1 hereof. Any Unrealized Gain or Unrealized Loss attributable to such property shall be allocated in the same manner as Net Termination Gain or Net Termination Loss pursuant to Section 5.1(c) hereof; provided, however, that, in making any such allocation, Net Termination Gain or Net Termination Loss actually realized shall be allocated first and; provided, further, that in allocating any Unrealized Gain upon the constructive termination resulting from the Initial Offering, Section 5.1(c)(i)(B) will be applied as if it required that 100% of such Unrealized Gain be allocated among the Limited Partners, in accordance with their respective Percentage Interests. In determining such Unrealized Gain or Unrealized Loss the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) immediately prior to a distribution shall (A) in the case of a deemed distribution occurring as a result of a termination of the Partnership pursuant to Section 708 of the Code, be determined and allocated in the manner provided in Section 4.6(d)(i) or (B) in the case of a liquidating distribution pursuant to Section 14.3 or 14.4, be determined and allocated by the Liquidator using such reasonable methods of valuation as it may adopt. Notwithstanding anything to the contrary provided herein, the preceding provisions of this subsection 4.6(d)(ii) shall not be applied to distributions of cash in redemption or retirement of a Partnership Interest (and no such adjustment shall be made) unless the adjustment therein described is necessary to maintain the economic uniformity of the Units within each class of publicly traded Units. 4.7 Interest. No interest shall be paid by the Partnership on Capital Contributions or on balances in Partners' Capital Accounts. 4.8 No Withdrawal. No Partner shall be entitled to withdraw any part of his Capital Contribution (including with respect to SPUs) or his Capital Account or to receive any distribution from the Partnership, except as provided in Section 4.2 hereof, and Articles V, XIII and XIV hereof. 4.9 Loans from Partners. Loans by a Partner to the Partnership shall not constitute Capital Contributions. If any Partner shall advance funds to the Partnership in excess of the amounts required hereunder to be contributed by it to the capital of the Partnership, the making of such excess advances shall not result in any increase in the amount of the Capital Account of such Partner. The amount of any such excess advances shall be a debt obligation of the Partnership to such Partner and shall be payable or collectible only out of the Partnership assets in accordance with the terms and conditions upon which such advances are made. 4.10 No Fractional Units. No fractional Units shall be issued by the Partnership. 4.11 Splits and Combinations. (a) Subject to Section 4.11(d) hereof, the General Partner may make a pro rata distribution of Units or Partnership Securities to all Record Holders or may effect a subdivision or combination of Units or other Partnership Securities; provided, however, that after any such distribution, B-19 20 subdivision or combination, each Partner shall have the same Percentage Interest in the Partnership as before such distribution, subdivision or combination. (b) Whenever such a distribution, subdivision or combination of Units or Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice of the distribution, subdivision or combination at least 20 days prior to such Record Date, to each Record Holder as of the date not less than 10 days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Units to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation. (c) Promptly following any such distribution, subdivision or combination, the General Partner may cause Depositary Receipts to be issued to the Record Holders of Units as of the applicable Record Date representing the new number of Units held by such Record Holders, or the General Partner may adopt such other procedures as it may deem appropriate to reflect such distribution, subdivision or combination; provided, however, that in the event any such distribution, subdivision or combination results in a smaller total number of Units outstanding, the General Partner shall require, as a condition to the delivery to a Record Holder of such new Depositary Receipt, the surrender of any Depositary Receipt held by such Record Holder immediately prior to such Record Date. (d) The Partnership shall not issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of Section 4.10 and this Section 4.11(d), each fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit). ARTICLE V ALLOCATIONS AND DISTRIBUTIONS 5.1 Allocations For Capital Account Purposes. For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership's items of income, gain, loss and deduction (computed in accordance with Section 4.6(b) hereof) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below. (a) Net Income. After giving effect to the special allocations set forth in Section 5.1(d), all items of income, gain, loss and deduction taken into account in computing Net Income for such taxable period shall be allocated in the same manner as such Net Income is allocated hereunder: (i) First, 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 5.1(a)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 5.1(b)(v) for all previous taxable years; (ii) Second, 100% to Partners holding Deferred Participation Interests, in the proportion of the number of Deferred Participation Interests held by each such Partner to the total number of Deferred Participation Interests then outstanding, until the aggregate Net Income allocated to such Partners pursuant to this Section 5.1(a)(ii) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to such Partners pursuant to Section 5.1(b)(iv) for all previous taxable years; (iii) Third, 100% to the Special Limited Partners, in the proportion of the number of SPUs held by each such Partner to the total number of SPUs then outstanding, until the aggregate Net Income allocated to the Special Limited Partners pursuant to this Section 5.1(a)(iii) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the Special Limited Partners pursuant to Section 5.1(b)(iii) for all previous taxable years; B-20 21 (iv) Fourth, 100% to the Limited Partners, in accordance with their respective Percentage Interests, until the aggregate Net Income allocated to the Limited Partners pursuant to this Section 5.1(a)(iv) for the current taxable year and all previous taxable years is equal to the aggregate Net Losses allocated to the Limited Partners pursuant to Section 5.1(b)(ii) for all previous taxable years; and (v) Fifth, the balance, if any, 100% to the General Partner and the Limited Partners in accordance with their respective Percentage Interests. (b) Net Losses. After giving effect to the special allocations set forth in Section 5.1(d), all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated in the same manner as such Net Losses are allocated hereunder: (i) First, 100% to the General Partner and the Limited Partners, in accordance with their respective Percentage Interests, until the aggregate Net Losses allocated pursuant to this Section 5.1(b)(i) for the current taxable year and all previous taxable years is equal to the aggregate Net Income allocated to such Partners pursuant to Section 5.1(a)(v) for all previous taxable years; (ii) Second, 100% to the Limited Partners, in accordance with their respective Percentage Interests; provided, that Net Losses shall not be allocated pursuant to this Section 5.1(b)(ii) to the extent that such allocation would cause any Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); (iii) Third, 100% to the Special Limited Partners, in the proportion of the number of SPUs held by each such Partner to the total number of SPUs then outstanding; provided, that Net Losses shall not be allocated pursuant to this Section 5.1(b)(iii) to the extent that such allocation would cause any Special Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); (iv) Fourth, if such taxable period ends prior to the conversion of the last outstanding Deferred Participation Interest, pursuant to Section 5.7(b) hereof, 100% to the Partners holding Deferred Participation Interests, in the proportion of the number of Deferred Participation Interests held by each such Partner to the total number of Deferred Participation Interests then outstanding; provided, that Net Losses shall not be allocated pursuant to this Section 5.1(b)(iv) to the extent that such allocation would cause any Partner holding such Deferred Participation Interests to have a deficit balance in its Adjusted Capital Account at the end of such taxable year (or increase any existing deficit balance in its Adjusted Capital Account); and (v) Fifth, the balance, if any, 100% to the General Partner. (c) Net Termination Gains and Losses. After giving effect to the special allocations set forth in Section 5.1(d), all items of gain and loss taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 5.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 5.1 and after all distributions of Available Cash provided under Section 5.4 have been made with respect to the taxable period ending on the Liquidation Date. (i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net Termination Gain shall be allocated between the General Partner and the Limited Partners in the following manner (and the Capital Accounts of the Partners shall be increased by the amount so allocated in each of the following B-21 22 subclauses, in the order listed, before an allocation is made pursuant to the next succeeding subclause): (A) First, to each Partner having a deficit balance in its Capital Account, in the proportion of such deficit balance to the deficit balances in the Capital Accounts of all Partners, until each such Partner has been allocated Net Termination Gain equal to any such deficit balance in its Capital Account; (B) Second, 98% to the Limited Partners, in accordance with their respective Percentage Interests, and 2% to the General Partner until each Limited Partner's Capital Account (determined on a per Unit basis) in respect of its Units is equal to the sum of (1) the Unrecovered Capital attributable to each such Unit plus (2) the Cumulative Base Deficiency, if any, attributable to each such Unit; (C) Third, 98% to the Limited Partners, in accordance with their respective Percentage Interests, and 2% to the General Partner until each Limited Partner's Capital Account (determined on a per Unit basis) in respect of its Units is equal to the First Liquidation Target Amount, determined with respect to each such Unit; (D) Fourth, if such Termination Capital Transaction occurs (or is deemed to occur) prior to the conversion of the last outstanding Deferred Participation Interest, pursuant to Section 5.7(b) hereof, 100% to the Partners holding such Deferred Participation Interests, in the ratio of the number of Deferred Participation Interests held by each such Partner to the total number of Deferred Participation Interests then outstanding, in the amount which will increase the Capital Account balance of each such Partner maintained with respect to such Deferred Participation Interests to that amount which equals its Unrecovered Capital attributable to such Deferred Participation Interests, determined for the taxable year (or portion thereof) to which this allocation of gain relates; (E) Fifth, if such Termination Capital Transaction occurs (or is deemed to occur) prior to the redemption of all SPUs then outstanding, 100% to the Special Limited Partners holding such SPUs, in the proportion of the number of SPUs held by each such Partner to the total number of SPUs then outstanding, in the amount which will increase the Capital Account balance of each such Special Limited Partner maintained with respect to such SPUs to that amount which equals its Unrecovered Capital attributable to such SPUs, determined for the taxable year (or portion thereof) to which this allocation of gain relates; (F) Sixth, 88% to the Limited Partners, in accordance with their respective Percentage Interests, and 12% to the General Partner until each Limited Partner's Capital Account (determined on a per Unit basis) is equal to the Second Liquidation Target Amount, determined with respect to each such Unit; (G) Seventh, 78% to the Limited Partners, in accordance with their respective Percentage Interests, and 22% to the General Partner until each Limited Partner's Capital Account (determined on a per Unit basis) is equal to the Third Liquidation Target Amount, determined with respect to each such Unit; (H) Eighth, 68% to the Limited Partners, in accordance with their respective Percentage Interests, and 32% to the General Partner until each Limited Partner's Capital Account (determined on a per Unit basis) is equal to the Fourth Liquidation Target Amount, determined with respect to each such Unit; and (I) Finally, the balance if any, 63% to all Limited Partners, in accordance with their respective Percentage Interests, and 37% to the General Partner. B-22 23 (ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 4.6.(d)) from Termination Capital Transactions, such Net Termination Loss shall be allocated to the Partners in the following manner: (A) First, 100% to the General Partner and the Limited Partners in proportion to, and to the extent of, the positive balances in their respective Capital Accounts; (B) Second, if such Termination Capital Transaction occurs (or is deemed to occur) prior to the redemption of all SPUs outstanding, 100% to the Special Limited Partners, in the proportion of the number of SPUs held by each such Partner to the total number of SPUs then outstanding, to the extent of the positive balances in their respective Capital Accounts maintained with respect to such SPUs; (C) Third, if such Termination Capital Transaction occurs (or is deemed to occur) prior to the conversion of the last outstanding Deferred Participation Interest, pursuant to Section 5.7(b) hereof, 100% to the Partners holding Deferred Participation Interests, in the proportion of the number of Deferred Participation Interests held by each such Partner to the total number of Deferred Participation Interests then outstanding, to the extent of the positive balances in their respective Capital Accounts maintained with respect to such Deferred Participation Interests; and (D) Fourth, the balance, if any, 100% to the General Partner. (d) Special Allocations. Notwithstanding any other provision of this Section 5.1, the following special allocations shall be made for such taxable period: (i) Partnership Minimum Gain Chargeback. Notwithstanding any other provision of this Section 5.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the greater of (A) the portion of such Partner's share of the net decrease in Partnership Minimum Gain during such taxable period that is allocable (in accordance with the principles set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(e)(2)) to the disposition of Partnership property subject to one or more Nonrecourse Liabilities of the Partnership, or (B) the deficit balance in such Partner's Adjusted Capital Account at the end of such taxable period (modified, as appropriate, by Treasury Regulation Section 1.704- 1T(b)(4)(iv)(e)(2)). The items to be so allocated shall be determined in accordance with Treasury Regulation Section 1.704-1T(b)(4)(iv)(e) and, for purposes of this Section 5.1(d), each Partner's Adjusted Capital Account balance shall be determined, and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d) with respect to such taxable period. This Section 5.1(d)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-1T(b)(iv)(4)(e) and shall be interpreted consistently therewith. (ii) Chargeback of Minimum Gain Attributable to Partner Nonrecourse Debt. Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(d)(i)), if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any Partnership taxable period, any Partner with a share of Minimum Gain Attributable to Partner Nonrecourse Debt at the beginning of such taxable period shall be allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the greater of (A) the portion of such Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt that is allocable (in accordance with the principles set forth in Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4)) to the disposition of Partnership property subject to such Partner Nonrecourse Debt, or (B) the deficit balance in such Partner's Adjusted Capital Account at the end of such taxable period (modified, as appropriate, by Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4)). The items to be so allocated shall be determined in a manner consistent with the principles of Treasury Regulation Section 1.704- B-23 24 1T(b)(4)(iv)(e) and, for purposes of this Section 5.1(d), each Partner's Adjusted Capital Account balance shall be determined and the allocation of income or gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(d), other than Section 5.1(d)(i), with respect to such taxable period. This Section 5.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4) and shall be interpreted consistently therewith. (iii) Priority Allocations. All or a portion of the remaining items of Partnership gross income or gain for the taxable period, if any, shall be allocated 100% to the General Partner until the aggregate amount of such items allocated to the General Partner under this paragraph (iii) for the current taxable period and all previous taxable periods is equal to the cumulative amount of cash distributed to the General Partner as an Incentive Distribution from the Closing Date to a date 45 days after the end of the current taxable period. (iv) Qualified Income Offset. Except as provided in Sections 5.1(d)(i) and 5.1 (d)(ii), in the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) (modified, as appropriate, by Treasury Regulation Sections 1.704-1T(b)(4)(iv)(e)(3) and 1.704-1T(b)(4)(iv)(h)(4)), items of Partnership income and gain shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible; provided, that an allocation pursuant to this Section 5.1(d)(iv) shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 5.1 have been tentatively made as if this Section 5.1(d)(iv) was not in the Agreement. (v) Gross Income Allocations. In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period that is in excess of the sum of (A) the amount such Partner is obligated to restore pursuant to any provision of this Agreement and (B) the amount such Partner is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5), such Partner shall be specially allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 5.1(d)(v) shall be made only if and to the extent that such Partner would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Section 5.1 have been tentatively made as if Section 5.1(d)(iv) hereof and this Section 5.1(d)(v) were not in the Agreement. (vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests. If the General Partner determines in its good faith discretion that the Partnership's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the Limited Partners, to revise the prescribed ratio to the numerically closest ratio which does satisfy such requirements. (vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-1T(b)(4)(iv)(h). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss. (viii) Nonrecourse Liabilities. For purposes of Treasury Regulation Section 1.752-1T(e)(ii)(C), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the B-24 25 sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests. (ix) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury regulations. (x) Economic Uniformity. At the election of the General Partner with respect to any taxable period or portion thereof, all or a portion of the items of Partnership gross income, gain or expense for such taxable period or portion thereof, if any, shall be allocated 100% to each Partner holding Deferred Participation Interests during such period or portion thereof, in the proportion of the number of Deferred Participation Interests held by such Partner to the total number of Deferred Participation Interests then outstanding, until each such Partner has been allocated an amount of gross income, gain or expense which adjusts the Capital Account maintained with respect to such Interests to an amount equal to the product of (A) the number of Deferred Participation Interests held by such Partner and (B) the Per Unit Capital Amount. The purpose of this allocation is to establish uniformity between the Capital Accounts underlying Deferred Participation Interests and the Capital Accounts underlying Units held by Public Unitholders. This allocation method for establishing such economic uniformity will only be available to the General Partner if the method for allocating the Capital Account maintained with respect to the Deferred Participation Interests between the transferred and retained Deferred Participation Interests pursuant to Section 4.6(c)(iii) is not applicable or does not otherwise provide such economic uniformity to the Deferred Participation Interests. Notwithstanding anything to the contrary provided herein, the provisions of this subsection shall be applied to the General Partner not later than with respect to the taxable period or portion of period ending on the date of the temination of the Support Period. (xi) Curative Allocation. (A) Notwithstanding any other provision of this Section 5.1, other than the Required Allocations, the Required Allocations shall be taken into account in making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss and deduction allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and this Curative Allocation not otherwise been provided in this Section 5.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into account except to the extent that there has been a decrease in Minimum Gain Attributable to Partner Nonrecourse Debts. Allocations pursuant to this Section 5.1(d)(xi)(A) shall only be made with respect to Required Allocations to the extent the General Partner reasonably determines that such allocations will otherwise be inconsistent with the economic agreement among the Partners. Further, allocations pursuant to this Section 5.1(d)(xi)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the General Partner reasonably determines that such allocations are likely to be offset by subsequent Required Allocations. (xii) Notwithstanding the other provisions of this Section 5.1(d) (other than paragraphs (i) and (ii)) all or a portion of the remaining items of Partnership gross income or gain for the taxable period, if any, shall be allocated to each Partner who has received a deemed distribution of Available Cash pursuant to Section 9.7 hereof until the aggregate amount of such items allocated to each such Partner under this paragraph (xii) for the current taxable period and all previous taxable periods is equal to the cumulative amount of cash deemed distributed to such Partner pursuant to Section 9.7 for the current taxable period and all previous periods. (B) The General Partner shall have reasonable discretion, with respect to each taxable period, to (1) apply the provisions of Section 5.1(d)(xi)(A) hereof in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to Section 5.1(d)(xi)(A) hereof among the Partners in a manner that is likely to minimize such economic distortions. B-25 26 (xii) Restorative Allocation. (A) in the event (1) the allocation described in Section 5.1(d)(x) is made pursuant to such Section; (2) a Termination Capital Transaction occurs after such allocation, but prior to the temrination of the Support Period; and (3) as a result thereof there is a Net Termination Gain allocable to periods ending on or prior to the end of the Support Period, then all or a portion of the items of Partnership gross income or gain, if any, for the taxable year in which such Termination Capital Transaction occurs, shall be allocated pro rata to Partners holding Units, until the allocation of gain or income that would have been made to the General Partner absent the allocation made pursuant to this Section 5.1(d)(xii)(A) has instead been made to the holders of Units up to an amount equal to the amount of the allocation previously made pursuant to Section 5.1(d)(x). If the allocation of gain or income to Partners holding Units pursuant to the preceding sentence is less than the amount of the allocation previously made pursuant to Section 5.1(d)(x), then an amount of Partnership loss or deduction for such taxable year equal to such difference shall be allocated to the General Partner. (B) In the event (1) the allocation described in Section 5.1(d)(x) is made pursuant to such Section; (2) a Termination Capital Transaction occurs after such allocation, but prior to the termination of the Support Period; and (3) as a result thereof there is a Net Termination Loss allocable to periods ending on or prior to the end of the Support Period, then all or a portion of the items of Partnership loss or deduction, if any, for the taxable year in which such Termination Capital Transaction occurs, shall be allocated to the General Partner, until the allocation of loss or deduction that would have been made to the Partners holding Units absent the allocation made pursuant to this Section 5.1(d)(xii)(B) has instead been made to the General Partner up to an amount equal to the amount of the allocation previously made pursuant to Section 5.1(d)(x). 5.2 Allocations for Tax Purposes. (a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of "book" income, gain, loss or deduction is allocated pursuant to Section 5.1 hereof. (b) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, depreciation, depletion and cost recovery deductions shall be allocated for federal income tax purposes among the Partners as follows: (i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted basis at the time of contribution; and (B) except as otherwise provided in Section 5.2(b)(iv), any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 5.1. (ii) (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 4.6(d)(i) or (ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 5.2(b)(i)(A); and (B) except as otherwise provided in Section 5.2(b)(iv), any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of "book" gain or loss is allocated pursuant to Section 5.1. (iii) Except as otherwise provided in Section 5.2(b)(iv), all other items of income, gain, loss and deduction shall be allocated among the Partners in the same manner as their correlative item of "book" gain or loss is allocated pursuant to Section 5.1. (iv) Any items of income, gain, loss or deduction otherwise allocable under Section 5.2(b)(i)(B), 5.2(b)(ii)(B) or 5.2(b)(iii) shall be subject to allocation by the General Partner in a manner designed B-26 27 to eliminate, to the maximum extent possible, Book-Tax Disparities in a Contributed Property or Adjusted Property otherwise resulting from the application of the "ceiling" limitation (under Section 704(c) of the Code or Section 704(c) principles) to the allocations provided under Section 5.2(b)(i)(A) or 5.2(b)(ii)(A). (c) For the proper administration of the Partnership and for the preservation of uniformity of the Units (or any class or classes thereof), the General Partner shall have sole discretion to (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including gross income) or deductions; and (iii) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the Units (or any class or classes thereof). The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 5.2(c) only if such conventions, allocations or amendments would not have a material adverse effect on the Partners, the holders of any class or classes of Units issued and outstanding or the Partnership, and if such allocations are consistent with the principles of Section 704 of the Code. (d) The General Partner in its sole discretion may determine to depreciate the portion of an adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a predetermined rate derived from the depreciation method and useful life applied to the Partnership's common basis of such property, despite the inconsistency of such approach with Proposed Treasury Regulation Section 1.168-2(n) and Treasury Regulation Section 1.167(c)-1(a)(6). If the General Partner later determines that such reporting position cannot reasonably be taken, the General Partner may adopt a depreciation convention under which all purchasers acquiring Units in the same month would receive depreciation, based upon the same applicable rate as if they had purchased a direct interest in the Partnership's property. If the General Partner chooses not to utilize such aggregate method, the General Partner may use any other reasonable depreciation convention to preserve the uniformity of the intrinsic tax characteristics of any Units that would not have a material adverse effect on the Limited Partners or the Record Holders of any class or classes of Units. (e) Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 5.2 be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. (f) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, that such allocations once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted or required by Sections 734 and 743 of the Code. (g) Each item of Partnership income, gain, loss and deduction attributable to a transferred Partnership Interest shall, for federal income tax purposes, be determined on an annual basis and prorated on a monthly basis and shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of each month; provided, however, that (i) except as otherwise provided in clause (ii), such items for the period beginning on the Closing Date and ending on the last day of the month in which the Closing Date occurs shall be allocated to Partners as of the opening of the New York Stock Exchange on the first Business Day of the next succeeding month or (ii) if the Underwriters' over-allotment option is exercised, such items for the period beginning on the Closing Date and ending on the last day of the month in which the Second Time of Delivery (as defined in the Underwriting Agreement) occurs shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the next succeeding month; and provided, further, that gain or loss on a sale or other disposition of any assets of the Partnership other than in the ordinary course of business shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the month in which such gain or loss is recognized for B-27 28 federal income tax purposes. The General Partner may revise, alter or otherwise modify such methods of allocation as it determines necessary, to the extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder. (h) Allocations that would otherwise be made to a Limited Partner under the provisions of this Article V shall instead be made to the beneficial owner of Units held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner in its sole discretion. 5.3 Requirement and Characterization of Distributions. Within 60 days following the end of each calendar quarter (or following the period from the Closing Date to June 30, 1989) an amount equal to 100% of Available Cash with respect to such quarter (or period) shall be distributed in accordance with this Article V by the Partnership to the Partners, as of the Record Date selected by the General Partner in its reasonable discretion. The foregoing shall not modify in any respect the provisions of Section 4.2 hereof regarding the distribution of any interest or other profit on the initial Capital Contributions referred to therein. The General Partner shall have the right to determine in its sole discretion whether a particular distribution of cash consists of Available Cash or Cash From Capital Transactions and the amount of cash in each such category, except to the extent it is established that such determination is contrary to any of the express provisions in this Agreement. Except as otherwise provided in Section 5.5(b), the Partnership shall not be obligated to make distributions of Cash From Capital Transactions and the General Partner shall have the right to cause the Partnership to use Cash From Capital Transactions for any purpose the General Partner deems necessary or desirable, including but not limited to, purchase of Units in the public market, in privately negotiated transactions or otherwise (and in no event shall the General Partner be obligated to cause such purchases to be made on a pro rata basis or to afford every Limited Partner an equal opportunity to participate in the transactions involved). 5.4 Distributions. Available Cash with respect to any calendar quarter shall be distributed as follows: (a) First, 98% to the Limited Partners, in accordance with their respective Percentage Interests, and 2% to the General Partner until there has been distributed in respect of each of the outstanding Units an amount equal to the Minimum Quarterly Amount; (b) Second, 98% to the Limited Partners, in accordance with their respective Percentage Interests, and 2% to the General Partner until there has been distributed in respect of each of the outstanding Units an amount equal to any Cumulative Base Deficiency existing as of the end of such quarter; (c) Third, 98% to the Limited Partners, in accordance with their respective Percentage Interests, and 2% to the General Partner until there has been distributed in respect of each of the outstanding Units an amount equal to the excess of the First Target Amount over the Minimum Quarterly Amount; (d) Fourth, 100% to the Special Limited Partners, in proportion to the Unrecovered Capital balance attributable to the respective SPUs held by them, to the extent necessary to redeem any and all then outstanding SPUs at a price equal to the Unrecovered Capital attributable thereto; (e) Fifth, 88% to the Limited Partners, in accordance with their respective Percentage Interests, and 12% to the General Partner until there has been distributed in respect of each of the outstanding Units an amount equal to the excess of the Second Target Amount over the First Target Amount; (f) Sixth, 78% to the Limited Partners, in accordance with their respective Percentage Interests, and 22% to the General Partner until there has been distributed in respect of each of the outstanding Units an amount equal to the excess of the Third Target Amount over the Second Target Amount; (g) Seventh, 68% to the Limited Partners, in accordance with their respective Percentage Interests and 32% to the General Partner until there has been distributed in respect of each of the outstanding Units an amount equal to the Fourth Target Amount over the Third Target Amount; and (h) Finally, the balance, if any, 63% to the Limited Partners, in accordance with their respective Percentage Interests, and 37% to the General Partner. B-28 29 5.5 Distributions of Cash from Capital Transactions. (a) Cash from Capital Transactions which the General Partner determines in accordance with Section 5.3 to distribute shall be distributed, unless the provisions of Section 5.5(b) hereof require otherwise, 98% to the Limited Partners, in accordance with their respective Percentage Interests, and 2% to the General Partner until the Limited Partners have received, since the Closing Date through such date, distributions of Available Cash that are deemed to be Cash from Capital Transactions in an aggregate amount equal to the product obtained by multiplying (i) the Initial Unit Price by (ii) 12,500,000 (increased by the number of Units, if any, issued pursuant to exercise of the Underwriters' over-allotment option). Thereafter, any Cash from Capital Transactions shall be distributed in accordance with Section 5.4. (b) If one or more Capital Transactions shall occur in any taxable year, then (except as otherwise provided below) the General Partner shall be required to make a distribution of Cash from Capital Transactions on or before the April 1st next following the end of the taxable year in which such Capital Transactions occur in accordance with the following procedures: (i) The General Partner shall determine the net capital gain and net ordinary income recognized by the Partnership (without taking account of any Code Section 743 adjustments) for federal income tax purposes from all Capital Transactions during such year, and shall then determine the portion of such net capital gain and net ordinary income allocable to Units purchased by the Underwriters pursuant to the Underwriting Agreement for federal income tax purposes. Such portion of any net capital gain or net ordinary income shall then be divided by the number of Units purchased by the Underwriters pursuant to the Underwriting Agreement. (ii) The General Partner shall then cause the Partnership to distribute to the Partners, in accordance with their respective Percentage Interests, cash until an amount has been distributed pursuant hereto with respect to every Unit outstanding on the Record Date established by the General Partner with respect to such distribution equal to 125% of the federal income tax liability that would be due with respect to the "net capital gain" and "net ordinary income" attributed to each outstanding Unit on the Record Date for the distribution to be made pursuant to the preceding sentence (assuming for such purpose that the maximum effective federal income tax rates for individuals, relating to either long-term capital gain or ordinary income, whichever the case may be, applied to all holders of Units at the time of such recognition without regard to any recapture of lower rates or alternative minimum tax rate). (iii) No distribution of Cash from Capital Transactions shall be required by this Section 5.5(b) with respect to any tax year if the amount otherwise distributable for such taxable year under this Section 5.5(b) does not exceed $0.10 per Unit, or if such distribution shall be prohibited by requirements binding upon the Partnership or any Subsidiary at the time such distribution would otherwise be required (including but not limited to any such requirement imposed by any loan agreement then in effect). 5.6 Adjustment of Minimum Quarterly Amount, Unrecovered Capital, Cumulative Base Deficiency and Target Amounts. (a) The Minimum Quarterly Amount, Unrecovered Capital, Cumulative Base Deficiency, First Target Amount, Second Target Amount, Third Target Amount and Fourth Target Amount shall be proportionately adjusted in the event of any distribution, combination or subdivision (whether effected by a distribution payable in Units or otherwise) of Units or Partnership Securities in accordance with Section 4.11 hereof. In the event of a distribution of Cash from Capital Transactions, the Minimum Quarterly Amount, First Target Amount, Second Target Amount, Third Target Amount and Fourth Target Amount shall be adjusted proportionately downward to equal the product of the otherwise applicable Minimum Quarterly Amount, First Target Amount, Second Target Amount, Third Target Amount and Fourth Target Amount, as the case may be, by a fraction, of which the numerator is the Unrecovered Capital immediately after giving effect to such distribution and of which the denominator is the Unrecovered Capital immediately prior to giving effect to such distribution. (b) The Minimum Quarterly Amount, First Target Amount, Second Target Amount, Third Target Amount and Fourth Target Amount shall also be subject to adjustment pursuant to Section 9.6 hereof. 5.7 Special Provisions Relating to the Deferred Participation Interests. (a) During the Support Period, the holder of a Deferred Participation Interest shall not be entitled to any cash distributions and shall only B-29 30 possess the rights and obligations specifically provided in this Agreement with respect to a Deferred Participation Interest (and no other rights otherwise available to a holder of a Partnership Interest). (b) Immediately upon the expiration of the Support Period, the General Partner shall take all reasonable steps necessary, based on advice of counsel, including the application of Sections 4.6(c)(ii), 4.6(c)(iii) and 5.1(d)(x); provided, however, that no such steps may be taken that would have a material adverse effect on the Limited Partners or the Record Holders of any class or classes of Units, to ensure that each Deferred Participation Interest has, as a substantive matter, like intrinsic economic and federal income tax characteristics, in all material respects, to the intrinsic economic and federal income tax characteristics of a Unit then outstanding, and each Deferred Participation Interest shall, upon the expiration of the Support Period, automatically convert to a Unit and from that time forward shall constitute a Unit for all purposes under this Agreement. ARTICLE VI MANAGEMENT AND OPERATION OF BUSINESS 6.1 Management. (a) The General Partner shall conduct, direct and exercise full control over all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any right of control or management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or which are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 6.3 hereof, shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership, to exercise all powers set forth in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof including, without limitation, (i) the making of any expenditures, the borrowing of money, the guaranteeing of indebtedness and other liabilities, the issuance of evidences of indebtedness and the incurring of any obligations it deems necessary for the conduct of the activities of the Partnership; (ii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership; (iii) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any assets of the Partnership or the merger or other combination of the Partnership with or into another entity (all of the foregoing subject to any prior approval which may be required by Section 6.3 hereof); (iv) the use of the assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any terms it sees fit, including, without limitation, the financing of the conduct of the operations of the Partnership or any Subsidiary, the lending of funds to other persons (including any Subsidiary) and the repayment of obligations of the Partnership and any Subsidiary and the making of capital contributions to any Subsidiary; (v) the negotiation and execution on any terms deemed desirable in its sole discretion and the performance of any contracts, conveyances or other instruments that it considers useful or necessary to the conduct of the Partnership operations or the implementation of its powers under this Agreement; (vi) the distribution of Partnership cash; (vii) the selection and dismissal of employees and agents (including, without limitation, employees having titles such as "president", "vice president", "secretary" and "treasurer") and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; (viii) the maintenance of such insurance for the benefit of the Partnership and the Partners as it deems necessary or appropriate; (ix) the formation of, or acquisition of an interest in, and the contribution of property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to any Subsidiary from time to time); (x) the control of any matters affecting the rights and obligations of the Partnership, including the conduct of litigation and the incurring of legal expense and the settlement of claims and litigation; (xi) the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness and the securing of same by mortgage, deed of trust or other lien or encumbrance, the bringing and defending of actions at law or in equity and the indemnification of any Person against liabilities and contingencies to the extent permitted by law; (xii) B-30 31 the entering into listing agreements with the New York Stock Exchange and any other securities exchange and delisting some or all of the Units from, or requesting that trading be suspended on, any such exchange (subject to any prior approval which may be required under Section 1.6 hereof); (xiii) the undertaking of any action in connection with the Partnership's investment in any Subsidiary (including, without limitation, the contribution or loan by the Partnership to any Subsidiary of funds); and (xiv) the undertaking of any action in connection with the Partnership's direct or indirect investment in any Subsidiary. (b) Each of the Partners and each other Person who may acquire an interest in Units hereby approves, ratifies and confirms the execution, delivery and performance by the parties thereto of the Deposit Agreement, the Underwriting Agreement, and the other agreements described in the Registration Statement, and agrees that the General Partner is authorized to execute, deliver and perform the above-mentioned agreements and transactions and such other agreements described in the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the other Persons who may acquire an interest in Units, notwithstanding any other provision of this Agreement, the Delaware Act or any applicable law, rule or regulation. None of the execution, delivery or performance by the General Partner, the Partnership or any Affiliate of any of them of any agreement authorized or permitted under this Agreement shall constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated or implied by law or equity. 6.2 Certificate of Limited Partnership. The General Partner has filed the Certificate of Limited Partnership with the Secretary of State of the State of Delaware as required by the Delaware Act and shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent that such action is determined by the General Partner to be reasonable and necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all the things to maintain the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) under the laws of the State of Delaware or any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 7.5(a) hereof, the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership or any amendment thereto to any Limited Partner. 6.3 Restrictions on General Partner's Authority. (a) The General Partner may not, without the written approval of the specific act by all of the Limited Partners or by other written instrument executed and delivered by all of the Limited Partners subsequent to the date of this Agreement, take any action in contravention of this Agreement, including, without limitation, (i) take any act that would make it impossible to carry on the ordinary business of the Partnership, except as otherwise provided in this Agreement; (ii) possess Partnership property, or assign any rights in specific Partnership property, for other than a Partnership purpose; (iii) admit a person as a Partner, except as otherwise provided in this Agreement; (iv) amend this Agreement in any manner, except as otherwise provided in this Agreement; or (v) transfer its interest as General Partner of the Partnership, except as otherwise provided in this Agreement. (b) Except as provided in Article XIV hereof, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the Partnership's assets in a single transaction or a series of related transactions (including by way of merger, consolidation or other combination with any other Person) or approve on behalf of the Partnership the sale, exchange or other disposition of all or substantially all of the assets of the Facilities Subsidiary, without the approval of at least 66 2/3% of the outstanding Units (excluding any Units owned by the General Partner and its Affiliates) during the Support Period and thereafter without the approval of at least a majority of the outstanding Units (excluding any Units owned by the General Partner and its Affiliates); provided, however, that this provision shall not preclude or limit the mortgage, pledge, hypothecation or grant of a security interest in all or substantially all of the Partnership's assets and shall not apply to any forced sale of any or all of the Partnership's assets pursuant to the foreclosure of, or other realization upon, any such encumbrance. B-31 32 (c) Unless approved by the affirmative vote of the holders of at least 66 2/3% of each class of outstanding Units and the affirmative vote of the holders of at least a majority of outstanding Units excluding for purposes of such determination any Units owned by the General Partner and its Affiliates, the General Partner shall not take any action or refuse to take any reasonable action the effect of which, if taken or not taken, as the case may be, would be to cause the Partnership to be treated for federal income tax purposes as an association taxable as a corporation. (d) At all times while serving as the general partner of the Partnership, the General Partner will not make any dividend or distribution on, or repurchase any stock or take any other action if the effect of such dividend or distribution, repurchase or other action would be to reduce its net worth below an amount necessary to receive an Opinion of Counsel that the Partnership will be treated as a partnership for federal income tax purposes. 6.4 Reimbursement of the General Partner. (a) Except as provided in this Section 6.4 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as general partner of the Partnership. (b) The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole discretion, for (i) all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership (including amounts paid to any Person to perform services to or for the Partnership) and (ii) that portion of the General Partner's or its Affiliates' legal, accounting, investor communications, utilities, telephone, secretarial, travel, entertainment, bookkeeping, reporting, data processing, office rent and other office expenses (including overhead charges), salaries, fees and other compensation and benefit expenses of employees, officers and directors, other administrative or overhead expenses and all other expenses, in each such case, necessary or appropriate to the conduct of the Partnership's business and allocable to the Partnership or otherwise incurred by the General Partner in connection with operating the Partnership's business (including, without limitation, expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the fees and expenses that are allocable to the Partnership in any reasonable manner determined by the General Partner in its sole discretion. Such reimbursements shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 6.7 hereof. (c) Subject to Section 4.4(c) hereof, the General Partner in its sole discretion and without the approval of the Limited Partners may propose and adopt on behalf of the Partnership, employee benefit plans (including, without limitation, plans involving the issuance of Units), for the benefit of employees of the General Partner, the Partnership, any Subsidiary or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Partnership or any Subsidiary. 6.5 Outside Activities. (a) After the Closing Date, the General Partner shall not, for so long as it is the general partner of the Partnership, enter into or conduct any business nor incur any debts or liabilities except in connection with or incidental to (i) its performance of the activities required or authorized by this Agreement or described in or contemplated by the Registration Statement and (ii) the acquisition, ownership or disposition of the partnership interest in the Partnership or its equity interest in any Subsidiary. (b) Except as described in the Registration Statement or provided in Section 6.5(a) hereof, no Indemnitee shall be expressly or implicitly restricted or proscribed pursuant to this Agreement or the partnership relationship established hereby from engaging in other activities for profit, whether in the businesses engaged in by the Partnership or anticipated to be engaged in by the Partnership or otherwise, including, without limitation, those businesses described in or contemplated by the Registration Statement. Neither the Partnership, any Limited Partner nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby or thereby in any business ventures of any Indemnitee, and, except as set forth in the Registration Statement, such Indemnitees shall have no obligation to offer any interest in any such business ventures to the Partnership, any Limited Partner or any such other Person. The General Partner and any other Persons affiliated with the General Partner may acquire Units or Partnership Securities, in addition to those acquired by any of such Persons on the Closing Date, and shall be B-32 33 entitled to exercise all rights of an Assignee or Limited Partner, as applicable, relating to such Units or Partnership Securities, as the case may be. 6.6 Contracts with Affiliates. (a) The Partnership may lend or contribute to any Subsidiary, and any other Subsidiary may borrow funds, on terms and conditions established in the sole discretion of the General Partner. The foregoing authority shall be exercised by the General Partner in its reasonable discretion and shall not create any right or benefit in favor of any Subsidiary or any other Person. The Partnership may not lend funds to the General Partner or any of its Affiliates. (b) The General Partner may itself, or may enter into an agreement with any of its Affiliates to, render services to the Partnership. Any services rendered to the Partnership by the General Partner or any of its Affiliates shall be on terms that are fair and reasonable to the Partnership. The provisions of Section 6.4 hereof shall apply to the rendering of services described in this Section 6.6(b). (c) The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law. (d) Neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Partnership; provided, however, that the requirements of this Section 6.6(d) shall be deemed to be satisfied as to any transactions described in or contemplated by the Registration Statement. 6.7 Indemnification. (a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, each Indemnitee shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as (x) the General Partner, a Departing Partner or any of their Affiliates, (y) an employee, partner, agent or trustee of the General Partner, any Departing Partner or any of their Affiliates or (z) a Person serving at the request of the Partnership in another entity in a similar capacity, provided that in each case the Indemnitee acted in good faith and in the manner which such Indemnitee believed to be in, or not opposed to, the best interests of the Partnership and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that the Indemnitee acted in a manner contrary to that specified above. Any indemnification pursuant to this Section 6.7 shall be made only out of the assets of the Partnership. (b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 6.7. (c) The indemnification provided by this Section 6.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity. (d) The Partnership may purchase and maintain insurance, on behalf of the General Partner and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Partnership's activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement. (e) For purposes of this Section 6.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership B-33 34 also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute "fines" within the meaning of Section 6.7(a); and action taken or omitted by it with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants, and beneficiaries of the plan shall be deemed to be for a purpose which is in, or not opposed to, the best interests of the Partnership. (f) In no event may an Indemnitee subject the Limited Partners or the Special Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement. (g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement. (h) The provisions of this Section 6.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. (i) No amendment, modification or repeal of this Section 6.7 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligation of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 6.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 6.8 Liability of Indemnitees. (a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, Limited Partners, Special Limited Partners or to any Persons who have acquired interests in the Units for losses sustained or liabilities incurred as a result of any act or omission if such Indemnitee acted in good faith. (b) Subject to its obligations and duties as General Partner set forth in Section 6.1(a) hereof, the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith. (c) Any amendment, modification or repeal of this Section 6.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations or the liability to the Partnership, the Limited Partners and the Special Limited Partners of the General Partner, their directors, officers, partners and employees under this Section 6.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted. 6.9 Resolution of Conflicts of Interest. (a) Unless otherwise expressly provided in this Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership or any Partner, on the other hand, any resolution or course of action in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of any agreement contemplated herein, or of any duty stated or implied by law or equity, if the resolution or course of action is or, by operation of this Agreement, is deemed to be fair and reasonable to the Partnership. Any such resolution or course of action in respect of any conflict of interest shall not constitute a breach of this Agreement, of any other agreement contemplated herein, or of any duty stated or implied by law or equity, if such resolution or course of action is fair and reasonable to the Partnership. The General Partner shall be authorized in connection with its resolution of any conflict of interest to consider (i) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; (ii) any customary or accepted industry practices; (iii) any applicable generally accepted accounting practices or principles; and (iv) such additional factors as the General Partner determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the General Partner to consider the interests of any Person other than the Partnership. In the absence B-34 35 of bad faith by the General Partner, the resolution, action or terms so made, taken or provided by the General Partner with respect to such matter shall not constitute a breach of this Agreement or any other agreement contemplated herein or a breach of any standard of care or duty imposed herein or therein or under the Delaware Act or any other law, rule or regulation. (b) Whenever this Agreement or any other agreement contemplated hereby provides that the General Partner or any of its Affiliates is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority or latitude, the General Partner or such Affiliate shall be entitled to consider only such interests and factors as it desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Partnership or any Limited Partner, or (ii) in "good faith" or under another express standard, the General Partner or such Affiliate shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or any other agreement contemplated hereby. (c) Whenever a particular transaction, arrangement or resolution of a conflict of interest is required under this Agreement to be "fair and reasonable" to any Person, the fair and reasonable nature of such transaction, arrangement or resolution shall be considered in the context of all similar or related transactions. 6.10 Other Matters Concerning the General Partner. (a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including an Opinion of Counsel) of such Persons as to matters which such General Partner reasonably believes to be within such Person's professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. (c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder. 6.11 Title to Partnership Assets. Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner. The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its best efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held. 6.12 Reliance by Third Parties. Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms B-35 36 of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. ARTICLE VII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS 7.1 Limitation of Liability. The Limited Partners and the Organizational Limited Partner shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act. 7.2 Management of Business. No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner or any of its Affiliates, in its capacity as such) shall take part in the operation, management or control (within the meaning of the Delaware Act) of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership. The transaction of any such business by the General Partner, any of its Affiliates or any officer, director, employee, partner, agent or trustee of the General Partner or any of its Affiliates, in its capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement. 7.3 Outside Activities. Subject to the provisions of Section 6.5 hereof, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners or Assignees, any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership. Neither the Partnership nor any Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee. 7.4 Return of Capital. No Limited Partner shall be entitled to the withdrawal or return of his Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon termination of the Partnership as provided herein. Except to the extent provided by Article V hereof or as otherwise expressly provided in this Agreement, no Limited Partner or Assignee shall have priority over any other Limited Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. 7.5 Rights of Limited Partners Relating to the Partnership. (a) In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 7.5(b) hereof, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon reasonable demand and at such Limited Partner's own expense: (i) to obtain true and full information regarding the status of the business and financial condition of the Partnership; (ii) promptly after becoming available, to obtain a copy of the Partnership's federal, state and local income tax returns for each year; (iii) to have furnished to him, upon notification to the General Partner, a current list of the name and last known business, residence or mailing address of each Partner; (iv) to have furnished to him, upon notification to the General Partner, a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed; B-36 37 (v) to obtain true and full information regarding the amount of cash and a description and statement of the Agreed Value of any other Capital Contribution by each Partner and which each Partner has agreed to contribute in the future, and the date on which each became a Partner; and (vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable. (b) Notwithstanding any other provision of this Section 7.5, the General Partner may keep confidential from the Limited Partners for such period of time as the General Partner determines in its sole discretion to be reasonable, any information that the General Partner reasonably believes to be in the nature of trade secrets or other information the disclosure of which the General Partner in good faith believes is not in the best interests of the Partnership or which the Partnership is required by law or by agreements with unaffiliated third parties to maintain confidentiality. ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS 8.1 Records and Accounting. The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership's business including, without limitation, all books and records necessary to provide to the Limited Partners any information, lists and copies of documents required to be provided pursuant to Section 7.5(a) hereof. Any records maintained by or on behalf of the Partnership in the regular course of its business, including the record of the Record Holders and Assignees of Units, Depositary Units or Partnership Securities, books of account and records of Partnership proceedings, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micrographics or any other information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with generally accepted accounting principles. 8.2 Fiscal Year. The fiscal year of the Partnership shall be the calendar year. 8.3 Reports. (a) As soon as practicable, but in no event later than 120 days after the close of each Partnership Year, the General Partner shall cause to be mailed to each Record Holder of a Unit as of a date selected by the General Partner in its sole discretion, an annual report containing financial statements of the Partnership for such Partnership Year, presented in accordance with generally accepted accounting principles, including a balance sheet and statements of operations, Partners' equity and changes in financial position, such statements to be audited by a firm of independent public accountants selected by the General Partner. (b) As soon as practicable, but in no event later than 45 days after the close of each calendar quarter except the last calendar quarter of each year, the General Partner shall cause to be mailed to each Record Holder of a Unit, as of a date selected by the General Partner in its sole discretion, a report containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of any National Securities Exchange on which the Units are listed for trading, or as the General Partner determines to be appropriate. ARTICLE IX TAX MATTERS 9.1 Preparation of Tax Returns. The General Partner shall arrange for the preparation and timely filing of all returns of Partnership income, gains, deductions, losses and other items required of the Partnership for federal and state income tax purposes and shall use all reasonable efforts to furnish, within 90 days of the close of each taxable year, the tax information reasonably required by Unitholders for federal and state income tax reporting purposes. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes. The taxable year of the Partnership shall be the calendar year. B-37 38 9.2 Tax Elections. Except as otherwise provided herein, the General Partner shall, in its sole discretion, determine whether to make any available election pursuant to the Code; provided, however, that the General Partner shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder. The General Partner shall have the right to seek to revoke any such election (including, without limitation, the election under Section 754 of the Code) upon the General Partner's determination in its sole discretion that such revocation is in the best interests of the Limited Partners and Assignees. For purposes of computing the adjustments under Section 743(b) of the Code, the General Partner shall be authorized (but not required) to adopt a convention whereby the price paid by a transferee of Units will be deemed to be the lowest quoted trading price of the Units on any National Securities Exchange on which such Units are traded during the calendar month in which such transfer is deemed to occur pursuant to Section 5.2(g) hereof without regard to the actual price paid by such transferee. 9.3 Tax Controversies. Subject to the provisions hereof, the General Partner is designated the Tax Matters Partner (as defined in Section 6231 of the Code), and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner or Assignee agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 9.4 Organizational Expenses. The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the Partnership ratably over a 60-month period as provided in Section 709 of the Code. 9.5 Withholding. Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines in its sole discretion to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or Assignee (including by reason of Section 1446 of the Code), the amount withheld shall be treated as a distribution of cash pursuant to Section 5.3 hereof in the amount of such withholding from such Partner. 9.6 Entity-Level Taxation. If legislation is enacted which causes the Partnership to become treated as an association taxable as a corporation for federal income tax purposes, then with respect to any calendar quarter, the Minimum Quarterly Amount, the First Target Amount, Second Target Amount, Third Target Amount or Fourth Target Amount, as the case may be, shall be equal to the product of (i) the amount of such distribution multiplied by (ii) 1 minus the sum of (x) the highest marginal federal corporate income tax rate for the Partnership Year in which such quarter occurs (expressed as a percentage) plus (y) the effective overall state and local income tax rate (expressed as a percentage) applicable to the Partnership for the calendar year next preceding the calendar year in which such quarter occurs (after taking into account the benefit of any deduction allowable for federal income tax purposes with respect to the payment of state and local income taxes). Such effective overall state and local income tax rate shall be determined for the calendar year next preceding the first calendar year during which the Partnership is taxable for federal income tax purposes as a corporation or as an association taxable as a corporation by determining such rate as if the Partnership had been subject to such state and local taxes during such preceding calendar year. 9.7 Entity-Level Deficiency Collections. If the Partnership is required by applicable law to pay any federal, state or local income tax on behalf of any Partner or Assignee or any former Partner or Assignee (i) the General Partner shall pay such tax on behalf of such Partner or Assignee or former Partner or Assignee from the funds of the Partnership; (ii) any amount so paid on behalf of any Partner or Assignee shall constitute a distribution of Available Cash to such Partner or Assignee pursuant to Section 5.3 hereof; and (iii) to the extent any such Partner or Assignee (but not a former Partner or Assignee) is not then entitled to such distribution under this Agreement, the General Partner shall be authorized, without the approval of any Partner or Assignee, to amend this Agreement insofar as is necessary to maintain the uniformity of intrinsic tax characteristics as to all Units and to make subsequent adjustments to distributions in a manner which, in B-38 39 the reasonable judgment of the General Partner, will make as little alteration in the priority and amount of distributions otherwise applicable under this Agreement, and will not otherwise alter the distributions to which Partners and Assignees are entitled under this Agreement. If the Partnership is permitted (but not required) by applicable law to pay any such tax on behalf of any Partner or Assignee or former Partner or Assignee, the General Partner shall be authorized (but not required) to pay such tax from the funds of the Partnership and to take any action consistent with this Section 9.7. The General Partner shall be authorized (but not required) to take all necessary or appropriate actions to collect all or any portion of a deficiency in the payment of any such tax which relates to prior periods which is attributable to Persons who were Limited Partners or Assignees when such deficiencies arose, from such Persons. 9.8 Opinions of Counsel. Notwithstanding any other provision of this Agreement, if the Partnership is taxable for federal income tax purposes as a corporation or an association taxable as a corporation at any time and, pursuant to the provisions hereof, an Opinion of Counsel would otherwise be required at that time to the effect that an action will not cause the Partnership to become so taxable as a corporation or to be treated as an association taxable as a corporation, such requirement for an Opinion of Counsel shall be deemed automatically waived. ARTICLE X CERTIFICATES AND DEPOSITARY RECEIPTS 10.1 Certificates and Depositary Receipts. (a) Upon the issuance of Units by the Partnership to the Initial Limited Partners or any other Person, the Partnership shall issue one or more Certificates in the name of the Initial Limited Partners or such Person evidencing the number of such Units being so issued. Certificates shall be executed on behalf of the Partnership by the General Partner. (b) The General Partner (i) may cause the deposit of some or all of the Certificates in the Deposit Account pursuant to the Deposit Agreement; (ii) with respect to those Certificates deposited in the Deposit Account, shall receive from the Depositary Receipts registered in the name of the Person(s) to whom such Units have been issued, evidencing the same number of Depositary Units, as the case may be, as the number of Units represented by the Certificates so deposited; and (iii) shall cause the distribution of such Depositary Receipts to such Person(s). 10.2 Registration of Transfer and Exchange. (a) The General Partner shall cause to be kept on behalf of the Partnership a register (the "Unit Register") in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 10.2(b) hereof, the General Partner will provide for the registration of Units and the transfer of such Units. The Depositary is hereby appointed Transfer Agent and registrar for the purpose of registering Units and transfers of such Units as herein provided. The Partnership shall not recognize transfers of Certificates representing Units which have been deposited pursuant to Section 10.1(a) hereof and not withdrawn or interests therein except by transfers of Depositary Units in the manner described in this Section 10.2 and in the Deposit Agreement. Upon surrender for registration of transfer of any Depositary Units evidenced by a Depositary Receipt and, subject to the provisions of Section 10.2(b) hereof, the General Partner on behalf of the Partnership will execute, and the Transfer Agent will countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Depositary Receipts evidencing the same aggregate number of Depositary Units as was evidenced by the Depositary Receipt so surrendered. (b) The Partnership shall not recognize any transfer of Depositary Units until the Depositary Receipts evidencing such Depositary Units are surrendered for registration of transfer and such Depositary Receipts are accompanied by a Transfer Application duly executed by the transferee (or the transferee's attorney-in-fact duly authorized in writing). No charge shall be imposed by the Partnership for such transfer, provided that, as a condition to the issuance of any new Depositary Receipt under this Section 10.2, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto. B-39 40 10.3 Mutilted, Destroyed, Lost or Stolen Depositary Receipts. (a) If any mutiliated Depositary is surrendered to the Transfer Agent, the Depositary shall execute, and the Transfer Agent shall countersign and deliver in exchange therefor, a new Depositary Receipt evidencing the same number of Depositary Units, as the case may be, as the Depositary Receipt so surrendred. (b) If there shall be deliverd to the General Partner and the Transfer Agent (i) evidence (including, without limitation, proof by affidavit if requested by the General Partner in form and substance satisfactory to the General Partner) to their satisfaction of the destruction, loss or theft of any Depositary Receipt and (ii) such security or indemnity as may be required by them to indemnify and hold each of them and any of their agents harmless, then, in the absence of notice to the General Partner or the Transfer Agent that such Depositary Receipt has been acquired by a bona fide purchaser, the General Partner on behalf of the Partnership shall execute and, upon its request, the Transfer Agent shall countersign and deliver, in exchange for and in lieu of any such destroyed, lost or stolen Depositary Receipt, a new Depositary Receipt evidencing the same number of Depositary Units, as the Depositary Receipt so destroyed, lost or stolen. (c) As a condition to the issuance of any new Depositary Receipt under this Section 10.3, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent) connected therewith. 10.4 Registered Owner. In accordance with Section 10.2(b) hereof, the Partnership shall be entitled to recognize the Record Holder as the Limited Partner or Assignee with respect to any Units and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Units on the part of any other Person, whether or not the Partnership shall have actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed for trading. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Units, as between the Partnership on the one hand and such other Persons on the other hand, such representative Person (a) shall be the Limited Partner or Assignee (as the case may be) of record and beneficially, (b) must execute and deliver a Transfer Application and (c) shall be bound by this Agreement and shall have the rights and obligations of a Limited Partner or Assignee (as the case may be) hereunder and as provided for herein. 10.5 Withdrawal of Units from and Redeposit of Units in Depositary Account. Any Units may be withdrawn from the Depositary Account by surrender of the Depositary Receipts evidencing the corresponding Depositary Units duly executed by the Record Holder thereof (or his attorney-in-fact duly authorized in writing), provided that such Record Holder is then reflected on the books and records of the Partnership as the Limited Partner in respect of the Units for which such withdrawal is requested. Upon any such withdrawal, the General Partner shall cause the Partnership to issue a Certificate evidencing such Units. Any such withdrawn Units, or Units which have not previously been so deposited, may be redeposited or deposited (as the case may be) in the Deposit Account by the surrender of the Certificate evidencing such withdrawn Units or non-deposited Units to the Depositary and payment to the Depositary of such fee and upon such terms as may be required therefor pursuant to the Deposit Agreement. Upon any such redeposit or deposit, the Depositary shall issue a Depositary Receipt evidencing the same number of Units as was evidenced by the Certificate so redeposited or deposited. 10.6 Amendment of Deposit Agreement. Subject to its fiduciary obligations, the General Partner may amend or modify any provision of the Deposit Agreement in any respect it reasonably determines to be necessary or appropriate, provided, however, that the General Partner shall not amend or modify the Deposit Agreement if the effect of any such amendment or modification would be to impair the right of Limited Partners to withdraw their Units from deposit thereunder. B-40 41 ARTICLE XI TRANSFER OF INTERESTS 11.1 Transfer. (a) The term "transfer," when used in this Article XI with respect to a Partnership Interest, shall be deemed to refer to an appropriate transaction by which the General Partner assigns its Partnership Interest as General Partner to another Person or by which the holder of a Unit assigns such Unit to another Person who is or becomes an Assignee and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise. (b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article XI. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article XI shall be null and void. 11.2 Transfer of General Partner's Partnership Interest. (a) The General Partner may transfer all, but not less than all, of its Partnership Interest as the General Partner to a single transferee if, but only if, (i) the holders of at least 66 2/3% of the outstanding Units (excluding for purposes of such determination any Units owned by the General Partner and its Affiliates) approves of such transfer and of the admission of such transferee as General Partner, (ii) the transferee agrees to assume and be bound by the provisions of this Agreement and (iii) the Partnership receives an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Limited Partner or the taxation of the Partnership as a corporation or as an association taxable as a corporation for federal income tax purposes. (b) Neither Section 11.2(a) hereof nor any other provision of this Agreement shall be construed to prevent (and all Partners do hereby consent to) the transfer by the General Partner of all of its Partnership Interest (i) to an Affiliate of Burlington or (ii) upon its merger, consolidation or other combination into any other entity or the transfer by it of all or substantially all of its assets to another entity (provided that such entity assumes all of the rights and duties of the General Partner), to the transferee or successor entity; provided that, such entity furnishes to the Partnership an Opinion of Counsel that such merger, consolidation, combination, transfer or assumption will not result in a loss of limited liability of any Limited Partner or result in the Partnership being treated as an association taxable as a corporation for federal income tax purposes. In the case of a transfer pursuant to this Section 11.2(b), the transferee or successor (as the case may be) shall be admitted to the Partnership as the General Partner immediately prior to the transfer of the Partnership Interest, and the business of the Partnership shall continue without dissolution. 11.3 Transfer of Units. (a) Any Units which have been deposited in the Deposit Account may be transferred, but only in the manner described in Section 10.2 hereof. Units with respect to which no such deposit has been made or which have been withdrawn from the Deposit Account and not redeposited are not transferable except upon death or by operation of law, by transfer to the General Partner for the account of the Partnership or otherwise in accordance with this Agreement. The transfer of any Units and the admission of any new Partner shall not constitute an amendment to this Agreement. (b) Until admitted as a Substituted Limited Partner pursuant to Article XII, the Record Holder of a Depositary Unit shall constitute an Assignee in respect of such Unit. (c) Each distribution in respect of Units shall be paid by the Partnership, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holders thereof as of the Record Date set for the distribution. Such payment shall constitute full payment and satisfaction of the Partnership's liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise. 11.4 Restrictions on Transfers. Notwithstanding the other provisions of this Article XI, no transfer of any Unit or interest therein of any Limited Partner in the Partnership shall be made if such transfer (i) would violate the then applicable federal or state securities laws or rules and regulations of the Securities and Exchange Commission, any state securities commission or any other governmental authorities with jurisdiction over such transfer, (ii) would result in the taxation of the Partnership as a corporation or as an association B-41 42 taxable as a corporation for federal income tax purposes or (iii) would affect the Partnership's existence or qualification as a limited partnership under the Delaware Act. 11.5 Citizenship Certification; Non-citizen Assignees. (a) In the event that, because of the nationality (or any other status) of a Limited Partner or Assignee, the Partnership is or becomes subject to federal, state or local laws or regulations the effect of which would, in the reasonable determination of the General Partner, cause cancellation or forfeiture of any property in which the Partnership has an interest, the General Partner may request any such Limited Partner or Assignee to furnish to the General Partner or, with respect to Depositary Units, to the Depositary within 30 days after receipt of such request an executed Citizenship Certification or such other information concerning his nationality, citizenship or other status (or, if the Limited Partner or Assignee is a nominee holding for the account of another Person, the nationality, citizenship or other status of such Person) as the General Partner may request. If a Limited Partner or Assignee fails to furnish such Citizenship Certification or other information as may be requested, or if upon receipt of such Citizenship Certification or other information the General Partner determines, with the advice of counsel, that a Limited Partner or an Assignee is not an Eligible Citizen, the Units owned by such Limited Partner or Assignee shall be subject to redemption in accordance with the provisions of Section 11.6 hereof. In addition to becoming subject to redemption, the General Partner may require that the status of any such Limited Partner or Assignee be changed to that of a Non-citizen Assignee, and, thereupon, the General Partner shall be substituted for such Non-citizen Assignee as the Limited Partner in respect of his Units. (b) The General Partner shall, in exercising voting rights in respect of Units held by it on behalf of Non-citizen Assignees, distribute the votes in the same ratios as the votes of Limited Partners in respect of Units other than those of Non-citizen Assignees are cast, either for, against or abstaining as to the matter. (c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have no right to receive a distribution in kind pursuant to Section 14.4 hereof but shall be entitled to the cash equivalent thereof, and the General Partner shall provide cash in exchange for an assignment of the Non-citizen Assignee's share of the distribution in kind. Such payment and assignment shall be treated for Partnership purposes as a purchase by the General Partner from the Non-citizen Assignee of his Partnership Interest (representing his right to receive his share of such distribution in kind). (d) At any time after he can and does certify that he has become an Eligible Citizen, a Non-citizen Assignee may, upon application to the General Partner, request admission as a Substituted Limited Partner with respect to any Partnership Interest of such Non-citizen Assignee not redeemed pursuant to Section 11.6 hereof, and upon his admission pursuant to Section 12.2 hereof the General Partner shall cease to be deemed to be the Limited Partner in respect of the Non-citizen Assignee's Units. 11.6 Redemption of Interests. (a) If at any time a Limited Partner or Assignee fails to furnish a Citizenship Certification or other information requested within the 30-day period specified in Section 11.5(a) hereof, or if upon receipt of such Citizenship Certification or other information the General Partner determines, with the advice of counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the Partnership may, unless the Limited Partner or Assignee establishes to the satisfaction of the General Partner that such Limited Partner or Assignee is an Eligible Citizen or has transferred his Units to a person who furnishes a Citizenship Certification to the General Partner prior to the date fixed for redemption as provided below, redeem the Partnership Interest of such Limited Partner or Assignee as follows: (i) The General Partner shall, not later than the 30th day before the date fixed for redemption, give notice of redemption to the Limited Partner or Assignee, at his last address designated on the records of the Partnership or the Depositary, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when so mailed. The notice shall specify the Redeemable Units, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon surrender of the Depositary Receipt or the Certificate evidencing the Redeemable Units and that on and after the date fixed for redemption no further allocations or distributions to which the Limited Partner or Assignee would otherwise be entitled in respect of the Redeemable Units will accrue or be made. B-42 43 (ii) The aggregate redemption price for Redeemable Units shall be an amount equal to the Current Market Price (as defined in Section 17.1) (the date of determination of which shall be the date fixed for redemption) of Units of the class to be so redeemed multiplied by the number of Units of each such class included among the Redeemable Units. The redemption price shall be paid, in the sole discretion of the General Partner, in cash or by delivery of a promissory note of the Partnership in the principal amount of the redemption price, bearing interest at the rate of 10% annually and payable in three equal annual installments of principal, together with accrued interest, commencing one year after the redemption date. (iii) Upon surrender by or on behalf of the Limited Partner or Assignee, at the place specified in the notice of redemption, of the Depositary Receipt or the Certificate evidencing the Redeemable Units, duly endorsed in blank or accompanied by an assignment duly executed in blank, the Limited Partner or Assignee or his duly authorized representative shall be entitled to receive the payment therefor. (iv) After the redemption date, Redeemable Units shall no longer constitute issued and outstanding Units. (b) The provisions of this Section 11.6 shall be applicable to Units held by a Limited Partner or Assignee as nominee of a Person determined to be other than an Eligible Citizen. (c) Nothing in this Section 11.6 shall prevent the recipient of a notice of redemption from transferring his Units before the redemption date if such transfer is otherwise permitted under this Agreement. Upon receipt of notice of such a transfer, the General Partner shall withdraw the notice of redemption; provided, the transferee of such Units or Depositary Units certifies in the Transfer Application that he is an Eligible Citizen. If the transferee fails to make such certification, such redemption shall be effected from the transferee on the original redemption date. (d) If the Partnership or the General Partner determines that because of the nationality (or other status) of the General Partner, whether or not in its capacity as such, the Partnership is or becomes subject to federal, state or local regulations the effect of which would, in the reasonable determination of the General Partner, cause cancellation or forfeiture of any property in which the Partnership has an interest, the Partnership may, unless the General Partner has furnished a Citizenship Certification or transferred his Partnership Interest or Units to a Person who furnishes a Citizenship Certification prior to the date fixed for redemption, redeem the Partnership Interest or Interests of the General Partner in the Partnership as provided in Section 11.6(a) hereof. The redemption price shall be paid in cash. 11.7 Transfer of Deferred Participation Interests. (a) The holders of Deferred Participation Interests may transfer their Deferred Participation Interests to any Person or Persons and such Person or Persons shall have the right to deposit with the Depositary such Deferred Participation Interests if, but only if, either (i) such Deferred Participation Interests so transferred are identified and registered as a trading class separate and distinguishable from the Units then outstanding or (ii) such Deferred Participation Interests so proposed to be transferred have been converted to Units pursuant to Section 5.7(b) of this Agreement; provided, however, the foregoing restriction shall not apply to a transfer of all, but not less than all, of the Deferred Participation Interests held by the transferor to an Affiliate of such transferor; provided further, that no holder of a Deferred Participation Interest shall have the right to transfer the Deferred Participation Interest during the Support Period to other than an Affiliate of such holder; provided, further, that, notwithstanding anything to the contrary set forth above, the holder of the Deferred Participation Interests may transfer the Deferred Participation Interests to DPI Intermediate Holdings, L.P., a Delaware limited partnership, and PC Advisory II, L.P., a Delaware limited partnership. (b) Notwithstanding Section 11.7(a) above, no such restrictions shall apply with respect to the transfer of Deferred Participation Interests after the Conversion Date with respect to such Interests. (c) The holders of Deferred Participation Interests will receive certificates evidencing such interests. Subject to Section 11.7(a), such certificates may be exchanged by the holders for Certificates of limited partner interests and then deposited and transferred in accordance with Articles X and XI hereof. B-43 44 11.8 Transfer of Management Units. The holders of Management Units may transfer their Management Units to any Person or Persons and such Person or Persons shall have the right to deposit with the Depositary such Management Units if, but only if, the General Partner determines, based on advice of counsel, that such Management Units so proposed to be transferred have, as a substantive matter, like intrinsic economic and federal income tax characteristics, in all material respects, to the intrinsic economic and federal income tax characteristics of the Units then outstanding. ARTICLE XII ADMISSION OF PARTNERS 12.1 Admission of Initial Limited Partners and Underwriters. Upon the issuance of Units by the Partnership to the Initial Limited Partners (as described in Section 4.3 hereof), the General Partner shall admit to the Partnership the Initial Limited Partners as Limited Partners in respect of the Units. Each such party shall execute a Transfer Application and thereby agree to be bound by the terms hereof as a Limited Partner. 12.2 Admission of Substituted Limited Partners. By transfer of a Depositary Unit in accordance with Article XI hereof, the transferor shall be deemed to have given the transferee the right to seek admission as a Substituted Limited Partner subject to the conditions of, and in the manner permitted under, this Agreement. A transferor of a Depositary Receipt shall, however, only have the authority to convey to a purchaser or other transferee who does not execute and deliver a Transfer Application (i) the right to negotiate such Depositary Receipt to a purchaser or other transferee and (ii) the right to transfer the right to request admission as a Substituted Limited Partner to such purchaser or other transferee in respect of the transferred Depositary Units. Each transferee of a Depositary Unit (including any nominee holder or an agent acquiring such Depositary Unit for the account of another Person) who executes a Transfer Application shall be an Assignee and shall be deemed to have applied to become a Substituted Limited Partner with respect to the Depositary Units so transferred to such Person by virtue of executing and delivering such Transfer Application. Such Assignee shall become a Substituted Limited Partner at such time as the General Partner consents thereto, which consent may be given or withheld in the General Partner's sole discretion, and when any such admission is shown on the books and records of the Partnership. If such consent is withheld, such transferee shall be an Assignee. An Assignee shall have an interest in the Partnership equivalent to that of a Limited Partner with respect to allocations and distributions, including liquidating distributions, of the Partnership. With respect to voting rights attributable to Units that are held by Assignees, the General Partner shall be deemed to be the Limited Partner with respect thereto and shall, in exercising the voting rights in respect of such Units on any matter, vote such Units at the written direction of the Assignee who is the Record Holder of such Units. If no such written direction is received, such Units will not be voted. An Assignee shall have no other rights of a Limited Partner. 12.3 Admission of Successor General Partner. A successor General Partner approved pursuant to Section 13.1 hereof or the transferee of or successor to all of the General Partner's Partnership Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to the withdrawal or removal of the General Partner pursuant to Section 13.1 hereof or the transfer pursuant to Section 11.2; provided, however, that no such successor shall be admitted to the Partnership until the terms of Section 11.2 hereof have been complied with. Any such successor shall carry on the business of the Partnership without dissolution. In each case, the admission shall be subject to the successor General Partner executing and delivering to the Partnership an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. 12.4 Admission of Additional Limited Partners. (a) A Person (other than an Initial Limited Partner, an Underwriter or a Substituted Limited Partner) who makes a Capital Contribution to the Partnership in accordance with this Agreement (other than by the purchase of SPUs) shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including, without B-44 45 limitation, the power of attorney granted in Section 1.4 hereof and (ii) such other documents or instruments as may be required in the discretion of the General Partner in order to effect such Person's admission as an Additional Limited Partner. (b) Notwithstanding anything to the contrary in this Section 12.4, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner's sole discretion. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission. 12.5 Amendment of Agreement and Certificate of Limited Partnership. For the admission to the Partnership of any Partner, the General Partner shall take all steps necessary and appropriate under the Delaware Act to amend the records of the Partnership and, if necessary, to prepare as soon as practical an amendment of this Agreement and, if required by law, shall prepare and file an amendment to the Certificate of Limited Partnership and may for this purpose exercise the power of attorney granted pursuant to Section 1.4 hereof. ARTICLE XIII WITHDRAWAL OR REMOVAL OF PARTNERS 13.1 Withdrawal of the General Partner. (a) The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an "Event of Withdrawal"): (i) the General Partner voluntarily withdraws from the Partnership by giving written notice to the other Partners; (ii) the General Partner transfers all of its rights as General Partner pursuant to Section 11.2 hereof; (iii) the General Partner is removed pursuant to Section 13.2 hereof; (iv) the General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary bankruptcy petition; (C) files a petition or answer seeking for itself a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any law; (D) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in paragraphs (A)-(C) of this subsection; or (E) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the General Partner or of all or any substantial part of its properties; (v) a final and non-appealable judgment is entered by a court with appropriate jurisdiction ruling that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief is entered by a court with appropriate jurisdiction against the General Partner, in each case under any federal or state bankruptcy or insolvency laws as now or hereafter in effect; or (vi) a certificate of dissolution or its equivalent is filed for the General Partner, or 90 days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation. If an Event of Withdrawal specified in paragraphs (iv), (v) or (vi) occurs, the withdrawing General Partner shall give written notice to the Limited Partners within 30 days after such occurrence. The Partners hereby B-45 46 agree that only the Events of Withdrawal described in this Section 13.1 shall result in withdrawal of the General Partner from the Partnership. (b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal will not constitute a breach of this Agreement under the following circumstances: (i) at any time during the period ending on December 31, 1999, the General Partner voluntarily withdraws by giving at least 90 days' advance written notice of its intention to withdraw to the Limited Partners, provided that, prior to the effective date of such withdrawal, the Limited Partners approve such withdrawal by the vote of at least 66 2/3% of the outstanding Units (excluding for purposes of such determination any Units owned by the General Partner and its Affiliates); (ii) at any time after December 31, 1999, the General Partner voluntarily withdraws by giving at least 90 days' advance written notice to the Limited Partners, such withdrawal to take effect on the date specified in such notice; (iii) at any time that the General Partner ceases to be a General Partner pursuant to Section 13.1(a)(ii) hereof or is removed pursuant to Section 13.1(a)(iii) hereof; or (iv) notwithstanding clause (i) above, at any time that the General Partner voluntarily withdraws by giving at least 90 days' advance written notice of its intention to withdraw to the Limited Partners, such withdrawal to take effect on the date specified in the notice, if at the time such notice is given more than 50% of the outstanding Units held by Persons other than by the General Partner and its Affiliates are owned beneficially or of record or controlled at any time by one Person or its Affiliates. If the General Partner gives a notice of withdrawal pursuant to Section 13.1(a)(i) hereof or if the General Partner is removed pursuant to Section 13.2 hereof, holders of at least a majority of the outstanding Units (excluding for purposes of such determination Units owned by the General Partner and its Affiliates) may, prior to the effective date of such withdrawal, elect a successor General Partner. If, prior to the effective date of the General Partner's withdrawal, a successor is not selected by the Limited Partners as provided herein or the Partnership does not receive an Opinion of Counsel that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of the holders of Units or cause the Partnership to be taxable as a corporation or to be treated as an association taxable as a corporation for federal income tax purposes, the Partnership shall be dissolved in accordance with Section 14.1 hereof. If a successor General Partner is elected and the Opinion of Counsel rendered as provided herein, such successor shall be admitted (subject to Section 12.3 hereof) immediately prior to the effective time of the withdrawal of the Departing Partner and shall continue the business of the Partnership without dissolution. 13.2 Removal of the General Partner. The General Partner may be removed during the Support Period only if such removal is approved by the written consent or affirmative vote of Limited Partners holding at least 90% of the outstanding Units (excluding for purposes of such determination any Units owned by the General Partner and its Affiliates) and, thereafter, only if such removal is approved by the written consent or affirmative vote of Limited Partners owning at least 66 2/3% of the outstanding Units (excluding for purposes of such determination any Units owned by the General Partner and its Affiliates). Any such action by the Limited Partners for removal of the General Partner must also provide for the election and succession of a new General Partner. Such removal shall be effective immediately following the admission of the successor General Partner pursuant to Article XII. The right of the Limited Partners to remove the General Partner shall not exist or be exercised unless the Partnership has received an Opinion of Counsel that the removal of the General Partner and the selection of a successor General Partner will not result in (i) the loss of limited liability of the Partnership or any Limited Partner in the Partnership or (ii) the taxation of the Partnership as a corporation or the treatment of the Partnership as an association taxable as a corporation for federal income tax purposes. 13.3 Interest of Departing Partner and Successor General Partner. (a) In the event of (i) withdrawal of the General Partner under circumstances where such withdrawal does not violate this Agreement or (ii) removal of the General Partner by the Limited Partners under circumstances where "cause" does not exist, the Departing Partner shall, at its option exercisable prior to the effective date of the departure of such Departing Partner, promptly receive from its successor in exchange for its Partnership Interest as General Partner an amount in cash equal to the fair market value of the Departing Partner's Partnership Interest as General Partner, such amount to be determined and payable as of the effective date of its departure. If the General Partner is removed by the Limited Partners under circumstances where "cause" B-46 47 exists or if the General Partner withdraws under circumstances where such withdrawal violates this Agreement, its successor shall have the option described in the immediately preceding sentence, and the Departing Partner shall not have such option. In either event, the Departing Partner shall be entitled to receive all reimbursements due such Departing Partner pursuant to Section 6.4, including any employee-related liabilities, including severance liabilities, incurred in connection with the termination of any employees employed by the Departing Partner for the benefit of the Partnership. Subject to Section 13.3(b) hereof, the Departing Partner shall, as of the effective date of its departure, cease to share in any allocations or distributions with respect to its Partnership Interest as the General Partner and Partnership income, gain, loss, deduction and credit will be prorated and allocated as set forth in Section 5.1(d) hereof. For purposes of this Section 13.3, "cause" means that a court of competent jurisdiction has entered a final non-appealable judgment finding the General Partner liable for actual fraud, gross negligence or wilful or wanton misconduct in its capacity as General Partner of the Partnership. For purposes of this Section 13.3(a), the fair market value of the Departing Partner's Partnership Interest as the General Partner herein shall be determined by agreement between the Departing Partner and its successor or, failing agreement within 30 days after the effective date of such Departing Partner's departure, by an independent investment banking firm or other independent expert selected by the Departing Partner and its successor, which, in turn, may rely on other experts and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then such firm shall be designated by the independent investment banking firm or other independent expert selected by each of the Departing Partner and its successor. In making its determination, such independent investment banking firm or other independent expert shall consider the then current trading price of Units on any National Securities Exchange on which Units are then listed, the value of the Partnership's assets, the rights and obligations of the General Partner and other factors it may deem relevant. (b) If the Partnership Interest is not acquired in the manner set forth in Section 13.3(a) hereof, the Departing Partner shall become a Limited Partner and its Partnership Interest shall be converted into Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 13.3(a) hereof, without reduction in such Partnership Interest (but subject to proportionate dilution by reason of the admission of its successor). Any successor General Partner shall indemnify the Departing Partner as to all debts and liabilities of the Partnership arising on or after the date on which the Departing Partner becomes a Limited Partner. For purposes of this Agreement, the General Partner's conversion of its Partnership Interest to Units will be characterized as if the General Partner contributed its Partnership Interest to the Partnership in exchange for the newly-issued Units. (c) If the option described in Section 13.3(a) hereof is not exercised by the party entitled to do so, the successor General Partner shall, at the effective date of its admission to the Partnership, contribute to the capital of the Partnership cash in an amount such that its Capital Account, after giving effect to such contribution and any adjustments made to the Capital Accounts of all Partners pursuant to Section 4.6(d)(i), shall be equal to that percentage of the Capital Accounts of all Partners that is equal to its Percentage Interest as the General Partner. In such event, each successor General Partner shall, subject to the following sentence, be entitled to such Percentage Interest of all Partnership allocations and distributions and any other allocations and distributions to which the Departing Partner was entitled. In addition, such successor General Partner shall cause this Agreement to be amended to reflect that, from and after the date of such successor General Partner's admission, the successor General Partner's interest in all Partnership distributions and allocations shall be 2%, and that of the Unitholders shall be 98%. 13.4 Redemption of SPUs and Deferred Participation Interests. In the event that Plum Creek Management Company (or any Affiliate of Burlington which is a successor to Plum Creek Management Company as General Partner of the Partnership) withdraws as General Partner under circumstances where such withdrawal does not violate this Agreement or is removed by the Limited Partners under circumstances where "cause" does not exist, (i) in the case of SPUs, Burlington or its Affiliate shall have the right to require the Partnership within 30 days of the effective date of such withdrawal or removal to redeem any SPUs which are then outstanding at a price equal to the Unrecovered Capital attributable thereto or (ii) in the case of B-47 48 Deferred Participation Interests, Plum Creek Timber Company, Inc. (or its successor) or its Affiliate, shall have the right to require the Partnership within 30 days of the effective date of such withdrawal or removal to redeem any Deferred Participation Interests which are then outstanding, and not yet converted into Units pursuant to Section 5.7(b), at a price equal to the Unrecovered Capital attributable thereto. 13.5 Withdrawal of Limited Partners. Except as provided in Section 13.4, no Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner's Units becomes a Record Holder, such transferring Limited Partner shall cease to be a Limited Partner with respect to the Units so transferred. ARTICLE XIV DISSOLUTION AND LIQUIDATION 14.1 Dissolution. The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner any successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon: (a) the expiration of its term as provided in Section 1.5 hereof; (b) an Event of Withdrawal of the General Partner as provided in Section 13.1(a) hereof, unless a successor is named as provided in Section 13.1(b) hereof; (c) an election to dissolve the Partnership by the General Partner that is approved by the affirmative vote of the holders of at least 66 2/3% of outstanding Units, excluding for purposes of such determination Units owned by the General Partner and its Affiliates, (and all Limited Partners hereby expressly consent that such approval may be effected upon written consent of the holders of at least 66 2/3% of outstanding Units); (d) entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Delaware Act; or (e) the sale of all or substantially all of the assets and properties of the Partnership. 14.2 Continuation of the Business of the Partnership after Dissolution. Upon (i) dissolution of the Partnership caused by the withdrawal or removal of the General Partner and following a failure of all Partners, within 90 days after the withdrawal or removal of the General Partner, to agree to continue the business of the Partnership and appoint a successor General Partner, then within an additional 90 days or (ii) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Section 13.1(a)(iv) hereof, then within 180 days thereafter, at least 66 2/3% of the outstanding Units may elect to reconstitute the Partnership and continue its business on the same terms and conditions set forth in this Agreement by forming a new limited partnership on terms identical to those set forth in this Agreement and having as a general partner a Person approved by the holders of at least 66 2/3% of the outstanding Units. Upon any such election by the holders of at least 66 2/3% of the outstanding Units, all Partners shall be bound thereby and shall be deemed to have approved thereof. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then: (a) the reconstituted Partnership shall continue until the end of the term set forth in Section 1.5 hereof unless earlier dissolved in accordance with this Article XIV; (b) if the successor General Partner is not the former General Partner, then the interest of the former General Partner shall be treated thenceforth as the interests of a Limited Partner and converted into Units in the manner provided in Section 13.3(b) hereof; and B-48 49 (c) all necessary steps shall be taken to cancel this Agreement and the Certificate of Limited Partnership and to enter into and, as necessary, to file a new partnership agreement and certificate of limited partnership, and the successor general partner may for this purpose exercise the powers of attorney granted the General Partner pursuant to Section 1.4 hereof; provided, that the right of the holders of at least 66 2/3% of outstanding Units to approve a successor general partner and to reconstitute and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not result in the loss of limited liability of any Limited Partner and (y) neither the Partnership nor the reconstituted limited partnership would become taxable as a corporation or treated as an association taxable as a corporation for federal income tax purposes upon the exercise of such right to continue. 14.3 Liquidation. Upon dissolution of the Partnership, unless the Partnership is continued under an election to reconstitute and continue the Partnership pursuant to Section 14.2 hereof, the General Partner, or in the event the General Partner has been dissolved or removed, become bankrupt as set forth in Section 13.1 or withdrawn from the Partnership, a liquidator or liquidating committee approved by the holders of at least 66 2/3% of the outstanding Units, shall be the Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by the holders of at least 66 2/3% of the outstanding Units. The Liquidator shall agree not to resign at any time without 15 days' prior written notice and (if other than the General Partner) may be removed at any time, with or without cause by notice of removal approved by at least 66 2/3% of the outstanding Units. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by the holders of at least 66 2/3% of the outstanding Units. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XIV, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 6.3(b) hereof) to the extent necessary or desirable in the good faith judgment of the Liquidator to carry out the duties and functions of the Liquidator hereunder for and during such period of time as shall be reasonably required in the good faith judgment of the Liquidator to complete the winding-up and liquidation of the Partnership as provided for herein. The Liquidator shall liquidate the assets of the Partnership, and apply and distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of applicable law: (a) the payment to creditors of the Partnership, including Partners who are creditors, in order of priority provided by law; and the creation of a reserve of cash or other assets of the Partnership for contingent liabilities in an amount, if any, determined by the Liquidator to be appropriate for such purposes; and (b) to all Partners and Special Limited Partners in accordance with the positive balances in their respective Capital Accounts after taking into account adjustments to such Capital Accounts pursuant to Section 5.1(c) hereof. 14.4 Distributions in Kind. Notwithstanding the provisions of Section 14.3 hereof, which require the liquidation of the assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all of the Partnership's assets would be impractical or would cause undue loss to the Partners, the Liquidator may, in its absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Partnership (including those to Partners as creditors) and/or distribute to the Partners or to specific classes of Partners, in lieu of cash, as tenants in common and in accordance with the provisions of Section 14.3 hereof, undivided interests in such Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Limited Partners, and shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable B-49 50 and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt. 14.5 Cancellation of Certificate of Limited Partnership. Upon the completion of the distribution of Partnership cash and property as provided in Sections 14.3 and 14.4 hereof, the Partnership shall be terminated and the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be cancelled and such other actions as may be necessary to terminate the Partnership shall be taken. 14.6 Reasonable Time for Winding-Up. A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Partnership and the liquidation of its assets pursuant to Section 14.3 hereof, in order to minimize any losses otherwise attendant upon such winding-up and the provisions of this Agreement shall remain in effect between the Partners during the period of liquidation. 14.7 Return of Capital. The General Partner shall not be personally liable for the return of the Capital Contributions of the Limited Partners, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets. 14.8 No Capital Account Restoration. No Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. 14.9 Waiver of Partition. Each Partner hereby waives any right to partition of the Partnership property. ARTICLE XV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE 15.1 Amendment to be Adopted Solely by General Partner. Each Limited Partner agrees that the General Partner (pursuant to its powers of attorney from the Limited Partners and Assignees), without the approval of any Limited Partner or Assignee, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent or the registered office of the Partnership; (b) admission, substitution, withdrawal or removal of Partners in accordance with this Agreement; (c) a change that, in the sole discretion of the General Partner, is reasonable and necessary or appropriate to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or that is necessary or advisable in the opinion of the General Partner to ensure that the Partnership will not be taxable as a corporation or treated as an association taxable as a corporation for federal income tax purposes; (d) a change (i) that, in the sole discretion of the General Partner, does not adversely affect the Limited Partners in any material respect, (ii) that is necessary or desirable to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including, without limitation, the Delaware Act) or that is necessary or desirable to facilitate the trading of the Depositary Units (including, without limitation, the division of outstanding Units into different classes in order to facilitate uniformity of tax consequences within such classes of Units) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Depositary Units are or will be listed for trading, compliance with any of which the General Partner determines in its sole discretion to be in the best interests of the Partnership and the Limited Partners or (iii) that is required to effect the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement; B-50 51 (e) an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership or the General Partner or its directors or officers from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or "plan asset" regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor; (f) subject to the terms of Section 4.4 hereof, an amendment that the General Partner determines in its sole discretion to be necessary or desirable in connection with the authorization for issuance of any class or series of Units pursuant to Section 4.4 hereof; (g) any amendment expressly permitted in this Agreement to be made by the General Partner acting alone; (h) any amendment made after the Support Period, the effect of which is to separate into a security separate and apart from the Units, the rights of holders of the Units to receive any Cumulative Base Deficiency in respect of the Support Period; (i) an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 16.3 hereof; or (j) any other amendments similar to the foregoing. 15.2 Amendment Procedures. Except as provided in Sections 15.1 and 15.3 hereof, all amendments to this Agreement shall be made in accordance with the following requirements: If an amendment is proposed, the General Partner shall seek the written approval of the requisite Percentage Interests or call a meeting of the Limited Partners to consider and vote on such proposed amendment. Each such proposal to the Limited Partners shall contain the text of the proposed amendment. A proposed amendment shall be effective upon its approval by at least 66 2/3% of the outstanding Units unless a greater or different percentage is required under this Agreement. The General Partner shall notify all Record Holders upon final adoption of any proposed amendment. 15.3 Amendment Requirements. (a) Amendments to this Agreement may be proposed solely by the General Partner. Notwithstanding the provisions of Sections 15.1 and 15.2 hereof, no provision of this Agreement which establishes a Percentage Interest required to take any action shall be amended, altered, changed, repealed or rescinded in any respect which would have the effect of reducing such voting requirement unless such amendment is approved by the written consent or the affirmative vote of Partners whose aggregate Percentage Interests constitute not less than the voting requirement sought to be reduced. (b) Notwithstanding the provisions of Sections 15.1 and 15.2 hereof, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner, (ii) modify the compensation payable to the General Partner or any of its Affiliates by the Partnership, (iii) change Section 14.1(a) or (c) hereof, (iv) restrict in any way any action by or rights of the General Partner as set forth in this Agreement or (v) except as set forth in Section 14.1(c) hereof, give any person the right to dissolve the Partnership. (c) Except as otherwise provided, the General Partner may amend the Partnership Agreement without the approval of the Limited Partners, except that any amendment that would have a material adverse effect on the holders of any class of outstanding Units must be approved by the holders of not less than 66 2/3% of the outstanding Units of such class. (d) Notwithstanding any other provision of this Agreement, except for amendments pursuant to Sections 6.3 or 15.1 hereof, no amendment shall become effective without the approval of the Record Holders of all Units unless the Partnership obtains an Opinion of Counsel to the effect that (i) such amendment will not cause the Partnership to become taxable as a corporation or treated as an association taxable as a corporation for federal income tax purposes and (ii) such amendment will not affect the limited liability of any Limited Partner in the Partnership under applicable law. B-51 52 (e) This Section 15.3 shall only be amended with the approval by written consent or affirmative vote of the holders of not less than 95% of the outstanding Units. 15.4 Meetings. All acts of Limited Partners to be taken hereunder shall be taken in the manner provided in this Article XV. Meetings of the Limited Partners may be called by the General Partner or by Limited Partners owning 20% or more of the outstanding Units of the class for which a meeting is proposed. Limited Partners shall call a meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a meeting and indicating the general or specific purposes for which the meeting is to be called. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send a notice of the meeting to the Limited Partners either directly or indirectly through the Transfer Agent. A meeting shall be held at a time and place determined by the General Partner on a date not more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business. 15.5 Notice of a Meeting. Notice of a meeting called pursuant to Section 15.4 hereof shall be given to the Record Holders in writing by mail or other means of written communication in accordance with Section 17.1 hereof. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication. 15.6 Record Date. For purposes of determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners or to give approvals without a meeting as provided in Section 15.11 hereof, the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed for trading, in which case the rule, regulation, guideline or requirement of such exchange shall govern) or (b) in the event that approvals are sought without a meeting, the date on which Limited Partners are requested in writing by the General Partner to give such approvals. 15.7 Adjournment. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XV. 15.8 Waiver of Notice; Approval of Meeting; Approval of Minutes. The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the Limited Partners entitled to vote, present in person or by proxy, signs a written waiver of notice or an approval of the holding of the meeting or an approval of the minutes thereof. All waivers and approvals shall be filed with the Partnership records or made a part of the minutes of the meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Limited Partner does not approve, at the beginning of the meeting, of the transaction of any business because the meeting is not lawfully called or convened; and except that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting. 15.9 Quorum. 66 2/3% of the outstanding Units of the class for which a meeting has been called represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class unless any such action by the Limited Partners requires approval by holders of a majority in interest of the Units, in which case, the quorum shall be a majority. At any meeting of the Limited Partners duly called and B-52 53 held in accordance with this Agreement at which a quorum is present, the act of Limited Partners whose Percentage Interests represent at least 66 2/3% of the Percentage Interests entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners owning such different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required Percentage Interests of the Limited Partners specified in this Agreement. In the absence of a quorum, any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of a majority of the Percentage Interests represented either in person or by proxy, but no other business may be transacted, except as provided in Section 15.7 hereof. 15.10 Conduct of Meeting. The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of approvals in writing, including, without limitation, the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 15.4 hereof, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting, in either case including, without limitation, a Partner or a director or officer of the General Partner. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals in writing. 15.11 Action Without a Meeting. Any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if an approval in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum Percentage Interests that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted. Prompt notice of the taking of action without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot submitted to Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Units held by the Limited Partner, the Partnership shall be deemed to have failed to receive a ballot for the Units which were not voted. If approval of the taking of any action by the Limited Partners is solicited by any Person other than by or on behalf of the General Partner, the written approvals shall have no force and effect unless and until (a) they are deposited with the Partnership in care of the General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days prior to the date sufficient approvals are deposited with the Partnership and (c) an Opinion of Counsel is delivered to the General Partner to the effect that the exercise of such right and the action proposed to be taken with respect to any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners' limited liability, (ii) will not jeopardize the status of the Partnership as a partnership under applicable tax laws and regulations and (iii) is otherwise permissible under the state statutes then governing the rights, duties and liabilities of the Partnership and the Partners. 15.12 Voting and Other Rights. (a) Only those Record Holders of Units on the Record Date set pursuant to Section 15.6 hereof shall be entitled to notice of, and to vote at, a meeting of Limited Partners or to act with respect to matters as to which approvals are solicited. (b) With respect to Units that are held for a Person's account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Units are registered, such broker, dealer or other agent shall, in exercising the voting rights in respect of such B-53 54 Units on any matter, and unless the arrangement between such Persons provides otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 15.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 10.4 hereof. ARTICLE XVI MERGER 16.1 Authority. The Partnership may merge or consolidate with one or more corporations, business trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including, without limitation, a general partnership or limited partnership, formed under the laws of the State of Delaware or any other state of the United States of America pursuant to a written agreement of merger or consolidation ("Merger Agreement") in accordance with this Article. 16.2 Procedure for Merger or Consolidation. Merger or consolidation of the Partnership pursuant to this Article requires the prior approval of the General Partner. If the General Partner shall determine, in the exercise of its sole discretion, to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth: (a) The names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate; (b) The name and jurisdictions of formation or organization of the business entity that is to survive the proposed merger or consolidation (hereafter designated as the "Surviving Business Entity"); (c) The terms and conditions of the proposed merger or consolidation; (d) The manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any general or limited partnership interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or general or limited partnership interests, rights, securities or obligations of any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity) which the holders of such general or limited partnership interests are to receive in exchange for, or upon conversion of, their securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or general or limited partnership interests, rights, securities or obligations of the Surviving Business Entity or any limited partnership, corporation, trust or other entity (other than the Surviving Business Entity), or evidences thereof are to be delivered; (e) A statement of any changes in the constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation; (f) The effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 16.4 hereof or a later date specified in or determinable in accordance with the Merger Agreement (provided that if the effective time of the merger is to be later than the date of the filing of the certificate of merger, it shall be fixed no later than the time of the filing of the certificate of merger and stated therein); and (g) Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable. 16.3 Approval by Limited Partners of Merger or Consolidation. (a) The General Partner of the Partnership, upon its approval of the Merger Agreement, shall direct that the Merger Agreement be submitted to a vote of Limited Partners whether at a meeting or by written consent, in either case in accordance with the B-54 55 requirements of Article XV hereof. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of a meeting or the written consent. (b) The Merger Agreement shall be approved upon receiving the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding Units of each class unless the Merger Agreement contains any provision which, if contained in an amendment to the Agreement, the provisions of this Agreement or the Delaware Act would require the vote or consent of a greater percentage of the Percentage Interests of the Limited Partners or of any class of Limited Partners, in which case such greater percentage vote or consent shall be required for approval of the Merger Agreement. (c) After such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the certificate of merger pursuant to Section 16.4 hereof, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement. 16.4 Certificate of Merger. Upon the required approval by the General Partner and Limited Partners of a Merger Agreement, a certificate of merger shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act. 16.5 Effect of Merger. (a) Upon the effective date of the certificate of merger: (i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity; (ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation; (iii) all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and (iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity, and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it. (b) A merger or consolidation effected pursuant to this Article shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another having occurred. ARTICLE XVII RIGHT TO ACQUIRE UNITS 17.1 Right to Acquire Units. (a) Notwithstanding the provisions of Section 13.1(a) hereof or any other provision of this Agreement (i) in the event that at any time after the Support Period less than 10% of the total Units outstanding are held by Persons other than the General Partner and its Affiliates, the General Partner shall then have the right, which right it may assign and transfer to the Partnership or any Affiliate of the General Partner, exercisable in its sole discretion, to purchase all, but not less than all, of the Units outstanding held by Persons other than the General Partner and its Affiliates, at the greater of (x) the Current Market Price as of the date the notice described in Section 17.1(b) hereof is mailed, (y) the Initial Unit Price or (z) the highest cash price paid by the General Partner for any Unit purchased during the 90-day period preceding the date that the notice described in Section 17.1(b) hereof is mailed. As used herein, (i) "Current Market Price" of any class of Units listed or admitted to trading on any National Securities Exchange means the average of the daily Closing Prices (as hereinafter defined) per Unit of such class for the 20 consecutive Trading Days (as hereinafter defined) immediately prior to such date and (ii) "Trading Day" means a day on which the principal National Securities Exchange on which the Units of any class are listed or admitted to trading is open for the transaction of business or, if Units of a class are not listed or admitted to trading on any National Securities Exchange, a day on which banking institutions in New York City generally are open. B-55 56 (b) If the General Partner, any Affiliate of the General Partner or the Partnership elects to exercise either right to purchase Units granted pursuant to Section 17.1(a) hereof, the General Partner shall deliver to the Transfer Agent written notice of such election to purchase (hereinafter in this Section 17.1 called the "Notice of Election to Purchase") and shall cause the Transfer Agent to mail a copy of such Notice of Election to Purchase to the Record Holders of Units (as of a Record Date selected by the General Partner) at least 10, but not more than 60, days prior to the Purchase Date. Such Notice of Election to Purchase shall also be published in daily newspapers of general circulation printed in the English language and published in the Borough of Manhattan, New York. The Notice of Election to Purchase shall specify the Purchase Date and the price (determined in accordance with Section 17.1(a) hereof) at which Units will be purchased and state that the General Partner, its Affiliate or the Partnership, as the case may be, elects to purchase such Units, upon surrender of Depositary Receipts with respect to such Units in exchange for payment, at such office or offices of the Transfer Agent as the Transfer Agent may specify, or as may be required by any National Securities Exchange on which the Units are listed or admitted to trading. Any such Notice of Election to Purchase mailed to a Record Holder of Units at his address as reflected in the records of the Transfer Agent shall be conclusively presumed to have been given whether or not the owner receives such notice. On or prior to the Purchase Date, the General Partner, its Affiliate or the Partnership, as the case may be, shall deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate purchase price of all of the Units to be purchased in accordance with this Section 17.1. If the Notice of Election to Purchase shall have been duly given as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to the Purchase Date the deposit described in the preceding sentence has been made for the benefit of the holders of Units subject to purchase as provided herein, then from and after the Purchase Date, notwithstanding that any Depositary Receipt shall not have been surrendered for purchase, all rights of the holders of such Units (including, without limitation, any rights pursuant to Articles IV, V and XIV hereof) shall thereupon cease, except the right to receive the purchase price (determined in accordance with Section 17.1(a) hereof) for Units therefor, without interest, upon surrender to the Transfer Agent of the Depositary Receipts representing such Units, and such Units shall thereupon be deemed to be transferred to the General Partner, its Affiliate or the Partnership, as the case may be, on the record books of the Transfer Agent and the Partnership, and the General Partner or any Affiliate of the General Partner, or the Partnership, as the case may be, shall be deemed to be the owner of all such Units from and after the Purchase Date and shall have all rights as the owner of such Units (including, without limitation, all rights as owner of such Units pursuant to Articles IV, V and XIV hereof). (c) At any time from and after the Purchase Date, a holder of an outstanding Unit subject to purchase as provided in this Section 17.1 may surrender his Depositary Receipt or Certificate, as the case may be, evidencing such Unit to the Transfer Agent in exchange for payment of the amount described in Section 17.1(a) therefor without interest thereon. ARTICLE XVIII GENERAL PROVISIONS 18.1 Addresses and Notices. Any notice, demand, request or report required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first-class United States mail or by other means of written communication to the Partner or Assignee at the address described below. Any notice, payment or report to be given or made to a Partner or Assignee hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Unit at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Unit or the Partnership Interest of a General Partner by reason of an assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 18.1 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of B-56 57 such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by the United States Post Office marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Partner or Assignee at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners and Assignees. Any notice to the Partnership shall be deemed given if received by the General Partner at the principal office of the Partnership designated pursuant to Section 1.3 hereof. The Partnership and the General Partner may rely and shall be protected in relying on any notice or other document from a Partner or other Person if believed by them to be genuine. 18.2 Titles and Captions. All article or section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to "Articles" and "Sections" are to Articles and Sections of this Agreement. 18.3 Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. 18.4 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement. 18.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns. 18.6 Integration. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. 18.7 Creditors. None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership. 18.8 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. 18.9 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Unit, upon executing and delivering a Transfer Application as herein described, independently of the signature of any other party. 18.10 Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. 18.11 Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. B-57 58 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. GENERAL PARTNER: Plum Creek Management Company, L.P. By: DAVID D. LELAND -------------------------------------- David D. Leland, President ORGANIZATIONAL LIMITED PARTNER: DAVID D. LELAND -------------------------------------- David D. Leland LIMITED PARTNERS: All Limited Partners now and hereafter admitted as limited partners of the Partnership, pursuant to Powers of Attorney now and hereafter executed in favor of, and granted and delivered to, the General Partner. By: Plum Creek Management Company, L.P. General Partner, as attorney-in-fact for all Limited Partners pursuant to the Powers of Attorney granted pursuant to Section 1.4 hereof. By: DAVID D. LELAND -------------------------------------- David D. Leland, President B-58 EX-4.C.1 3 EXHIBIT 4.C.1 1 Exhibit 4.C.1 SENIOR NOTE AGREEMENT AMENDMENT PLUM CREEK TIMBER COMPANY, L.P. 999 THIRD AVENUE SEATTLE, WASHINGTON 98104 As of September 1, 1993 To each of the Purchasers listed on the attached Purchaser Schedule Dear Purchaser: RECITALS WHEREAS, you and Plum Creek Timber Company, L.P., a Delaware limited partnership (the "Company"), have entered into Senior Note Agreements dated as of May 31, 1989 and as amended to the date hereof (the "Senior Note Agreements") pursuant to which the Company issued its 11-1/8% Senior Notes due June 8, 2007 (the "Senior Notes"); WHEREAS, Plum Creek Manufacturing, L.P., a Delaware limited partnership ("Manufacturing"), is the obligor with respect to certain 11-1/8% First Mortgage Notes due June 8, 2007 (the "Mortgage Notes"), pursuant to certain Mortgage Note Agreements, dated May 31, 1989 and as amended to the date hereof, among Manufacturing, the Company and the several holders of the Mortgage Notes identified on the Purchaser Schedule attached thereto ("Mortgage Note Agreements"); WHEREAS, the Company desires to purchase certain timberlands in the State of Montana ("Champion Timberlands") from Champion International Corporation; WHEREAS, the Company, in order to finance the purchase of the Champion Timberlands, proposes to enter into a Revolving Credit Agreement with Bank of America National Trust and Savings Association and the other lenders parties to such facility ("Bank of America Revolving Credit Agreement"); WHEREAS, concurrently with the execution and delivery of this Agreement, Manufacturing is executing and delivering a Mortgage Note Agreement Amendment ("Mortgage Note Amendment Agreement") with the Required Holders (as defined in the Mortgage Note Agreement) of the Mortgage Notes; WHEREAS, consummation of certain of the foregoing transactions requires certain amendments to the Senior Note Agreements; NOW, THEREFORE, the Company hereby agrees with you that this Agreement 2 shall become effective as of the date on which the Bank of America Revolving Credit Agreement become effective (the "Effective Time") and that thereafter, all references to, and actions taken in connection with, the Senior Note Agreements shall incorporate this Agreement in its entirety. All capitalized terms used in this Agreement and not otherwise defined have the meanings ascribed to them in the Senior Note Agreements. 1. CERTAIN AMENDMENTS A. DEFINITIONS (1) The definition of "Designated Acres" in Paragraph 10B of the Senior Note Agreements shall be amended by replacing the numeral "150,000" in the second line thereof with "200,000." (2) The following definitions shall be added to Paragraph 10B of the Senior Note Agreements: "Bank of America Revolving Credit Agreement" shall mean the credit agreement to be entered into between the Company, Bank of America National Trust and Savings Association, as Administrative Agent, and certain other lenders pursuant to which the lenders thereunder shall provide credit facilities to the Company in an aggregate principal amount not to exceed $260,000,000. "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 and the Bank of America Revolving Credit Agreement. "Actual Percentage" shall mean, at any date of determination, the percentage determined by dividing the aggregate outstanding principal balance of the Notes by the aggregate outstanding principal balance of all Qualified Debt, including the Notes. "Desired Percentage" shall mean thirty-eight percent (38%), the percentage determined by dividing the aggregate outstanding principal balance of the Notes on September 1, 1993 by the aggregate outstanding principal balance of all Qualified Debt outstanding upon the drawdown of the Bank of America Revolving Credit Agreement. -2- 3 B. PARAGRAPH 6B(5)(VIII)--MERGER AND SALE OF ASSETS (1) The existing Paragraph 6B(5)(viii) of the Senior Note Agreements shall be replaced by the following new subparagraphs (viii) and (ix): (viii) the Company and its Restricted Subsidiaries may otherwise sell for cash properties that constitute the Company's Columbia River Unit 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 are either (x) subject to subclause (e) of this Paragraph 6B(5)(viii), distributed immediately upon receipt thereof to holders of Qualified Debt other than the Notes for application (either immediately or within 180 days) to prepayment of such Qualified Debt, or (y) applied, within 180 days after such sale, to the purchase of productive assets in the same line of business, (c) in the event net proceeds of any such sale are in excess of $25,000,000 and if not applied immediately as provided in subclause (b) above, placed immediately upon receipt thereof in an escrow or cash collateral account or accounts, pursuant to an agreement or agreements in form and substance satisfactory to holders of 66-2/3% of the outstanding principal amount balance of the Qualified Debt other than the Notes, for the purpose of application in accordance with subclause (b) above, (d) 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), and (e) the aggregate net proceeds of all sales pursuant to this paragraph (viii) during the year from the funding of the first loan under the Bank of America Revolving Credit Agreement to the first anniversary thereof that are applied in repayment of Qualified Debt other than the Notes do not exceed $150,000,000, and (ix) the Company and its Restricted Subsidiaries may otherwise sell for cash properties (other than properties described in Paragraph 6B(5)(viii) above) 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 first, if any net proceeds -3- 4 have been used to repay Qualified Debt other than the Notes in accordance with paragraph 6B(5)(viii), to the prepayment of the Notes pursuant to Paragraphs 4A or 4B, as the case may be, to the extent necessary to cause their Actual Percentage to equal the Desired Percentage, and second, pro rata (based on the current outstanding principal of all Qualified Debt) to the holders of all Qualified Debt, or (y) are applied, within 180 days after such sale, to the purchase of productive assets in the same line of business, (c) the net proceeds of any such sale are either (x) distributed immediately upon receipt thereof to holders of Qualified Debt in accordance with subclause (b)(x) above for application (either immediately or within 180 days, which, in the case of the Notes, shall be pursuant to an escrow agreement satisfactory in form and substance to the Required Holder(s)) to repayment of such Qualified Debt, or (y) if in excess of $25,000,000, placed immediately upon receipt thereof in an escrow or cash collateral account or accounts, pursuant to an agreement or agreements in form and substance reasonably satisfactory to holders of 66-2/3% of the outstanding principal balance of the Qualified Debt, for the purpose of application in accordance with subclause (b) above, and (d) 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). C. PARAGRAPH 6B(6)--HARVESTING RESTRICTIONS Paragraph 6B(6) of the Senior Note Agreements shall be amended in its entirety to read as follows: 6B(6) HARVESTING RESTRICTIONS -- In any calendar year, harvest Timber on the Timberlands then owned by the Company in excess of the amount set forth for such calendar year in the following table: -4- 5
Maximum MMBF Calendar Year to be Harvested ------------- --------------- 1989 (including harvest by predecessor prior to the closing) through 1991 675 MMBF 1992 and 1993 650 MMBF 1994 through 1996 700 MMBF 1997 through 2000 675 MMBF 2001 through 2007 625 MMBF
plus, in each year, the amount, if any, by which the cumulative amount set forth in the table above for the preceding years exceeds the cumulative amount actually harvested in such years; unless the net cash proceeds from such excess harvest are either (i) distributed to all holders of Qualified Debt pro rata based upon outstanding principal balances at the time of such distribution for application (either immediately or within 180 days after such excess harvest) to the repayment of such Qualified Debt, which, in the case of the Notes, shall be a prepayment pursuant to Paragraph 4A or 4B, as the case may be, and shall be pursuant to an escrow agreement satisfactory in form and substance to the Required Holder(s), 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. 2. CONDITIONS TO EFFECTIVENESS The amendments to the Senior Note Agreements and the other agreements set forth herein shall become effective, subject to the fulfillment of the following conditions to your satisfaction or waiver by you thereof (as evidenced by your execution and delivery of this Agreement) on or prior to the Effective Time. A. REPRESENTATIONS AND WARRANTIES; NO DEFAULT The representations and warranties contained in Paragraph 3 hereof 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; and there shall exist on the date of closing no Event of Default or Default. -5- 6 B. CERTAIN AGREEMENTS Each of (i) this Agreement, (ii) Bank of America Revolving Credit Agreement, and (iii) the Mortgage Note Amendment Agreement shall have been duly authorized, executed and delivered by the parties thereto (other than you) and shall be in full force and effect. C. 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 you, and you shall have received all such counterpart originals or certified or other copies of such documents as you may reasonably request. 3. REPRESENTATIONS AND WARRANTIES The Company represents and warrants as follows: A. ORGANIZATION The Company is a limited partnership duly organized, validly existing and in good standing under the Delaware Revised Uniform Limited Partnership Act and has all requisite partnership power and authority to own and operate its properties, to conduct its business as now conducted and as proposed to be conducted and to enter into this Agreement. B. QUALIFICATION The Company is duly qualified or registered for transaction of business and in good standing as a foreign limited partnership in each jurisdiction in which the failure so to qualify or be registered would have a material adverse effect on the business, property or assets, condition or operations of the Company, or on the ability of the Company to perform its obligations under this Agreement, or, after giving effect to the transactions contemplated hereby, the Senior Note Agreements or the Senior Notes. -6- 7 C. SUBSIDIARIES As of the Effective Time the General Partner owns a 2% general partner's interest and the Company owns a 98% limited partner's interest in Manufacturing, which interests have been duly authorized and validly issued, fully paid and non-assessable and are owned free and clear of any Liens. Manufacturing has issued no warrants or options to acquire, or instruments convertible into or exchangeable for any equity interest in Manufacturing. As of the Effective Time the General Partner owns 4% of the capital stock and the Company owns 96% of the capital stock of Marketing, which capital stock has been duly authorized and validly issued, fully paid and non-assessable and are owned free and clear of any liens. Marketing has issued no warrants or options to acquire or interests convertible into or exchangeable for any equity interest in Marketing. As of the Effective Time the Company has no Subsidiaries other than Manufacturing and Marketing. As of the Effective Time Manufacturing has no Subsidiaries. D. CHANGES, ETC. Except as contemplated by this Agreement, since June 30, 1993, the date of the most recent consolidated financial statements of the Company, (a) the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions not in the ordinary course of business (except for the commitment to purchase the Champion Timberlands), and (b) there has not been any material adverse change in the financial condition or operations of the Company. E. ACTIONS PENDING There is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company, or any properties or rights of the Company, by or before any court, arbitrator or administrative or governmental body which questions the validity of this Agreement, or any action taken or to be taken pursuant to this Agreement, which would be reasonably likely to result in any material adverse change in the business, properties or assets, condition or operations of the Company, or in the inability of the Company to perform its obligations under this Agreement, the Senior Note Agreements or the Senior Notes, following the effectuation of the transactions described herein. -7- 8 F. COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not in violation of any provision of the Partnership Agreement or of any term of any agreement or instrument to which it is a party or by which it or any of its properties is bound or any term of any applicable law, ordinance, rule or regulation of any governmental authority or any term of any applicable order, judgment or decree of any court, arbitrator or governmental authority (collectively, "term"), the consequences of which violation would be reasonably likely to have a material adverse effect on its business, properties or assets, condition or operations or on the ability of the Company to perform its obligations under this Agreement, or, after giving effect to the transactions contemplated hereby, the Senior Note Agreements or the Senior Notes, and the execution, delivery and performance by the Company of this Agreement, or, after giving effect to the transactions contemplated hereby, the Senior Note Agreements or the Senior Notes will not result in any violation of or be in conflict with or constitute a default under any such term or result in the creation of (or impose any obligation on the Company to create) any Lien upon any of the properties or assets of the Company, pursuant to any such term except for Liens permitted by paragraph 6B(1) of the Senior Note Agreements; and there is no such term which materially adversely affects or in the future would be likely to materially adversely affect the business, properties or assets, condition or operations of the Company or the ability of the Company to perform its obligations under this Agreement, or, after giving effect to the transactions contemplated hereby, the Senior Note Agreements or the Senior Notes. G. GOVERNMENTAL CONSENT No consent, approval or authorization of, or declaration or filing with, any governmental authority is required for the valid execution, delivery and performance by the Company of this Agreement, or, after giving effect to the transactions contemplated hereby, the Senior Note Agreements or the Senior Notes other than those which have been obtained on or prior to the Effective Time. H. FOREIGN ASSETS CONTROL REGULATIONS, ETC. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby will not violate 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 Nicaraguan Trade Control Regulations, the South African Transactions Regulations, the Libyan Sanctions Regulations, the Soviet Gold Coin Regulations or the Panamanian Transactions Regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or (i) Executive Orders 12722 and 12724 (55 Fed. Reg. 31803 and 55 Fed Reg. 33089), Blocking Iraqi Government Property and Prohibiting Transactions with Iraq, and (ii) Executive Orders 12723 and 12725 (55 Fed. Reg. 31805 and 55 Fed. Reg. 33091), Blocking Kuwaiti Government Property and Prohibiting Transactions with Kuwait. -8- 9 I. DISCLOSURE Neither this Agreement nor any other document, certificate or statement furnished to you by or on behalf of the Company in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact peculiar to the Company which materially adversely affects or in the future may (so far as the Company can now reasonably foresee) materially adversely affect the businesses, property or assets, condition or results of operations of the Company and which has not been set forth in this Agreement, or in the other documents, certificates and statements furnished to you by or on behalf of the Company, prior to the date hereof in connection with the transactions contemplated hereby. 4. EXPENSES; INDEMNIFICATION The Company shall, whether or not the transactions contemplated hereby are consummated, save each holder of Senior Notes harmless for all out-of-pocket expenses arising in connection with the execution and delivery or performance of this Agreement, including the reasonable fees and expenses of special counsel for the holders of Senior Notes. The Company shall also indemnify and save each holder of Senior Notes harmless from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever (including, without limitation, any taxes, and any additional taxes imposed on any amounts payable pursuant to this Paragraph 4) which may at any time be imposed on, incurred by or asserted against any holder of Senior Notes in any way arising out of, relating to or resulting from this Agreement or the transactions contemplated hereby. The obligations of the Company under this Paragraph 4 shall survive the transfer of any Senior Note or portion thereof or interest therein by a holder of Senior Notes or any transferee and the payment of any Senior Note. 5. MISCELLANEOUS. A. CONTINUITY AND INTEGRATION OF AGREEMENTS. The Senior Note Agreements, as affected by this Agreement, shall remain in full force and effect and are hereby ratified and confirmed, and the Senior Note Agreements and this Agreement shall be deemed to be and are construed as a single agreement. B. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained herein shall survive the execution and delivery of this Agreement, and the transfer of any Senior Note by a holder thereof. Such representations and warranties may be relied upon by any transferee of a Senior Note from a holder thereof. -9- 10 C. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. D. 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. E. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK. THIS AGREEMENT SHALL BE BINDING UPON THE COMPANY AND THE HOLDERS OF SENIOR NOTES AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. -10- 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the date first above written. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., General Partner By: . . . . . . . . . . . . . . . Name: Rick R. Holley Title: Vice President and Chief Financial Officer The foregoing is accepted and agreed to: By: . . . . . . . . . . . . . . . . . Name: Title: Company: -11- EX-4.C.2 4 EXHIBIT 4.C.2 1 Exhibit 4.C.2 MORTGAGE NOTE AGREEMENT AMENDMENT PLUM CREEK MANUFACTURING, L.P. 999 THIRD AVENUE SEATTLE, WASHINGTON 98104 As of September 1, 1993 To each of the Purchasers listed on the attached Purchaser Schedule Dear Purchaser: RECITALS WHEREAS, you, Plum Creek Manufacturing, L.P., a Delaware limited partnership (the "Company"), and Plum Creek Timber Company, L.P., a Delaware limited partnership (the "Partnership"), are parties to Mortgage Note Agreements dated as of May 31, 1989 and as amended to the date hereof (the "Mortgage Note Agreements") pursuant to which the Company is the obligor with respect to certain 11-1/8% First Mortgage Notes due June 8, 2007 (the "Mortgage Notes"); WHEREAS, the payment of the Mortgage Notes is guaranteed by the Partnership pursuant to Paragraph 7 of the Mortgage Note Agreements; WHEREAS, the Partnership desires to purchase certain timberlands in the State of Montana ("Champion Timberlands") from Champion International Corporation; WHEREAS, the Partnership, in order to finance the purchase of the Champion Timberlands pursuant to the Purchase Agreement, proposes to enter into a Revolving Credit Agreement with Bank of America National Trust and Savings Association and the other lenders under to such facility ("Bank of America Revolving Credit Agreement"); WHEREAS, consummation of the foregoing transactions requires certain amendments to the Mortgage Note Agreements; NOW, THEREFORE, the Company and the Partnership hereby agree with you that this Agreement shall become effective as of the date on which the Bank of America Revolving Credit Agreement becomes effective (the "Effective Time") and that thereafter, all references to, and actions taken in connection with, the Mortgage Note Agreements shall incorporate this Agreement in its entirety. All capitalized terms used in this Agreement and not otherwise defined have the meanings ascribed to them in the Mortgage Note Agreements. 2 1. AMENDMENT The first part of Paragraph 7J of the Mortgage Note Agreements shall be amended to read as follows: 7J INCORPORATED COVENANTS. The provisions of paragraphs 5 and 6 of the Senior Note Agreements as originally in effect (except as amended to and as of September 1, 1993 between the Partnership and the Senior Noteholders ("Amendments")) and the definitions set forth or specified by reference in the Senior Note Agreement as originally in effect (except as amended by the Amendments) of terms used in such paragraphs 5 and 6 or in such definitions (herein, collectively, the Incorporated Provisions") . . . The last sentence of Paragraph 7J shall be amended to read as follows: The Incorporated Provisions shall not be affected by any amendments, modification, waiver or termination of the Senior Note Agreements, except as amended by the Amendments, and may be amended, modified, waived or terminated only pursuant to Paragraph 12C of this Agreement. 2. CONDITIONS TO EFFECTIVENESS The amendments to the Mortgage Note Agreements and the other agreements set forth herein shall become effective, subject to the fulfillment of the following conditions to your satisfaction or waiver by you thereof (as evidenced by your execution and delivery of this Agreement) on or prior to the Effective Time: A. REPRESENTATIONS AND WARRANTIES; NO DEFAULT The representations and warranties contained in Paragraph 3 hereof shall be true in all material respects on and as of the Effective Time, except to the extent of changes caused by the transactions herein contemplated; and there shall exist on the date of closing no Event of Default or Default. B. CERTAIN AGREEMENTS Each of (i) this Agreement, (ii) the Bank of America Revolving Credit Agreement, and (iii) the amendment to the Senior Note Agreement of even date herewith among the Partnership and the several holders of the Senior Notes (the "Senior Note Agreement Amendment") shall have been duly authorized, executed and delivered by the parties thereto (other than you) and shall be in full force and effect. -2- 3 C. 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 you, and you shall have received all such counterpart originals or certified or other copies of such documents as you may reasonably request. 3. REPRESENTATIONS AND WARRANTIES Each of the Company and the Partnership represents and warrants: A. ORGANIZATION The Company is a limited partnership duly organized, validly existing and in good standing under the Delaware Revised Uniform Limited Partnership Act and has all requisite partnership power and authority to own and operate its properties, to conduct its business as now conducted and as proposed to be conducted, and to enter into and carry out the terms of this Agreement. The Partnership is a limited partnership duly organized, validly existing and in good standing under the Delaware Revised Uniform Limited Partnership Act and has all requisite partnership power and authority to own and operate its properties, to conduct its business as now conducted and as proposed to be conducted, and to enter into and carry out the terms of this Agreement. B. CHANGES, ETC. Except as contemplated by this Agreement, since June 30, 1993, the date of the most recent consolidated financial statements of the Partnership, (i) neither the Company nor the Partnership has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions not in the ordinary course of business (except for the commitment to purchase the Champion Timberlands), and (ii) there has not been any material adverse change in the financial condition or operations of the Company or the Partnership. 4. AFFIRMATION OF GUARANTEE The Partnership hereby agrees that its Guarantee in respect of the Mortgage Notes, as set forth in Paragraph 7 of the Mortgage Note Agreements, shall continue in full force and effect from and after the Effective Time. -3- 4 5. EXPENSES; INDEMNIFICATION The Company shall, whether or not the transactions contemplated hereby are consummated, save each holder of Mortgage Notes harmless for all out-of-pocket expenses arising in connection with the execution and delivery or performance of this Agreement and the consummation of the transactions contemplated hereby, including the reasonable fees and expenses of special counsel for the holders of Mortgage Notes. The Company shall also indemnify and save each holder of Mortgage Notes harmless from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements or any kind whatsoever (including, without limitation, any taxes, and any additional taxes imposed on any amounts payable pursuant to this Paragraph 5) which may at any time be imposed on, incurred by or asserted against any holder of Mortgage Notes in any way arising out of, relating to or resulting from this Agreement or the transactions contemplated hereby. The obligations of the Operations Partnership under this Paragraph 5 shall survive the transfer of any Mortgage Note or portion thereof or interest therein by a holder of Mortgage Notes or any transferee and the payment of any Mortgage Note. 6. MISCELLANEOUS A. CONTINUITY AND INTEGRATION OF AGREEMENTS The Mortgage Note Agreements, as affected by this Agreement, shall remain in full force and effect and are hereby ratified and confirmed, and the Mortgage Note Agreements and this Agreement shall be deemed to be and construed as a single agreement. B. SURVIVAL OF REPRESENTATIONS AND WARRANTIES All representations and warranties contained herein shall survive the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the transfer of any Mortgage Note by a holder of Mortgage Notes. Such representations and warranties may be relied upon by any transferee of a Mortgage Note from a holder of Mortgage Notes. C. SUCCESSORS AND ASSIGNS All covenants and agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. D. DESCRIPTIVE HEADINGS The descriptive headings of the several paragraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. -4- 5 E. COUNTERPARTS This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK. THIS AGREEMENT SHALL BE BINDING UPON THE COMPANY, THE PARTNERSHIP, THE OPERATIONS PARTNERSHIP, THE MERGER COMPANY AND THE HOLDERS OF MORTGAGE NOTES AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. -5- 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the date first above written. PLUM CREEK MARKETING, INC. By: . . . . . . . . . . . . . . . . Name: Rick R. Holley Title: Vice President and Chief Financial Officer PLUM CREEK MANUFACTURING, L.P.. By: Plum Creek Management Company, L.P., General Partner By: . . . . . . . . . . . . . . . . Name: Rick R. Holley Title: Vice President and Chief Financial Officer PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., General Partner By: . . . . . . . . . . . . . . . . Name: Rick R. Holley Title: Vice President and Chief Financial Officer The foregoing is accepted and agreed to: By: . . . . . . . . . . . . . . . . Name: Title: Company: -6- EX-4.C.3 5 EXHIBIT 4.C.3 1 Exhibit 4.C.3 ================================================================================ CREDIT AGREEMENT Dated as of October 28, 1993 among PLUM CREEK TIMBER COMPANY, L.P., BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO ================================================================================ 2 PLUM CREEK TIMBER COMPANY CREDIT AGREEMENT DESK SET INDEX Document Number: - ------- 1. Credit Agreement dated as of October 28, 1993 (the "Credit Agreement"), among Plum Creek Timber Company, L.P., the financial institutions party thereto (the "Banks") and Bank of America National Trust and Savings Association, as agent for the Banks 2. Schedules to the Credit Agreement: o Schedule 1.01: Investment Policy o Schedule 2.01: Commitments o Schedule 5.05: Litigation o Schedule 5.07: ERISA o Schedule 5.12: Environmental Matters o Schedule 5.18: Subsidiaries of PCTC o Schedule 7.01: Permitted Liens o Schedule 7.04: Permitted Investments 3. Exhibits to the Credit Agreement: o Exhibit A: Notice of Borrowing o Exhibit B: Notice of Conversion/Continuation o Exhibit C-1: Form of Legal Opinion of Company Counsel o Exhibit C-2: Form of Legal Opinion of Perkins Coie o Exhibit D: Compliance Certificate o Exhibit E: Form of Cash Collateral Agreement o Exhibit F: Form of Assignment and Acceptance 4. Closing Documents List 3 TABLE OF CONTENTS
Section Page ARTICLE I DEFINITIONS ................. 1 1.01 Defined Terms ............................... 1 1.02 Other Interpretive Provisions ............... 30 (a) Defined Terms .......................... 30 (b) The Agreement .......................... 30 (c) Certain Common Terms ................... 30 (d) Performance; Time ...................... 30 (e) Contracts .............................. 31 (f) Laws ................................... 31 (g) Captions ............................... 31 (h) Independence of Provisions ............. 31 (i) Interpretation ......................... 31 1.03 Accounting Principles ....................... 31 ARTICLE II THE CREDITS ................. 32 2.01 Amounts and Terms of Commitments ............ 32 2.02 Loan Accounts ............................... 32 2.03 Procedure for Borrowing ..................... 32 2.04 Conversion and Continuation Elections ....... 33 2.05 Voluntary Termination or Reduction of Commitments ................................. 35 2.06 Optional Prepayments ........................ 36 2.07 Mandatory Prepayments of Loans; Mandatory Commitment Reductions ....................... 36 (a) Asset Dispositions ..................... 36 (b) Mandatory Commitment Reductions ........ 36 (c) General ................................ 37 (d) Reduction of Commitment ................ 37 2.08 Repayment ................................... 38 2.09 Interest .................................... 38 2.10 Fees ........................................ 40 (a) Agency and Participation Fees .......... 40 (b) Commitment Fees. ....................... 40 2.11 Computation of Fees and Interest ............ 40 2.12 Payments by the Company ..................... 41 2.13 Payments by the Banks to the Agent .......... 42 2.14 Sharing of Payments, Etc .................... 43
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Section Page ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY ... 43 3.01 Taxes ....................................... 43 3.02 Illegality .................................. 47 3.03 Increased Costs and Reduction of Return ..... 47 3.04 Funding Losses .............................. 48 3.05 Inability to Determine Rates ................ 49 3.06 Certificate of Bank ......................... 49 3.07 Survival .................................... 49 ARTICLE IV CONDITIONS PRECEDENT ............ 50 4.01 Conditions of Initial Loans ................. 50 (a) Credit Agreement ....................... 50 (b) Resolutions; Incumbency ................ 50 (c) Articles of Incorporation; By-laws; Partnership Documents and Good Standing 50 (d) Legal Opinion .......................... 51 (e) Payment of Fees ........................ 51 (f) Certificate ............................ 51 (g) Financial Statements ................... 52 (h) Credit Agreements ...................... 52 (i) Other Documents ........................ 52 4.02 Conditions to All Borrowings. ............... 52 (a) Notice of Borrowing or Continuation/Conversion ................ 52 (b) Continuation of Representations and Warranties ............................. 52 (c) No Existing Default .................... 53 ARTICLE V REPRESENTATIONS AND WARRANTIES ....... 53 5.01 Corporate Existence and Power ............... 53 5.02 Authorization; No Contravention ............. 54 5.03 Governmental Authorization .................. 54 5.04 Binding Effect .............................. 54 5.05 Litigation .................................. 54 5.06 No Default .................................. 55 5.07 ERISA Compliance ............................ 55 5.08 Use of Proceeds; Margin Regulations ......... 57 5.09 Title to Properties ......................... 57 5.10 Taxes ....................................... 57 5.11 Financial Condition ......................... 58 5.12 Environmental Matters ....................... 58 5.13 Regulated Entities .......................... 59 5.14 No Burdensome Restrictions .................. 59 5.15 Solvency .................................... 59 5.16 Labor Relations ............................. 60
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Section Page 5.17 Copyrights, Patents, Trademarks and Licenses, etc. ........................................ 60 5.18 Subsidiaries ................................ 60 5.19 Partnership Interests ....................... 60 5.20 Broker's; Transaction Fees .................. 61 5.21 Insurance ................................... 61 5.22 Timber Harvest .............................. 61 5.23 Full Disclosure ............................. 61 ARTICLE VI AFFIRMATIVE COVENANTS ............ 61 6.01 Financial Statements ........................ 61 6.02 Certificates; Other Information ............. 63 6.03 Notices ..................................... 63 6.04 Preservation of Corporate Existence, Etc. ... 66 6.05 Maintenance of Property ..................... 66 6.06 Insurance ................................... 66 6.07 Payment of Obligations ...................... 66 6.08 Compliance with Laws ........................ 67 6.09 Inspection of Property and Books and Records 67 6.10 Environmental Laws .......................... 67 6.11 Use of Proceeds ............................. 68 6.12 Solvency .................................... 68 ARTICLE VII NEGATIVE COVENANTS ............. 68 7.01 Limitation on Liens ......................... 68 7.02 Merger; Disposition of Assets ............... 70 7.03 Harvesting Restrictions ..................... 74 7.04 Loans and Investments ....................... 74 7.05 Limitation on Indebtedness .................. 76 7.06 Transactions with Affiliates ................ 79 7.07 Use of Proceeds ............................. 79 7.08 Sale of Stock and Debt of Subsidiaries ...... 79 7.09 Certain Contracts ........................... 80 7.10 Joint Ventures .............................. 81 7.11 Compliance with ERISA ....................... 81 7.12 Sale and Leaseback .......................... 81 7.13 Restricted Payments ......................... 82 7.14 Change in Business .......................... 83 7.15 Issuance of Stock by Subsidiaries ........... 83 7.16 Amendments .................................. 83 7.17 Available Cash............................... 83 ARTICLE VIII EVENTS OF DEFAULT .............. 84 8.01 Event of Default ............................ 84 (a) Non-Payment ............................ 84 (b) Representation or Warranty ............. 84
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Section Page (c) Specific Defaults ...................... 85 (d) Other Defaults ......................... 85 (e) Cross-Default .......................... 85 (f) Insolvency; Voluntary Proceedings ...... 85 (g) Involuntary Proceedings ................ 85 (h) ERISA .................................. 86 (i) Monetary Judgments ..................... 87 (j) Non-Monetary Judgments ................. 87 (k) Montana Timberlands .................... 87 (1) Adverse Change ......................... 87 8.02 Remedies .................................... 88 8.03 Rights Not Exclusive ........................ 88 ARTICLE IX THE AGENT .................. 88 9.01 Appointment and Authorization ............... 88 9.02 Delegation of Duties ........................ 89 9.03 Liability of Agent .......................... 89 9.04 Reliance by Agent ........................... 89 9.05 Notice of Default ........................... 90 9.06 Credit Decision ............................. 91 9.07 Indemnification ............................. 91 9.08 Agent in Individual Capacity ................ 92 9.09 Successor Agent ............................. 93 ARTICLE X MISCELLANEOUS ................ 94 10.01 Amendments and Waivers ...................... 94 10.02 Notices ..................................... 95 10.03 No Waiver; Cumulative Remedies .............. 96 10.04 Costs and Expenses .......................... 96 10.05 Indemnity ................................... 97 10.06 Marshalling; Payments Set Aside ............. 97 10.07 Successors and Assigns ...................... 97 10.08 Assignments, Participations, etc ............ 98 10.09 Set-off ..................................... 101 10.10 Automatic Debits of Fees .................... 101 10.11 Notification of Addresses, Lending Offices, Etc. ........................................ 101 10.12 Counterparts ................................ 101 10.13 Severability ................................ 102 10.14 No Third Parties Benefited .................. 102 10.15 Time ........................................ 102 10.16 Governing Law and Jurisdiction .............. 102 10.17 Arbitration; Reference ...................... 102 10.18 Entire Agreement ............................ 103
iv 7 SCHEDULES Schedule 1.01 Corporate Investment Policy Schedule 2.01 Commitments Schedule 5.05 Litigation Schedule 5.07 ERISA Schedule 5.12 Environmental Matters Schedule 5.18 Subsidiaries and Equity Investments Schedule 7.01 Permitted Liens Schedule 7.04 Permitted Investments
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
v 8 CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of October 28, 1993, 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 agent for the Banks. WHEREAS, the Banks have agreed to make available to the Company a revolving credit facility 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: ARTICLE I DEFINITIONS 1.01 Defined Terms. In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "Actual Percentage" means, at any date of determination, the percentage determined by dividing the aggregate outstanding principal balance of the Notes by the aggregate outstanding principal balance of all Qualified Debt, including the Notes. "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. 1 9 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 the signature page hereto in relation to the Agent or such other address as the Agent may from time to time specify in accordance with Section 10.02. "Agent-Related Persons" means BofA and any successor agent arising under Section 9.09, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Aggregate Commitment" means the combined Commitments of the Banks, in the initial amount of two hundred seventy-five million dollars ($275,000,000), as such amount may be reduced from time to time pursuant to this Agreement. "Agreement" means this Credit Agreement, as amended from time to time in accordance with the terms hereof. "Applicable Margin" means (i) with respect to Base Rate Loans, 0.000%; (ii) with respect to CD Rate Loans, 1.250%; and (iii) with respect to Offshore Rate Loans, 1.125%. "Assignee" has the meaning specified in subsection 10.08(a). "Assignment and Acceptance" has the meaning specified in subsection 10.08(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, 2 10 (b) the amount of depletion, depreciation, amortization and other noncash charges utilized in determining net income of the Company for such quarter, (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 3 11 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 such guarantees, contingent liabilities or endorsements) made by the Company during such quarter pursuant to subsections 7.04(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 7.04(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, 4 12 provided, however, (1) 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 (2) any disbursements made of the types described in clauses (ii)(a), (b), (c), (f) and (g) or reserves established, in accordance with clause (ii)(d), 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 (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 net income of any Subsidiary shall be determined on an after-tax basis; 5 13 (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. "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 that bears interest based on the Base Rate. "BofA" means Bank of America National Trust and Savings Association, a national banking association. 6 14 "Board Foot" means a unit of measurement one foot square and one inch thick. "Borrowing" means a borrowing hereunder consisting of Loans made to the Company on the same day by the Banks pursuant to Article II. "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 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 account in the ordinary course of business) by the Company, (ii) sales of equity interests by the Company (other than sales of SPUs) 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 7 15 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 pursuant to subsection 7.02(i) substantially in the form of Exhibit E. "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. "CD Rate" means, for each Interest Period in respect of CD Rate Loans comprising a part of the same Borrowing, the rate of interest (rounded upward to the nearest 1/100th of 1%) determined pursuant to the following formula: CD Rate = Certificate of Deposit Rate + Assessment --------------------------- Rate 1.00 - Reserve Percentage Where: "Assessment Rate" means for any day of any Interest Period for CD Rate Loans, the rate determined by the Agent as equal to the annual assessment rate in effect on such day that is payable to the FDIC by a member of the Bank Insurance Fund that is classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification within the meaning of 12 C.F.R. Section 327.3(d)) for insuring time deposits at offices of such member in the United States, or, in the event that the FDIC shall at any time hereafter cease to assess time deposits based upon such classifications or successor classifications, equal to the maximum annual assessment rate in effect on such day that is payable to the FDIC by commercial banks for insuring time deposits at offices of such banks in the United States. "Certificate of Deposit Rate" means for any Interest Period for CD Rate Loans the rate of 8 16 interest per annum determined by the Agent to be the arithmetic mean (rounded upward to the nearest 1/100th of 1%) of the rates notified to the Agent as the rates of interest bid by two or more certificate of deposit dealers of recognized standing selected by the Agent for the purchase at face value of dollar certificates of deposit issued by major United States banks, for a maturity comparable to such Interest Period and in the approximate amount of the CD Rate Loans to be made, at the time selected by the Agent on the first day of such Interest Period. "Reserve Percentage" means for any day for any Interest Period for CD Rate Loans the reserve percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%), as determined by the Agent, in effect on such day (including any ordinary, marginal, emergency, supplemental, special and other reserve percentages) prescribed by the Federal Reserve Board for determining the reserves to be maintained by member banks of the Federal Reserve System with deposits exceeding $1,000,000,000 for new non-personal time deposits for a period comparable to such Interest Period and in an amount of $100,000 or more. The CD Rate shall be adjusted automatically as of the effective date of any change in the Reserve Percentage. "CD Rate Loan" means a Loan that bears interest based on the CD Rate. "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 4.01 are satisfied or waived by all Banks. "Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder. "Columbia River Unit" means those certain approximately 63,000 acres located in southwest Washington and generally referred to on the date hereof as the Company's "Columbia River Unit." "Commitment", with respect to each Bank, has the meaning specified in Section 2.01. 9 17 "Commitment Percentage" means, as to any Bank, the percentage equivalent of such Bank's Commitment divided by the Aggregate Commitment. "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 Date" means any date on which the Company converts a Base Rate Loan to an Offshore Rate Loan or a CD Rate Loan; a CD Rate Loan to an Offshore Rate Loan or a Base Rate Loan; or an Offshore Rate Loan to a CD Rate Loan or a Base Rate Loan. "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. "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 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 the Note Agreements). "Designated Immaterial Subsidiary" means 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 Indebtedness 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 10 18 subsection 7.05(j), 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, subsection 7.04(i), 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" means and includes 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. "Desired Percentage" means thirty-eight percent (38%), the percentage determined by dividing the aggregate outstanding principal balance of the Notes on September 1, 1993 by the aggregate outstanding principal balance of all Qualified Debt outstanding upon the drawdown of the Loans. "Distribution Support Agreement" means the Distribution Support Agreement, dated as of June 8, 1989 between the Company and Burlington Resources Inc. "Dollars", "dollars" and "$" each mean lawful money of the United States. 11 19 "Domestic Lending Office" means, with respect to each Bank, the office of that Bank designated as such in the signature pages hereto or such other office of the Bank as it may from time to time specify to the Company and the Agent. "DPI Borrower" has the meaning specified in Section 9.08. "EBITDA" means, for any period, for the Company and its Subsidiaries on a combined basis, determined in accordance with GAAP, the sum of (a) the net income (or net loss) for such period, plus (b) all amounts treated as expenses for depreciation, depletion and interest and the amortization of intangibles of any kind to the extent included in the determination of such net income (or loss), plus (c) all adjustments arising by virtue of the conversion from average cost accounting to a LIFO basis with respect to inventory to the extent included in the determination of such net income, plus (d) all accrued taxes on or measured by income to the extent included in the determination of such net income (or loss); provided, however, that net income (or loss) shall be computed for these purposes without giving effect to extraordinary losses or extraordinary gains. "Effective Date" means the later to occur of the Closing Date or November 1, 1993. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States; and (iii) a Person that is primarily engaged in the business of commercial banking and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a Person of which a Bank is a Subsidiary. "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), 12 20 property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non- negligent, sudden or non-sudden, accidental or non- accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in, or from Property, whether or not owned by such person, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety, land use, conservation, and timber harvesting matters; including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know Act. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or 414(c) of the Code. "ERISA Event" means (a) a Reportable Event with respect to a Qualified Plan or a Multiemployer Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 13 21 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure by the Company or any ERISA Affiliate to make required contributions to a Qualified Plan or Multiemployer Plan; (f) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Qualified Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate; (h) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Plan; (i) a non-exempt prohibited transaction occurs with respect to any Plan for which the Company may be directly or indirectly liable; or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary or disqualified person with respect to any Plan for which the Company may be directly or indirectly liable. "Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate". "Event of Default" means any of the events or circumstances specified in Section 8.01. "Event of Loss" means, with respect to any Property, any of the following: (a) any loss, destruction or damage of such Property; (b) any pending or threatened institution of any proceedings for the condemnation or seizure of such Property or for the exercise of any right of eminent domain; or (c) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such Property or the requisition of the use of such Property. "Exchange Act" means the Securities and Exchange Act of 1934, as amended, and regulations promulgated thereunder. "Facilities Subsidiary" means, collectively, Plum Creek Manufacturing, L.P., a Delaware limited partnership, and Plum Creek Marketing, Inc., a Delaware corporation, 14 22 "Facilities Subsidiary's Facility" means any facility pursuant to which the Facilities Subsidiary may incur Indebtedness for purposes of making capital improvements, additions to, or expansions of, property, plant and equipment of the Facilities Subsidiary or its Subsidiaries. "Facilities Subsidiary's Revolving Credit Facility" means any facility pursuant to which the Facilities Subsidiary may obtain revolving credit, take-down credit, the issuance of standby and payment letters of credit and backup for the issuance of commercial paper. "FDIC" means the Federal Deposit Insurance Corporation, or any entity succeeding to any of its principal functions. "Federal Funds Rate" means, for any period, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotation") for such day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such previous day is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions. "Form 1001" has the meaning specified in subsection 3.01(f). "Form 4224" has the meaning specified in subsection 3.01(f). 15 23 "Funded Debt" means, without duplication, any Indebtedness payable more than one year from the date of the creation thereof. "Funds Flow" means, for any period, (a) EBITDA for the period less (b) the sum of (i) taxes paid in cash during the period by the Company and its combined Subsidiaries that are not already excluded in the calculation of EBITDA, plus (ii) capital expenditures of the Company and its combined Subsidiaries for the period. "Funds Flow Ratio" means, as of the date of determination, the ratio of (a) Funds Flow to (b) combined Indebtedness of the Company and its Subsidiaries. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), or in such other statements by such other entity as may be in general use by significant segments of the U.S. accounting profession, which are applicable to the circumstances as of the date of determination. "General Partner" means Plum Creek Management Company, L.P., a Delaware limited partnership, the managing general partner of the Company, and any successor managing general partner of the Company. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "GP Borrower" has the meaning specified in Section 9.08. "Guarantee" means the guarantee in paragraph 7 of the Mortgage Note Agreements. 16 24 "Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste. "Indebtedness" of any Person means, as of any date of determination, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds, banker's acceptances and other similar instruments guaranteeing payment or other performance of obligations by such Person, (c) 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, (d) lease obligations of such Person which, in accordance with GAAP, should be capitalized, (e) 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, (f) 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, (g) all net obligations with respect to Rate Contracts, and (h) any obligations of any other Person of the type described in the above clauses (a) through (g), 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 property, securities, products, materials or supplies or for any transportation or services regardless of the non-delivery or nonfurnishing thereof, in any such case if the purpose or intent of such agreement is to provide 17 25 assurance that such obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected against loss in respect thereof or to otherwise assure or hold harmless the holder of any primary obligation against loss in respect thereof. The amount of any obligations of the type described in clause (h) of this definition shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such obligation is made or, if not stated or if not determinable, the maximum reasonably anticipated liability in respect thereof. The amount of any obligations of the type described in clause (g) of this definition shall be marked to market on a current basis in accordance with GAAP. "Indemnified Person" has the meaning specified in subsection 10.05. "Indemnified Liabilities" has the meaning specified in subsection 10.05. "Insolvency Proceeding" means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case (a) and (b) undertaken under U.S. Federal, State or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, with respect to any CD Rate Loan or Offshore Rate Loan, the last day of each Interest Period applicable to such Loan and, with respect to Base Rate Loans, the last Business Day of each calendar quarter and each date a Base Rate Loan is converted into an Offshore Rate Loan or a CD Rate Loan, provided, however, that if any Interest Period for a CD Rate Loan or Offshore Rate Loan exceeds 90 days or three months, respectively, the date which falls 90 days or three months (as the case may be) after the beginning of such Interest Period and after each Interest Payment Date thereafter shall also be an Interest Payment Date. "Interest Period" means, (a) with respect to any Offshore Rate Loan, the period commencing on the Business Day the Loan is disbursed or continued or on the Conversion Date on which the Loan is converted to 18 26 the Offshore Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; and (b) with respect to any CD Rate Loan, the period commencing on the Business Day the CD Rate Loan is disbursed or continued or on the Conversion Date on which a Loan is converted to the CD Rate Loan and ending 30, 60, 90 or 180 days thereafter, as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided that: (i) if any Interest Period pertaining to an Offshore Rate Loan or CD Rate Loan would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period for any Loan shall extend beyond the Maturity Date. "Investment Policy" means the Corporate Investment Policy of the Company, as it existed on April 5, 1993 and as attached hereto as Schedule 1.01 (without giving effect to any later amendments thereto). "Investments" has the meaning specified in Section 7.04. "Joint Venture" means a partnership, joint venture or other similar legal arrangement (whether created pursuant to contract or conducted through a separate legal entity) now or hereafter formed by the Company or any of its Restricted Subsidiaries with another Person in order to conduct a common venture or enterprise with such Person. 19 27 "Lending Office" means, with respect to any Bank, the office or offices of the Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, opposite its name on the applicable signature page hereto, or such other office or offices of the Bank as it may from time to time notify the Company and the Agent. "Lien" means any mortgage, pledge, security interest, encumbrance, lien, preference or priority 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). "Loan" means an extension of credit by a Bank to the Company pursuant to Article II, and may be a Base Rate Loan, CD Rate Loan or an Offshore Rate Loan. "Loan Documents" means this Agreement and all documents delivered to the Agent pursuant to this Agreement. "Majority Banks" means at any time Banks then holding at least 66-2/3% of the then aggregate unpaid principal amount of the Loans, or, if no such principal amount is then outstanding, Banks then having at least 66-2/3% of the Commitments. "Mandatory Commitment Reduction" has the meaning specified in Section 2.07. "Mandatory Commitment Reduction Date" has the meaning specified in Section 2.07. "Margin Reduction Discount" has the meaning specified in Section 2.09. "Margin Stock" means "margin stock" as such term is defined in Regulation G, T, U or X of the Federal Reserve Board. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, any of the operations, business, properties, condition (financial or otherwise) or prospects of the Company or the Company and its Subsidiaries taken as a whole or as to any Restricted Subsidiary; (b) a material impairment of the ability of the Company to perform under any Loan 20 28 Document and avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Loan Document. "Material Default" means 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 the Agent or any Bank, or any continuing Event of Default. "Maturity Date" means November 1, 2001. "Maximum Pro Forma Annual Interest Charges" means, as of any date, the highest total amount payable during any period of four consecutive fiscal quarters, commencing with the fiscal quarter in which such date occurs and ending with the fiscal quarter in which the Maturity Date 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 Indebtedness 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 Indebtedness 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 Indebtedness 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 Indebtedness outstanding on such date which is guaranteed or in effect guaranteed by the Company or any Restricted Subsidiaries), after giving effect to any Indebtedness proposed to be created on such date and to the concurrent retirement of any other Indebtedness. "MMBF" means one million Board Feet. "Montana Timberlands" means those certain approximately 870,000 acres of timberlands located in Montana together with certain personal properties, owned by Champion International Corporation, and to be acquired by the Company. 21 29 "Mortgage Note Agreements" means the Note Agreements, dated as of May 31, 1989, 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, as amended by (a) those certain Mortgage Note Agreement Amendment, Consent and Waivers dated as of January 1, 1991, (b) that certain letter agreement dated April 22, 1993, and (c) that certain Mortgage Note Agreement Amendment dated as of September 1, 1993. "Mortgage Notes" means the 11 1/8% First Mortgage Notes of the Facilities Subsidiary issued and sold pursuant to the Mortgage Note Agreements. "Multiemployer Plan" means a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) and to which any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. "Net Proceeds" means proceeds in cash as and when received by the Person making a sale of Property, net of: (a) the direct costs relating to such sale excluding amounts payable to the Company or any Affiliate of the Company, (b) sale, use or other transaction taxes paid or payable as a result thereof, and (c) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured by a Lien on the asset which is the subject of such disposition. "Notes" means those certain senior promissory notes in the aggregate principal amount of $165,000,000 issued and pursuant to the Note Agreements. "Note Agreements" means those certain Note Agreements dated as of May 31, 1989, providing for the issuance and sale by the Company of the Notes to the purchasers listed in the schedule of purchasers attached thereto, as amended by (a) those certain Senior Note Agreement Amendment, Consent and Waivers dated as of January 1, 1991, (b) that certain letter agreement dated April 22, 1993, and (c) that certain Senior Note Agreement Amendment dated as of September 1, 1993. "Notice of Borrowing" means a notice given by the Company to the Agent pursuant to Section 2.03, in substantially the form of Exhibit A. 22 30 "Notice of Conversion/Continuation" means a notice given by the Company to the Agent pursuant to Section 2.04, in substantially the form of Exhibit B. "Notice of Lien" means any "notice of lien" or similar document intended to be filed or recorded with any court, registry, recorder's office, central filing office or other Governmental Authority for the purpose of evidencing, creating, perfecting or preserving the priority of a Lien securing obligations owing to a Governmental Authority. "Obligations" means all Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owing by the Company to any Bank, the Agent, or any other Person required to be indemnified, that arises under any Loan Document, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. "Offshore Lending Office" means with respect to each Bank, the office of such Bank designated as such in the signature pages hereto or such other office of such Bank as such Bank may from time to time specify to the Company and the Agent. "Offshore Rate" means, for each Interest Period in respect of Offshore Rate Loans comprising part of the same Borrowing, an interest rate per annum (rounded upward to the nearest 1/16th of 1%) determined pursuant to the following formula: Offshore Rate = IBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means for any day for any Interest Period the reserve percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%) in effect for such day under regulations issued from time to time by the Federal Reserve Board for determining the reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as 23 31 "Eurocurrency liabilities") having a term comparable to such Interest Period; and "IBOR" means the rate of interest per annum determined by the Agent as the rate at which dollar deposits in the approximate amount of BofA's Offshore Rate Loan and having a maturity comparable to such Interest Period would be offered by BofA's Grand Cayman Branch, Grand Cayman B.W.I. (or such other office as may be designated for such purpose by BofA), to major banks in the offshore dollar interbank market upon request of such banks at approximately 11:00 a.m. (New York City time) two Business Days prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Loan" means a Loan that bears interest based on the Offshore Rate. "Operating Lease" means, as applied to any Person, any lease of Property which is not a Capital Lease. "Ordinary Course of Business" means, in respect of any transaction involving the Company or any Subsidiary of the Company, the ordinary course of such Person's business, as conducted by any such Person in accordance with past practice and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document. "Organization Documents" means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation; and, for any limited partnership, the certificate of limited partnership, the limited partnership agreement, and all applicable partnership resolutions. "Other Taxes" has the meaning specified in subsection 3.01(b). "Participant" has the meaning specified in subsection 10.08(d). 24 32 "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of the Company, as in effect on the Closing Date, and as the same may, from time to time, be amended, modified or supplemented in accordance with the terms thereof. "Partner Entities" means the General Partner, the PCMC General Partner and the PC Advisory General Partner. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any of its principal functions under ERISA. "PC Advisory General Partner" means PC Advisory Corp. I, a Delaware corporation, the managing general partner of the PCMC General Partner, and any successor managing general partner of the PCMC General Partner. "PCMC General Partner" means PC Advisory Partners I, L.P., a Delaware limited partnership, the managing general partner of the General Partner, and any successor managing general partner of the General Partner. "Permitted Business" means any business engaged in by the Company or the Facilities Subsidiary on the Closing Date, and any business substantially similar or related to any such business, which shall not include pulp or paper manufacturing. "Permitted Liens" has the meaning specified in Section 7.01. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Company or any ERISA Affiliate sponsors or maintains or to which the Company or any ERISA Affiliate makes, is making or is obligated to make contributions, and includes any Multiemployer Plan or Qualified Plan. "Pro Forma Free Cash Flow" as of any date means (i) net income of the Company and its Restricted Subsidiaries on a pro forma combined basis (excluding (a) gain on the sale of any Capital Asset, (b) non-cash 25 33 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 determined in accordance with GAAP plus depreciation, depletion, amortization and other noncash charges, interest expense on Indebtedness and provision for income taxes, minus (ii) capital expenditures made by the Company and its Restricted Subsidiaries during such period of four consecutive fiscal quarters to maintain their respective operations. "Property" means any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "Qualified Debt" means, as to the Company, as of any date of determination, without duplication, all outstanding indebtedness of the Company for borrowed money, including, without limitation, Indebtedness represented by the Notes and this Agreement. "Qualified Plan" means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the Code and which any ERISA Affiliate sponsors, maintains, or to which it makes, is making or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period covering at least five (5) plan years, but excluding any Multiemployer Plan. "Rate Contracts" means swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates. "Reportable Event" means, as to any Plan, (a) any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC, (b) a withdrawal from a Plan described in Section 4063 of ERISA, or (c) a cessation of operations described in Section 4062(e) of ERISA. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or 26 34 determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "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" means (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 PC Advisory General Partner. "Restricted Payment" means (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 Repurchases; 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" means 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 have been paid in full and retired, the 27 35 Facilities Subsidiary and its Subsidiaries shall become and be Restricted Subsidiaries. "Revolving Credit Facility" means 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, other than that established pursuant to this Agreement. "Revolving Termination Date" means the earlier to occur of: (a) the Maturity Date; and (b) the date on which the Aggregate Commitment shall terminate in accordance with the provisions of this Agreement. "SEC" means the Securities and Exchange Commission, or any entity succeeding to any of its principal functions. "Solvent" means, as to any Person at any time, that (a) the fair value of the Property of such Person is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code and, in the alternative, for purposes of the Uniform Fraudulent Transfer Act; (b) the present fair saleable value of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its Property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital. "SPUs" has the meaning specified in the Partnership Agreement. "Subsidiary" of a Person means any corporation, partnership or other entity a majority of (i) the total 28 36 combined voting power of all classes of Voting Stock of which or (ii) the outstanding equity interests of which shall, at the time of which any determination is being made, be owned by the Company either directly or through Subsidiaries. "Taxes" has the meaning specified in subsection 3.01(a). "Timber" means standing trees not yet harvested. "Timberlands" means the timberlands owned by the Company as of the Closing Date and any timberlands acquired by the Company or any Subsidiary after the Closing Date. "Transferee" has the meaning specified in subsection 10.08(e). "UCC" means the Uniform Commercial Code as in effect in the State of California. "Unfunded Pension Liabilities" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used by the Plan's actuaries for funding the Plan pursuant to section 412 for the applicable plan year. "United States" and "U.S." each means the United States of America. "Voting Stock" means, 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" means Austria, Belgium, Denmark, Finland, France, Great Britain, Greece, Iceland, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and Germany. "Wholly-Owned Subsidiary" means any Subsidiary organized under the laws of any state of the United States which conducts the major portion of its business in the United States, and all of the stock or other 29 37 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. "Withdrawal Liabilities" means, as of any determination date, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the Controlled Group made a complete withdrawal from all Multiemployer Plans and any increase in contributions pursuant to Section 4243 of ERISA. 1.02 Other Interpretive Provisions. (a) Defined Terms. Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the UCC shall have the meanings therein described. (b) The Agreement. The words "hereof", "herein", "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, section, schedule and exhibit references are to this Agreement unless otherwise specified. (c) Certain Common Terms. (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (d) Performance; Time. Whenever any performance obligation hereunder (other than a payment obligation) shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including". 30 38 If any provision of this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect, of taking, or not taking, such action. (e) Contracts. Unless otherwise expressly provided herein, references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document. (f) Laws. References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (g) Captions. The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (h) Independence of Provisions. The parties acknowledge that this Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each be performed, except as expressly stated to the contrary in this Agreement. (i) Interpretation. This Agreement is the result of negotiations among and has been reviewed by counsel to the Agent, the Company and other parties, and is the product of all parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in the preparation of such documents and agreements. 1.03 Accounting Principles. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. 31 39 ARTICLE II THE CREDITS 2.01 Amounts and Terms of Commitments. Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make loans to the Company from time to time on any Business Day during the period from the Effective Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth opposite the Bank's name in Schedule 2.01 under the heading "Commitment" (such amount as the same may be reduced pursuant to Section 2.05 or Section 2.07), or as a result of one or more assignments pursuant to Section 10.08, the Bank's "Commitment"); provided, however, that, after giving effect to any Borrowing of Loans, the aggregate principal amount of all outstanding Loans shall not exceed the Aggregate Commitment. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01, prepay pursuant to Section 2.06 and reborrow pursuant to this Section 2.01. 2.02 Loan Accounts. The Loans made by each Bank shall be evidenced by one or more loan accounts maintained by such Bank in the ordinary course of business. The loan accounts or records maintained by the Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. 2.03 Procedure for Borrowing. (a) Each Borrowing shall be made upon the Company's irrevocable written notice delivered to the Agent in accordance with Section 10.02 in the form of a Notice of Borrowing (which notice must be received by the Agent prior to 9:00 a.m. (San Francisco time) (i) three Business Days prior to the requested Borrowing date, in the case of Offshore Rate Loans; (ii) three Business Days prior to the requested Borrowing date, in the case of CD Rate Loans, and (iii) on the requested Borrowing date, in the case of Base Rate Loans, specifying: (A) the amount of the Borrowing, which shall be in an aggregate minimum principal amount of five million dollars ($5,000,000) or any 32 40 multiple of one million dollars ($1,000,000) in excess thereof; (B) the requested Borrowing date, which shall be a Business Day; (C) whether the Borrowing is to be comprised of Offshore Rate Loans, CD Rate Loans or Base Rate Loans; (D) the duration of the Interest Period applicable to such Loans included in such notice. If the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Borrowing comprised of CD Rate Loans or Offshore Rate Loans, such Interest Period shall be 90 days or three months, respectively. (b) Upon receipt of the Notice of Borrowing, the Agent will promptly notify each Bank thereof and of the amount of such Bank's Commitment Percentage of the Borrowing. (c) Each Bank will make the amount of its Commitment Percentage of the Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 12:00 noon (San Francisco time) on the Borrowing date requested by the Company in funds immediately available to the Agent. The proceeds of all such Loans will then be made available to the Company by the Agent at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Banks and in like funds as received by the Agent. (d) Unless the Majority Banks shall otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Loan be made as, or converted into or continued as, an Offshore Rate Loan or a CD Rate Loan. (e) After giving effect to any Borrowing, there shall not be more than five different Interest Periods in effect. 2.04 Conversion and Continuation Elections. (a) The Company may upon irrevocable written notice to the Agent in accordance with subsection 2.04(b): 33 41 (i) elect to convert on any Business Day, any Base Rate Loans (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Offshore Rate Loans or CD Rate Loans or; (ii) elect to convert on the last day of the applicable Interest Period any Offshore Rate Loans having Interest Periods maturing on such day (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into CD Rate Loans or Base Rate Loans; (iii) elect to convert on the last day of the applicable Interest Period any CD Rate Loans having Interest Periods maturing on such day (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Offshore Rate Loans or Base Rate Loans; or (iv) elect to renew on the last day of the applicable Interest Period any Offshore Rate Loans or CD Rate Loans having Interest Periods maturing on such day (or any part thereof in an amount not less than $5,000,000, or that is in an integral multiple of $1,000,000 in excess thereof); provided, that if the aggregate amount of CD Rate Loans or Offshore Rate Loans in respect of any Borrowing shall have been reduced, by payment, prepayment, or conversion of part thereof to be less than $1,000,000, such CD Rate Loans or Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of the Company to continue such Loans as, and convert such Loans into, Offshore Rate Loans or CD Rate Loans, as the case may be, shall terminate. (b) The Company shall deliver a Notice of Conversion/ Continuation in accordance with Section 10.02 to be received by the Agent not later than 9:00 a.m. (San Francisco time) (i) at least three Business Days in advance of the Conversion Date or continuation date, if the Loans are to be converted into or continued as Offshore Rate Loans; (ii) at least three Business Days in advance of the Conversion Date or continuation date, if the Loans are to be converted into or continued as CD Rate Loans; and (iii) on the Conversion Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion Date or continuation date; 34 42 (B) the aggregate amount of Loans to be converted or renewed; (C) the nature of the proposed conversion or continuation; and (D) the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to CD Rate Loans or Offshore Rate Loans, the Company has failed to select timely a new Interest Period to be applicable to such CD Rate Loans or Offshore Rate Loans, as the case may be, or if any Default or Event of Default shall then exist, the Company shall be deemed to have elected to convert such CD Rate Loans or Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. (d) Upon receipt of a Notice of Conversion/ Continuation, the Agent will promptly notify each Bank thereof, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank. (e) Unless the Majority Banks shall otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Loan converted into or continued as an Offshore Rate Loan or a CD Rate Loan. (f) Notwithstanding any other provision contained in this Agreement, after giving effect to any conversion or continuation of any Loans, there shall not be more than five different Interest Periods in effect. 2.05 Voluntary Termination or Reduction of Commitments. The Company may, upon not less than five Business Days' prior notice to the Agent, terminate the Aggregate Commitments or permanently reduce the Aggregate Commitment by an aggregate minimum amount of $5,000,000 or any multiple of $5,000,000 in excess thereof; provided that no such reduction or termination shall be permitted if, after giving effect thereto and to any prepayments of the Loans made on the effective date thereof, the then outstanding principal amount of the Loans would exceed the amount of the Aggregate Commitment then in effect and, provided, further, that once reduced in accordance with this Section 2.05, the Aggregate 35 43 Commitment may not be increased. Any reduction of the Aggregate Commitment shall be applied to each Bank's Commitment in accordance with such Bank's Commitment Percentage. All accrued commitment fees to, but not including the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. 2.06 Optional Prepayments. Subject to Section 3.04, the Company may, at any time or from time to time, upon at least three Business Days' notice to the Agent, ratably prepay Loans in whole or in part, in amounts of $5,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall specify the date and amount of such prepayment and whether such prepayment is of Base Rate Loans, CD Rate Loans or Offshore Rate Loans, or any combination thereof. Such notice shall not thereafter be revocable by the Company and the Agent will promptly notify each Bank thereof and of such Bank's Commitment Percentage of such prepayment. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.04. 2.07 Mandatory Prepayments of Loans; Mandatory Commitment Reductions. (a) Asset Dispositions. If the Company or any of its Restricted Subsidiaries shall at any time or from time to time make or agree to make a sale of Properties permitted by subsection 7.02(i) or 7.02(j), or harvest excess Timber permitted by Section 7.03, then (i) the Net Proceeds of such sale shall either be paid by the Company as a prepayment of Loans or reinvested in accordance with the provisions of subsection 7.02(i), (ii) the Net Proceeds of such sale shall either be paid pro-rata by the Company as a prepayment of Loans or reinvested in accordance with the provisions of subsection 7.02(j), or (iii) the Net Proceeds from such excess harvest shall either be paid pro-rata by the Company as a prepayment of Loans or reinvested in accordance with the provisions of subsection 7.03, each as applicable. (b) Mandatory Commitment Reductions. (i) The Aggregate Commitment shall be reduced by equal decrements of $13,750,000 each (such amount, as the same may be reduced pursuant to clause (ii) of this subsection, the "Mandatory Commitment Reduction"), commencing on the last day of 36 44 the six month period commencing on the Effective Date and on the last day of each successive six month period thereafter until the Revolving Termination Date. On each such day (each, a "Mandatory Commitment Reduction Date"), the Company shall prepay Loans in an amount equal to the excess of (x) the aggregate principal amount of all outstanding Loans, over (y) the Aggregate Commitment after giving effect to the Mandatory Commitment Reduction on such Mandatory Commitment Reduction Date. (ii) Upon any reduction in the Aggregate Commitment pursuant to Section 2.05 or clause (i) of subsection 2.07(d), there shall be no decrease in the Mandatory Commitment Reduction, unless and until the Aggregate Commitment is or has been reduced by a cumulative amount (pursuant to Section 2.05, clause (i) of subsection 2.07(d), or this subsection 2.07(b)) such that the remaining Mandatory Commitment Reductions would decrease the Aggregate Commitment to zero as of or prior to the Maturity Date. Once the Aggregate Commitment has been so decreased to zero, on any reduction in the Aggregate Commitment pursuant to Section 2.05 or clause (i) of subsection 2.07(d), each remaining Mandatory Commitment Reduction shall be adjusted pro- rata to equal an amount which would reduce the Aggregate Commitment to zero as of the Maturity Date based on the remaining semi-annual reduction periods. (c) General. Any prepayments pursuant to this Section 2.07 shall be applied first to any Base Rate Loans then outstanding and then to CD Rate Loans and Offshore Rate Loans with the shortest Interest Periods remaining. The Company shall pay, together with each prepayment under this Section 2.07, accrued interest on the amount prepaid and any amounts required pursuant to Section 3.04. (d) Reduction of Commitment. Upon (i) the making of any mandatory prepayment under subsection 2.07(a), and (ii) each Mandatory Commitment Reduction Date, the Commitment of each Bank shall automatically be reduced by an amount equal to such Bank's ratable share of the aggregate of principal repaid, effective as of the earlier of the date that such prepayment is made or the date by which such prepayment is due and payable hereunder, or of the Mandatory Commitment Reduction, as the case may be. All accrued commitment fees to, but not including the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. 37 45 2.08 Repayment. The Company shall repay to the Banks in full on the Revolving Termination Date the aggregate principal amount of the Loans outstanding on the Revolving Termination Date. 2.09 Interest. (a) Subject to subsection 2.09(d), each Loan shall bear interest on the outstanding principal amount thereof from the date when made until it becomes due at a rate per annum equal to the CD Rate, the Offshore Rate or the Base Rate, as the case may be, plus the Applicable Margin, as the same may be adjusted pursuant to the provisions of subsection 2.09(b). (b) The Applicable Margin for Offshore Rate Loans and CD Rate Loans shall be adjusted by deducting therefrom the applicable Margin Reduction Discount, if any. The applicable "Margin Reduction Discount" shall be determined as of the end of each fiscal quarter and shall be effective on the third Business Day after the Agent shall have received from the Company the financial reports required to be delivered pursuant to the provisions of subsection 6.01(c) and the certificate required to be delivered pursuant to the provisions of subsection 6.02(b) for such fiscal quarter (each such date, a "margin determination date"). If any such financial reports and certificate are delivered to the Agent after the date required in subsections 6.01(c) and 6.02(b) and such financial reports and certificate shall give rise to a reduction in the applicable Margin Reduction Discount, then the Company shall pay on the date of delivery of such financial reports and certificate, an amount sufficient to compensate the Banks for the Company's failure to deliver the financial report and certificate on a timely basis. The Margin Reduction Discount shall mean the percentage, if any, specified below opposite the Funds Flow Ratio (which shall be calculated as of the end of the fiscal quarter immediately preceding the margin determination date for the 12 months ended on such fiscal quarter) in effect on the last margin determination date; provided, however, that as long as any Default or Event of Default exists no Margin Reduction Discount shall be effective or remain in effect (and the Offshore Rate Loans and CD Rate Loans shall bear interest without any reduction of the Applicable Margin from the date of the Default or Event of Default until the same has been cured): 38 46
Funds Flow Ratio Margin Reduction at End of Fiscal Quarter Discount ------------------------ ------------------------ Offshore Rate CD Rate Loans Loans ----- ----- Less than 40.00% 0.00% 0.00% Greater than or equal to 0.25% 0.25% 40.00% and less than 50.00% Greater than or equal to 0.375% 0.375% 50.00%
Subject to the proviso of the preceding paragraph, the applicable Margin Reduction Discount shall remain in effect so long as such Funds Flow Ratio is applicable; provided, however, that if, as of the day of delivery of any report delivered pursuant to subsection 6.01(c) and certificate delivered pursuant to subsection 6.02(b), such Margin Reduction Discount shall cease to be effective, the applicable Margin Reduction Discount, if any, shall be readjusted on the third day after delivery of such report and certificate. (c) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans pursuant to Section 2.06 and 2.07 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand. (d) While any Event of Default exists or after acceleration, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all Loans due and unpaid, at a rate per annum equal to the Base Rate plus 2%. (e) Anything herein to the contrary notwithstanding, the obligations of the Company hereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by the respective Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest which may be lawfully contracted for, charged or received by such Bank, and in such event the Company shall pay such Bank interest at the highest rate permitted by applicable law. 39 47 2.10 Fees. (a) Agency and Participation Fees. The Company shall pay to BofA for BofA's own account fees in the amounts and at the times set forth in a letter agreement between the Company and BofA dated June 21, 1993 and the term sheet attached thereto. The Company shall pay to the Agent on the Closing Date for the account of each Bank a participation fee in an amount equal to the product of (i) 0.25% times (ii) such Bank's Commitment as set forth in Schedule 2.01 hereof. The foregoing fees shall be non-refundable. (b) Commitment Fees. The Company shall pay to the Agent for the account of each Bank a commitment fee on the average daily unused portion of such Bank's Commitment, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon the daily utilization for that quarter as calculated by the Agent, equal to 0.25 % per annum. Such commitment fee shall accrue from the Effective Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter, commencing on the first such day after this Agreement is executed by the Company through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date; provided that, in connection with any reduction or termination of Commitments pursuant to Section 2.05 or Section 2.07, the accrued commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the next succeeding quarterly payment being calculated on the basis of the period from the reduction or termination date to such quarterly payment date. The commitment fees provided in this subsection shall accrue at all times after the above- mentioned commencement date, including at any time during which one or more conditions in Article IV are not met. 2.11 Computation of Fees and Interest. (a) All computations of interest payable in respect of Base Rate Loans at all times as the Base Rate is determined by BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest under this Agreement shall be made on the basis of a 360-day year and actual days elapsed, which results in more interest being paid than if computed on the basis of a 365-day year. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. 40 48 (b) The Agent will, with reasonable promptness, notify the Company and the Banks of each determination of an Offshore Rate or of a CD Rate; provided that any failure to do so shall not relieve the Company of any liability hereunder or provide the basis for any claim against the Agent. Any change in the interest rate on a Loan resulting from a change in the Applicable Margin, Reserve Percentage, Eurocurrency Reserve Percentage, or the Assessment Rate shall become effective as of the opening of business on the day on which such change in the Applicable Margin, Reserve Percentage, Eurocurrency Reserve Percentage, or the Assessment Rate becomes effective. The Agent will with reasonable promptness notify the Company and the Banks of the effective date and the amount of each such change, provided that any failure to do so shall not relieve the Company of any liability hereunder or provide the basis for any claim against the Agent. (c) Each determination of an interest rate by the Agent pursuant hereto shall be conclusive and binding on the Company and the Banks in the absence of manifest error. 2.12 Payments by the Company. (a) All payments (including prepayments) to be made by the Company on account of principal, interest, fees and other amounts required hereunder shall be made without set-off, recoupment or counterclaim; shall, except as otherwise expressly provided herein, be made to the Agent for the ratable account of the Banks at the Agent's Payment Office, and shall be made in dollars and in immediately available funds, no later than 10:00 a.m. (San Francisco time) on the date specified herein. The Agent will promptly distribute to each Bank its Commitment Percentage (or other applicable share as expressly provided herein) of such principal, interest, fees or other amounts, in like funds as received. Any payment which is received by the Agent later than 10:00 a.m. (San Francisco time) shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. (b) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be; subject to the provisions set forth in the definition of "Interest Period" herein. (c) Unless the Agent shall have received notice from the Company prior to the date on which any payment is 41 49 due to the Banks hereunder that the Company will not make such payment in full as and when required hereunder, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Company shall not have made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate as in effect for each such day. 2.13 Payments by the Banks to the Agent. (a) Unless the Agent shall have received notice from a Bank on the Closing Date or, with respect to each Borrowing after the Closing Date, at least one Business Day prior to the date of any proposed Borrowing, that such Bank will not make available to the Agent as and when required hereunder for the account of the Company the amount of that Bank's Commitment Percentage of the Borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the next Business Day following the date of such Borrowing make such amount available to the Agent, together with interest at the Federal Funds Rate for and determined as of each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection 2.13(a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the next Business Day following the date of such Borrowing, the Agent shall notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. 42 50 (b) The failure of any Bank to make any Loan on any date of borrowing shall not relieve any other Bank of any obligation hereunder to make a Loan on the date of such borrowing, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on the date of any borrowing. 2.14 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Commitment Percentage of payments on account of the Loans obtained by all the Banks, such Bank shall forthwith (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's Commitment Percentage (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.09) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.14 and will in each case notify the Banks following any such purchases or repayments. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes. (a) Subject to subsection 3.01(g), any and all payments by the Company to each Bank or the Agent under this Agreement shall be made free and clear of, and without 43 51 deduction or withholding for, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Bank's net income by the jurisdiction under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). (b) In addition, the Company shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents (hereinafter referred to as "Other Taxes"). (c) Subject to subsection 3.01(g), the Company shall indemnify and hold harmless each Bank and the Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.01) paid by the Bank or the Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days from the date the Bank or the Agent makes written demand therefor. (d) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then, subject to subsection 3.01(g): (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) such Bank or the Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Company shall make such deductions; and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. 44 52 (e) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Agent. (f) Each Bank which is a foreign person (i.e., a person other than a United States person for United States Federal income tax purposes) agrees that: (i) it shall, no later than the Closing Date (or, in the case of a Bank which becomes a party hereto pursuant to Section 10.08 after the Closing Date, the date upon which the Bank becomes a party hereto) deliver to the Company through the Agent two accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), or two accurate and complete signed originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"), as appropriate, in each case indicating that the Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees under this Agreement free from withholding of United States Federal income tax; (ii) if at any time the Bank makes any changes necessitating a new Form 4224 or Form 1001, it shall with reasonable promptness deliver to the Company through the Agent in replacement for, or in addition to, the forms previously delivered by it hereunder, two accurate and complete signed originals of Form 4224; or two accurate and complete signed originals of Form 1001, as appropriate, in each case indicating that the Bank is on the date of delivery thereof entitled to receive payments of principal, interest and fees under this Agreement free from withholding of United States Federal income tax; (iii) it shall, before or promptly after the occurrence of any event (including the passing of time but excluding any event mentioned in (ii) above) requiring a change in or renewal of the most recent Form 4224 or Form 1001 previously delivered by such Bank, deliver to the Company through the Agent two accurate and complete original signed copies of Form 4224 or Form 1001 in replacement for the forms previously delivered by the Bank; and (iv) it shall, promptly upon the Company's or the Agent's reasonable request to that effect, deliver to the Company or the Agent (as the case may be) such 45 53 other forms or similar documentation as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Bank's tax status for withholding purposes. (g) The Company will not be required to pay any additional amounts in respect of United States Federal income tax pursuant to subsection 3.01(d) to any Bank for the account of any Lending Office of such Bank: (i) if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank to comply with its obligations under subsection 3.01(f) in respect of such Lending Office; (ii) if such Bank shall have delivered to the Company a Form 4224 in respect of such Lending Office pursuant to subsection 3.01(f), and such Bank shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by the Company hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or in the official interpretation of such law or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 4224; or (iii) if the Bank shall have delivered to the Company a Form 1001 in respect of such Lending Office pursuant to subsection 3.01(f), and such Bank shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by the Company hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or any applicable tax treaty or regulations or in the official interpretation of any such law, treaty or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the date of delivery of such Form 1001. (h) If, at any time, the Company requests any Bank to deliver any forms or other documentation pursuant to subsection 3.01(f)(iv), then the Company shall, on demand of such Bank through the Agent, reimburse such Bank for any costs and expenses (including Attorney Costs) reasonably incurred by such Bank in the preparation or delivery of such forms or other documentation. 46 54 (i) If the Company is required to pay additional amounts to any Bank or the Agent pursuant to subsection 3.01(d), then such Bank shall use its reasonable best efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. 3.02 Illegality. (a) If any Bank shall determine that the introduction of any Requirement of Law, or any change in any Requirement of Law or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company through the Agent, the obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank shall have notified the Agent and the Company that the circumstances giving rise to such determination no longer exists. (b) If a Bank shall determine that it is unlawful to maintain any Offshore Rate Loan, the Company shall prepay in full all Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.04. 3.03 Increased Costs and Reduction of Return. (a) If any Bank shall determine that, due to either (i) the introduction of or any change after the date hereof (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the CD Rate or the Offshore Rate or in respect of the assessment rate payable by any Bank to the FDIC for insuring U.S. deposits) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loans or CD Rate Loans, then the Company shall be liable 47 55 for, and shall from time to time, upon demand therefor by such Bank (with a copy of such demand to the Agent), pay to the Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs. (b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation after the date hereof, (ii) any change in any Capital Adequacy Regulation after the date hereof, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof after the date hereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank, with any Capital Adequacy Regulation; affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, credits or obligations under this Agreement, then, upon demand of such Bank (with a copy to the Agent), the Company shall upon demand pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase. 3.04 Funding Losses. The Company agrees to reimburse each Bank and to hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (a) the failure of the Company to make any payment or mandatory prepayment of principal of any Offshore Rate Loan or CD Rate Loan (including payments made after any acceleration thereof); (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment after the Company has given a notice in accordance with Section 2.06; (d) the prepayment (including pursuant to Section 2.07) of an Offshore Rate Loan or a CD Rate Loan on a day which is not the last day of the Interest Period with respect thereto; or 48 56 (e) the conversion pursuant to Section 2.04 of (i) any Offshore Rate Loan to a CD Rate Loan or a Base Rate Loan, or (ii) any CD Rate Loan to an Offshore Rate Loan or Base Rate Loan, on a day that is not the last day of the respective Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or CD Rate Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. 3.05 Inability to Determine Rates. If the Majority Banks shall have determined that for any reason adequate and reasonable means do not exist for ascertaining the Offshore Rate or the CD Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan or CD Rate Loan or that the Offshore Rate or the CD Rate applicable pursuant to subsection 2.09(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan or CD Rate Loan does not adequately and fairly reflect the cost to such Banks of funding such Loan, the Agent will forthwith give notice of such determination to the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain CD Rate Loans or Offshore Rate Loans, as the case may be, hereunder shall be suspended until the Agent upon the instruction of the Majority Banks revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such notice, the Banks shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of CD Rate Loans or Offshore Rate Loans, as the case may be. 3.06 Certificate of Bank. Each Bank, if claiming reimbursement or compensation pursuant to this Article III, shall deliver to the Company, a certificate setting forth in reasonable detail the amount payable to such Bank hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 3.07 Survival. The covenants, agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations. 49 57 ARTICLE IV CONDITIONS PRECEDENT 4.01 Conditions of Initial Loans. The obligation of each Bank to make its initial Loan hereunder is subject to the condition that the Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and, as to the items referenced in subsection 4.01(h) and (i), the Majority Banks, and in sufficient copies for each Bank: (a) Credit Agreement. This Agreement executed by the Company, the Agent and each of the Banks; (b) Resolutions; Incumbency. (i) Copies of the resolutions of the board of directors of the PC Advisory General Partner, as general partner of the PCMC General Partner, as general partner of the General Partner, as general partner of the Company, approving and authorizing the execution, delivery and performance by such entities on behalf of the Company of this Agreement and the other Loan Documents to be delivered hereunder, and authorizing the borrowing of the Loans, certified as of the Closing Date by the Secretary or an Assistant Secretary of the PC Advisory General Partner; and (ii) A certificate of the Secretary or Assistant Secretary of the PC Advisory General Partner certifying the names and true signatures of the duly authorized officers of the General Partner, as general partner of the Company, authorized to execute, deliver and perform, as applicable, this Agreement on behalf of the Company, and all other Loan Documents to be delivered hereunder; (c) Articles of Incorporation; By-laws; Partnership Documents and Good Standing. Each of the following documents: (i) the partnership certificate of each of the Company, the General Partner, and the PCMC General Partner as in effect on the Closing Date, certified by the Secretary of State (or similar, applicable Governmental Authority) of the state of formation of such entities as of a recent date and by the Secretary or Assistant Secretary of the PC Advisory General Partner as of the Closing Date, and the partnership agreement of each of the Company, the General Partner, 50 58 and the PCMC General Partner as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the PC Advisory General Partner as of the Closing Date; (ii) the articles or certificate of incorporation of the PC Advisory General Partner as in effect on the Closing Date, certified by the Secretary of State (or similar, applicable Governmental Authority) of the state of incorporation of the PC Advisory General Partner as of a recent date and by the Secretary or Assistant Secretary of the PC Advisory General Partner as of the Closing Date, and the bylaws of the PC Advisory General Partner as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the PC Advisory General Partner as of the Closing Date; and (iii) a good standing certificate for each of the Company, the General Partner, the PCMC General Partner, and the PC Advisory General Partner from the Secretary of State (or similar, applicable Governmental Authority) of its state of incorporation or formation, as applicable and each state where the Company is qualified to do business as a foreign corporation or limited partnership, as applicable, as of a recent date, together with a bring down certificate by facsimile, dated the Closing Date; (d) Legal Opinions. An opinion of (i) James A. Kraft, Vice President, Law and Corporate Affairs of the Company and (ii) Perkins Coie, counsel to the Company, each addressed to the Agent and the Banks and substantially in the form of Exhibits C-1 and C-2, respectively; (e) Payment of Fees. The Company shall have paid all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with Attorney Costs of BofA to the extent invoiced prior to or on the Closing Date, together with such additional amounts of Attorney Costs as shall constitute BofA's reasonable estimate of Attorney Costs incurred or to be incurred through the closing proceedings, provided that such estimate shall not thereafter preclude final settling of accounts between the Company and BofA; including any such costs, fees and expenses arising under or referenced in Sections 2.10, 3.01 and 10.04; (f) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: 51 59 (i) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the initial Borrowing; and (iii) there has occurred since December 31, 1992, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; (g) Financial Statements. A copy certified by the chief financial officer of the Company of the financial statements of the Company and its Subsidiaries referred to in Section 5.11; (h) Credit Agreements. Copies certified by a Responsible Officer of (i) the Note Agreements, as amended (ii) the Mortgage Note Agreements, as amended, and (iii) that certain $15,000,000 Revolving Credit Agreement dated as of May 1, 1993 between the Company, ABN AMRO Bank N.V., as agent, and the banks parties thereto, as amended; (i) Other Documents. Such other approvals, opinions, documents or materials as the Agent or the Majority Bank may request. 4.02 Conditions to All Borrowings. The obligation of each Bank to make any Loan to be made by it hereunder (including its initial Loan) or to continue or convert any Loan pursuant to Section 2.04 is subject to the satisfaction of the following conditions precedent on the relevant borrowing, continuation or conversion date: (a) Notice of Borrowing or Continuation/ Conversion. The Agent shall have received (with, in the case of the initial Loan only, a copy for each Bank) a Notice of Borrowing or a Notice of Continuation/Conversion, as applicable; (b) Continuation of Representations and Warranties. The representations and warranties made by the Company contained in Article V shall be true and correct on and as of such borrowing, continuation or conversion date with the same effect as if made on and as of such borrowing, continuation or conversion date (except to the extent such representations and warranties specifically relate to an earlier date, in which case they shall be true and correct as of such earlier date); and 52 60 (c) No Existing Default. No Default or Event of Default shall exist or shall result from such Borrowing or continuation or conversion. Each Notice of Borrowing and Notice of Continuation/ Conversion submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice or application and as of the date of each Borrowing, continuation or conversion, as applicable, that the conditions in Section 4.02 are satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.01 Corporate Existence and Power. (a) The Company, each of its Subsidiaries, and each of the Partner Entities: (i) is a limited partnership or corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (ii) is duly qualified as a foreign partnership or corporation, as applicable, and licensed and in good standing, under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and (iii) is in compliance with all Requirements of Law except where failure to so comply would not reasonably be expected to have a Material Adverse Effect. (b) The Company and each of its Subsidiaries has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets and carry on its business; and the Company and each of the Partner Entities has the power and authority and all governmental licenses, authorizations, consents and approvals to execute, deliver, and perform its obligations under, the Loan Documents. 53 61 5.02 Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement, and any other Loan Document to which the Company is party, have been duly authorized by all necessary corporate and partnership action on behalf of the PC Advisory General Partner, as general partner of the PCMC General Partner, as general partner of the General Partner, as general partner of the Company, and by all necessary partnership action on behalf of the Company, and do not and will not: (a) contravene the terms of the Organization Documents of any of the Company or the Partner Entities; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its Property is subject; or (c) violate any Requirement of Law. 5.03 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company, the Partner Entities or any of their Subsidiaries of the Agreement or any other Loan Document. 5.04 Binding Effect. This Agreement and each other Loan Document to which the Company is a party constitute the legal, valid and binding obligations of the Company and the Partner Entities, enforceable against the Company and the Partner Entities in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditor's rights generally or by equitable principles relating to enforceability. 5.05 Litigation. There are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company and the Partner Entities, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, the Partner Entities or their Subsidiaries or any of their respective Properties which: (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or 54 62 (b) have a reasonable probability of success on the merits and which, if determined adversely to the Company, the Partner Entities or their Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.06 No Default. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. Neither the Company, the Partner Entities, nor any of their Subsidiaries is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, would reasonably be expected to have a Material Adverse Effect or that would, if such default had occurred after the Closing date, create an Event of Default under subsection 8.01(e). 5.07 ERISA Compliance. (a) Schedule 5.07 lists all Plans and separately identifies Plans intended to be Qualified Plans and Multiemployer Plans. All written descriptions thereof provided to the Agent are true and complete in all material respects. (b) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state law, including all requirements under the Code or ERISA for filing reports (which are true and correct in all material respects as of the date filed), and benefits have been paid in accordance with the provisions of the Plan. (c) Except as specifically disclosed in Schedule 5.07, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the Code, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the Code, and to the best knowledge of the Company nothing has occurred which would cause the loss of such qualification or tax-exempt status. (d) Except as specifically disclosed in Schedule 5.07, there is no outstanding liability under Title IV of ERISA with respect to any Plan maintained or sponsored by the Company or any ERISA Affiliate, nor with respect to 55 63 any Plan to which the Company or any ERISA Affiliate contributes or is obligated to contribute. (e) Except as specifically disclosed in Schedule 5.07, no Plan subject to Title IV of ERISA has any Unfunded Pension Liability. (f) Except as specifically disclosed in Schedule 5.07, no member of the Controlled Group has ever represented, promised or contracted (whether in oral or written form) to any current or former employee (either individually or to employees as a group) that such current or former employee(s) would be provided, at any cost to any member of the Controlled Group, with life insurance or employee welfare plan benefits (within the meaning of section 3(1) of ERISA) following retirement or termination of employment. To the extent that any member of the Controlled Group has made any such representation, promise or contract, such member has expressly reserved the right to amend or terminate such life insurance or employee welfare plan benefits with respect to claims not yet incurred. (g) Members of the Controlled Group have complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Code. (h) Except as specifically disclosed in Schedule 5.07, no ERISA Event has occurred or, to the best knowledge of the Company is reasonably expected to occur with respect to any Plan. (i) There are no pending or, to the best knowledge of the Company, threatened claims, actions or lawsuits, other than routine claims for benefits in the usual and ordinary course, asserted or instituted against (i) any Plan maintained or sponsored by the Company or its assets, (ii) any member of the Controlled Group with respect to any Qualified Plan, or (iii) any fiduciary with respect to any Plan for which the Company may be directly or indirectly liable, through indemnification obligations or otherwise. This representation is not made with respect to any Multiemployer Plan. (j) Except as specifically disclosed in Schedule 5.07, neither the Company nor any ERISA Affiliate has incurred nor, to the best knowledge of the Company, reasonably expects to incur (i) any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability under Title IV of 56 64 ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan. (k) Except as specifically disclosed in Schedule 5.07, neither the Company nor any ERISA Affiliate has transferred any Unfunded Pension Liability to a Person other than the Company or an ERISA Affiliate or otherwise engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. (l) The Company has not engaged, directly or indirectly, in a non-exempt prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Plan which would reasonably be expected to have a Material Adverse Effect. 5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are intended to be and shall be used solely for the purposes set forth in and permitted by Section 6.11, and are intended to be and shall be used in compliance with Section 7.07. Neither the Company, the Partner Entities, nor any of their Subsidiaries is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. 5.09 Title to Properties. The Company and each of its Subsidiaries have good record and marketable title in fee simple to, or valid leasehold interests in, all real Property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. As of the Closing Date, the Property of the Company and its Subsidiaries is subject to no Liens, other than Permitted Liens. 5.10 Taxes. The Company, the Partner Entities and their Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP and no Notice of Lien has been filed or recorded. There is no proposed tax assessment against the Company, the Partner Entities or any of their Subsidiaries which would, if the assessment were made, have a Material Adverse Effect. 57 65 5.11 Financial Condition. (a) The audited combined financial statements of financial condition of the Company and its Subsidiaries dated December 31, 1992, and the related combined statements of income and combined statement of cash flows for the fiscal year ended on that date: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and (iii) show all material Indebtedness and other liabilities, direct or contingent of the Company and its combined Subsidiaries as of the date thereof, including liabilities for taxes and material commitments. (b) Since December 31, 1992, there has been no Material Adverse Effect. 5.12 Environmental Matters. (a) Except as specifically disclosed in Schedule 5.12, the on-going operations of the Company, the Partner Entities and each of their Subsidiaries comply in all respects with all Environmental Laws, except such non- compliance which would not (if enforced in accordance with applicable law) result in liability in excess of $25,000,000 in the aggregate. (b) Except as specifically disclosed in Schedule 5.12, the Company, the Partner Entities and each of their Subsidiaries have obtained all licenses, permits, authorizations and registrations required under any Environmental Law ("Environmental Permits") and necessary for their respective ordinary course operations, all such Environmental Permits are in good standing, and the Company, the Partner Entities and each of their Subsidiaries are in compliance with all terms and conditions of such Environmental Permits except where the failure to obtain, maintain in good standing or comply with such Environmental Permits would not reasonably be expected to have a Material Adverse Effect. (c) Except as specifically disclosed in Schedule 5.12, none of the Company, the Partner Entities, 58 66 any of their Subsidiaries or any of their respective present Property or operations, is subject to any outstanding written order from or agreement with any Governmental Authority, nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Material arising out of a violation or alleged violation of any Environmental Law. (d) Except as specifically disclosed in Schedule 5.12, there are no Hazardous Materials or other conditions or circumstances existing with respect to any Property, or arising from operations prior to the Closing Date, of the Company, the Partner Entities, or any of their Subsidiaries that would reasonably be expected to give rise to Environmental Claims with a potential liability of the Company and its Subsidiaries in excess of $25,000,000 in the aggregate for any such condition, circumstance or Property. In addition, (i) neither the Company, the Partner Entities nor any of their Subsidiaries has any underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials off-site, and (ii) the Company, the Partner Entities and their Subsidiaries have notified all of their employees of the existence, if any, of any health hazard arising from the conditions of their employment and have met all notification requirements under Title III of CERCLA and all other Environmental Laws. 5.13 Regulated Entities. None of the Company, the Partner Entities, any Person controlling the Company or the Partner Entities, or any Subsidiary of the Company or the Partner Entities, is (a) an "Investment Company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 5.14 No Burdensome Restrictions. Neither the Company nor any of its Subsidiaries is a party to or bound by any Contractual Obligation, or subject to any charter or corporate restriction, or any Requirement of Law, which would reasonably be expected to have a Material Adverse Effect. 5.15 Solvency. The Company, the General Partner, the Facilities Subsidiary, and the Restricted Subsidiaries are each Solvent. 59 67 5.16 Labor Relations. There are no material strikes, lockouts or other labor disputes against the Company or any of its Subsidiaries, or, to the best of the Company's knowledge, threatened against or affecting the Company or any of its Subsidiaries, and no significant unfair labor practice complaint is pending against the Company or any of its Subsidiaries or, to the best knowledge of the Company, threatened against any of them before any Governmental Authority. 5.17 Copyrights, Patents, Trademarks and Licenses, etc. The Company or its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any of its Subsidiaries infringes upon any rights held by any other Person; except as specifically disclosed in Schedule 5.05, no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Company, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Company, proposed, which, in either case, would reasonably be expected to have a Material Adverse Effect. 5.18 Subsidiaries. The Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 5.18 hereto and has no equity investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 5.18. Except as disclosed in part (a) of Schedule 5.18, the Company owns 100% of the ownership interests of its Subsidiaries. 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. 5.19 Partnership Interests. The only general partner of the Company is the General Partner, which on the Closing Date will own a 2% interest in the Company. The only general partners of the General Partner are (i) the PCMC General Partner, which is the managing general partner of the General Partner, and (ii) Sub Advisory Corp. I, a Delaware corporation. The only general partner of the PCMC General Partner is the PC Advisory General Partner. 60 68 5.20 Broker's; Transaction Fees. Neither the Company nor any of its Subsidiaries has any obligation to any Person in respect of any finder's, broker's or investment banker's fee in connection with the transactions contemplated hereby. 5.21 Insurance. The Properties of the Company and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where the Company or such Subsidiary operates. 5.22 Timber Harvest. The Company and its Restricted Subsidiaries harvested 1,663 MMBF of its fee Timber during the calendar years 1989 (including harvest by the Company's predecessor prior to closing under the Note Agreements) through 1991, and 469 MMBF of its fee Timber during calendar year 1992. 5.23 Full Disclosure. None of the representations or warranties made by the Company, the General Partners, or any of their Subsidiaries in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in each exhibit, report, written statement or certificate furnished by or on behalf of the Company or any of its Subsidiaries in connection with the Loan Documents, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. ARTICLE VI AFFIRMATIVE COVENANTS The Company covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 6.01 Financial Statements. The Company shall deliver to the Agent in form and detail satisfactory to the Agent and the Majority Banks, with sufficient copies for each Bank: (a) as soon as available, but not later than 90 days after the end of each fiscal year, a copy of the 61 69 audited combined balance sheet of the Company as at the end of such year and the related combined statements of income and statements 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 periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by such accountant of any material portion of the Company's or any Subsidiary's records and shall be delivered to the Agent pursuant to a reliance agreement in favor of the Agent and Banks by such accounting firm in form and substance satisfactory to the Agent and the Majority Banks; (b) as soon as available, but not later than 120 days after the end of each fiscal year, a copy of an audited combining balance sheet of the Company and each of its Subsidiaries as at the end of such fiscal year and the related combining statements of income and statement of cash flows for such fiscal year, all in reasonable detail certified by an appropriate Responsible Officer as having been used in connection with the preparation of the financial statements referred to in subsection (a) of this Section 6.01; (c) as soon as available, but not later than 45 days after the end of each 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 statements of income and statement of cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by an appropriate Responsible Officer as being complete and correct and fairly presenting, in accordance with GAAP, the financial position and the results of operations of the Company and the Subsidiaries; (d) as soon as available, but not later than 45 days after the end of each fiscal quarter of each year, a copy of the unaudited combining balance sheets of the Company and each of its Subsidiaries, and the related combining statements of income and statement of cash flows for such quarter, all 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 subsection (c) of this Section 6.01; 62 70 (e) as soon as available, but not later than September 30 of each year, a business plan which shall include five years' pro-forma projections of the Company accompanied by appropriate assumptions on which such projections are based. 6.02 Certificates; Other Information. The Company shall furnish to the Agent, with sufficient copies for each Bank: (a) concurrently with the delivery of the financial statements referred to in subsection 6.01(a) above, a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 6.01(a) through (d) above, a certificate of a Responsible Officer substantially in the form of Exhibit D (i) stating that, to the best of such officer's knowledge, the Company, during such period, has observed and performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Default or Event of Default except as specified (by applicable subsection reference) in such certificate, (ii) stating if an applicable Margin Reduction Discount should be implemented or changed, and (iii) showing in detail the calculations supporting such statement in respect of Section 7.03, subsection 7.04(i), Section 7.05 and Section 7.13, and supporting the computation of the Funds Flow Ratio; (c) promptly after the same are sent, copies of all financial statements and reports which the Company sends to its limited partners (excluding the Form K-1s); and promptly after the same are filed, copies of all financial statements and regular, periodical or special reports which the Company may make to, or file with, the SEC or any successor or similar Governmental Authority; and (d) promptly, such additional business, financial, corporate affairs and other information as the Agent, at the request of any Bank, may from time to time reasonably request. 6.03 Notices. The Company shall promptly upon becoming aware thereof notify the Agent and each Bank: 63 71 (a) (i) of the occurrence of any Default or Event of Default, (ii) of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default, and (iii) of the occurrence or existence of any event or circumstance that would cause the condition to Borrowing set forth in subsection 4.02(b) not to be satisfied if a Borrowing were requested on or after the date of such event or circumstance; (b) of (i) any breach or non-performance of, or any default under, any Contractual Obligation of the Company, the Partner Entities, or any of their Subsidiaries which could result in a Material Adverse Effect; and (ii) any dispute, litigation, investigation, proceeding or suspension which may exist at any time between the Company, the Partner Entities, or any of their Subsidiaries and any Governmental Authority which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) of the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary (i) which, if adversely determined, would reasonably be expected to have a Material Adverse Effect, or (ii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any Loan Document; (d) upon, but in no event later than 10 days after, becoming aware of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Company or any of its Subsidiaries or any of their respective Properties pursuant to any applicable Environmental Laws where, if adversely determined, the potential liability or expense relating thereto could exceed $25,000,000 or the potential remedy with respect thereto would otherwise reasonably be expected to have a Material Adverse Effect, (ii) all other Environmental Claims which allege liability in excess of $25,000,000 or have the possibility of remedies that would, if adversely determined, otherwise reasonably be expected to constitute a Material Adverse Effect, and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the property of the Company or any Subsidiary that would reasonably be anticipated to cause such property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such property under any Environmental Laws where the net book value of such property exceeds $25,000,000; 64 72 (e) of any other litigation or proceeding affecting the Company or any of its Subsidiaries which the Company would be required to report to the SEC pursuant to the Exchange Act, within four days after reporting the same to the SEC; (f) of any of the following ERISA events affecting the Company or any member of its Controlled Group (but in no event more than 10 days after such event), together with a copy of any notice with respect to such event that may be required to be filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Company or any member or its Controlled Group with respect to such event: (i) an ERISA Event; (ii) the adoption of any new Plan that is subject to Title IV of ERISA or section 412 of the Code by any member of the Controlled Group; (iii) the adoption of any amendment to a Plan that is subject to Title IV of ERISA or section 412 of the Code, if such amendment results in a material increase in benefits or unfunded liabilities; or (iv) the commencement of contributions by any member of the Controlled Group to any Plan that is subject to Title IV of ERISA or section 412 of the Code; (g) any Material Adverse Effect subsequent to the date of the most recent audited financial statements of the Company delivered to the Banks pursuant to subsection 6.01(a) or 4.01(g); (h) of any material labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other labor disruption against or involving the Company or any of its Subsidiaries. Each notice pursuant to this Section shall be accompanied by a written statement by a Responsible Officer of the Company setting forth details of the occurrence referred to therein, and stating what action the Company proposes to take with respect thereto and at what time. Each notice under subsection 6.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated. 65 73 6.04 Preservation of Corporate Existence, Etc. The Company shall, except as permitted by Section 7.02, and shall cause each of its Subsidiaries to: (a) preserve and maintain in full force and effect its partnership or corporate existence and good standing under the laws of its state or jurisdiction of formation or incorporation; (b) preserve and maintain in full force and effect all rights, privileges, qualifications, permits, licenses and franchises necessary in the normal conduct of its business; (c) use its reasonable efforts, in the Ordinary Course of Business, to preserve its business organization and preserve the goodwill and business of the customers, suppliers and others having material business relations with it; and (d) preserve or renew all of its registered trademarks, trade names and service marks, the non- preservation of which would reasonably be expected to have a Material Adverse Effect. 6.05 Maintenance of Property. The Company shall maintain, and shall cause each of its Subsidiaries to maintain, and preserve all its Property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted. 6.06 Insurance. The Company shall maintain, and shall cause each of its Subsidiaries to maintain, with financially sound and reputable independent insurers, insurance with respect to its Properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons. 6.07 Payment of Obligations. The Company shall, and shall cause its Subsidiaries to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; 66 74 (b) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.08 Compliance with Laws. The Company shall comply, and shall cause each of its Subsidiaries to comply with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act) the non-compliance with which would reasonably be expected to have a Material Adverse Effect, except such as may be contested in good faith or as to which a bona fide dispute may exist. 6.09 Inspection of Property and Books and Records. The Company shall maintain and shall cause each of its Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiaries. The Company shall permit, and shall cause each of its Subsidiaries to permit, representatives and independent contractors of the Agent or any Bank to visit and inspect any of their respective Properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at the expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, when an Event of Default exists the Agent or any Bank may do any of the foregoing at the expense of the Company such Properties at any time during normal business hours and without advance notice. 6.10 Environmental Laws. (a) The Company shall, and shall cause each of its Subsidiaries to, conduct its operations and keep and maintain its Property in compliance with all Environmental Laws, the non-compliance with which would reasonably be expected to have a Material Adverse Effect. (b) Upon the written request of the Agent or any Bank, the Company shall submit and cause each of its Subsidiaries to submit, to the Agent and with sufficient copies for each Bank, at the Company's sole cost and expense, at reasonable intervals, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any 67 75 notice or report required pursuant to subsection 6.03(d), that could, individually or in the aggregate, result in liability in excess of $25,000,000. 6.11 Use of Proceeds. The Company shall use the proceeds of the Loans solely as follows: (a) in connection with the acquisition of the Montana Timberlands, (b) other capital expenditures, (c) repayment of Indebtedness, and (d) for working capital purposes not in contravention of any Requirement of Law. 6.12 Solvency. The Company shall at all times be, and shall cause each of its Restricted Subsidiaries to be, Solvent. ARTICLE VII NEGATIVE COVENANTS The Company hereby covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 7.01 Limitation on Liens. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): (a) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 6.07, provided that no Notice of Lien has been filed or recorded under the Code; (b) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the Ordinary Course of Business which are not delinquent or remain payable without penalty or unless such lien 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 GAAP shall have been made therefor; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made incidental to the conduct of its business or the ownership of its Property including 68 76 (i) pledges or deposits in connection with worker's compensation, unemployment insurance and other social security legislation, (ii) deposits to secure insurance, the performance of bids, tenders, contracts, leases, licenses, franchises and statutory obligations, each in the Ordinary Course of Business, and (iii) 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 materially impair the use of such Property in the operation of its business; (d) 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 stayed pending appeal, or shall not have been discharged within 45 days after expiration of any such stay; (e) easements, rights-of-way, restrictions and other similar charges or encumbrances incurred in the Ordinary Course of Business 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; (f) Liens on Property of any Restricted Subsidiary securing obligations of such Restricted Subsidiary owing to the Company or another Restricted Subsidiary; (g) any Lien existing prior to the time of acquisition upon any Property acquired by the Company or any Restricted Subsidiary after the Closing Date 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 Indebtedness incurred to pay all or a portion of) the purchase price thereof, provided that (i) any such Lien does not encumber any other property of the Company or such Restricted Subsidiary, (ii) the Indebtedness secured by such Lien is not prohibited by the provisions of Section 7.05, (iii) the aggregate principal amount of the Indebtedness secured by 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 (iv) the aggregate outstanding principal amount (without duplication) of the Indebtedness secured by all such Liens and the Indebtedness of all Restricted Subsidiaries at no time (a) during the period commencing on May 31, 1989 (the 69 77 "Senior Note Closing") and ending on the fifth anniversary of the Senior Note Closing exceeds $12,000,000, (b) during the period commencing on the fifth anniversary of the Senior Note Closing and ending on the tenth anniversary of the Senior Note Closing exceeds $25,000,000, and (c) during the period commencing on the tenth anniversary of the Senior Note Closing and ending on the Revolving Termination Date exceeds $50,000,000; (h) 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 UCC 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 subsection 7.05(e); (i) any Lien existing on the Property of the Company or its Subsidiaries on the Closing Date and set forth in Schedule 7.01 securing Indebtedness outstanding on such date; and (j) any Lien renewing, extending, refunding or refinancing any Lien permitted by subsection (i) of this Section, 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 Indebtedness which, at the time the Lien was initially placed upon the Property secured thereby, Responsible Representatives declare would have been the maturity date of Indebtedness customary for the type of Property being financed. 7.02 Merger; Disposition of Assets. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to, merge or consolidate with any Person or, directly or indirectly, sell, lease or transfer or otherwise dispose of (whether in one or a series of transactions) any Property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except that: (a) any Restricted Subsidiary of the Company may merge with the Company (provided that the Company shall be the continuing or surviving corporation) or with any one or more other Restricted Subsidiaries; 70 78 (b) any Restricted Subsidiary of the Company may sell, lease, transfer or otherwise dispose of any of its assets to the Company or a Restricted Subsidiary; (c) any Restricted Subsidiary may merge or consolidate with any other entity, provided that, immediately after giving effect to such merger or consolidation (i) the continuing or surviving entity of such merger or consolidation shall constitute a Restricted Subsidiary, (ii) no Event of Default or Material Default shall exist, and (iii) following the merger, the entity surviving the merger is not engaged in any business other than a Permitted Business; (d) 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 (i) either (x) the Company shall be the continuing or surviving entity (in the case of such merger) or (y) the successor or acquiring entity shall be a solvent corporation or partnership organized under the laws of the United States and shall expressly assume in writing all of the obligations of the Company under this Agreement, the Note Agreements and the Mortgage Note Agreements, 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, the Note Agreements and the Mortgage Note Agreements 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 (ii) 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 subsection 7.05(j), and (z) the entity surviving the merger or consolidation or to which such assets have been transferred is not engaged in any business other than a Permitted Business; (e) the Company or any Restricted Subsidiary may make dispositions of inventory in the Ordinary Course of Business; (f) the Company or any Restricted Subsidiary may sell Designated Acres (or notes receivable arising from the sale of Designated Acres) for the fair value thereof as 71 79 reasonably determined in good faith by Responsible Representatives; (g) the Company and its Restricted Subsidiaries may exchange Timberlands with other Persons in the Ordinary Course of Business, provided that (i) the fair value of the Timberlands plus any Net 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, (ii) such exchange would not materially and adversely affect the business, Property, 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 and the Note Agreements and the Mortgage Note Agreements, and (iii) any Properties shall be deemed sold to the extent of Net Proceeds received and such sales shall be allowed only to the extent otherwise permitted by this Section 7.02; (h) the Company and its Restricted Subsidiaries may sell Properties for cash 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 (the "Permitted Amount") equal to (i) in calendar year 1989 and 1990, $3,000,000 and (ii) in each calendar year thereafter, the sum of (x) the Permitted Amount for the preceding calendar year plus (y) an increase equal to the percentage increase, if any, in the consumer price index for goods and services in the United States, as published by the U.S. Bureau of Labor Statistics, or successor publication, for such preceding calendar year, times such permitted amount; (i) the Company and its Restricted Subsidiaries may otherwise sell for cash properties that constitute the Company's Columbia River Unit in an amount not less than the fair value thereof as determined in good faith by the Responsible Representatives, if and only if (i) immediately after giving effect to such proposed sale, no condition or event shall exist which constitutes an Event of Default or Material Default, (ii) the Net Proceeds of any such sale are either (x) subject to clause (v) of this subsection 7.02(i), paid immediately to the Agent on behalf of the Banks for prepayment of the Loans in accordance with the provisions of Section 2.07, or (y) are applied, within 180 days after such sale, to the purchase of productive assets in the same line of business, provided, that the Company shall have notified the Agent promptly after its determination to so apply the Net Proceeds, (iii) if the Net Proceeds are in excess of $25,000,000 and if not paid immediately as provided in 72 80 clause (ii) above, placed immediately upon receipt thereof in a cash collateral account or accounts at BofA, pursuant to a Cash Collateral Account Agreement, for the purpose of application in accordance with subclause (ii)(y) above, (iv) immediately after giving effect to such sale (giving effect on a pro forma basis to any proposed retirement of Indebtedness out of proceeds thereof), the Company could incur $1 of additional Funded Debt pursuant to subsection 7.05(j), and (v) the aggregate Net Proceeds of all sales pursuant to this subsection 7.02(i) during the year from the funding of the first Loan hereunder to the first anniversary thereof that are applied in repayment of the Loans is less than or equal to $150,000,000; and (j) the Company and its Restricted Subsidiaries may otherwise sell Properties for cash (other than properties described in subsection 7.02(i) above) in an amount not less than the fair value thereof as determined in good faith by the Responsible Representatives, if and only if (i) immediately after giving effect to such proposed sale, no condition or event shall exist which constitutes an Event of Default or Material Default, (ii) the Net Proceeds of any such sale (x) are applied first, if any Net Proceeds have been used to repay the Loans in accordance with subsection 7.02(i), to the holders of the Notes to the extent necessary to cause their Actual Percentage to equal the Desired Percentage, and second, pro rata (based on the then outstanding principal of all Qualified Debt) to the holders of all Qualified Debt, or (y) are applied, within 180 days after such sale, to the purchase of productive assets in the same line of business, provided, that the Company shall have notified the Agent promptly after its determination to so apply the Net Proceeds, (iii) the net proceeds of any such sale are either (x) distributed immediately upon receipt thereof to holders of Qualified Debt in accordance with subclause (ii)(x) above for application (either immediately or within 180 days) to repayment of such Qualified Debt, provided that, such proceeds to be paid to the Agent on behalf of the Banks shall be paid and applied immediately in accordance with the provisions of Section 2.07, or (y) if in excess of $25,000,000, placed immediately upon receipt thereof in an escrow or cash collateral account or accounts, pursuant to an agreement or agreements in form and substance reasonably satisfactory to holders of 66-2/3% of the outstanding principal balance of the Qualified Debt, for the purpose of application in accordance with clause (ii) above, and (iv) immediately after giving effect to such sale (giving effect on a pro forma basis to any proposed retirement of Qualified Debt out of proceeds thereof), the Company could 73 81 incur $1 of additional Funded Debt pursuant to subsection 7.05(j). 7.03 Harvesting Restrictions. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to, 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:
Maximum MMBF to be Calendar Year Harvested ------------------------- ------------ 1989 (including harvest by predecessor prior to closing under the Note Agreements) through 1991 675 MMBF 1992 and 1993 650 MMBF 1994 through 1996 700 MMBF 1997 through 2000 675 MMBF 2001 625 MMBF
plus, in each year, the amount, if any, by which the cumulative amount set forth in the table above for the preceding years exceeds the cumulative amount actually harvested in such years; unless the Net Proceeds from such excess harvest are either (i) distributed to all holders of Qualified Debt pro rata based upon the outstanding principal balance at the time of such distribution for application (either immediately or within 180 days after such excess harvest) to the repayment of such Qualified Debt, provided that, such proceeds to be paid to the Agent on behalf of the Banks shall be paid and applied immediately in accordance with the provisions of Section 2.07, 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 the Company shall have notified the Agent promptly after its determination to so apply the Net Proceeds. 7.04 Loans and Investments. The Company shall not suffer or permit any of its Restricted Subsidiaries to make or commit to 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 74 82 connection with the obligations, stock or dividends of, or own, purchase or acquire (or commit to own, purchase or acquire) any stock, obligations or securities of, or any other interest in (including, without limitation, the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person), or make or commit to make any capital contribution to, any Person (all of the foregoing (but excluding any Designated Repurchases permitted by Section 7.13 hereof) being referred to herein as "Investments"), except that the Company or any Restricted Subsidiary may: (a) 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 otherwise permitted by this Section 7.04) unless (i) immediately after giving effect to such Investment, no Event of Default or Default, or "Default" or "Event of Default" as defined in the Mortgage Note Agreements, shall exist, (ii) immediately prior to giving effect to such Investment, no Default or Event of Default (other than an "Event of Default" as defined in the Mortgage Note Agreements) shall exist, and (iii) 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. (b) own, purchase or acquire real or personal property to be used in the Ordinary Course of Business; (c) own, purchase or acquire investments of the type specified in, and in accordance with the requirements and limitations of, the Investment Policy; (d) continue to own Investments owned on the Closing Date as set forth on Schedule 7.04; (e) endorse negotiable instruments for collection in the Ordinary Course of Business; (f) become and be obligated under the Guarantee and under the guarantees permitted by subsections 7.05(g) and (h), and acquire and own subordinated subrogation rights upon performance of such guarantees; (g) make advances in the Ordinary Course of Business of the Company or any Restricted Subsidiary, including deposits permitted under subsection 7.01(c), advances to employees for travel, relocation and other employment related expenses, advances to contractors 75 83 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; (h) make Investments in Restricted Subsidiaries, or any entity which immediately after such Investment will be a Restricted Subsidiary; and (i) make Investments not otherwise permitted by this Section 7.04 in entities engaged solely in a Permitted Business, provided that the cumulative aggregate amount of such Investments at original cost (including the principal amount of any obligations guaranteed to the extent such guarantees are not otherwise permitted by this Section 7.04) made pursuant to this subsection (i) between the closing date of the Note Agreements 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. 7.05 Limitation on Indebtedness. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement; (b) Funded Debt represented by the Notes and any refinancing thereof so long as such refinancing does not increase the principal amount thereof and is on terms no less favorable to the Company, and to the rights of the Agent and the Banks hereunder, than those contained on the Closing Date in the Notes and the documentation relating thereto; (c) 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; (d) Indebtedness of any Restricted Subsidiary owing to the Company or to a Restricted Subsidiary; (e) Indebtedness incurred by the Company pursuant to the Revolving Credit Facility (and any extension, renewal, refunding or refinancing thereof, including any 76 84 refunding or refinancing in an amount in excess of the principal amount then outstanding under the Revolving Credit Facility), or any other Indebtedness pursuant to a bank credit facility which is unsecured or is secured by Liens permitted by subsection 7.01(h), not in excess of an aggregate principal amount of $15,000,000 at any time outstanding, provided that the Company shall not suffer to exist any Indebtedness permitted by this subsection (e) 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 Indebtedness permitted by this subsection (e); (f) Indebtedness represented by the Guarantee and any refinancing thereof so long as such refinancing does not increase the principal amount thereof and is on terms no less favorable to the Company, and to the rights of the Agent and the Banks hereunder, than those contained on the Closing Date in the Guarantee and the documentation relating thereto; (g) 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 Indebtedness 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; (h) the Company's guarantee of Funded Debt (and related obligations not constituting Indebtedness) incurred by the Facilities Subsidiary to finance the making of capital improvements, expansions and additions to the Facilities Subsidiaries' 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; (i) Funded Debt of the Company or any Restricted Subsidiary secured by a Lien permitted by subsection 7.01(g), 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 77 85 the Indebtedness secured by such Lien), the Company could incur at least $1 of additional Funded Debt pursuant to clause (j) below; (j) Funded Debt of the Company (other than Funded Debt owing to a Restricted Subsidiary) in addition to that otherwise permitted by the foregoing subsections of this Section 7.05, including guarantees of Indebtedness to the extent permitted by Section 7.04 and not otherwise permitted by the foregoing subsections of this Section 7.05, 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 1.00; and provided, further, that the aggregate outstanding principal amount of such additional Funded Debt shall not exceed $400,000,000; (k) from and after the time that the Facilities Subsidiary becomes a Restricted Subsidiary, Indebtedness incurred by the Facilities Subsidiary pursuant to 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 any other Indebtedness incurred by the Facilities Subsidiary pursuant to a bank credit facility which is unsecured or is secured by Liens permitted by subsection 7.01(h), not in excess of an aggregate principal amount of $20,000,000 at any time outstanding, provided that to the extent that the Facilities Subsidiary is a Restricted Subsidiary, the Facilities Subsidiary shall not suffer to exist any Indebtedness permitted by this subsection (k) on any day unless there shall have been a period of at least 45 consecutive days within the 12 months immediately preceding such day during which the Facilities Subsidiary shall have been free from all Indebtedness permitted by this subsection (k); and (l) from and after the time that the Facilities Subsidiary or any Designated Immaterial Subsidiary becomes a Restricted Subsidiary, Indebtedness 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 (i) 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 78 86 to subsection (j) 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 (ii) the aggregate amount (without duplication) of such Indebtedness and all other Indebtedness, in each case, secured by Liens permitted by subsection 7.01(g) does not violate subclause (iv) to the proviso to such subsection (g). 7.06 Transactions with Affiliates. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to 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 of the Company or of any such Restricted Subsidiary, except in the Ordinary Course of Business and pursuant to the reasonable requirements of the business of the Company or such Restricted Subsidiary 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 not an Affiliate of the Company or such Restricted Subsidiary. 7.07 Use of Proceeds. The Company shall not and shall not suffer or permit any of its Subsidiaries to use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. 7.08 Sale of Stock and Indebtedness of Subsidiaries. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to, sell or otherwise dispose of, or part with control of, any shares of stock or Indebtedness of any Subsidiary, except to the Company or a Restricted Subsidiary, and except that all shares of stock and Indebtedness 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 PC Advisory General Partner) at the time of sale of the shares of stock and Indebtedness so sold, provide that the assets of such Subsidiary do not include any assets which could not be disposed of pursuant 79 87 to the provisions of Section 7.02 unless the conditions to the sale of such assets set forth in Section 7.02 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 Indebtedness of any other Subsidiary (unless all of the shares of stock and Indebtedness of such other Subsidiary owned, directly or indirectly, by the Company and its Subsidiaries are simultaneously being sold as permitted by this Section 7.08). 7.09 Certain Contracts. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to enter into or be a party to: (a) 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 (b) 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 subsection (b) shall prevent the Company from (i) entering into take-or-pay contracts in the Ordinary Course of Business with the United States Forest Service, the Bureau of Land Management, the Bureau of Indian Affairs, the Washington Department of Natural Resources or similar state or federal governmental agencies, or (ii) making payments in satisfaction of contracts with such Persons which contracts are deemed by the Responsible Representatives to be disadvantageous to perform; or (c) 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 (d) 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 80 88 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 (e) any other contract which in economic effect, is substantially equivalent to a guarantee, except as permitted by the provisions of subsection 7.04(a), (e), (f), (g), (h) or (i). 7.10 Joint Ventures. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to enter into any Joint Venture, other than in Permitted Businesses and so long as any such Joint Venture is not entered into for the purposes of evading any covenant or restriction in any Loan Documents. 7.11 Compliance with ERISA. The Company shall not, and shall not suffer or permit any of its Subsidiaries to, without the consent of the Majority Banks, (i) terminate any Plan subject to Title IV of ERISA so as to result in any material (in the opinion of the Majority Banks) liability to the Company or any ERISA Affiliate, (ii) permit to exist any ERISA Event or any other event or condition with respect to any Plan other than a Multiemployer Plan, which presents the risk of a material (in the opinion of the Majority Banks) liability to the Company, (iii) make a complete or partial withdrawal (within the meaning of ERISA Section 4201) from any Multiemployer Plan so as to result in any material (in the opinion of the Majority Banks) liability to the Company or any ERISA Affiliate, (iv) enter into any new Plan or modify any existing Plan so as to increase its obligations thereunder which could result in any material (in the opinion of the Majority Banks) liability to any member of the Controlled Group, or (v) permit the present value of all nonforfeitable accrued benefits under any Plan (using the actuarial assumptions utilized by the PBGC upon termination of a Plan) materially (in the opinion of the Majority Banks) to exceed the fair market value of Plan assets allocable to such benefits, all determined as of the most recent valuation date for each such Plan. 7.12 Sale and Leaseback. The Company shall not, and shall not suffer or permit any of its Restricted Subsidiaries to, 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 81 89 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 rental obligations of the Company or any Restricted Subsidiary, provided that this Section 7.12 shall not apply to any property sold pursuant to subsection 7.02(h). 7.13 Restricted Payments. The Company shall not and shall not permit or suffer 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: (a) 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 reserves established during such quarter pursuant to clause (ii)(d) of the definition of Available Cash an amount not less than (i) 50% of the aggregate amount of all interest in respect of the Notes to be paid on the interest date immediately following such immediately preceding calendar quarter, (ii) 100% of the aggregate amount of all interest in respect of the Loans to be paid on the respective Interest Payment Dates for such Loans immediately following such immediately preceding calendar quarter, (iii) 25% of the aggregate amount of all principal in respect of the Notes scheduled to be paid during the 12 calendar months immediately following such immediately preceding calendar quarter, and (iv) 25% of the aggregate amount of payments required to be made on account of Mandatory Commitment Reductions scheduled 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 (i)(c) of the definition of Available Cash, unless and until (A) the amount of interest or principal in respect of which such amount has been reserved has in fact been paid and (B) in the case of clause (iv) of this 82 90 subsection 7.13(a), the amount of the reserves so included exceeds fifty percent (50%) of the aggregate amount of payments required to be made on account of the Mandatory Commitment Reductions scheduled during the 12 calendar months immediately following such immediately preceding calendar quarter; and (b) 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. 7.14 Change in Business. The Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than a Permitted Business. 7.15 Issuance of Stock by Subsidiaries. The Company covenants that it will not permit any Subsidiary to (either directly, or indirectly by the issuance of rights or options for, or securities convertible into, such shares) 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. 7.16 Amendments. The Company shall not, and shall not suffer or permit any of its Subsidiaries to amend, modify, supplement, waive or otherwise modify any provision of any agreement evidencing funded Debt in excess of $35,000,000 which amendment, modification, supplement or waiver would reasonably be expected to affect the Agent's or the Banks' rights hereunder (including the right to be repaid pursuant to subsection 7.02(i)) or the ability of the Company to perform its obligations under any Loan Document. 7.17 Available Cash. The Company shall not at any time permit Available Cash to be less than zero. For purposes of this Section 7.17, in determining Available Cash with respect to the immediately preceding calendar quarter, the Company will include in the amount of reserves established during such quarter pursuant to clause (ii)(d)(1) (with respect to principal on Indebtedness) and clause (ii)(d)(4) of the definition of "Available Cash" an amount not less than (a) 50% of the aggregate amount of all interest in respect of the Notes to be paid on the interest date immediately following such immediately preceding calendar 83 91 quarter, (b) 100% of the aggregate amount of all interest in respect of the Loans to be paid on the respective Interest Payment Dates for such Loans immediately following such immediately preceding calendar quarter, (c) 25% of the aggregate amount of all principal in respect of the Notes scheduled to be paid during the 12 calendar months immediately following such immediately preceding calendar quarter, and (d) 25% of the aggregate amount of payments required to be made on account of Mandatory Commitment Reductions scheduled 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 (i)(c) of the definition of Available Cash, unless and until (i) the amount of interest or principal in respect of which such amount has been reserved has in fact been paid and (ii) in the case of clause (d) of this Section 7.17, the amount of the reserves so included exceeds fifty percent (50%) of the aggregate amount of payments required to be made on account of the Mandatory Commitment Reductions scheduled during the 12 calendar months immediately following such immediately preceding calendar quarter. ARTICLE VIII EVENTS OF DEFAULT 8.01 Event of Default. Any of the following shall constitute an "Event of Default": (a) Non-Payment. The Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within 5 days after the same shall become due, any interest, fee or any other amount payable hereunder or pursuant to any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by the Company or any of its Subsidiaries made or deemed made herein, in any Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, its Responsible Representatives, any of its Subsidiaries, or their respective Responsible Officers, furnished at any time under this Agreement, or in or under any Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or 84 92 (c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in Sections 6.01, 6.02, 6.03 and 6.09 or Article VII; or (d) Other Defaults. The Company fails to perform or observe any other term or covenant contained in this Agreement or any Loan Document, and such default shall continue unremedied for a period of 20 days after the earlier of (i) the date upon which a Responsible Officer or Responsible Representative of the Company knew or should have known of such failure or (ii) the date upon which written notice thereof is given to the Company by the Agent or any Bank; or (e) Cross-Default. The Company or any of its Subsidiaries (i) fails to make any payment in respect of any Indebtedness having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $5,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise); or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness, if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or with respect to any contingent obligations, to become payable or cash collateral in respect thereof to be demanded; or (f) Insolvency; Voluntary Proceedings. The Company, any of its Subsidiaries, or any Partner Entity (i) ceases or fails to be Solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company, the Facilities Subsidiary, any Restricted Subsidiary of the Company, or any Partner Entity, or any writ, judgment, warrant of attachment, execution or similar 85 93 process, is issued or levied against a substantial part of the Company's, any of its Restricted Subsidiaries', any Partner Entities' or the Facilities Subsidiaries' Properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company, any Partner Entity, the Facilities Subsidiary, or any of the Company's Restricted Subsidiaries admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company, any Partner Entity, any of the Company's Restricted Subsidiaries, or the Facilities Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its Property or business; or (h) ERISA. (i) A member of the Controlled Group shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under a Multiemployer Plan; (ii) the Company or an ERISA Affiliate shall fail to satisfy its contribution requirements under Section 412(c)(11) of the Code, whether or not it has sought a waiver under Section 412(d) of the Code; (iii) in the case of an ERISA Event involving the withdrawal from a Plan of a "substantial employer" (as defined in Section 4001(a)(2) or Section 4062(e) of ERISA), the withdrawing employer's proportionate share of that Plan's Unfunded Pension Liabilities is more than $10,000,000; (iv) in the case of an ERISA Event involving the complete or partial withdrawal from a Multiemployer Plan, the withdrawing employer has incurred a withdrawal liability in an aggregate amount exceeding $10,000,000; (v) in the case of an ERISA Event not described in clause (iii) or (iv), the Unfunded Pension Liabilities of the relevant Plan or Plans exceed $10,000,000; (vi) a Plan that is intended to be qualified under Section 401(a) of the Code shall lose its qualification, and the loss can reasonably be expected to impose on members of the Controlled Group liability (for additional taxes, to Plan participants, or otherwise) in the aggregate amount of $10,000,000 or more; (vii) the commencement or increase of contributions to, or the adoption of or the amendment of a Plan by, a member of the Controlled Group shall result in a net increase in unfunded liabilities to the Controlled Group in excess of $10,000,000; (viii) any member of the Controlled Group engages in or otherwise becomes liable for a non-exempt 86 94 prohibited transaction and the initial tax or additional tax under section 4975 of the Code relating thereto might reasonably be expected to exceed $10,000,000; (ix) a violation of section 404 or 405 of ERISA or the exclusive benefit rule under section 401(a) of the Code if such violation might reasonably be expected to expose a member or members of the Controlled Group to monetary liability in excess of $10,000,000; (x) any member of the Controlled Group is assessed a tax under section 4980B of the Code in excess of $10,000,000; or (xi) the occurrence of any combination of events listed in clauses (iii) through (x) that involves a potential liability, net increase in aggregate Unfunded Pension Liabilities, unfunded liabilities, or any combination thereof, in excess of $10,000,000; or (i) Monetary Judgments. One or more non- interlocutory judgments, orders or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability (not fully covered by independent third-party insurance) as to any single or related series of transactions, incidents or conditions, of $25,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after the entry thereof; or (j) Non-Monetary Judgments. Any non-monetary judgment, order or decree shall be rendered against the Company or any of its Subsidiaries which does or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (k) Montana Timberlands. The Company shall not have acquired the Montana Timberlands on or before the date that is 30 days after the Closing Date; or (l) Adverse Change. There shall occur (i) a material adverse change in, or a material adverse effect upon, any of the operations, business, properties, or condition (financial or otherwise) of the Company or the Company and its Subsidiaries taken as a whole or as to any Restricted Subsidiary which materially impairs the ability of the Company to perform under any Loan Document and avoid any Event of Default, or (ii) a material adverse effect upon the legality, validity, binding effect or enforceability of any Loan Document. 87 95 8.02 Remedies. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Majority Banks, (a) declare the Commitment of each Bank to make Loans to be terminated, whereupon such Commitments shall forthwith be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable; without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and (c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in paragraph (f) or (g) of Section 8.01 above (in the case of clause (i) of paragraph (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Bank. 8.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.01 Appointment and Authorization. Each Bank hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto, including, without limitation, to enter into Cash Collateral Account Agreements from time to time in 88 96 accordance with subsection 7.02(i) of this Agreement, and to release funds to the Company in accordance with Section 1(b) of the Cash Collateral Agreement pursuant to an Officer's Certificate substantially in the form attached thereto as Exhibit A. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 9.02 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in- fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the Properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 9.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, 89 97 facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter either sent or made available by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank, unless an officer of the Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from the Bank prior to the initial Borrowing specifying its objection thereto and either such objection shall not have been withdrawn by notice to the Agent to that effect or the Bank shall not have made available to the Agent the Bank's ratable portion of such Borrowing. 9.05 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Majority Banks in accordance with Article VIII; provided, however, that unless and until the Agent shall have received any such request, the Agent may (but shall not 90 98 be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.06 Credit Decision. Each Bank expressly acknowledges that none of the Agent-Related Persons has made any representation or warranty to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated thereby, and made its own decision to enter into this Agreement and extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Agent-Related Persons. 9.07 Indemnification. Whether or not the transactions contemplated hereby shall be consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind whatsoever which may at any time (including at any time following the repayment of the Loans and the termination or resignation of the related Agent) be imposed on, incurred by or asserted against any such Person in any way relating to 91 99 or arising out of this Agreement or any document contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any such Person under or in connection with any of the foregoing; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out- of-pocket expenses (including reasonable Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. Without limiting the generality of the foregoing, if the Internal Revenue Service or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses and attorneys' fees (including reasonable Attorney Costs). The obligation of the Banks in this Section shall survive the payment of all Obligations hereunder. 9.08 Agent in Individual Capacity. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with the Company and its Subsidiaries and Affiliates as though BofA was not the Agent hereunder and without notice to or consent of the Banks. With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include BofA in its individual capacity. BofA has provided and may in the 92 100 future provide credit facilities (which presently consist of the issuance of a letter of credit in the amount of $32,486,640 for the benefit of Burlington Resources Inc.) for the account of or to PCMC Intermediate Holdings, a Delaware limited partnership (the "GP Borrower"), and DPI Intermediate Holdings, L.P., a Delaware limited partnership (the "DPI Borrower"), in connection with or related to the acquisition by the GP Borrower and the PCMC General Partner of the limited and general partnership interests in the General Partner, and the acquisition by the DPI Borrower and PC Advisory Partners II, L.P. of the limited and general partnership interests in DPI Sub L.P., a Delaware limited partnership that owned the Deferred Participation Interests (as defined in the Partnership Agreement). Those credit facilities are secured by, among other things, security interests in the general and limited partnership interests in the General Partner and in DPI Sub L.P.; accordingly, upon the exercise of remedies following a default under those credit facilities, BofA could become the owner of (or could transfer to a third person) those limited and general partnership interests. Each Bank acknowledges that (i) it has, independently and without reliance upon BofA and based on such documents and information as it has deemed appropriate, made its own investigation into those credit facilities; (ii) BofA has responded satisfactorily to any request by such Bank for information regarding such credit facilities; (iii) BofA may manage its relationship with the GP Borrower and the DPI Borrower, and deal with its collateral for such credit facilities, as it sees fit as though it were not the Agent hereunder; (iv) BofA's liability under the letter of credit will be directly related to, and the ability of the GP Borrower and the DPI Borrower to pay sums due under such credit facilities may be dependant in whole or part on, distributions received from the Company; and (v) BofA shall have no obligation to disclose to any Bank any information received by BofA in connection with such credit facilities. 9.09 Successor Agent. The Agent may, and at the request of the Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If an Agent shall resign as Agent under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers 93 101 and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. ARTICLE X MISCELLANEOUS 10.01 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks, the Company and acknowledged by the Agent, and then such waiver shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks, the Company and acknowledged by the Agent, do any of the following: (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to subsection 8.02(a)) or subject any Bank to any additional obligations; (b) postpone or delay any date fixed for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or of any fees or other amounts payable hereunder or under any Loan Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for the Banks or any of them to take any action hereunder; or 94 102 (e) amend this Section 10.01 or Section 2.14 or any provision providing for consent or other action by all Banks; and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document. 10.02 Notices. (a) All notices, requests and other communications provided for hereunder shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on the applicable signature page hereof, and (ii) shall be followed promptly by a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on the applicable signature page hereof; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to each other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or IX shall not be effective until actually received by the Agent. (c) The Company acknowledges and agrees that any agreement of the Agent and the Banks at Article II herein to receive certain notices by telephone and facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written 95 103 confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 10.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.04 Costs and Expenses. The Company shall, whether or not the transactions contemplated hereby shall be consummated: (a) pay or reimburse BofA (including in its capacity as Agent) within five Business Days after demand (subject to subsection 4.01(e)) for all reasonable costs and expenses incurred by BofA (including in its capacity as Agent) in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including the reasonable Attorney Costs incurred by BofA (including in its capacity as Agent) with respect thereto; provided, however, that this subsection (a) shall not apply to any such costs and expenses incurred by BofA after any date that BofA is no longer the Agent hereunder and after any such date any references in this subsection (a) to BofA shall be deemed a reference to the successor Agent; and (b) pay or reimburse each Bank and the Agent within five Business Days after demand (subject to subsection 4.01(e)) for all costs and expenses incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding) under this Agreement, any other Loan Document, and any such other documents, including Attorney Costs and appraisal (including the allocated cost of internal appraisal services), audit, environmental inspection and review (including the allocated cost of such internal services), and search and filing 96 104 costs, fees and expenses, incurred by the Agent and any Bank. 10.05 Indemnity. Whether or not the transactions contemplated hereby shall be consummated: The Company shall pay, indemnify, and hold each Bank, the Agent and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and any other Loan Documents, or the transactions contemplated hereby and thereby, and with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations. 10.06 Marshalling; Payments Set Aside. Neither the Agent nor the Banks shall be under any obligation to marshall any assets in favor of the Company or any other Person or against or in payment of any or all of the Obligations. To the extent that the Company makes a payment or payments to the Agent or the Banks, or the Agent or the Banks enforce their Liens or exercise their rights of set- off, and such payment or payments or the proceeds of such enforcement or set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent in its discretion) to be repaid to a trustee, receiver or any other party in connection with any Insolvency Proceeding, or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred, and (b) each Bank severally agrees to pay to the Agent upon demand its ratable share of the total amount so recovered from or repaid by the Agent. 10.07 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of 97 105 the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. 10.08 Assignments, Participations, etc. (a) Prior to the date that is one year after the Closing Date, the Banks shall be prohibited from assigning all or any part of the Loans, the Commitments, or any other right or obligation hereunder. Thereafter, any Bank may, with the written consent of the Company at all times other than during the existence of an Event of Default and the Agent, which consents of the Company and the Agent may be given or withheld in each of their sole discretion, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company or the Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder; provided that no assignment shall in any event be less than $20,000,000 unless as a result of such assignment the assigning Bank's rights and obligations hereunder shall be reduced to zero; and provided further that if a Bank assigns less than all of its rights and obligations hereunder, such Bank's remaining Commitment, after giving effect to such assignment, shall not be less than $20,000,000; provided, however, that (i) the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (A) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Bank and the Assignee; (B) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance in the form of Exhibit F ("Assignment and Acceptance") and (C) the assignor Bank or Assignee has paid to the Agent a processing fee in the amount of $3,500. (b) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and 98 106 obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance, this Agreement, shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank pro tanto. (d) Any Bank may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents; provided, however, that (i) the originating Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in the first proviso to Section 10.01. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 3.01, 3.03 and 10.05 as though it were also a Bank hereunder, and if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (e) Each Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" by the Company and provided to it by the 99 107 Company or any Subsidiary of the Company, or by the Agent on such Company's or Subsidiary's behalf, in connection with this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement; provided, however, that any Bank may disclose such information (A) to the extent that such information was or becomes generally available to the public other than as a result of a disclosure by the Bank; (B) to the extent such information was or becomes available to such Bank to whom it was furnished on a non-confidential basis; (C) at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (D) pursuant to subpoena or other court process; (E) when required to do so in accordance with the provisions of any applicable Requirement of Law; (F) to the extent reasonably required in connection with any litigation or proceeding to which the Agent, any Bank or their respective Affiliates may be party; (G) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (H) to such Bank's independent auditors and other professional advisors. Notwithstanding the foregoing, the Company authorizes each Bank to disclose to any Participant or Assignee (each, a "Transferee") and to any prospective Transferee, such financial and other information in such Bank's possession concerning the Company or its Subsidiaries which has been delivered to the Agent or the Banks pursuant to this Agreement or which has been delivered to the Agent or the Banks by the Company in connection with the Banks' credit evaluation of the Company prior to entering into this Agreement; provided that, unless otherwise agreed by the Company, such Transferee agrees in writing to such Bank to keep such information confidential to the same extent required of the Banks hereunder. (f) Notwithstanding any other provision contained in this Agreement or any other Loan Document to the contrary, any Bank may assign all or any portion of the Loans held by it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Federal Reserve Board and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans made by the Company to or for the account of the assigning or pledging Bank in accordance with the terms of this Agreement shall satisfy the Company's obligations hereunder in respect to such assigned Loans to the extent of such payment. No such assignment shall release the assigning Bank from its obligations hereunder. 100 108 10.09 Set-off. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists, each Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing to, such Bank to or for the credit or the account of the Company against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not the Agent or such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank under this Section 10.09 are in addition to the other rights and remedies (including other rights of set-off) which the Bank may have. 10.10 Automatic Debits of Fees. With respect to any commitment fee, facility fee, or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent or BofA under the Loan Documents, the Company hereby irrevocably authorizes BofA to debit any deposit account of the Company with BofA in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in BofA's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section 10.10 shall be deemed a setoff. 10.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall notify the Agent in writing of any changes in the address to which notices to the Bank should be directed, of addresses of its Offshore Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.12 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. A set of the copies of this Agreement 101 109 signed by all the parties shall be lodged with the Company and the Agent. 10.13 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.14 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks and the Agent, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. Neither the Agent nor any Bank shall have any obligation to any Person not a party to this Agreement or other Loan Documents. 10.15 Time. Time is of the essence as to each term or provision of this Agreement and each of the other Loan Documents. 10.16 Governing Law and Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. 10.17 Arbitration; Reference. (a) Mandatory Arbitration. Any controversy or claim between or among the parties, including but not limited to those arising out of or relating to this Agreement or any agreements or instruments relating hereto or delivered in connection herewith and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to applicable statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any 102 110 party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) Judicial Reference. At the request of any party a controversy or claim which is not submitted to arbitration as provided and limited in subparagraph (a) shall be determined by a reference in accordance with California Code of Civil Procedure Section 638 et seq. If such an election is made, the parties shall designate to the court a referee or referees selected under the auspices of the AAA in the same manner as arbitrators are selected in AAA-sponsored proceedings. The presiding referee of the panel, or the referee if there is a single referee, shall be an active attorney or retired judge. Judgment upon the award rendered by such referee or referees shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. (c) Provisional Remedies, Self-Help and Foreclosure. No provision of this paragraph shall limit the right of any party to this Agreement to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. 10.18 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks and the Agent, and supersedes all prior or contemporaneous Agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof, except for the fee letter referenced in subsection 2.10(a), and any prior arrangements made with respect to the payment by the Company of (or any indemnification for) any fees, costs or expenses 103 111 payable to or incurred (or to be incurred) by or on behalf of the Agent or the Banks. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco, California by their proper and duly authorized officers as of the day and year first above written. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its general partner By: ______________________________ Title: ___________________________ Address for notices: 999 Third Avenue, Suite 2300 Seattle, WA 98104 Attn: Chief Financial Officer Facsimile: (206) 467-3797 Tel: (206) 467-3600 104 [signatures continue] 112 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: ___________________________________ Title: ________________________________ Address for notices: 1455 Market Street, 12th Floor San Francisco, CA 94103 Attn: Global Agency #5596 Facsimile: (415) 622-4894 Tel: (415) 953-0849 Attention: Daniel G. Farthing Address for payments: Bank of America NT&SA ABA 121-000-358 Attention: Global Agency #5596 1850 Gateway Blvd. Concord, CA 94520 for credit to Account No. 1233-6-14205 105 [signatures continue] 113 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: ___________________________________ Title: ________________________________ Address for notices: San Francisco Credit Products (#3838) 555 California Street, 41st Floor San Francisco, CA 94104 Attention: Michael J. Balok Facsimile: (415) 622-4585 Tel: (415) 622-2018 Address for payments: Bank of America National Trust and Savings Association Global Payment Operations Customer Service Americas (#5693) 1850 Gateway Boulevard Concord, CA 94520 Attention: Daryl L. Hurst ABA 121-000-358 SF Domestic and Offshore Lending Office: Same as address for payments 106 [signatures continue] 114 NATIONSBANK OF NORTH CAROLINA, N.A. By: ___________________________________ Title: ________________________________ Address for notices: 1 NationsBank Plaza NC1-002-06-19 Charlotte, NC 28255 Attention: William White Facsimile: (704) 386-8694 Tel: (704) 386-7891 Address for payments: NationsBank of North Carolina, N.A. ABA 053-000-196 Specialized Loan Support Account No. 13662122506 Domestic and Offshore Lending Office: Forest Products NationsBank Corporate Center, 8th Fl. Charlotte, NC 28255 107 [signatures continue] 115 UNITED STATES NATIONAL BANK OF OREGON By: ___________________________________ Title: ________________________________ Address for Notices: c/o U.S. Bank of Washington 1414 Fourth Avenue WWH276 Seattle, WA 98101 Attention: Peter G. Bentley, Vice President Facsimile: (206) 587-5259 Tel: (206) 587-5237 Address for payments: United States National Bank of Oregon Commercial Loan Department Attention: Fran Reference: Plum Creek Domestic and Offshore Lending Office: Same as notice address 108 [signatures continue] 116 WELLS FARGO BANK, N.A. By: ___________________________________ Title: ________________________________ Address for notices: 420 Montgomery St., 9th Floor San Francisco, CA 94163 (for notices of Borrowings) Attention: Joan Nitis Facsimile: (415) 989-4319 Tel: (415) 396-4916 (for all other notices) Attention: Ralph Turner Facsimile: (415) 421-1352 Tel: (415) 396-4932 Address for payments: Wells Fargo Bank, N.A. ABA 121000248 Corporate Note Dept., SR 703 Account No. 2712-507201 Reference: Plum Creek Timber Company, L.P. Attention: Joan Nitis Domestic and Offshore Lending Office: 109 [signatures continue] 117 SEATTLE FIRST NATIONAL BANK By: ___________________________________ Title: ________________________________ Address for notices: 701 Fifth Avenue, 12th Floor Box 94010 Seattle, WA 98120-9410 Attention: John Wilson, Vice President, Northwest National Division Facsimile: (206) 358-3113 Tel: (206) 358-8945 Address for payments: Seattle First National Bank ABA 125000024 CLSC Loans RC #94680 Reference: Plum Creek Timber Company, L.P., AFS #7007143921 Domestic and Offshore Lending Office: same as notice address 110 [signatures continue] 118 ABN AMRO BANK N.V. By: ___________________________________ Title: ________________________________ By: ___________________________________ Title: ________________________________ Address for notices: One Union Square, Suite 2323 Seattle, WA 98101 Attention: David McGinnis, Vice President Facsimile: (206) 682-5641 Tel: (206) 587-0342 Address for payments: ABN AMRO Bank N.V., New York ABA 026009580 for credit to ABN AMRO Seattle, Account No. 651001085541 Reference: Plum Creek Domestic and Offshore Lending Offices: Same as notice address 111 [signatures continue] 119 CHEMICAL BANK By: ___________________________________ Title: ________________________________ Address for notices: 270 Park Avenue, 9th Fl. New York, NY 10017 Attention: Abigail L. Garcia Facsimile: (212) 818-1456 Tel: (212) ________ Address for payments: Chemical Bank Commercial Loan Operations 52 Broadway, 3rd Fl. Attention: John Gallagher ABA 021000128 Reference: Plum Creek Timber Co. Domestic and Offshore Lending Offices: Chemical Bank 270 Park Avenue New York, NY 10017 112 [signatures continue] 120 THE BANK OF TOKYO, LTD. By: ___________________________________ Title: ________________________________ Address for notices: 1201 Third Avenue, Suite 1100 Seattle, WA 98101 Attention: Corey W. Kalbfleisch, Corporate Banking Officer Facsimile: (206) 382-6067 Tel: (206) 382-6021 Address for payments: The Bank of Tokyo, Ltd., Seattle Branch ABA 1250-0162-9 Reference: Plum Creek Timber Co. (CBD) Domestic and Lending Offices: Seattle Branch 1201 Third Avenue, Suite 1100 Seattle, CA 98101 113 [signatures continue] 121 THE BANK OF CALIFORNIA, N.A. By: ___________________________________ Title: ________________________________ Address for notices: 400 California Street, 17th Fl. San Francisco, CA 94104 Attention: Katharyn Simien Banking Assistant Facsimile: (415) 765-3146 Tel: (415) 765-2722 Address for payments: The Bank of California, N.A. ABA 1210-000-15 for credit to Corporate Banking Note Dept., Bancontrol Acct. #001060235 Attention: E. DeLeon Reference: Plum creek Domestic and Offshore Lending Offices: Same as notice address 114 [signatures continue] 122 SCHEDULE 1.01 APRIL 5, 1993 Page 1 of 2 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: . Preserves principal . Meets liquidity needs . Allows for appropriate diversification of investments . 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). 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. 123 April 5, 1993 Page 2 of 2 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. 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. 124 SCHEDULE 2.01 COMMITMENTS
Bank Commitment Bank of America National Trust and Savings Association $50,000,000 NationsBank of North Carolina, N.A. $40,000,000 United States National Bank of Oregon $40,000,000 Wells Fargo Bank, N.A. $40,000,000 Seattle First National Bank $25,000,000 ABN AMRO Bank N.V. $20,000,000 Chemical Bank $20,000,000 The Bank of Tokyo, Ltd. $20,000,000 The Bank of California, N.A. $20,000,000
125036 (753/711) 125 PLUM CREEK TIMBER COMPANY, L.P. SCHEDULE 5.05 Litigation None. 126 PLUM CREEK TIMBER COMPANY, L.P. SCHEDULE 5.07 5.07 (a) QUALIFIED PLANS: Plum Creek Pension Plan Plum Creek Thrift and Profit Sharing Plan Plum Creek Welfare Plan - Plan Number 505 - Component Documents listed in Appendix II, thereto NON-QUALIFIED PLANS: Plum Creek Management Company, L.P. Executive Incentive Sharing Plan Plum Creek Management Company, L.P. Executive Incentive Compensation Plan Plum Creek Management Company, L.P. Key Employee Unit Award Plan Plum Creek Management Company, L.P. Executive and Key Employee Salary and Incentive Compensation Deferral Plan Plum Creek Management Company, L.P. Executive Unit Award Plan Plum Creek Supplemental Benefits Plan PC Advisory Corp. I Deferred Compensation Plan for Directors MULTI-EMPLOYER PLANS: None. 5.07 (c) A favorable determination letter from the IRS has been received for the Plum Creek Thrift and Profit Sharing Plan. The Plum Creekk Pension Plan, adopted in March 1990, is intended to be a qualified plan pursuant to Internal Revenue Service Code section 401(a) and the Trust is intended to be tax exempt pursuant to Code section 501(a). The current plan has not yet been submitted for a determination letter which will confirm it is qualified. The Plum Creek Pension Plan will be submitted for a favorable determination letter request no later than the last day of its plan year commencing on or after January 1, 1994 and the Company will adopt any appropriate amendments and take any action requested by the Internal Revenue Service as a condition of issuing a favorable determination letter on the Plum Creek Pension Plan. 5.07 (d) and (e) None. 127 5.07 (f) Retiree Life Insurance: - Insured plan - $10,000 coverage per salaried retiree - Approximately 47 retirees covered - Plan continues to be available to salaried retirees Retiree Medical: - Liability to cover four retirees for life and five retirees to age 65 - Plan continues to be available to salaried retirees at a retiree pay all basis Both the Life and Retiree Medical Communications contain disclaimers regarding the rights of the Company to modify, amend or terminate the Plans. The Accumulated Post-retirement Benefit Obligation at December 31, 1992 was $334,003. 5.07 (h), (j), and (k) None. 128 PLUM CREEK TIMBER COMPANY, L.P. SCHEDULE 5.12 5.12 (a) None. 5.12 (b) Plum Creek Manufacturing, L.P. is in the process of applying for groundwatear discharge permits at the Columbia Falls and Evergreen complexes. It has not been determined yet whether a Groundwater Discharge Permit will be required at the Pablo facility. 5.12 (c) Resolved Consent Decrees: Columbia Falls Veneer Dryers - May 21, 1990 Evergreen Veneer Dryers - May 26, 1991 Evergreen Boiler - May, 19, 1992 Environmental Claims related to: EPA/North American Environmental Inc. (Clearfield, UT) EPA/Evergreen Plywood glue pit EPA/Somers site (Somers, MT) DOE/Old Landsburg Mine Site (Ravensdale, WA) Yakima Health District/Dump Site (Yakima, WA) 5.12 (d) None. 129 PLUM CREEK TIMBER COMPANY, L.P. SCHEDULE 5.18 Subsidiaries 5.18 (a) Plum Creek Timber Company, L.P. a Delaware limited partnership, (the "Company") has direct ownership in two subsidiaries, and indirect ownership of two additional subsidiaries. The Company owns 98% of Plum Creek Manufacturing, L.P., a Delaware limited partnership. The remaining 2% of Plum Creek Manufacturing, L.P., is owned by Plum Creek Management Company, L.P., a Delaware limited partnership, general partner of the Company. The Company owns 96% of the issued and outstanding stock of Plum Creek Marketing, Inc., a Delaware corporation. The remaining 4% of the issued and outstanding stock of Plum Creek Marketing, Inc. is owned by Plum Creek Management Company, L.P., general partner of the Company. Plum Creek Marketing, Inc. owns 100% of the issued and outstanding stock of Plum Creek Remanufacturing, Inc., a Washington corporation, and Plum Creek Foreign Sales Corp., a Guam corporation. Plum Creek Foreign Sales Corp. is an active corporation. 5.18 (b) None. 130 PLUM CREEK TIMBER COMPANY, L.P. SCHEDULE 7.01 Permitted Liens NONE. 131 PLUM CREEK TIMBER COMPANY, L.P. SCHEDULE 7.04 Permitted Investments 1. 98% interest in Plum Creek Manufacturing, L.P. 2. 96% interest in Plum Creek Marketing, Inc. 132 EXHIBIT A NOTICE OF BORROWING Date: __________________ To: Bank of America National Trust and Savings Association, as Agent for the Banks parties to the Credit Agreement dated as of October 28, 1993 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among Plum Creek Timber Company, L.P., certain Banks which are signatories thereto and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: The undersigned, Plum Creek Timber Company, L.P, (the "Company"), refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of the Credit Agreement, of the Borrowing specified herein: 1. The aggregate amount of the proposed Borrowing is $_____________________. 2. The Business Day of the proposed Borrowing is _____________________________, 19___. 3. The Borrowing is to be comprised of $___________ of [CD Rate] [Offshore Rate] [Base Rate] Loans. 4. The duration of the Interest Period for the [CD Rate Loans] [Offshore Rate Loans] included in the Borrowing shall be [____________ days] [_________ months]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: 1 133 (a) the representations and warranties of the Company contained in Article V of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties specifically relate to an earlier date, in which case they are true and correct as of such earlier date); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; and (c) the proposed Borrowing will not cause the aggregate principal amount of all outstanding Loans to exceed the Aggregate Commitment. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its general partner By:_________________________________ Title:______________________________ 2 123587 (753)(711) 134 EXHIBIT B NOTICE OF CONVERSION/CONTINUATION Date: __________________ To: Bank of America National Trust and Savings Association, as Agent for the Banks parties to the Credit Agreement dated as of October 28, 1993 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among Plum Creek Timber Company, L.P., certain Banks which are signatories thereto and Bank of America National Trust and Savings Association, as Agent Ladies and Gentlemen: The undersigned, Plum Creek Timber Company, L.P. (the "Company"), refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of the Credit Agreement, of the [conversion] [continuation] of the Loans specified herein, that: 1. The date of the [conversion] [continuation] is ______________________, 19__. 2. The aggregate amount of the Loans [converted] [continued] is $______________. 3. The Loans are to be [converted into] [continued as] [CD Rate] [Offshore Rate] [Base Rate] Loans. 4. [If applicable:] The duration of the Interest Period for the Loans included in the [conversion] [continuation] shall be [____ days] [____ months]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed [conversion][continuation], before and after giving effect thereto and to the application of the proceeds therefrom: 1 135 (a) the representations and warranties of the Company contained in Article V of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties specifically relate to an earlier date, in which case they are true and correct as of such earlier date); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed [conversion] [continuation]; and (c) the proposed [conversion] [continuation] will not cause the aggregate principal amount of all outstanding Loans to exceed the Aggregate Commitment. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its general partner By:_________________________________ Title:______________________________ 2 123588 (753)(711) 136 EXHIBIT C-1 FORM OF OPINION OF PERKINS COIE October ____, 1993 The Persons Named on Attached Annex A RE: THAT CERTAIN CREDIT AGREEMENT DATED AS OF OCTOBER ___, 1993 THE ("CREDIT AGREEMENT") AMONG PLUM CREEK TIMBER COMPANY, L.P. (THE "COMPANY"), THE FINANCIAL INSTITUTIONS PARTY THERETO (THE "BANKS") AND BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION AS AGENT (THE "AGENT") FOR THE BANKS Ladies and Gentlemen: We have acted as special counsel for the Company in connection with the transactions contemplated by the Credit Agreement. This opinion is furnished pursuant to Section 4.01(d) of the Credit Agreement. For the purpose of rendering this opinion, we have examined executed originals of the Credit Agreement and of the documents delivered to the Agent on the date hereof pursuant to the Credit Agreement. We have also examined the original or copies of such other partnership and corporate records, documents, instruments or agreements as we deemed necessary to render the opinion contained herein, subject to the limitations contained herein. In rendering this opinion, we have relied on the following assumptions, the accuracy of which we have not independently verified: (i) Each party to the Credit Agreement (other than the Company) is a corporation or other legally cognizable entity duly organized and validly existing in good standing under the laws of its jurisdiction of organization and has the full power, authority and legal right to execute and deliver the Credit Agreement to which it is a party and to perform its obligations thereunder; and each such party has duly authorized the 137 Persons Named on the Attached Annex A October , 1993 Page 2 execution, delivery and performance of the Credit Agreement and the transactions contemplated thereunder. (ii) The Credit Agreement constitutes the legal, valid and binding obligation of each party thereto (other than the Company), enforceable against such party in accordance with its terms. (iii) All signatures on the Credit Agreement and the other documents and materials examined by us are genuine, and, where any such signature purports to have been made in a corporate, partnership, governmental, fiduciary or other capacity, the person whose signature so appears had the requisite legal capacity and authority to do so; the factual matters contained in the documents examined by us are accurate, true and correct; all documents and other materials submitted to us as originals are authentic; and all documents and other materials submitted to us as copies of the originals conform to the originals. (iv) The Agent and each Bank is exempt from the application of the restrictions set forth in Article XV, Section 1, of the California Constitution. We have not conducted any independent investigation or otherwise attempted to verify any factual matters which would have a bearing upon this opinion. Based upon the foregoing, and subject to the further qualifications stated below, it is our opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The opinion set forth above is subject to the following additional limitations: (a) We express no opinion as to any laws other than the laws of the State of California (including its choice of law principles) and the federal laws of the United States. (b) We express no opinion as to the validity, binding effect or enforceability of any right or obligation to the extent that such right or obligation (1) may be limited by (A) applicable bankruptcy, insolvency, reorganization, 138 Persons Named on the Attached Annex A October ____, 1993 Page 3 moratorium, fraudulent transfer or other laws relating to or affecting creditors' rights generally or (B) general principles of equity (regardless of whether considered in a proceeding in equity or at law), including those relating to the availability of the remedy of specific performance, injunctive relief or setoff or (2) purports to authorize or permit any person to act in a manner which is not in good faith, diligent or commercially reasonable (including, without limitation, exercising any rights without the giving of reasonable notice) or purports to waive any rights of any person with respect to such actions or (3) purports to require that provisions of the Credit Agreement may only be modified in writing to the extent that an oral agreement has been made modifying such provision. (c) We express no opinion with respect to the need for any consent or approval of, the giving of notice to, the registration with, or the taking of any action with respect to, any governmental authority or agency which may be required by reason of the business or activities of the Agent and the Banks generally. (d) We express no opinion as to the validity, priority or perfection of any security interest or other lien which may be created by the Credit Agreement or as to any provision purporting to (1) set evidentiary standards or (2) require the payment of any amount to the extent that such amount is deemed to constitute a penalty, forfeiture, late payment charge or an increase in the applicable rate of interest upon delinquency. (e) Notwithstanding any provision in the Credit Agreement to the effect that such agreement, either in itself or together with any other agreements, reflects the entire understanding of the parties with respect to the matters described therein, the courts of the state of California may consider extrinsic evidence of the circumstances surrounding the making of such agreement or agreements to ascertain the intent of the parties in using the language employed in such agreement or agreements, regardless of whether the meaning of the language used in such agreement or agreements is plain and unambiguous on its face, and may determine that additional or supplementary terms can be incorporated into such agreement or agreements. 139 Persons Named on the Attached Annex A October ____, 1993 Page 4 (f) We express no opinion as to the conclusive nature of any certificate or determination which may be furnished or made by or on behalf of any party pursuant to the Credit Agreement. (g) Indemnity obligations imposed or undertaken pursuant to the Credit Agreement may be unenforceable to the extent such obligations do not satisfy the requirements of Sections 2773 through 2774 of the California Civil Code, or which require the indemnifying party to indemnify another party against an act which constitutes gross negligence on the part of the indemnified party or its agent. (h) The effect of California law which provides that where a contract permits one party to the contract to recover attorneys' fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys' fees notwithstanding the absence of a written agreement to such effect. (i) Statutes and case law reflecting public policy may render unenforceable a waiver or release of the benefits of statutory, common law, or broadly or vaguely stated rights or unknown future rights. (j) We express no opinion as to the enforceability of the provisions in the Credit Agreement to the effect that failure to exercise, or delay in exercising, rights or remedies will not operate as a waiver of any such rights or remedies. (k) We express no opinion as to the enforceability of any provision relating to cumulation of remedies or the availability of remedies in the event of a non-material default. The opinion set forth above is given as of the date hereof, and we disavow any undertaking or obligation to advise you of any changes in law or any facts or circumstances that may hereafter occur or come to our attention that could affect this opinion. This opinion is delivered to the parties identified on Annex A hereto solely for use in connection with the transactions referenced herein and may not be used by any such party for any other purpose and may not be relied on by any person other than the parties identified on Annex A hereto 140 Persons Named on the Attached Annex A October ____, 1993 Page 5 and their permitted successors and assigns under the Credit Agreement, or duplicated or disclosed, without our prior written consent. Very truly yours, 141 ANNEX A TO OPINION OF PERKINS COIE DATED OCTOBER ____, 1993 Bank of America National Chemical Bank Trust and Savings 9th Floor Association, as Agent 270 Park Avenue 12th Floor New York, NY 10017 1455 Market Street San Francisco, CA 94103 The Bank of Tokyo, Ltd. Suite 1100 Bank of America National 1201 Third Avenue Trust and Savings Seattle, WA 98101 Association, as a Bank 41st Floor The Bank of California, N.A, 555 California Street 17th Floor. San Francisco, CA 94104 400 California Street San Francisco, CA 94104 NationsBank of North Carolina, N.A. 1 NationsBank Plaza NC1-002-06-19 Charlotte, NC 28255 United States National Bank of Oregon c/o U.S. Bank of Washington 1414 Fourth Avenue WWH276 Seattle, WA 98101 Wells Fargo Bank, N.A. 9th Floor 420 Montgomery Street San Francisco, CA 94163 Seattle First National Bank 12th Floor 701 Fifth Avenue Box 94010 Seattle, WA 98120-9410 ABN Amro Bank N.V. Suite 2323 One Union Square Seattle, WA 98101
142 EXHIBIT C - 2 October 28, 1993 To the Banks and the Agent Referred to Below c/o Bank of America National Trust and Savings Association 1455 Market Street, 12th Floor San Francisco, CA 94103 Ladies and Gentlemen: As Vice President Law and Corporate Affairs of Plum Creek Management Company, L.P. (the "General Partner"), I have acted as counsel to Plum Creek Timber Company, L.P., a Delaware limited partnership (the "Company") and its subsidiaries in connection with that certain Credit Agreement, dated as of October 28, 1993 (the "Credit Agreement"), among the Company, the banks listed on the signature pages thereof (the "Banks"), and Bank of America National Trust and Savings Association as agent for the Banks (the "Agent"). This opinion is delivered to you pursuant to Section 4.01(d)(i) of the Credit Agreement. All capitalized terms used herein that are defined in, or by reference in, the Credit Agreement have the meanings assigned to such terms therein, or by reference therein, unless otherwise defined herein. In connection with this opinion, I have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements, instruments, documents and records of the Company, such certificates of public officials and such other documents, and (iii) received such information from officers and representatives of the Company, as I have deemed necessary or appropriate for the purposes of this opinion. I have examined, among other documents, a copy of the Credit Agreement. In all such examinations, I have assumed the genuineness of all signatures on original or certified, conformed or reproduction copies of documents of all parties other than the Company, and the conformity to original or certified copies of all copies submitted to me as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, I have relied upon, and assume the accuracy of, certificates and oral or written statements and other information of or from public officials, representatives of the Company and others and assume compliance on the part of all parties to the Credit Agreement with the covenants and agreements contained therein. To the extent it may be relevant to the opinions expressed herein, I have assumed that the Agent and the Banks have the power to enter into and perform such agreement and that such agreement has been duly authorized, executed and delivered by, and constitutes the legal, valid and binding obligation of, such parties. 143 Bank of America October 28, 1993 Page 2 Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, I am of the opinion that: (a) Each of the Company, the General Partner, PCMC General Partner and Plum Creek Manufacturing, L.P. is a limited partnership duly formed under the laws of the State of Delaware, with a stated term beyond the term of the Loan Documents (in those cases where the Loan Documents have a fixed term) and is duly qualified and in good standing in each state in which the failure to so qualify would have a Material Adverse Effect. (b) Each of PC Advisory General Partner and Plum Creek Marketing, Inc., is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified and in good standing in each state in which the failure to so qualify would have a Material Adverse Effect. (c) The Company and each of the Partner Entities have the partnership or corporate, as applicable, power and authority to execute and deliver, and to perform and observe the provisions of, the Loan Documents. (d) The execution, delivery and performance by the Company of the Loan Documents have been duly authorized by all necessary corporate and partnership action on behalf of PC Advisory General Partner, as general partner of PCMC General Partner, as general partner of the General Partner, as general partner of the Company. (e) The Loan Documents have been duly executed and delivered by the Company. (f) The Company and each of its Subsidiaries has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets and carry on its business, except for such governmental licenses, authorizations, consents and approvals, the lack thereof would not have a Material Adverse Effect. (g) No registration with, consent or approval of, notice to, or other action by, any Governmental Authority is required on the part of the Company or the Partner Entities or any of their Subsidiaries for the execution, delivery or performance by the Company of the Loan Documents, or if required, such registration has been made, such consent or approval has been obtained, such notice has been given or such other appropriate action has been taken. (h) The execution, delivery and performance of the Loan Documents by the Company are not in violation of the partnership documents of the Company, the General Partner or the PCMC General Partner or the Articles of Incorporation and Bylaws of the PC Advisory General Partner. (i) The execution, delivery and performance of the Loan Documents by the Company 144 Bank of America October 28, 1993 Page 3 (including, without limitation, the sale of the Columbia River Unit and the application of the Net Proceeds thereof in accordance with Section 7.02 (i) of the Credit Agreement) will not violate or result in a breach of any of the terms of or constitute a default under or result in a creation of any Lien on any property or assets of the Company or any of the Partner Entities, pursuant to the terms of any indenture, mortgage, deed of trust or other agreement to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject. (j) The execution, delivery and performance of the Loan Documents will not conflict with or contravene any of Regulations G, T, U and X promulgated by the Federal Reserve Board. (k) Neither the Company, the Partner Entities, any Person controlling the Company or the Partner Entities, or any Subsidiary of the Company or the Partner Entities, is an "Investment Company" within the meaning of the Investment Company Act of 1940, as amended, or subject to regulation under the Public Utility Holding Company Act of 1935, as amended. (l) There are no actions, suits, proceedings, claims or disputes pending or, to the best of my knowledge, threatened against the Company, the Partner Entities or any of their Subsidiaries or any of their respective properties before any court, regulatory body, administrative agency, at law, in equity, in arbitration or before any Governmental Authority which (a) purport to affect or pertain to the Loan Documents, or any of the transactions contemplated thereby, (b) have a reasonable probability of success on the merits and which, if determined adversely to the Company, the Partner Entities or their Subsidiaries, would reasonably be expected to have a Material Adverse Effect. The opinions expressed herein are limited to the federal laws of the United States of America and the laws of the State of Washington and, to the extent relevant hereto, the General Corporation Law of the State of Delaware and the Delaware Uniform Revised Limited Partnership Act. The opinions expressed herein are solely for the benefit of the Agent and the Banks and may not be relied on in any manner or for any purpose by any person or entity other than the Agent and the Banks and their permitted successors and assigns under the Credit Agreement. Very truly yours, James A. Kraft Vice President, Law and Corporate Affairs /sw 145 EXHIBIT D PLUM CREEK TIMBER COMPANY, L.P. COMPLIANCE CERTIFICATE DATE: _______________ Reference is made to that certain Credit Agreement dated as of October 28, 1993 among Plum Creek Timber Company, L.P., a Delaware limited partnership (the "Company"), certain financial institutions from time to time parties to the Credit Agreement (the "Banks") and Bank of America National Trust and Savings Association, a national banking association, as agent for the Banks (in such capacity, the "Agent"). Unless otherwise defined herein, capitalized terms used herein have the respective meanings assigned to them in the Credit Agreement. The undersigned Responsible Officer of the Company, hereby certifies as of the date hereof that he/she is the ________________________ of the Company, and that, as such, he/she is authorized to execute and deliver this Certificate to the Banks and the Agent on the behalf of the Company and its Subsidiaries and not as an individual, and that: [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(a) of the Credit Agreement.] 1. Attached as Schedule 1 hereto are (a) a true and correct copy of the audited combined balance sheet of the Company as at the end of the fiscal year ended December 31, ____ and (b) the related combined statements of income and 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 certified independent public accounting firm. Such opinion is not qualified or limited because of a restricted or limited examination by such accountant of any material portion of the Company's or any Subsidiary's records and is delivered to the Agent pursuant to a reliance agreement between the Agent and Banks and such accounting firm which you have advised us is in form and substance satisfactory to the Agent and the Majority Banks; -1- 146 or [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection 6.01(b) of the Credit Agreement.] 1. Attached as Schedule 1 hereto are (a) a true and correct copy of the audited combining balance sheets of the Company and each of its Subsidiaries as at the end of the fiscal year ended December 31, ____ and (b) the related combining statements of income and statement of cash flows for such fiscal year; which financial statements were used in connection with the preparation of the audited combined balance sheet of the Company as of the end of such fiscal year and the related combined statements of income and statement of cash flows for such fiscal year. or [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsections 6.01(c) and (d) of the Credit Agreement.] 1. (a) Attached as Schedule 1A hereto is (i) a true and correct copy of the unaudited combined balance sheet of the Company and its combined Subsidiaries as of the end of the fiscal quarter ended __________ __, ____ and (ii) the related combined statements of income and statement of cash flows of the Company and its combined Subsidiaries for the period commencing on the first day and ending on the last day of such quarter, setting forth in each case in comparative form the figures for the previous year (subject to normal year-end audit adjustments). (b) Attach as Schedule 1B hereto is (i) a true and correct copy of the unaudited combining balance sheets of the Company and each of its Subsidiaries as of the end of the fiscal quarter ended __________ __, ____ and (ii) the related combining statements of income and statement of cash flows for such quarter, which financial statements were used in connection with the preparation of the financial statements referred to in paragraph 1(a) above of this Certificate. 2. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and conditions (financial or -2- 147 otherwise) of the Company during the accounting period covered by the attached financial statements. 3. The attached financial statements are complete and correct, and have been prepared in accordance with GAAP on a basis consistent with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 4. The attached financial statements are certified by a Responsible Officer of the Company and fairly state the financial position and results of operations of the Company and its Combined Subsidiaries. 5. To the best of the undersigned's knowledge, the Company, during such period, has observed, performed or satisfied all of its covenants and other agreements, and satisfied every condition in the Credit Agreement to be observed, performed or satisfied by the Company, and the undersigned has no knowledge of any Default or Event of Default. 6. The following financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this Certificate. [7. A Margin Reduction Discount of ____% should be implemented in accordance with Section 2.09 of the Credit Agreement.] or [7. The existing Margin Reduction Discount should be changed to ____% in accordance with Section 2.09 of the Credit Agreement.] or [7. The Margin Reduction Discount pursuant to Section 2.09 of the Credit Agreement does not apply.] -3- 148 IN WITNESS WHEREOF, the undersigned has executed this Certificate as of _______________ __, ____. PLUM CREEK TIMBER COMPANY L.P. By: Plum Creek Management Company, L.P., its general partner By: ___________________________ Title: ________________________ -4- W88149.AB9[753/711] 149 Plum Creek Timber Company, L.P. Schedule 2 to the Compliance Certificate ($ in 000's) Section 7.03: Harvesting Restrictions (MMBF) 199_ Maximum Allowable Harvest Add: Prior year Cumulataive Carryover Harvest Maximum Allowable 199_ Harvest Actual 199_ Harvest 199_ Carryover Harvest Section 7.04(i): Investments Not Otherwise Permitted: The greater of $30 million or 60% of the average annual Pro Forma Free Cash Flow for the two fiscal years preceding such date. $ Cumulative Investments made through month-day-year $ Section 7.05(c): Funded Debt Incurred to Finance Capital Improvements: Maximum Allowed $20,000 Outstanding at month-day-year $ Section 7.05(e): Indebtedness Incurred Pursuant to a Revolving Credit Facility: Maximum Allowed $15,000 Outstanding at month-day-year $ Section 7.05(g): Guarantee of Facilities Subsidiary Revolving Credit Facility: Maximum Allowed $20,000 Outstanding at month-day-year $ Section 7.05(h): Guarantee of Facility Subsidiary Capital Improvement Funded Debt: Maximum Allowed $20,000 Outstanding at month-day-year $ 150 Plum Creek Timber Company, L.P. Schedule 2 to the Compliance Certificate ($ in 000's) Section 7.05(i): Aggregate Principal Amount of Indebtedness Secured by Liens: Maximum Allowed $ Outstanding at month-day-year $ Section 7.05(j): Additional Funded Debt: Pro Forma Free Cash Flow $ Maximum Pro Forma Annual Interest Charges: 2:25 to 1 $ Current Interest Expense $ Additional Allowable Interest $ Allowable Fund Debt at ___% Interest Rate* $ * Aggregate outstanding principal amount of such additional Funded Debt shall not exceed $400 million. 151 Plum Creek Timber Company, L.P. Schedule 2 to the Compliance Certificate ($ in 000's) Section 7.13(a): Restricted Payments: Available Cash means, with respect to any calendar quarter, (i)(a) Net Income $ (a) Excluding gain on the sale of any Capital Assets $ Plus: (b) DD&A $ (b) Other non-cash charges $ (c) Reduction in reserves of the types referred to in clause (ii)(d) below $ (d) Proceeds received from the sale of Designated Acres $ (e) Cash from Capital Transaction used to refinance or refund Indebtedness $ Less (ii) the sum of: (a) All payments of principal Indebtedness $ (b) Capital Expenditures $ (c) Capital Expenditures made in prior quarter anticipated to be financed but have not been $ (d) Reserve for future principal payments: Bank $ Senior Notes $ (d) Reserve for future capital expenditures $ (d) Reserve for additional working capital $ (d) Reserve for future interest payments: Bank $ Senior Notes $ (e) Other noncash credits $ (f) The amount of any Investments $ (g) Any investmenets made in prior quarter anticipated to be financed but have not been $ Available Cash - month-day-year $ General Partner 2% Interest $ General Partner Incentive Distribution $ Allocable to Unitholders - Net $ 152 Plum Creek Timber Company, L.P. Schedule 2 to the Compliance Certificate ($ in 000's) Summary of Available Cash Reserves:
Cumulative Balance ---------- Reserve for future principal payments: Bank $ Senior Notes $ Reserve for future Capital Expenditures $ Reserve for additional working capital $ Reserve for future distributions $ Reserve for future interest payments: Bank $ Senior Notes $ Funds Flow Ratio Calculation with respect to any quarter. EBITDA $ Less: Taxes paid in cash not already excluded from EBITDA $ Capital Expenditures $ Total Funds Flow $ Indebtedness $ Funds Flow Ratio ___%
153 EXHIBIT E FORM OF CASH COLLATERAL ACCOUNT AGREEMENT This CASH COLLATERAL ACCOUNT AGREEMENT ("Agreement") dated as of ______________, 199_ is entered into by and between PLUM CREEK TIMBER COMPANY, L.P., a Delaware limited partnership (the "Company"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent (solely in such capacity, "Agent") for the financial institutions from time to time parties to the Credit Agreement referred to below (such entities, together with their respective successors and assigns, being collectively referred to as the "Banks"). RECITALS A. The Company, Agent and the Banks have entered into a Credit Agreement dated as of October 28, 1993 (as the same may from time to time be amended, amended and restated, modified, supplemented or renewed, the "Credit Agreement"). Capitalized terms used herein without definition shall have the meanings given to them in the Credit Agreement. B. The Company wishes to sell properties that constitute all or a part of its Columbia River Unit and to apply the Net Proceeds thereof to the purchase of productive assets in the same line of business. C. Pursuant to the Credit Agreement, any such Net Proceeds in excess of $25,000,000 not paid immediately to Agent on behalf of the Banks for prepayment of the Loans or paid immediately to purchase such productive assets shall be placed immediately upon receipt thereof into a cash collateral account at Bank of America National Trust and Savings Association ("BofA") for application in accordance with Section 7.02(i) of the Credit Agreement. D. The execution and delivery by the Company of this Agreement is a condition to the application of the Net Proceeds as set forth in Recital B above. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the Company and Agent hereby agree as follows: 1 154 1. Cash Collateral Account. (a) Cash Collateral Account. For purposes of Section 7.02(i) of the Credit Agreement, the Company has established with BofA, for the benefit of Agent on behalf of itself and the Banks, a special purpose restricted deposit account in the name of the Company, deposit account #__________ (together with any successor account(s) that may be established from time to time in replacement thereof, the "Cash Collateral Account"). Agent shall have exclusive control over the Cash Collateral Account and the sole right of withdrawal therefrom, except as expressly provided in Section 1(b) below. The Company agrees that the Cash Collateral Account shall be a blocked account, and upon the deposit of funds into the Cash Collateral Account by or at the direction of the Company, such deposit shall become (except as expressly provided in such Section 1(b) hereof) irrevocable and the Company shall have no right to withdraw amounts contained therein or interest accrued thereon except as provided in Section 1(b) hereof or upon the indefeasible payment in full of the Obligations; and until such indefeasible payment in full of the Obligations the Company waives (i) the right to make withdrawals from the Cash Collateral Account and (ii) the right to instruct BofA to honor drafts drawn against the Cash Collateral Account, except in each case as expressly provided in Section 1(b) hereof. (b) Withdrawal. The Company may withdraw funds from the Cash Collateral Account if and only if (i) such funds are applied directly (1) to purchase investments permitted hereunder or (2) to purchase productive assets in the same line of business provided that the Company shall have delivered to Agent no later than three (3) Business Days prior to the proposed date of such withdrawal a certificate of a Responsible Representative substantially the form of Exhibit A hereto, and (ii) no Default or Event of Default exists or will occur by virtue of such withdrawal and purchase. (c) Application to Loans. Upon the date that is 180 days after the date of the sale of the properties that constitute all or part of the Columbia River Unit, Agent shall promptly apply any amounts remaining in the Cash Collateral Account to the prepayment of the Loans in accordance with the provisions of Section 2.07 of the Credit Agreement and the Company irrevocably directs Agent to apply such funds at such time to the prepayment of the Loans in accordance with Section 2.07 of the Credit Agreement. 2 155 2. Lien. The Cash Collateral Account, all funds and investments contained therein, all interest accrued thereon, and all proceeds thereof shall be held by BofA for the benefit of Agent on behalf of itself and the Banks as cash collateral to secure the Company's obligations to Agent and the Banks. As security for the payment and performance of all obligations of the Company hereunder and under the Credit Agreement, the Company hereby grants to Agent on behalf of itself and the Banks a first priority perfected security interest in all of its rights, title and interest now existing or hereafter arising in and to the Cash Collateral Account and any proceeds or products thereof. Agent and the Company hereby notify BofA of the foregoing lien, and BofA, by its signature below, acknowledges receipt of such notice. The Company shall be deemed in default under this Agreement upon the occurrence of an Event of Default, as that term is defined in the Credit Agreement. Upon the occurrence of any such Event of Default, Agent may, at its option, and without notice to or demand on the Company and in addition to all rights and remedies available to Agent under the Credit Agreement, do any one or more of the following: (a) foreclose or otherwise enforce Agent's security interest in any manner permitted by law, or provided for in this Agreement; (b) dispose of the Cash Collateral Account on such terms and in such manner as Agent may determine; and (c) recover from the Company all costs and expenses, including, without limitation, Attorneys Costs, incurred or paid by Agent in exercising any right, power or remedy provided by this Agreement, the Loan Documents, or by law. 3. Investments. Upon the Company's written instructions as provided in Section 4 below, if no Default or Event of Default exists, Agent shall invest the funds on deposit in the Cash Collateral Account in any of the permitted investments described in the Investment Policy attached as Schedule 1.01 to the Credit Agreement; provided that with respect to any instruction to invest funds in any investment that does not constitute a "deposit account" (as defined in Division 9 of the California Commercial Code) maintained with BofA, Agent shall take no action to effect such instructions to invest funds unless and until the Company has duly executed and delivered such documents and instruments and caused to be delivered such opinions of counsel as the Majority Lenders may reasonably deem necessary or appropriate to perfect or to confirm the perfection and first priority status of Agent's security interest in such investments. 3 156 4. Investment Direction. With respect to the investment of funds on deposit in the Cash Collateral Account pursuant to Section 3 above, Agent shall be entitled to rely upon the written instructions of those individuals whose signatures appear in the spaces provided below, or such other individuals as may hereafter be designated in writing by the Company: ______________________________ ______________________________ ______________________________ 5. Compensation. BofA shall be entitled to compensation from the Company for the maintenance of and investment of funds contained in the Cash Collateral Account in accordance with its standard fees for such services in effect from time to time. Such compensation shall be payable upon demand. 6. Notices, Etc. Any notice or other communication herein required or permitted to be given shall be in writing and may be delivered in person, with receipt acknowledged, or sent by telex, telecopy or by United States mail, registered or certified, return receipt requested, postage prepaid and addressed as set forth on the signature pages to this Agreement or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. All such notices and communications shall, when transmitted by overnight delivery, telegraphed, telecopied by facsimile, telexed or cabled, be effective when delivered for overnight delivery or to the telegraph company, transmitted by telecopier (with successful transmission confirmation), confirmed by telex answerback or delivered to the cable company, respectively, or if delivered, upon delivery. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated above to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 4 157 7. Termination. This Agreement shall terminate when transfers of amounts in the Cash Collateral Account pursuant to Section 1 hereof shall have reduced the balance of the Cash Collateral Account to zero. 8. Successors and Assigns; Governing Law. This Agreement shall be binding upon and inure to the benefit of the Company, Agent and the Banks and their respective successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Agent and each Bank. Except as otherwise expressly provided herein or in any of the other Loan Documents, in all respects, including all matters of construction, validity and performance, this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflict of laws, and any applicable laws of the United States of America. 9. Entire Agreement; Construction; Amendments and Waivers. (a) Entire Agreement. This Agreement, the Credit Agreement and the other Loan Documents, taken together, constitute and contain the entire agreement among the parties and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof. (b) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the Company, Agent and the Banks and their respective counsel; accordingly, this Agreement shall be deemed to be the product of the parties hereto, and no ambiguity shall be construed in favor of or against the Company, Agent or the Banks. The Company, Agent and the Banks agree that they intend the literal words of this Agreement and that no parol evidence shall be necessary or appropriate to establish the Company's, Agent's or any Bank's actual intentions. (c) Interpretation. The terms of this Agreement shall be interpreted in accordance with the provisions of Article I of the Credit Agreement, provided, however, that (a) any reference to a "Section" shall refer to the relevant Section to this Agreement, unless specifically indicated to the contrary and (b) the words "herein," "hereof" and "hereunder" and other words of similar import (including, without limitation, in Article I 5 158 of the Credit Agreement) shall refer to this Agreement as a whole, as the same may from time to time be amended, amended and restated, modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement. (d) Amendments; Waivers. No amendment, modification, discharge or waiver of, or consent to any departure by the Company from, any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Agent with the written consent of the Majority Banks, and then such waiver shall be effective only in the specific instance and for the specific purpose for which given. 10. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be valid, legal and enforceable under the applicable law of any jurisdiction. Without limiting the generality of the foregoing sentence, in case any provision of this Agreement shall be invalid, illegal or unenforceable under the applicable law of any jurisdiction, the validity, legality and enforceability of the remaining provisions, or of such provision in any other jurisdiction, shall not in any way be affected or impaired thereby. 11. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 12. No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, Agent, the Banks, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with this Agreement. Neither Agent nor any Bank shall have any obligation to any Person not a party to this Agreement. 13. Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 6 159 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its general partner By:_________________________________ Title:______________________________ Notice to be sent to: Plum Creek Timber Company, L.P. 999 Third Avenue, Suite 2300 Seattle, WA 98104 Attn: Chief Financial Officer Tel: (206) 467-3600 Fax: (206) 467-3797 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: _____________________________________ Printed Name: Title: Notice to be sent to: Bank of America National Trust and Savings Association 1455 Market Street, 12th Floor San Francisco, CA 94103 Attn: Daniel G. Farthing Global Agency #5596 Tel: (415) 953-0849 Fax: (415) 622-4894 7 160 Notice of security interest acknowledged: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as depository By: _________________________ Printed Name: Title: Notice to be sent to: Bank of America National Trust and Savings Association 555 California Street, 41st Floor San Francisco, CA 94104 Attn: Michael J. Balok Tel: (415) 622-2018 Fax: (415) 622-4585 8 123957 (753)(711) 161 EXHIBIT A OFFICER'S CERTIFICATE Date: ___________________ Reference is made to that certain Cash Collateral Account Agreement dated as of _____________, 199_ (the "Cash Collateral Account Agreement") between Plum Creek Timber Company, L.P., a Delaware limited partnership (the "Company"), and Bank of America National Trust and Savings Association, as agent ("Agent") (capitalized terms used herein without definition shall have the meanings given to them in the Cash Collateral Account Agreement). The undersigned Responsible Representative of the Company, hereby certifies as of the date hereof that he/she is the ____________________________ of the Company, and that, as such, he/she is authorized to execute and deliver this Certificate to the Agent on behalf of the Company and not as an individual, and that: (1) Pursuant to Section 1(b) of the Cash Collateral Account Agreement, the Company may withdraw funds from the Cash Collateral Account to purchase productive assets in the same line of business; (2) The Company has acquired [or will acquire on __________, 199_] the assets listed on Schedule 1 attached hereto (the "Eligible Assets"), which Eligible Assets constitute productive assets in the same line of the Company's business; (3) The aggregate purchase price for the Eligible Assets is $____________________ (the "Purchase Price"); (4) No Default or Event of Default exists or would result from such proposed purchase of the Eligible Assets or a withdrawal from the Cash Collateral Account to fund such purchase; and (5) The representations and warranties made by the Company contained in Article V of the Credit Agreement are true and correct as though made on and as of the date hereof (except to the extent such representations and warranties specifically relate to an earlier date, in which case they are true and correct as of such earlier date). 1 162 The Company hereby requests that the Agent release from the Cash Collateral Account and transfer to the Company at _______________________________________ on ______________, 199_ an amount equal to the lesser of (i) the Purchase Price and (ii) the amount remaining in the Cash Collateral Account on such date of transfer. The undersigned hereby certifies that such amount shall be used solely to pay the Purchase Price, or part thereof, of the Eligible Assets. IN WITNESS WHEREOF, the Company has executed and delivered this Certificate as of ________________. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its general partner By: __________________________ Title: ________________________ 2 123957(753)(711) 163 SCHEDULE 1 ELIGIBLE ASSETS 123957(753)(711) 164 EXHIBIT F FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as of __________, ____ is made between ______________________________ (the "Assignor") and __________________________ (the "Assignee"). RECITALS WHEREAS, the Assignor is party to that certain Credit Agreement dated as of October 28, 1993 among PLUM CREEK TIMBER COMPANY, L.P., a Delaware limited partnership (the "Company"), the several financial institutions from time to time party thereto (including the Assignor, the "Banks"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (as from time to time amended, amended and restated, modified, supplemented or renewed, the "Credit Agreement"). Any terms defined in the Credit Agreement and not defined in this Agreement are used herein as defined in the Credit Agreement; WHEREAS, as provided under the Credit Agreement, the Assignor has committed to making Loans (the "Committed Loans") to the Company in an aggregate amount not to exceed $__________ (the "Commitment"); WHEREAS, [the Assignor has made Committed Loans in the aggregate principal amount of $__________ to the Company] [no Committed Loans are outstanding under the Credit Agreement]; and WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the Credit Agreement in respect of its Commitment, [together with a corresponding portion of each of its outstanding Committed Loans,] in an amount equal to $__________ (the "Assigned Amount") on the terms and subject to the conditions set forth herein and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: -1- 165 1. Assignment and Acceptance. (a) Subject to the terms and conditions of this Agreement, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Agreement) __% (the "Assignee's Percentage Share") of (A) the Commitment [and the Committed Loans] of the Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the Credit Agreement and the Loan Documents. [If appropriate, add paragraph specifying payment to Assignor by Assignee of outstanding principal of, accrued interest on, and fees with respect to, Committed Loans assigned.] (b) With effect on and after the Effective Date (as defined herein), the Assignee shall be a party to the Credit Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Bank under the Credit Agreement, including the requirements concerning confidentiality, with a Commitment in an amount equal to the Assigned Amount. The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Amount and the Assignor shall relinquish its rights and be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. (c) After giving effect to the assignment and assumption, on the Effective Date the Assignee's Commitment will be $__________. 2. Payments. (a) As consideration for the sale, assignment and transfer contemplated in Section 1, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $__________, representing the Assignee's Percentage Share of the principal amount of all Committed Loans previously made, and currently owed, by the Company to -2- 166 the Assignor under the Credit Agreement and outstanding on the Effective Date. (b) The [Assignor] [Assignee] further agrees to pay to the Agent a processing fee in the amount specified in Section 10.08(a) of the Credit Agreement. 3. Reallocation of Payments. Any interest, fees and other payments accrued to the Effective Date with respect to the Committed Loans and the Commitment shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. 4. Independent Credit Decision. The Assignee (a) acknowledges that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements referred to in Section 6.01 of the Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Agreement; and (b) agrees that it will, independently and without reliance upon the Assignor, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the Credit Agreement. 5. Effective Date; Notices. (a) As between the Assignor and the Assignee, the effective date for this Agreement shall be __________, ____ (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date: (i) this Agreement shall be executed and delivered by the Assignor and the Assignee; (ii) the consent of the Company and the Agent required for an effective assignment of the Assigned Amount by the Assignor to the Assignee -3- 167 under Section 10.08(a) of the Credit Agreement shall have been duly obtained and shall be in full force and effect as of the Effective Date; (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Agreement; (iv) the Assignee shall have complied with Section 3.01(f) of the Credit Agreement (if applicable; and (v) the processing fee referred to in Section 2(b) hereof and in Section 10.08(a) of the Credit Agreement shall have been paid to the Agent. (b) Promptly following the execution of this Agreement, the Assignor shall deliver to the Company and the Agent for acknowledgement by the Agent, a Notice of Assignment in the form attached hereto as Schedule 1. [6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AGENT] (a) The Assignee hereby appoints and authorizes the Assignor to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agent by the Banks pursuant to the terms of the Credit Agreement. (b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Agent under the Credit Agreement.] 7. Withholding Tax. The Assignee agrees to comply with Section 3.01(f) of the Credit Agreement (if applicable). 8. Representations and Warranties. (a) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any lien, security interest or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement and any other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or -4- 168 approvals of, any person are required (other than any already given or obtained) for its due execution, delivery and performance of this Agreement, and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any person is required of it for such execution, delivery or performance; and (iv) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) The Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Company, or the performance or observance by the Company, of any of its respective obligations under the Credit Agreement or any other instrument or document furnished in connection therewith. (c) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Agreement and any other documents required or permitted to be executed or delivered by it in connection with this Agreement, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any person are required (other than any already given or obtained) for its due execution, delivery and performance of this Agreement; and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any person is required of it for such execution, delivery or performance; (iii) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to -5- 169 enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; and (iv) it is an Eligible Assignee. 9. Further Assurances. The Assignor and the Assignee each hereby agrees to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Agreement, including the delivery of any notices or other documents or instruments to the Company or the Agent, which may be required in connection with the assignment and assumption contemplated hereby. 10. Miscellaneous. (a) Any amendment or waiver of any provision of this Agreement shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Agreement shall be without prejudice to any rights with respect to any other or further breach thereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement. (d) This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (e) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. The Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in California over any suit, action or proceeding arising out of or relating to this Agreement and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such California State or Federal court. Each party to this Agreement hereby -6- 170 irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. (f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN). [Other provisions to be added as may be negotiated between the Assignor and the Assignee, provided that such provisions are not inconsistent with the Credit Agreement.] IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance Agreement to be executed and delivered by their duly authorized officers as of the date first above written. __________________________________ Assignor By: _________________________________ Title: ______________________________ Address: __________________________________ Assignee By: _________________________________ Title: ______________________________ Address: -7- 171 SCHEDULE 1 NOTICE OF ASSIGNMENT AND ACCEPTANCE _______________, 19__ Bank of America National Trust and Savings Association, as Agent 1455 Market Street, 12th Floor San Francisco, CA 94103 Attn: Global Agency #5596 Plum Creek Timber Company, L.P. 999 Third Avenue, Suite 2300 Seattle, WA 98104 Attn: Chief Financial Officer Ladies and Gentlemen: We refer to the Credit Agreement dated as of October 28, 1993 (the "Credit Agreement") among Plum Creek Timber Company, L.P. (the "Company"), the Banks referred to therein and Bank of America National Trust and Savings Association, as Agent. Terms defined in the Credit Agreement are used herein as therein defined. 1. We hereby give you notice of, and request the consent of the Company to, the assignment by __________________ (the "Assignor") to _______________ (the "Assignee") of _____% of the right, title and interest of the Assignor in and to the Credit Agreement (including, without limitation, the right, title and interest of the Assignor in and to the Commitments of the Assignor and all outstanding Loans made by the Assignor). Before giving effect to such assignment the Assignor's Commitment is $ ___________, and the aggregate amount of its outstanding Loans is $_____________. 2. The Assignee agrees that, upon receiving the consent of the Company and the Agent to such assignment, the Assignee will be bound by the terms of the Credit Agreement as fully and to the same extent as if the Assignee were the Bank originally holding such interest in the Credit Agreement. -8- 172 3. The following administrative details apply to the Assignee: (A) Notice Address: Assignee name: __________________________ Address: _______________________________ _______________________________ _______________________________ Attention: _____________________________ Telephone: (___) _______________________ Telecopier: (___) ______________________ Telex (Answerback): ____________________ (B) Payment Instructions: Account No.: ___________________________ At: ___________________________ ___________________________ ___________________________ Reference: ___________________________ Attention: ___________________________ IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment Notice and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [Name of Assignor] By: ________________________ Title: [Name of Assignee] By: ________________________ Title: -9- 173 ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO: PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P. By: ______________________ Its: _____________________ By: __________________________ Title: _______________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: __________________________ Vice President -10- 123897.AB2 (753)(711) 174 CLOSING DOCUMENTS PLUM CREEK CREDIT AGREEMENT PARTIES Borrower & Affiliates: - --------------------- Plum Creek Timber Company, L.P. ("Company") Plum Creek Management Company, L.P. ("General Partner") PC Advisory Partners I, L.P. ("PMC General Partner") PC Advisory Corp. I ("PC Advisory General Partner") Agent: - ----- Bank of America National Trust and Savings Association, as agent for the Banks ("Agent") Collectively the Banks: ("Banks") - ---------------------- Bank of America National Trust and Savings Association NationsBank of North Carolina, N.A. United States National Bank of Oregon Wells Fargo Bank, N.A. Seattle First National Bank ABN AMRO Bank N.V. Chemical Bank The Bank of Tokyo, Ltd. The Bank of California, N.A. Counsel: - ------- Morrison & Foerster ("MoFo") (for Agent) Perkins Coie ("Perkins") (for PCTC) 1 175 Document Number: - -------- CREDIT DOCUMENTS ---------------- 1. Credit Agreement dated as of October 28, 1993, among PCTC, the Banks and the Agent 2. Schedules to the Credit Agreement: . Schedule 1.01: Investment Policy . Schedule 2.01: Commitments . Schedule 5.05: Litigation . Schedule 5.07: ERISA . Schedule 5.12: Environmental Matters . Schedule 5.18: Subsidiaries of PCTC . Schedule 7.01: Permitted Liens . Schedule 7.04: Permitted Investments 3. Exhibits to the Credit Agreement: . Exhibit A: Notice of Borrowing . Exhibit B: Notice of Conversion/Continuation . Exhibit C-1: Form of Legal Opinion of Company Counsel . Exhibit C-2: Form of Legal Opinion of Perkins . Exhibit D: Compliance Certificate . Exhibit E: Form of Cash Collateral Agreement . Exhibit F: Form of Assignment and Acceptance CORPORATE AND PARTNERSHIP DOCUMENTS ----------------------------------- 4. Resolutions of the Board of Directors of PC Advisory General Partner certified by the Assistant Secretary 5. Incumbency Certificate of PC Advisory General Partner 2 176
Document Number: - -------- 6. Certificates of the Assistant Secretary of PC Advisory General Partner certifying a copy of Company's: (i) Partnership Certificate, certified by the Delaware Secretary of State (ii) Partnership Agreement 7. Certificates of the Assistant Secretary of PC Advisory General Partner certifying a copy of General Partner's: (i) Partnership Certificate, certified by the Delaware Secretary of State (ii) Partnership Agreement 8. Certificates of the Assistant Secretary of PC Advisory General Partner certifying a copy of PCMC General Partner's: (i) Partnership Certificate, certified by the Delaware Secretary of State (ii) Partnership Agreement 9. Certificates of the Assistant Secretary of PC Advisory General Partner certifying: (i) Articles of Incorporation of PC Advisory General Partner, certified by the Delaware Secretary of State. (ii) Bylaws of PC Advisory General Partner 10. Good standing certificates of Company from the States of: - Delaware - Washington - Montana - Idaho 11. Good standing certificates of General Partner from the States of: - Delaware - Washington - Montana - Idaho
3 177 Document Number: - -------- 12. Good standing certificates of PCMC General Partner from the States of: -Delaware -Washington -Montana 13. Good standing certificates of PC Advisory General Partner from the States of: -Delaware -Washington -Montana LEGAL OPINIONS -------------- 14. Opinion of Company's Counsel 15. Opinion of Perkins 16. Officer's Certificate with respect to representations true and correct, no Event of Default and no Material Adverse Effect 17. Certificate of Chief Financial Officer of General Partner with respect to Financial Statements of Company 18. Officer's Certificate of PC Advisory General Partner certifying a copy of: (a) Senior Note Agreement, as amended (b) Mortgage Note Agreement, as amended (c) ABN Credit Agreement, as amended 4 EX-10.C.2 6 EXHIBIT 10.C.2 1 EXHIBIT 10.C.2 RELEASE AND WAIVER OF RIGHTS This release by the undersigned ("Executive"), who is a participant in the Plum Creek Management Company Incentive Sharing Plan ("IS Plan") and the Plum Creek Management Company Executive Incentive Compensation Plan ("EIC Plan") is made this 28th day of January, 1994, in consideration for and contingent upon the adoption by Plum Creek Management Company, L.P. ("Company") of the Plum Creek Management Company, L.P. Long-Term Incentive Plan ("LTIP") and the Plum Creek Management Company, L.P. Management Incentive Plan ("MIP"). RECITALS A. The Executive has participated in the IS Plan and the EIC Plan. B. The Executive is generally entitled to continue participation in the IS Plan and the EIC Plan through May 31, 1994 pursuant to a letter agreement with the Company dated June 9, 1989, as amended and modified by a subsequent letter agreement dated December 28, 1992 (collectively referred to as the "Letter Agreements"). C. The Company intends to establish the LTIP and the MIP to provide incentives for the Executive intended to replace the incentives previously provided the Executive under the IS Plan and the EIC Plan. D. The Executive agrees that, as a condition to the Executive's participation in the LTIP and the MIP, (i) the Executive's participation in the IS Plan and the EIC Plan shall be discontinued effective on and after January 1, 1994; (ii) the Company and the Plum Creek Timber Company, L.P. ("PCL") or any affiliate of the Company or PCL (collectively referred to as the "Affiliates") shall be released from all obligations under the IS Plan and the EIC Plan arising after December 31, 1993; (iii) the discontinuance of the Executive's participation in and the termination of the IS Plan and the EIC Plan with respect to the Executive shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment thereunder. RELEASE AND WAIVER AGREEMENT NOW, THEREFORE, in consideration for and contingent upon the Company's adoption of the LTIP and the MIP and the mutual undertaking of the parties hereto, the Executive and the Company, agree as follows: 1. Upon the Company's adoption of the LTIP and the MIP substantially in the form proposed as of this date, including an original grant of 375,000 Unit Appreciation Rights to the Executive under the LTIP, and the designation of the Executive as a Participant in the MIP for the Plan Year beginning January 1, 1994 (i) the IS Plan and the EIC Plan shall be terminated with respect to the Executive and the Executive's participation therein shall be discontinued effective on and after January 1, 1994; (ii) the Executive, on behalf of himself, his heirs, executors, administrators, successors and assigns, hereby releases, acquits and forever discharges the Company and the Affiliates from any and all obligations and waives any and all claims and causes of action of every kind whether known or unknown, suspected or unsuspected, to which the Executive may have otherwise been entitled under the terms and provisions of the IS Plan and the EIC Plan and the Letter Agreements; and (iii) the Executive hereby agrees that the discontinuance of the Executive's participation in and 2 the termination of the IS Plan and the EIC Plan shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment under said Letter Agreements. 2. Notwithstanding the foregoing, the parties hereto acknowledge that the Original Grants of Unit Appreciation Rights pursuant Section 5.1(a) to the LTIP is expressly conditioned upon the Committee's written determination prior to June 30, 1994 that such Original Grants comply with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or any other comparable or successor rule or regulatory requirement. Accordingly, this Release and Waiver Agreement shall become null and void ab initio in the event that the Committee does make a written determination as described in the preceding sentence prior to June 30, 1994. EXECUTIVE: COMPANY: PLUM CREEK MANAGEMENT COMPANY, L.P. _________________________________ ___________________________________ Charles P. Grenier Keith B. Sletten Executive Vice President Vice President Human Resources _________________________________ ___________________________________ Date Date EX-10.C.3 7 EXHIBIT 10.C.3 1 EXHIBIT 10.C.3 RELEASE AND WAIVER OF RIGHTS This release by the undersigned ("Executive"), who is a participant in the Plum Creek Management Company Incentive Sharing Plan ("IS Plan") and the Plum Creek Management Company Executive Incentive Compensation Plan ("EIC Plan") is made this 28th day of January, 1994, in consideration for and contingent upon the adoption by Plum Creek Management Company, L.P. ("Company") of the Plum Creek Management Company, L.P. Long-Term Incentive Plan ("LTIP") and the Plum Creek Management Company, L.P. Management Incentive Plan ("MIP"). RECITALS A. The Executive has participated in the IS Plan and the EIC Plan. B. The Executive is generally entitled to continue participation in the IS Plan and the EIC Plan through May 31, 1994 pursuant to a letter agreement with the Company dated June 9, 1989, as amended and modified by a subsequent letter agreement dated December 28, 1992 (collectively referred to as the "Letter Agreements"). C. The Company intends to establish the LTIP and the MIP to provide incentives for the Executive intended to replace the incentives previously provided the Executive under the IS Plan and the EIC Plan. D. The Executive agrees that, as a condition to the Executive's participation in the LTIP and the MIP, (i) the Executive's participation in the IS Plan and the EIC Plan shall be discontinued effective on and after January 1, 1994; (ii) the Company and the Plum Creek Timber Company, L.P. ("PCL") or any affiliate of the Company or PCL (collectively referred to as the "Affiliates") shall be released from all obligations under the IS Plan and the EIC Plan arising after December 31, 1993; (iii) the discontinuance of the Executive's participation in and the termination of the IS Plan and the EIC Plan with respect to the Executive shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment thereunder. RELEASE AND WAIVER AGREEMENT NOW, THEREFORE, in consideration for and contingent upon the Company's adoption of the LTIP and the MIP and the mutual undertaking of the parties hereto, the Executive and the Company, agree as follows: 1. Upon the Company's adoption of the LTIP and the MIP substantially in the form proposed as of this date, including an original grant of 525,000 Unit Appreciation Rights to the Executive under the LTIP, and the designation of the Executive as a Participant in the MIP for the Plan Year beginning January 1, 1994 (i) the IS Plan and the EIC Plan shall be terminated with respect to the Executive and the Executive's participation therein shall be discontinued effective on and after January 1, 1994; (ii) the Executive, on behalf of himself, his heirs, executors, administrators, successors and assigns, hereby releases, acquits and forever discharges the Company and the Affiliates from any and all obligations and waives any and all claims and causes of action of every kind whether known or unknown, suspected or unsuspected, to which the Executive may have otherwise been entitled under the terms and provisions of the IS Plan and the EIC Plan and the Letter Agreements; and (iii) the Executive hereby agrees that the discontinuance of the Executive's participation in and 2 the termination of the IS Plan and the EIC Plan shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment under said Letter Agreements. 2. Notwithstanding the foregoing, the parties hereto acknowledge that the Original Grants of Unit Appreciation Rights pursuant Section 5.1(a) to the LTIP is expressly conditioned upon the Committee's written determination prior to June 30, 1994 that such Original Grants comply with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or any other comparable or successor rule or regulatory requirement. Accordingly, this Release and Waiver Agreement shall become null and void ab initio in the event that the Committee does make a written determination as described in the preceding sentence prior to June 30, 1994. EXECUTIVE: COMPANY: PLUM CREEK MANAGEMENT COMPANY, L.P. _________________________________ ___________________________________ Rick R. Holley Keith B. Sletten President & Chief Executive Officer Vice President Human Resources _________________________________ ___________________________________ Date Date EX-10.C.4 8 EXHIBIT 10.C.4 1 EXHIBIT 10.C.4 RELEASE AND WAIVER OF RIGHTS This release by the undersigned ("Executive"), who is a participant in the Plum Creek Management Company Incentive Sharing Plan ("IS Plan") and the Plum Creek Management Company Executive Incentive Compensation Plan ("EIC Plan") is made this 28th day of January, 1994, in consideration for and contingent upon the adoption by Plum Creek Management Company, L.P. ("Company") of the Plum Creek Management Company, L.P. Long-Term Incentive Plan ("LTIP") and the Plum Creek Management Company, L.P. Management Incentive Plan ("MIP"). RECITALS A. The Executive has participated in the IS Plan and the EIC Plan. B. The Executive is generally entitled to continue participation in the IS Plan and the EIC Plan through May 31, 1994 pursuant to a letter agreement with the Company dated June 9, 1989, as amended and modified by a subsequent letter agreement dated December 28, 1992 (collectively referred to as the "Letter Agreements"). C. The Company intends to establish the LTIP and the MIP to provide incentives for the Executive intended to replace the incentives previously provided the Executive under the IS Plan and the EIC Plan. D. The Executive agrees that, as a condition to the Executive's participation in the LTIP and the MIP, (i) the Executive's participation in the IS Plan and the EIC Plan shall be discontinued effective on and after January 1, 1994; (ii) the Company and the Plum Creek Timber Company, L.P. ("PCL") or any affiliate of the Company or PCL (collectively referred to as the "Affiliates") shall be released from all obligations under the IS Plan and the EIC Plan arising after December 31, 1993; (iii) the discontinuance of the Executive's participation in and the termination of the IS Plan and the EIC Plan with respect to the Executive shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment thereunder. RELEASE AND WAIVER AGREEMENT NOW, THEREFORE, in consideration for and contingent upon the Company's adoption of the LTIP and the MIP and the mutual undertaking of the parties hereto, the Executive and the Company, agree as follows: 1. Upon the Company's adoption of the LTIP and the MIP substantially in the form proposed as of this date, including an original grant of 225,000 Unit Appreciation Rights to the Executive under the LTIP, and the designation of the Executive as a Participant in the MIP for the Plan Year beginning January 1, 1994 (i) the IS Plan and the EIC Plan shall be terminated with respect to the Executive and the Executive's participation therein shall be discontinued effective on and after January 1, 1994; (ii) the Executive, on behalf of himself, his heirs, executors, administrators, successors and assigns, hereby releases, acquits and forever discharges the Company and the Affiliates from any and all obligations and waives any and all claims and causes of action of every kind whether known or unknown, suspected or unsuspected, to which the Executive may have otherwise been entitled under the terms and provisions of the IS Plan and the EIC Plan and the Letter Agreements; and (iii) the Executive hereby agrees that the discontinuance of the Executive's participation in and 2 the termination of the IS Plan and the EIC Plan shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment under said Letter Agreements. 2. Notwithstanding the foregoing, the parties hereto acknowledge that the Original Grants of Unit Appreciation Rights pursuant Section 5.1(a) to the LTIP is expressly conditioned upon the Committee's written determination prior to June 30, 1994 that such Original Grants comply with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or any other comparable or successor rule or regulatory requirement. Accordingly, this Release and Waiver Agreement shall become null and void ab initio in the event that the Committee does make a written determination as described in the preceding sentence prior to June 30, 1994. EXECUTIVE: COMPANY: PLUM CREEK MANAGEMENT COMPANY, L.P. _________________________________ ___________________________________ James A. Kraft Keith B. Sletten Vice President, Law Vice President Human Resources _________________________________ ___________________________________ Date Date EX-10.C.5 9 EXHIBIT 10.C.5 1 EXHIBIT 10.C.5 RELEASE AND WAIVER OF RIGHTS This release by the undersigned ("Executive"), who is a participant in the Plum Creek Management Company Incentive Sharing Plan ("IS Plan") and the Plum Creek Management Company Executive Incentive Compensation Plan ("EIC Plan") is made this 28th day of January, 1994, in consideration for and contingent upon the adoption by Plum Creek Management Company, L.P. ("Company") of the Plum Creek Management Company, L.P. Long-Term Incentive Plan ("LTIP") and the Plum Creek Management Company, L.P. Management Incentive Plan ("MIP"). RECITALS A. The Executive has participated in the IS Plan and the EIC Plan. B. The Executive is generally entitled to continue participation in the IS Plan and the EIC Plan through May 31, 1994 pursuant to a letter agreement with the Company dated June 9, 1989, as amended and modified by a subsequent letter agreement dated December 28, 1992 (collectively referred to as the "Letter Agreements"). C. The Company intends to establish the LTIP and the MIP to provide incentives for the Executive intended to replace the incentives previously provided the Executive under the IS Plan and the EIC Plan. D. The Executive agrees that, as a condition to the Executive's participation in the LTIP and the MIP, (i) the Executive's participation in the IS Plan and the EIC Plan shall be discontinued effective on and after January 1, 1994; (ii) the Company and the Plum Creek Timber Company, L.P. ("PCL") or any affiliate of the Company or PCL (collectively referred to as the "Affiliates") shall be released from all obligations under the IS Plan and the EIC Plan arising after December 31, 1993; (iii) the discontinuance of the Executive's participation in and the termination of the IS Plan and the EIC Plan with respect to the Executive shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment thereunder. RELEASE AND WAIVER AGREEMENT NOW, THEREFORE, in consideration for and contingent upon the Company's adoption of the LTIP and the MIP and the mutual undertaking of the parties hereto, the Executive and the Company, agree as follows: 1. Upon the Company's adoption of the LTIP and the MIP substantially in the form proposed as of this date, including an original grant of 375,000 Unit Appreciation Rights to the Executive under the LTIP, and the designation of the Executive as a Participant in the MIP for the Plan Year beginning January 1, 1994 (i) the IS Plan and the EIC Plan shall be terminated with respect to the Executive and the Executive's participation therein shall be discontinued effective on and after January 1, 1994; (ii) the Executive, on behalf of himself, his heirs, executors, administrators, successors and assigns, hereby releases, acquits and forever discharges the Company and the Affiliates from any and all obligations and waives any and all claims and causes of action of every kind whether known or unknown, suspected or unsuspected, to which the Executive may have otherwise been entitled under the terms and provisions of the IS Plan and the EIC Plan and the Letter Agreements; and (iii) the Executive hereby agrees that the discontinuance of the Executive's participation in and 2 the termination of the IS Plan and the EIC Plan shall not constitute a breach of the Letter Agreements or be considered Good Reason for the Executive's voluntary termination of employment under said Letter Agreements. 2. Notwithstanding the foregoing, the parties hereto acknowledge that the Original Grants of Unit Appreciation Rights pursuant Section 5.1(a) to the LTIP is expressly conditioned upon the Committee's written determination prior to June 30, 1994 that such Original Grants comply with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or any other comparable or successor rule or regulatory requirement. Accordingly, this Release and Waiver Agreement shall become null and void ab initio in the event that the Committee does make a written determination as described in the preceding sentence prior to June 30, 1994. EXECUTIVE: COMPANY: PLUM CREEK MANAGEMENT COMPANY, L.P. _________________________________ ___________________________________ Robert E. Manne Keith B. Sletten Executive Vice President Vice President Human Resources _________________________________ ___________________________________ Date Date EX-10.D.1 10 EXHIBIT 10.D.1 1 Exhibit 10.D.1 REVOLVING CREDIT AGREEMENT AMENDMENT DATED AS OF SEPTEMBER 1, 1993 THIS REVOLVING CREDIT AGREEMENT AMENDMENT (this "Amendment") is made by and among PLUM CREEK TIMBER COMPANY, L.P., a Delaware limited partnership (the "Borrower"), the banks (the "Banks") listed on the signature pages hereof, and ABN AMRO BANK N.V., acting through its Seattle Branch, individually ("ABN Bank or a "Bank") and as agent (the "Agent") for the Banks hereunder. RECITALS The Borrower, the Banks and ABN Bank entered into a Revolving Credit Agreement dated as of May 1, 1993 ("Credit Agreement"). The Borrower desires to purchase certain timberlands in the State of Montana ("Champion Timberlands") from Champion International Corporation; The Borrower, in order to finance the purchase of the Champion Timberlands, proposes to enter into a Revolving Credit Agreement with Bank of America National Trust and Savings Association and the other lenders parties to such facility ("Bank of America Revolving Credit Agreement"); NOW, THEREFORE, the parties hereto agree that this Amendment shall become effective after the signing hereof by the majority banks and as of the date on which the Bank of America Revolving Credit Agreement becomes effective (the "Effective Time") and that thereafter, all references to, and actions taken in connection with, the Credit Agreement shall incorporate this Amendment in its entirety. All capitalized terms used in this Amendment and not otherwise defined have the meanings ascribed to them in the Credit Agreement. ARTICLE I CERTAIN AMENDMENTS SECTION 1.01 DEFINITIONS (a) The definition of "Designated Acres" in Section 1.01 of the Credit Agreement shall be amended by replacing the numeral "150,000" in the first line thereof with "200,000." (b) The following definitions shall be added to Section 1.01 of the Credit Agreement: 2 "Bank of America Revolving Credit Agreement" shall mean the credit agreement to be entered into between the Borrower, Bank of America National Trust and Savings Association, as Administrative Agent, and certain other lenders pursuant to which the lenders thereunder shall provide credit facilities to the Borrower in an aggregate principal amount not to exceed $260,000,000. "Qualified Debt" shall mean, as to the Borrower, as of any date of determination, without duplication, all outstanding indebtedness of the Borrower for borrowed money, including, without limitation, Debt represented by the borrowings under the Credit Agreement, the Senior Notes and the Bank of America Revolving Credit Agreement. "Actual Percentage" shall mean, at any date of determination, the percentage determined by dividing the aggregate outstanding principal balance of the Senior Notes by the aggregate outstanding principal balance of all Qualified Debt, excluding any Notes but including the Senior Notes. "Desired Percentage" shall mean thirty-eight percent (38%), the percentage determined by dividing the aggregate outstanding principal balance of the Senior Notes on September 1, 1993 by the aggregate outstanding principal balance of all Qualified Debt, other than any Notes, outstanding upon the drawdown of the Bank of America Revolving Credit Agreement. "Columbia River Unit" means those certain approximately 63,000 acres located in southwest Washington and generally referred to on the date hereof as the Borrower's "Columbia River Unit." SECTION 1.02 SECTION 5.02.6--MERGER AND SALE OF ASSETS (a) The existing clause (h) of Subsection 5.02.6 of the Credit Agreement shall be replaced by the following new clauses (h) and (i): (h) the Borrower and its Restricted Subsidiaries may otherwise sell for cash properties that constitute the Borrower's Columbia River Unit in an amount not less than the fair value thereof as determined in good faith by the Responsible Representatives, if and only if (i) immediately after giving effect to such proposed sale, no condition or event shall exist which constitutes an Event of Default or Material Default, (ii) the net proceeds of any such sale are either (x) subject to clause (v) of this clause (h) of Subsection 5.02.6, - 2 - 3 distributed immediately upon receipt thereof to holders of Qualified Debt other than the Notes and the Senior Notes for application (either immediately or within 180 days) to prepayment of such Qualified Debt, or (y) applied, within 180 days after such sale, to the purchase of productive assets in the same line of business, (iii) in the event net proceeds of any such sale are in excess of $25,000,000 and if not applied immediately as provided in clause (ii) above, placed immediately upon receipt thereof in an escrow or cash collateral account or accounts for the purpose of application in accordance with clause (ii) above, (iv) 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 Borrower could incur $1 of additional Funded Debt pursuant to clause (i) of Subsection 5.02.3, and (v) the aggregate net proceeds of all sales pursuant to this clause (h) of Subsection 5.02.6 during the year from the funding of the first loan under the Bank of America Revolving Credit Agreement to the first anniversary thereof that are applied in repayment of Qualified Debt other than the Senior Notes do not exceed $150,000,000, and (i) the Borrower and its Restricted Subsidiaries may otherwise sell for cash properties (other than any Collateral or any properties described in clause (h) of Subsection 5.02.6 above) in an amount not less than the fair value thereof as determined in good faith by the Responsible Representatives if and only if (i) immediately after giving effect to such proposed sale, no condition or event shall exist which constitutes an Event of Default or Material Default, (ii) the net proceeds of any such sale (x) are applied first, if any net proceeds have been used to repay Qualified Debt other than the Notes and the Senior Notes in accordance with clause (h) of Subsection 5.02.6, to the prepayment of the Senior Notes to the extent necessary to cause their Actual Percentage to equal the Desired Percentage, and second, pro rata (based on the current outstanding principal of all Qualified Debt other than the Notes) to the holders of all Qualified Debt other than the Notes, or (y) are applied, within 180 days after such sale, to the purchase of productive assets in the same line of business, (iii) the net proceeds of any such sale are either (x) distributed immediately upon receipt thereof to holders of Qualified Debt in accordance with clause (ii)(x) above for application within 180 days to repayment of such Qualified Debt, or (y) if in excess of $25,000,000, placed immediately upon receipt thereof in an escrow or cash collateral account or accounts for the purpose of application in accordance with subclause (b) above, - 3 - 4 and (d) 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 Borrower could incur $1 of additional Funded Debt pursuant to clause (i) of Subsection 5.02.3. (b) The existing clause (i) of Subsection 5.02.6 shall be relabeled as subsection (j). SECTION 1.03 SECTION 5.02.7--HARVESTING RESTRICTIONS Section 5.02.7 of the Credit Agreement shall be amended in its entirety to read as follows: 5.02.7 HARVESTING RESTRICTIONS -- The Borrower will not, and will not permit any Restricted Subsidiary to, in any calendar year, harvest Timber on the Timberlands then owned by the Borrower in excess of the amount set forth for such calendar year in the following table:
Maximum MMBF to be Calendar Year Harvested ------------- ------------------ 1989 (including harvest by predecessor prior to the closing) through 1991 675 MMBF 1992 and 1993 650 MMBF 1994 through 1996 700 MMBF 1997 through 2000 675 MMBF 2001 through 2007 625 MMBF
plus, in each year, the amount, if any, by which the cumulative amount set forth in the table above for the preceding years exceeds the cumulative amount actually harvested in such years; unless the net cash proceeds from such excess harvest are either (i) distributed to all holders of Qualified Debt other than the Notes pro rata based upon outstanding principal balances at the time of such distribution for application (either immediately or within 180 days after such excess harvest) to the repayment of such Qualified Debt other than the Notes, 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 - 4 - 5 judgment of the Responsible Representatives) not less than the fair value of the Timber subject to such excess harvest. ARTICLE II MISCELLANEOUS SECTION 2.01 CONTINUITY AND INTEGRATION OF AGREEMENT. The Credit Agreement, as affected by this Amendment, shall remain in full force and effect and are hereby ratified and confirmed, and the Credit Agreement and this Amendment shall be deemed to be and are construed as a single agreement. SECTION 2.02 COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery to the Agent of a counterpart executed by a Bank shall constitute delivery as such counterpart to all of the Banks. IN WITNESS WHEREOF, the parties hereto have executed this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., General Partner By: ----------------------------------- Name: Rick R. Holley Title: Vice President and Chief Financial Officer - 5 - 6 ABN AMRO Bank N.V., acting through its Seattle Branch as Agent By ----------------------------------- Its -------------------------------- By ----------------------------------- Its -------------------------------- The Banks ABN AMRO Bank N.V., acting through its Seattle Branch By ----------------------------------- Its -------------------------------- By ----------------------------------- Its -------------------------------- U.S. BANK OF WASHINGTON NATIONAL ASSOCIATION By ----------------------------------- Its -------------------------------- SEATTLE-FIRST NATIONAL BANK By ----------------------------------- Its -------------------------------- - 6 - EX-10.E.6 11 EXHIBIT 10.E.6 1 EXHIBIT 10.E.6 PLUM CREEK MANAGEMENT COMPANY, L.P. LONG-TERM INCENTIVE PLAN SECTION 1 - ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE 1.1 Establishment of Plan. Plum Creek Management Company, L.P., a Delaware limited partnership (the "Company") hereby establishes this 28th day of January, 1994 the "PLUM CREEK MANAGEMENT COMPANY, L.P. LONG-TERM INCENTIVE PLAN" (the "Plan") for the benefit of certain executives of the Company. Subject to the terms and conditions provided herein, the Plan provides for rewarding participating executives with a transfer of Units (as defined herein) representing an ownership interest in the Plum Creek Timber Company, L.P. (the "Partnership"). 1.2 Purpose. The purpose of the Plan is to help retain the services of participating executives, to align their interests with the interests of the partners of the Partnership, and to encourage participating executives to increase operating profitability, allocate capital wisely, and generate cash with the ultimate goal of attaining appreciation in the value of the Units. Transfers of Units under this Plan will reward participating executives with ownership interests in the Partnership for which the Company serves as general partner and to which it provides management support through the efforts of the participating executives of the Company. This Plan is intended to be an unfunded "bonus program" within the meaning of the United States Code of Federal Regulations Section 2510.3-2(c) and is maintained primarily for the purpose of providing long-term incentives to a select group of management or highly compensated employees. 1.3 Effective Date of Plan. The Plan shall be effective as of October 1, 1993 upon the approval of the Board of Directors of PC Advisory Corp. I (the "Board"), the general partner of PC Advisory Partners I, L.P., which serves as a general partner of the Company, which serves as the general partner of the Partnership. SECTION 2 - DEFINITIONS 2.1 Definitions. When used in the Plan, the following terms shall have the meanings specified below: (a) "Account" means a Participant's Reinvested Distribution Account and Unit Appreciation Account. (b) "Base Unit Value" means, with respect to Unit Appreciation Rights granted as of the Effective Date, the amount of $20 and, with respect to Unit Appreciation Rights granted after the Effective Date, the amount established by the Committee pursuant to Section 5.1(b). (c) "Beneficiary" means the person or entity determined to be a Participant's beneficiary pursuant to Section 16. (d) "Board" means the Board of Directors of PC Advisory Corp. I. (e) "Cause" means, when used in the phrase "for Cause" or "without Cause" in connection with a termination of employment, that the termination is evidenced by a resolution 2 adopted in good faith by at least two-third (2/3rds) of the members of the Board who are not employees of the Company or the Partnership, that the Participant (i) willfully and continually failed substantially to perform the Participant's duties with the Company or a Related Company (other than a failure resulting from the Participant's incapacity due to physical or mental illness) which failure continued for a period of at least 30 days after a written notice of demand for substantial performance has been delivered to the Participant specifying the manner in which the Participant has failed substantially to perform the Participant's duties, or (ii) willfully engaged in conduct which is demonstrably and materially injurious to the Company or a Related Company, monetarily or otherwise; provided no termination of the Participant's employment shall be for Cause set forth in clause (ii) above until there shall have been delivered to the Participant a copy of a written notice setting forth that the Participant was guilty of the conduct set forth in clause (ii) and specifying the particulars thereof in detail, and the Participant shall have been provided an opportunity to be heard by the Board (with the assistance of the Participant's counsel if the Participant so desires). No act, nor failure to act, on the Participant's part, shall be considered "willful" unless the Participant acted, or failed to act, with an absence of good faith and without a reasonable belief that such action or failure to act was in the best interest of the Company or a Related Company. Notwithstanding anything contained in this Plan to the contrary, no failure to perform by the Participant after notice of termination is given to the Participant shall constitute Cause. (f) "Change in Control" shall be deemed to occur at such time as Mr. John H. Scully and Mr. William E. Oberndorf no longer control, either individually or in the aggregate, the Company. (g) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (h) "Committee" means a committee of two or more Board members appointed by the Board. (i) "Distribution Date" means the date a Partnership Distribution is paid to the unitholders. (j) "Effective Date" means October 1, 1993. (k) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. (m) "Good Reason" means the occurrence of any of the following events or conditions: -2- 3 (i) a change in the Participant's status or responsibilities (including reporting responsibilities) which represents a substantial reduction of the status or responsibilities as in effect immediately prior thereto; the assignment to the Participant of any duties or responsibilities which are inconsistent with such status or responsibilities; or any removal of the Participant from or failure to reappoint or reelect the Participant to a position of responsibility, except in connection with the termination of the Participant's employment for Cause, Permanent Disability, as a result of death, or by the Participant for other than Good Reason; (ii) a reduction in the Participant's annual base salary; (iii) the failure by the Company or a Related Company to provide the Participant with benefits substantially equal (in terms of aggregate benefit levels and reward opportunities) to those provided under the employee benefit plans, programs and practices as in effect on the Effective Date; (iv) any material breach by the Company of any provision of this Plan; and (v) any purported termination of the Participant's employment for Cause by the Company or a Related Company, as the case may be, which does not otherwise comply with the terms of this Plan. Good Reason should not be inferred from a mere change in title or position or because the exigencies of competition, changes in business climate and opportunities presented in the marketplace may require a Participant to undertake new roles and tasks or to travel or move in order to best further the interests of the Company or any Related Company. (n) "Incentive Plans" means the Plan, the Plum Creek Management Company, L.P. Management Incentive Plan, the Plum Creek Management Company, L.P. Key Employee Long-Term Incentive Plan and any other incentive plan maintained by the Company and designated by the Committee as an Incentive Plan. (o) "Market Price" means with respect to a Unit, the closing reported sales price, regular way, per Unit on the New York Stock Exchange Composite Tape, or if Units are not then traded on such stock exchange, the principal national securities exchange on which Units are then traded, or if not so traded, the highest bid quotation on the over-the-counter market as reported by the National Quotations Bureau, or any similar organization, on any relevant date, or if not so reported, as determined by the Committee in a manner consistently applied. (p) "Participant" means an executive employee of the Company designated as a Participant pursuant to Section 4.1 or Section 4.2 or a former executive employee of the Company or a Related Company who has any rights under the Plan. (q) "Partnership Distributions" means cash distributions of the Partnership with respect to the Units, including all ordinary and extraordinary cash distributions. (r) "Performance Period" means the period beginning on the Effective Date and ending on December 31, 1998. -3- 4 (s) "Permanent Disability" means a condition that results in the Participant's being totally disabled, whether due to physical or mental causes, to the extent that the Participant is prevented from engaging in further employment with the Company or any Related Company and the Participant's condition is likely to be permanent and continuous during the remainder of the Participant's life, as determined by the Committee, upon the basis of medical evidence. (t) "Plan" means the Plum Creek Management Company, L.P. Long-Term Incentive Plan, as set forth herein and as amended from time to time. (u) "Realization Event" means the first to occur of (i) the expiration of the Performance Period, (ii) the occurrence of a Change in Control, (iii) the Participant's termination of employment with the Company and any Related Company as a result of the Participant's Permanent Disability, (iv) the termination of the Participant's employment with the Company and any Related Company either voluntarily by the Participant for Good Reason or involuntarily by the employer without Cause, or (v) the Participant's death. (v) "Reinvested Distribution Account" means a book account maintained by the Company with respect to each Participant reflecting the number of Shadow Units credited to the Participant with respect to Partnership Distributions. (w) "Related Companies" means the Partnership, Plum Creek Manufacturing, L.P., and Plum Creek Marketing, Inc., but not the Company, and any other entity owned, directly or indirectly, now or in the future, by the Partnership to the extent of 50% or more. (x) "Revocation Event" means a determination by the Board in its sole discretion that any of the following has occurred or is likely to occur: (i) a determination by the Department of Labor or a court of competent jurisdiction that the assets of the Trust are subject to Part 4 of Subtitle B of Title I of ERISA or (ii) a determination by the Internal Revenue Service or a court of competent jurisdiction that any amount deposited in the Trust is taxable to any Participant or Beneficiary prior to the distribution to the Participant or Beneficiary of such amount. (y) "Securities Act" means the Securities Act of 1933, as amended from time to time. (z) "Shadow Unit" means the right of a Participant to receive Units to be transferred (if not forfeited) pursuant to the terms of the Plan upon the occurrence of a Realization Event. (aa) "Termination of Employment" means ceasing to be an Employee of either the Company or a Related Company for any reason. (ab) "Trust" means any trust established in connection with the Plan. (ac) "Trustee" means the trustee of the Trust. -4- 5 (ad) "Unit Appreciation Account" means a book account maintained by the Company with respect to each Participant reflecting the number of Shadow Units credited to the Participant with respect to the attainment of one or more of the Unit Value targets established pursuant to Section 5.2. (ae) "Unit Appreciation Right" means the right of the Participant to be credited pursuant to Section 5.3 with Shadow Units upon the attainment of Unit Value targets. (af) "Units" means the depositary units representing limited partner interests in the Partnership, or such other substituted units as may replace them pursuant to Section 13 hereof. (ag) "Unit Value" on any date means, with respect to a Unit Appreciation Right, the arithmetic sum of the Market Price of a Unit on such date and the value of all Partnership Distributions paid on or after the later of January 1, 1994 and the date of grant of the Unit Appreciation Right and on or before the date on which the Unit Value is determined. For the purpose of determining Unit Value, the Market Price on any day that Units are not traded shall be the Market Price on the first preceding day that Units were traded. Any terms defined in the Partnership Agreement have the same meaning in this Plan as in the Partnership Agreement. SECTION 3 - ADMINISTRATION 3.1 Administration. The Committee shall be responsible for the administration of the Plan. The Committee, by majority action thereof, is authorized to interpret and construe any provision of the Plan, to determine eligibility and benefits under the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to adopt such forms as it may deem appropriate for the administration of the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations, interpretations, or other actions made or taken by the Committee under the Plan shall be final and binding for all purposes and upon all persons. Committee decisions shall be made by a majority of its members present at a meeting (which meeting may be held by telephone) at which a quorum is present. Any decision reduced to writing and signed by all members of the Committee shall be fully effective as if it had been made at a meeting duly held. 3.2 Indemnification of Committee. The Company and the Partnership shall indemnify each member of the Committee (which, for purposes of this Section 3.2, includes any employee of the Company or a Related Company to whom the Committee has delegated any responsibility in the administration of the Plan) against any and all claims, losses, damages, expenses, including counsel fees incurred by the Committee, and any liability, including any amounts paid in settlement with the Company's approval, arising from the member's or the Committee's determination, action or failure to act, except when the same is judicially determined to be attributable to the gross negligence or willful misconduct of such member. The right of indemnity described in the preceding sentence shall be conditioned upon (i) the timely receipt of notice by the Company of any claim asserted against the Committee member, which notice, in the event of a lawsuit, shall be given within ten (10) days after receipt by the Committee member, and (ii) the timely receipt by the Company of an offer from the Committee member of an opportunity to participate in the settlement or defense of such claim. -5- 6 3.3 Cost. Although the Plan is maintained by the Company for administrative convenience, all expenses and costs associated with the Plan, including the cost of administration and the cost of funding the benefits to be provided by the Plan, shall be borne by the Partnership. All economic benefits and burdens will accrue to and be incurred by the Partnership, and the Company shall have no opportunity to profit from the operation of the Plan. SECTION 4 - ELIGIBILITY AND PARTICIPATION 4.1 Participants on Effective Date. The Participants in the Plan on the Effective Date shall be those executives designated in Section 5.1(a). 4.2 Participants Designated by the Committee. The Committee may, in its sole discretion, designate one or more of the senior executives of the Company to be a Participant in the Plan effective as of such date as the Committee in its sole discretion shall specify. SECTION 5 - ALLOCATION OF UNIT APPRECIATION RIGHTS AND CREDITING OF SHADOW UNITS 5.1 Unit Appreciation Rights. A grant of a Unit Appreciation Right entitles the Participant to receive a benefit in an amount determined by reference to the appreciation in the value of a Unit over the Base Unit Value assigned to the Unit Appreciation Right and in the form of Units to be transferred to the Participant (if not forfeited pursuant to Section 6) pursuant to the terms of the Plan. The right to receive Units with respect to Unit Appreciation Rights granted under the Plan in accordance with the terms and conditions of the Plan is reflected by Shadow Units credited to the Participant's Account. -6- 7 (a) Original Grants. Pursuant to the Committee's determination, Unit Appreciation Rights shall be granted as of the Effective Date to the Participants listed below in the amount indicated below:
Unit Appreciation Participant Rights Granted ----------- -------------- Rick R. Holley 525,000 Charles P. Grenier 375,000 Robert E. Manne 375,000 James A. Kraft 225,000
Pursuant to the Committee's determination, the Base Unit Value with respect to Unit Appreciation Rights granted pursuant to this Section 5.1(a) shall be $20.00. The Unit Appreciation Rights granted pursuant to this Section 5.1(a) shall be conditioned upon the Committee's written determination prior to June 30, 1994 that such grants have been made in compliance with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or any comparable or successor rule or regulatory requirement. (b) Subsequent Grants. Unit Appreciation Rights may be granted to Participants by the Committee, in its sole discretion, provided that the total of all Unit Appreciation Rights granted pursuant to this Section 5.1 and not cancelled pursuant to Section 6 shall not exceed 2,000,000. Although the Committee may grant additional Unit Appreciation Rights pursuant to this Section 5.1(b) to a Participant who received a grant on the Effective Date pursuant to Section 5.1(a), it is not presently expected or intended that the Committee will make such a grant. The Base Unit Value with respect to Unit Appreciation Rights granted pursuant to this Section 5.1(b) shall be established by the Committee in its sole discretion at the time of the grant. 5.2 Unit Appreciation Rights Triggered by Unit Value Targets. On the later of January 1, 1994 or when the Unit Value equals or exceeds, in turn, one of the value targets established with respect to Unit Appreciation Rights pursuant to this Section 5.2 for 75 calendar days during any 90 consecutive calendar day period beginning on the first trading day the Unit Value equals or exceeds the applicable value target, a percentage of the Unit Appreciation Rights granted shall be triggered. -7- 8 (a) Value Targets for Original Unit Appreciation Right Grants. The following table sets forth five Unit Value targets for all original grants of Unit Appreciation Rights pursuant to Section 5.1(a) and the percentage of such Unit Appreciation Rights triggered with respect to that Unit Value target:
Percentage of Unit Unit Appreciation Target Value Target Rights Triggered ------ ------------ ---------------- First $23.00 10% Second $26.45 15% Third $30.42 20% Fourth $34.98 25% Fifth $40.23 30%
(b) Value Targets for Subsequent Unit Appreciation Right Grants. The Committee in its sole discretion shall establish at the time of the grant of Unit Appreciation Rights pursuant to Section 5.1(b) one or more Unit Value targets and the percentage of such Unit Appreciation Rights triggered with respect to each Unit Value target. 5.3 Shadow Units Credited to Unit Appreciation Account. The Company shall establish a Unit Appreciation Account for each Participant granted Unit Appreciation Rights pursuant to Section 5.1. The Participant's Unit Appreciation Account shall reflect the number of Shadow Units credited to the Participant as a result of Unit Appreciation Rights triggered by the attainment of Unit Value targets. The number of Shadow Units credited to the Participant's Unit Appreciation Account upon the attainment of a Unit Value target with respect to Unit Appreciation Rights granted to the Participant shall be determined by (a) multiplying (i) the excess of the dollar amount of the fifth Unit Value target over the Base Unit Value for the Unit Appreciation Rights granted to the Participant by (ii) the number of Unit Appreciation Rights granted to the Participant which are triggered by the Unit Value target attained, and (b) dividing the product obtained in (a) above by the dollar amount of the fifth Unit Value target for the Unit Appreciation Rights granted to the Participant. If a Participant has been granted Unit Appreciation Rights pursuant to more than one grant, the number of Shadow Units determined pursuant to this Section 5.3 shall be determined and credited separately with respect to each grant of Unit Appreciation Rights. In the case of Unit Appreciation Rights granted by the Committee pursuant to Section 5.1(b), the dollar amount of the highest Unit Value target established for the Unit Appreciation Rights by the Committee pursuant to Section 5.2(b) shall be substituted for the fifth Unit Value target in applying Section 5.3(a)(i) and (b) to determine the number of Shadow Units in the Participant's Unit Appreciation Account. -8- 9 5.4 Shadow Units Credited to Reinvested Distribution Account. The Company shall establish a Reinvested Distribution Account for each Participant who has Shadow Units credited to his Account under the Plan. The purpose of the Reinvested Distribution Account is to provide the Participant with an additional benefit under the Plan equal to the value of the benefit the Participant would receive from Partnership Distributions if the Participant was the unitholder of the Units which are reflected in the form of Shadow Units credited to the Participant's Account. On the Distribution Date of any Partnership Distribution, Shadow Units shall be credited to the Participant's Reinvested Distribution Account in an amount equal to (a) the product of the Shadow Units credited to the Participant's Account as of the Distribution Date and the amount of the Partnership Distribution determined on a per Unit basis, divided by (b) the Market Price of a Unit on the Distribution Date. 5.5 Examples. Examples of calculations with respect to Participants' Accounts pursuant to the rules provided by this Section 5 are set forth in Appendix A. SECTION 6 - CANCELLATIONS AND FORFEITURES 6.1 Cancellation of Unit Appreciation Rights. The Unit Appreciation Rights granted to a Participant shall be cancelled upon the occurrence of a Realization Event or a forfeiture pursuant to Section 6.2 with respect to the Participant. Upon the cancellation of a grant of Unit Appreciation Rights, the right of a Participant to have Shadow Units credited to his Account with respect to such Unit Appreciation Rights upon the attainment of Unit Value targets not previously attained shall be forfeited; provided the Committee, in its sole discretion, may provide (although it is not presently expected or intended that the Committee will exercise such authority) that all or a portion of the Unit Appreciation Rights granted to a Participant shall not be cancelled upon the occurrence of a Realization Event described in Section 2.1 (u) and that the Participant shall continue to be entitled to have all or a portion of the Shadow Units credited to the Participant's Account pursuant to Section 5.3 and 5.4 and shall continue to participate in the Plan in accordance with the provisions of the Plan subject to such additional terms and conditions as the Committee, in its sole discretion, may require. Any Unit Appreciation Rights cancelled in accordance with this Section 6.1 shall, subject to Section 8, be available again to be used in connection with a subsequent grant pursuant to Section 5.1(b) at any time prior to the end of the Performance Period. 6.2 Forfeiture of Shadow Units. A Participant shall forfeit any Shadow Units credited to the Participant's Account and any related transfer of Units to be made under this Plan if, prior to the occurrence of a Realization Event, the Participant's employment with the Company and any Related Company is terminated either by the employer for Cause or by the Participant without Good Reason. SECTION 7 - TRANSFER OF UNITS Upon the occurrence of a Realization Event with respect to the Participant, the Company shall transfer or cause to be transferred to the Participant a number of Units equal to the number of whole Shadow Units then credited to the Participant's Account, including any Shadow Units credited to the Participant's Reinvested Distribution Account for subsequent Partnership Distributions pursuant to Section 5.4, less any withholding pursuant to Section 14. -9- 10 SECTION 8 - DURATION OF PLAN Subject to Section 15 and Section 17, the Plan shall remain in effect until December 31, 1998. SECTION 9 - UNITS SUBJECT TO PLAN Unit Appreciation Rights shall be granted under the Plan with respect to a maximum of 2,000,000 Units, subject to the subsequent grant of previously granted Unit Appreciation Rights after cancellation pursuant to Section 6.1 and subject to any adjustment that may be made in connection with an event described in Section 13. The number of Units transferred under the Plan shall be subject to increase by the number of Shadow Units credited to Participants' Reinvested Distribution Accounts and shall also be subject to any adjustment that may be made in connection with an event described in Section 13. SECTION 10 - FUNDING OF THE PLAN Although the Company may cause Units that are subject to be transferred pursuant to the terms of the Plan or are otherwise reserved and other funds reserved for use under the Plan and other Incentive Plans to be held under a grantor trust agreement, the Plan is unfunded. Benefits under the Plan shall be paid from the general assets of the Company. A Trust, which shall be intended to be a "grantor trust" within the meaning of section 671 of the Code, shall be established pursuant to a trust agreement, to assist the Company in meeting its obligations under the Incentive Plans. Such trust agreement shall provide that the Trust may invest in Units. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company, the Partnership, the Board (or any of its members), or the Committee (or any of its members) and any Participant, any Beneficiary, or any other person. Although the Company may establish an accounting reserve with respect to future payments under the Plan, no reserve or set aside amounts shall imply any rights of any Participant therein. Any reserve or set aside shall be fully subject to the claims of the Company's creditors to the same extent as the general assets of the Company. To the extent that any person acquires a right to receive Units from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. Nothing contained in this Plan shall be construed to give any Participant an ownership interest in, or the right to receive distributions from the Partnership with respect to any Shadow Units credited to the Participant's Account or any Units subject to a transfer related to such Shadow Units until such Units have been transferred to the Participant pursuant to the terms of the Plan. The trust agreement creating the Trust shall contain procedures substantially to the following effect which may be revised to the extent deemed desirable by the Company for the purpose of ensuring that Participants will not be in constructive receipt of income or incur an economic benefit for federal income tax purposes because of the adoption or maintenance of the Trust: (a) The Trustee shall cease payment of benefits to Participants and their Beneficiaries if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this trust agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below. -10- 11 (c) The Board and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Participants or their Beneficiaries. (d) Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. (e) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Participants or their Beneficiaries and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in the trust agreement shall in any way diminish any rights of Participants or their Beneficiaries to pursue their rights as general creditors of the Company with respect to benefits due under the Incentive Plans or otherwise. (f) The Trustee shall resume the payment of benefits to Participants or their Beneficiaries in accordance with the provisions of the trust agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). (g) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to subsection (e) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Participants or their Beneficiaries under the terms of the Incentive Plans for the period of such discontinuance, less the aggregate amount of any payments made to Incentive Plan participants or their beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance. SECTION 11 - TRANSFERS OF UNITS AND PAYMENTS UNDER THE PLAN (a) Within 30 business days after the occurrence of a Realization Event, the Company shall deliver or cause to be delivered to the Participant certificates for a number of Units equal to the whole number of such Shadow Units credited to such Participant's Account as of the Realization Event and cash with respect to any fractional Shadow Unit credited to such Participant's Account in an amount equal to the product of such fraction and the Market Price of a Unit on the date the Realization Event occurs. (b) The Plan's principal purpose is to provide Participants with a continuing long-term investment in the Partnership. In order to accomplish that principal purpose, it is imperative that a Participant's rights under the Plan generally be required to remain in the form of Shadow Units credited to the Participant's Account until the occurrence of a Realization Event with respect to the Participant. Accordingly, in the event that a court of competent jurisdiction finally determines that the Company is obligated to distribute to a Participant, Beneficiary or any other person certificates for any Units reflecting Shadow Units credited to a Participant's Account prior to the -11- 12 occurrence of a Realization Event with respect to the Participant or the Committee determines the distribution of such certificates is appropriate, the certificates so distributed to such Participant, Beneficiary or other person shall be restricted as to transferability until the date that a Realization Event would have occurred with respect to the Participant had they not been distributed to the Participant, Beneficiary or other person and remained subject to the Plan, and each such Unit certificate shall bear the following legend: The transferability of this certificate and the Units represented hereby are subject to the restrictions, terms and conditions (including forfeiture and restrictions against transfer) applicable to the Shadow Units to which the Units represented by this certificate relate, all as contained in the Plum Creek Management Company, L.P. Long-Term Incentive Plan. A copy of the Plan is on file in the office of the Plum Creek Management Company; 999 Third Avenue, Suite 2300; Seattle, Washington 98104. (c) To further promote and ensure the accomplishment of the Plan's principal purpose of providing Participants with a continuing long-term investment in the Partnership, each Participant will generally be required to retain until Termination of Employment at least fifty percent (50%) of the after-tax benefit provided under the Plan as reflected by the Shadow Units credited to the Participant's Account in a long-term investment in the Partnership in the form of Units transferred to the Participant pursuant to this Plan. Accordingly, a percentage of the Units transferred pursuant to this Plan shall be restricted as to transferability until the Participant's Termination of Employment equal to fifty percent (50%) of the excess of one hundred percent (100%) over the highest marginal combined federal and applicable state individual income tax rate, and the certificates for such Units shall bear such legend as the Committee shall in its sole discretion deem appropriate to reflect such restriction on transferability. The Committee may in its sole discretion modify or choose not to impose the requirement of this Section 11(c) at any time with respect to one or more Participants or with respect to one or more grants of Unit Appreciation Rights as it may deem appropriate. SECTION 12 - SECURITIES MATTERS (a) Subject to Section 11, the Partnership shall use its best efforts to assure that any securities distributed to Participants hereunder are marketable at the time of distribution, including, to the extent required under applicable law, effecting the registration pursuant to the Securities Act of any Units to be distributed hereunder or effecting similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Partnership shall not be obligated to cause to be issued or delivered any certificates evidencing Units awarded pursuant to the Plan unless and until the Partnership is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of the New York Stock Exchange and any other securities exchange on which Units are traded. The Committee may require, as a condition of the issuance and delivery of certificates evidencing Units pursuant to the terms hereof, that the recipient of such Units make such covenants, agreements and representations, and that such certificates bear such legends, as the Committee, in its sole discretion, deems necessary or desirable. (b) Without limitation on the Committee's powers pursuant to this Section 12, to the extent required by Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or by any comparable or successor exemption under which the Committee believes it is appropriate for the Plan to qualify, the Committee may (i) restrict a Participant's ability to sell Units distributed to such Participant pursuant to this Plan until the expiration of 6 months (or such other period as the Committee deems appropriate) after the date as of which the Shadow Units relating thereto were credited to the Participant's Account, (ii) in lieu of distributing Units with respect to Shadow Units that were credited to a Participant's Account within 6 months (or such other period as the -12- 13 Committee deems appropriate) after the date as of which the Shadow Units relating thereto were credited to the Participant's Account, (ii) in lieu of distributing Units with respect to Shadow Units that were credited to a Participant's Account within 6 months (or such other period as the Committee deems appropriate) prior to the respective Realization Event, distribute a cash amount equal to the Market Price of such Units as of the Realization Event, or (iii) impose such other conditions on the exercise of any election under the Plan or in connection with any distribution under the Plan as the Committee deems appropriate. SECTION 13 - ADJUSTMENT OF ACCOUNTS IN CERTAIN EVENTS (a) Unless the Committee otherwise determines, a Participant's Account shall be adjusted to reflect any securities, cash and other property received with respect to Units equal in number to the Shadow Units credited to such Participant's Account as a result of any Unit distribution or split, recapitalization, extraordinary distribution, merger, consolidation, combination or exchange of Units or similar change or any other event that the Committee, in its sole discretion, deems appropriate. The purpose of this adjustment is to treat Participants as if they were unitholders of Units with respect to the number of Shadow Units credited to their Accounts. However, the Committee may convert any securities, cash or other property that would have been received in respect of Units into an equivalent number of Shadow Units to be credited to the Participant's Account, or may provide that any security received in respect of Units shall be substituted for Units under the Plan. (b) In the event of any change in the number of Units outstanding by reason of any Unit distribution or split, recapitalization, extraordinary dividend, merger, consolidation, combination or exchange of Units or similar change or any other event that the Committee, in its sole discretion, deems appropriate, the maximum aggregate number of Units subject to the Incentive Plans, the number of Unit Appreciation Rights allocated under this Plan, the number of Shadow Units credited to the Accounts of Participants, and the amount of any target established under Section 5.2 shall be appropriately adjusted by the Committee. In the event of any change in the number of Units outstanding by reason of any other event or transaction, the Committee may, but need not, make such adjustments in the number and class of Units subject to the Incentive Plans, the terms of Unit Appreciation Rights created and allocated under this Plan and the Shadow Units credited to Participants' Accounts as the Committee may deem appropriate. (c) A Participant shall have no rights as a result of any Unit distribution or split, recapitalization, extraordinary distribution, merger, consolidation, combination or exchange of Units or similar change, except as may be determined by the Committee pursuant to this Section 13. (d) The grants of Unit Appreciation Rights under Section 5.1(a) pursuant to the Committee's determination are based upon the total Units outstanding on January 1, 1994, and no adjustment shall be determined by the Committee pursuant to this Section 13 on account of any Unit split or other transaction with respect to Units occurring prior to January 1, 1994. SECTION 14 - PAYROLL AND WITHHOLDING TAXES All federal, state, local and other withholding tax requirements, if any, attributable to a distribution shall be met pursuant to the following procedures: -13- 14 (a) The Company and Related Companies shall have the right to withhold from any cash amounts payable to a Participant (including salary, bonus or any other amounts payable from the Company or any Related Company to the Participant) an amount sufficient to satisfy such federal, state, local and other withholding tax requirements, prior to the delivery of any certificate or certificates for such Units or other payments pursuant to the Plan. (b) The Company or Related Company shall have the right to require Participants to remit to the Company or Related Company in cash an amount sufficient to satisfy such federal, state, local and other withholding tax requirements, prior to the delivery of any certificate or certificates for such Units or other payments pursuant to the Plan. (c) At the election of the Participant, to the extent permitted by the Committee, the Participant shall deliver, or the Company or Related Company (or, if a distribution is to be made from the Trust, the Trustee) shall withhold, a number of such Units, the Market Price of which on the date the Units are to be distributed to the Participant is determined by the Committee to be sufficient to satisfy the minimum federal, state, local and other withholding tax requirements under applicable law. (d) If a Participant is subject to Section 16(b) of the Exchange Act, the Committee may prescribe such requirements or limitations on the Participant's ability to elect the withholding options contained in Section 14(c) as may be required by Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or by any comparable or successor exemption. SECTION 15 - TERMINATION AND AMENDMENT The Plan may be terminated with respect to any or all Participants at any time by the Board. Subject to Section 11 hereof, in order to meet the benefit obligations under the Plan upon such termination, the Company shall deliver or cause to be delivered to each Participant with respect to whom the Plan has been terminated a certificate for a number of Units equal to the whole number of Shadow Units credited to such Participant's Account as of the date the Plan was terminated and cash with respect to any fractional Shadow Units credited to such Participant's Account, in an amount equal to the product of such fraction and the Market Price of a Unit as of the date the Plan was terminated. The Plan may be amended by the Board from time to time in any respect; provided that if the Committee, in its sole discretion, deems it appropriate or advisable to comply with Rule 16b-3 or any comparable or successor rule or regulatory requirement, the approval of security holders shall be necessary to adopt any amendment to the extent that the adoption of such amendment without such approval would cause the Plan to no longer comply with Rule 16b-3 or any comparable or successor rule or regulatory requirement; and provided further that Section 5 of the Plan with respect to grants made as of the Effective Date shall not be amended more than once every six months, other than to comport with changes in the Code, ERISA, or other rules thereunder. No amendment or termination shall be made that would impair the rights of any Participant in any Unit Appreciation Right theretofore granted, any Shadow Unit theretofore credited or any Unit theretofore transferred, without such Participant's prior written consent; provided that the Company may amend the Plan and the Trust from time to time in such a manner as may be necessary to avoid having the trust agreement pursuant to which the Trust is created, the Incentive Plans or the Trust being subject to ERISA and to avoid the current taxation of the assets held in the trusts established in connection with the Incentive Plans to Participants. Neither a Participant's incurring any income tax liability nor the loss of an investment opportunity as a result of the termination of the Plan shall be considered an impairment of the rights of a Participant. -14- 15 SECTION 16 - BENEFICIARIES, PERMITTED TRANSFEREES, AND OTHER PAYEES 16.1 Designation of Beneficiary. Each Participant shall have the right to designate in writing from time to time a Beneficiary by filing a written notice of such designation with the Committee. A Participant's designation of a Beneficiary may be revoked by filing with the Committee an instrument of revocation or a later designation. Any designation or revocation shall be effective when received by the Committee. In the event of the death of a Participant, any payment required to be made hereunder to such Participant shall be made to such Participant's Beneficiary. Unless the Participant's Beneficiary designation provides otherwise, no person shall be entitled to benefits upon the death of the Participant unless such person survives the Participant. If the Beneficiary designated by a Participant does not survive the Participant or if the Participant has not made a valid Beneficiary designation, the Participant's Beneficiary shall be the Participant's estate. No payment shall be made after the death of a Participant with respect to the Participant's Account, unless the Committee shall have been furnished with such evidence as the Committee may deem necessary to establish the validity of the payment. 16.2 Nontransferability. Except as provided in Section 16.1, no Unit Appreciation Rights allocated to Participants under the Plan, no Shadow Units credited to the Participant's Accounts under the Plan, no Units subject to transfer that have not yet been transferred to Participants pursuant to the Plan, no interest in any trust that may hold Units for the purpose of meeting the Company's obligations under the Incentive Plans, and no other interest or right of a Participant under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (except by will or by the laws of descent and distribution), or in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of a Participant or Beneficiary entitled thereto, or be subject to any lien, directly or indirectly, by operation of law or otherwise, including execution, levy, garnishment, attachment, and bankruptcy. 16.3 Incapacity of Participant or Beneficiary. If the Committee finds that any Participant or Beneficiary to whom a payment is payable under the Plan is unable to care for his or her affairs because of illness or accident or is under a legal disability, any payment due (unless a prior claim therefore shall have been made by a duly appointed legal representative), may in the sole discretion of the Committee, be paid to the spouse, child, parent or brother or sister of such Participant or Beneficiary. Any such payment shall be a complete discharge of the obligations of the Company under the provisions of the Plan. SECTION 17 - EFFECT OF REVOCATION EVENT Upon the occurrence of a Revocation Event, the Board may, in its sole discretion, elect to terminate the Plan, the Trust, or any Participant's Account. The Company shall, in its sole discretion, (a) pay to each Participant whose Account is terminated, as soon as practicable after the date of such termination, a lump sum in cash equal to the Market Price of a Unit multiplied by the number of Shadow Units reflected in each Participant's Account as of the date of such termination or (b) distribute to each Participant whose Account is terminated, as soon as practicable after the date of such termination, that number of Units that would have been distributable to such Participant under the Plan upon the occurrence of a Realization Event with respect to the Participant. If it is finally determined in a proceeding, which the Company either controls or was offered the right to control and declines, that the Participant has an interest in the Trust that is taxable to the Participant notwithstanding any termination of such Participant's Account, the Company shall pay or distribute the Participant's interest (whether or not the Board has previously elected to terminate the Plan, the Trust or the Participant's Account) in accordance with either (a) or (b) of the preceding sentence. -15- 16 SECTION 18 - RIGHTS OF EMPLOYMENT Nothing in this Plan shall interfere with or limit in any way the right of the Company or any Related Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or any Related Company. SECTION 19 - REQUIREMENTS OF LAW AND GOVERNING LAW 19.1 Requirements of Law. The transfer of Units under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 19.2 Governing Law. The Plan and all agreements under the Plan shall be construed in accordance with and governed by the laws of the State of Washington. PLUM CREEK MANAGEMENT COMPANY, L.P. ___________________________________ ___________________________________ Date -16- 17 APPENDIX A - EXAMPLES 1. If the Unit Value for 75 of the 90 calendar days during the period beginning on January 31, 1994 and ending on May 1, 1994 is greater than or equal to $23.00, then the first value target with respect to the Unit Appreciation Rights granted to the initial Participants would be attained. Assume that the 75th day that the Unit Value exceeds $23.00 is April 24, 1994, then the number of Shadow Units in the Unit Appreciation Accounts of the initial Participants determined as of April 24, 1994 would be calculated as follows:
Divided Participant Maximum Unit _ Base Unit x by x = Value Target Value Total Max. Percentage Shadow Units in = UARs Value Units Unit Appreciation Maximum Target Triggered Account Spread in Unit Value Rick R. Holley $40.23 - $20 = $20.23 525,000 $40.23 10% 26,400.07 Charles P. Grenier $40.23 - $20 = $20.23 375,000 $40.23 10% 18,857.20 Robert E. Manne $40.23 - $20 = $20.23 375,000 $40.23 10% 18,857.20 James A. Kraft $40.23 - $20 = $20.23 225,000 $40.23 10% 11,314.32
2. Assume quarterly distributions of $.35 are paid on the last day of the second month following each calendar quarter. No Shadow Units were credited to any Participant's Reinvested Distribution Account with respect to the February 28, 1994 distribution, as no Shadow Units were yet credited to any Participant's Account on that date. Assume that the Market Price of a Unit on May 31 and August 31, 1994, is $24 and $27, respectively, when the first and second quarter dividends are paid. Shadow Units are credited to the Reinvested Distribution Accounts of the initial Participants with respect to the distribution on May 31, 1994 calculated as follows:
Divided PARTICIPANT SHADOW UNITS CREDITED x by = TO PARTICIPANT'S UNIT DISTRIBUTION MARKET SHADOW UNITS CREDITED TO APPRECIATION ACCOUNT AMOUNT PRICE PARTICIPANT'S REINVESTED DISTRIBUTION ACCOUNT Rick R. Holley 26,400.07 $.35 $24 385.00 Charles P. Grenier 18,857.20 $.35 $24 275.00 Robert E. Manne 18,857.20 $.35 $24 275.00 James A. Kraft 11,314.32 $.35 $24 165.00
18 3. Additional Shadow Units are credited to Participants' Reinvested Distribution Accounts with respect to the distribution on August 31, 1994 calculated as follows:
DIVIDED PARTICIPANT SHADOW UNITS CREDITED TO UNIT X BY = APPRECIATION ACCOUNT AND DISTRIBUTION MARKET ADDITIONAL SHADOW UNITS REINVESTED DISTRIBUTION AMOUNT PRICE CREDITED TO REINVESTED ACCOUNT DISTRIBUTION ACCOUNT Rick R. Holley 26,400.07 + 385.00 = 26,785.07 $.35 $27 347.21 Charles P. Grenier 18,857.20 + 275.00 = 19,132.20 $.35 $27 248.01 Robert E. Manne 18,857.20 + 275.00 = 19,132.20 $.35 $27 248.01 James A. Kraft 11,314.32 + 165.00 = 11,479.32 $.35 $27 148.81
4. If the Unit Value for 75 of the 90 calendar days during the period beginning on August 18, 1994 and ending on November 16, 1994 is greater than or equal to $26.45, then the second value target with respect to Unit Appreciation Rights granted to the initial Participants in the Plan would be attained. Assume that the 75th day that the Unit Value exceeds $26.45 is November 9, 1994, then the number of additional Shadow Units credited to the Unit Appreciation Accounts of each initial Participant and the aggregate Shadow Units in the Unit Appreciation Accounts of each initial Participant as of November 9, 1994 are calculated as follows:
DIVIDED PARTICIPANT MAX. SPREAD X BY X = AGGREGATE SHADOW UNITS IN UNIT TOTAL MAX. PERCENTAGE ADDITIONAL IN UNIT APPRECIATION VALUE1 UARs VALUE UNITS SHADOW UNITS ACCOUNT TARGET TRIGGERED IN UNIT APPRECIATION ACCOUNT Rick R. Holley $20.23 525,000 $40.23 15% 39,600.11 26,400.07 + 39,600.11 = 66,000.18 Charles P. Grenier $20.23 375,00 $40.23 15% 28,285.79 18,857.20 + 28,285.79 = 47,142.99 Robert E. Manne $20.23 375,00 $40.23 15% 28,285.79 18,857.20 + 28,285.79 = 47,142.99 James A. Kraft $20.23 225,00 $40.23 15% 16,971.48 11,314.32 + 16,971.48 = 28,285.80
________________________ 1 See Paragraph 1 for complete calculation. 2 19 5. After the foregoing events, the Accounts of the initial Participants in the Plan as of November 9, 1994 would be as follows:
PARTICIPANT AGGREGATE SHADOW UNITS CREDITED + = TO REINVESTED DISTRIBUTIONS AGGREGATE AGGREGATE ACCOUNT SHADOW UNITS IN UNIT SHADOW UNITS (MAY 31 AND AUGUST 31 CREDITS) APPRECIATION ACCOUNT Rick R. Holley 385.00 + 347.21 = 732.21 66,000.18 66,732.39 Charles P. Grenier 275.00 + 248.01 = 523.01 47,142.99 47,666.00 Robert E. Manne 275.00 + 248.01 = 523.01 47,142.99 47,666.00 James A. Kraft 165.00 + 148.81 = 313.81 28,285.80 28,599.61
6. If the Unit Value for 75 of the 90 calendar days during a 90 consecutive calendar day period is greater than or equal to $30.42, then the third value target with respect to Unit Appreciation Rights granted to the initial Participants in the Plan would be attained. The number of additional Shadow Units credited to the Unit Appreciation Accounts of each initial Participant and the aggregate Shadow Units in the Unit Appreciation Accounts of each initial Participant, determined as of the 75th day that the Unit Value exceeds $30.42, are calculated as follows:
DIVIDED PARTICIPANT MAX. X BY X = AGGREGATE SHADOW SPREAD TOTAL MAX. PERCENTAGE ADDITIONAL UNITS IN UNIT IN UNIT UARs VALUE UNITS SHADOW APPRECIATION ACCOUNT VALUE(2) TARGET TRIGGERED UNITS IN UNIT APPRECIATION ACCOUNT Rick R. Holley $20.23 525,00 $40.23 20% 52,800.15 66,000.18 + 52,800.15 = 118,800.33 Charles P. Grenier $20.23 375,00 $40.23 20% 37,714.39 47,142.99 + 37,714.39 = 84,857.38 Robert E. Manne $20.23 375,00 $40.23 20% 37,714.39 47,142.99 + 37,714.39 = 84,857.38 James A. Kraft $20.23 225,00 $40.23 20% 22,628.64 28,285.80 + 22,628.64 = 50,914.44
________________________ 2 See Paragraph 1 for complete calculation. 3 20 7. If the Unit Value for 75 of the 90 calendar days during a 90 consecutive calendar day period is greater than or equal to $34.98, then the fourth value target with respect to Unit Appreciation Rights granted to the initial Participants in the Plan would be attained. The number of additional Shadow Units credited to the Unit Appreciation Accounts of each initial Participant and the aggregate Shadow Units in the Unit Appreciation Accounts of each initial Participant, determined as of the 75th day that the Unit Value exceeds $34.98, are calculated as follows:
DIVIDED PARTICIPANT MAX. X BY X = ()AGGREGATE SHADOW SPREAD TOTAL MAX. PERCENTAGE ADDITIONAL UNITS IN UNIT IN UNIT UARs VALUE UNITS SHADOW APPRECIATION ACCOUNT VALUE(3) TARGET TRIGGERED UNITS IN UNIT APPRECIATION ACCOUNT Rick R. Holley $20.23 525,000 $40.23 25% 66,000.19 118,800.33 + 66,000.19 = 184,800.52 Charles P. Grenier $20.23 375,000 $40.23 25% 47,142.99 84,857.38 + 47,142.99 = 132,000.37 Robert E. Manne $20.23 375,000 $40.23 25% 47,142.99 84,857.38 + 47,142.99 = 132,000.37 James A. Kraft $20.23 225,000 $40.23 25% 28,285.79 50,914.44 + 28,285.79 = 79,200.23
8. If the Unit Value for 75 of the 90 calendar days during a 90 consecutive calendar day period is greater than or equal to $40.23, then the fifth and final value target with respect to Unit Appreciation Rights granted to the initial Participants in the Plan would be attained. The number of additional Shadow Units credited to the Unit Appreciation Accounts of each initial Participant and the aggregate Shadow Units in the Unit Appreciation Accounts of each initial Participant, determined as of the 75th day that the Unit Value exceeds $40.23, are calculated as follows:
DIVIDED PARTICIPANT MAX. X BY X = AGGREGATE SHADOW SPREAD TOTAL MAX. PERCENTAGE ADDITIONAL UNITS IN UNIT IN UNIT UARs VALUE UNITS SHADOW APPRECIATION ACCOUNT VALUE(3) TARGET TRIGGERED UNITS IN UNIT APPRECIATION ACCOUNT Rick R. Holley $20.23 525,000 $40.23 30% 79,200.22 184,800.52 + 79,200.22 = 264,000.74 Charles P. Grenier $20.23 375,000 $40.23 30% 56,571.59 132,000.37 + 56,571.59 = 188,571.96 Robert E. Manne $20.23 375,000 $40.23 30% 56,571.59 132,000.37 + 56,571.59 = 188,571.96 James A. Kraft $20.23 225,000 $40.23 30% 33,942.95 79,200.23 + 33,942.95 = 113,143.18
________________________ 3 See Paragraph 1 for complete calculation. 4 EX-10.E.7 12 EXHIBIT 10.E.7 1 EXHIBIT 10.E.7 PLUM CREEK MANAGEMENT COMPANY, L.P. MANAGEMENT INCENTIVE PLAN SECTION 1 - ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE 1.1 Establishment of Plan. Plum Creek Management Company, L.P., a Delaware limited partnership (the "Company") hereby establishes the "PLUM CREEK MANAGEMENT COMPANY, L.P. MANAGEMENT INCENTIVE PLAN" (the "Plan") for the benefit of certain executives of the Company. Subject to the terms and conditions provided herein, the Plan provides for rewarding participating executives with a bonus in the form of cash and Units (as defined herein) representing an ownership interest in the Plum Creek Timber Company, L.P. (the "Partnership"). 1.2 Purpose. The purpose of the Plan is to help retain the services of participating executives, to align their interests with the interests of the partners of the Partnership, and to encourage participating executives to increase operating profitability, allocate capital wisely, and generate cash with the ultimate goals of improving current operating profitability and attaining appreciation in the value of the Units. Cash bonus payments and the transfer of Units under this Plan will reward participating executives with incentive compensation and ownership interests in the Partnership for which the Company serves as general partner and to which it provides management support through the efforts of the participating executives of the Company. This Plan is intended to be an unfunded "bonus program" within the meaning of the United States Code of Federal Regulations Section 2510.3-2(c) and is maintained primarily for the purpose of providing current and long-term incentives to a select group of management or highly compensated employees. 1.3 Effective Date of Plan. The Plan shall be effective as of January 1, 1994 upon the approval of the Board of Directors of PC Advisory Corp. I (the "Board"), the general partner of PC Advisory Partners I, L.P., which serves as a general partner of the Company, which serves as the general partner of the Partnership. SECTION 2 - DEFINITIONS 2.1 Definitions. When used in the Plan, the following terms shall have the meanings specified below: (a) "Account" means a Participant's Unit Portion Account. (b) "Average Price" of a Unit for any date means the average price, excluding commissions, paid by the Trustee per Unit purchased during the 90-day period beginning on such date relating to the Shadow Units credited to the Participant's Account pursuant to Section 6.2 or Section 6.3, whichever is applicable. In the event that the Trustee does not purchase any Units during such 90-day period, then the "Average Price" of a Unit means the average Market Price of a Unit during such 90-day period. Subject to Section 10, it is intended that the Trustee will purchase the Units relating to the Shadow Units credited to the Participant's Account pursuant to Section 6.2 or Section 6.3, whichever is applicable, as soon as reasonably practicable following the commencement of such 90-day period. 2 (c) "Base Salary" means the regular salary accrued during the Plan Year, including any salary reduction contributions made to any plan maintained by the Company or any Related Company pursuant to Section 125 or Section 401(k) of the Code. (d) "Beneficiary" means the person or entity determined to be a Participant's beneficiary pursuant to Section 16. (e) "Board" means the Board of Directors of PC Advisory Corp. I. (f) "Bonus" means the amount of the incentive award earned under the Plan for a Plan Year as determined by the Committee pursuant to Section 5.5. (g) "Bonus Percentage" means the percentage of the Participant's Base Salary for the Plan Year that may be earned as a Bonus with respect to the achievement of a goal established as part of the Participant's Performance Objectives. (h) "Cash Portion" means that portion of the Participant's Bonus which shall be paid in cash following the end of the Plan Year in which it has been earned by the Participant. (i) "Cause" means, when used in the phrase "for Cause" or "without Cause" in connection with a termination of employment, that the termination is evidenced by a resolution adopted in good faith by at least two-third (2/3rds) of the members of the Board who are not employees of the Company or the Partnership, that the Participant willfully engaged in conduct which is demonstrably and materially injurious to the Company or a Related Company, monetarily or otherwise; provided no termination of the Participant's employment shall be for Cause until there shall have been delivered to the Participant a copy of a written notice setting forth that the Participant was guilty of the conduct described above and specifying the particulars thereof in detail, and the Participant shall have been provided an opportunity to be heard by the Board (with the assistance of the Participant's counsel if the Participant so desires). No act, nor failure to act, on the Participant's part, shall be considered "willful" unless the Participant acted, or failed to act, with an absence of good faith and without a reasonable belief that such action or failure to act was in the best interest of the Company or a Related Company. Notwithstanding anything contained in this Plan to the contrary, no failure to perform by the Participant after notice of termination is given to the Participant shall constitute Cause. (j) "Change in Control" shall be deemed to occur at such time as Mr. John H. Scully and Mr. William E. Oberndorf no longer control, either individually or in the aggregate, the Company. (k) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (l) "Committee" means a committee of two or more Board members appointed by the Board. (m) "Distribution Date" means the date a Partnership Distribution is paid to the unitholders. (n) "Effective Date" means January 1, 1994. -2- 3 (o) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. (p) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. (q) "Incentive Plans" means the Plan, the Plum Creek Management Company, L.P. Long-Term Incentive Plan, the Plum Creek Management Company, L.P. Key Employee Long-Term Incentive Plan and any other incentive plan maintained by the Company and designated by the Committee as an Incentive Plan. (r) "Market Price" means with respect to a Unit, the closing reported sales price, regular way, per Unit on the New York Stock Exchange Composite Tape, or if Units are not then traded on such stock exchange, the principal national securities exchange on which Units are then traded, or if not so traded, the highest bid quotation on the over-the-counter market as reported by the National Quotations Bureau, or any similar organization, on any relevant date, or if not so reported, as determined by the Committee in a manner consistently applied. (s) "Participant" means an executive employee of the Company selected for participation in the Plan for the Plan Year by the Committee pursuant to Section 4 or a current or former executive employee of the Company or a Related Company who was selected for participation in the Plan in a preceding Plan Year and who has any rights under the Plan. (t) "Partnership Distributions" means cash distributions of the Partnership with respect to the Units, including all ordinary and extraordinary cash distributions. (u) "Performance Objectives" means the performance criterion comprised of quantitative and qualitative goals established by the Committee with respect to each Participant and utilized by the Committee in determining the Participant's Bonus, if any, for the Plan Year. (v) "Performance Period" means, with respect to the Unit Portion of a Bonus converted into Shadow Units, the period ending on the third anniversary of the end of the Plan Year with respect to which the Bonus was earned. (w) "Permanent Disability" means a condition that results in the Participant's being totally disabled, whether due to physical or mental causes, to the extent that the Participant is prevented from engaging in further employment with the Company or any Related Company and the Participant's condition is likely to be permanent and continuous during the remainder of the Participant's life, as determined by the Committee, upon the basis of medical evidence. (x) "Permissive Retirement" means a Participant's termination of employment with the Company and any Related Company, other than by reason of death or Disability, in accordance with any retirement policy established by the Committee and then in effect or designated by the Committee in writing as a Permissive Retirement. (y) "Plan" means the Plum Creek Management Company, L.P. Management Incentive Plan, as set forth herein and as amended from time to time. -3- 4 (z) "Plan Year" means the Partnership's fiscal year. (aa) "Related Companies" means the Partnership, Plum Creek Manufacturing, L.P., and Plum Creek Marketing, Inc., but not the Company, and any other entity owned, directly or indirectly, now or in the future, by the Partnership to the extent of 50% or more. (ab) "Revocation Event" means a determination by the Board in its sole discretion that any of the following has occurred or is likely to occur: (i) a determination by the Department of Labor or a court of competent jurisdiction that the assets of the Trust are subject to Part 4 of Subtitle B of Title I of ERISA or (ii) a determination by the Internal Revenue Service or a court of competent jurisdiction that any amount deposited in the Trust is taxable to any Participant or Beneficiary prior to the distribution to the Participant or Beneficiary of such amount. (ac) "Securities Act" means the Securities Act of 1933, as amended from time to time. (ad) "Shadow Unit" means the right of a Participant to receive a Unit to be transferred (if not forfeited) pursuant to the terms of the Plan upon the expiration of the Performance Period. (ae) "Trust" means any trust established in connection with the Plan. (af) "Trustee" means the trustee of the Trust. (ag) "Unit Portion" means that portion of the Participant's Bonus which shall be converted to Shadow Units and credited to the Participant's Account. (ah) "Unit Portion Account" means a book account maintained by the Company with respect to each Bonus earned by a Participant under the Plan reflecting the aggregate of the number of Shadow Units to which the Unit Portion of the Bonus was converted pursuant to Section 6.2 and the number of additional Shadow Units credited to the Participant for subsequent Partnership Distributions pursuant to Section 6.3. (ai) "Units" means the depositary units representing limited partner interests in the Partnership, or such other substituted units as may replace them pursuant to Section 13 hereof. Any terms defined in the Partnership Agreement have the same meaning in this Plan as in the Partnership Agreement. SECTION 3 - ADMINISTRATION 3.1 Administration. The Committee shall be responsible for the administration of the Plan. The Committee, by majority action thereof, is authorized to interpret and construe any provision of the Plan, to determine eligibility and benefits under the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to adopt such forms as it may deem appropriate for the administration of the Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests -4- 5 of the Company, and to make all other determinations necessary or advisable for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations, interpretations, or other actions made or taken by the Committee under the Plan shall be final and binding for all purposes and upon all persons. Committee decisions shall be made by a majority of its members present at a meeting (which meeting may be held by telephone) at which a quorum is present. Any decision reduced to writing and signed by all members of the Committee shall be fully effective as if it had been made at a meeting duly held. 3.2 Indemnification of Committee. The Company and the Partnership shall indemnify each member of the Committee (which, for purposes of this Section 3.2, includes any employee of the Company or a Related Company to whom the Committee has delegated any responsibility in the administration of the Plan) against any and all claims, losses, damages, expenses, including counsel fees incurred by the Committee, and any liability, including any amounts paid in settlement with the Company's approval, arising from the member's or the Committee's determination, action or failure to act, except when the same is judicially determined to be attributable to the gross negligence or willful misconduct of such member. The right of indemnity described in the preceding sentence shall be conditioned upon (i) the timely receipt of notice by the Company of any claim asserted against the Committee member, which notice, in the event of a lawsuit, shall be given within ten (10) days after receipt by the Committee member, and (ii) the timely receipt by the Company of an offer from the Committee member of an opportunity to participate in the settlement or defense of such claim. 3.3 Cost. The Plan is maintained by the Company for administrative convenience. The expense and cost of funding the benefits shall be borne by the Company. All other costs associated with the Plan, including the cost of administration, shall be borne by the Partnership. SECTION 4 - ELIGIBILITY AND PARTICIPATION 4.1 Eligibility. Eligibility for participation in the Plan for the purpose of earning a Bonus for the Plan Year will be limited to those senior executive employees who, by the nature and scope of their position, are materially responsible for the management, growth, and success of the Partnership. Participation in the Plan for the purpose of earning a Bonus for each Plan Year shall be determined by the Committee in its sole discretion. Eligible senior executives selected for participation by the Committee shall be notified of their selection as soon as practicable. 4.2 Partial Plan Year Participation. The Committee may select an eligible senior executive to participate for the remaining portion of the Plan Year following the date the Committee establishes as the effective date for such Participant's participation in the Plan. In such a case, the Participant's Bonus for the Plan Year shall be determined by the Committee based upon the portion of Participant's Base Salary for the Plan Year accrued on and after the effective date of the Participant's participation in the Plan. 4.3 No Right to Participate. No provision contained in this Plan may be interpreted or construed to grant, and no action taken by the Committee will grant, any Participant who was eligible for a Bonus in a previous Plan Year or who continues to participate because of a Bonus earned with respect to a previous Plan Year, or any other eligible senior executive at any time, a right to be selected for participation for a Bonus in a current or future Plan Year. Nothing contained in this Section 4.3 shall affect any rights any executive may have pursuant to any separate written agreement. -5- 6 SECTION 5 - DETERMINATION OF BONUS 5.1 Performance Objectives. At the beginning of each Plan Year or, in the case of a senior executive selected for participation during the Plan Year pursuant to Section 4.2, as soon as practicable after the executive's selection for participation, the Committee shall establish Performance Objectives for each Participant participating for the purpose of earning a Bonus under the Plan for the Plan Year, including quantitative goals and qualitative goals. Quantitative goals shall be based in whole or in part upon measurements of the Company's, the Partnership's or a Related Company's financial or operational performance and may vary in relation to a Participant's duties or responsibilities. It is expected that quantitative goals will emphasize operating income, cash flow and free cash flow, or other quantitative measurements which have considerable bearing upon such financial measurements and may be significantly influenced by the Participant's managerial performance. Qualitative goals shall be based upon the achievement of immediate goals or the accomplishment of tasks assigned to the Participant which may or may not affect the Company's, the Partnership's or a Related Company's current financial performance, but are considered to have tactical significance in the Company's strategic plan to maximize the Partnership's overall financial performance. The Committee shall communicate to each Participant the Performance Objectives established for the Participant for the Plan Year and the Bonus Percentages assigned to each established goal as soon as practicable. 5.2 Assignment of Bonus Percentages. With respect to each quantitative goal and each qualitative goal established as part of the Performance Objectives for a Participant for the Plan Year, the Committee shall assign a Bonus Percentage that shall be earned by the Participant if the respective goal is attained. The Committee may provide that a portion of the Bonus Percentage assigned to a goal may be earned by the Participant if the respective goal is not completely attained based upon either a schedule prescribed by the Committee or a determination made by the Committee in its sole discretion based on the Participant's performance with respect to the goal. The sum of Bonus Percentages assigned to all goals established as part of the Participant's Performance Objectives established for the Plan Year shall not exceed 100%. 5.3 Adjustment of Performance Objectives and Bonus Percentages. During the Plan Year, the Committee shall have the right to adjust the Performance Objectives established for a Participant and the Bonus Percentage assigned to any goal if the Committee determines in its sole discretion that external changes or other unanticipated business conditions have either materially affected the desirability or significance of the established goals or unduly influenced the attainability of the established goals. Quantitative goals may be adjusted up or down, qualitative goals may be enhanced or diminished, goals may be eliminated, additional or substitute goals may be established, and the Bonus Percentage assigned to any goal may be increased or reduced; provided that after any adjustment made by the Committee pursuant to this Section 5.3, the sum of the Bonus Percentages assigned to all the goals comprising a Participant's Performance Objectives for the Plan Year shall not exceed 100%. 5.4 Determination of Bonus Percentage Earned. As soon as reasonably practicable after the end of each Plan Year, the Committee shall determine the aggregate Bonus Percentage earned by each Participant who is actively employed by the Company or a Related Company on the last day of the Plan Year or who terminated employment with the Company or a Related Company during the Plan Year by reason of death, Permanent Disability or Permissive Retirement. The Committee shall determine the amount of the Bonus Percentage earned with respect to each quantitative goal and each qualitative goal established as part of the Participant's Performance Objectives. If the Committee determines that a goal was not attained because of unanticipated conditions not within the Participant's control, the Committee -6- 7 may in its sole discretion consider the Participant to have earned all or a portion of the Bonus Percentage assigned such goal based upon the Committee's assessment of the Participant's performance with respect to such goal. 5.5 Final Bonus Determination. The Bonus of each Participant who is employed by the Company or Related Company on the last day of the Plan Year or who terminated employment with the Company or Related Company during the Plan Year either by reason of death, Permanent Disability or Permissive Retirement shall be equal to the Participant's Base Salary for the Plan Year multiplied by the aggregate Bonus Percentage, determined by the Committee pursuant to Section 5.4. A Participant who is not actively employed with the Company or a Related Company on the last day of the Plan Year and who did not terminate employment with the Company or a Related Company during the Plan Year by reason of death, Permanent Disability, or Permissive Retirement shall not be entitled to a Bonus for the Plan Year. The Committee, in its sole discretion, may accelerate the determination pursuant to Section 5.4 and this Section 5.5 of the Bonuses of all Participants in the event a Change in Control occurs during the Plan Year or the Bonus of any Participant who has terminated employment during the Plan Year by reason of death, Permanent Disability, or Permissive Retirement and may then accelerate payment of the Cash Portion or the Unit Portion of the Bonus or Bonuses so determined pursuant to Section 6.1 or Section 7, respectively. SECTION 6 - CASH AND UNIT PORTIONS OF BONUS 6.1 Cash and Unit Portions. One-half (50%) of the Bonus determined with respect to each Participant, referred to as the Cash Portion, shall be paid in cash following the end of the Plan Year at such time or times as the Committee shall determine. The Committee, in its sole discretion, may accelerate any payment to be made either with respect to a Participant who has terminated employment by reason of death, Permanent Disability, or Permissive Retirement or in the event a Change in Control occurs. The remaining one-half (50%) of each Participant's Bonus, referred to as the Unit Portion, shall be converted into Shadow Units to be credited to the Participant's Unit Portion Account established with respect to the Bonus earned for the Plan Year. Units as reflected by such Shadow Units credited to the Participant's Unit Portion Account shall be transferred to the Participant (if not forfeited pursuant to Section 6.4) at the time and in the manner provided by Section 7 and Section 11. 6.2 Conversion of Unit Portion into Shadow Units. The Company shall maintain a Unit Portion Account for each Bonus earned by a Participant to reflect the Units to which the Participant is entitled with respect to such Bonus. The Unit Portion of each Participant's Bonus for the Plan Year shall be converted into Shadow Units to be credited to the Participant's Unit Portion Account as of the last day of the Plan Year in an amount of Shadow Units equal to (a) the amount of the Unit Portion of the Participant's Bonus, divided by (b) the Average Price of a Unit for the date the Cash Portion of the Bonus is paid to the Participant. 6.3 Shadow Units Credited for Subsequent Partnership Distributions. The purpose of crediting Shadow Units for subsequent Partnership Distributions is to provide the Participant with an additional benefit with respect to each Bonus earned under the Plan equal to the value of the benefit the Participant would have received from Partnership Distributions if the Participant was the unitholder of the Units reflected by the Shadow Units credited to the Participant's Unit Portion Account and reinvested the -7- 8 Partnership Distributions received in additional Units. On the Distribution Date of any Partnership Distribution, Shadow Units shall be credited to each Unit Portion Account maintained with respect to the Participant in an amount equal to (a) the product of the Shadow Units credited to the Participant's Unit Portion Account as of the Distribution Date and the amount of the Partnership Distribution determined on a per Unit basis, divided by (b) the Average Price of a Unit for the Distribution Date. 6.4 Forfeiture of Shadow Units. A Participant shall forfeit any Shadow Units credited to a Participant's Unit Portion Account and any related transfer of Units to be made under this Plan if, prior to the expiration of the Performance Period, the Participant's employment with the Company and any Related Company is terminated by the employer for Cause. Any Shadow Unit cancelled in accordance with this Section 6.4 shall, subject to Section 8, be available again to be credited to a Participant's Unit Portion Account pursuant to Section 6.2. SECTION 7 - TRANSFER OF UNITS Upon the expiration of the Performance Period with respect to the Shadow Units credited to the Participant's Unit Portion Account attributable to the Bonus earned by the Participant for a Plan Year, the Company shall transfer or cause to be transferred to the Participant a number of Units equal to the number of whole Shadow Units then credited to the Participant's Unit Portion Account attributable to the Bonus earned by the Participant for such Plan Year, including any Shadow Units credited to the Participant's Unit Portion Account for subsequent Partnership Distributions pursuant to Section 6.3, less any withholding pursuant to Section 14. The Committee, in its sole discretion, may accelerate any payment to be made either with respect to a Participant who has terminated employment by reason of death, Permanent Disability or Permissive Retirement or in the event a Change in Control occurs. SECTION 8 - DURATION OF PLAN The Plan shall remain in effect until terminated by the Board. SECTION 9 - UNITS SUBJECT TO PLAN The aggregate number of Units available to Participants because of Bonuses earned under the Plan may not exceed 800,000, subject to the subsequent grant of previously granted Shadow Units after forfeiture pursuant to Section 6.4 and subject to any adjustment that may be made in connection with an event described in Section 13. The number of Units transferred under the Plan shall be subject to increase by the number of Shadow Units credited to Participants' Accounts with respect to Partnership Distributions pursuant to Sections 6.3 and shall also be subject to any adjustment that may be made in connection with an event described in Section 13. SECTION 10 - FUNDING OF THE PLAN Although the Company may cause Units that are subject to be transferred pursuant to the terms of the Plan or are otherwise reserved and other funds reserved for use under the Plan and other Incentive Plans to be held under a grantor trust agreement, the Plan is unfunded. Benefits under the Plan shall be -8- 9 paid from the general assets of the Company. A Trust, which shall be intended to be a "grantor trust" within the meaning of section 671 of the Code, shall be established pursuant to a trust agreement, to assist the Company in meeting its obligations under the Incentive Plans. Such trust agreement shall provide that the Trust may invest in Units. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company, the Partnership, the Board (or any of its members), or the Committee (or any of its members) and any Participant, any Beneficiary, or any other person. Although the Company may establish an accounting reserve with respect to future payments under the Plan, no reserve or set aside amounts shall imply any rights of any Participant therein. Any reserve or set aside shall be fully subject to the claims of the Company's creditors to the same extent as the general assets of the Company. To the extent that any person acquires a right to receive Units from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. Nothing contained in this Plan shall be construed to give any Participant an ownership interest in, or the right to receive distributions from the Partnership with respect to any Shadow Units credited to the Participant's Account or any Units subject to a transfer related to such Shadow Units until such Units have been transferred to the Participant pursuant to the terms of the Plan. The trust agreement creating the Trust shall contain procedures substantially to the following effect which may be revised to the extent deemed desirable by the Company for the purpose of ensuring that Participants will not be in constructive receipt of income or incur an economic benefit for federal income tax purposes because of the adoption or maintenance of the Trust: (a) The Trustee shall cease payment of benefits to Participants and their Beneficiaries if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this trust agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below. (c) The Board and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Participants or their Beneficiaries. (d) Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. (e) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Participants or their Beneficiaries and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in the trust agreement shall in any way diminish any rights of Participants or their Beneficiaries to pursue their rights -9- 10 as general creditors of the Company with respect to benefits due under the Incentive Plans or otherwise. (f) The Trustee shall resume the payment of benefits to Participants or their Beneficiaries in accordance with the provisions of the trust agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). (g) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to subsection (e) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Participants or their Beneficiaries under the terms of the Incentive Plans for the period of such discontinuance, less the aggregate amount of any payments made to Incentive Plan participants or their beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance. SECTION 11 - TRANSFERS OF UNITS AND PAYMENTS UNDER THE PLAN (a) Within 30 business days after the expiration of the Performance Period with respect to Shadow Units attributable to the Bonus earned by a Participant for any Plan Year, the Company shall deliver or cause to be delivered to the Participant certificates for a number of Units equal to the whole number of such Shadow Units as of the expiration of the Performance Period and cash with respect to any fractional Shadow Unit credited to such Participant's Account in an amount equal to the product of such fraction and the Market Price of a Unit on the date the Performance Period expires. (b) The principal purpose of the Unit Portion of a Participant's Bonus under the Plan is to provide the Participant with a continuing long-term investment in the Partnership. In order to accomplish that principal purpose, it is imperative that a Participant's rights under the Plan with respect to the Unit Portion of any Bonus earned generally be required to remain in the form of Shadow Units until the expiration of the Performance Period with respect to the Shadow Units attributable to any Bonus. Accordingly, in the event that a court of competent jurisdiction finally determines that the Company is obligated to distribute to a Participant, Beneficiary or any other person certificates for any Units reflecting Shadow Units credited to a Participant's Unit Portion Account prior to the expiration of the Performance Period with respect to the Participant or the Committee determines the distribution of such certificates is appropriate, the certificates so distributed to such Participant, Beneficiary or other person shall be restricted as to transferability until the date that the Performance Period would have expired with respect to such Shadow Units had the certificates not been distributed to the Participant, Beneficiary or other person and remained subject to the Plan, and each such Unit certificate shall bear the following legend: The transferability of this certificate and the Units represented hereby are subject to the restrictions, terms and conditions (including forfeiture and restrictions against transfer) applicable to the Shadow Units to which the Units represented by this certificate relate, all as contained in the Plum Creek Management Company, L.P. Management Incentive Plan. A copy of the Plan is on file in the office of the Plum Creek Management Company; 999 Third Avenue, Suite 2300; Seattle, Washington 98104. -10- 11 SECTION 12 - SECURITIES MATTERS (a) Subject to Section 11, the Partnership shall use its best efforts to assure that any securities distributed to Participants hereunder are marketable at the time of distribution, including, to the extent required under applicable law, effecting the registration pursuant to the Securities Act of any Units to be distributed hereunder or effecting similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Partnership shall not be obligated to cause to be issued or delivered any certificates evidencing Units awarded pursuant to the Plan unless and until the Partnership is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of the New York Stock Exchange and any other securities exchange on which Units are traded. The Committee may require, as a condition of the issuance and delivery of certificates evidencing Units pursuant to the terms hereof, that the recipient of such Units make such covenants, agreements and representations, and that such certificates bear such legends, as the Committee, in its sole discretion, deems necessary or desirable. (b) Without limitation on the Committee's powers pursuant to this Section 12, to the extent required by Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or by any comparable or successor exemption under which the Committee believes it is appropriate for the Plan to qualify, the Committee may (i) restrict a Participant's ability to sell Units distributed to such Participant pursuant to this Plan until the expiration of 6 months (or such other period as the Committee deems appropriate) after the date as of which the Shadow Units relating thereto were credited to the Participant's Account, (ii) in lieu of distributing Units with respect to Shadow Units that were credited to a Participant's Account within 6 months (or such other period as the Committee deems appropriate) prior to the expiration of the respective Performance Period, distribute a cash amount equal to the Market Price of such Units as of the expiration of the Performance Period, or (iii) impose such other conditions on the exercise of any election under the Plan or in connection with any distribution under the Plan as the Committee deems appropriate. SECTION 13 - ADJUSTMENT OF ACCOUNTS IN CERTAIN EVENTS (a) Unless the Committee otherwise determines, a Participant's Account shall be adjusted to reflect any securities, cash and other property received with respect to Units equal in number to the Shadow Units credited to such Participant's Account as a result of any Unit distribution or split, recapitalization, extraordinary distribution, merger, consolidation, combination or exchange of Units or similar change or any other event that the Committee, in its sole discretion, deems appropriate. The purpose of this adjustment is to treat Participants as if they were unitholders of Units with respect to the number of Shadow Units credited to their Accounts. However, the Committee may convert any securities, cash or other property that would have been received in respect of Units into an equivalent number of Shadow Units to be credited to the Participant's Account, or may provide that any security received in respect of Units shall be substituted for Units under the Plan. (b) In the event of any change in the number of Units outstanding by reason of any Unit distribution or split, recapitalization, extraordinary dividend, merger, consolidation, combination or exchange of Units or similar change or any other event that the Committee, in its sole discretion, deems appropriate, the maximum aggregate number of Units subject to the -11- 12 Incentive Plans and the number of Shadow Units credited to the Accounts of Participants shall be appropriately adjusted by the Committee. In the event of any change in the number of Units outstanding by reason of any other event or transaction, the Committee may, but need not, make such adjustments in the number and class of Units subject to the Incentive Plans and the Shadow Units credited to the Participant's Account under this Plan as the Committee may deem appropriate. (c) A Participant shall have no rights as a result of any Unit distribution or split, recapitalization, extraordinary distribution, merger, consolidation, combination or exchange of Units or similar change, except as may be determined by the Committee pursuant to this Section 13. SECTION 14 - PAYROLL AND WITHHOLDING TAXES All federal, state, local and other withholding tax requirements, if any, attributable to a distribution shall be met pursuant to the following procedures: (a) The Company and Related Companies shall have the right to withhold from any cash amounts payable to a Participant (including salary, bonus or any other amounts payable from the Company or any Related Company to the Participant) an amount sufficient to satisfy such federal, state, local and other withholding tax requirements, prior to the delivery of any certificate or certificates for such Units or other payments pursuant to the Plan. (b) The Company or Related Company shall have the right to require Participants to remit to the Company or Related Company in cash an amount sufficient to satisfy such federal, state, local and other withholding tax requirements, prior to the delivery of any certificate or certificates for such Units or other payments pursuant to the Plan. (c) At the election of the Participant, to the extent permitted by the Committee, the Participant shall deliver, or the Company or Related Company (or, if a distribution is to be made from the Trust, the Trustee) shall withhold, a number of such Units, the Market Price of which on the date the Units are to be distributed to the Participant is determined by the Committee to be sufficient to satisfy the minimum federal, state, local and other withholding tax requirements under applicable law. (d) If a Participant is subject to Section 16(b) of the Exchange Act, the Committee may prescribe such requirements or limitations on the Participant's ability to elect the withholding options contained in Section 14(c) as may be required by Rule 16b-3 promulgated under Section 16(b) of the Exchange Act or by any comparable or successor exemption. SECTION 15 - TERMINATION AND AMENDMENT The Plan may be terminated with respect to any or all Participants at any time by the Board. Subject to Section 11 hereof, in order to meet the benefit obligations under the Plan upon such termination, the Company shall deliver or cause to be delivered to each Participant with respect to whom the Plan has been terminated a certificate for a number of Units equal to the whole number of Shadow Units credited to such Participant's Account as of the date the Plan was terminated and cash with respect to any fractional Shadow Units credited to such Participant's Account, in an amount equal to the product -12- 13 of such fraction and the Market Price of a Unit as of the date the Plan was terminated. The Plan may be amended by the Board from time to time in any respect; provided that if the Committee, in its sole discretion, deems it appropriate or advisable to comply with Rule 16b-3 or any comparable or successor rule or regulatory requirement, the approval of security holders shall be necessary to adopt any amendment to the extent that the adoption of such amendment without such approval would cause the Plan to no longer comply with Rule 16b-3 or any comparable or successor rule or regulatory requirement. No amendment or termination shall be made that would impair the rights of any Participant in any Shadow Unit theretofore credited or any Unit theretofore transferred, without such Participant's prior written consent; provided that the Company may amend the Plan and the Trust from time to time in such a manner as may be necessary to avoid having the trust agreement pursuant to which the Trust is created, the Incentive Plans or the Trust being subject to ERISA and to avoid the current taxation of the assets held in the trusts established in connection with the Incentive Plans to Participants. Neither a Participant's incurring any income tax liability nor the loss of an investment opportunity as a result of the termination of the Plan shall be considered an impairment of the rights of a Participant. -13- 14 SECTION 16 - BENEFICIARIES, PERMITTED TRANSFEREES, AND OTHER PAYEES 16.1 Designation of Beneficiary. Each Participant shall have the right to designate in writing from time to time a Beneficiary by filing a written notice of such designation with the Committee. A Participant's designation of a Beneficiary may be revoked by filing with the Committee an instrument of revocation or a later designation. Any designation or revocation shall be effective when received by the Committee. In the event of the death of a Participant, any payment required to be made hereunder to such Participant shall be made to such Participant's Beneficiary. Unless the Participant's Beneficiary designation provides otherwise, no person shall be entitled to benefits upon the death of the Participant unless such person survives the Participant. If the Beneficiary designated by a Participant does not survive the Participant or if the Participant has not made a valid Beneficiary designation, the Participant's Beneficiary shall be the Participant's estate. No payment shall be made after the death of a Participant with respect to the Participant's Account, unless the Committee shall have been furnished with such evidence as the Committee may deem necessary to establish the validity of the payment. 16.2 Nontransferability. Except as provided in Section 16.1, no Shadow Units credited to the Participant's Account under the Plan, no Units subject to transfer that have not yet been transferred to Participants pursuant to the Plan, no interest in any trust that may hold Units for the purpose of meeting the Company's obligations under the Incentive Plans, and no other interest or right of a Participant under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (except by will or by the laws of descent and distribution), or in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of a Participant or Beneficiary entitled thereto, or be subject to any lien, directly or indirectly, by operation of law or otherwise, including execution, levy, garnishment, attachment, and bankruptcy. 16.3 Incapacity of Participant or Beneficiary. If the Committee finds that any Participant or Beneficiary to whom a payment is payable under the Plan is unable to care for his or her affairs because of illness or accident or is under a legal disability, any payment due (unless a prior claim therefore shall have been made by a duly appointed legal representative), may in the sole discretion of the Committee, be paid to the spouse, child, parent or brother or sister of such Participant or Beneficiary. Any such payment shall be a complete discharge of the obligations of the Company under the provisions of the Plan. SECTION 17 - EFFECT OF REVOCATION EVENT Upon the occurrence of a Revocation Event, the Board may, in its sole discretion, elect to terminate the Plan, the Trust, or any Participant's Account. The Company shall, in its sole discretion, (a) pay to each Participant whose Account is terminated, as soon as practicable after the date of such termination, a lump sum in cash equal to the Market Price of a Unit multiplied by the aggregate number of Shadow Units reflected in each Participant's Account as of the date of such termination or (b) distribute to each Participant whose Account is terminated, as soon as practicable after the date of such termination, a number of Units equal to the number of Shadow Units reflected in the Participant's Account. If it is finally determined in a proceeding, which the Company either controls or was offered the right to control and declines, that the Participant has an interest in the Trust that is taxable to the Participant notwithstanding any termination of such Participant's Account, the Company shall pay or distribute the Participant's interest (whether or not the Board has previously elected to terminate the Plan, the Trust or the Participant's Account) in accordance with either (a) or (b) of the preceding sentence. SECTION 18 - RIGHTS OF EMPLOYMENT -14- 15 Nothing in this Plan shall interfere with or limit in any way the right of the Company or any Related Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or any Related Company. SECTION 19 - REQUIREMENTS OF LAW AND GOVERNING LAW 19.1 Requirements of Law. The transfer of Units under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 19.2 Governing Law. The Plan and all agreements under the Plan shall be construed in accordance with and governed by the laws of the State of Washington. PLUM CREEK MANAGEMENT COMPANY, L.P. ____________________________________ ____________________________________ Date -15- -----END PRIVACY-ENHANCED MESSAGE-----