-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lbsd8YFz/vQI+cyuf7wN9OZMHYp+MgPn9HNOxxzD/5JVF7NQ/nXEZlyJtImUArxi MyiwvePmI3wx7Eabo5YC+w== 0000891020-97-000379.txt : 19970327 0000891020-97-000379.hdr.sgml : 19970327 ACCESSION NUMBER: 0000891020-97-000379 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970321 DATE AS OF CHANGE: 19970326 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLUM CREEK TIMBER CO L P CENTRAL INDEX KEY: 0000849213 STANDARD INDUSTRIAL CLASSIFICATION: 2400 IRS NUMBER: 911443693 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10239 FILM NUMBER: 97560969 BUSINESS ADDRESS: STREET 1: 999 THIRD AVE CITY: SEATTLE STATE: WA ZIP: 98104 BUSINESS PHONE: 2064673600 MAIL ADDRESS: STREET 1: 999 THIRD AVENUE CITY: SEATTLE STATE: WA ZIP: 98104-4096 10-K 1 FORM 10-K FOR THE FISCAL YEAR ENDED 12/31/96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-10239 PLUM CREEK TIMBER COMPANY, L.P. (Exact name of registrant as specified in its charter) 999 Third Avenue, Seattle, Washington 98104-4096 Telephone: (206) 467-3600 Organized in the State of Delaware I.R.S. Employer Identification No. 91-1443693 Securities registered pursuant to Section 12(b) of the Act: Depositary Units, Representing Limited Partner Interests The above securities are registered on the New York Stock Exchange. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant'S knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Units held by non-affiliates based on the closing sales price on February 28, 1997 was approximately $1,317,059,696. For this calculation, all executive officers and directors have been deemed affiliates. Such determination should not be deemed an admission that such executive officers and directors are, in fact, affiliates of the registrant. DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: None. 2 PART I ITEM 1. BUSINESS GENERAL Plum Creek Timber Company, L.P. (the "Partnership"), a Delaware limited partnership organized in 1989, Plum Creek Manufacturing, L.P. ("Manufacturing"), and Plum Creek Marketing, Inc. ("Marketing"), own, manage, and operate approximately 2.4 million acres of timberland and twelve wood products conversion facilities in the northwest and southeast United States. The Partnership owns 98 percent of Manufacturing, and 96 percent of Marketing. Plum Creek Management Company, L.P., (the "General Partner"), manages the businesses of the Partnership, Manufacturing and Marketing and owns the remaining two percent and four percent of Manufacturing and Marketing, respectively. As used herein, "Company" refers to the combined entities of the Partnership, Manufacturing and Marketing. ACQUISITIONS AND DISPOSITION On October 18, 1996, the Partnership acquired approximately 529,000 acres (plus approximately 9,000 leased acres) of timberland in Louisiana and Arkansas, along with two sawmills, a plywood plant and a nursery from Riverwood International Corporation for a total purchase price of $540 million, plus $11.9 million for working capital (the "Southern Region Acquisition"). See Financial Condition and Liquidity and Note 2 of Notes to Combined Financial Statements. On October 11, 1996, the Company consummated the sale to Stimson Lumber Company ("Stimson") of 107,000 acres of timberland in Northeast Washington and Northern Idaho and the Company's sawmill near Colville, Washington (the "Newport Asset Sale") for approximately $141.9 million, plus $8.7 million for working capital. The Company used the net proceeds from the Newport Asset Sale to pay a portion of the purchase price for the Southern Region Acquisition. See Financial Condition and Liquidity and Note 2 of Notes to Combined Financial Statements. On November 1, 1993, the Partnership purchased approximately 865,000 acres of timberland and other timber related assets located in western Montana (the "Montana Timberland Acquisition") from Champion International Corporation for approximately $260 million. SEGMENT INFORMATION As used herein, "Resources Segment" refers to the combined timber and land management business of the Partnership. "Manufacturing Segment" refers to the combined business of Manufacturing and Marketing. Certain financial information for each business segment is included in Note 13 of Notes to Combined Financial Statements. 2 3 RESOURCES SEGMENT GENERAL. The Partnership owns and manages approximately 2.4 million acres of timberland in the northwest and southeast United States (the "Timberlands"). The Timberlands are geographically segregated into three regions: the Cascades Region in western Washington, the Rocky Mountain Region in western Montana and northern Idaho, and the Southern Region in Louisiana and Arkansas. At December 31, 1996, the Timberlands contained an estimated timber inventory of 8.9 billion board feet ("BBF") of standing timber in the Cascades and Rocky Mountain Regions (the "Northwest Timberlands") and approximately 5.4 million Cunits in the Southern Region (the"Southern Timberlands"). The Resources Segment grows and harvests timber for sale in export and domestic markets and sells, on an opportunistic basis, land which is designated as having a higher and better use than for forest management. The Cascades Region consists of approximately 311,000 acres of timberland containing an estimated 2.1 BBF of standing timber. Logs harvested in the Cascades Region are sold for export to Pacific Rim countries, principally Japan, and to domestic mills owned by third parties, as the Company does not own mills in the Cascades Region. Logs sold for export are generally of higher quality than logs sold into the domestic market. The Rocky Mountain Region consists of approximately 1,593,000 acres of timberland containing an estimated 6.8 BBF of standing timber. The Rocky Mountain Region sells logs to the Manufacturing Segment, with the remainder sold to third-party domestic mills. Simultaneously with the Montana Timberland Acquisition, the Partnership entered into a log sourcing agreement with Stimson to supply Stimson's Montana mills with logs, at prevailing market prices, over a ten year period ending in 2003. The Southern Region consists of approximately 538,000 acres (including 9,000 acres of leased land) containing an estimated 5.4 million Cunits of standing timber. The Southern Timberlands are nearing the end of a process commenced in 1972 of conversion from unmanaged second growth timber into plantation forests. The Partnership expects this process to be completed by approximately 2000. The pine fiber growth from these plantations is expected to increase substantially over the next 10 to 15 years as a result of this conversion. The Southern Region sells sawlogs to the Manufacturing Segment and to third-party domestic mills and sells pulp logs to third-party domestic pulp and paper manufacturers. As part of the Southern Region Acquisition, the Partnership entered into a long-term agreement to supply pulp wood fiber to Riverwood International's West Monroe paperboard plant at prevailing market prices. The Partnership expects that the agreement will provide the Company with a secure market for its local mill residuals and a substantial portion of the pine and hardwood pulp logs harvested from the Southern Timberlands. DOMESTIC LOGS. The Partnership sells its sawlogs directly to the Manufacturing Segment and unaffiliated wood products manufacturers and sells its pulpwood and in-woods chips to unaffiliated pulp and paper manufacturers. The percentage of logs which are sold as sawlogs or pulp logs varies by region and is dependent on, among other things, the species mix and quality of 3 4 the inventory harvested and the market dynamics affecting the given region. The Partnership's customers include numerous operators of conversion facilities. Domestic sawlog sales accounted for approximately 21%, 21% and 22% of the Company's combined revenues in 1996, 1995 and 1994, respectively. In the Cascades Region, approximately 51% of the total volume harvested in 1996 was sold to unaffiliated domestic wood products manufacturers. The Partnership also sold 9% of the volume harvested in 1996 to third parties as pulp logs. Pulp logs generally constitute smaller and lower quality logs which are not suitable for use by wood products manufacturers. In the Rocky Mountain Region, the Partnership sells its logs domestically, virtually all as saw timber. In 1996, approximately 57% of the timber harvested was sold to the Manufacturing Segment and the remainder was sold to third-party domestic mills. In addition, a small amount of lower quality logs is sold to pulp and paper manufacturers when market conditions permit. The fee harvest in the Southern Region during the period from October 19, 1996 through December 31, 1996 consisted of 55% pulp logs and 45% sawlogs. Approximately 43% of the total timber harvest in the Southern Region was sold to the Manufacturing Segment, with the remainder sold to third-party domestic conversion facilities. Due to the strength in the pulp and paper markets in 1995, the Partnership implemented in- woods chipping operations in conjunction with conventional logging operations wherever feasible, producing wood-chips from once valueless treetops and other debris that were previously unutilized. Chip markets are highly susceptible to fluctuations in markets for pulp and paper because pulp and paper manufacturers are the primary customers. During the first half of 1996, a decline in chip prices made it uneconomical to continue most of the Partnership's in-woods chipping operations. However, operations resumed at reduced levels in the second half of the year. Domestic wood and fiber consuming facilities tend to purchase raw materials within relatively confined geographic areas, generally within a 200-mile radius, due to transportation costs. Competitive factors within a market area generally will include price, species and grade, quality, proximity to wood consuming facilities, ability to consistently supply logs meeting the customer's specifications and ability to meet delivery requirements. The Partnership has a reputation as a stable and consistent supplier of well-merchandised, high-quality logs. In domestic log markets, the Partnership competes with numerous private land and timber owners in the northwestern and southeastern United States and the state agencies of Arkansas, Idaho, Louisiana, Montana, Oregon and Washington, as well as lesser amounts of foreign imports, primarily from Chile and New Zealand. In addition, the Partnership competes with the United States government, principally the United States Forest Service ("USFS"), the Bureau of Land Management ("BLM") and the Bureau of Indian Affairs ("BIA"). Timber supplied from public lands in Washington and Oregon is restricted from export, and is sold solely into domestic markets. EXPORT LOGS. Due to its extensive timber holdings, the Partnership harvests large volumes of Douglas-fir logs, historically a preferred species in Japan. Approximately 40% of the total 1996 timber harvest in the Cascades Region was sold for export to Pacific Rim countries, principally 4 5 Japan. Douglas-fir logs sold for export have generally commanded a significant premium over Douglas-fir sold domestically. Export log revenues accounted for 8%, 10% and 12% of combined revenues for 1996, 1995 and 1994, respectively, and accounted for 18%, 21% and 24%, respectively, of operating income in such periods. The Partnership's export log customers consist of large Japanese trading companies who resell the logs purchased to Japanese conversion facilities or wholesalers. Competitors in this market include numerous private land or timber owners in the United States and Canada, as well as companies and state-controlled enterprises in Chile, New Zealand, Russia and Scandinavia, all of which have abundant timber resources. In the export log market, the Partnership competes based on its long- term relationships with established customers and its reputation as a reliable supplier of premium grade logs. Other competitive factors include price, species and grade, and the ability to meet delivery requirements on a year-round basis. TIMBER RESOURCE MANAGEMENT. The Partnership's resource operations involve timber management and harvesting operations, which include road construction and reforestation, as well as wildlife and watershed management. The Partnership employs a number of traditional and newly developed harvesting techniques on its lands based on site specific characteristics and other considerations. The Partnership practices "Environmental Forestry" on the Northwest Timberlands which attempts to better protect and maintain the ecosystem while providing for a reasonable harvest. The Partnership also manages the Southern Timberlands, which consist primarily of managed plantations, in a manner consistent with its environmental stewardship approach. Particular forestry practices vary by geographic region and depend upon factors such as soil productivity, tree size, age and stocking. Forest stands are thinned periodically to improve growth and stand quality until they are harvested. The Partnership actively utilizes pre-commercial and commercial thinning timber management practices. Pre-commercial thinning occurs when the timber harvested is not merchantable. The Partnership believes that such thinning improves the overall productivity of the Timberlands by enhancing the growth of the remaining trees. It is the Partnership's policy to ensure that every acre harvested is promptly reforested. Based on the geographic and climatic conditions of the harvest site, harvested areas may be regenerated naturally by leaving mature trees to reseed the area. Natural regeneration methods are widely used on about 70% of the harvested land in the Rocky Mountain Region. During 1996, the Partnership planted over 4 million seedlings on the Northwest Timberlands, mostly in the Cascades Region where substantially all of the reforestation is done by planting. Substantially all of the areas harvested in the Southern Timberlands are regenerated with seedlings. Forests are subject to a number of natural hazards, including damage by fire, insects and disease. Severe weather conditions and other natural disasters can also reduce the productivity of forest lands and can interfere with the processing and delivery of forest products. However, damage from natural causes is typically localized and would only affect a portion of the Timberlands at any given time. Nevertheless, such hazards are to a large extent unpredictable and there can be no assurance that losses will be so limited. The size, species, diversity and checker-board ownership of the Northwest Timberlands, as well as the Partnership's forest management practices, should help 5 6 to minimize these risks. Consistent with the practices of other large timber companies, the Partnership does not maintain insurance against loss to standing timber on the Timberlands, but maintains insurance for loss of logs due to fire and other occurrences following harvesting. LAND MANAGEMENT. The Partnership seeks to realize the value of property that may have a higher and better use than for commercial timberland management or is otherwise a candidate for sale or exchange. The Partnership identified approximately 150,000 acres of land located in recreational areas or near expanding population centers that may optimally be used for conservation, residential or recreational purposes. Over the next five to fifteen years the Partnership expects to realize the value of these properties, either through sales or exchanges. Approximately 21,600 acres of this land were sold or exchanged during 1996. MANUFACTURING SEGMENT GENERAL. The Manufacturing Segment consists of four lumber mills, two plywood plants, a lumber remanufacturing facility and a medium density fiberboard ("MDF") facility in western Montana and a wood chip plant in Washington (collectively known as the "Northwest Conversion Facilities") and a lumber mill and plywood plant located in Joyce, Louisiana and a lumber mill located in Huttig, Arkansas, all of which were purchased in connection with the Southern Region Acquisition (collectively known as the "Southern Conversion Facilities", and together with the Northwest Conversion Facilities, the "Conversion Facilities"). The Northwest Conversion Facilities produce a wide variety of lumber, plywood and MDF products that are sold to Marketing, which markets and sells the products. Marketing targets the products to retail home centers and various specialty niche markets which are less cyclical than traditional housing related markets. In addition, in order to enhance customer service and provide prompt deliveries, Marketing has established a network of over 40 independent warehouses located strategically throughout the United States. The Southern Conversion Facilities produce a wide variety of lumber and plywood products that are sold to home construction and industrial markets. LUMBER. Manufacturing produces a diverse line of lumber products, including boards, studs and dimension lumber which are manufactured at two studmills, two dimension lumber mills, two random-length lumber mills and a lumber remanufacturing plant. For the years ended December 31, 1996, 1995 and 1994 these mills produced 461 million board feet ("MMBF"), 433 MMBF, and 388 MMBF of lumber, respectively. Production increased in 1996 primarily due to the addition of the two dimension lumber mills in the southeast United States, offset in part by the disposition of the Company's Arden random-length lumber mill, in October 1996. Production increased in 1995 due to the addition of the lumber remanufacturing plant, which began operations in late November 1994, higher productivity due to improved log merchandising specifications and capital improvements, and additional production shifts. Lumber product revenues represented approximately 38% of total combined revenues in 1996, 1995 and 1994. Upgrades at the Pablo mill to allow for more efficient processing of small logs were begun in 1996. This project will be completed in 1997. 6 7 Lumber products manufactured in the Northwest Conversion Facilities are targeted towards domestic lumber retailers, such as retail home center chains, for use in repair and remodeling projects. Value-added products and services such as consumer appearance boards, pull-to-length boards, premium furring strips, premium studs and pattern boards, aimed at retail and other specialty markets, have made the Manufacturing Segment less dependent on the cyclical housing related market. Lumber products manufactured in the Southern Conversion Facilities are targeted toward the home construction, industrial and export markets. In 1996, 54% of Manufacturing's lumber products was sold into retail markets, 19% to stocking distributors, 17% to industrial and remanufactured product markets, 4% to export markets and 6% to other markets. Competition in the Company's lumber markets is primarily based on price and quality, and to a lesser extent, the ability to meet delivery requirements on a consistent long-term basis and to provide specialized customer service. The Partnership competes in domestic lumber markets primarily with other United States and Canadian companies. Canadian lumber producers have increased their penetration into the United States market due to their lower wood fiber costs and favorable exchange rates. During the five-year period ended December 31, 1995, Canadian producers increased their percentage of the North American lumber markets from 27% to 36%. In 1995, the United States and Canadian governments announced a five-year lumber trade agreement effective April 1, 1996. This agreement is intended to reduce the volume of Canadian lumber exported into the United States through the assessment of an export tariff on annual lumber exports to the United States in excess of certain levels from the four major producing provinces. The lumber market is also subject to competition from substitute products, primarily in shelving, window and door markets. Substitute products include radiata pine, MDF, particle board, laminates and wire shelving. Substitution has significantly increased in the past several years due to the increase in the price of studs and boards in the early 1990's. PLYWOOD. Manufacturing produces a diverse line of plywood products at the Company's three plywood facilities. The Northwest Conversion Facilities produce high-grade plywood which is primarily sold into specialized industrial markets. The Southern Conversion Facilities produce commodity and specialty grade panel products used in home construction and furniture. For the years ended December 31, 1996, 1995 and 1994 the plywood plants produced 334 million square feet ("MMSF") (3/8" basis), 294 MMSF, and 290 MMSF of plywood, respectively. The increase in production in 1996 is due to the addition of the Joyce, Louisiana plywood plant in October 1996. Plywood product revenues represented 17%, 18% and 17% of total combined revenues in 1996, 1995 and 1994, respectively. During 1996, the lathe was upgraded at the Evergreen plywood plant which will increase wood recovery by allowing logs to be peeled to a smaller core. During 1995, capital improvements were made that expanded production to include medium-density overlay plywood and scarfed (joined together) plywood to produce longer lengths for specialty products. During 1996, 67% of Manufacturing's plywood products was sold in specialty industrial markets, including carpet strip, recreational boat, recreational vehicle, fiberglass-reinforced panel, manufactured home and furniture markets. Manufacturing's plywood products are generally of higher quality than commodity construction grade products, which makes them more valuable in these specialty niche markets. 7 8 Competition within the plywood market is based primarily on price and quality, and to a lesser extent, the ability to offer a full line of products and to meet delivery requirements on a consistent, long-term basis. The domestic plywood market is characterized by numerous large and small producers and is also subject to competition from oriented strand board ("OSB"), a wood product which is a less expensive and generally lower quality substitute. Due to OSB's cost advantage, its demand and market share in the residential segment has been increasing, and this trend is expected to continue. Between 1994 and 1998 the annual capacity for OSB is expected to nearly double to an industry-wide capacity of 20 billion square feet ("BSF") (3/8" basis). The quality of OSB continues to improve and has become widely accepted in many building applications. However, since OSB does not have the strength, weight and machinability of plywood, it cannot be used in certain specialty applications. Some commodity plywood manufacturers, in order to avoid closing their facilities, have been refocusing their products toward the industrial markets which has resulted in increased competition in markets that the Company serves. The Company expects to remain competitive due to its strong customer base, years of experience in the industrial markets, reputation for high quality products (including various trademarked products such as MarineTech, RV-X, DuraFloor, and Ultra-Core), superior wood, and the full line of products that it offers. MEDIUM DENSITY FIBERBOARD. Manufacturing produces MDF products which are primarily sold to distributors and door, moulding, fixture and furniture manufacturers. During 1995, the manufacturing process was redesigned to produce MDF(2), a higher quality MDF product that can be machined and finished more efficiently. For the years ended December 31, 1996, 1995 and 1994 the plant produced 113 MMSF (3/4" basis), 102 MMSF, and 123 MMSF of MDF, respectively. Production for 1995 was below full capacity due to downtime encountered during the start-up of new high-energy refiners for the Company's new MDF(2) product and deterioration in market demand. Production for 1996 was also below full capacity due to a continued focus on producing high quality MDF(2) during the extended start-up phase. MDF(2) start-up was completed in the second half of 1996. The Manufacturing Segment supplies high quality MDF to markets primarily in North America and Pacific Rim countries. The introduction of MDF(2), one of the highest quality MDF products available, has expanded the Partnership's markets to include higher value applications, such as moulding and kitchen cabinets. In 1996, the Manufacturing Segment sold approximately 58% of its MDF directly to domestic industrial manufacturers or fabricators, 26% to stocking distributors, 10% into overseas export markets, primarily Pacific Rim countries, and 6% to retail and other markets. MDF producers compete on a global scale, primarily on the basis of price, quality and the level of service provided. MDF is also subject to competition from solid wood products and hardboard and particle board products. Competition in the industry has been increasing as a result of significant capacity expansion both in the United States and Canada. In 1996, North American capacity was approximately 1.7 BSF and, by the year 2000, capacity is expected to increase by an additional 0.9 BSF. Much of the capacity additions will be in direct competition with MDF(2). Over the same time period demand is also expected to increase, but at a slower rate. The Partnership believes it is well positioned to compete based on quality and price. MDF(2) commands a price 8 9 premium over standard MDF due to its superior quality, and the panel's physical properties and densities. Moreover, because the Company's fiber supply consists of western softwoods, a slow growth species with a low abrasive content, MDF(2) has proven to have superior machining qualities over competing MDF products. In addition, by eliminating wood chips from the MDF manufacturing process (which substantially reduces raw material costs) and because of the facility's access to low cost energy sources the Partnership believes it is one of the lowest cost producers in the market. CHIPS. Manufacturing's lumber and plywood mills produce residual wood chips as a by-product from the conversion of raw logs into finished products. These wood chips are sold to regional paper and pulp mills. The Company's lumber and plywood facilities produced 333 thousand bone dry units ("MBDU"), 297 MBDU and 288 MBDU of chips in 1996, 1995 and 1994, respectively. The increase in volume in 1996 was due to the addition of the Southern Conversion Facilities in October 1996. In addition, residual wood chip sales volume has increased annually due to increased lumber and plywood production and increased chip recoveries. A substantial portion of the Company's chips produced in the Rocky Mountain Region are sold to a customer under a long-term supply agreement. Manufacturing also produces wood chips at its Cle Elum, Washington chip plant. The chip plant produced 6 MBDU, 32 MBDU and 45 MBDU in 1996, 1995 and 1994, respectively. The chip plant was shut down on April 1, 1996 due to weak chip markets and will not reopen until prices improve. The decrease in production in 1995 resulted from production curtailments for approximately five months due to log supply shortages. RAW MATERIALS. Manufacturing obtains the majority of its raw logs from the Partnership's Timberlands. The Resources Segment provided 70%, 73%, and 63% of the Northwest Conversion Facilities raw log needs in 1996, 1995 and 1994, respectively. The Southern Conversion facilities obtained 75% of their raw logs from the Resources Segment during the period from October 19 through December 31, 1996. The price of logs obtained from the Partnership is determined quarterly based upon estimated market prices and terms in effect at the time. The Timberlands provide a consistent supply of quality logs and preferred species to the Conversion Facilities, although over time the average log size is expected to decline, and the species mix is expected to change due to harvest and growth patterns. Manufacturing has and will continue to purchase stumpage and logs from external sources, which include the USFS, BIA, BLM and state and private timberland owners. At December 31, 1996 and 1995, the Northwest Conversion Facilities had 84 MMBF and 75 MMBF, respectively, of timber under contract from external sources which may be harvested over the next three years. The USFS harvest plan is expected to provide for a 1997 harvest of 300 MMBF in the geographic area of the Northwest Conversion Facilities. However, due in part to legal challenges and changes in public policy, the USFS will most likely sell less volume. Manufacturing is permitted to bid on up to approximately fifty percent annually of this USFS volume, with the remainder set aside for small businesses. In addition, approximately 450 MMBF of timber is expected to be made available annually from other sources. At December 31, 1996, the Southern Conversion Facilities had 18 MMBF of timber under contract from external sources which may be harvested over a three 9 10 year period. The amount of timber expected to be available from other sources in 1997 in the geographic area of the Southern Conversion Facilities is 16 MMBF and 200 MMBF from the USFS and other sources, respectively. The geographic area in which the Conversion Facilities operate may expand or contract from year to year as the cost of logs and value of manufactured products fluctuate. (For further discussion of other timber supply issues see "Federal and State Regulations".) The MDF facility has a consistent supply of sawdust and wood shavings from internal and external sources. The remanufacturing facility uses short pieces of lumber, a by-product of Manufacturing's studmill operations. COMPETITION Markets for forest products are highly competitive in terms of price and quality. Many of the Company's competitors have substantially greater financial and operating resources than the Company. In addition, wood products are subject to increasing competition from a variety of substitute products, including non-wood and engineered wood products. Plywood markets are subject to competition from OSB, and lumber and log markets are subject to competition from other worldwide suppliers. The Partnership believes it is able to compete effectively due to its extensive private timber inventory (which includes several premium species such as Douglas-fir and Ponderosa Pine), its proven leadership in environmental forestry which has reduced the uncertainty associated with ever increasing levels of federal and state regulation, its reputation as a dependable, long-term supplier of quality products, its innovative approach to providing high quality, value-added products to various specialty and industrial niche markets and the integration of its timberlands with its efficient manufacturing processes. See "Resources Segment" and "Manufacturing Segment." SEASONALITY Domestic log sales volumes from the Northwest Timberlands are typically at their lowest point in the second quarter of each year during spring break-up, when warming weather thaws and softens roadbeds, restricting access to logging sites. Log sales volumes from the Southern Timberlands are generally at their lowest point during the first quarter of each year, as winter rains limit operations in some areas. Export log sales are affected in part by variations in inventory, both domestically and in the countries where such logs are sold, as well as by weather conditions. Winter logging activity in the Pacific Northwest takes place at lower elevations, where predominantly second growth logs are found, affecting the volume of higher quality export logs sold during this time of the year. Demand for manufactured products is generally lower in the fall and winter quarters when activity in the construction markets is slower, and higher in the spring and summer quarters when these markets are more active. In addition to seasonal fluctuations in demand, prices of manufactured products can be impacted by weather-related, seasonal fluctuations in supply, as production can be hampered during severely cold winter months and then rebound when warmer spring weather arrives. Working capital varies with seasonal fluctuations. Log inventories increase 10 11 going into the winter season to prepare for reduced harvest during spring break-up. FEDERAL AND STATE REGULATIONS GENERAL. The activities of the Company are subject to various federal and state environmental laws and regulations which impose limitations on the discharge of pollutants into the air and water and which also establish standards for the treatment, storage and disposal of solid and hazardous waste and govern the discharge of runoff stormwater and wastewater. The General Partner believes that the Company is in substantial compliance with such laws and regulations. (See Item 3. Legal Proceedings.) The activities of the Company are also subject to federal and state regulations regarding natural resources and forestry operations and the requirements of the federal Occupational Safety and Health Act and comparable state statutes relating to the health and safety of the Company's employees. The General Partner believes that the Company is in substantial compliance with such laws and regulations. The Company conducts operations in or near significant environmentally sensitive areas which include the habitats of numerous species, including a number of threatened or endangered species. As a result, the Company's activities in such areas may be subject to restrictions relating to the harvesting of timber and the construction of roads. THREATENED AND ENDANGERED SPECIES. The Endangered Species Act ("ESA") protects species threatened with possible extinction. Protection of endangered species may include the imposition of restrictions on timber harvesting and road building activities in areas containing the affected species. A number of species indigenous to the Timberlands have been listed as threatened or endangered or have been proposed for such status under the ESA, including the northern spotted owl, marbled murrelet, gray wolf, red cockaded woodpecker, mountain caribou, grizzly bear, bald eagle and various salmon species. In 1990, the United States Fish and Wildlife Service (the "USFWS") listed the northern spotted owl ("Owl") as a threatened species throughout its range in Washington, Oregon and California. At the time of the listing, the USFWS issued suggested guidelines ("Guidelines") to be followed by landowners in order to comply with the ESA's prohibition against harming or harassing Owls. The Guidelines recommend several measures, including the restriction of harvest activities in areas within a certain proximity of known Owl activity centers. The USFWS also has proposed a rule for the conservation of the Owl on non-federal land. Such proposed rule has not been adopted but is substantially similar to the Washington Rule described below. In May 1996, the Washington State Forest Practices Board (the "Board") adopted permanent regulations, effective July 1996, to protect habitat for the Owl (the "Washington Rule"). Under the Washington Rule, designated Owl special emphasis areas ("SEAs") have restrictions that are similar to but slightly greater than those contained in the Guidelines. Approximately 60% of the Partnership's timberlands in the Cascades Region are within SEAs. 11 12 The Washington Rule exempts from its provisions forest practices that are consistent with a federally approved habitat conservation plan and related permit. In June 1996, the Partnership received a permit under the ESA from the USFWS and the National Marine Fisheries Service ("NMFS" and together with the USFWS, the "Services") that covers the Partnership's forest management on 170,000 acres within SEAs in the Cascades Region (the "Planning Area"). Substantially all of the areas impacted by Owls are within the Planning Area. As a part of the permit application, the Partnership prepared a multi-species habitat conservation plan (the "HCP") that will govern the Partnership's management activities in the Planning Area during the 50-year life of the permit. Consistent with government policy (the "No-Surprises Policy"), the implementing agreement for the HCP provides that no additional costs will be imposed on or land restrictions required from the Partnership in the Planning Area, absent extraordinary circumstances, so long as the Partnership is in compliance with the terms of the HCP. The HCP requires the Partnership to maintain certain levels of wildlife habitat and to take numerous other mitigation measures, including the protection of riparian areas. In consideration for such mitigation, the permit authorizes forestry practices that are consistent with the HCP even though they may have an adverse impact on the four listed species currently covered by the plan and permit, including the Owl. The HCP provides that the Services will amend the permit to add subsequently listed species without requiring the Partnership to provide additional mitigation absent extraordinary circumstances. Such circumstances would include situations where continued activity under the HCP would have a significant material adverse impact on the species and mitigation on federal land would not alleviate the concern. As an incentive to the Partnership to create additional wildlife habitat in the Planning Area, the permit provides certain additional authorization during a second 50-year period if the wildlife habitat within the Planning Area exceeds levels set in the HCP. The permit thus is expected to provide long-term certainty and predictability for the Partnership's harvest activities in the Planning Area. For lands within the Planning Area, the HCP management restrictions replace existing state and federal restrictions for Owls. In November 1996, a lawsuit was filed by a number of groups in Federal District Court for the District of Columbia challenging the process by which the Clinton Administration adopted the No-Surprises Policy. The Partnership is unable at this time to predict the outcome of the challenge, or what effect, if any, it might have on the HCP, if successful. In December 1995, the Partnership entered into an agreement to conserve grizzly bears (the "Grizzly Bear Agreement") with the USFWS, the USFS, and the state of Montana covering 83,000 acres of the Partnership's timberlands in the Swan Valley in western Montana. Under the Grizzly Bear Agreement, the Partnership has agreed to protect certain habitat and to minimize the impact of the Partnership's forestry activities on the grizzly bear. In consideration for this mitigation, the USFWS authorized forestry practices in the Swan Valley that are consistent with the agreement even though such practices may have an adverse impact on grizzly bears. In November 1996, several organizations filed a lawsuit against the Secretary of the Interior and certain USFWS and Forest Service officials in Federal District Court for the District 12 13 of Montana challenging the Grizzly Bear Agreement under the ESA and the National Environmental Policy Act. The Partnership is unable at this time to predict the outcome of the challenge or what effect, if any, it might have on the Grizzly Bear Agreement, if successful. Although the HCP and Grizzly Bear Agreement have been implemented and are functioning as expected, there can be no assurance that the terms of such agreements will remain in force or be sufficient to protect against subsequent amendment of the ESA or additional listings thereunder, or against changes to other applicable laws and regulations. Any such changes could materially and adversely affect the Partnership's operations. In addition, legal challenges such as those described above could disrupt the continued operation of the HCP and the Grizzly Bear Agreement and thereby reduce the level of certainty the Partnership anticipates gaining from such plans. The ESA also prohibits the federal government from jeopardizing species listed under the ESA or from destroying or adversely modifying their designated critical habitat. Private landowners are potentially affected by these restrictions if a private activity requires federal action, such as the granting of access or federal funding. Where there is such a federal connection, the federal agency involved must consult with the USFWS or, in the case of anadromous fish, NMFS to determine that the proposed activity would not jeopardize the listed species or cause direct or indirect adverse modification of its designated critical habitat. If the landowner's proposed activity would have such effects, the USFWS or NMFS must propose, where possible, alternatives or modifications to the proposed activity. The Northwest Timberlands are often intermingled with federal land in or near areas that include the habitats of a number of threatened or endangered species such as the Owl and the grizzly bear. Access across federal lands may require federal approval. In the past, the Partnership's access to such areas has been delayed by administrative processes and legal challenges and has been restricted under the ESA. The Partnership believes that access to its lands in the Planning Area and the Swan Valley should be facilitated by the HCP and the Grizzly Bear Agreement, although no assurance can be given that further such delays will not occur. At this time, the Partnership believes that federal and state laws and regulations related to the environment and the protection of endangered species will not have a material adverse effect on the Partnership's financial position, results of operations or liquidity. The Partnership anticipates, however, that increasingly strict laws and regulations relating to the environment, natural resources and forestry operations, as well as increased social concern over environmental issues, may result in additional restrictions on the Partnership leading to increased costs, additional capital expenditures and reduced operating flexibility. LEGISLATION RESTRICTING LOG EXPORTS. Federal legislation currently prohibits the sale of unprocessed logs harvested from federal lands located in the western half of the U.S. if such logs will be exported from the U.S. by the purchaser thereof, or if such logs will be used by the purchaser thereof, as a substitute for timber from private lands which is exported by such purchaser. In order to enforce this substitution prohibition, the legislation requires persons who export private logs and who wish to purchase federal timber to obtain an approved federal timber "sourcing area". 13 14 To obtain approval it must be shown that the desired federal timber sourcing area is economically and geographically separate from the area from which such person exports private logs. In 1991, the Company applied for and obtained an approved sourcing area for the Partnership's conversion facilities. Under the legislation, sourcing areas are subject to review and renewal at least every five years. In October 1995, the United States Forest Service issued final regulations implementing the 1990 legislation that could have made it more difficult to obtain sourcing areas. These regulations, along with regulations providing for periodic review of sourcing areas, however, have been temporarily withdrawn pursuant to Congressional action to allow time for further public comment and for Congress to consider modifications to the export law. Revisions to the law and regulations have not yet been proposed. Although the uncertainty surrounding the export regulations makes it difficult to predict the timing or the outcome of a review, the Company believes that its sourcing area meets the current statutory test and should be renewed. In addition, federal legislation prohibits the export of unprocessed logs harvested from certain state lands. Initially, Washington and Oregon prohibited the export of all logs harvested from state lands. The legislation provided, however, that the ban in Washington state on the export of state logs would become a partial ban beginning January 1, 1996. Pending finalization of the rules, the full ban is being maintained. Proposals have also been made from time to time, but to date have been unsuccessful, to either ban or tax the export of unprocessed logs harvested from private lands. INCOME TAX CONSIDERATIONS PARTNERSHIP STATUS. The Partnership is not a taxable entity and incurs no federal income tax liability. Each partner is required to take into account in computing his or her federal income tax liability, his or her allocable share of income, gains, losses, deductions and credits of the Partnership, regardless of whether cash distributions are made. Distributions by the Partnership to a partner are generally not taxable. Publicly traded partnerships will, as a general rule, be taxed as corporations. However, an exception (the "Qualifying Income Exception") exists with respect to publicly traded partnerships of which 90% or more of the gross income for every taxable year consists of qualifying income. Qualifying income includes income from the processing, refining, marketing or transportation of timber and land sales. The Partnership's principal sources of income include income from the sale of timber, the transportation of timber, the operation of sawmills and the production of plywood and MDF. The Internal Revenue Service ("IRS") has issued two rulings to the Partnership that income from the operation of sawmills and the production of plywood and MDF is qualified for this purpose. SECTION 754 ELECTION. The Partnership has made the election permitted by Section 754 of the Internal Revenue Code (the "Code"). The election requires a purchaser of depositary units representing limited partner interests ("Units") to adjust his or her share of the basis in the 14 15 Partnership's properties ("Inside Basis") pursuant to Section 743(b) of the Code to fair market value (as reflected by his or her Unit cost). A Unitholder's allocable share of Partnership income, gains, losses and deductions is determined in accordance with the Unitholder's unique basis under this election. Such election is irrevocable and may not be changed without the consent of the IRS. The Section 743(b) adjustment is attributed solely to a purchaser of Units and is not added to the basis of the Partnership's assets associated with all of the Unitholders. FEDERAL INCOME TAXATION - GENERAL. Marketing, organized as a separate corporation, reports all of its income, gains, losses, deductions and credits arising from its operations on its own tax return and pays a corporate tax on any resulting net income. Under current law, Marketing's net income is subject to federal income tax at rates of up to 35%. Losses realized by Marketing do not flow through to the Partnership, but are carried back and forward, within certain limitations, to offset taxable income of Marketing in past or future years. Distributions, if any, received by the Partnership from Marketing generally would be characterized as either taxable dividends of current or accumulated earnings and profits or in the absence of earnings and profits, as a nontaxable return of capital (to the extent of the Partnership's tax basis in Marketing's stock) or as taxable capital gain (after the Partnership's basis in such stock is reduced to zero). STATE TAX INFORMATION. The Partnership conducts operations in six states, four of which (Arkansas, Idaho, Louisiana and Montana) have a state income tax. To simplify the Unitholders' state filing requirements, the Partnership files composite returns in each of those states and pays the state income tax due on behalf of non-resident Unitholders. Marketing conducts operations in approximately 25 states for which it pays state corporate income taxes. TAX-EXEMPT ENTITIES. Certain entities otherwise generally exempt from federal income taxes (such as individual retirement accounts ("IRAs"), employee benefit plans and other charitable or exempt organizations) may be subject to federal income tax if their share of Unrelated Business Taxable Income ("UBTI") exceeds $1,000. For years prior to 1994, all income derived from publicly traded partnerships was classified as UBTI. For years after 1993, income is classified as UBTI dependent upon source. Most of the Partnership's income continues to be classified as UBTI. Regulated investment companies are required to derive 90% or more of their gross income from qualified sources, such as interest or security trading income; gross income from the Partnership is not qualifying income for purposes of this test. TIMBER INCOME. Section 631 of the Code provides special rules by which gains from the sale of timber or cut logs, which would otherwise be taxable as ordinary income, are treated in whole or in part as capital gains from the sale of property used in a trade or business. The Partnership has elected to apply the provisions of Section 631. Substantially all of the Partnership's 1996 taxable income is expected to qualify for capital gains treatment. 15 16 ENCUMBRANCES Under the terms of the Partnership's debt agreements, the Partnership has agreed not to pledge, assign or transfer the Timberlands, except under limited circumstances. Under the terms of the First Mortgage Notes of Manufacturing, the holders of these notes have a first mortgage lien on a significant portion of the Conversion Facilities. In addition, the Partnership guarantees the First Mortgage Notes of Manufacturing. The Partnership's title to the timberlands acquired during the formation of the Company on June 8, 1989 and in the Southern Region Acquisition includes substantially all the related hard rock mineral interests. However, the Partnership did not obtain the hard rock mineral interests to a significant portion of the 865,000 acres of timberland purchased in the Montana Timberland Acquisition. In addition, the Partnership does not own oil and gas interests to any of its Timberlands. The title to the Timberlands is subject to presently existing easements, rights of way, flowage and flooding rights, servitudes, cemeteries, camping sites, hunting and other leases, licenses and permits, none of which materially adversely affect the value of the Timberlands or materially restrict the harvesting of timber or other operations of the Partnership. EMPLOYEES The Company currently has approximately 425 salaried and 1,950 hourly employees, including employees of the General Partner that manage the businesses of the Company. The Company believes that its employee relations are good. The Company's wage scale and benefits are generally competitive with other forest products companies. Hourly employees (154 employees) at the Huttig, Arkansas lumber mill participated in the UBC Southern Council of Industrial Workers, Local Union No. 2346, AFL-CIO under a contract with Riverwood International Corporation. The Company is currently meeting with union representatives regarding contract negotiation. The harvesting and delivery of logs are conducted by independent contractors who are not employees of the Company. ITEM 2. PROPERTIES The Company believes that its Timberlands and Conversion Facilities are suitable and adequate for current operations. The Conversion Facilities are maintained through on-going capital investments, regular maintenance and equipment upgrades. The majority of the Conversion Facilities are modern, state of the art facilities. The Company owns all of the Conversion Facilities. Substantially all of the Conversion Facilities are operated at, or near, maximum capacity levels year round. See Item 1. Business for discussion of the location and description of properties and encumbrances related to properties. 16 17 ITEM 3. LEGAL PROCEEDINGS In June 1995, the Company received a Compliance Order ("Order") from the Environmental Protection Agency ("EPA") under the Clean Air Act. The Order alleges that the startup in 1990 of a boiler at the Company's Pablo sawmill did not meet new source performance standards ("NSPS"). Work on the boiler project commenced in March 1989, when NSPS did not apply to boilers of this size. Prior to final startup of the boiler, however, new rules were proposed that, if applicable, would have required meeting these standards. The EPA has taken the position that the new rules applied, and is seeking compliance with NSPS. In December 1995, the Company voluntarily installed a pollution control device and an opacity monitor on the boiler at a cost of $700,000 without waiving any defenses to the EPA claim. The Company believes it is in full compliance with both the Order and NSPS. On March 12, 1996, the Department of Justice, on behalf of the EPA, filed suit in federal court seeking civil penalties and injunctive relief for the alleged violation of NSPS in accordance with the Clean Air Act which contemplates civil penalties. The Company believes it has meritorious defenses to the claim. However, due to the inherent nature of litigation, the Company cannot predict the outcome of the enforcement case. If not resolved earlier, it is likely that the matter will go to trial in 1997. The General Partner believes, based upon available information and current EPA enforcement policies, that the ultimate outcome of this action will not have a material adverse effect on the Company's financial position, results of operations or liquidity. The Company has worked with the State of Washington Department of Ecology ("DOE") concerning opacity above permitted levels associated with emissions at the Arden Sawmill that may have occurred prior to the sale of the mill to Stimson Lumber Company in October of 1996 as part of the Newport Asset Sale. Prior to the sale of the mill, the Company received a letter from DOE requesting information concerning such emissions. DOE has not taken any other compliance actions with respect to this matter. As part of the Newport Asset Sale, the Company agreed to indemnify Stimson for any liabilities that arise relating to the period when the Company owned the Arden Sawmill. The Company believes that this matter will not materially affect the Company's financial position, results of operations or liquidity. There is no pending litigation, and to the knowledge of the General Partner there is no threatened litigation involving the Company which would have a material adverse effect on the financial position, the results of operations or liquidity of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 17 18 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS The Partnership's Units are traded on the New York Stock Exchange. As of February 28, 1997, there were approximately 61,000 beneficial owners of 46,323,300 outstanding Units. Trading price data, as reported by the New York Stock Exchange, and declared cash distribution information for 1996 and 1995 are as follows:
1996 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. - - ---- -------- -------- -------- -------- High $ 27-3/4 $ 27-5/8 $ 27 $ 27-1/8 Low 23-3/4 23-1/4 22-7/8 25 Cash Distribution per Unit $ 0.49 $ 0.51 $ 0.51 $ 0.51
1995 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. - - ---- -------- -------- -------- -------- High $ 24 $ 26-1/8 $ 26-5/8 $ 25-1/4 Low 19-7/8 21-7/8 23-5/8 21-7/8 Cash Distribution per Unit $ 0.49 $ 0.49 $ 0.49 $ 0.49
Cash distributions are paid from available cash as defined by the Partnership's partnership agreement. It is the Company's intention to maintain the distribution into the foreseeable future; however, there can be no guarantee. In addition, the Company's debt agreements have certain restrictive covenants limiting the amount of cash distributions. 18 19 ITEM 6. SELECTED FINANCIAL DATA
1996(1) 1995 1994 1993(2) 1992(3) ------- ---- ---- ------- ------- For the year: (In millions, except per Unit): Revenues $ 633.7 $ 585.1 $ 578.7 $ 501.0 $ 439.9 Depreciation, Depletion and Amortization 56.9 54.1 54.1 38.8 39.0 Operating Income 165.0 159.0 164.1 126.6 97.8 Net Income 223.6 110.7 112.2 91.4 64.2 Capital Expenditures (4) 19.3 30.7 25.8 29.3 25.6 Net Cash Provided by Operations 171.9 165.2 155.1 115.3 78.0 Net Income per Unit (5) 4.71 2.17 2.36 1.92 1.34 Cash Distributions Declared per Unit (5) 2.02 1.96 1.67 1.38 1.17 At year end (in millions): Working Capital 153.0 111.5 90.5 51.0 99.7 Total Assets 1,336.4 826.1 826.2 818.7 587.0 Total Debt 780.8 531.4 544.4 569.9 318.5 Partners' Capital (6) $ 491.6 $ 233.9 $ 223.0 $ 192.6 $ 225.3 Operating Data: Northwest Timberlands Fee Timber Harvested (MMBF) 577 562 559 458 469 Southern Timberlands Fee Timber Harvested (thousand Cunits) 127 Northwest Timberlands Non-Fee Timber Harvested (MMBF) 128 116 71 77 117 Southern Timberlands Non-Fee Timber Harvested (thousand Cunits) 21 Lumber Production (MMBF) 461 433 388 352 395 Plywood Production (MMSF) (3/8" basis) 334 294 290 289 294 MDF Production (MMSF) (3/4" basis) 113 102 123 106 109
(1) Included in 1996 results of operations was a gain of $105.7 million related to the Newport Asset Sale. Results include the impact of the Southern Region Acquisition from October 19, 1996 and the Newport Asset Sale from October 12, 1996. (2) During 1993, the Company elected to change its method for valuing inventories from average cost to the last-in, first-out ("LIFO") method. This change in accounting lowered 1993 earnings by $8.0 million or $0.18 per Unit. The cumulative effect of the accounting change and pro forma effects on prior years' earnings have not been included because such effects are not reasonably determinable. In addition, on August 30, 1993, the Partnership redeemed the 1.25 million Deferred Participation Interests (on a pre-Unit split basis) for $63.0 million. Results subsequent to 1993 include the impact of the November 1993 Montana Timberland Acquisition. (3) Included in 1992 results of operations was the sale of the 164,000 acre Gallatin Unit, together with the Belgrade sawmill for $23 million plus the value of inventory. The sale resulted in a net gain of $15.6 million. (4) Does not include $560.7 million related to the Southern Region Acquisition in 1996 or $255.3 million related to the timberlands acquired as part of the Montana Timberland Acquisition in 1993. (5) Per Unit amounts have been restated for the December 6, 1993 three-for-one Unit split. (6) The Partnership issued 5.7 million Units during 1996 for net proceeds of $144.3 million. 19 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EVENTS AND TRENDS AFFECTING OPERATING RESULTS MARKET FORCES. The demand for logs and manufactured wood products depends upon international and domestic market conditions, the value of the U.S. dollar in foreign exchange markets, competition, the availability of substitute products and other factors. In particular, the demand for logs, lumber, plywood and MDF is affected by residential and industrial construction, and repair and remodel activity. These activities are subject to fluctuations due to changes in economic conditions, tariffs, interest rates, population growth and other economic, demographic and environmental factors. Additionally, the demand for logs is impacted by the demand for wood chips in the pulp and paper markets. CURRENT MARKET CONDITIONS. Prices for domestic logs in the Cascades Region for 1996 decreased from levels experienced in 1995, primarily as a result of weak pulp and chip markets. Pulp and paper markets have been weak for the past year resulting in an excess supply of wood chips. The over-supply has depressed chip prices and caused downward pressure on the price of domestic logs in the Cascades Region. However, prices have improved slightly since the third quarter of 1996 as a result of the robust housing market, the strong export market and reduced log production due to winter weather. Prices for domestic logs in the Rockies Region for 1996 have remained relatively flat from those experienced during 1995. The downward pressure due to weak chip prices and declining commodity plywood prices has been offset by favorable lumber prices. Prices have declined since the third quarter of 1996 due to seasonal declines in building activity and declining commodity plywood prices. Pulp log prices declined significantly during 1996 in both regions as a result of weakness in the pulp and paper markets. Domestic and pulp log prices in the Southern Region increased during the fourth quarter of 1996 as a result of wet weather limiting supply. In the export market, 1996 Douglas-fir prices were stable compared to 1995. Japanese demand was strong due to a robust Japanese housing market as a result of an improving economy, record low interest rates and an upcoming increase in the Japanese consumption tax. At year end, prices for Douglas-fir began to soften as a result of importers adjusting to an anticipated decline in demand following an April 1, 1997 consumption tax increase. Export prices for whitewoods have declined as compared to 1995 due to ample supply and increased acceptance of substitute products. However, whitewood prices improved during the fourth quarter of 1996 due to a temporary supply shortage which resulted from strong domestic demand and prior production curtailments. Industry composite indices for lumber commodity prices were 19% higher in 1996 than in 1995. The increase in lumber prices was a result of the robust housing market, the reduced supply of Canadian lumber and strength in the repair and remodel markets in the retail sector. The housing sector has been strong throughout 1996 due to favorable interest rates and a good economy. As a result, the backlog of unsold homes has been declining and housing starts have remained strong. Effective April 1, 1996 the United States and Canada agreed to place a quota on the amount of duty- free lumber that can be exported to the United States. Additionally, the cost of manufacturing 20 21 lumber in the Canadian Provence of British Columbia has increased due to higher stumpage prices and environmental costs. Both the quota and higher costs have contributed to the upward pressure on the price of lumber. Lumber prices in the repair and remodel markets continued to improve as a result of supply limitations caused by a decline in the supply of preferred western species and numerous mills targeting production toward the housing market sector. Industry composite indices for plywood commodity prices were 12% lower than in 1995 primarily due to increased competition from OSB. North American OSB capacity increased by over 20% in 1996, and capacity is expected to increase by approximately 50% in 1997 through 2001. In the fourth quarter of 1996, OSB prices declined to a record five-year low due to seasonal declines in building activity and increased capacity. This has resulted in an unusually high plywood to OSB price premium. Prices for the Company's MDF were 16% lower in 1996, compared to 1995, due to significant capacity expansion during 1996. Between 1995 and 1996, North American MDF capacity increased from approximately 1.5 billion square feet to approximately 1.7 billion square feet and is expected to expand even faster in 1997. At the same time demand has been reduced as distributors reduce inventory levels in anticipation of further price declines. COMPARABILITY OF FINANCIAL STATEMENT PERIODS. As part of its business strategy, the Company has pursued and will continue to pursue the acquisition of additional timberlands to increase inventories of fee timber. On November 1, 1993, the Company completed the Montana Timberland Acquisition. In addition, on October 18, 1996, the Company completed the Southern Region Acquisition. (See Note 2 to Notes to Combined Financial Statements.) The Company may also, from time to time, sell timberlands and facilities if attractive opportunities arise. The Newport Asset Sale was completed on October 11, 1996. Revenues and operating income generated by the assets sold in the Newport Asset Sale were $61.0 million and $15.7 million, respectively, in 1996 and were $67.8 million and $14.6 million, respectively in 1995. Accordingly, the comparability of periods covered by the Company's financial statements is, and in the future may be, affected by the impact of acquisitions and divestitures. HARVEST PLANS. The Partnership determines its harvesting plans based on a number of factors, including age and size of, and species distribution within, its timber acreage, economic maturity of each harvest area, environmental considerations and mill requirements both in the Conversion Facilities and at unaffiliated mills. The timing of harvests of merchantable timber depends in part on growth cycles and in part on economic conditions. Harvest levels in the Rocky Mountain Region have averaged approximately 360 MMBF (excluding the harvest from the timberlands sold in the Newport Asset Sale) over the last three years. These harvest levels are expected, on average, to remain relatively stable over the next several years. By the year 2001, the Partnership anticipates that it will have nearly completed the conversion of slower growing forests to younger, more productive stands in the Rocky Mountain Region, at which time it anticipates a moderate reduction in the region's harvest levels. Harvest levels in the Cascades Region have averaged 155 MMBF over the past three years. The Partnership expects its harvest levels to decline gradually for the foreseeable future as the conversion process in the region approaches completion. Harvest levels in the Southern Region are expected to increase modestly between 1997 and 2000 as we complete the conversion of mature second growth pine timberlands into intensively 21 22 managed pine plantations. Following the completion of the conversion process, harvest levels should decline and then gradually increase as the Company benefits from the faster growing, intensively managed plantations. Since harvest plans are influenced by projections of demand, price, availability of timber from other sources and other factors that may be outside of the Partnership's control, actual harvest levels may vary. The Partnership believes that its harvest plans are sufficiently flexible to permit modification in response to short-term fluctuations in the markets for logs and lumber. RESULTS OF OPERATIONS The following table compares operating income by segment for the years ended December 31, 1996, 1995 and 1994. Operating Income by Segment (In Thousands)
1996 1995 1994 ---- ---- ---- Resources ......................... $ 163,306 $ 139,192 $ 150,730 Manufacturing ..................... 22,516 35,567 32,175 Other & Eliminations .............. (20,834) (15,783) (18,771) --------- --------- --------- Total ............................. $ 164,988 $ 158,976 $ 164,134 --------- --------- ---------
1996 COMPARED TO 1995 Resources Segment revenues increased by $42.3 million, or 12.9%, to $369.3 million in 1996, as compared to $327.0 million in 1995. Such increase was primarily due to a $38.2 million increase in land sales revenue and an $18.3 million increase as a result of the addition of the Southern Timberlands in the Southern Region Acquisition, offset in part by a decrease of $14.4 million in revenues from Northwest Timberland pulpwood and chip sales. The increase in land sales revenue was due to approximately 21,600 acres of higher and better use land sales in 1996 resulting in revenues of $42.3 million, compared to $4.1 million in 1995. (See Item 1. Business Resources Segment - Land Management.) The decrease in pulpwood and chip revenues was a result of weak pulp and paper markets and the over supply of available wood fiber. Domestic log sales volume in the Northwest Timberlands increased by 5%, compared to 1995, as a result of increased harvest levels to take advantage of favorable pricing resulting from strong product markets. Export prices decreased by 8%, compared to 1995, due to a higher percentage of lower valued logs in the 1996 sales mix. Resources Segment costs and expenses increased by $18.2 million, or 9.7%, to $206.0 million in 1996 compared to $187.8 million in 1995. Such increase was primarily due to $10.1 22 23 million of additional costs related to the Southern Region, the increase in land sales, the increase in Northwest Timberlands domestic log sales volume and increased costs related to longer hauling distances, offset in part by reduced pulpwood and chip operations. Manufacturing Segment revenues increased by $12.2 million, or 3.2%, to $387.9 million in 1996 compared to $375.7 million in 1995. Such increase was due to additional revenues of $24.7 million from the Southern Conversion Facilities, increased lumber sales prices and increased MDF sales volumes, offset in part by lower MDF sales prices and decreased chip revenues. Lumber sales prices in the Northwest increased by 6% as compared to the year earlier period as a result of the robust housing market, strength in the repair and remodel markets and supply constraints. The U.S. housing market remained unusually strong throughout most of the summer and fall. Additionally, as a result of the U.S. - Canada trade agreement, Canada was not able to significantly increase its output to take full advantage of the improving U.S. housing market. The Partnership also experienced favorable pricing in the repair and remodel markets due to reduced supply as a result of a number of mills targeting production toward the home construction segment. MDF sales volume was restored to normal levels during the second half of 1996 and was 8% higher than the sales volume for 1995. MDF sales volume was unusually low during 1995 due to production downtime associated with the conversion of production processes to manufacture high quality, super-refined MDF(2) and weak market conditions. MDF prices decreased by 16% as a result of significant 1996 capacity expansion. However, the Company experienced less downward price pressure than the industry as a whole due to increasing demand for its higher quality MDF(2) product. Residual chip prices decreased by 29% over 1995 due to excess chip inventories throughout the entire industry. The chip plant was closed during most of 1996 as a result of weak chip markets. Manufacturing Segment costs and expenses increased by $25.3 million, or 7.4%, to $365.4 million in 1996 compared to $340.1 million in 1995. Such increase was primarily due to $24.0 million of additional costs related to the Southern Conversion Facilities and increased MDF sales volumes. Other Costs and Eliminations (which consists of corporate overhead, intercompany log profit elimination, and intercompany LIFO elimination) decreased operating income by $20.8 million in 1996 compared to $15.8 million in 1995. The variance of $5.0 million was primarily due to the release of more intercompany log profit in 1995 than in 1996 as a result of reducing inventory levels in 1995. On a combined basis, the Resources Segment's profit on intercompany log sales is deferred until Manufacturing converts existing log inventories into finished products and sells them to third parties. Interest expense increased by $3.3 million as a result of both an increase in outstanding debt and debt issuance costs related to the October 1996 Southern Region Acquisition. Gain on disposition of assets increased in 1996 primarily as a result of a $105.7 million gain related to the Newport Asset Sale. The income allocated to the General Partner increased by $5.3 million during 1996 compared to 1995 as a result of higher quarterly distributions to the Unitholders which increased the incentive distribution paid to the General Partner and an increase in net income. Net income is allocated to 23 24 the General Partner based on two percent of the Company's net income (adjusted for the incentive distribution paid), plus the incentive distribution. The incentive distribution is based on a percentage of the quarterly distribution paid which totaled $2.00 per Unit for the year ended 1996, compared to $1.90 per Unit in 1995. 1995 COMPARED TO 1994 Resources Segment revenues increased by $2.6 million, or 0.8%, to $327.0 million in 1995, as compared to $324.4 million in 1994. Such increase was primarily due to a $21.7 million increase in revenues from pulpwood and chip sales offset in part by lower export log sales volume and lower domestic log prices. The increase in pulpwood and chip revenues was due to the addition in 1995 of in-woods chipping operations, which utilize small tops of trees and small trees from thinning operations, and a significant increase in pulp log prices and sales volume as compared to 1994 due to strong pulp and paper markets. Export log sales volume decreased by 18% as compared to 1994 due to the shifting of lower quality export logs to the domestic market as a result of a weaker Japanese economy and a planned reduction in harvest levels. Domestic log prices decreased by 8% as compared to 1994. The decrease was attributable entirely to the Rocky Mountain Region and was due to weak lumber markets and aggressive competition from Canadian lumber producers. Resources Segment costs and expenses increased by $14.1 million, or 8.1%, to $187.8 million in 1995 as compared to $173.7 million in 1994. Such increase was primarily due to the costs relating to higher volumes of pulpwood and chip sales. Manufacturing Segment revenues increased by $3.5 million, or 0.9%, to $375.7 million in 1995 as compared to $372.2 million in 1994. Such increase was due to an increase in lumber sales volume and a 60% increase in revenues from residual chip sales, offset in part by lower lumber prices and lower MDF sales volume. Lumber sales volume increased by 8% as compared to 1994 due to increased production as a result of the Partnership's new lumber remanufacturing facility, higher productivity due to improved log merchandising specifications and capital improvements, and additional production shifts. Lumber prices decreased by 13% as compared to 1994 due to a weaker housing market as a result of generally slower economic conditions, and increased competition from both Canadian imports and substitute products. While the Partnership's lumber prices are influenced by commodity prices, it is able to maintain sales volume due to its high concentration of sales in the repair and remodel and industrial markets, which are less affected by the slow housing market. MDF sales volume decreased by 15% as compared to 1994 as a result of production downtime associated with weak market conditions and operational issues encountered during the start-up of new high-energy refiners for the Partnership's new MDF(2) product. Residual chip revenues increased due to a substantial increase in prices over 1994 due to strong pulp and paper markets. Manufacturing Segment costs and expenses were $340.1 million for each of the years ended 1995 and 1994. Increased costs due to increased lumber sales volumes were offset by lower log costs (14% and 4% lower for lumber and plywood, respectively) and lower MDF 24 25 production costs as a result of downtime. Other Costs and Eliminations reduced operating income by $15.8 million in 1995 as compared to reducing income by $18.8 million in 1994. The variance was primarily due to lower intercompany profit elimination, offset in part by an increase in the intercompany LIFO elimination. On a combined basis, the Resources Segment's profit on intercompany log sales is deferred until Manufacturing converts existing log inventories into finished products and sells them to third parties. The 1995 intercompany profit elimination was lower than the prior year's due to a decrease in log inventory levels, and a lower log transfer price as a result of a weaker domestic log market. On a combined basis, the LIFO impact related to price fluctuations on the sale of intercompany logs is eliminated. The 1995 intercompany LIFO elimination was greater than the prior year's due to a lower log transfer price, which resulted in a greater decrement in Manufacturing's separate company LIFO reserve as compared to the combined LIFO reserve. The income allocated to the General Partner increased by $6.2 million during 1995 compared to 1994 as a result of higher quarterly distributions to the Unitholders which increased the incentive distribution paid to the General Partner. Net income is allocated to the General Partner based on 2% of the Company's net income (adjusted for the incentive distribution paid), plus the incentive distribution. The incentive distribution is based on a percentage of the quarterly distribution paid which totaled $1.90 per Unit for the year ended 1995, as compared to $1.62 per Unit in 1994. EXPORT SALES The Company sells logs and finished wood products for export. These sales are denominated in U.S. dollars and are generally sold to Pacific Rim countries, principally Japan, Canada and Europe. Combined export revenues as a percentage of total revenues were 11%, 13% and 15% for 1996, 1995, and 1994, respectively. FINANCIAL CONDITION AND LIQUIDITY Net cash provided by operating activities was $171.9 million, $165.2 million and $155.1 million for 1996, 1995 and 1994, respectively. The increase of $6.7 million in 1996 is primarily a result of increased operating income compared to 1995. In 1994, operating cash flow was reduced by $9.2 million, net of expense, for the funding of certain employee benefit plans. There was no such funding in 1996 or 1995. For further discussion of these benefit plans, see Note 11 of Notes to Combined Financial Statements. On December 31, 1996, the Company had $123.9 million of cash and cash equivalents. On October 18, 1996, the Partnership acquired approximately 529,000 acres (plus approximately 9,000 leased acres) of timberland in Louisiana and Arkansas, along with two sawmills, a plywood plant and a nursery in the Southern Region Acquisition for a total purchase price of $540 million, plus $11.9 million for working capital. The Partnership financed the Southern Region Acquisition from cash on hand, including proceeds from certain ordinary course asset dispositions, the proceeds from the Newport Asset Sale, and two new bank credit 25 26 facilities dated as of October 17, 1996, (the "New Bank Facilities"), consisting of a five-year $400 million unsecured, revolving credit facility (the "New Line of Credit") and an 18-month $250 million unsecured bridge facility (the "Bridge Facility"). The Partnership borrowed $50 million under the Bridge Facility and $322 million under the New Line of Credit to finance the Southern Region Acquisition. No further borrowings are permitted under the Bridge Facility. On October 22, 1996, the Partnership issued 5,600,000 Units for net proceeds of $141.4 million. On November 5, 1996, 115,000 additional Units were issued by the Partnership for net proceeds of $2.9 million. The combined net proceeds were used to repay the Bridge Facility and a portion of the amount outstanding under the New Line of Credit. On November 13, 1996, the Partnership issued $200 million of senior notes (the "New Notes") in a private placement. The New Notes have an average life of 13 years and bear interest at a weighted average rate of 7.88% annually. The New Notes are unsecured obligations of the Partnership and the terms of the New Notes are substantially similar to the terms of its existing senior notes. The proceeds from the New Notes were used to repay a portion of the outstanding borrowings under the New Line of Credit. The commitment under the New Line of Credit was reduced to $225 million in November 1996. See Note 2 and 6 of Notes to Combined Financial Statements. As of December 31, 1996, the Partnership had $161.0 million outstanding under the New Line of Credit. The New Line of Credit permits the Partnership to borrow up to $225 million for general corporate purposes, including standby letters of credit issued on behalf of the Partnership or Manufacturing. The New Line of Credit matures on December 13, 2001 and bears interest at a floating rate. Borrowings on the New Line of Credit fluctuate daily based on cash needs. As of January 3, 1997, the Partnership had repaid $126.0 million of the borrowings under the New Line of Credit. The Company's loan agreements contain certain restrictive covenants, including limitations on harvest levels, sale of assets, cash distributions and the amount of future indebtedness. In addition, the New Line of Credit requires the maintenance of a required interest coverage ratio. The Company was in compliance with its debt covenants as of December 31, 1996. The Partnership will distribute $0.51 per Unit for the fourth quarter of 1996. The distribution will equal $31.0 million (including $7.4 million to the General Partner), and will be paid on February 28, 1997 to Unitholders of record on February 14, 1997. The computation of cash available for distribution includes required reserves for the payment of principal and interest, as well as other reserves established at the discretion of the General Partner for working capital, capital expenditures, and future cash distributions. Cash required to meet the Partnership's quarterly cash distributions, capital expenditures and to satisfy interest and principal payments on the Company's debt will be significant. The General Partner expects that all debt service will be funded from cash generated by operations. The Partnership expects to make cash distributions from current funds and cash generated from operations. It is anticipated that future capital expenditures will be funded from cash on hand, 26 27 cash generated from operations, and borrowings under the New Line of Credit. The Company is involved in certain environmental and regulatory proceedings and other related matters. Although it is possible that new information or future developments could require the Company to reassess its potential exposure related to these matters, the Company believes, based upon available information, that the resolution of these issues will not have a materially adverse effect on its results of operations, financial position or liquidity. CAPITAL EXPENDITURES. Capital expenditures for the Resources Segment were $6.5 million, $8.5 million and $7.1 million for 1996, 1995 and 1994, respectively, excluding $514.9 million related to the Southern Region Acquisition in 1996. Resources Segment capital expenditures included the construction of logging roads and reforestation. Capital expenditures for the Manufacturing Segment were $12.8 million, $22.2 million and $18.7 million for 1996, 1995 and 1994, respectively, excluding $45.8 million related to the Southern Region Acquisition in 1996. Capital expenditures in 1996 included the purchase and installation of various lumber and plywood optimization projects, as well as replacements and upgrades of other equipment in several of the Conversion Facilities. Capital expenditures have decreased as compared to 1995 and 1994 due to the completion of major improvements at the majority of the manufacturing facilities. Planned capital expenditures for the Resources Segment in 1997 are $12 million, primarily for logging roads and reforestation. The Manufacturing Segment's 1997 planned capital expenditures are $12 million which includes various lumber and plywood projects to improve productivity and increase recovery, as well as replacements and upgrades of equipment in several of the Conversion Facilities. EFFECT OF INFLATION During recent years the Company has generally experienced increased costs due to the effect of inflation, particularly in the Manufacturing Segment, on the cost of raw materials, labor, supplies and energy and, in the Resources Segment, on logging and hauling costs. However, the Company utilizes the LIFO inventory valuation method for its raw materials, work-in-process and finished goods inventory which generally matches current costs to current revenues and thus, tends to reflect the impact of inflation on cost of goods sold. 27 28 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION PLUM CREEK TIMBER COMPANY, L. P. COMBINED STATEMENT OF INCOME
Year Ended December 31, ------------------------------- 1996 1995 1994 (In Thousands, Except Per Unit) Revenues ....................................... $633,741 $585,074 $578,657 -------- -------- -------- Costs and Expenses: Cost of Goods Sold ....................... 429,897 388,450 375,782 Selling, General and Administrative ...... 38,856 37,648 38,741 -------- -------- -------- Total Costs and Expenses ............... 468,753 426,098 414,523 -------- -------- -------- Operating Income ............................... 164,988 158,976 164,134 Interest Expense ............................... (50,141) (46,836) (47,410) Interest Income ................................ 1,291 1,073 889 Gain (Loss) on Disposition of Assets - Net ..... 108,852 (133) (1,074) Other Expense - Net ............................ (1,777) (3,403) -------- -------- -------- Income before Income Taxes ..................... 224,990 111,303 113,136 Provision for Income Taxes ..................... 1,391 572 924 -------- -------- -------- Net Income ..................................... $223,599 $110,731 $112,212 General Partner Interest ....................... 27,777 22,487 16,325 -------- -------- -------- Net Income Allocable to Unitholders ............ $195,822 $ 88,244 $ 95,887 ======== ======== ======== Net Income per Unit ............................ $ 4.71 $ 2.17 $ 2.36 ======== ======== ========
See accompanying Notes to Combined Financial Statements. 28 29 PLUM CREEK TIMBER COMPANY, L.P. COMBINED BALANCE SHEET
December 31, ------------------------------ 1996 1995 (In Thousands) ASSETS Current Assets: Cash and Cash Equivalents............ $ 123,892 $ 87,604 Accounts Receivable.................. 23,697 31,750 Inventories.......................... 53,884 47,366 Timber Contract Deposits............. 5,987 2,320 Other Current Assets................. 15,025 4,949 ------------ ------------ 222,485 173,989 Timber and Timberlands - Net............ 922,652 467,992 Property, Plant and Equipment - Net..... 172,688 166,152 Other Assets............................ 18,609 17,953 ------------ ------------ Total Assets............................ $ 1,336,434 $ 826,086 ============ ============ LIABILITIES Current Liabilities: Current Portion of Long-Term Debt.... $ 17,400 $ 14,100 Accounts Payable..................... 13,443 15,771 Interest Payable..................... 9,530 7,543 Wages Payable........................ 13,187 11,513 Taxes Payable........................ 5,275 5,122 Workers' Compensation Liabilities.... 1,450 2,318 Other Current Liabilities............ 9,212 6,081 ------------ ------------ 69,497 62,448 Long-Term Debt.......................... 602,400 419,800 Lines of Credit......................... 161,000 97,500 Workers' Compensation Liabilities....... 8,533 8,405 Other Liabilities....................... 3,356 4,065 ------------ ------------ Total Liabilities....................... 844,786 592,218 ------------ ------------ Commitments and Contingencies PARTNERS' CAPITAL Limited Partners' Units................. 490,105 234,117 General Partner......................... 1,543 (249) ------------ ------------ Total Partners' Capital................. 491,648 233,868 ------------ ------------ Total Liabilities and Partners' Capital. $ 1,336,434 $ 826,086 ============ ============ See accompanying Notes to Combined Financial Statements.
29 30 PLUM CREEK TIMBER COMPANY, L. P. COMBINED STATEMENT OF CASH FLOWS
Year Ended December 31, ---------------------------------------- 1996 1995 1994 -------- -------- -------- (In Thousands) Cash Flows From Operating Activities: Net Income ...................................................... $223,599 $110,731 $112,212 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: Depreciation, Depletion and Amortization ..................... 56,945 54,097 54,143 Gain on Property Dispositions - Net .......................... (108,852) (2,986) (419) Working Capital Changes, net of effect of business acquisition and disposition: Accounts Receivable ......................................... 8,053 (4,884) 1,845 Inventories ................................................. (1,052) 7,319 (6,583) Timber Contract Deposits .................................... 1,663 503 164 Other Current Assets ........................................ (10,579) (936) 1,386 Accounts Payable ............................................ (2,328) 2,540 193 Interest Payable ............................................ 1,987 (138) 4,676 Wages Payable ............................................... (77) 2,089 (645) Taxes Payable ............................................... (661) (972) 446 Workers' Compensation Liabilities ........................... (868) (292) Other Current Liabilities ................................... 2,148 (697) (1,560) Funding of Benefit Plans - Net ............................... 4,375 2,411 (9,198) Other ........................................................ (2,405) (3,571) (1,545) -------- -------- -------- Net Cash Provided By Operating Activities ....................... 171,948 165,214 155,115 -------- -------- -------- Cash Flows From Investing Activities: Southern Region Acquisition ..................................... (555,966) Proceeds from Newport Asset Sale ................................ 148,676 Additions to Other Properties ................................... (19,280) (30,683) (25,837) Proceeds from Other Property Dispositions ....................... 7,329 6,777 4,472 Other ........................................................... (1,806) 458 -------- -------- -------- Net Cash Used In Investing Activities ........................... (419,241) (25,712) (20,907) -------- -------- -------- Cash Flows From Financing Activities: Cash Distributions .............................................. (110,116) (99,840) (81,790) Borrowings on Lines of Credit and Bridge Facility ............... 948,250 399,000 368,345 Payments on Lines of Credit and Bridge Facility ................. (884,750) (399,000) (530,846) Issuance of Long-Term Debt ...................................... 200,000 150,000 Retirement of Long-Term Debt .................................... (14,100) (13,000) (13,000) Issuance of Limited Partner Units ............................... 144,297 -------- -------- -------- Net Cash Provided By (Used In) Financing Activities .......................................... 283,581 (112,840) (107,291) -------- -------- -------- Increase in Cash and Cash Equivalents ........................................... 36,288 26,662 26,917 Cash and Cash Equivalents: Beginning of Year ............................................... 87,604 60,942 34,025 -------- -------- -------- End of Year ..................................................... $123,892 $ 87,604 $ 60,942 ======== ======== ======== Supplementary Cash Flow Information Interest Paid ................................................... $ 46,635 $ 46,904 $ 42,734 Income Taxes Paid - Net ......................................... $ 972 $ 952 $ 973
See accompanying Notes to Combined Financial Statements. 30 31 PLUM CREEK TIMBER COMPANY, L. P. NOTES TO COMBINED FINANCIAL STATEMENTS NOTE 1. ACCOUNTING POLICIES BASIS OF PRESENTATION. Plum Creek Timber Company, L.P. (the "Partnership"), a Delaware limited partnership, Plum Creek Manufacturing, L.P. ("Manufacturing"), and Plum Creek Marketing, Inc. ("Marketing"), own, manage and operate approximately 2.4 million acres of timberland and twelve wood products conversion facilities in the northwestern and southeastern United States. See Note 2 to Notes to Combined Financial Statements. The Partnership owns 98 percent of Manufacturing and 96 percent of Marketing. Plum Creek Management Company, L.P. (the "General Partner"), manages the businesses of the Partnership, Manufacturing and Marketing and owns the remaining two percent general partner interest of Manufacturing and four percent of Marketing. As used herein, "Company" refers to the combined entities of the Partnership, Manufacturing and Marketing. "Resources Segment" refers to the timber and land management business of the Partnership, and "Manufacturing Segment" refers to the combined businesses of Manufacturing and Marketing. The Resources Segment grows and harvests timber for sale in export markets, primarily Pacific Rim countries, and domestic markets, primarily in Arkansas, Idaho, Louisiana, Montana and Washington. The Manufacturing Segment produces a wide variety of lumber, plywood and medium density fiberboard ("MDF") products. The Manufacturing Segment targets these products to retail home centers and various specialty niche markets as well as housing related markets. The principal markets for lumber and plywood products are in the United States and, to a lesser extent, Pacific Rim countries and Europe. MDF markets primarily consist of North America and, to a lesser extent, Pacific Rim countries. The combined financial statements of the Company include all the accounts of the Partnership, Manufacturing and Marketing. All significant intercompany transactions have been eliminated in combination. Certain financial statement reclassifications have been made to the 1995 and 1994 amounts presented for comparability purposes and have no impact on net income. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NET INCOME PER UNIT. Net income per Unit is calculated using the weighted average number of Units outstanding, divided into the combined Partnership net income, after adjusting for the General Partner interest. The weighted average number of Units outstanding was 41,619,803, 40,608,300 and 40,608,300 for the years ended December 31, 1996, 1995 and 1994, respectively. 31 32 REVENUE RECOGNITION. Revenues received from the sale of logs, wood products and by-products, primarily wood chips, are generally recorded as revenue at the time of shipment. Sales are denominated in U.S. dollars. Sales of timberlands identified by the Partnership as higher and better use lands (for use other than for forest management purposes) are included in revenues when the sale is consummated. CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Substantially all of the cash and cash equivalents are deposited with one financial institution. INVENTORIES. Logs, work-in-process, and finished goods inventories are stated at the lower of cost or market on the last-in, first-out ("LIFO") method. Cost for manufactured inventories includes raw materials, labor, supplies, energy, depreciation and production overhead. Cost of log inventories includes timber depletion, stumpage, associated logging and harvesting costs, road costs and production overhead. The average cost method is used to value the Company's supplies inventories. TIMBER AND TIMBERLANDS. Timber and timberlands, including logging roads, are stated at cost less depletion for timber previously harvested and accumulated amortization. Cost of the Partnership's timber harvested is determined based on the volume of timber harvested in relation to the amount of estimated recoverable timber. The Partnership estimates its timber inventory using statistical information and data obtained from physical measurements, site maps, photo-types and other information gathering techniques. For timberlands located in the southern United States, estimates of future growth and costs related thereto are also made. The cost of logging roads is amortized over the estimated useful life on a straight-line basis. PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is stated at cost. Improvements and replacements are capitalized. Depreciation is provided for on a straight-line basis for buildings and on a unit-of-production basis for machinery and equipment, which approximates a straight-line basis. Maintenance and repairs necessary to maintain properties in operating condition are expensed as incurred. The cost and related accumulated depreciation of property sold or retired are removed from the accounts and any gain or loss is recorded. INCOME TAXES. The Partnership and Manufacturing are not subject to federal income tax and their income or loss is included in the tax returns of individual Unitholders. The Partnership files composite returns in the states in which it does business, paying taxes on behalf of nonresident Unitholders. State taxes paid on behalf of nonresident Unitholders are included in other expense. Marketing, as a separate taxable corporation, provides for income taxes on a separate company basis. UNIT-BASED COMPENSATION PLANS. The Company accounts for Unit-based compensation plans under the provisions of Accounting Principles Board Opinion No. 25 ("APB 25"). The Company has adopted the disclosure-only provisions of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123") for the year ended December 31, 1996. 32 33 The difference between compensation cost under APB 25 and FAS 123 is not material. See Note 11 to Notes to Combined Financial Statements for discussion of the above referenced plans. NOTE 2. ACQUISITION AND DISPOSITION On October 18, 1996, the Partnership acquired approximately 529,000 acres (plus approximately 9,000 leased acres) of timberlands in Louisiana and Arkansas, along with two sawmills, a plywood plant and a nursery from Riverwood International Corporation for a total cash purchase price of $540 million, plus $11.9 million for working capital (the "Southern Region Acquisition"). The acquisition was accounted for as a purchase and the operations of the business acquired have been included in the Company's combined financial statements from the date of acquisition. The total purchase price of $560.7 million, including $4.1 million of acquisition costs and $4.7 million of assumed liabilities, was allocated as follows (in thousands): Timber and Timberlands $508,834 Property, Plant and Equipment 33,477 Other Assets 18,429 -------- Total Assets Acquired $560,740 ======== Total Liabilities Assumed $ 4,745 ========
The Southern Region Acquisition was initially financed with the New Bank Facilities (see Note 6 to Notes to Combined Financial Statements) and cash on hand, including the proceeds from the Newport Asset Sale (discussed below). The proceeds from the issuance of Limited Partner Units (see Note 8 to Notes to Combined Financial Statements) and the Senior Notes due 2016 (see Note 6 to Notes to Combined Financial Statements) were used to repay a portion of the New Bank Facilities. The unaudited combined results of operations of the Company on a pro forma basis as though the Southern Region Acquisition, the issuance of Limited Partner Units and borrowings on the New Bank Facilities and Senior Notes due 2016 had occurred as of the beginning of the years ended December 31, 1996 and 1995 are as follows (in thousands, except per Unit):
1996 1995 ---- ---- Revenues $771,153 $756,569 Net Income 240,540 122,653 Net Income Allocable to Unitholders 210,080 97,073 Net Income per Unit $ 4.54 $ 2.10
The pro forma financial information is not necessarily indicative of results of operations that would have occurred had the Southern Region Acquisition occurred as of those dates or of results which may occur in the future. 33 34 On October 11, 1996, the Company consummated the sale to Stimson Lumber Company ("Stimson") of 107,000 acres of timberland in northeastern Washington and northern Idaho and its sawmill near Colville, Washington (the "Newport Asset Sale") for approximately $141.9 million, plus $8.7 million for working capital as of the closing date. The Company used the net proceeds from the Newport Asset Sale to pay a portion of the purchase price for the Southern Region Acquisition. The sale resulted in a net gain of approximately $105.7 million, net of expenses of approximately $2.0 million. NOTE 3. ACCOUNTS RECEIVABLE Accounts receivable were presented net of allowances for doubtful accounts of $1,425,000 and $1,316,000 at December 31, 1996 and 1995, respectively. NOTE 4. INVENTORIES Inventories consisted of the following at December 31 (in thousands):
1996 1995 ---- ---- Raw materials (logs) ....................... $23,171 $18,967 Work-in-process ............................ 7,227 5,798 Export logs ................................ 1,048 420 Finished goods ............................. 15,034 16,012 ------- ------- 46,480 41,197 Supplies ................................... 7,404 6,169 ------- ------- Total ...................................... $53,884 $47,366 ======= =======
Excluding supplies, which are valued at average cost, the cost of the LIFO inventories valued at the lower of average cost or market (which approximates current cost) at December 31, 1996 and 1995 was $46.4 million and $46.3 million, respectively. NOTE 5. TIMBER AND TIMBERLANDS AND PROPERTY, PLANT AND EQUIPMENT Timber and timberlands consisted of the following at December 31 (in thousands):
1996 1995 ---- ---- Timber and logging roads - net ............... $824,160 $423,475 Timberlands .................................. 98,492 44,517 -------- -------- Timber and Timberlands - net ................. $922,652 $467,992 ======== ========
34 35 Property, plant and equipment consisted of the following at December 31 (in thousands):
1996 1995 ---- ---- Land, buildings and improvements ............. $ 60,173 $ 50,056 Machinery and equipment ...................... 229,513 227,598 --------- --------- 289,686 277,654 Accumulated depreciation ..................... (116,998) (111,502) --------- --------- Property, Plant and Equipment - net .......... $ 172,688 $ 166,152 ========= =========
NOTE 6. BORROWINGS Long-term debt and lines of credit consisted of the following at December 31 (in thousands):
1996 1995 ---- ---- Senior Notes due 2007 ................................ $ 138,600 $ 145,200 Senior Notes due 2009 ............................... 150,000 150,000 First Mortgage Notes ................................. 131,200 138,700 Senior Notes due 2016 ................................ 200,000 Lines of Credit ...................................... 161,000 97,500 --------- --------- Total Long-term Debt ................................. 780,800 531,400 Less: Current Portion ................................ (17,400) (14,100) --------- --------- Long-Term Portion .................................... $ 763,400 $ 517,300 ========= =========
In October 1996, the Partnership entered into two new bank credit facilities (the "New Bank Facilities"), consisting of a five-year $400 million unsecured, revolving credit facility (the "New Line of Credit") and an 18-month $250 million unsecured bridge facility (the "Bridge Facility") which were used to finance a portion of the Southern Region Acquisition. On October 28, 1996, the Bridge Facility was terminated and on November 13, 1996 the commitment under the New Line of Credit was reduced to $225 million, including standby letters of credit issued on behalf of the Partnership or Manufacturing. The New Line of Credit matures on December 13, 2001 and bears interest at a floating rate (7.0% as of December 31, 1996). The weighted average interest rate for borrowings under the New Line of Credit during 1996 was 6.0%. Borrowings on the New Line of Credit fluctuate daily based on cash needs. As of January 3, 1997, the Partnership had repaid $126.0 million of the borrowings under the New Line of Credit. 35 36 The New Line of Credit replaced two revolving credit facilities which allowed the Partnership to borrow up to $135 million and matured through October 2000. The revolving credit facilities bore interest at a variable rate (6.5% as of December 31, 1995). On November 13, 1996, the Partnership issued $200 million of senior notes (the "Senior Notes due 2016") in a private placement. The Senior Notes due 2016 mature in 2006 through 2016 and bear interest at rates ranging from 7.74% through 8.05%, payable semiannually. The proceeds from the Senior Notes due 2016 were used to repay a portion of the outstanding borrowings under the New Line of Credit. On August 1, 1994, the Partnership issued $150 million of senior notes due in full on August 1, 2009 (the "Senior Notes due 2009") which bear interest at 8.73%, payable semiannually. The proceeds obtained from the issuance of the Senior Notes due 2009 were used to refinance a portion of the $260 million line of credit incurred to finance the November 1, 1993 Montana Timberland Acquisition. The Senior Notes due 2007 and the First Mortgage Notes bear interest of 11.125%, payable semiannually. The Senior Notes and the First Mortgage Notes (collectively, the "Note Agreements") are redeemable prior to maturity subject to a premium on redemption, which is based upon interest rates of U.S. Treasury securities having similar average maturity as the Note Agreements. At December 31, 1996 and 1995, the premium that would have been due upon early retirement would have approximated $99 million and $119 million, respectively. The three series of senior notes are unsecured. The First Mortgage Notes are collateralized by a significant portion of the property, plant and equipment of Manufacturing and are guaranteed by the Partnership. The annual principal payments on the Note Agreements and mandatory principal payments under the New Line of Credit are as follows (in thousands):
Note New Line Agreements Of Credit ---------- --------- 1997 $ 17,400 1998 18,400 1999 18,400 2000 26,950 2001 26,950 $ 161,000 Thereafter 511,700
All principal and interest payments due under the Note Agreements are nonrecourse to the General Partner. The Note Agreements and the New Line of Credit contain certain restrictive covenants, including limitations on harvest levels, sales of assets, cash distributions and the amount of future 36 37 indebtedness. In addition, the New Line of Credit requires the maintenance of a required interest coverage ratio. The Company was in compliance with such covenants at December 31, 1996 and 1995. NOTE 7. FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents approximate fair value due to the short-term maturities of these instruments. The estimated fair value of the Company's debt, based on current interest rates for similar obligations with like maturities, was approximately $842 million and $615 million and was carried at $781 million and $531 million as of December 31, 1996 and 1995, respectively. NOTE 8. PARTNERS' CAPITAL The changes in Partners' Capital were as follows (in thousands):
Limited General Partners Partner Total --------- --------- --------- January 1, 1994 ...................... $ 192,925 $ (370) $ 192,555 Net Income ........................... 95,887 16,325 112,212 Cash Distributions ................... (65,784) (16,006) (81,790) --------- --------- --------- December 31, 1994 ................... 223,028 (51) 222,977 Net Income ........................... 88,244 22,487 110,731 Cash Distributions ................... (77,155) (22,685) (99,840) --------- --------- --------- December 31, 1995 .................... 234,117 (249) 233,868 Net Income ........................... 195,822 27,777 223,599 Cash Distributions ................... (84,131) (25,985) (110,116) Issuance of Limited Partner Units .... 144,297 144,297 --------- --------- --------- December 31, 1996 .................... $ 490,105 $ 1,543 $ 491,648 ========= ========= =========
The total number of Units outstanding at December 31, 1996 and 1995 was 46,323,300 and 40,608,300, respectively. On October 22, 1996, the Partnership issued 5,600,000 Units for net proceeds of $141.4 million. On November 5, 1996, 115,000 additional Units were issued by the Partnership for net proceeds of $2.9 million. The combined proceeds are net of issuance costs of $8.6 million. The combined net proceeds were used to repay the Bridge Facility and a portion of the amounts outstanding under the New Line of Credit. In accordance with the Partnership Agreement, the General Partner is authorized to make quarterly cash distributions. For the years ended December 31, 1996, 1995 and 1994, the General Partner declared $2.02, $1.96 and $1.67 per Unit, respectively, to be paid to the Partnership's Unitholders. If quarterly cash distributions exceed $0.21-2/3 per Unit, the General Partner is provided with an incentive distribution. See Note 11 to Notes to Combined Financial Statements. 36 38 NOTE 9. INCOME TAXES The provision for income taxes was as follows (in thousands):
Year Ended December 31, ------------------------------------ 1996 1995 1994 ----- ----- ----- Current Federal ................... $1,201 $ 464 $ 829 Current State ..................... 190 108 95 ------ ------ ------ Total ............................. $1,391 $ 572 $ 924 ====== ====== ======
Reconciliation of the federal statutory rate to the effective income tax rate was as follows:
1996 1995 1994 ---- ---- ---- Statutory tax rate ................................................. 35.0% 35.0% 35.0% State tax net of federal tax benefit ............................... 0.1 0.1 0.1 Nontaxable partnership income ...................................... (34.6) (34.1) (33.6) Net operating loss carryforward .................................... 0.0 0.0 (0.7) Other .............................................................. 0.1 (0.5) 0.0 ---- ---- ---- Effective tax rate ................................................. 0.6% 0.5% 0.8% ---- ---- ----
NOTE 10. EMPLOYEE PENSION AND RETIREMENT PLANS PENSION PLAN. The Company's pension plan is a non-contributory defined benefit plan covering substantially all employees. The salaried employee benefits are based on years of credited service and the highest five-year average compensation levels, and the hourly employee benefits are based on years of service. Contributions to the plan are based upon the Projected Unit Credit actuarial funding method and are limited to amounts that are currently deductible for tax purposes. 38 39 The following table sets forth the funded status of the Company's pension plan at December 31 (in thousands):
1996 1995 ---- ---- Actuarial present value of benefit obligations: Vested .......................................... $ 34,704 $ 36,431 Non-vested ...................................... 882 926 -------- -------- Accumulated benefit obligation ...................... $ 35,586 $ 37,357 ======== ======== Projected benefit obligation ........................ $ 44,386 $ 46,979 Plan assets, primarily marketable equity and debt securities, at fair market value ................ 48,300 40,576 -------- -------- Projected benefit obligation in excess of plan assets 3,914 (6,403) Unrecognized net loss ............................... 2,954 12,554 Prior service cost not yet recognized ............... (1,200) (78) -------- -------- Prepaid pension cost ................................ $ 5,668 $ 6,073 ======== ========
The components of the Company's pension cost were as follows (in thousands):
Year Ended December 31, -------------------------- 1996 1995 1994 ---- ---- ---- Service cost ................................ $ 1,910 $ 1,277 $ 1,441 Interest cost on projected benefit obligation 3,103 2,886 2,709 Actual return on plan assets ................ (7,568) (6,210) 432 Net amortization and deferral ............... 4,548 3,273 (2,715) ------- ------- ------- Net pension cost ............................ $ 1,993 $ 1,226 $ 1,867 ======= ======= =======
The following assumptions were used in the accounting for the Company's pension plan as of December 31:
1996 1995 1994 ---- ---- ---- Weighted average discount rate ................. 7.5% 7.0% 8.5% Rate of increase in compensation levels ........ 5.0% 5.0% 5.0% Expected long-term rate of return on plan assets 8.5% 8.5% 8.0%
The Company adopted two nonqualified defined benefit pension plans for executives and key management employees effective January 1, 1993 and January 1, 1994, respectively. The projected benefit obligation for these plans was $4.4 million as of December 31, 1996 and 1995. The Company's pension expense for these plans was $0.9 million, $0.6 million and $0.8 million for 1996, 1995 and 1994, respectively. 39 40 THRIFT AND PROFIT SHARING PLAN. The Company sponsors an employee thrift and profit sharing plan under section 401 of the Internal Revenue Code. This plan covers substantially all full-time employees. The Company matches employee contributions of up to six percent of compensation at rates ranging from 35 to 100 percent, depending upon the Company's financial performance. Amounts charged to expense were $2.6 million, $2.7 million and $2.0 million during 1996, 1995 and 1994, respectively. OTHER BENEFIT PLANS. Certain executives and key employees of the General Partner participate in incentive benefit plans established by the General Partner which provide for the granting of Units and/or cash bonuses upon meeting performance objectives. See Note 11 to Notes to Combined Financial Statements. NOTE 11. RELATED-PARTY TRANSACTIONS The General Partner has overall responsibility for the management of the Company. The General Partner has a two percent general partner interest in the income and cash distributions of the Partnership, subject to certain adjustments, and owns two percent and four percent interests in Manufacturing and Marketing, respectively. The Company reimburses the General Partner for the actual cost of administering its businesses. Amounts reimbursed to the General Partner for such costs were $5.7 million, $5.6 million and $5.0 million for the years ended December 31, 1996, 1995 and 1994, respectively. Effective October 1, 1993, the General Partner established a Long-Term Incentive Plan ("LTIP") which authorizes granting up to 2,000,000 Unit Appreciation Rights ("UARs") to certain executives of the General Partner. When any of five Unit Value Targets ("UVTs") established by the LTIP are met through a combination of Unit market appreciation plus Partnership cash distributions, a percentage of the UARs is triggered and Units are credited to the executives' accounts. The performance period under the LTIP during which UVTs may be met ends December 31, 1998, at which time any earned Units will be distributed. Earned Units generally vest at the end of the performance period. Costs incurred by the General Partner in administering and funding the LTIP are borne by the Partnership. The General Partner has granted 1,382,267 UARs, net of forfeitures, which could result in a total of 695,085 Units being earned under the LTIP if all UVTs were met. Units in the executives' accounts will earn additional Units equal to the amount of any subsequent Partnership cash distributions. As of December 31, 1996, three UVTs had been achieved and 309,737 Units had been allocated to the executives' accounts. Total compensation expense with respect to the achievement of these three UVTs will be approximately $8.3 million, of which $3.1 million, $1.0 million and $0.8 million was recognized in 1996, 1995 and 1994, respectively. The remaining compensation expense of $3.4 million will be recognized over the remaining performance period ending December 31, 1998. 40 41 Effective January 1, 1994, the General Partner established a Key Employee Long-Term Incentive Plan ("KLTIP") for certain of its other key employees which authorizes granting up to 500,000 UARs. The KLTIP provisions are similar to the LTIP described above. The General Partner has granted 391,334 UARs, net of forfeitures, which could result in a total of 196,786 Units being earned under the KLTIP if all UVTs were met. Units in the participants' accounts will earn additional Units equal to the amount of any subsequent Partnership cash distributions. As of December 31, 1996, three UVTs had been achieved and 77,910 Units had been allocated to the key employees' accounts. Total compensation expense with respect to the achievement of these three UVTs will be approximately $2.1 million, of which $0.8 million and $0.5 million was recognized in 1996 and 1995, respectively. The remaining compensation expense of $0.8 million will be recognized over the remaining performance period ending December 31, 1998. Costs incurred by the General Partner in administering and funding the plan are borne by the Partnership. The Partnership is required under the Partnership Agreement to reimburse the General Partner for compensation costs related to the management of the Partnership, including the purchase of Units associated with these benefit plans. During 1994, the Partnership paid the General Partner for its purchase of 496,800 Units at a total cost of $12.8 million, of which $10.5 million was funded from current operations and $2.3 million from funds held by an employee benefit trust of the Partnership. Effective January 1, 1994, the General Partner established a Management Incentive Plan ("MIP") for certain executives of the General Partner. An annual bonus of up to 100% of the respective executive's base salary may be awarded if certain performance objectives established by the General Partner are met by the Company and by the executive. One-half of the bonus will be paid annually in cash and the remaining half will be converted into Units at fair market value and will be distributed at the end of three years. Units in executives' accounts will earn additional Units equal to the amount of any subsequent Partnership cash distributions. Costs incurred in administering and funding the MIP have been borne by the General Partner. Net income is allocated to the General Partner based on two percent of the Company's combined net income (adjusted for the incentive distribution), plus the incentive distribution, as provided by the Partnership Agreement. The incentive distributions paid in 1996, 1995 and 1994 were approximately $23.8 million, $20.7 million and $14.4 million, respectively. Certain conflicts of interest could arise as a result of the relationships described above. The Board of Directors and management of the General Partner have a duty to manage the Company in the best interests of the Unitholders and, consequently, must exercise good faith and integrity in handling the assets and affairs of the Company. Related non-interest bearing receivables and payables between the General Partner and the Company are settled in the ordinary course of business. As of December 31, 1996, the Company had a receivable from the General Partner of $168,600. As of December 31, 1995, the Company had a payable to the General Partner of $42,000. 41 42 NOTE 12. COMMITMENTS AND CONTINGENCIES A portion of the Company's log requirements is acquired through contracts with public and private sources. Except for required deposits, no amounts are recorded until such time as the Company harvests the timber. At December 31, 1996 and 1995, the unrecorded amounts of those contract commitments were approximately $14.6 million and $18.2 million, respectively. During 1993, the Partnership entered into a log sourcing contract to sell logs to a customer over a ten-year period ending in 2003, at prevailing market rates. The Partnership has an annual commitment to supply pulpwood and residual chips to a customer for a twenty-year period ending in 2016, at prevailing market rates. There are no contingent liabilities which would have a materially adverse effect on the financial position, the results of operations or liquidity of the Company. The Company is subject to regulations regarding harvest practices and is involved in various legal proceedings, including environmental matters, incidental to its business. While administration of current regulations and any new regulations or proceedings have elements of uncertainty, the General Partner believes that none of the pending legal proceedings or regulatory matters will have a materially adverse effect on the financial position, the results of operations or liquidity of the Company. The Company leases buildings and equipment under non-cancelable operating lease agreements. The Company's operating lease expense was $2.3 million, $2.2 million and $1.8 million for 1996, 1995 and 1994, respectively. The following summarizes the future minimum lease payments (in thousands): 1997 ............... $ 3,066 1998 ............... 2,636 1999 ............... 1,676 2000 ............... 1,342 2001 ............... 887 Thereafter 2,121 ------- Total .............. $11,728 ======= 42 43 NOTE 13. SEGMENT INFORMATION
YEAR ENDED DECEMBER 31, (In Thousands) 1996 1995 1994 ---- ---- ---- Revenues Resources .................... $ 369,335 $ 327,043 $ 324,426 Manufacturing ................ 387,875 375,677 372,248 Eliminations ................. (123,469) (117,646) (118,017) ----------- ----------- ----------- $ 633,741 $ 585,074 $ 578,657 =========== =========== =========== Operating Income Resources .................... $ 163,306 $ 139,192 $ 150,730 Manufacturing ................ 22,516 35,567 32,175 Other and Eliminations ....... (20,834) (15,783) (18,771) ----------- ----------- ----------- $ 164,988 $ 158,976 $ 164,134 =========== =========== =========== Depreciation, Depletion and Amortization Resources .................... $ 36,160 $ 35,394 $ 36,782 Manufacturing ................ 20,785 18,703 17,361 ----------- ----------- ----------- $ 56,945 $ 54,097 $ 54,143 =========== =========== =========== Identifiable Assets Resources .................... $ 1,098,203 $ 604,510 $ 617,934 Manufacturing ................ 262,380 244,877 247,415 Eliminations ................. (24,149) (23,301) (39,129) ----------- ----------- ----------- $ 1,336,434 $ 826,086 $ 826,220 =========== =========== =========== Capital Expenditures Resources .................... $ 6,470 $ 8,481 $ 7,139 Manufacturing ................ 12,810 22,202 18,698 ----------- ----------- ----------- $ 19,280 $ 30,683 $ 25,837 =========== =========== ===========
Revenues include both sales to unaffiliated customers and intersegment sales. Intersegment sales prices are determined quarterly, based upon estimated market prices and terms in effect at that time and are eliminated in combination. Intersegment sales from the Resources Segment to the Manufacturing Segment were $123.5 million, $117.6 million and $118.0 million for 1996, 1995 and 1994, respectively. Operating income from the Resources Segment includes land sales of $35.4 million, $1.6 million and $1.9 million, for 1996, 1995 and 1994, respectively. Combined export revenues, primarily to Pacific Rim countries, as a percentage of total revenues were 11%, 13% and 15%, for 1996, 1995 and 1994, respectively. During 1995 and 1994, net sales to one Resources Segment customer were approximately 10% and 11% of combined revenues, respectively. Capital expenditures do not include $514.9 million and $45.8 million in 1996 for the Resources Segment and Manufacturing Segment, respectively, related to the Southern Region 43 44 Acquisition. NOTE 14. SUBSEQUENT EVENT On January 21, 1997, the Board of Directors of the General Partner authorized the Partnership to make a distribution of $0.51 per Unit for the fourth quarter of 1996. Total distributions will approximate $31.0 million (including $7.4 million to the General Partner) and will be paid on February 28, 1997 to Unitholders of record on February 14, 1997. 44 45 REPORT OF INDEPENDENT ACCOUNTANTS To the Unitholders and Directors of the General Partner of Plum Creek Timber Company, L.P. We have audited the accompanying combined balance sheet of Plum Creek Timber Company, L.P. as of December 31, 1996 and 1995, and the related combined statements of income and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Plum Creek Timber Company, L.P. at December 31, 1996 and 1995, and the combined results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ COOPERS & LYBRAND L.L.P. Coopers & Lybrand L.L.P. Seattle, Washington January 21, 1997 45 46 REPORT OF MANAGEMENT The management of Plum Creek Timber Company, L.P. is responsible for the preparation, fair presentation, and integrity of the information contained in the financial statements in this Annual Report on Form 10-K. These statements have been prepared in accordance with generally accepted accounting principles and include amounts determined using management's best estimates and judgements. The Company maintains a system of internal controls to provide reasonable assurance that assets are safeguarded and that transactions are recorded properly to produce reliable financial records. The system of internal controls includes appropriate divisions of responsibility, established policies and procedures (including a code of conduct to foster a strong ethical climate) that are communicated throughout the Company, and careful selection, training and development of our people. The Company conducts a corporate audit program to provide assurance that the system of internal controls is operating effectively. Our independent certified public accountants have performed audit procedures deemed appropriate to obtain reasonable assurance that the financial statements are free of material misstatement. The Board of Directors provides oversight to the financial reporting process through its Audit and Compliance Committee, which meets regularly with management, corporate audit, and the independent certified public accountants to review the activities of each and to ensure that each is meeting its responsibilities with respect to financial reporting and internal controls. /s/ RICK R. HOLLEY Rick R. Holley President and Chief Executive Officer /s/ DIANE M. IRVINE Diane M. Irvine Vice President and Chief Financial Officer 46 47 SUPPLEMENTARY FINANCIAL INFORMATION Combined Quarterly Information (Unaudited) (In Thousands, Except per Unit)
1996 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr(2) - - ---- ------- ------- ------- -------- Revenues ....................... $127,694 $138,744 $173,039 $194,264 Operating Income ............... 27,398 32,750 48,449 56,391 Net Income ..................... 15,915 20,977 36,776 149,931 Net Income Allocable to Unitholders ................ 10,197 15,158 30,198 140,269 Net Income per Unit(1) ......... $ 0.25 $ 0.37 $ 0.75 $ 3.14 1995 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr - - ---- ------- ------- ------- -------- Revenues ....................... $144,094 $139,372 $152,296 $149,312 Operating Income ............... 40,958 36,655 42,382 38,981 Net Income ..................... 28,392 24,534 30,173 27,632 Net Income Allocable to Unitholders ................ 23,751 18,644 24,170 21,679 Net Income per Unit ............ $ 0.58 $ 0.46 $ 0.60 $ 0.53
(1) Net income per Unit is computed independently for each of the quarters presented. Therefore, the sum of the quarterly net income per Unit does not equal the total computed for the year due to the issuance of Units during the fourth quarter of 1996. See Note 8 to Notes to Combined Financial Statements. (2) Included in fourth quarter 1996 results of operations was a gain of $105.7 million related to the Newport Asset Sale. 47 48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Items 10. and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT and EXECUTIVE COMPENSATION, Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT and Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS will be filed by amendment to this Form 10-K on Form 10-K/A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT: (1) FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION The following combined financial statements of the Company are included in Part II, Item 8 of this Form 10-K: Combined Statement of Income .................................... 28 Combined Balance Sheet .......................................... 29 Combined Statement of Cash Flows ................................ 30 Notes to Combined Financial Statements .......................... 31 Report of Independent Accountants ............................... 45 Report of Management ............................................ 46 Supplementary Financial Information ............................. 47 (2) FINANCIAL STATEMENT SCHEDULES Not applicable. 48 49 (3) LIST OF EXHIBITS Each exhibit set forth below in the Index to Exhibits is filed as a part of this report. Exhibits not incorporated by reference to a prior filing are designated by an asterisk ("*"); all exhibits not so designated are incorporated herein by reference to a prior filing as indicated. Exhibits designated by a positive sign ("+") indicates management contracts or compensatory plans or arrangements required to be filed as an exhibit to this report. INDEX TO EXHIBITS
Exhibit Designation Nature of Exhibit 2.1 Asset Purchase Agreement Among Plum Creek Timber Company, L.P., Riverwood International Corporation and New River Timber, LLC, dated August 6, 1996 (Previously filed as Exhibit 2 to the Current Report on Form 8-K dated August 7, 1996, filed by Riverwood Holding, Inc., Commission file no. 1-11113, and incorporated herein by reference). 2.2 Amendment to Asset Purchase Agreement Among Plum Creek Timber Company, L.P., Riverwood International Corporation and New River Timber, LLC, dated October 18, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996). 2.3 Timberland Purchase and Sale Agreement for Newport Unit Timberlands by and between Plum Creek Timber Company, L.P. as Seller, and Stimson Lumber Company as Purchaser, dated as of September 27, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996). 2.4 Mill Asset Purchase and Sale Agreement By and Between Plum Creek Manufacturing, L.P. as Seller, and Stimson Lumber Company as Purchaser, dated as of September 27, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996). 3.1 Amended and Restated Agreement of Limited Partnership of Plum Creek Timber Company, L.P. dated June 8, 1989, as amended and restated through October 17, 1995 (Form 10-Q, No. 1-10239, for the quarter ended September 31, 1995). 3.2 Certificate of Limited Partnership of Plum Creek Timber Company, L.P., as filed with the Secretary of State of the state of Delaware on April 12, 1989 (Form S-1, Regis. No. 33-28094, filed May 1989). 4.1 Form of Deposit Agreement by and among Plum Creek Timber Company, L.P. and The First National Bank of Boston, dated as of May 1989, (Form S-1, Regis. No. 33-28094, filed May 1989). 4.2 Form of Transfer Application (Form S-1, Regis. No. 33-28094, filed May 1989). 4.3 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek Timber Company, L. P. (Form 10-Q, No. 1-10239, for the quarter ended June
49 50 30, 1989). Amendment No. 1, consent and waiver dated January 1, 1991 to Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek Timber Company, L.P. (Form 8 Amendment No. 1, for the year ended December 31, 1990). Amendment No. 2, consent and waiver dated September 1, 1993 to the Senior Note Agreement (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). Amendment No. 3, Senior Note Agreement Amendment dated May 20, 1994 (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). Senior Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1996). 4.4 Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8, 2007, Plum Creek Manufacturing, Inc. (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1989). Amendment No. 1, consent and waiver dated January 1, 1991 to Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8, 2007, Plum Creek Manufacturing, Inc., now Plum Creek Manufacturing, L.P. (Form 8 Amendment No. 1, for the year ended December 31, 1990). Amendment No. 2, consent and waiver dated September 1, 1993 to the Mortgage Note Agreement (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). Amendment No. 3, Mortgage Note Agreement Amendment dated May 20, 1994 (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). Amendment to Mortgage Note Agreement dated June 15, 1995 (Form 10-Q, No. 1-10239, for the quarter ended September 30, 1995). Mortgage Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1996). 4.5 Senior Note Agreement, dated August 1, 1994, 8.73% Senior Notes due August 1, 2009, Plum Creek Timber Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). Senior Note Agreement Amendment dated as of October 15, 1995 (Form 10-K, No. 1-10239, for the year ended December 31, 1995). Senior Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1996). 4.6* Senior Note Agreement, dated as of November 13, 1996, $75 million Series A due November 13, 2006, $25 million Series B due November 13, 2008, $75 million Series C due November 13, 2011, $25 million Series D due November 13, 2016. See attached exhibit. 10.1* Revolving Credit and Bridge Loan Agreement dated as of October 17, 1996 among Plum Creek Timber Company, L.P., Bank of America National Trust and Savings Association, as Agent, and the Other Financial Institutions Party Hereto. See attached exhibit. 10.2* Amended and Restated Revolving Credit Agreement dated as of December 13, 1996 among Plum Creek Timber Company, L.P., Bank of America National Trust and Savings Association, as Agent, NationsBank of North Carolina, N.A., as senior co-agent and the Other Financial Institutions Party Hereto. See attached exhibit. 10.3+ Plum Creek Supplemental Benefits Plan (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). First Amendment to the Plum Creek Supplemental Benefits Plan (Form 10-Q, No. 1-10239, for the quarter ended September 30, 1995). 10.4+ Long-Term Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). First Amendment to the Plum Creek Management Company, L.P. Long-Term Incentive Plan (Form 10-Q, No. 1-10239,
50 51
for the quarter ended September 30, 1995). 10.5+ Management Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). 10.6+ Executive and Key Employee Salary and Incentive Compensation Deferral Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). 10.7+ Deferred Compensation Plan for Directors, PC Advisory Corp. I (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). 10.8+* Plum Creek Director Unit Ownership and Deferral Plan. See attached exhibit. 21 Subsidiaries of the Registrant. (Form 8 Amendment No. 1, for the year ended December 31, 1990). 27* Financial Data Schedule for the year ended December 31, 1996. See attached exhibit.
(B) REPORTS ON FORM 8-K The Partnership filed a current report on Form 8-K dated October 11, 1996, in which it reported the Southern Region Acquisition and the Newport Asset Sale and related pro forma financial information under Item 2 - Acquisition or Disposition of Assets and Item 7 - Financial Statements and Exhibits. 51 52 SIGNATURES Pursuant to the requirements of Section 13 (or 15(d)) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLUM CREEK TIMBER COMPANY, L. P. (Registrant) By: Plum Creek Management Company, L.P. as General Partner BY: /s/ RICK R. HOLLEY -------------------------------------- Rick R. Holley President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, in the capacities and on the dates indicated, on behalf of, as applicable, Plum Creek Management Company, L.P., the registrant's general partner, and/or PC Advisory Corp. I, the general partner of the managing general partner of the registrant's general partner. By /s/ DAVID D. LELAND Chairman of the Board of January 21, 1997 ------------------------ Directors, PC Advisory Corp. I David D. Leland By /s/ IAN B. DAVIDSON Director, PC Advisory Corp. I January 21, 1997 ------------------------ Ian B. Davidson By /s/ GEORGE M. DENNISON Director, PC Advisory Corp. I January 21, 1997 ------------------------ George M. Dennison By /s/ CHARLES P. GRENIER Executive Vice President, Plum January 21, 1997 ------------------------ Creek Management Co., L.P. Charles P. Grenier Director, PC Advisory Corp. I By /s/ RICK R. HOLLEY President and Chief Executive January 21, 1997 ------------------------ Officer, Plum Creek Management Rick R. Holley Co., L.P. Director, PC Advisory Corp. I 52 53 By /s/ WILLIAM E. OBERNDORF Director, PC Advisory Corp. I January 21, 1997 ------------------------ William E. Oberndorf By /s/ WILLIAM J. PATTERSON Director, PC Advisory Corp. I January 21, 1997 ------------------------ William J. Patterson By /s/ JOHN H. SCULLY Director, PC Advisory Corp. I January 21, 1997 ------------------------ John H. Scully By /s/ DIANE M. IRVINE Vice President and Chief January 21, 1997 ------------------------ Financial Officer, Plum Creek Diane M. Irvine Management Co., L.P. (Principal Financial and Accounting Officer) 53 54 INDEX TO EXHIBITS Each exhibit set forth below in the Index to Exhibits is filed as a part of this report. Exhibits not incorporated by reference to a prior filing are designated by an asterisk ("*"); all exhibits not so designated are incorporated herein by reference to a prior filing as indicated. Exhibits designated by a positive sign ("+") indicates management contracts or compensatory plans or arrangements required to be filed as an exhibit to this report.
Exhibit Designation Nature of Exhibit 2.1 Asset Purchase Agreement Among Plum Creek Timber Company, L.P., Riverwood International Corporation and New River Timber, LLC, dated August 6, 1996 (Previously filed as Exhibit 2 to the Current Report on Form 8-K dated August 7, 1996, filed by Riverwood Holding, Inc., Commission file no. 1-11113, and incorporated herein by reference). 2.2 Amendment to Asset Purchase Agreement Among Plum Creek Timber Company, L.P., Riverwood International Corporation and New River Timber, LLC, dated October 18, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996). 2.3 Timberland Purchase and Sale Agreement for Newport Unit Timberlands by and between Plum Creek Timber Company, L.P. as Seller, and Stimson Lumber Company as Purchaser, dated as of September 27, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996). 2.4 Mill Asset Purchase and Sale Agreement By and Between Plum Creek Manufacturing, L.P. as Seller, and Stimson Lumber Company as Purchaser, dated as of September 27, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996). 3.1 Amended and Restated Agreement of Limited Partnership of Plum Creek Timber Company, L.P. dated June 8, 1989, as amended and restated through October 17, 1995 (Form 10-Q, No. 1-10239, for the quarter ended September 31, 1995). 3.2 Certificate of Limited Partnership of Plum Creek Timber Company, L.P., as filed with the Secretary of State of the state of Delaware on April 12, 1989 (Form S-1, Regis. No. 33-28094, filed May 1989). 4.1 Form of Deposit Agreement by and among Plum Creek Timber Company, L.P. and The First National Bank of Boston, dated as of May 1989, (Form S-1, Regis. No. 33-28094, filed May 1989). 4.2 Form of Transfer Application (Form S-1, Regis. No. 33-28094, filed May 1989). 4.3 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek Timber Company, L. P. (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1989). Amendment No. 1, consent and waiver dated January 1, 1991 to Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek Timber Company, L.P. (Form 8 Amendment No. 1, for the year ended December 31, 1990). Amendment No. 2, consent and waiver dated September 1, 1993 to the Senior Note Agreement (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). Amendment No. 3, Senior Note Agreement Amendment dated May 20, 1994 (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). Senior Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1996).
54 55 4.4 Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8, 2007, Plum Creek Manufacturing, Inc. (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1989). Amendment No. 1, consent and waiver dated January 1, 1991 to Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8, 2007, Plum Creek Manufacturing, Inc., now Plum Creek Manufacturing, L.P. (Form 8 Amendment No. 1, for the year ended December 31, 1990). Amendment No. 2, consent and waiver dated September 1, 1993 to the Mortgage Note Agreement (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). Amendment No. 3, Mortgage Note Agreement Amendment dated May 20, 1994 (Form 10- K/A, Amendment No. 1, for the year ended December 31, 1994). Amendment to Mortgage Note Agreement dated June 15, 1995 (Form 10-Q, No. 1-10239, for the quarter ended September 30, 1995). Mortgage Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1996). 4.5 Senior Note Agreement, dated August 1, 1994, 8.73% Senior Notes due August 1, 2009, Plum Creek Timber Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). Senior Note Agreement Amendment dated as of October 15, 1995 (Form 10-K, No. 1-10239, for the year ended December 31, 1995). Senior Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1996). 4.6* Senior Note Agreement, dated as of November 13, 1996, $75 million Series A due November 13, 2006, $25 million Series B due November 13, 2008, $75 million Series C due November 13, 2011, $25 million Series D due November 13, 2016. See attached exhibit. 10.1* Revolving Credit and Bridge Loan Agreement dated as of October 17, 1996 among Plum Creek Timber Company, L.P., Bank of America National Trust and Savings Association, as Agent, and the Other Financial Institutions Party Hereto. See attached exhibit. 10.2* Amended and Restated Revolving Credit Agreement dated as of December 13, 1996 among Plum Creek Timber Company, L.P., Bank of America National Trust and Savings Association, as Agent, NationsBank of North Carolina, N.A., as senior co-agent and the Other Financial Institutions Party Hereto. See attached exhibit. 10.3+ Plum Creek Supplemental Benefits Plan (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). First Amendment to the Plum Creek Supplemental Benefits Plan (Form 10-Q, No. 1-10239, for the quarter ended September 30, 1995). 10.4+ Long-Term Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). First Amendment to the Plum Creek Management Company, L.P. Long-Term Incentive Plan (Form 10-Q, No. 1-10239, for the quarter ended September 30, 1995). 10.5+ Management Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993). 10.6+ Executive and Key Employee Salary and Incentive Compensation Deferral Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). 10.7+ Deferred Compensation Plan for Directors, PC Advisory Corp. I (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994).
55 56 10.8+* Plum Creek Director Unit Ownership and Deferral Plan. See attached exhibit. 21 Subsidiaries of the Registrant. (Form 8 Amendment No. 1, for the year ended December 31, 1990). 27* Financial Data Schedule for the year ended December 31, 1996. See attached exhibit.
56 EX-4.6 2 SENIOR NOTE AGREEMENT 1 EXHIBIT 4.6 [CONFORMED COPY] ================================================================================ PLUM CREEK TIMBER COMPANY, L.P. $200,000,000 SENIOR NOTES $75,000,000 Series A due November 13, 2006 $25,000,000 Series B due November 13, 2008 $75,000,000 Series C due November 13, 2011 $25,000,000 Series D due November 13, 2016 - - -------------------------------------------------------------------------------- SENIOR NOTE AGREEMENT - - -------------------------------------------------------------------------------- Dated as of November 13, 1996 ================================================================================ 2 Table of Contents
SECTION HEADING PAGE 1. Authorization of Issue of Notes . . . . . . . . . . . . . . . . . . . . . . 1 2. Purchase and Sale of Notes . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3A. Opinion of Purchaser's Special Counsel . . . . . . . . . . . . 2 3B. Opinion of Company's Counsel . . . . . . . . . . . . . . . . . 2 3C. Representations and Warranties; No Default . . . . . . . . . . 2 3D. Sale of Notes to All Purchasers . . . . . . . . . . . . . . . . 3 3E. Purchase Permitted by Applicable Laws . . . . . . . . . . . . . 3 3F. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3G. Special Counsel's Fees . . . . . . . . . . . . . . . . . . . . 3 3H. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4A(1). Scheduled Prepayments of Series D Notes . . . . . . . . . . . . 4 4A(2). Optional Prepayment With Yield-Maintenance Premium . . . . . . 4 4B. Notice of Optional Prepayment . . . . . . . . . . . . . . . . . 4 4C. Partial Payments Pro Rata . . . . . . . . . . . . . . . . . . . 5 4D. Retirement of Notes . . . . . . . . . . . . . . . . . . . . . . 5 4E. Payments on Business Days . . . . . . . . . . . . . . . . . . . 5 5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 5A. Financial Statements . . . . . . . . . . . . . . . . . . . . . 6 5B. Inspection of Property . . . . . . . . . . . . . . . . . . . . 8 5C. Covenant to Secure Notes Equally . . . . . . . . . . . . . . . 9 5D. Partnership Existence, Etc . . . . . . . . . . . . . . . . . . 9 5E. Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . 9 5F. Compliance with Laws, Etc . . . . . . . . . . . . . . . . . . . 9 5G. Maintenance of Properties . . . . . . . . . . . . . . . . . . . 10 6. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 6A. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 10 6B. Lien, Indebtedness and Other Restrictions . . . . . . . . . . . 11 6B(1) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6B(2) Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6B(3) Loans, Advances, Investments and Contingent Liabilities . . . . 15 6B(4) Sale of Stock and Debt of Subsidiaries . . . . . . . . . . . . 16 6B(5) Merger and Sale of Assets . . . . . . . . . . . . . . . . . . . 17
-i- 3
6B(6) Harvesting Restrictions . . . . . . . . . . . . . . . . . . . . 19 6B(7) Sale and Lease-Back . . . . . . . . . . . . . . . . . . . . . . 19 6B(8) Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . 20 6B(9) Transactions with Affiliates . . . . . . . . . . . . . . . . . 20 6C. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . 21 6D. Issuance of Stock by Subsidiaries . . . . . . . . . . . . . . . 21 7. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 7A. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . 21 7B. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 25 8. Representations, Covenants and Warranties . . . . . . . . . . . . . . . . . 25 8A. Organization . . . . . . . . . . . . . . . . . . . . . . . . . 25 8B. General Partner Net Worth . . . . . . . . . . . . . . . . . . . 26 8C. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 26 8D. Partnership Interests . . . . . . . . . . . . . . . . . . . . . 26 8E. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . 26 8F. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 8G. Changes, etc . . . . . . . . . . . . . . . . . . . . . . . . . 27 8H. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . 27 8I. Franchises, Licenses, Agreements, etc . . . . . . . . . . . . . 27 8J. Actions Pending . . . . . . . . . . . . . . . . . . . . . . . . 28 8K. Title to Properties . . . . . . . . . . . . . . . . . . . . . . 28 8L. Compliance with Other Instruments, etc . . . . . . . . . . . . 28 8M. Governmental Consent . . . . . . . . . . . . . . . . . . . . . 29 8N. Foreign Assets Control Regulations, etc . . . . . . . . . . . . 29 8O. Offering of Notes . . . . . . . . . . . . . . . . . . . . . . . 29 8P. Regulation G, etc . . . . . . . . . . . . . . . . . . . . . . . 29 8Q. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 8R. Status Under Certain Federal Statutes . . . . . . . . . . . . . 32 8S. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 32 8T. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 32 8U. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 34 9. Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . 34 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 10A. Yield-Maintenance Terms . . . . . . . . . . . . . . . . . . . . 36 10B. Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 37 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 11A. Note Payments . . . . . . . . . . . . . . . . . . . . . . . . . 49 11B. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-ii- 4
11C. Consent to Amendments . . . . . . . . . . . . . . . . . . . . . 50 11D. Solicitation of Holders of Notes . . . . . . . . . . . . . . . 50 11E. Form, Registration, Transfer and Exchange of Notes; Lost Notes 51 11F. Persons Deemed Owners; Participations . . . . . . . . . . . . . 52 11G. Non-Recourse Nature of Liability . . . . . . . . . . . . . . . 52 11H. Survival of Representations and Warranties . . . . . . . . . . 52 11I. Successors and Assigns . . . . . . . . . . . . . . . . . . . . 52 11J. Disclosure to Other Persons . . . . . . . . . . . . . . . . . . 53 11K. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 11L. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . 54 11M. Substitution of Purchaser . . . . . . . . . . . . . . . . . . . 54 11N. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . 54 11O. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 54 11P. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 54
ATTACHMENTS TO SENIOR NOTE AGREEMENT Schedule I --Names and Commitments of Purchasers Exhibit A --Form of Note Exhibit B-1 --Form of Opinion of Purchaser's Counsel Exhibit B-2 --Form of Opinion of Company's Counsel Exhibit D --Liens Exhibit E --Investments Exhibit F --Environmental Notices Exhibit 8C --Other Subsidiaries Exhibit 8G --Material Transactions Exhibit 8K --Property Titles Exhibit 8T --Environmental Permits and Licenses Schedule 10B(1) -- Investment Policy -iii- 5 PLUM CREEK TIMBER COMPANY, L.P. 999 THIRD AVENUE SEATTLE, WASHINGTON 98104 As of November 13, 1996 To the Purchasers named in Schedule I to this Agreement Dear Purchaser: The undersigned, Plum Creek Timber Company, L.P. (together with any Person who succeeds to all or substantially all Plum Creek Timber Company, L.P.'s assets and business, herein called the "Company"), a Delaware limited partnership, hereby agrees with the Purchasers named on Schedule I to this Agreement (the "Purchasers") as follows: 1. AUTHORIZATION OF ISSUE OF NOTES The Company will authorize the issue of its senior promissory notes (herein called the "Notes") in the aggregate principal amount of $200,000,000, to be comprised of Series A Notes to mature on November 13, 2006 in an aggregate principal amount of $75,000,000, Series B Notes to mature on November 13, 2008 in an aggregate principal amount of $25,000,000, Series C Notes to mature on November 13, 2011 in an aggregate principal amount of $75,000,000 and Series D Notes to mature on November 13, 2016 in an aggregate principal amount of $25,000,000, in each case to be dated the date of issue thereof, and to bear interest on the unpaid balance thereof from the date thereof to but excluding the date the principal thereof shall have become due and payable at the rate of 7.74% per annum in the case of the Series A Notes, 7.87% per annum in the case of the Series B Notes, 7.97% per annum in the case of the Series C Notes and 8.05% per annum in the case of the Series D Notes, and on overdue principal, premium and interest at the respective rates specified therein, and to be substantially in the form of Exhibit A attached hereto. Interest on the Notes of each series will be computed on the basis of a 360-day year of twelve 30-day months. The term "Notes" as used herein shall include each Note delivered pursuant to any provision of this Agreement and each Note delivered in substitution or exchange for any such Note pursuant to any such provision. 2. PURCHASE AND SALE OF NOTES The Company hereby agrees to sell to each Purchaser and, subject to the terms and conditions herein set forth, such Purchaser agrees to purchase from the Company the Notes set forth opposite its name in Schedule I hereto at a price of 100% of the aggregate principal amount thereof. The Company will deliver to each Purchaser, at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, one or more Notes registered in 6 Plum Creek Timber Company, L.P. Senior Note Agreement such Purchaser's name or in the name of its nominee, evidencing the aggregate principal amount of Notes to be purchased by such Purchaser and in the denomination or denominations specified with respect to it in Schedule I, against payment of the purchase price thereof by transfer of immediately available funds for credit to the Company's account #67327817 at Seafirst Bank, Seattle, Washington, ABA #125-000-024, Message: Senior Note Funding Ref: Plum Creek Timber Company, L.P. on the date of closing, which shall be November 13, 1996, or any other date on or before November 30, 1996 upon which the Company and the Purchasers may mutually agree (herein called the "closing" or the "date of closing"). If at the closing the Company shall fail to tender such Notes to any Purchaser as provided above in this paragraph 2, or any of the conditions specified in paragraph 3 shall not have been fulfilled to any Purchaser's satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any other rights it may have by reason of such failure or such nonfulfillment. The sale of Notes to the Purchasers pursuant to this Agreement shall be separate and several sales. The obligations of each Purchaser hereunder shall be several and not joint, and no Purchaser shall be liable or responsible for the acts or defaults of any other Purchaser. 3. CONDITIONS OF CLOSING The obligation of each Purchaser to purchase and pay for the Notes to be purchased by it hereunder is subject to the satisfaction, on or before the date of closing, of the following conditions: 3A. OPINION OF PURCHASER'S SPECIAL COUNSEL Each Purchaser shall have received from Chapman and Cutler, who are acting as special counsel for the Purchasers in connection with this transaction, an opinion satisfactory to each Purchaser and substantially in the form of Exhibit B-1 attached hereto and including such other matters as it may reasonably request. 3B. OPINION OF COMPANY'S COUNSEL Each Purchaser shall have received from James A. Kraft, Vice President, General Counsel and Secretary for the Company, a favorable opinion satisfactory to such Purchaser and substantially in the form of Exhibit B-2 attached hereto and including such other matters as it may reasonably request. 3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT The representations and warranties contained in paragraph 8 shall be true in all material respects on and as of the date of closing, except to the extent of changes caused by the transactions herein contemplated; there shall exist on the date of closing no Event of Default or Default; and the Company shall have delivered to each Purchaser a certificate signed by a Responsible Officer, dated the date of closing, to both such effects. -2- 7 Plum Creek Timber Company, L.P. Senior Note Agreement 3D. SALE OF NOTES TO ALL PURCHASERS The Company shall have sold the entire aggregate principal amount of the Notes scheduled to be sold on the date of closing pursuant to this Agreement. 3E. PURCHASE PERMITTED BY APPLICABLE LAWS The purchase of and payment for the Notes to be purchased by each Purchaser on the date of closing on the terms and conditions herein provided (including the use of the proceeds of such Notes by the Company) shall not violate any applicable law or governmental regulation (including, without limitation, section 5 of the Securities Act or Regulation G, T or X of the Board of Governors of the Federal Reserve System), shall not subject such Purchaser to any tax, penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation, and shall be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, but without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by life insurance companies without restriction as to the character of the particular investment. If required by any Purchaser, such Purchaser shall have received an Officers' Certificate of the Company certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is permitted. 3F. INSURANCE The Company shall have delivered to each Purchaser an Officers' Certificate, dated the date of closing, certifying that insurance with respect to its properties and business complying with the provisions of paragraph 5G (including, without limitation, the provisions of paragraph 5G permitting the Company to self-insure) is in full force and effect. 3G. SPECIAL COUNSEL'S FEES The Company shall have paid the reasonable fees and expenses of Chapman and Cutler, special counsel to the Purchasers, invoiced in connection with the purchase of the Notes by the Purchasers. 3H. PROCEEDINGS All proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be satisfactory in substance and form to each Purchaser, and each Purchaser shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request. If the above conditions (other than the conditions stated in paragraph 3D) are satisfied, the obligation of the Company to sell to each Purchaser the Notes to be purchased by it hereunder is subject to the tendering by the other Purchasers of the purchase price of the Notes to be purchased by them pursuant to this Agreement on the date of closing. -3- 8 Plum Creek Timber Company, L.P. Senior Note Agreement 4. PREPAYMENTS The Notes shall be subject to prepayment under the circumstances set forth in paragraph 4A(1) and (2). 4A(1). SCHEDULED PREPAYMENTS OF SERIES D NOTES The Company agrees that it will prepay and apply and there shall become due and payable on the principal indebtedness evidenced by the Series D Notes on each of the following dates an amount equal to the lesser of (i) the amount set forth opposite such date or (ii) the principal amount of the Series D Notes then outstanding: November 13, 2010 $3,571,428.57 November 13, 2011 $3,571,428.57 November 13, 2012 $3,571,428.57 November 13, 2013 $3,571,428.57 November 13, 2014 $3,571,428.57 November 13, 2015 $3,571,428.57
The entire remaining principal amount of the Series D Notes shall become due and payable on November 13, 2016. No premium shall be payable in connection with a required prepayment made pursuant to this paragraph 4A(1). For purposes of this paragraph 4A(1), any prepayment of less than all of the outstanding Series D Notes pursuant to paragraph 4A(2) shall reduce the principal amount of the Series D Notes required to be prepaid on November 13 in each subsequent year to and including the stated maturity of the Series D Notes in the same proportion as the aggregate principal amount of the Series D Notes outstanding immediately prior to such prepayment has been reduced by such prepayment. 4A(2). OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE PREMIUM In addition to prepayments required with respect to the Series D Notes pursuant to paragraph 4A(1), the Notes shall be subject to prepayment on any Business Day, in whole at any time or from time to time in part (other than in the case of any prepayment pursuant to paragraph 6B(5)(viii) or 6B(6), in multiples of $5,000,000; provided that, if the Company shall so prepay the Notes in part, such prepayment shall be made on each series ratably in accordance with the unpaid principal amount of such series) at the option of the Company, at 100% of the principal amount so prepaid plus interest thereon to the prepayment date and the Yield-Maintenance Premium, if any, with respect to each Note. 4B. NOTICE OF OPTIONAL PREPAYMENT The Company shall give the holder of each Note irrevocable written notice of any prepayment pursuant to paragraph 4A(2) not less than 20 Business Days prior to the prepayment date, specifying such prepayment date and the principal amount of the Notes, -4- 9 Plum Creek Timber Company, L.P. Senior Note Agreement and of the Notes held by such holder, to be prepaid on such date and stating that such prepayment is to be made pursuant to paragraph 4A(2). Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the prepayment date and together with the premium, if any, herein provided, shall become due and payable on such prepayment date. The Company shall deliver (i) two (2) Business Days prior to each prepayment pursuant to paragraph 4A(2) an Officers' Certificate stating whether a Yield-Maintenance Premium is payable in connection with such prepayment and setting forth the calculations made in making such determination based on an estimate of such Yield-Maintenance Premium and (ii) on the date of such prepayment, an Officers' Certificate stating whether such Yield-Maintenance Premium is payable and setting forth the actual calculation. 4C. PARTIAL PAYMENTS PRO RATA Upon any partial prepayment of the Notes (other than a partial prepayment of the Series D Notes pursuant to paragraph 4A(1)), the principal amount so prepaid shall be allocated to all Notes at the time outstanding (including, for the purpose of this paragraph 4C only, all Notes prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A(1) or (2)) in proportion to the respective outstanding principal amounts thereof. Upon any partial prepayment of the Series D Notes pursuant to paragraph 4A(1), the principal amount so prepaid shall be allocated to all Series D Notes at the time outstanding (including, for the purpose of this paragraph 4C only, all Series D Notes prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A(1) or (2)) in proportion to the respective outstanding principal amounts thereof. 4D. RETIREMENT OF NOTES The Company shall not, and shall not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part prior to their stated final maturity (other than a prepayment pursuant to paragraph 4A(1) or (2) or upon acceleration of such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes held by any holder unless the Company or such Subsidiary or Affiliate shall have offered to prepay or otherwise retire or purchase or otherwise acquire, as the case may be, the same proportion of the aggregate principal amount of Notes held by each other holder of Notes at the time outstanding upon the same terms and conditions. Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose under this Agreement, except as provided in paragraph 4C. 4E. PAYMENTS ON BUSINESS DAYS If the date specified for any required payment under this Agreement falls on a day that is not a Business Day, the payment shall be made on the next succeeding Business Day and interest shall be payable to the date of such payment. -5- 10 Plum Creek Timber Company, L.P. Senior Note Agreement 5. AFFIRMATIVE COVENANTS 5A. FINANCIAL STATEMENTS The Company covenants that it will deliver to each Significant Holder in duplicate: (i) as soon as available, but not later than 90 days after the end of each fiscal year, a copy of the audited combined balance sheet of the Company and its combined Subsidiaries as of the end of such year and the related combined statement of income and combined statement of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Coopers & Lybrand, or another nationally recognized independent public accounting firm, which report shall state that such combined financial statements present fairly the financial position for the dates specified and the results of operations for the periods indicated in conformity with generally accepted accounting principles applied on a basis consistent with prior years; (ii) as soon as available, but not later than 120 days after the end of each fiscal year, a copy of a combining balance sheet of the Company and each of its Subsidiaries as at the end of such fiscal year and the related combining statement of income and combining statement of cash flows for such fiscal year, all in reasonable detail and satisfactory in scope to the Required Holder(s) and unaudited but certified by an appropriate Responsible Officer as having been used in connection with the preparation of the financial statements referred to in clause (i) of this paragraph 5A; (iii) as soon as available, but not later than 45 days after the end of each fiscal quarter (other than the last fiscal quarter) of each year, a copy of the unaudited combined balance sheet of the Company and its combined Subsidiaries as of the end of such quarter and the related combined statement of income and combined statement of cash flows for the period commencing on the first day and ending on the last day of such quarter, in each case setting forth in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and satisfactory in scope to the Required Holder(s) (information in detail and scope comparable to information required to be included in a Quarterly Report on Form 10-Q shall be deemed to be satisfactory for such purposes), such combined balance sheets to be as of the end of such quarter and such combined statements of income and combined statements of cash flows to be for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter, and certified by an appropriate Responsible Officer as being complete and correct and presenting fairly the financial position for the dates specified and the results of operations of the Company and the Subsidiaries for the periods indicated in conformity with generally accepted accounting principles applied on a consistent basis; (iv) as soon as available, but not later than 45 days after the end of each fiscal quarter (other than the last fiscal quarter) of each year, a copy of the unaudited combining balance sheet of the Company and each of its Subsidiaries, and the related -6- 11 Plum Creek Timber Company, L.P. Senior Note Agreement combining statement of income and combining statement of cash flows for such quarter, in each case setting forth in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and satisfactory in scope to the Required Holder(s), (information in detail and scope that would normally be required on interim financial statements, except as provided for in this paragraph, shall be deemed to be satisfactory for such purposes), such combining balance sheets to be as of the end of such quarter and such combining statements of income and combining statements of cash flows to be for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter, and certified by an appropriate Responsible Officer of the Company as having been used in connection with the preparation of the financial statements referred to in clause (iii) of this paragraph 5A; (v) to the extent not delivered pursuant to clauses (i), (ii), (iii) and (iv) above, promptly upon transmission thereof, copies of all such financial statements as are delivered to the Mortgage Noteholders pursuant to the Mortgage Note Agreements; (vi) to the extent not delivered pursuant to clause (i), (ii), (iii), (iv) or (v), promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it sends to its public security holders and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission and any governmental body or agency succeeding to the functions of the Securities and Exchange Commission; (vii) as soon as practicable, and in any event within 10 Business Days after the Company, any of its Subsidiaries or any Related Person knows of the occurrence or existence or expected occurrence or existence of any event or condition or series of events or conditions with respect to any Plan or Plans which are reasonably likely to result in (a) a material liability to the Company, any of its Subsidiaries or any Related Person pursuant to ERISA or the Code (other than liability for PBGC premiums or regular periodic contributions to any such Plan or Plans) or (b) the imposition of a Lien on any of the assets or other properties of the Company, any of its Subsidiaries or any Related Person pursuant to ERISA or the Code, the Company shall deliver to each Significant Holder a statement signed by the chief financial officer of the Company setting forth details respecting such event or condition or series of events or conditions and the action, if any, that the Company, any of its Subsidiaries or any Related Person proposes to take with respect thereto (and a copy of any notice, report or other written communication, or a written description of any oral communication, with or from the PBGC, the Internal Revenue Service or the Department of Labor with respect to such event or condition or series of events or conditions); and (viii) with reasonable promptness, such other information and financial data as such Significant Holder may reasonably request. Together with each delivery of financial statements required by clauses (i) and (iii) above, the Company will deliver to each Significant Holder an Officers' Certificate -7- 12 Plum Creek Timber Company, L.P. Senior Note Agreement demonstrating (with computations in reasonable detail) compliance by the Company and its Subsidiaries with the provisions of paragraph 6 (including, without limitation, paragraph 6A) and stating that there exists no continuing Event of Default or Default, or, if any continuing Event of Default or Default exists, specifying the nature and period of existence thereof and what action the Company proposes to take or is taking with respect thereto. Together with each delivery of financial statements required by clause (i) above, the Company will deliver to each Significant Holder a certificate of such accountants stating that, in making the audit necessary to the certification of such financial statements, they have obtained no knowledge of any Event of Default or Default continuing, or, if they have obtained knowledge of any Event of Default or Default continuing, specifying the nature and period of existence thereof. Such accountants, however, shall not be required to engage in any auditing procedures other than those procedures required by generally accepted auditing standards, and shall not be liable to anyone by reason of their failure to obtain knowledge of any Event of Default or Default which would not be disclosed in the course of an audit conducted in accordance with generally accepted auditing standards. Notwithstanding the foregoing provisions of this paragraph 5A, the Company shall not be required to deliver any financial statements or other documents (other than documents or information which have become public information) to any Person engaged in any Permitted Business in competition with the Company or any Subsidiary. The Company also covenants that forthwith upon the chief executive officer, principal financial officer or principal accounting officer of the Company or the General Partner becoming aware of an Event of Default and within 5 Business Days after the chief executive officer, principal financial officer or principal accounting officer of the Company or the General Partner becomes aware of a Default, it will deliver to each Significant Holder an Officers' Certificate specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto, provided, however, no such officer shall be obligated to provide a certificate with respect to any such Event of Default or Default that has been cured on or before the date upon which such officer becomes aware thereof. 5B. INSPECTION OF PROPERTY The Company covenants that it will permit any Person designated in writing by (a) any Purchaser named on Schedule I hereto or (b) any Significant Holder or Significant Holders of not less than 5% in aggregate principal amount of the Notes at the time outstanding (other than any Person acting on behalf of any holder which is engaged directly in any Permitted Business in competition with the Company or any Subsidiary), at such holder's or holders' expense (except during the continuance of an Event of Default, in which case at the expense of the Company), to visit and inspect any of the properties of the Company and its Subsidiaries, to examine the books and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom and to discuss the affairs, finances and accounts of the Company or any of such Subsidiaries with the principal officers of the Company and its independent public accountants, all upon reasonable notice and at such reasonable times and as often as such holder or holders may reasonably request. -8- 13 Plum Creek Timber Company, L.P. Senior Note Agreement 5C. COVENANT TO SECURE NOTES EQUALLY The Company covenants that, if it shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of paragraph 6B(1) (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to paragraph 11C), it will make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Debt thereby secured so long as any such other Debt shall be so secured; provided that, satisfaction of the foregoing requirements with respect to any such Lien shall not remedy the Event of Default resulting from such Lien. 5D. PARTNERSHIP EXISTENCE, ETC. Except as permitted by paragraph 6B(5) the Company covenants that it will, and will cause each of its Restricted Subsidiaries to, at all times preserve and keep in full force and effect its partnership or corporate existence, as the case may be, and rights and franchises material to its business, and those of each of its Restricted Subsidiaries, and will qualify, and cause each of its Restricted Subsidiaries to qualify, to do business in any jurisdiction where the failure to do so would have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole, provided that the corporate existence of any Restricted Subsidiary or any rights and franchises of the Company or any Restricted Subsidiary may be terminated if, in the good faith judgment of the Company, such termination is in the best interests of the Company and would not have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. 5E. PAYMENT OF TAXES AND CLAIMS The Company covenants that it will, and will cause each of its Restricted Subsidiaries to, pay all material taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or profits before any penalty accrues thereon, and all material claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien upon any of its properties or assets, provided that no such tax, assessment, charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such accrual or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made therefor. 5F. COMPLIANCE WITH LAWS, ETC. The Company covenants that it will, and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, the noncompliance with which would materially adversely affect the -9- 14 Plum Creek Timber Company, L.P. Senior Note Agreement business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. 5G. MAINTENANCE OF PROPERTIES; INSURANCE The Company covenants that it will maintain or cause to be maintained in good repair, working order and condition (normal wear and tear excepted) all properties used or useful in the business of the Company and its Restricted Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof except where the failure to make such repair, renewal or replacement would not have a material adverse effect on the business, condition (financial or other), assets, properties or results of operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. The Company will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and business of its Restricted Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established reputation of similar size engaged in the same or similar business and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations, provided that the Company may self-insure with respect to its properties and business and the properties and business of its Restricted Subsidiaries to the extent consistent with the practice of corporations of established reputation of similar size engaged in the same or similar business and similarly situated. 6. NEGATIVE COVENANTS 6A. RESTRICTED PAYMENTS The Company covenants that it will not and will not permit any Subsidiary to directly or indirectly pay, declare, order, make or set apart any sum for any Restricted Payment, except that the Company may make, pay or set apart during each calendar quarter one or more Restricted Payments if (i) such Restricted Payments are in an aggregate amount not exceeding the amount by which Available Cash with respect to the immediately preceding calendar quarter exceeds any amount contributed to Available Cash with respect to such immediately preceding calendar quarter by any Subsidiary if and to the extent that the payment of such amount as a dividend or distribution to the Company has not been made and is not at the time permitted by the terms of such Subsidiary's charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary, provided that in determining Available Cash with respect to such immediately preceding calendar quarter, the Company will include in the amount of the reserves established during such quarter pursuant to clause (b)(iv) of the definition of Available Cash an amount not less than (x) 50% of the aggregate amount of all interest in respect of the Notes, the 8.73% Senior Notes and the 11 1/8% Senior Notes to be paid on the interest payment date immediately following such immediately preceding calendar quarter, and (y) 25% of the aggregate -10- 15 Plum Creek Timber Company, L.P. Senior Note Agreement amount of all principal in respect of the Series D Notes and the 11 1/8% Senior Notes scheduled to be paid during the 12 calendar months immediately following such immediately preceding calendar quarter, and the Company will not reduce the amount of the reserves so included, in determining Available Cash for any calendar quarter subsequent to such immediately preceding calendar quarter pursuant to clause (a)(iii) of the definition of Available Cash, unless and until the amount of interest or principal, as the case may be, in respect of which such amount has been reserved has in fact been paid, and (ii) immediately after giving effect to any such proposed action no condition or event shall exist which constitutes an Event of Default or Material Default. The Company will not, in any event, directly or indirectly declare, order, pay or make any Restricted Payment except in cash. 6B. LIEN, INDEBTEDNESS AND OTHER RESTRICTIONS The Company covenants that it will not, and will not permit any Restricted Subsidiary to: 6B(1) LIENS Create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired, except (i) Liens for taxes, assessments or other governmental charges the payment of which is not at the time required by paragraph 5E, (ii) Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers and materialmen and similar Liens incurred in the ordinary course of business for sums not yet due or the payment of which is not at the time required by paragraph 5E, (iii) Liens incurred or deposits made incidental to the conduct of its business or the ownership of its property including, without limitation, (a) pledges or deposits in connection with worker's compensation, unemployment insurance and other social security legislation, (b) deposits to secure insurance, the performance of bids, tenders, contracts, leases, licenses, franchises and statutory obligations, each in the ordinary course of business, and (c) other obligations which were not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property and which do not in the aggregate materially detract from the value of its property or assets or materially impair the use of such property or assets in the operation of its business, (iv) any attachment or judgment Lien, unless the judgment it secures shall not, within 45 days after the entry thereof, have been discharged or execution thereof -11- 16 Plum Creek Timber Company, L.P. Senior Note Agreement stayed pending appeal, or shall not have been discharged within 45 days after expiration of any such stay, (v) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, which, in each case, and in the aggregate, do not materially interfere with the ordinary conduct of the business of the Company or any Restricted Subsidiary, (vi) Liens on property or assets of any Restricted Subsidiary securing obligations of such Restricted Subsidiary owing to the Company or another Restricted Subsidiary, (vii) any Lien existing prior to the time of acquisition upon any property acquired by the Company or any Restricted Subsidiary after the date of closing through purchase, merger or consolidation or otherwise, whether or not assumed by the Company or such Subsidiary, or placed upon property at (or within 30 days after) the later of the time of acquisition or the completion of construction by the Company or any Restricted Subsidiary to secure all or a portion of (or to secure Debt incurred to pay all or a portion of) the purchase price thereof, provided that (w) any such Lien does not encumber any other property of the Company or such Restricted Subsidiary, (x) the Debt secured by such Lien is not prohibited by the provisions of paragraph 6B(2), (y) the aggregate principal amount of the Debt secured by any such Lien at no time exceeds 80% of the cost to the Company and its Restricted Subsidiaries of the property subject to such Lien, and (z) the aggregate outstanding principal amount (without duplication) of the Debt secured by all such Liens and the Debt of all Restricted Subsidiaries at no time (a) during the period commencing on the date of closing and ending on June 8, 1999 exceeds $25,000,000, (b) during the period commencing on June 9, 1999 and ending June 8, 2004 exceeds $50,000,000, and (c) thereafter exceeds $100,000,000, (viii) Liens on the accounts, rights to payment for goods sold or services rendered that are evidenced by chattel paper or instruments, and rights against persons who guarantee payment or collection of the foregoing, and on the Company's inventory and on the proceeds (as defined in the Uniform Commercial Code in any applicable jurisdiction) thereof securing the obligations of the Company under the Revolving Credit Facility (and any extension, renewal, refunding or refinancing thereof) permitted by paragraph 6B(2)(iv), (ix) from and after the time that the Facilities Subsidiary becomes a Restricted Subsidiary, Liens on the accounts, rights to payment for goods sold or services rendered that are evidenced by chattel paper or instruments, and rights against persons who guarantee payment or collection of the foregoing, and on the Facilities Subsidiary's inventory and on the proceeds (as defined in the Uniform Commercial Code in any applicable jurisdiction) thereof securing the obligations of the Facilities Subsidiary under the Facilities Subsidiary's Revolving Credit Facility (and any -12- 17 Plum Creek Timber Company, L.P. Senior Note Agreement extension, renewal, refunding or refinancing thereof) permitted by paragraph 6B(2)(x), (x) Liens existing on the property or assets of the Company or any Subsidiary on the date of closing and set forth on Exhibit D hereto, and (xi) any Lien renewing, extending, refunding or refinancing any Lien permitted by clause (vii) of this paragraph 6B(1), provided that the principal amount secured is not increased and the Lien is not extended to other property and further provided, that the maturity of the Lien is not extended beyond the maturity date of the Debt which, at the time the Lien was initially placed upon the property secured thereby, Responsible Representatives declare would have been the maturity date of Debt customary for the type of asset being financed; 6B(2) DEBT Create, incur, assume or suffer to exist any Funded or Current Debt, except (i) Funded Debt represented by the Notes, the 8.73% Senior Notes and the 11 1/8% Senior Notes, (ii) Funded Debt which is unsecured and is incurred by the Company to finance the making of capital improvements, expansions and additions to the Company's property (including Timberlands), plant and equipment, provided that the aggregate outstanding principal amount of such Funded Debt shall at no time exceed $20,000,000, (iii) Funded or Current Debt of any Restricted Subsidiary owing to the Company or to a Restricted Subsidiary, (iv) Debt incurred by the Company pursuant to (a) the Revolving Credit Facility (and any extension, renewal, refunding or refinancing thereof, including any refunding or refinancing in an amount in excess of the principal amount then outstanding under the Revolving Credit Facility), or (b) a bank credit facility which is unsecured or is secured by Liens permitted by paragraph 6B(1)(viii), provided that the aggregate outstanding principal amount of all Debt permitted by this clause (iv) shall at no time exceed $15,000,000, and provided, further, that the Company shall not suffer to exist any Debt permitted by this clause (iv) on any day unless there shall have been a period of at least 45 consecutive days within the 12 months immediately preceding such day during which the Company shall have been free from all Debt permitted by this clause (iv), (v) Debt represented by the Guarantee in an amount not greater than $131,200,000 at any time, -13- 18 Plum Creek Timber Company, L.P. Senior Note Agreement (vi) the Company's guarantee of obligations incurred by the Facilities Subsidiary pursuant to the Facilities Subsidiary's Revolving Credit Facility (and any extension, renewal, refunding or refinancing thereof permitted by clause (iv) of paragraph 6B(2) of the Mortgage Note Agreements), provided that the aggregate outstanding principal amount of such Debt shall at no time exceed $20,000,000, and provided, further, that such guarantee shall be subordinated to the Notes by subordination provisions substantially the same as those contained in paragraph 7I of the Mortgage Note Agreements, (vii) the Company's guarantee of Funded Debt (and related obligations not constituting Debt) incurred by the Facilities Subsidiary to finance the making of capital improvements, expansions and additions to the Facilities Subsidiary's properties pursuant to the Facilities Subsidiary's Facility, provided that such guarantee shall be subordinated to the Notes by subordination provisions substantially the same as those contained in paragraph 7I of the Mortgage Note Agreements, and provided, further, that the aggregate outstanding principal amount of such Funded Debt shall at no time exceed $20,000,000, (viii) Funded Debt of the Company or any Restricted Subsidiary secured by a Lien permitted by clause (vii) of paragraph 6B(1), provided that immediately after the acquisition of the property subject to such Lien or upon which such Lien is placed (or, if later, the incurrence of the Debt secured by such Lien), the Company could incur at least $1 of additional Funded Debt pursuant to clause (ix) below, (ix) Funded Debt of the Company (other than Funded Debt owing to a Restricted Subsidiary) in addition to that otherwise permitted by the foregoing clauses of this paragraph 6B(2), including guarantees of Debt to the extent permitted by paragraph 6B(3) and not otherwise permitted by the foregoing clauses of this paragraph 6B(2), provided that, on the date the Company becomes liable with respect to any such additional Funded Debt and immediately after giving effect thereto and to the concurrent retirement of any other Funded Debt, the ratio of Pro Forma Free Cash Flow to Maximum Pro Forma Annual Interest Charges is not less than 2.25 to 1.0, (x) from and after the time that the Facilities Subsidiary becomes a Restricted Subsidiary, Debtincurred by the Facilities Subsidiary pursuant to (a) the Facilities Subsidiary's Revolving Credit Facility (and any extension, renewal, refunding or refinancing thereof, including any refunding or refinancing in an amount in excess of the principal amount then outstanding under the Facilities Subsidiary's Revolving Credit Facility), or (b) a bank credit facility which is unsecured or is secured by Liens permitted by paragraph 6B(1)(ix), provided that the aggregate outstanding principal amount of all Debt permitted by this clause (x) shall at no time exceed $20,000,000, and provided, further, that to the extent that the Facilities Subsidiary is a Restricted Subsidiary, the Facilities Subsidiary shall not suffer to exist any Debt permitted by this clause (x) on any day unless there shall have been a period of at least 45 consecutive -14- 19 Plum Creek Timber Company, L.P. Senior Note Agreement days within the 12 months immediately preceding such day during which the Facilities Subsidiary shall have been free from all Debt permitted by this clause (x), and (xi) from and after the time that the Facilities Subsidiary or any Designated Immaterial Subsidiary becomes a Restricted Subsidiary, Debt of the Facilities Subsidiary or any such Designated Immaterial Subsidiary outstanding at the time the Facilities Subsidiary or such Designated Immaterial Subsidiary becomes a Restricted Subsidiary, provided that (a) immediately after the Facilities Subsidiary or any such Designated Immaterial Subsidiary becomes a Restricted Subsidiary, the Company could incur at least $1 of additional Funded Debt pursuant to clause (ix) above (the Facilities Subsidiary or any such Designated Immaterial Subsidiary shall be deemed to be a Restricted Subsidiary for the four consecutive fiscal quarters immediately prior to its becoming a Restricted Subsidiary for purposes of determining Pro Forma Free Cash Flow), and (b) the aggregate amount (without duplication) of such Debt and all other Debt which is secured by Liens and permitted by clause (vii) of paragraph 6B(1) does not violate subclause (z) of the proviso to such clause (vii); provided that notwithstanding any other provision in this paragraph 6B(2), any guarantee issued by the Company of any Funded Debt or Current Debt of any Subsidiary shall be subordinated to the Notes by subordination provisions substantially the same as those contained in paragraph 7I of the Mortgage Note Agreements; 6B(3) LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES Make or permit to remain outstanding any loan or advance to, or guarantee, endorse or otherwise be or become contingently liable, directly or indirectly, in connection with the obligations, stock or dividends of, or own, purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person (all of the foregoing, other than Designated Repurchases permitted by paragraph 6A hereof, being referred to herein as "Investments"), except that the Company or any Restricted Subsidiary may (i) make Investments in the Facilities Subsidiary, provided that the Company will not make or permit any Restricted Subsidiary to make any such Investment (including any guaranty of obligations of the Facilities Subsidiary not otherwise permitted by this paragraph 6B(3)) unless (a) immediately after givingeffect to such Investment, no Event of Default or Default, or "Default" or "Event of Default" as defined in the Mortgage Note Agreements, shall exist, (b) immediately prior to giving effect to such Investment, no Default or Event of Default (other than under clause (xvi) of paragraph 7A) shall exist, and (c) immediately after giving effect to such Investment, the ratio of Pro Forma Free Cash Flow to Maximum Pro Forma Annual Interest Charges is not less than 2.5 to 1.0, (ii) own, purchase or acquire real or personal property to be used in the ordinary course of its business, -15- 20 Plum Creek Timber Company, L.P. Senior Note Agreement (iii) own, purchase or acquire Investments of the type specified in, and in accordance with the requirements and limitations of, the Investment Policy, (iv) continue to own Investments owned on the date of closing as set forth on Exhibit E, (v) endorse negotiable instruments for collection in the ordinary course of business, (vi) become and be obligated under the Guarantee and under the guarantees permitted by clauses (vi) and (vii) of paragraph 6B(2), and acquire and own subordinated subrogation rights upon performance of such guarantees, (vii) make advances in the ordinary course of conducting the business of the Company or any Restricted Subsidiary, including deposits permitted under paragraph 6B(1)(iii), advances to employees for travel, relocation and other employment related expenses, advances to contractors performing services for the Company or such Restricted Subsidiary, advances to owners of timber or timber properties to acquire rights to harvest timber and other similar advances, (viii) make Investments in Restricted Subsidiaries, or any entity which immediately after such Investment will be a Restricted Subsidiary, and (ix) make Investments not otherwise permitted by this paragraph 6B(3) in entities engaged solely in a Permitted Business, provided that the cumulative aggregate amount of such Investments (calculated at original cost and including the principal amount of any obligations guaranteed to the extent such guarantees are not otherwise permitted by this paragraph 6B(3)) outstanding from time to time made pursuant to this clause (ix) between the date of closing and any date thereafter shall not exceed the greater of $30,000,000 or 60% of the average annual Pro Forma Free Cash Flow for the two fiscal years preceding such date; 6B(4) SALE OF STOCK AND DEBT OF SUBSIDIARIES Sell or otherwise dispose of, or part with control of, any shares of stock or Debt of any Subsidiary, except to the Company or a Restricted Subsidiary, and except that all shares of stock and Debt of any Subsidiary (other than the Facilities Subsidiary) at the time owned by or owed to the Company and its Restricted Subsidiaries may be sold as an entirety for a cash consideration which represents the fair value (as determined in good faith by the Responsible Representatives of the General Partner) at the time of sale of the shares of stock and Debt so sold; provided that the assets of such Subsidiary do not include any assets which could not be disposed of pursuant to the provisions of paragraph 6B(5) unless the conditions to thesale of such assets set forth in paragraph 6B(5) are complied with, and further provided that, at the time of such sale, such Subsidiary shall not own, directly or indirectly, any shares of stock or Debt of any other Subsidiary (unless all of the shares of stock and -16- 21 Plum Creek Timber Company, L.P. Senior Note Agreement Debt of such other Subsidiary owned, directly or indirectly, by the Company and its Subsidiaries are simultaneously being sold as permitted by this paragraph 6B(4)); 6B(5) MERGER AND SALE OF ASSETS Merge or consolidate with any other Person or sell, lease or transfer or otherwise dispose of any assets (other than inventory sold in the ordinary course of business) except that (i) any Restricted Subsidiary may merge with the Company (provided that the Company shall be the continuing or surviving entity) or with any one or more other Restricted Subsidiaries, (ii) any Restricted Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Company or a Restricted Subsidiary, (iii) any Restricted Subsidiary may merge or consolidate with any other entity, provided that, immediately after giving effect to such merger or consolidation, (a) the continuing or surviving entity of such merger or consolidation shall be a solvent corporation or partnership organized under the laws of any State of the United States of America and shall constitute a Restricted Subsidiary, (b) no Event of Default or Material Default shall exist, and (c) following the merger, the entity surviving the merger is not engaged in any business other than a Permitted Business, provided that, after giving effect on a pro forma basis to such merger or consolidation, the gross revenue contribution of pulp and paper manufacturing activities of the Company and its Subsidiaries on a combined basis for the 12 months preceding such merger or consolidation does not exceed 33% of the total revenues of the Company and its Subsidiaries on a combined basis, (iv) the Company may merge or consolidate with, or sell or dispose of all or substantially all of its assets to, any other entity, provided that (a) either (x) the Company shall be the continuing or surviving entity (in the case of any such merger), or (y) the successor or acquiring entity shall be a solvent corporation or partnership organized under the laws of any State of the United States of America and shall expressly assume in writing all of the obligations of the Company under this Agreement and on the Notes, including all covenants herein and therein contained, and such successor or acquiring corporation or partnership shall succeed to and be substituted for the Company with the same effect as if it had been named herein as a party hereto, provided, however, that no such sale shall release the Company from any of its obligations and liabilities under this Agreement or the Notes unless such sale is followed by the complete liquidation of the Company and substantially all the assets of the Company immediately following such sale are distributed in such liquidation, and (b) immediately after such merger or consolidation or such sale or other disposition, (x) no Event of Default or Material Default shall exist, (y) the Company could incur at least $1 of additional Funded Debt pursuant to paragraph 6B(2)(ix), and (z) the entity surviving the merger or consolidation or to which such assets have been transferred is -17- 22 Plum Creek Timber Company, L.P. Senior Note Agreement not engaged in any business other than aPermitted Business, provided that, after giving effect on a pro forma basis to such merger, consolidation or sale, the gross revenue contribution of pulp and paper manufacturing activities of the merged or consolidated entity and its Subsidiaries on a combined basis for the 12 months preceding such merger, consolidation or sale does not exceed 33% of total revenues of the Company or such merged or consolidated entity, as the case may be, and its Subsidiaries on a combined basis, (v) the Company or any Restricted Subsidiary may sell Designated Acres for the fair value thereof as reasonably determined in good faith by the Responsible Representatives, (vi) the Company and its Restricted Subsidiaries may exchange Timberlands with other Persons in the ordinary course of business, provided that (a) the fair value of the Timberlands plus any net cash proceeds received in such exchange is, in the good faith judgment of the Responsible Representatives, not less than the fair value of Timberlands exchanged plus any other consideration paid, (b) such exchange would not materially and adversely affect the business, property or assets, condition or results of operations of the Company and its Restricted Subsidiaries on a combined basis or of the Facilities Subsidiary or impair the ability of the Company to perform its obligations hereunder or under the Notes, and (c) any Timberlands so exchanged shall be deemed sold to the extent of cash proceeds received in such exchange and such sales shall be allowed only to the extent otherwise permitted by this paragraph 6B(5), (vii) the Company and its Restricted Subsidiaries may sell properties for not less than the fair value thereof as determined in good faith by the Responsible Representatives, provided that the aggregate net proceeds of such sales in any calendar year do not exceed an amount equal to one percent (1%) of Consolidated Total Assets, determined as of the last day of the immediately preceding calendar year, and (viii) the Company and its Restricted Subsidiaries may otherwise sell for cash properties in an amount not less than the fair value thereof as determined in good faith by the Responsible Representatives if and only if (a) immediately after giving effect to such proposed sale, no condition or event shall exist which constitutes an Event of Default or Material Default, (b) the net proceeds of any such sale (x) are applied, within 180 days after such sale, to the repayment of Qualified Debt selected by the Company, which, in the case of the Notes, shall be a prepayment pursuant to paragraph 4A(2), or (y) are applied, within 180 days after such sale, to the purchase of productive assets in the same line of business, and (c) immediately after giving effect to such sale (giving effect on a pro forma basis to any proposed retirement of Qualified Debt out of the proceeds thereof), the Company could incur $1 of additional Funded Debt pursuant to paragraph 6B(2)(ix); provided that, if (I) the net proceeds of any such sale exceed $50,000,000 (and such proceeds are not immediately applied in accordance with clause (b) above), or (II) the unapplied net proceeds of all such sales exceed $100,000,000 in the aggregate at any time, all the net proceeds of any such sale described in clause (I) and/or all the unapplied net proceeds of such sales described in -18- 23 Plum Creek Timber Company, L.P. Senior Note Agreement clause (II), as the case may be, shall be placed immediately in an escrow or cash collateral account or accounts, pursuant to an agreement or agreements in form and substance reasonably satisfactory to the holders of greater than 50% of the outstanding principal amount of Qualified Debt, for the purpose of application in accordance with clause (b) above; 6B(6) HARVESTING RESTRICTIONS In any calendar year, harvest Timber on the Timberlands then owned by the Company in excess of the amount set forth for such calendar year in the following table: MAXIMUM CUNITS CALENDAR YEAR TO BE HARVESTED 1996 1,470 MCCF 1997 through 2000 1,970 MCCF 2001 and each calendar year thereafter 1,910 MCCF
plus, in each year, the amount, if any, by which (a) the sum of (x) the cumulative amount set forth in the table above for the years preceding such year of determination and (y) 2,130 MCCF, exceeds (b) the cumulative amount actually harvested in such years preceding such year of determination; unless the net cash proceeds from such excess harvest are either (i) applied, within 180 days after any such excess harvest, to the repayment of Qualified Debt selected by the Company, which, in the case of the Notes, shall be a prepayment pursuant to paragraph 4A(2), or (ii) applied, within 180 days after any such excess harvest, to purchase Timber (including Timber on Timberlands purchased) having a fair value (in the good faith judgment of the Responsible Representatives) not less than the fair value of the Timber subject to such excess harvest; provided that, if the net proceeds of any such excess harvest exceed $50,000,000 (and such proceeds are not immediately applied in accordance with clause (i) or (ii) above), all the net proceeds of such excess harvest shall be placed immediately in an escrow or cash collateral account or accounts, pursuant to an agreement or agreements in form and substance reasonably satisfactory to the holders of greater than 50% of the outstanding principal amount of Qualified Debt, for the purpose of application in accordance with clause (i) or (ii) above; 6B(7) SALE AND LEASE-BACK Enter into any arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by the Company or any Restricted Subsidiary of real or personal property which has been or is to be sold or transferred by the Company or any Restricted Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or -19- 24 Plum Creek Timber Company, L.P. Senior Note Agreement rental obligations of the Company or any Restricted Subsidiary, provided that this paragraph 6B(7) shall not apply to any property sold pursuant to clause (vii) of paragraph 6B(5); 6B(8) CERTAIN CONTRACTS Enter into or be a party to (i) any contract providing for the making of loans, advances or capital contributions to any Person or for the purchase of any property from any Person, in each case in order primarily to enable such Person to maintain working capital, net worth or any other balance sheet condition or to pay debts, dividends or expenses, or (ii) any contract for the purchase of materials, supplies or other property or services if such contract (or any related document) requires that payment for such materials, supplies or other property or services shall be made regardless of whether or not delivery of such materials, supplies or other property or services is ever made or tendered, provided that nothing in this clause (ii) shall prevent the Company from (a) entering into take-or-pay contracts in the ordinary course of business with the United States Forest Service, the Bureau of Land Management, the Washington Department of Natural Resources or similar state or federal governmental agencies, or (b) making payments in satisfaction of contracts with such Persons which contracts are deemed by the Responsible Representatives to be disadvantageous to perform, or (iii) any contract to rent or lease (as lessee) any real or personal property if such contract (or any related document) provides that the obligation to make payments thereunder is absolute and unconditional under conditions not customarily found in commercial leases then in general use or requires that the lessee purchase or otherwise acquire securities or obligations of the lessor, or (iv) any contract for the sale or use of materials, supplies or other property, or the rendering of services, if such contract (or any related document) requires that payment for such materials, supplies or other property, or the use thereof, or payment for such services, shall be subordinated to any indebtedness (of the purchaser or user of such materials, supplies or other property or the Person entitled to the benefit of such services) owed or to be owed to any Person, or (v) any other contract which in economic effect, is substantially equivalent to a guarantee except as permitted by the provisions of clauses (i), (v), (vi), (vii), (viii) or (ix) of paragraph 6B(3); 6B(9) TRANSACTIONS WITH AFFILIATES Directly or indirectly engage in any transaction (including, without limitation, the purchase, sale or exchange of assets or the rendering of any service) with any Affiliate -20- 25 Plum Creek Timber Company, L.P. Senior Note Agreement except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those which might be obtained in an arm's length transaction at the time from Persons which are not such an Affiliate. The foregoing shall not prohibit Designated Repurchases otherwise permitted by this Agreement. 6C. CONDUCT OF BUSINESS The Company covenants that it will not, and will not permit any Subsidiary to, engage in any business other than Permitted Businesses. 6D. ISSUANCE OF STOCK BY SUBSIDIARIES The Company covenants that it will not permit any Subsidiary (either directly, or indirectly by the issuance of rights or options for, or securities convertible into, such shares) to issue, sell or otherwise dispose of any shares of any class of its stock or partnership or other ownership interests (other than directors' qualifying shares) except to the Company or a Restricted Subsidiary and except to the extent that holders of minority interests may be entitled to purchase stock by reason of preemptive rights. 7. EVENTS OF DEFAULT 7A. ACCELERATION If any of the following events shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise): (i) the Company defaults in the payment of any principal or of premium on any Note when the same shall become due, either by the terms thereof or otherwise as herein provided; or (ii) the Company defaults in the payment of any interest on any Note for more than 10 days after the date due; or (iii) the Company or any Restricted Subsidiary (a) defaults in any payment of principal of or interest on any other obligation for money borrowed (or any payment obligation under the Guarantee, any Capital Lease Obligation, any obligation under a conditional sale or other title retention agreement, any obligation issued or assumed as full or partial payment for property whether or not secured by a purchase money mortgage or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any period of grace provided with respect thereto, or (b) fails to perform or observe any other agreement, term or condition contained in any agreement under which any such obligation is created within any applicable grace period provided therein (or if any other event thereunder or under any such -21- 26 Plum Creek Timber Company, L.P. Senior Note Agreement agreement shall occur and be continuing) and the effect of such failure or other event is (x) to then cause such obligation to become due prior to any stated maturity or (y) to then permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause such obligation to become due prior to any stated maturity, provided that the aggregate outstanding principal amount of all obligations as to which such payment defaults shall occur and be continuing or such failures or other events causing or permitting acceleration shall occur and be continuing exceeds $5,000,000; or (iv) any representation or warranty made by the Company herein or in any writing furnished in connection with or pursuant to this Agreement shall be false in any material respect on the date as of which made; or (v) the Company fails to perform or observe any agreement contained in the last sentence of paragraph 5A or in paragraph 6; or (vi) the Company fails to perform or observe any other agreement, term or condition contained herein and such failure shall not be remedied within 30 consecutive days after written notice thereof shall have been received by the Company from any holder of any Note; or (vii) the Company or the General Partner or any Restricted Subsidiary makes a general assignment for the benefit of creditors or is generally not paying its debts as such debts become due; or (viii) any decree or order for relief in respect of the Company or the General Partner or any Restricted Subsidiary is entered under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law, whether now or hereafter in effect (herein called the "Bankruptcy Law"), of any jurisdiction; or (ix) the Company or the General Partner or any Restricted Subsidiary petitions or applies to any tribunal for, or consents to, the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official of the Company or the General Partner or any Restricted Subsidiary, or of any substantial part of the assets of the Company or the General Partner or any Restricted Subsidiary, or commences a voluntary case under the Bankruptcy Law of the United States or any proceedings (other than proceedings for the voluntary liquidation and dissolution of a Restricted Subsidiary) relating to the Company or the General Partner or any Restricted Subsidiary under the Bankruptcy Law of any other jurisdiction; or (x) any such petition or application is filed, or any such proceedings as described in clause (ix) above are commenced, against the Company or the General Partner or any Restricted Subsidiary and the Company or the General Partner or such Restricted Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein, or an order, judgment or decree is entered appointing any such -22- 27 Plum Creek Timber Company, L.P. Senior Note Agreement trustee, receiver, custodian, liquidator or similar official, or approving the petition in any such proceedings, and such order, judgment or decree remains unstayed and in effect for more than 60 consecutive days; or (xi) any order, judgment or decree is entered in any proceedings against the Company or the General Partner or any Restricted Subsidiary decreeing the dissolution, winding-up or liquidation of the Company or the General Partner or any Restricted Subsidiary and such order, judgment or decree remains unstayed and in effect for more than 60 consecutive days; or (xii) any order, judgment or decree is entered in any proceedings against the Company or any Restricted Subsidiary decreeing a split-up of the Company or such Restricted Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of or partnership or other ownership interest in a Subsidiary whose assets represent a substantial part, of the combined assets of the Company and its Restricted Subsidiaries (determined in accordance with generally accepted accounting principles) or which requires the divestiture of assets, or stock of or partnership or other ownership interest in a Subsidiary, which shall have contributed a substantial part of the combined net income of the Company and its Restricted Subsidiaries (determined in accordance with generally accepted accounting principles) for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than 60 consecutive days; or (xiii) a final judgment (which is non-appealable or has not been stayed pending appeal or as to which all rights to appeal have expired or been exhausted) in an amount in excess of $5,000,000 is rendered against the Company or any Restricted Subsidiary and, within 60 consecutive days after entry thereof, such judgment is not discharged or execution thereof stayed pending appeal, or within 60 consecutive days after the expiration of any such stay, such judgment is not discharged; or (xiv) this Agreement shall at any time, for any reason, cease to be in full force and effect or shall be declared to be null and void in whole or in any material part by the final judgment (which is nonappealable or has not been stayed pending appeal or as to which all rights to appeal have expired or been exhausted) of any court or other governmental or regulatory authority having jurisdiction in respect thereof, or the validity or the enforceability of this Agreement shall be contested by or on behalf of the Company, or the Company shall renounce this Agreement, or deny that it is bound by the terms hereof or has any further liability hereunder; or (xv) any "Event of Default" as defined in the Mortgage Note Agreements shall exist; or (xvi) the Facilities Subsidiary, any Subsidiary of the Facilities Subsidiary or any Designated Immaterial Subsidiary, immediately after they become Restricted Subsidiaries under the definition of "Restricted Subsidiary" contained in -23- 28 Plum Creek Timber Company, L.P. Senior Note Agreement paragraph 10B, shall have any Debt outstanding which is not permitted by clause (x) or (xi) of paragraph 6B(2) insofar as it relates to such Facilities Subsidiary, Subsidiary of the Facilities Subsidiary or Designated Immaterial Subsidiary; or (xvii) if any of the events or conditions or series of events or conditions described in subparagraph (vii) of paragraph 5A occurs which events or conditions or series of events or conditions have, or could reasonably be expected to have, a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole; then (a) if such event is an Event of Default specified in clause (viii) , (ix) or (x) of this paragraph 7A with respect to the Company, all of the Notes at the time outstanding shall automatically become immediately due and payable at par together with interest accrued thereon, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company, and (b) if such event is any other continuing Event of Default, the holder or holders of a majority of the aggregate principal amount of the Notes at the time outstanding may at its or their option, by notice in writing to the Company, declare all of the Notes to be, and all of the Notes shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Premium, if any, with respect to each Note, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company andthe Company shall give notice in writing of such declaration to the other holders, provided that (x) if such event is a continuing Event of Default specified in clause (i) or (ii) of this paragraph 7A in respect of any Note, any Significant Holder may, at its option, by notice in writing to the Company, declare all of the Notes held by such Significant Holder to be, and all of such Notes shall thereupon be and become, immediately due and payable together with interest accrued thereon and together with the Yield-Maintenance Premium, if any, with respect to each such Note, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, (y) if any Significant Holder shall have declared all of the Notes held by such Significant Holder to be due and payable pursuant to clause (x) of this proviso, then the Company shall give notice in writing of such declaration to the other holders and any other holder may at any time thereafter and until the later of (A) the expiration of 60 days after such other holder shall have received notice from the Company of such declaration and (B) the date on which all Events of Default and Defaults have been cured or waived pursuant to paragraph 11C, by notice in writing to the Company, declare all of the Notes held by such other holder to be immediately due and payable, together with interest accrued thereon and together with the Yield-Maintenance Premium, if any, with respect to each such Note without presentment, demand, protest or any other notice of any kind, all of which are hereby waived by the Company, and (z) the Yield-Maintenance Premium, if any, with respect to each Note shall be due and payable upon any such declaration only if (1) such event is a continuing Event of Default specified in any of clauses (i) through (vi), inclusive, (xiii), (xiv), (xv), (xvi) and (xvii) of this paragraph 7A, (2) the holder or holders effecting such declaration shall have given to the Company, at least 10 Business Days before such declaration, written notice stating its or their intention so to declare the Notes to be immediately due and payable and identifying one or more such -24- 29 Plum Creek Timber Company, L.P. Senior Note Agreement Events of Default whose occurrence on or before the date of such notice permits such declaration and (3) one or more of the Events of Default so identified shall be continuing at the time of such declaration. At any time after the principal of, and interest accrued on, any or all of the Notes are declared due and payable, the holders of not less than 66 2/3% aggregate principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (x) the Company has paid all overdue interest on the Notes, the principal of and premium, if any, on any Notes which have become due otherwise than by reason of such declaration, and interest on such overdue principal and premium and (to the extent permuted by applicable law) any overdue interest in respect of such Notes of each series at a rate per annum from time to time equal to the greater of (i) one percent over the rate of interest borne by the Notes of such series or (ii) the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York as its Prime Rate plus 2.0%, (y) all Events of Default and Defaults, other than non-payment of amounts which have become due solely by reason of such declaration, have been cured or waived pursuant to paragraph 11C, and (z) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; but no such rescission andannulment shall extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 7B. OTHER REMEDIES If any Event of Default shall occur and be continuing, the holder of any Note may proceed to protect and enforce its rights under this Agreement and such Note by exercising such remedies as are available to such holder in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in this Agreement or in aid of the exercise of any power granted in this Agreement. No remedy conferred in this Agreement upon the holder of any Note is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise. 8. REPRESENTATIONS, COVENANTS AND WARRANTIES The Company represents, covenants and warrants: 8A. ORGANIZATION The Company is a limited partnership duly organized, validly existing and in good standing under the Delaware Revised Uniform Limited Partnership Act and has all requisite partnership power and authority to own and operate its properties, to conduct its business as currently conducted, to enter into this Agreement, to issue and sell the Notes and to carry out the terms of this Agreement and the Notes. -25- 30 Plum Creek Timber Company, L.P. Senior Note Agreement 8B. GENERAL PARTNER NET WORTH On the date of closing the General Partner will have a net worth (excluding its interest in the Company and any notes receivable from or payable to the Company) at least equal to the amount sufficient to meet the tax requirements for a general partner of a Delaware limited partnership (based on the fair market value of its assets). 8C. SUBSIDIARIES The General Partner owns 2% and the Company owns 98% of the limited partnership interest in Manufacturing. The General Partner owns 4% and the Company owns 96% of the issued and outstanding stock of Marketing. The Facilities Subsidiary Stock has been duly authorized and validly issued, is fully paid and non-assessable and is owned free and clear of any Liens. The Facilities Subsidiary has issued no rights, warrants or options to acquire or instruments convertible into or exchangeable for any equity interest in the Facilities Subsidiary. On the date of closing the Company will have no Subsidiaries other than the Facilities Subsidiary and those listed on Exhibit 8C. 8D. PARTNERSHIP INTERESTS The only general partner of the Company is the General Partner, which on the date of closing will own a 2% interest in the Company. 8E. QUALIFICATION The Company is duly qualified or registered for the transaction of business and in good standing as a foreign limited partnership in each of the State of Arkansas, the State of Idaho, the State of Louisiana, the State of Montana, the State of Texas and the State of Washington, which are the only jurisdictions in which the failure so to qualify or be registered would have a material adverse effect on the business, property or assets, condition, or results of operations of the Company, or on the ability of the Company to perform its obligations under this Agreement and the Notes. 8F. BUSINESS; FINANCIAL STATEMENTS (a) The Company and its Subsidiaries have not engaged in any business or activities prior to the date of this Agreement other than (i) owning, acquiring and disposing of Timber and Timberlands, and (ii) owning and operating lumber mills, plywood and fiberboard manufacturing plants, and wood chip plants. The Company and its Subsidiaries do not have any significant assets other than Timber, Timberlands and the facilities described in clause (ii) above, and, after giving effect to the application of the proceeds of the Notes in accordance with paragraph 8S, on the date of closing will not have any significant liabilities other than the Notes, the 11 1/8% Senior Notes, the 8.73% Senior Notes, the Guarantee and the Mortgage Notes or indebtedness under the Bank of America Revolving Credit and Bridge Loan Agreement. -26- 31 Plum Creek Timber Company, L.P. Senior Note Agreement (b) The Company has delivered or caused to be delivered to each Purchaser complete and correct copies of (i) the Company's Form 10-K as filed with the Securities and Exchange Commission on March 6, 1996 and the Company's Form 10-Qs as filed with the Securities and Exchange Commission on May 13, 1996 and August 14, 1996 (together, the "1934 Act Reports") and (ii) the memorandum dated October 1996 prepared by the Company for use in connection with the Company's private placement of the Notes (such memorandum, including, without limitation, the preliminary prospectus contained therein, being herein called the "Memorandum"). The annual financial statements and schedules included in the 1934 Act Reports have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods specified and present fairly the financial position for the dates specified, and the results of their operations and cash flows of the Company for the respective periods specified. The quarterly financial statements and schedules included in the 1934 Act Reports present fairly the financial position for the dates specified and the results of operations for the quarterly periods presented. The pro forma financial information set forth in the Memorandum is based upon assumptions stated in the Memorandum that are reasonable in all material respects and the financial projections contained therein are reasonable based upon such reasonable assumptions and the best information available to the officers of the Company. 8G. CHANGES, ETC Except as contemplated by this Agreement or disclosed in Exhibit 8G, subsequent to December 31, 1995, (a) neither the Company nor the Facilities Subsidiary has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions not in the ordinary course of business, and (b) there has not been (i) any material adverse change in the financial condition or operations of the Company or the Facilities Subsidiary or (ii) any Restricted Payment of any kind declared, paid or made by the Company. 8H. TAX RETURNS AND PAYMENTS The Company and each of its Restricted Subsidiaries has filed all tax returns required by law to be filed by it (or obtained extensions with respect thereto) and has paid all material taxes, assessments and other material governmental charges levied upon it, or any of its properties, assets, income or franchises which are due and payable by it, other than those which are not past due or delinquent or the non-payment of which is permitted by paragraph 5E. 8I. FRANCHISES, LICENSES, AGREEMENTS, ETC. Except as disclosed in Exhibit 8T, the Company is in possession of and operating in substantial compliance with all franchises, grants, authorizations, approvals, licenses, permits, easements, consents, certificates and orders required to own or lease its properties and to permit the conduct of its business, except for those franchises, grants, authorizations, approvals, licenses, permits, easements, consents, certificates and orders the failure of which to be obtained, given or complied with would not individually or in the aggregate materially -27- 32 Plum Creek Timber Company, L.P. Senior Note Agreement and adversely affect the business, property or assets, condition or operations of the Company or impair the ability of the Company to perform its obligations hereunder or under the Notes or impair the validity or enforceability of this Agreement or the Notes. 8J. ACTIONS PENDING There is no action, suit, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company, or any properties or rights of the Company, by or before any court, arbitrator or administrative or governmental body which questions the validity of this Agreement or the Notes or any action taken or to be taken pursuant to this Agreement or the Notes or which would be reasonably likely to result in any material adverse change in the business, property or assets, condition or operations of the Company, or in the inability of the Company to perform its obligations hereunder or under the Notes. 8K. TITLE TO PROPERTIES Except as disclosed in Exhibit 8K, the Company has good title to its real properties (other than properties which it leases) and good title to all of its other properties and assets, subject to no Lien of any kind except Liens permitted by paragraph 6B(l), and except such Liens as do not materially interfere with the full ownership and enjoyment of such properties and assets. All leases necessary in any material respect for the conduct of the respective businesses of the Company and its Subsidiaries are valid and subsisting and are in full force and effect. 8L. COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not in violation of any term of the Partnership Agreement or of any term of any other agreement or instrument to which it is a party or by which it or any of its properties is bound or any term of any applicable law, ordinance, rule or regulation of any governmental authority or any term of any applicable order, judgment or decree of any court, arbitrator or governmental authority, the consequences of which violation would be reasonably likely to have a material adverse effect on its business, property or assets, condition or operations or on the ability of the Company to perform its obligations under this Agreement or the Notes, and the execution, delivery and performance by the Company of this Agreement and the Notes will not result in any violation of or be in conflict with or constitute a default under any such term or result in the creation of (or impose any obligation on the Company to create) any Lien (other than the Liens contemplated by this Agreement) upon any of the properties or assets of the Company, pursuant to any such term except for Liens permitted by paragraph 6B(1); and there is no such term which materially adversely affects or in the future would be likely to materially adversely affect the business, property or assets, condition or operations of the Company, or the ability of the Company to perform its obligations under this Agreement or the Notes. -28- 33 Plum Creek Timber Company, L.P. Senior Note Agreement 8M. GOVERNMENTAL CONSENT No consent, approval or authorization of, or declaration or filing with, any governmental authority is required for the valid execution, delivery and performance by the Company of this Agreement or the valid offer, issue, sale and delivery of the Notes pursuant to this Agreement. 8N. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the issue and sale of the Notes by the Company nor its use of the proceeds thereof as contemplated by this Agreement will violate any of the regulations administered by the Office of Foreign Assets Control, United States Department of the Treasury, including, without limitation, the Foreign Assets Control Regulations, the Transaction Control Regulations, the Cuban Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the Iranian Transactions Regulations, the Iraqi Sanctions Regulations, the Haitian Transactions Regulations, the Libyan Sanctions Regulations, and the Soviet Gold Coin Regulations (31 C.F.R., Subtitle B, Chapter V, as amended) or the restrictions set forth in Executive Orders No. 12543 (Libya), 12544 (Libya), 12801 (Libya), 12722 (Iraq) or 12724 (Iraq), 12775 (Haiti), 12779 (Haiti), 12808 (Yugoslavia), 12810 (Yugoslavia) or 12831 (Yugoslavia), as amended, of the President of the United States of America or of any rules or regulations issued thereunder. 8O. OFFERING OF NOTES Neither the Company nor any agent acting on behalf of the Company has, directly or indirectly, offered the Notes or any similar security of the Company for sale to, or solicited any offers to buy the Notes or any similar security of the Company from, or otherwise approached or negotiated with respect thereto with any Person other than 60 persons who are "accredited investors" by reason of the provisions of clause (1), (3) or (7) of the definition of that term in Regulation D under the Securities Act, each of whom was offered a portion of the Notes at private sale for investment, and neither the Company nor any agent acting on behalf of the Company has taken or will take any action which would subject the issuance or sale of the Notes to the provisions of section 5 of the Securities Act or to the provisions of any securities or Blue Sky law of anyapplicable jurisdiction. 8P. REGULATION G, ETC. The Company does not own or have any present intention of acquiring any "margin stock" as defined in Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve System (herein called "margin stock"). None of the proceeds of the sale of the Notes will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any margin stock or for the purpose of maintaining, reducing or retiring any indebtedness which was originally incurred to purchase or carry any stock that is currently a margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of such Regulation G. Neither the Company nor any agent acting on its behalf has taken or will take any action which might -29- 34 Plum Creek Timber Company, L.P. Senior Note Agreement cause this Agreement or the Notes to violate Regulation G, Regulation T or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Securities Exchange Act of 1934, as amended, in each case as in effect now or as the same may hereafter be in effect. 8Q. ERISA (a) Neither the Company nor any of its Subsidiaries has breached the fiduciary rules of ERISA or engaged in any prohibited transaction which, in any such case, could reasonably be expected to result in any direct or indirect material liability (including, without limitation, as a result of an indemnification obligation) to the Company or any of its Subsidiaries in connection with a suit for damages or pursuant to section 409, 502(i) or 502(l) of ERISA or section 4975 of the Code, which liability, either individually or in the aggregate, has had or could reasonably be expected to have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. (b) None of the Company, any of its Subsidiaries or any Related Person has incurred any direct or indirect material liability (including, without limitation, as a result of an indemnification obligation) under or pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, which liability has had or could reasonably be expected to have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. No event, transaction or condition has occurred or exists or, to the Company's Knowledge, is expected to occur or exist with respect to any Plan that could reasonably be expected to result in any direct or indirect material liability to the Company, any of its Subsidiaries or any Related Person (including, without limitation, as a result of an indemnification obligation) under or pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, which liability has had or could reasonably be expected to have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. There has been no reportableevent (within the meaning of section 4043(b) of ERISA), other than reportable events for which the notification requirements have been waived in regulations or other pronouncements issued by the PBGC, or any other event or condition with respect to any Plan which presents a risk of the termination of, or the appointment of a trustee to administer, any such Plan by the PBGC. (c) Full payment (made in a timely manner such that any incidental delay in making a payment, if any, has not resulted in any Lien or any material liability to the Company, any of its Subsidiaries or any Related Person) has been made of all amounts which the Company, any of its Subsidiaries or any Related Person is required under applicable law, the terms of each Plan or any collective bargaining agreement to have paid as contributions to each such Plan, and no accumulated funding deficiency (as defined in section 302 of ERISA or section 412 of the Code), whether or not waived, exists or is expected to exist with respect to any Plan (other than a Multiemployer Plan). -30- 35 Plum Creek Timber Company, L.P. Senior Note Agreement (d) The present value of the accumulated benefit obligations (whether or not vested) under each Plan (other than a Multiemployer Plan), determined as of the end of each such Plan's most recently ended Plan year on the basis of the actuarial assumptions specified for funding purposes in each such Plan's actuarial valuation report for such Plan year, each of which assumptions is reasonable and in compliance with section 412 of the Code, did not exceed the current value of the assets of each such Plan allocable to such accumulated benefit obligations by an amount which could have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole, and no event has occurred since such date that could reasonably be expected to cause the present value of such accumulated benefit obligations to increase by a material amount. The terms "present value" and "current value" shall have the meanings assigned to such terms in section 3 of ERISA, and the term "accumulated benefit obligations" shall have the meaning assigned to such term in Statement of Financial Accounting Standards No. 87. (e) None of the Company, any of its Subsidiaries or any Related Person has incurred or expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan or any Plan that is a "multiple employer plan" within the meaning of section 4063 or 4064 of ERISA, which liability has had or could reasonably be expected to have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. The aggregate withdrawal liability of the Company, its Subsidiaries and the Related Persons with respect to all Multiemployer Plans and Plans that are "multiple employer plans" within the meaning of section 4063 or 4064 of ERISA, determined as if a complete withdrawal had occurred on the date hereof, does not exceed $25,000,000. To the Company's Knowledge, no Multiemployer Plan is insolvent or in reorganization within the meaning of section 4241 or 4245 of ERISA. (f) The "expected postretirement benefit obligation" (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries under Plans which are "employee welfare benefit plans" (as defined in section 3(1) of ERISA) did not exceed $25,000,000. (g) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction which is subject to the prohibitions of section 406(a)(1)(A)-(D) of ERISA or in connection with which a tax could be imposed on the Company pursuant to section 4975(c)(1)(A)-(D) of the Code. With respect to each employee benefit plan identified in writing to the Company in accordance with paragraph 9(c), neither the Company nor any "affiliate" thereof (as defined in section V(c) of Prohibited Transaction Class Exemption 84-14 (the "QPAM Exemption")) has at this time, and has not exercised at any time within the preceding year, the authority to appoint or terminate the "QPAM" (as defined in the QPAM Exemption) identified in accordance with paragraph 9(c) as manager of any of the assets of any plan identified in accordance with paragraph 9(c), or to negotiate the terms of any management agreement with such QPAM on -31- 36 Plum Creek Timber Company, L.P. Senior Note Agreement behalf of any such plan, the Company is not an "affiliate" (as defined in section V(c) of the QPAM Exemption) of such QPAM, and the Company is not a party in interest with respect to any plan identified in accordance with paragraph 9(c). The representations by the Company in this subparagraph (g) of paragraph 8Q are made in reliance upon and subject to the accuracy of each Purchaser's representation in paragraph 9 of this Agreement as to the source of the funds to be used by such Purchaser to pay the purchase price of the Notes to be purchased by it hereunder. As used in this paragraph 8Q, the terms "employee benefit plan" and "party in interest" have the respective meanings assigned to such terms in section 3 of ERISA. 8R. STATUS UNDER CERTAIN FEDERAL STATUTES The Company is not (i) an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, (iii) a "public utility" as such term is defined in the Federal Power Act, as amended, nor (iv) a "rail carrier" or a person controlled by or affiliated with a "rail carrier", within the meaning of Title 49, U.S.C., and neither the Company, the General Partner nor the Facilities Subsidiary is a "carrier" to which 49 U.S.C. Section 11301(b)(1) is applicable. 8S. USE OF PROCEEDS The Company will apply the proceeds of the sale of the Notes to the Purchasers to repay amounts owing under the Bank of America Revolving Credit and Bridge Loan Agreement. 8T. ENVIRONMENTAL MATTERS (a) Except as disclosed in Exhibit 8T, to the Company's Knowledge, the Company and its Subsidiaries are in compliance in all material respects with all Environmental Laws applicable to them or to real property owned or leased by them, or to the ownership, use, operation or occupancy thereof except where the failure to be in compliance with such Environmental Laws would not result in liability of the Company or any of its Subsidiaries in an aggregate amount in excess of $25,000,000. To the Company's Knowledge, neither the Company, its Subsidiaries nor any other Person acting at the direction of or on behalf of the Company has engaged in any activity in violation of any provision of any applicable Environmental Laws, which violation could reasonably be expected to have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole. (b) Except as permitted by paragraph 8I or as disclosed in Exhibit 8T, the Company has or will have on the date of closing all environmental permits or licenses necessary for the conduct of its business as conducted on the date of closing and, as to any such permit or -32- 37 Plum Creek Timber Company, L.P. Senior Note Agreement license that has expired or is about to expire or is needed for the proposed conduct of its business, the Company has or will have timely and properly applied for renewal or receipt of the same. Exhibit F lists all material notices from Federal, state or local environmental agencies to the Company citing environmental violations that have not been finally resolved and disposed of; no such violation, individually or in the aggregate, is reasonably expected to have a material adverse effect on the business, property or assets, condition or operations of the Company, and the Company is acting in compliance with all such notices. Notwithstanding any such notice, the Company is currently operating in compliance with the limits set forth in such environmental permits or licenses except for such noncompliance as would not reasonably be expected to have a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole and to the Company's Knowledge there are no threatened or pending proceedings for the revocation, loss or termination of any such environmental permits or licenses. Neither the Company nor any of its Subsidiaries is subject to any order or decree of any governmental authority under any Environmental Laws, which order or decree would reasonably be likely to result in a material adverse effect on the business, condition (financial or other), assets, properties or operations of the Company or the Company and its Restricted Subsidiaries taken as a whole, nor is there any basis for such order or decree. (c) All facilities located on the real property owned by the Company or the Facilities Subsidiary on the date of closing which are subject to regulation by the Federal Resource Conservation and Recovery Act, as in effect on the date hereof, are and to the knowledge of the Company have been operated in material compliance with such Act and the Company (or the Facilities Subsidiary, as the case may be) has not received or, to the knowledge of the Company, has not been threatened with, a notice of violation under such Act regarding such facilities which can reasonably be expected to have a material adverse effect on the business, property or assets, conditions or operations of the Company (or the Facilities Subsidiary, as the case may be), or the ability of the Company to perform its obligations under this Agreement or the Notes. (d) Except as disclosed in Exhibit 8T, with respect to the real property owned by the Company (or the Facilities Subsidiary, as the case may be) on the date of closing, there has not occurred to the knowledge of the Company (i) any Release of any Hazardous Substance in a Reportable Quantity, (ii) any discharge of any substance into ground, surface, or navigable waters for which a notice of violation has been received or threatened under any Federal, state or local laws, rules or regulations concerning water pollution, or (iii) any assertion of any Lien pursuant to Federal, state or local environmental law resulting from any use, spill, discharge or clean-up of any hazardous or toxic substance or waste, which occurrence can reasonably be expected to have a material adverse effect on the business, property or assets, condition or operations of the Company (or the Facilities Subsidiary, as the case may be). As used in this paragraph, the terms "Release," "Hazardous Substance," and "Reportable Quantity" shall have the meanings assigned such terms under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) as in effect on the date thereof. -33- 38 Plum Creek Timber Company, L.P. Senior Note Agreement 8U. DISCLOSURE Neither this Agreement, the Memorandum, the 1934 Act Reports nor any other document, certificate or statement furnished to any Purchaser by or on behalf of the Company in writing, in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact peculiar to the Company which materially adversely affects or in the future may (so far as the Company can now reasonably foresee) materially adversely affect the business, property or assets, condition or results of operations of the Company and which has not been set forth in this Agreement, the Memorandum or the 1934 Act Reports or in the other documents, certificates and statements in writing furnished to any Purchaser by or on behalf of the Company prior to the date hereof in connection with the transactions contemplated hereby. 9. REPRESENTATIONS OF THE PURCHASER Each Purchaser represents, and in making this sale to such Purchaser it is specifically understood and agreed between the Company and such Purchaser, that such Purchaser is not acquiring the Notes to be purchased by it hereunder with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act, provided that the disposition of its property shall at all times be and remain within its control. Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. Each Purchaser also represents that it is an "accredited investor" by reason of the provisions of clause (1), (3) or (7) of the definition of that term in Regulation D under the Securities Act and that at least one of the following statements is an accurate representation as to each source of funds to be used by it to pay the purchaseprice of the Notes purchased by it hereunder: (a) such Purchaser is an insurance company subject to state regulation and the source of the funds being used by such Purchaser to pay the purchase price of the Notes being purchased by it hereunder is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995), and there is no employee benefit plan (treating as a single plan, all employee benefit plans maintained by the same employer or an affiliate (as defined in section V(a)(1) of such PTE) of such employer or by the same employee organization) with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such employee benefit plan exceeds ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with such Purchaser's state of domicile; or (b) such Purchaser is an insurance company subject to state regulation and to the extent that any part of the funds being used by it to pay the purchase price of the -34- 39 Plum Creek Timber Company, L.P. Senior Note Agreement Notes being purchased by it hereunder constitutes assets allocated to any separate account maintained by it, (i) such separate account is an "insurance company pooled separate account" within the meaning of PTE 90-1, in which case such Purchaser has disclosed to the Company the name of each employee benefit plan whose assets in such separate account exceed 10% of the total assets or are expected to exceed 10% of the total assets of such account as of the date of such purchase (and for the purposes of this subparagraph (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan), or (ii) such separate account contains only the assets of a specific employee benefit plan, complete and accurate information as to the identity of which such Purchaser has delivered to the Company; or (c) all of the funds being used by such Purchaser to pay the purchase price of the Notes being purchased by it hereunder constitute assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or QPAM (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets which are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(g) of the QPAM Exemption are satisfied and the identity of such QPAM and the names of each employee benefit plan whose assets are included in such investment fund have been disclosed to the Company; or (d) such Purchaser is not an insurance company and all or a portion of the funds to be used by it to pay the purchase price of the Notes being purchased by it hereunder does not constitute assets of any employee benefit plan (other than a governmental plan exempt from the coverage of ERISA) and the remaining portion, if any, of such funds consists of funds which may be deemed to constitute assets of one or more specific employee benefit plans, complete and accurate information as to the identity of each of which such Purchaser has delivered to the Company. As used in this paragraph 9, the terms "employee benefit plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in section 3 of ERISA. 10. DEFINITIONS For the purpose of this Agreement, the terms defined in paragraphs 1 and 2 shall have the respective meanings specified therein, and the following terms shall have the meanings specified with respect thereto below: -35- 40 Plum Creek Timber Company, L.P. Senior Note Agreement 10A. YIELD-MAINTENANCE TERMS "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Called Principal" shall mean, with respect to any Note, the principal of such Note that is to be prepaid pursuant to paragraph 4A(2) (including partial prepayments made pursuant to paragraphs 6B(5)(viii) and 6B(6)) or is declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. "Discounted Value" shall mean, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on a semiannual basis) equal to 50 basis points above the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" shall mean, with respect to the Called Principal of any Note, the yield to maturity implied by (i) the yields reported, as of 10:00 A.M.. (New York City time) on the Business Day next preceding the Settlement Date with respect to such Called Principal, on the display designated as the USD page in the Bloomberg Financial Markets Service (or such other display as may replace the USD page in the Bloomberg Financial Markets Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, including by way of interpolation, (ii) the Treasury Constant Maturity Series yields reported, for the latest day for which such yields shall have been so reported as of the Business Day next preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between reported yields. "Remaining Average Life" shall mean, (a) with respect to the Called Principal of any Series A, B or C Note, the number of years (calculated to the nearest one-twelfth year) which will elapse between the Settlement Date with respect to such Called Principal and the stated maturity of such Note, and (b) with respect to any Called Principal of any Series D Note, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (I) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (II) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. -36- 41 Plum Creek Timber Company, L.P. Senior Note Agreement "Remaining Scheduled Payments" shall mean, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due on or after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date. "Settlement Date" shall mean, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to paragraph 4A(2) (including partial prepayments made pursuant to paragraphs 6B(5)(viii) and 6B(6)) or is declared to be immediately due and payable pursuant to paragraph 7A, as the context requires. "Yield-Maintenance Premium" shall mean, with respect to any Note, a premium equal to the excess, if any, of the Discounted Value of the Called Principal of such Note over the sum of (i) such Called Principal plus (ii) interest accrued thereon as of (including interest due on) the Settlement Date with respect to such Called Principal. The Yield-Maintenance Premium shall in no event be less than zero. 10B. OTHER TERMS "Affiliate" shall mean any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the Company, except a Restricted Subsidiary. A Person shall be deemed to control a corporation or other entity if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation or other entity, whether through the ownership of voting securities, by contract or otherwise. "Available Cash" shall mean, with respect to any calendar quarter, (a) the sum of: (i) the Company's net income (or net loss) (excluding gain on the sale of any Capital Asset) for such quarter, (ii) the amount of depletion, depreciation, amortization and other noncash charges utilized in determining net income of the Company for such quarter, (iii) the amount of any reduction in reserves of the Company of the types referred to in clause (b)(iv) below, (iv) proceeds received by the Company from the sale of Designated Acres, and (v) any Cash from Capital Transactions received by the Company during such quarter in specific contemplation that such Cash from Capital Transactions will be used to refund or refinance any payment of Debt of the type specified in clause (b)(i) below which was made in either of the two immediately preceding quarters, less (b) the sum of -37- 42 Plum Creek Timber Company, L.P. Senior Note Agreement (i) all payments of principal on Debt made by the Company in such quarter (excluding any payments of principal on Debt made with Cash from Capital Transactions received by the Company during such quarter or, to the extent such Cash from Capital Transactions remains available, received by the Company during the four immediately preceding quarters), (ii) capital expenditures made by the Company during such quarter (excluding any capital expenditures for such quarter made with Cash from Capital Transactions received by the Company during such quarter or, to the extent such Cash from Capital Transactions remains available, received by the Company during the four immediately preceding quarters, and capital expenditures which the General Partner reasonably anticipates will be financed with Cash from Capital Transactions within 90 days from the end of such quarter), (iii) the amount of any capital expenditures made by the Company in a prior quarter which was anticipated would be financed from Cash from Capital Transactions but which have not been financed from such source within 90 days from the end of such quarter, (iv) the amount of any reserves of the Company established during such quarter which are necessary or appropriate (A) to provide funds for the future payment of items of the types specified in clauses (b)(i) and (b)(ii) above, (B) to provide additional working capital, (C) to provide funds for cash distributions with respect to any one or more of the next four quarters, or (D) to provide funds for the future payment of interest in an amount equal to the interest to be accrued in the next quarter, (v) the amount of any noncash items of income utilized in determining net income of the Company for such quarter, (vi) the amount of any Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) made by the Company during such quarter pursuant to clause (i), (viii) or (ix) of paragraph 6B(3) (or in the case of any Subsidiary, Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) of similar type) to the extent not included in capital expenditures or payments on principal on Debt made by the Company during such quarter (excluding any such Investments for such quarter made with Cash from Capital Transactions received by the Company during such quarter or, to the extent such Cash from Capital Transactions remains available, received by the Company during the four immediately preceding quarters, and Investments which the General Partner reasonably anticipates will be financed with Cash from Capital Transactions within 90 days from the end of such quarter), and -38- 43 Plum Creek Timber Company, L.P. Senior Note Agreement (vii) the amount of any Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) made by the Company in a prior quarter pursuant to clause (i), (viii) or (ix) of paragraph 6B(3) (or in the case of any Subsidiary, Investments (other than guarantees, contingent liabilities orendorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) of similar type) to the extent not included in capital expenditures made by the Company during such quarter which was anticipated would be financed from Cash from Capital Transactions but which have not been financed from such source within 90 days from the end of such quarter, provided, however, (i) net proceeds to the Company from the issuance of SPUs (as such term is defined in the Partnership Agreement) shall be deemed to be Available Cash, and shall be deemed to be received, for purposes of determining Available Cash, during the quarter in respect of which such SPUs are issued, even if such cash is received by the Company after the last day of such quarter, and (ii) any disbursements made of the types described in clauses (b)(i), (ii), (iii), (vi) and (vii) or reserves established, in accordance with clause (b)(iv), within 45 days after the end of any quarter as to which SPUs were purchased in respect of such quarter in accordance with the Distribution Support Agreement shall be deemed to be made or established, for purposes of determining Available Cash, within such quarter if the General Partner so determines, provided that the aggregate amount of such disbursements made or reserves established which are so determined as being made within such quarter shall not exceed the aggregate dollar amount of SPUs purchased in respect of such quarter. Notwithstanding the foregoing, "Available Cash" shall not take into account any reductions in reserves or disbursements made or reserves established after commencement of the dissolution and liquidation of the Company. In determining "Available Cash", (i) all items under clauses (a)(i), (ii), (iii), (iv) and (v) above and all items under clauses (b)(i), (ii), (iii), (iv), (v), (vi) and (vii) above shall be calculated on a combined basis with any Subsidiary of the Company whose income is accounted for on a consolidated or combined basis with the Company and, in accordance therewith, "Available Cash" shall include a percentage of each such item of each such Subsidiary equal to the Company's percentage ownership interest in such Subsidiary, provided, however, that the items under clauses (a)(i), (ii), (iii), (iv) and (v) above shall only be included in Available Cash to the extent that the General Partner determines such amount to be legally available for dividends or distributions to the Company by such Subsidiary; (ii) the amount of net income and the amount of depletion, depreciation, amortization and other noncash charges, utilized in determining net income shall be determined, with respect to the Company, by the General Partner in accordance with generally accepted accounting principles and, with respect to any Subsidiary, -39- 44 Plum Creek Timber Company, L.P. Senior Note Agreement by its Board of Directors (or by such other body or Person which has the ultimate management authority of such Subsidiary) in accordance with generally accepted accounting principles; (iii) the net income of any Subsidiary shall be determined on an after-tax basis; (iv) the amount of any reductions in, or additions to, reserves for purposes of clauses (a)(iii) and (b)(iv) above shall be determined, with respect to the Company, by the General Partner in its reasonable good faith judgment and, with respect to any Subsidiary, by its Board of Directors (or by such other body or Person which has the ultimate management authority of such Subsidiary) in its reasonable good faith judgment; and (v) any determination of whether any capital expenditures orInvestments are financed, or anticipated to be financed, with Cash from Capital Transactions for purposes of clause (b) (ii) or (b) (vi) above shall be made, with respect to the Company, by the General Partner in its reasonable good faith judgment and, with respect to any Subsidiary, by its Board of Directors (or by such other body or Person which has the ultimate management authority of such Subsidiary) in its reasonable good faith judgment. "Bank of America Revolving Credit and Bridge Loan Agreement" shall mean the revolving credit and bridge loan agreement between the Company, Bank of America National Trust and Savings Association, as Administrative Agent, and certain other lenders pursuant to which the lenders thereunder provide credit facilities to the Company in an aggregate principal amount not to exceed $650,000,000 and any extension, renewal, refunding or refinancing thereof provided that such renewal, refunding or refinancing shall not contain terms which are any less favorable to the Purchasers. "Bankruptcy Law" shall have the meaning specified in clause (viii) of paragraph 7A. "Board Foot" shall mean a unit of measurement one foot square and one inch thick. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banking institutions in New York, New York or Seattle, Washington are authorized or required by law, regulation or executive order to be closed. "Capital Asset" shall mean any asset on the Company's or any Subsidiary's balance sheet, as the case may be, other than inventory, accounts receivable or any other current asset and assets disposed of in connection with normal retirements or replacements. "Capital Lease Obligation" shall mean, with respect to any Person, any rental obligation which, under generally accepted accounting principles, is or will be required to be capitalized on the books of such Person, taken at the amount thereof accounted for as indebtedness (net of interest expenses) in accordance with such principles. "Capital Transaction" shall mean (i) borrowings and sales of debt securities (other than for working capital purposes and other than for items purchased on open account in the ordinary course of business) by the Company, (ii) sales of equity interests by the Company and (iii) sales or other voluntary or involuntary dispositions of any assets of the Company (other than (x) sales or other dispositions of inventory in the ordinary course of business, (y) sales or other dispositions of other current assets including receivables and accounts and (z) sales or other dispositions of assets as a part of normal retirements or replacements), in each case prior to the commencement of the dissolution and liquidation of the Company provided, that in determining Cash from Capital Transactions, items (i), (ii) and (iii) above shall include, with respect to each Subsidiary of the Company whose income is accounted for on a consolidated or combined basis with the Company, a percentage of each such item of such Subsidiary equal to the Company's percentage ownership interest in such Subsidiary. -40- 45 Plum Creek Timber Company, L.P. Senior Note Agreement "Cash from Capital Transactions" shall mean at any date, such amounts of cash as are determined by the General Partner to be cash made available to the Company from or by reason of a Capital Transaction. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company's Knowledge" or "knowledge of the Company" shall mean the actual knowledge of Rick R. Holley, President and Chief Executive Officer, Charles P. Grenier, Executive Vice President, Diane M. Irvine, Vice President and Chief Financial Officer, James A. Kraft, Vice President, General Counsel and Secretary, Susanna N. Duke, Director, Law and Human Resources, William R. Brown, Vice President, Resource Management, and Mitchell Leu, Environmental Engineer and any successor to the offices and officers, such persons being the principal persons employed by the Company ultimately responsible for environmental operations and compliance, ERISA and legal matters relating to the Company. "Consolidated Total Assets" shall mean the total amount of all the assets of the Company and its Restricted Subsidiaries, determined on a combined basis in accordance with generally accepted accounting principles. A "Cunit" is equal to 100 cubic feet of wood. For purposes of conversion of Timber in the Company's northwest region, one MMBF shall equal 2.1 MCCF. "Debt" shall mean, as to any Person, as of any date of determination, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person, (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any Lien on any property owned by such Person, to the extent attributable to such Person's interest in such property, even though such Person has not assumed or become liable for the payment thereof, (iv) lease obligations of such Person which, in accordance with generally accepted accounting principles, should be capitalized, (v) lease obligations of such Person under leases which have a term (including any option to renew exercisable at the discretion of the lessee thereunder) longer than 10 years or under leases under which the lessor, pursuant to an agreement with such Person, has acquired the property specifically for the purpose of leasing it to such Person, (vi) obligations payable out of the proceeds of production from property of such Person, even though such Person has not assumed or become liable for the payment thereof, and (vii) any obligations of any other Person of the type described in the above clauses (i) through and including (vi), inclusive, which are guaranteed or in effect guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain the solvency or any balance sheet or other financial condition of the obligor of such obligation, or to make payment for any products, materials or supplies or for any transportation or services regardless of the non-delivery or nonfurnishing thereof, in any -41- 46 Plum Creek Timber Company, L.P. Senior Note Agreement such case if the purpose or intent of such agreement is to provide assurance that such obligation will be paid or discharged, or that any agreements relating theretowill be complied with, or that the holders of such obligation will be protected against loss in respect thereof. "Designated Acres" shall mean up to an aggregate of 150,000 acres owned by the Company which (based on the good faith determination of the Responsible Representatives that such acres have at the time such determination is made a higher value as recreational, residential, grazing or agricultural property than for timber production) may be reasonably designated by the General Partner at the time of the sale thereof as constituting Designated Acres (such aggregate number of acres to be determined over the term of existence of this Agreement). "Designated Immaterial Subsidiary" shall mean any entity which would otherwise be a Restricted Subsidiary and which at any time is designated by the Company as a Designated Immaterial Subsidiary, provided that no such designation of any entity as a Designated Immaterial Subsidiary shall be effective unless (i) at the time of such designation, such entity does not own any shares of stock or Debt of any Restricted Subsidiary which is not simultaneously being designated as a Designated Immaterial Subsidiary, (ii) immediately after giving effect to such designation, (a) the Company could incur at least $1 of additional Funded Debt pursuant to clause (ix) of paragraph 6B(2), and (b) no condition or event shall exist which constitutes an Event of Default or Material Default, (iii) the Company is permitted to make the Investment in such entity resulting from such designation pursuant to, and within the limitations specified in, clause (ix) of paragraph 6B(3), treating the aggregate book value (including equity in retained earnings) of the Investments of the Company and its Subsidiaries in such entity immediately prior to such designation as the cost of such Investment, and provided, further, that if at any time all Designated Immaterial Subsidiaries on a combined basis would be a "significant subsidiary" (assuming the Company is the registrant) within the meaning of Regulation S-X (17 CFR Part 210) the Company shall designate one or more Designated Immaterial Subsidiaries which are directly owned by the Company and its Restricted Subsidiaries as Restricted Subsidiaries such that the condition in this proviso is no longer applicable and the entities so designated shall no longer be Designated Immaterial Subsidiaries. Any entity which has been designated a Designated Immaterial Subsidiary shall not thereafter become a Restricted Subsidiary except pursuant to a designation required by the last proviso in the preceding sentence, and any Designated Immaterial Subsidiary which has been designated a Restricted Subsidiary pursuant to the last proviso of the preceding sentence shall not thereafter be redesignated as a Designated Immaterial Subsidiary. "Designated Repurchases" shall mean and include purchases, redemptions or other acquisitions, in each case at a price not to exceed fair market value, of the publicly traded limited partnership interests in the Company, which are retired by the Company within six months of such purchase, redemption or other acquisition. -42- 47 Plum Creek Timber Company, L.P. Senior Note Agreement "Distribution Support Agreement" shall mean the Distribution Support Agreement, dated as of June 8, 1989, between the Company and Burlington Resources Inc., a Delaware corporation. "8.73% Senior Note Agreements" shall mean the Note Agreements, dated as of August 1, 1994 and amended as of October 15, 1995 and May 31, 1996, providing for the issuance and sale by the Company of its 8.73% Senior Notes to the purchasers listed in the schedule of purchasers attached thereto. "8.73% Senior Notes" shall mean the 8.73% Senior Notes Due August 1, 2009 of the Company issued and sold pursuant to the 8.73% Senior Note Agreements. "11 1/8% Senior Note Agreements" shall mean the Note Agreements, dated as of May 31, 1989 and amended as of January 1, 1991, April 22, 1993, September 1, 1993, May 20, 1994 and May 31, 1996, providing for the issuance and sale by the Company of its 11 1/8% Senior Notes to the purchasers listed in the schedule of purchasers attached thereto. "11 1/8% Senior Notes" shall mean the 11 1/8% Senior Notes Due June 8, 2007 of the Company issued and sold pursuant to the 11 1/8% Senior Note Agreements. "Environmental Laws" shall mean Federal, state, local and foreign laws, rules or regulations relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, air, surface water, ground water or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Event of Default" shall mean any of the events specified in paragraph 7A, provided that there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act, and "Default" shall mean any of such events, whether or not any such requirement has been satisfied. "Facilities Subsidiary" shall mean, collectively, Manufacturing and Marketing. "Facilities Subsidiary's Facility" shall mean any facility pursuant to which the Facilities Subsidiary may incur Debt for purposes of making capital improvements, additions to, or expansions of, property, plant and equipment of the Facilities Subsidiary or its Subsidiaries. -43- 48 Plum Creek Timber Company, L.P. Senior Note Agreement "Facilities Subsidiary's Revolving Credit Facility" shall mean any facility pursuant to which the Facilities Subsidiary may obtain revolving credit, takedown credit, the issuance of standby and payment letters of credit and backup for the issuance of commercial paper. "Facilities Subsidiary Stock" shall mean, collectively, the limited partner interest of the Company in Manufacturing and the capital stock of Marketing that is owned by the Company. "Funded Debt" shall mean, without duplication, any Debt payable more than one year from the date of the creation thereof. "Current Debt" shall mean, without duplication, any Debt payable on demand or within a period of one year from the date of the creation thereof; provided that any Debt shall be treated as Funded Debt, regardless of its term, if such Debt is renewable pursuant to the terms thereof or of a revolving credit or similar agreement effective for more than one year after the date of the creation of such Debt, ormay be payable out of the proceeds of similar Debt pursuant to the terms of such Debt or of any such agreement. "General Partner" shall mean Plum Creek Management Company, L.P., a limited partnership organized and existing under the laws of the State of Delaware, and its successors and assigns. "Guarantee" shall mean the guarantee in paragraph 7 of the Mortgage Note Agreements. "Investment Policy" shall mean the Corporate Investment Policy of the Company, as it exists on April 5, 1993 and as attached hereto as Schedule 10B(1) . "Investments" shall have the meaning specified in paragraph 6B(3). "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). "Manufacturing" shall mean Plum Creek Manufacturing, L.P., a Delaware limited partnership. "Marketing" shall mean Plum Creek Marketing, Inc., a Delaware corporation. "Material Default" shall mean any continuing Default as to which a written notice of such Default (which notice has not been rescinded) shall have been received by the Company or the General Partner from any holder of any Note, or any continuing Event of Default. "Maximum Pro Forma Annual Interest Charges" shall mean, as of any date, the highest total amount payable during any period of four consecutive fiscal quarters, -44- 49 Plum Creek Timber Company, L.P. Senior Note Agreement commencing with the fiscal quarter in which such date occurs and ending with the fiscal quarter in which November 13, 2016 occurs, by the Company and its Restricted Subsidiaries on a combined basis, after eliminating all intercompany transactions, in respect of interest charges ((a) including amortization of debt discount and expense and imputed interest on Capital Lease Obligations and on other obligations included in Debt which do not have stated interest, (b) assuming, in the case of fluctuating interest rates which cannot be determined in advance, that the rate in effect on such date will remain in effect throughout such period, and (c) treating the principal amount of all Debt outstanding as of such date under a revolving credit or similar agreement as maturing and becoming due and payable on the scheduled maturity date thereof, without regard to any provision permitting such maturity date to be extended) on all Debt of the Company and its Restricted Subsidiaries outstanding on such date (excluding the Guarantee and the guarantees of the Facilities Subsidiary's Facility and the Facilities Subsidiary's Revolving Credit Facility but including, to the extent not already included, all other Debt outstanding on such date which is guaranteed or in effect guaranteed by the Company or any Restricted Subsidiaries), after giving effect to any Debt proposed to be created on such date and to the concurrent retirement of any other Debt. "MCCF" shall mean one thousand Cunits. "MMBF" shall mean one million Board Feet. "Mortgage Note Agreements" shall mean the Note Agreements, dated as of May 31, 1989 and amended as of January 1, 1991, April 22, 1993, September 1, 1993, May 20, 1994, June 15, 1995 and May 31, 1996, providing for the issuance and sale by the Facilities Subsidiary of its 11 1/8% First Mortgage Notes to the purchasers listed in the schedule of purchasers attached thereto. "Mortgage Noteholder" shall mean and include each holder from time to time of a Mortgage Note issued under the Mortgage Note Agreements. "Mortgage Notes" shall mean the 11 1/8% First Mortgage Notes of the Facilities Subsidiary issued and sold pursuant to the Mortgage Note Agreements. "Multiemployer Plan" shall mean any Plan which is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "Officers' Certificate" shall mean, as to any corporation, a certificate executed on its behalf by the Chairman of the Board of Directors (if an officer) or its President or one of its Vice Presidents and its Treasurer, or Controller or one of its Assistant Treasurers or Assistant Controllers, and, as to any partnership, a certificate executed on behalf of such partnership by its general partner in a manner which would qualify such certificate as an Officers' Certificate of such general partner hereunder. "Partnership Agreement" shall mean the Amended and Restated Agreement of Limited Partnership of the Company, as in effect on the date of closing, and as the same may, from time to time, be amended, modified or supplemented in accordance with the terms thereof. -45- 50 Plum Creek Timber Company, L.P. Senior Note Agreement "PBGC" shall mean the Pension Benefit Guaranty Corporation or any governmental authority succeeding to any of its functions. "Permitted Business" shall mean any business engaged in by the Company or the Facilities Subsidiary on the date of closing, pulp and paper manufacturing, and any business substantially similar or related to any such business. "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. "Plan" shall mean an "employee benefit plan" (as defined in section 3(3) of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company, any of its Subsidiaries or any Related Person or with respect to which the Company, any of its Subsidiaries or any Related Person may have any liability. "Pro Forma Free Cash Flow" as of any date shall mean (i) net income of the Company and its Restricted Subsidiaries on a combined basis (excluding (a) gain on the sale of any Capital Asset, (b) noncash items of income, and (c) any distributions or other income received from, or equity of the Company or any Restricted Subsidiary in the earnings of, any entity which is not a Restricted Subsidiary) for the period of four consecutive fiscal quarters immediately prior to such date (such period of four consecutive fiscal quarters being the "Measurement Period"), determined in accordance with generally accepted accounting principles plusdepreciation, depletion, amortization and other noncash charges, interest expense on Debt and provision for income taxes, minus (ii) capital expenditures made by the Company and its Restricted Subsidiaries during the Measurement Period, to maintain their respective operations; provided, however, if (A) the Company or a Restricted Subsidiary is acquiring a Restricted Subsidiary or assets and (B) Pro Forma Free Cash Flow is being determined in connection therewith, such Restricted Subsidiary shall be considered to have been a Restricted Subsidiary during the entire Measurement Period and such assets shall be considered to have been owned by the Company during the entire Measurement Period if net income attributable to such Restricted Subsidiary or such assets (as the case may be) for the entire Measurement Period is readily determinable and confirmed pursuant to an audit or a certification prepared in good faith by the Company's chief financial officer; further provided, however, that portion of Pro Forma Free Cash Flow allocable to such Restricted Subsidiary or assets shall be reduced on a pro rata basis to the extent Timber has been harvested by such Restricted Subsidiary or from such assets during the Measurement Period at a rate greater than the rate at which the Company has harvested Timber from its Timberlands during the Measurement Period, as certified in good faith by the chief financial officer of the Company; and finally provided, however, if Pro Forma Free Cash Flow is being determined for any Measurement Period and a Restricted Subsidiary or assets have been sold or otherwise disposed of at any time during such Measurement Period by the Company or any Restricted Subsidiary, such Restricted Subsidiary shall not be considered to have been a Restricted Subsidiary during any part of such Measurement Period and such assets shall not be considered to have been owned by the Company during any part of such Measurement Period, and the net income that otherwise would have been attributable to such -46- 51 Plum Creek Timber Company, L.P. Senior Note Agreement Restricted Subsidiary or asset during such Measurement Period shall be certified in good faith by the chief financial officer of the Company. "Qualified Debt" shall mean, as to the Company, as of any date of determination, without duplication, all outstanding indebtedness of the Company for borrowed money, including, without limitation, Debt represented by the Notes, the 8.73% Senior Notes and the 11 1/8% Senior Notes. "Related Person" shall mean, as of any date of determination, any trade or business, whether or not incorporated, which, together with the Company or any of its Subsidiaries, is treated as a single employer under section 414(b) or (c) of the Code or the regulations promulgated thereunder. "Required Holder(s)" shall mean the holder or holders of greater than 50% of the aggregate principal amount of the Notes from time to time outstanding. "Responsible Officer" means the chief executive officer, the president or any vice president of the General Partner, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, the chief financial officer or the treasurer of the General Partner, or any other officer having substantially the same authority and responsibility. "Responsible Representatives" shall mean (a) in the case of any transaction in which the value of any assets disposed of or received have a value of less than $5,000,000 or in which payments made are less than$5,000,000, the chief executive officer, chief financial officer or chief operating officer of the Company, and (b) in the case of any other transaction, the Board of Directors of the General Partner. "Restricted Payment" shall mean (a) any payment or other distribution, direct or indirect, in respect of any partnership interest in the Company, except a distribution payable solely in additional partnership interests in the Company, and (b) any payment, direct or indirect, on account of the redemption, retirement, purchase or other acquisition of any partnership interest in the Company including, without limitation, any Designated Repurchase; or, if the Company is at any time reorganized as or changed (by merger, sale of assets or otherwise) into a corporation, (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of the Company now or hereafter outstanding, except a dividend payable solely in shares of stock of the Company, and (ii) any redemption, retirement, purchase or other acquisition, direct or indirect, of any shares of any class of stock of the Company, now or hereafter outstanding, or of any warrants, rights or options to acquire any such shares, except to the extent that the consideration therefor consists of shares of stock of the Company. "Restricted Subsidiary" shall mean any Wholly-Owned Subsidiary other than (a) any Designated Immaterial Subsidiary and (b) the Facilities Subsidiary or any Subsidiary directly or indirectly owned by the Facilities Subsidiary, provided that after the Mortgage Notes shall -47- 52 Plum Creek Timber Company, L.P. Senior Note Agreement have been paid in full and retired, the Facilities Subsidiary and its Subsidiaries shall become and be Restricted Subsidiaries. "Revolving Credit Facility" shall mean any facility pursuant to which the Company may obtain revolving credit, take-down credit, the issuance of standby and payment letters of credit and back-up for the issuance of commercial paper. "Securities Act" shall mean the Securities Act of 1933, as amended. "Significant Holder" shall mean (i) each Purchaser named in Schedule I hereto, so long as it shall hold (or be committed under this Agreement to purchase) any Note, or (ii) any other insurance company, bank, financial institution, public or governmental retirement or pension fund or other similar institutional holder of Notes, whether acting for itself or in a trust, agency or other fiduciary capacity. "Subsidiary" shall mean any corporation, partnership or other entity a majority of (i) the total combined voting power of all classes of Voting Stock of which or (ii) the outstanding equity interests of which shall, at the time as of which any determination is being made, be owned by the Company either directly or through Subsidiaries. "Timber" shall mean standing trees not yet harvested. "Timberlands" shall mean the timberlands owned by the Company as of the date of closing and any timberlands acquired by the Company or any Subsidiary after the date of closing. "Transferee" shall mean any direct or indirect transferee of all or any part of any Note purchased by any Purchaser under this Agreement. "Voting Stock" shall mean, with respect to any corporation or other entity, any shares of stock or other ownership interests of such corporation or entity whose holders are entitled under ordinary circumstances to vote for the election of directors of such corporation or to manage any such other entity (irrespective of whether at the time stock or ownership interests of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Western Europe" shall mean Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain and the United Kingdom. "Wholly-Owned Subsidiary" shall mean any Subsidiary organized under the laws of any state of the United States of America which conducts the major portion of its business in the United States of America and all of the stock or other ownership interests of every class of which, except director's qualifying shares, and except in the case of the Facilities Subsidiary not more than 5% of the outstanding Voting Stock shall, at the time as of which any determination is being made, be owned by the Company either directly or through Wholly-Owned Subsidiaries. -48- 53 Plum Creek Timber Company, L.P. Senior Note Agreement 11. MISCELLANEOUS 11A. NOTE PAYMENTS The Company agrees that, so long as any Purchaser shall hold any Note, it will make payments of principal thereof and premium, if any, and interest thereon, which comply with the terms of this Agreement, by wire or electronic funds transfer of immediately available funds for credit to such Purchaser's account or accounts as specified in the Schedule I attached hereto, or such other account or accounts in the United States as such Purchaser may designate in writing, notwithstanding any contrary provision herein or in any Note with respect to the place of payment. Each Purchaser agrees that, before disposing of any Note, it will make a notation thereon (or on a schedule attached thereto) of all principal payments previously made thereon and of the date to which interest thereon has been paid. The Company agrees to afford the benefits of this paragraph 11A to any Transferee which shall have made the same agreement as the Purchasers have made in this paragraph 11A. 11B. EXPENSES Whether or not the transactions contemplated by this Agreement shall be consummated, the Company will pay and will indemnify and hold each Purchaser and each holder of any Notes harmless in respect of all reasonable expenses in connection with such transactions and in connection with any amendments or waivers (whether or not the same become effective) under or in respect of this Agreement or the Notes, including: (a) the cost and expenses of preparing and reproducing this Agreement or the Notes, of furnishing all opinions by counsel for the Company and all other opinions referred to herein (including any opinions requested by Chapman and Cutler (or another firm selected by the Purchasers and the other holders as Purchasers' special counsel) as to any legal matter arising hereunder) and all certificates on behalf of the Company or any of its Subsidiaries or Affiliates, and of the performance of and compliance with all agreements and conditions contained herein on the part of the Company to be performed or complied with, (b) the cost of delivering toeach Purchaser's principal office, insured to its satisfaction, the Notes sold to it hereunder and any Notes delivered to it upon any substitution of Notes pursuant to paragraph 11E and of its delivering any Notes, insured to its satisfaction, upon any such substitution, (c) the reasonable fees, expenses and disbursements of Purchasers' special counsel in connection with such transactions and any such amendments or waivers (whether or not such amendments or waivers become effective), (d) the reasonable out-of-pocket expenses incurred by such Purchaser in connection with such transactions (including the costs and expenses incurred in connection with obtaining a private placement number) and any such amendments or waivers and (e) the cost and expenses, including attorneys' fees, incurred by each Purchaser or any Transferee in enforcing any rights under this Agreement or the Notes or in responding to any subpoena or any other legal process issued in connection with this Agreement or the transactions contemplated hereby or thereby or by reason of any Purchaser or any Transferee's having acquired any Note (as to any Person, other than under circumstances in which such Person has contravened the understanding contained in the second sentence of paragraph 9), including without limitation costs and expenses incurred in any bankruptcy case. The Company shall have no obligation to pay any -49- 54 Plum Creek Timber Company, L.P. Senior Note Agreement legal fees incurred by any Purchaser or any other holder other than the reasonable fees of special counsel for the Purchasers and the other holders. The Company also will pay, and will indemnify and hold each Purchaser and each holder of any Notes harmless from, all claims in respect of the fees, if any, of brokers and finders (unless engaged by any Purchaser) and any and all liabilities with respect to any and all taxes including interest and penalties which may be payable in respect of the execution, delivery, filing or recording of this Agreement, the issue of the Notes and any amendment or waiver under or in respect of this Agreement or the Notes. In furtherance of the foregoing, on the date of closing the Company will pay the fees and disbursements of Chapman and Cutler, Purchasers' special counsel, which are reflected as unpaid in the statement of Purchasers' special counsel delivered to the Company on or prior to the date of closing. The obligations of the Company under this paragraph 11B shall survive the transfer of any Note or portion thereof or interest therein by any Purchaser or any Transferee and the payment of any Note. 11C. CONSENT TO AMENDMENTS This Agreement (including, without limitation, paragraph 5, paragraph 6 and clauses (iii) through (xvii) of paragraph 7A) may be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent to such amendment, action or omission to act, of the Required Holder(s) except that, without the written consent of the holder or holders of all Notes at the time outstanding, no amendment to this Agreement shall change the maturity of any Note, or change the principal of, or the rate or time of payment of any scheduled payment of principal pursuant to paragraph 4A(1) or payment of interest or any premium payable with respect to, any Note, or alter or amend the right of any Significant Holder to declare all of the Notes held by such Significant Holder to be due and payable in accordance with the provisions of paragraph 7A, or change the proportion of the principal amount of the Notes required with respect to any consent. Each holder of any Note at the time orthereafter outstanding shall be bound by any consent authorized by this paragraph 11C, whether or not such Note shall have been marked to indicate such consent, but any Notes issued thereafter may bear a notation referring to any such consent. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein and in the Notes, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 11D. SOLICITATION OF HOLDERS OF NOTES The Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of any Note shall concurrently be informed thereof in writing by the Company and shall be afforded the opportunity to consider the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of paragraph 11C shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed -50- 55 Plum Creek Timber Company, L.P. Senior Note Agreement and delivered by the holder or holders of the requisite percentage of outstanding Notes. In the event that the holder of a Note is a nominee for another Person, any request for such amendment, waiver or consent shall be delivered to both the nominee and such other Person, and, if acceptable to such other Person, such amendment, waiver or consent shall be executed by such other Person. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of any Note as consideration for or as an inducement to the entering into by any such holder of any Note of any waiver or amendment of any of the terms and provisions of this Agreement or the Notes unless such remuneration is concurrently paid, on the same terms, ratably to each holder of the then outstanding Notes. 11E. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES The Notes are issuable as registered notes without coupons in minimum denominations equal to the lesser of (a) $1,000,000 (except as may be necessary to reflect any principal amount not evenly divisible by $1,000,000) and (b) the aggregate principal amount of Notes purchased by each Purchaser hereunder (the "Minimum Note Amount"). The Company shall keep at its principal office a register in which the Company shall provide for the registration of Notes and of transfers of Notes. In the event that the holder is a nominee for another Person (and such fact is known to the Company), the name and address of such other Person shall also be noted on the register. Upon surrender for registration of transfer of any Note at the principal office of the Company, the Company shall, at its expense, execute and deliver one or more new Notes of like series and tenor and of a like aggregate principal amount, registered in the name of such transferee or transferees, provided that no transfer shall be made to any Transferee which does not acquire Notes in a principal amount equal to not less than the lesser of the Minimum Note Amount or the entire principal amount of the Notes owned by the transferor thereof, and no holder shall transfer any Notes if thereafter suchholder retains ownership of Notes and the aggregate principal amount retained is less than the Minimum Note Amount. At the option of the holder of any Note, such Note may be exchanged for other Notes of like series and tenor and of any authorized denominations, of a like aggregate principal amount, upon surrender of the Note to be exchanged at the principal office of the Company. Whenever any Notes are so surrendered for exchange, the Company shall, at its expense, execute and deliver the Notes which the holder making the exchange is entitled to receive. Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the holder of such Note or such holder's attorney duly authorized in writing. Any Note or Notes issued in exchange for any Note or upon transfer thereof shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so exchanged or transferred, so that neither gain nor loss of interest shall result from any such transfer or exchange. Upon receipt of written notice from the holder of any Note of the loss, theft, destruction or mutilation of such Note and, in the case of any such loss, theft or destruction, upon receipt of such holder's unsecured indemnity agreement, or in the case of any such mutilation upon surrender and cancellation of such Note, the Company will make and deliver a new Note, of like series and tenor, in lieu of the lost, stolen, destroyed or mutilated Note. -51- 56 Plum Creek Timber Company, L.P. Senior Note Agreement 11F. PERSONS DEEMED OWNERS; PARTICIPATIONS Prior to due presentment for registration of transfer, the Company may treat the Person in whose name any Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of and premium, if any, and interest on such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. Any Purchaser may without the consent of the Company sell participations in principal amounts of not less than the Minimum Note Amount or, in the case of any sale by a holder holding Notes in an aggregate principal amount less than the Minimum Note Amount, such aggregate principal amount of Notes so held, to one or more Persons who agree to be bound by the provisions of paragraph 11J in all or a portion of its rights in the Note or Notes held by it. 11G. NON-RECOURSE NATURE OF LIABILITY Notwithstanding anything to the contrary contained in this Agreement, each Purchaser hereby acknowledges and agrees that neither the General Partner nor any general partner or limited partner, stockholder, officer, employee, servant, controlling Person, executive, director or agent, as such, of the General Partner, nor any past, present or future general partner or limited partner, as such, of the General Partner, shall have any liability to such Purchaser or any Transferee (such liability, including such as may arise by operation of law, being hereby expressly waived) for the payment of any sums now or hereafter owing by the Company under this Agreement or under the Notes or for the performance of any of the obligations of the Company contained herein. 11H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT All representations and warranties contained herein or made in writing by or on behalf of the Company inconnection herewith shall survive the execution and delivery of this Agreement and the Notes, the transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any Transferee, regardless of any investigation made at any time by or on behalf of any Purchaser or any Transferee. All representations, warranties and covenants contained herein made by any Purchaser or any holder shall survive the execution and delivery of this Agreement and the Notes, and may be relied upon by the Company and its successors and assigns. No holder of any Notes (including each Purchaser) shall be responsible for the truth, correctness or performance of the representations or warranties of any other holder (including any Transferee). Subject to the preceding sentences, this Agreement and the Notes embody the entire agreement and understanding between each Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 11I. SUCCESSORS AND ASSIGNS All covenants and other agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and -52- 57 Plum Creek Timber Company, L.P. Senior Note Agreement assigns of the parties hereto (including, without limitation, any Transferee) whether so expressed or not. 11J. DISCLOSURE TO OTHER PERSONS Each Purchaser agrees to use its best efforts to keep any information (other than information which has become public information) delivered or made available by the Company or the General Partner to such Purchaser (including any information obtained pursuant to paragraph 5A or 5B) in connection with or pursuant to this Agreement which is proprietary in nature and clearly indicated to be confidential information, confidential from any one other than Persons employed or retained by such Purchaser who are or are expected to become engaged in evaluating, approving, structuring or administering the Notes; provided that nothing herein shall prevent any holder of any Notes from disclosing such information to (i) such holder's trustees, directors, officers, employees, agents and professional consultants, (ii) any other holder of any Notes, (iii) any Person to whom such holder offers to sell such Note or any part thereof which has agreed in writing to be bound by the provisions of this paragraph 11J, (iv) any Person to whom such holder sells or offers to sell a participation in all or any part of such Notes who has agreed in writing to be bound by the provisions of this paragraph 11J, (v) any federal or state regulatory authority having jurisdiction over such holder, (vi) the National Association of Insurance Commissioners or any similar organization or (vii) any other Person to whom such delivery or disclosure may be necessary or appropriate (a) in compliance with any law, rule, regulation or order applicable to such holder, (b) in response to any subpoena or other legal process, (c) in connection with any litigation to which such holder is a party or (d) in order to protect such holder's investment in such Note to the extent reasonably required in connection with the exercise of any remedy hereunder. 11K. NOTICES All written communications provided for hereunder shall be sent by first class mail, if promptly confirmed byfacsimile transmission (to the extent the recipient has provided a facsimile telephone number) and by telephone, or nationwide overnight delivery service (with charges prepaid) and (i) if to any Purchaser, addressed to such Purchaser at the address specified for such communications in Schedule I attached hereto, or at such other address as such Purchaser shall have specified to the Company in writing, (ii) if to any other holder of any Note, addressed to such other holder at such address as such other holder shall have specified to the Company in writing or, if any such other holder shall not have so specified an address to the Company, then addressed to such other holder in care of the last holder of such Note which shall have so specified an address to the Company, and (iii) if to the Company, addressed to it at 999 Third Avenue, Suite 2300, Seattle, Washington 98104, or at such other address as the Company shall have specified to the holder of each Note in writing; provided, however, that any such communication to the Company may also, at the option of the holder of any Note, be delivered by any other means either to the Company at its address specified above or to any officer of the Company. -53- 58 Plum Creek Timber Company, L.P. Senior Note Agreement 11L. DESCRIPTIVE HEADINGS The descriptive headings of the several paragraphs of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 11M. SUBSTITUTION OF PURCHASER Each Purchaser shall have the right to substitute any one of its affiliates as the purchaser of the Notes which such Purchaser has agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser and such affiliate, shall contain such affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such affiliate of the accuracy with respect to it of the representations set forth in paragraph 9. Upon receipt of such notice, wherever the word "Purchaser" is used in this Agreement (other than in this paragraph 11M), such word shall be deemed to refer to such affiliate in lieu of such Purchaser. In the event such affiliate is so substituted as a Purchaser hereunder and such affiliate thereafter transfers to such Purchaser all of the Notes then held by such affiliate, upon receipt by the Company of notice of such transfer, wherever the word "Purchaser" is used in this Agreement (other than in paragraph 11M), such word shall no longer be deemed to refer to such affiliate, but shall refer to such Purchaser, and such Purchaser shall have all the rights of an original holder of the Notes under this Agreement. 11N. SATISFACTION REQUIREMENT If any agreement, certificate or other writing, or any action taken or to be taken, is by the terms of this Agreement required to be satisfactory to any Purchaser or to the Required Holder(s), the determination of such satisfaction shall be made by such Purchaser or the Required Holder(s), as the case may be, in the sole and exclusive judgment (exercised in good faith) of the Person or Persons making such determination. 11O. GOVERNING LAW THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BEGOVERNED BY, THE LAW OF THE STATE OF NEW YORK. 11P. COUNTERPARTS This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. -54- 59 Plum Creek Timber Company, L.P. Senior Note Agreement The execution hereof by the Purchasers shall constitute a contract among the Company and the Purchasers for the uses and purposes hereinabove set forth. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its General Partner By: /s/ Diane M. Irvine ---------------------------------- Diane M. Irvine Its Vice President and Chief Financial Officer -55- 60 Plum Creek Timber Company, L.P. Senior Note Agreement NEW YORK LIFE INSURANCE COMPANY By/s/ Lydia S. Sangree ----------------------------------- Lydia S. Sangree Its Investment Vice President -56- 61 Plum Creek Timber Company, L.P. Senior Note Agreement THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By/s/ Joseph Y. Alouf ----------------------------------- Joseph Y. Alouf Its Vice President -57- 62 Plum Creek Timber Company, L.P. Senior Note Agreement TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By/s/ AB Kyle --------------------------------------- Angela Brock-Kyle Its Associate Director-Private Placements -58- 63 Plum Creek Timber Company, L.P. Senior Note Agreement CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. By/s/ Mary Stewart Law ------------------------------------- Mary S. Law Its Vice President -59- 64 Plum Creek Timber Company, L.P. Senior Note Agreement CIGNA REINSURANCE COMPANY By: CIGNA Investments, Inc. By/s/ Mary Stewart Law ----------------------------------- Mary S. Law Its Vice President -60- 65 Plum Creek Timber Company, L.P. Senior Note Agreement TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY By/s/ John M. Casparian --------------------------------- Its Investment Officer -61- 66 Plum Creek Timber Company, L.P. Senior Note Agreement TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY By /s/ John M. Casparian ------------------------------- Its Investment Officer -62- 67 Plum Creek Timber Company, L.P. Senior Note Agreement AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY THE VARIABLE ANNUITY LIFE INSURANCE COMPANY By /s/ Julia S. Tucker ------------------------------- Name: Julia S. Tucker Title: Investment Officer -63- 68 Plum Creek Timber Company, L.P. Senior Note Agreement THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By /s/ Richard A. Strait ------------------------------ Richard A. Strait Its Vice President -64- 69 Plum Creek Timber Company, L.P. Senior Note Agreement THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By /s/ Kay L. Scow --------------------------------------- Its Vice President -65- 70 Plum Creek Timber Company, L.P. Senior Note Agreement FEDERATED MUTUAL INSURANCE COMPANY By: MIMLIC Asset Management Company By /s/ Marilyn Froelich ------------------------------------- Its Vice President -66- 71 Plum Creek Timber Company, L.P. Senior Note Agreement FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN By: MIMLIC Asset Management Company By /s/ Lynne M. Mills ---------------------------------------- Its Vice President -67- 72 Plum Creek Timber Company, L.P. Senior Note Agreement FB ANNUITY COMPANY By: MIMLIC Asset Management Company By /s/ Guy de Lambert ------------------------------------ Its Vice President -68- 73 Plum Creek Timber Company, L.P. Senior Note Agreement ALLSTATE LIFE INSURANCE COMPANY By /s/ Patricia W. Wilson --------------------------------- Name: Patricia W. Wilson Its: Ass't. Vice President By /s/ Steven M. Laude --------------------------------- Name: Steven M. Laude Its: Authorized Signatory Authorized Signatories -69- 74 Plum Creek Timber Company, L.P. Senior Note Agreement THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK By /s/ William D. Goodwin ------------------------------------ William D. Goodwin Its Senior Managing Director -70- 75 Plum Creek Timber Company, L.P. Senior Note Agreement THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By /s/ Beatriz M. Cuervo --------------------------------------- Beatriz M. Cuervo Its Investment Officer -71- 76 Plum Creek Timber Company, L.P. Senior Note Agreement THE EQUITABLE OF COLORADO, INC. By /s/ Beatriz M. Cuervo ------------------------------- Beatriz M. Cuervo Its Investment Officer -72- 77 Plum Creek Timber Company, L.P. Senior Note Agreement PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY By /s/ James T. Rogers -------------------------------------- Its Vice President -73- 78 Plum Creek Timber Company, L.P. Senior Note Agreement AMERICAN ENTERPRISE LIFE INSURANCE COMPANY By /s/ Lorraine R. Hart -------------------------------- Lorraine R. Hart Its Vice President, Investments -74- 79 Plum Creek Timber Company, L.P. Senior Note Agreement IDS LIFE INSURANCE COMPANY By /s/ Lorraine R. Hart -------------------------------- Lorraine R. Hart Its Vice President, Investments -75- 80 Plum Creek Timber Company, L.P. Senior Note Agreement AMERICAN CENTURION LIFE ASSURANCE COMPANY By /s/ David M. Kuplic -------------------------------- David M. Kuplic Its Vice President - Investments -76- 81 Plum Creek Timber Company, L.P. Senior Note Agreement NATIONWIDE LIFE INSURANCE COMPANY By /s/ Michael D. Groseclose -------------------------------- Michael D. Groseclose Its Associate Vice President Corporate Fixed-Income Securities -77- 82 Plum Creek Timber Company, L.P. Senior Note Agreement PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY By /s/ Jon L. Skaggs -------------------------------------- Its Second Vice President - Investments -78- 83 Plum Creek Timber Company, L.P. Senior Note Agreement THE UNION CENTRAL LIFE INSURANCE COMPANY By /s/ Joseph A. Tucker III --------------------------------- Joseph A. Tucker III Its Assistant Treasurer -79- 84 Plum Creek Timber Company, L.P. Senior Note Agreement RGA REINSURANCE COMPANY By: Guarantee Life Insurance Company, Agent By /s/ Robert M. Jergovic --------------------------------------- Robert M. Jergovic, CFA Its Vice President-Private Placements -80- 85 Plum Creek Timber Company, L.P. Senior Note Agreement GUARANTEE LIFE INSURANCE COMPANY By /s/ Robert M. Jergovic --------------------------------------- Robert M. Jergovic, CFA Its Vice President-Private Placements -81- 86 Plum Creek Timber Company, L.P. Senior Note Agreement AMERITAS LIFE INSURANCE CORP. by Ameritas Investment Advisors, Inc. as Agent By /s/ Patrick J. Henry --------------------------------------- Patrick J. Henry Its Vice President - Fixed Income Securities -82- 87 Plum Creek Timber Company, L.P. Senior Note Agreement WOODMEN ACCIDENT AND LIFE COMPANY By /s/ A.M. McCray ----------------------------------- Its Vice President and Asst. Treasurer -83- 88 Schedule I
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED New York Life Insurance SERIES A Series B Series C Series D Company $6,000,000 -0- $14,000,000 -0- 51 Madison Avenue New York, New York 10010 Attention: Investment Department, Private Finance Group, Room 206 Telefacsimile: (212) 447-4122
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as (i) in the case of the Series A Notes, "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal, premium or interest," and (ii) in the case of the Series C Notes, "Plum Creek Timber Company, L.P., 7.97% Senior Notes, Series C due 2011, PPN: 729237 B@ 5 and principal, premium or interest") to: Morgan Guaranty Trust Company of New York New York, New York 10015 ABA #021-000-238 for the account of: New York Life Insurance Company General Account Number 810-00-000 Notices All notices with respect to payments and written confirmation of each such payment, to be addressed: New York Life Insurance Company 51 Madison Avenue New York, New York 10010-1603 Attention: Treasury Department, Securities Income Section, Room 209 Telefacsimile: (212) 447-4160 SCHEDULE I (to Senior Note Agreement) 89 All other notices and communications to be addressed as first provided above, with a copy of any notices regarding defaults or Events of Default under this operative document to: New York Life Insurance Company 51 Madison Avenue New York, New York 10010 Office of General Counsel Investment Section, Room 1104 Telefacsimile: (212) 576-8340 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-5582869 I-2 90
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED The Prudential Insurance SERIES A Series B Series C Series D Company of America $10,000,000 $2,500,000 $2,000,000 $5,500,000 c/o Prudential Capital Group - Corporates Four Embarcadero Center Suite 2700 San Francisco, California 94111 Attention: Managing Director
Payments All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to: Account No. 890-0304-391 The Bank of New York New York, New York (ABA No.: 021-000-018) Each such wire transfer shall set forth (a) the name of the Company, (b) the due date and application (as among principal, interest and Yield-Maintenance Premium) of the payment being made and (c) a reference to (i) in the case of the Series A Notes, "7.74% Notes due November 13, 2006, PPN #729237\A", (ii) in the case of the Series B Notes, "7.87% Notes due November 13, 2008, PPN #729237\B", (iii) in the case of the Series C Notes, "7.97% Notes due November 13, 2011, PPN #729237\C" and (iv) in the case of the Series D Notes, "8.05% Notes due November 13, 2016, PPN #729237\D". Address for all notices relating to payments: The Prudential Insurance Company of America c/o Prudential Capital Group Gateway Center Three 100 Mulberry Street Newark, New Jersey 07102 Attention: Manager, Investment Operations Group Telephone: (201) 802-5260 Telefacsimile: (201) 802-8055 I-3 91 Address for all other communications and notices: The Prudential Insurance Company of America c/o Prudential Capital Group - Corporates Four Embarcadero Center Suite 2700 San Francisco, California 94111 Attention: Managing Director Telefacsimile: (415) 296-5661 Recipient of telephonic prepayment notices: Manager, Investment Structure and Pricing Telephone: (201) 802-6660 Telefacsimile: (201) 802-9425 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 22-1211670 I-4 92
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED TEACHERS INSURANCE AND SERIES A Series B Series C Series D ANNUITY ASSOCIATION OF -0- -0- $20,000,000 -0- AMERICA (Two Notes: Each 730 Third Avenue $10,000,000) New York, New York 10017-3263
Payments All payments on or in respect of the Series C Notes shall be made in immediately available funds at the opening of business on the due date by electronic funds transfer through the Automated Clearing House System (identifying each payment as "Plum Creek Timber Company, L.P., 7.97% Senior Notes, Series C, due November 13, 2011, PPN: 729237 B@ 5, principal or interest") to: For Note R-C-3 ($10,000,000): Chase Manhattan Bank ABA No. 021000021 New York, New York Account of: Teachers Insurance and Annuity Association of America Account Number 910-2-766475 On order of: Plum Creek Timber Company, L.P. For Note R-C-4 ($10,000,000): Citibank, N.A. ABA No. 021000089 New York, New York Account of: Teachers Insurance and Annuity Association of America Account Number 4057-8501 On order of: Plum Creek Timber Company, L.P. Notices Contemporaneous with the above electronic funds transfer advice setting forth: (1) the full name, private placement number, interest rate and maturity date of the Series C Notes; (2) allocation of payment between principal, interest, Yield-Maintenance Premium and any special payment; and (3) the name and address of the bank from which such electronic funds transfer was sent, shall be delivered, mailed or faxed to: I-5 93 Teachers Insurance and Annuity Association of America 730 Third Avenue New York, NY 10017 Attention: Securities Accounting Division Telephone: (212) 916-4188 Telefacsimile: (212) 916-6955 All other notices and communications to be addressed as first provided above, except directed to: Attention: Securities Division, Private Placements Telephone: (212) 916-5724 (Angela Brock-Kyle) or (212) 490-9000 (general number) Telefacsimile: (212) 916-6901 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-1624203 I-6 94
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED Connecticut General Life SERIES A Series B Series C Series D Insurance Company $5,000,000 -0- $3,000,000 $7,700,000 900 Cottage Grove Road (TWO NOTES: (TWO NOTES: Hartford, Connecticut 06152-2307 $3,000,000 $3,988,141.21 ATTENTION: Private Securities $2,000,000) $3,711,858.79) Division - S-307 FAX: 203-726-7203
Payments All payments on or in respect of the Notes to be by Federal Funds Wire Transfer to: Chase Manhattan Bank, N.A. Chase NYC/CTR/ BNF=CIGNA Private Placements/AC=9009001802 ABA #021000021 OBI=[name of company; description of security; interest rate; maturity date; PPN; due date and application (as among principal, premium and interest of the payment being made); contact name and phone.] Address for Notices Related to Payments: CIG & Co. c/o CIGNA Investments, Inc. Attention: Securities Processing S-309 900 Cottage Grove Road Hartford, Connecticut 06152-2209 with a copy to: Chase Manhattan Bank, N.A. Private Placement Servicing P. O. Box 1508 Bowling Green Station New York, New York 10081 Attention: CIGNA Private Placements Fax: 212-552-3107/1005 I-7 95 Address for All Other Notices: CIG & Co. Attention: Private Securities Division - S-307 900 Cottage Grove Road Hartford, Connecticut 06152-2307 Fax: 860-726-7203 Name of Nominee in which Notes are to be issued: CIG & Co. Taxpayer I.D. Number for CIG & Co.: 13-3574027 I-8 96
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED SERIES A Series B Series C Series D CIGNA Reinsurance Company -0- -0- $2,300,000 -0- c/o CIGNA Investments, Inc. 900 Cottage Grove Road Hartford, Connecticut 06152-2307 Attention: Private Securities Division - S-307 Fax: 203-726-7203
Payments All payments on or in respect of the Notes to be by Federal Funds Wire Transfer to: Chase Manhattan Bank, N.A. Chase NYC/CTR/ BNF=CIGNA Private Placements/AC=9009001802 ABA #021000021 OBI=[name of company; description of security; interest rate; maturity date; PPN; due date and application (as among principal, premium and interest of the payment being made); contact name and phone.] Address for Notices Related to Payments: CIG & Co. c/o CIGNA Investments, Inc. Attention: Securities Processing S-309 900 Cottage Grove Road Hartford, Connecticut 06152-2309 with a copy to: Chase Manhattan Bank, N.A. Private Placement Servicing P. O. Box 1508 Bowling Green Station New York, New York 10081 Attention: CIGNA Private Placements Fax: 212-552-3107/1005 I-9 97 Address for All Other Notices: CIG & Co. c/o CIGNA Investments, Inc. Attention: Private Securities Division - S-307 900 Cottage Grove Road Hartford, Connecticut 06152-2307 Fax: 860-726-7203 Name of Nominee in which Notes are to be issued: CIG & Co. Taxpayer I.D. Number for CIG & Co.: 13-3574027 I-10 98
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED Transamerica Life Insurance SERIES A Series B Series C Series D and Annuity Company -0- $2,500,000 -0- $3,200,000 c/o Transamerica Investment Services 1150 South Olive Street, Suite 2700 Los Angeles, California 90015 Attention: John Casparian
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as (i) in the case of the Series B Notes, "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008, PPN: 729237 B* 7 and principal or interest", and (ii) in the case of the Series D Notes, "Plum Creek Timber Company, L.P., 8.05% Senior Notes, Series D due 2016, PPN: 729237 B# 3 and principal or interest") to: For Series B Note ($2,500,000): Federal Reserve Bank of Boston Boston Safe Deposit & Trust Boston, Massachusetts ABA 011-001-234 DDA: 12-526-1 FFC: Cost Center 1253 Re: Mellon Securities Ref: Transamerica Life Insurance and Annuity Company (FLEX) Account # TRAF 1506102 Ref: PPN and Description For Series D Note ($3,200,000): Federal Reserve Bank of Boston Boston Safe Deposit & Trust Boston, Massachusetts ABA 011-001-234 DDA: 12-526-1 FFC: Cost Center 1253 Re: Mellon Securities Ref: Transamerica Life Insurance and Annuity Company (SS) Account # TRAF 1506502 Ref: PPN and Description I-11 99 Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment and all account statements, to: Transamerica Life Companies P. O. Box 2101 - Securities Accounting Los Angeles, California 90051-0101 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 95-6140222 I-12 100
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED Transamerica Occidental Life SERIES A Series B Series C Series D Insurance Company -0- -0- $12,300,000 -0- c/o Transamerica Investment Services 1150 South Olive Street, Suite 2700 Los Angeles, California 90015 Attention: John Casparian
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P. 7.97% Senior Notes, Series C due 2011, PPN: 729237 B@ 5 and principal or interest") to: Federal Reserve Bank of Boston Boston Safe Deposit & Trust Boston, Massachusetts ABA 011-001-234 Acct#: 12-526-1 FFC: Cost Center 1253 Transamerica Occidental Life Insurance Company Account Segment: UNI Account No. TRAF 1505102 Ref: PPN and Description Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment and all account statements, to: Transamerica Life Companies P. O. Box 2101 - Securities Accounting Los Angeles, California 90051-0101 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 95-1060502 I-13 101
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED THE VARIABLE ANNUITY LIFE Series A Series B Series C Series D INSURANCE COMPANY $10,000,000 -0- -0- -0- c/o American General Corporation 2929 Allen Parkway Houston, Texas 77019-2155
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal, interest or premium") to: State Street Bank and Trust Company ABA #011000028 Boston, Massachusetts 02101 Re: The Variable Annuity Life Insurance Company AC-0125-821-9 OBI=PPN Number and description of payment Fund Number PA 54 Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: The Variable Annuity Life Insurance Company and PA 54 c/o State Street Bank and Trust Company Insurance Services Custody (AH2) 1776 Heritage Drive North Quincy, MA 02171 Telefacsimile: (617) 985-4923 Duplicate payment notices and all other correspondences to: The Variable Annuity Life Insurance Company c/o American General Corporation P. O. Box 3247 Houston, Texas 77253-3247 Attention: Investment Research Department, A37-01 Telefacsimile: (713) 831-1366 I-14 102 Overnight Mailing Address: 2929 Allen Parkway Houston, Texas 77019-2155 Telefacsimile: (713) 831-1366 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 74-1625348 I-15 103
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED AMERICAN GENERAL LIFE AND Series A Series B Series C Series D ACCIDENT INSURANCE COMPANY -0- $5,000,000 -0- -0- c/o American General Corporation 2929 Allen Parkway, Suite 3701 Houston, Texas 77019-2155
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008, PPN: 729237 B* 7 and principal, interest or premium") to: ABA #011000028 State Street Bank and Trust Company Boston, Massachusetts 02101 Re: American General Life and Accident Insurance Company AC-0125-934-0 OBI=PPN Number and description of payment Fund Number PA 10 Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: American General Life and Accident Insurance Company and PA 10 c/o State Street Bank and Trust Company Insurance Services Custody (AH2) 1776 Heritage Drive North Quincy, MA 02171 Telefacsimile: (617) 985-4923 Duplicate payment notices and all other correspondences: American General Life and Accident Insurance Company c/o American General Corporation P.O. Box 3247 Houston, Texas 77253-3247 Attention Investment Research Department, A37-01 Telefacsimile: (713) 831-1366 I-16 104 Overnight Mail Address: 2929 Allen Parkway Houston, Texas 77019-2155 Telefacsimile: (713) 831-1366 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 62-0306330 I-17 105
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED THE NORTHWESTERN MUTUAL Series A Series B Series C Series D LIFE INSURANCE COMPANY -0- $5,000,000 $10,000,000 -0- 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Securities Department Telefacsimile: (414) 299-7124
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as (i) in the case of the Series B Notes, "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008, PPN: 729237 B* 7 and principal or interest," and (ii) in the case of the Series C Notes, "Plum Creek Timber Company, L.P., 7.97% Senior Notes, Senior C due 2011, PPN: 729237 B@ 5 and principal and interest") to: Bankers Trust Company (ABA #0210-01033) 16 Wall Street Insurance Unit, 4th Floor New York, New York 10005 for credit to: The Northwestern Mutual Life Insurance Company Account Number 00-000-027 Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment to be addressed, Attention: Treasurers Department/Securities Operations. Telefacsimile: (414) 299-5714 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 39-0509570 I-18 106
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED THE MINNESOTA MUTUAL LIFE Series A Series B Series C Series D INSURANCE COMPANY $7,500,000 -0- -0- -0- 400 Robert Street North St. Paul, Minnesota 55101 Attention: MIMLIC Asset Management Company Telefacsimile: (612) 223-5959
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006 PPN: 729237 A# 4 and principal or interest") to: First Bank National Association Minneapolis, Minnesota ABA #091000022 BNF The Minnesota Mutual Life Insurance Company Account Number 1801-10-00600-4 (with sufficient information to identify the source and application of such funds). Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 41-0417830 I-19 107
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED FEDERATED MUTUAL INSURANCE Series A Series B Series C Series D COMPANY $2,500,000 -0- -0- -0- c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101 Attention: Client Administrator
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal or interest") to: Norwest Bank, Minnesota Minneapolis, Minnesota ABA #091-000-019 For Credit to: Trust Department Account Number: 0840245 For further credit to: Federated Mutual Insurance Company Account Number: 12364600 Attention: Jim Kosse Also, please reference sufficient information to identify the source and application of such funds. Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 41-0417460 I-20 108
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED FARM BUREAU LIFE INSURANCE Series A Series B Series C Series D COMPANY OF MICHIGAN $1,250,000 -0- -0- -0- c/o MIMLIC Asset Management Company 400 Robert Street North St. Paul, Minnesota 55101 Attention: Client Administrator
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal or interest") to: Comerica Bank Detroit, Michigan ABA #072-000-096 For credit to: Trust Operation -- Fixed Income Unit Cost Center 98530 Account Number 21585-98530 For further credit to: Farm Bureau Life Insurance Company of Michigan Account Number: 84-550 Also, please reference sufficient information to identify the source and application of such funds. Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 38-6053670 I-21 109
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED FB ANNUITY COMPANY Series A Series B Series C Series D c/o MIMLIC Asset Management $1,250,000 -0- -0- -0- Company 400 Robert Street North St. Paul, Minnesota 55101 Attention: Client Administrator
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal or interest") to: Comerica Bank Detroit, Michigan ABA #072-000-096 For credit to: Trust Operation -- Fixed Income Unit Cost Center 98530 Account Number: 21585-98530 For further credit to: FB Annuity Company Account Number: 84-553 Also, please reference sufficient information to identify the source and application of such funds. Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 38-2315027 I-22 110
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED ALLSTATE LIFE INSURANCE Series A Series B Series C Series D COMPANY $10,000,000 -0- -0- -0- 3075 Sanders Road, Ste G3A (TWO NOTES: Northbrook, Illinois 60062-7127 $6,000,000 AND Attention: Private Placements $4,000,000) Department Telephone: (847) 402-4394 Telefacsimile: (847) 402-3092
Payments All payments on or in respect of the Notes to be made by Fedwire transfer of immediately available funds (identifying each payment with name of the Issuer (and the Credit, if any), the Private Placement Number preceded by "DPP" and the payment as principal, interest or premium) in the exact format as follows: BBK = Harris Trust and Savings Bank ABA #071000288 BNF = Allstate Life Insurance Company Collection Account #168-117-0 ORG = Plum Creek Timber Company, L.P. OBI = DPP (PPN) - 729237 A# 4 Payment Due Date (MM/DD/YY)--- P ______ (enter "P" and the amount of principal being remitted, for example, P5000000.00) -- I ______ (enter "I" and the amount of interest being remitted, for example, I225000.00) Notices All notices of scheduled payments and written confirmation of such wire transfer, to be sent to: Allstate Insurance Company Investment Operations--Private Placements 3075 Sanders Road, STE G4A Northbrook, Illinois 60062-7127 Telephone: (847) 402-8709 Telefacsimile: (847) 402-7331 I-23 111 All financial reports, compliance certificates and all other written communications, including notice of prepayments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 36-2554642 I-24 112
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED THE MUTUAL LIFE INSURANCE Series A Series B Series C Series D COMPANY OF NEW YORK -0- -0- $10,000,000 -0- 1740 Broadway New York, New York 10019 Attention: MONY Capital Management Unit Telefacsimile: (212) 708-2491
Payments All payments on or in respect of the $10,000,000 Note issued in the name of The Mutual Life Insurance Company of New York to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.97% Senior Notes, Series C due 2011, PPN: 729237 B@ 5 and principal or interest") to: Chase Manhattan Bank ABA #021000021 for credit to: The Mutual Life Insurance Company of New York, Security Remittance Account Number 321-023803 Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Glenpointe Marketing & Operations Center--MONY Glenpointe Center West, 500 Frank W. Burr Blvd. Teaneck, New Jersey 07666-6888 Attention: Securities Custody Telefacsimile: (201) 907-6979 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-1632487 I-25 113
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED THE EQUITABLE LIFE ASSURANCE Series A Series B Series C Series D SOCIETY OF THE UNITED STATES -0- $5,750,000 -0- -0- c/o Alliance Capital Management, L.P. 1345 Avenue of the Americas, 37th Floor New York, New York 10105
Payments All payments on account of the Notes shall be made by bank wire transfer of immediately available funds to: The Chase Manhattan Bank, N.A. 110 West 52nd Street New York, New York 10019 ABA # 021-00002-1 Account of: The Equitable Life Assurance Society of the United States Account Number: 037-2-409417 On Order of: "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008" PPN: 729237 B* 7 Contemporaneous with the above wire transfer, advice setting forth: (a) the full name, interest rate and maturity date of the Notes; (b) allocation and payment between principal and any special payment; and (c) name and address of Bank (or Trustee) from which wire transfer was sent Shall be delivered to: The Equitable Life Assurance Society of the United States c/o Alliance Capital Management, L.P. 135 West 50th Street - 5th Floor New York, NY 10020 Attention: Treasury Services I-26 114 Notices All notices with respect to prepayments, both scheduled and unscheduled, whether partial or in full, and notice of maturity shall be delivered or mailed to: The Equitable Life Assurance Society of the United States c/o Alliance Capital Management, L.P. 135 West 50th Street, 5th Floor New York, New York 10020 Attention: Treasury Services All other communications which shall include, but not be limited to, financial statements and certificates of compliance with financial covenants, as well as notices of unscheduled prepayments shall be delivered or mailed to: The Equitable Life Assurance Society of the United States c/o Alliance Capital Management, L.P. 1345 Avenue of the Americas New York, NY 10105 Attention: Fixed Income Credit Research Division - 37th Floor Beatriz M. Cuervo (212) 969-1477 - TEL (212) 969-1466 - FAX Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-5570651 I-27 115
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED THE EQUITABLE OF COLORADO, INC. Series A Series B Series C Series D c/o Alliance Capital Management, L.P. -0- $3,000,000 -0- -0- 1345 Avenue of the Americas, 37th Floor New York, New York 10105
Payments All payments on account of the Notes shall be made by bank wire transfer of immediately available funds to: The Chase Manhattan Bank, N.A. 110 West 52nd Street New York, New York 10019 ABA #021-00002-1 Account of: The Equitable of Colorado, Inc. Account Number: 037-2-406389 On Order of: "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008" PPN: 729237 B* 7 Notices Contemporaneous with the above wire transfer, advice setting forth: (a) the full name, interest rate and maturity date of the Notes; (b) allocation and payment between principal and any special payment; and (c) name and address of Bank (or Trustee) from which wire transfer was sent Shall be delivered to: The Equitable of Colorado, Inc. c/o Alliance Capital Management, L.P. 135 West 50th Street - 5th Floor New York, NY 10020 Attention: Treasury Services I-28 116 All notices with respect to prepayments, both scheduled and unscheduled, whether partial or in full, and notice of maturity shall be delivered or mailed to: The Equitable of Colorado, Inc. c/o Alliance Capital Management, L.P. 135 West 50th Street, 5th Floor New York, New York 10020 Attention: Treasury Services All other communications which shall include, but not be limited to, financial statements and certificates of compliance with financial covenants, as well as notices of unscheduled prepayments shall be delivered or mailed to: The Equitable of Colorado, Inc. c/o Alliance Capital Management, L.P. 1345 Avenue of the Americas New York, NY 10105 Attention: Fixed Income Credit Research Division - 37th Floor Beatriz M. Cuervo (212) 969-1477 - TEL (212) 969-1466 - FAX Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 13-319-8083 I-29 117
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED PROVIDENT LIFE AND ACCIDENT SERIES A SERIES B SERIES C SERIES D INSURANCE COMPANY -0- -0- -0- $8,600,000 One Fountain Square, 6th Floor Chattanooga, Tennessee 37402 Attention: Private Placements/Investment Department Telefacsimile: (615) 755-3351 Confirmation: (615) 755-1365
All payments on account of the Notes shall be made by wire transfer of immediately available funds to: CUDD & CO. c/o The Chase Manhattan Bank, N.A. New York, New York ABA No. 021 000 021 SSG Private Income Processing A/C #900-9-000200 Custodial Account No. G06706 Please reference: Issuer (Plum Creek Timber Company, L.P.), 8.05% Senior Notes, Series D due 2016), PPN (3 B# 3) P=$ I=$ Address for all communications with respect to payments and for all other communications to: Provident Companies, Inc. Private Placements/Investment Department One Fountain Square Chattanooga, Tennessee 37402 Telephone: (423) 755-1365 Telefacsimile: (423) 755-3351 Name of Nominee in which Notes are to be issued: CUDD & CO. Taxpayer Identification Number: 13-6022143 I-30 118
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED AMERICAN ENTERPRISE LIFE SERIES A SERIES B SERIES C SERIES D INSURANCE COMPANY $4,750,000 -0- -0- -0- c/o American Express Financial Corporation 3000 IDS Tower--10 Minneapolis, Minnesota 55440 Attention: Director, Senior Securities Research
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A, due 2006 PPN: 729237 A# 4 and principal or interest") to: Norwest Bank Minneapolis, N.A. (ABA #091-000-019) 6th and Marquette Avenue Minneapolis, Minnesota 55480 for credit to: American Express Trust Co. Account # 0-38-500 for the benefit of: WRAP TWO & Co. Notices All notices of payments on or in respect of the Notes and written confirmation of each such payment to: WRAP TWO & Co. c/o American Express Trust Co. P. O. Box 1450 NW--9744 Minneapolis, Minnesota 55485 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: WRAP TWO & Co. Taxpayer I.D. Number: 94-2786905 I-31 119
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED SERIES A SERIES B SERIES C SERIES D IDS LIFE INSURANCE COMPANY $1,000,000 -0- -0- -0- c/o American Express Financial Corporation 3000 IDS Tower--10 Minneapolis, Minnesota 55440 Attention: Director - Senior Securities Research
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A, due 2006 PPN: 729237 A# 4 and principal or interest") to: Norwest Bank Minneapolis, N.A. (ABA #091 000 019) 6th and Marquette Avenue Minneapolis, Minnesota 55480 for credit to: American Express Trust Co. Account Number 00-38-500 for the benefit of: WRAP TWO & Co. Notices All notices of payment, on or in respect of the Notes and written confirmation of each such payment to: WRAP TWO & Co. c/o American Express Trust Co. P.O. Box 1450 NW-9744 Minneapolis, Minnesota 55485 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: WRAP TWO & Co. Taxpayer I.D. Number: 41-0823832 I-32 120
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED SERIES A SERIES B SERIES C SERIES D AMERICAN CENTURION LIFE $500,000 -0- -0- -0- ASSURANCE COMPANY c/o American Express Financial Corporation 3000 IDS Tower--10 Minneapolis, Minnesota 55440 Attention: Director--Senior Securities Research, Research Department
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A, due 2006 PPN: 729237 A# 4 and principal or interest") to: Chase NYC/Cust/American Centurion Life Assurance Company ABA #021-000-021 Account GO5342 Notices All notices of payments on or in respect of the Notes and written confirmation of each such payment to: Chase Manhattan Bank Worldwide Insurance Securities Service One Chase Manhattan Plaza, Floor 3B New York, New York 10081 Attn: 3CMC-6th Floor All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: CUDD & Co. Taxpayer I.D. Number 13-6022143 I-33 121
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED Nationwide Life Insurance SERIES A SERIES B SERIES C SERIES D Company $6,000,000 -0- -0- -0- One Nationwide Plaza Columbus, Ohio 43215-2220
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal or interest") to: The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attention: P&I Department Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Nationwide Life Insurance Company c/o The Bank of New York P. O. Box 19266 Newark, New Jersey 07195 Attention: P&I Department With a copy to: Nationwide Life Insurance Company One Nationwide Plaza (1-32-05) Columbus, Ohio 43215-2220 Attention: Investment Accounting I-34 122 All notices and communications other than those in respect to payments to be addressed: Nationwide Life Insurance Company One Nationwide Plaza (1-33-07) Columbus, Ohio 43215-2220 Attention: Corporate Fixed-Income Securities Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 31-4156830 I-35 123
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED Providian Life and Health SERIES A SERIES B SERIES C SERIES D Insurance Company $5,000,000 -0- -0- -0- c/o Providian Capital Management 400 West Market Street P.O. Box 32830 Louisville, Kentucky 40202 Attention: Securities Department, 10th Floor Telefacsimile: (502) 560-2030
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal or interest") to: Bankers - NYC ABA No. 021-001-033 Account No. 99-911-145 for further credit to: Providian Life & Health Insurance Company Account No. 099159 Notices Contemporaneous with the above wire transfer, advice setting forth (1) the full name, interest rate and maturity date of the bond or note; (2) allocation of payment between principal and interest; and (3) name and address of bank from which wire transfer was sent, should be mailed to: Attention: Securities Processing - 11th Floor Providian Life and Health Insurance Company c/o Providian Capital Management 400 West Market Street Louisville, Kentucky 40202 All other notices and communications to be addressed as first provided above. Name of Nominee in which Notes are to be issued: KINSAT I-36 124 Taxpayer I.D. Number for Providian Life & Health Insurance Company: 43-0378030 Taxpayer I.D. Number for KINSAT: 13-2839318 I-37 125
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED The Union Central Life SERIES A SERIES B SERIES C SERIES D Insurance Company $3,000,000 -0- -0- -0- c/o Carillon Advisors Inc. 1876 Waycross Road Cincinnati, Ohio 45240 Attention: Mr. Gary Rodmaker Telefacsimile: (513) 595-2843
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal or interest") to: Hare BNF/IOC 566 New York, New York ABA #021-000-018 for credit to: The Union Central Life Insurance Company Account # 367614 Attention: P&I Department Subject: Plum Creek 7.74% Senior Notes, Series A due 2006 Notices All notices with respect to payment shall be addressed to: The Union Central Life Insurance Company Post Office Box 179 Cincinnati, Ohio 45201 Attention: Treasury Department Telefacsimile: (513) 595-2843 All notices with respect to all other communications to be addressed as first provided above. Name of Nominee in which Notes are to be issued: Hare & Co. Taxpayer I.D. Number for Union Central Life: 31-0472910 Taxpayer I.D. Number for Hare & Co.: 13-6062916 I-38 126
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED RGA Reinsurance Company SERIES A SERIES B SERIES C SERIES D (GUARANTY LIFE INSURANCE COMPANY, -0- -0- $980,000 -0- as agent) 660 Major Ridge Center Drive St. Louis, Missouri 63141-8557 Attention: Carl Greiner Telefacsimile: (314) 453-7464
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.97% Senior Notes, Series C due 2011, PPN: 729237 B@ 5 and principal or interest") to: State Street Bank and Trust Company ABA #0100 0002 8 DTC #997 State Street Portfolio #: EQ3I DDA #2894 614 3 Contact Person: Mark Kelly (617) 985-6444 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 43-1235868 I-39 127
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED GUARANTEE LIFE Series A Series B Series C Series D INSURANCE COMPANY -0- -0- $420,000 -0- One Guarantee Centre 8801 Indian Hills Drive Omaha, Nebraska 68114-4066 Attention: Investment Division Telefacsimile: (402) 361-7400
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.97% Senior Notes, Series C due 2011, PPN: 729237 B@ 5 and principal or interest") to: State Street Bank and Trust Company ABA #0100 0002 8 DTC #997 State Street Portfolio #: EQ3H DDA #2894 614 3 Contact Person: Mark Kelly (617) 985-6444 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0179235 I-40 128
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED AMERITAS LIFE INSURANCE CORP. Series A Series B Series C Series D 5900 "O" STREET -0- $1,250,000 -0- -0- Lincoln, Nebraska 68510-2234 Attention: James Mikus Telefacsimile: (402) 467-6970
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008, PPN: 729237 B* 7 and principal or interest") to: First Bank Nebraska, NA ABA # 104-000-029 Ameritas Life Insurance Corp. Account # 1-494-0070-0188 Re: Description of Note; Principal and Interest Breakdown with sufficient information to identify the source and application of such funds. Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0098400 I-41 129
NAME AND ADDRESS PRINCIPAL AMOUNT OF OF PURCHASERS NOTES TO BE PURCHASED Woodmen Accident and Life Series A Series B Series C Series D Company $1,250,000 -0- -0- -0- P.O. Box 82288 Lincoln, Nebraska 68501 Attention: Securities Division Telefacsimile: (402) 437-4392
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Plum Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237 A# 4 and principal or interest") to: First Bank Nebraska, NA 13 and M Streets Lincoln, Nebraska 68508 ABA #1040-000-29 for credit to: Woodmen Accident and Life Company's General Fund Account No. 1-494-0092-9092 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above; provided, however, all notices and communications delivered by overnight courier shall be addressed as follows: Woodmen Accident and Life Company 1526 K Street Lincoln, Nebraska 68508 Attention: Securities Division Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0339220 I-42 130 PLUM CREEK TIMBER COMPANY, L.P. ____(1)% SENIOR NOTE, SERIES ___, DUE _____________(1) NO. R-____ $_________ NOVEMBER ___, 1996 PPN: (3) FOR VALUE RECEIVED, the undersigned, PLUM CREEK TIMBER COMPANY, L.P. (the "Company"), a limited partnership duly organized under the Delaware Revised Uniform Limited Partnership Act, hereby promises to pay to _______________________________, or registered assigns, the principal sum of __________________ DOLLARS on ________,(1) with interest (computed on the basis of a 360-day year consisting of twelve 30-day months) (a) on the unpaid balance thereof at the rate of _____(1)% per annum from the date hereof, payable on the 13th day of May and November in each year, commencing with the May 13 or November 13 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) on any overdue payment (including any overdue prepayment) of principal, any overdue payment of premium and, to the extent permitted by applicable law, any overdue payment of interest, payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) ____(2)% or (ii) the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its Prime Rate plus 2.0%. Payments of principal, premium, if any, and interest are to be made at the main office of Morgan Guaranty Trust Company of New York in New York City or at such other place as the holder hereof shall designate to the Company in writing, in lawful money of the United States of America. This Note is one of the Company's _____% Senior Notes, Series ___, due _____________,(1) (the "Notes") issued pursuant to that certain Senior Note Agreement, dated as of November 13, 1996 (the "Agreement"), between the Company and the respective original purchasers of the Notes named in the Schedule I attached thereto and is entitled to the benefits thereof. [As provided in the Agreement, this Note is subject to prepayment, in whole or from time to time in part, with such premium as is specified in the Agreement, and - - --------------------- (1) The Senior Notes will be issued in Series A, B, C and D, due November 13, 2006, November 13, 2008, November 13, 2011 and November 13, 2016, respectively, and bearing interest at the rate per annum of 7.74%, 7.87%, 7.97% and 8.05%, respectively. (2) A rate equal to 1% over the interest rate borne by such series of Senior Notes. (3) Series A - 729237 A #4; Series B - 729237 B *7; Series C - 729237 B @5; Series D - 729237 B #3. EXHIBIT A (to Senior Note Agreement) 131 this Note is not otherwise subject to prepayment.](2) [As provided in the Agreement, this Note is subject to certain scheduled prepayments of principal, which the Company hereby agrees to make as provided in paragraph 4A(1) of the Agreement, and in addition this Note is subject to prepayment, in whole or from time to time in part, with such premium as is specified in the Agreement. This Note is not otherwise subject to prepayment.](3) This Note is a registered Note and, as provided in the Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company shall not be affected by any notice to the contrary. In case an Event of Default, as defined in the Agreement, shall occur and be continuing, the principal of this Note may be declared or otherwise become due and payable in the manner and with the effect provided in the Agreement. THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK, AND THIS NOTE AND THE AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. PLUM CREEK TIMBER COMPANY, L.P. By: Plum Creek Management Company, L.P., its General Partner By: ---------------------------------- Title - - ------------- (2) To be included in Series A, B and C Notes. (3) To be included in Series D Notes. A-2 132 PURCHASERS' SPECIAL COUNSEL'S OPINION ____________________, 1996 To the Purchasers listed on the Schedule attached hereto: Re: $200,000,000 Senior Notes, Series A, B, C and D Due 2006-2016 of Plum Creek Timber Company, L.P. Ladies and Gentlemen: We have acted as your special counsel in connection with your separate purchases on the date hereof of $200,000,000 aggregate principal amount of the Senior Notes, Series A, B, C and D due 2006-2016 (the "Notes") of Plum Creek Timber Company, L.P., a Delaware limited partnership (the "Company"), issued under and pursuant to the Senior Note Agreement dated as of November 13, 1996 (the "Note Agreement"), among the Company and each of you. In that connection, we have examined the following: (a) The Note Agreement; (b) [charter documents of Company and General Partner]; (c) The opinion of James A. Kraft, Vice President, General Counsel and Secretary of the Company, dated the date hereof and delivered responsive to paragraph 3B of the Note Agreement; (d) The Notes delivered on the date hereof; (e) Such certificates of officers of the Company, its General Partner and of public officials as we have deemed necessary to give the opinions hereinafter expressed; and (f) Such other documents and matters of law as we have deemed necessary to give the opinions hereinafter expressed. We believe that the opinion referred to in clause (c) above is satisfactory in scope and form and that you are justified in relying thereon. Our opinion as to matters referred to in paragraph 1 below is based solely upon an examination of the Articles of Partnership of the EXHIBIT B-1 (to Senior Note Agreement) 133 Company and certificates of Company. We have also relied, as to certain factual matters, upon appropriate certificates of public officials and officers of the Company and its General Partner and upon representations of the Company and you delivered in connection with the issuance and sale of the Notes. Based upon the foregoing, we are of the opinion that: 1. The Company is a limited partnership, validly existing and in good standing under the laws of the State of Delaware and has the power and the authority to execute and deliver the Note Agreement and to issue the Notes. 2. The Note Agreement has been duly authorized by all necessary partnership action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 3. The Notes have been duly authorized by all necessary partnership action on the part of the Company, and the Notes being delivered on the date hereof have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The issuance and sale of the Notes and the execution and delivery of the Agreement by the Vice President and Chief Financial Officer of Plum Creek Management Company, L.P., the Company's general partner, on behalf of the Company do not conflict with or result in a breach of any provision of the Company's Amended and Restated Agreement of Limited Partnership dated as of October 17, 1995. 5. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreement do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. Our opinion is limited to the laws of the State of New York, the Delaware Revised Uniform Limited Partnership Act and the Federal laws of the United States and we express no opinion on the laws of any other jurisdiction. Respectfully submitted, B-1-2 134 _________________, 1996 To Each of the Purchasers Listed on the Attached Schedule of Purchasers Re: Plum Creek Timber Company, L.P. $200,000,000 Senior Notes Series A, B, C and D, due 2006-2016 Dear Purchaser: I am the Vice President, General Counsel and Secretary of Plum Creek Management Company, L.P. (the "General Partner"), which serves as the general partner of Plum Creek Timber Company, L.P., a Delaware limited partnership (the "Company"). In such capacity I have acted as counsel to the Company and as such I am familiar with transactions contemplated by the Senior Note Agreement, dated as of November 13, 1996 (the "Note Agreement"), between the Company and the purchasers listed in the attached Schedule of Purchasers (the "Purchasers"). Capitalized terms used in this opinion without definition have the respective meanings specified in the Note Agreement. In so acting, I have examined the following documents: (a) the Notes; and (b) the Note Agreement. The Notes and the Note Agreement are sometimes herein collectively referred to as the "Loan Documents". This opinion is being delivered to you pursuant to paragraph 3B of the Note Agreement. In such capacity, I have participated in the preparation of the Loan Documents. For purposes of this opinion, I have (a) investigated such questions of law, (b) examined such certificates of public officials and of officers of the Company and other documents, as in my judgment are necessary or appropriate to enable me to render the opinions expressed below, and (c) relied upon the representations and warranties as to factual matters contained in or made pursuant to the Loan Documents. In addition, I have, with your approval, assumed (i) the genuineness of the signatures of Persons signing all Loan Documents in connection with which this opinion is rendered on behalf of parties thereto (other than Persons signing on behalf of the Company or the General Partner), (ii) the authority of all Persons signing EXHIBIT B-2 (to Senior Note Agreement) 135 all documents on behalf of the parties thereto (other than Persons signing on behalf of the Company or the General Partner), (iii) the authenticity of all documents submitted to me as originals, (iv) the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies, (v) that each of the parties to the Loan Documents other than the Company has all requisite power and authority to execute, deliver and perform the Loan Documents to which it is a party and (vi) the due authorization, execution and delivery of the Loan Documents by all the parties thereto other than the Company. Based upon the foregoing, and subject to the further assumptions and qualifications hereinafter set forth, I am of the opinion that: 1. The Company is a limited partnership duly organized, validly existing and in good standing under the Delaware Revised Uniform Limited Partnership Act and has all requisite partnership power and authority to own and operate its properties, to conduct its business as currently conducted, to execute and deliver the Loan Documents, to issue and sell the Notes and to carry out the terms of the Note Agreement and the Notes. The Company has been qualified or registered and is in good standing as a foreign limited partnership for the transaction of business under the laws of the States of Arkansas, Idaho, Louisiana, Montana, Texas and Washington, which are the only jurisdictions in which the failure so to qualify or register would be likely, in my reasonable judgment, to subject the Company to any liability or disability which would be material to the financial condition or operations of the Company or to have a material adverse effect upon the ability of the Company to perform its obligations under the Loan Documents. 2. The Note Agreement and the Notes have been duly authorized by all necessary partnership action on the part of the Company. The Note Agreement and the Notes have been duly executed and delivered on behalf of the Company, and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to the qualifications that (a) such enforceability may be limited by bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting creditors' rights generally, (b) such enforceability may be limited by public policy, and (c) the enforceability of equitable rights and remedies is subject to equitable defenses and judicial discretion and such enforceability may be limited by general equitable principles. 3. The Company is not in violation of any term of the Partnership Agreement or, to my knowledge, of any term of any other agreement or instrument to which it is a party or by which it or any of its properties is bound or, to my knowledge, of any term of any applicable law, ordinance, rule or regulation of any governmental authority or, to my knowledge, of any term of any applicable order, judgment or decree of any court, arbitrator or governmental authority, the consequences of which violations, individually or in the aggregate, would be reasonably likely to have a material adverse effect on its business, property or assets, B-2-2 136 condition or operations or on the ability of the Company to perform its obligations under the Loan Documents. The execution, delivery and performance by the Company of the Loan Documents will not result in any violation of or be in conflict with or constitute a default under or result in the creation of (or impose any obligation on the Company to create) any Lien (other than the Liens required by paragraph 5C of the Note Agreement) upon any of the properties of the Company pursuant to the provisions of the Company's Partnership Agreement or (i) any other agreement or instrument known to me (it being understood that all agreements and instruments filed by the Company with the Securities and Exchange Commission are known to me), to which the Company is a party or by which the Company or any of its properties is bound, (ii) any term of any applicable law, ordinance, rule or regulation of any governmental authority, or (iii) to my knowledge any term of any applicable order, judgment or decree of any court, arbitrator or governmental authority. 4. No consent, approval or authorization of, or declaration or filing with, or the taking of any other action in respect of, any commission, authority, governmental agency or body of the United States of America or the State of Arkansas, Delaware, Idaho, Louisiana, Montana, Texas or Washington is required for the valid execution, delivery and performance by the Company of the Loan Documents or the valid offer, issue, sale and delivery of the Notes pursuant to the Note Agreement except such consents, approvals or authorizations as have been obtained and such filings as may be required under state securities laws or Blue Sky Laws in connection with the offer, issue, sale and delivery of the Notes. 5. There are no legal or governmental proceedings to which the Company is a party or to which any property or assets of the Company is subject or which is pending or, to my knowledge, threatened against the Company which questions the validity of the Loan Documents or any actions pursuant thereto or which would be reasonably likely to result in any material adverse change in the business, property or assets, condition or operations of the Company. 6. The Company is not an "investment company" as defined under the Investment Company Act of 1940, as amended, nor is the Company or the issue and sale of the Notes by the Company subject to regulation thereunder. 7. Based upon the representations of the Purchasers contained in the Note Agreement and a letter dated November 13, 1996 from BA Securities, Inc. to the Company, Andrews & Kurth, L.L.P., Perkins Coie and Chapman and Cutler representing as to certain facts in connection with the offer and sale of the Notes, the offer, issue, sale and delivery of the Notes under the circumstances contemplated by the Note Agreement constitute exempt transactions under the registration provisions of the Securities Act of 1933, as amended, and neither the registration of the Notes thereunder nor the qualification of an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended, is required in connection with such offer, issue, sale and delivery. B-2-3 137 8. Based upon the representation of the Company as to the use of the proceeds of the Notes contained in the Note Agreement, the issue and sale of the Notes do not violate Regulation G, T or X of the Board of Governors of the Federal Reserve System. The opinions expressed herein are based upon and limited exclusively to the laws of the State of Washington, the Delaware Revised Uniform Limited Partnership Act, and federal laws of the United States of America insofar as any of such laws are applicable, and I render no opinion with respect to any other laws, except that the opinions expressed in paragraphs 1, 2, 3 and 4 cover the laws of the State of Delaware, New York, Arkansas, Idaho, Louisiana, Montana or Texas, in each case, insofar as any such laws are applicable; provided that, with respect to my opinions relating to the laws of Arkansas, Idaho, Louisiana, Montana and Texas, please note that I am not licensed to practice law in those states and such opinions are based solely upon a general review of the partnership law and commercial law of those states and discussions with local counsel in such states. This opinion is solely for your benefit in connection with the transactions contemplated by the Note Agreement and may not be relied upon by any Person other than you or any transferee of any Note. This opinion is not to be quoted in whole or in part or otherwise referred to (except in a list of closing documents in connection with the transactions described herein), nor shall it be filed with any governmental agency or other Person without my prior written consent. I express no opinion with respect to any matter not expressly set forth in this opinion. Very truly yours, ------------------------------------ James A. Kraft, Vice President, General Counsel and Secretary B-2-4 138 Liens Mortgage, Security Agreement and Fixture Filings dated June 8, 1989 recorded in Flathead, Lake and Lincoln Counties, Montana as supplemented and amended by Mortgage Recording Supplements and Security Agreement and Fixture Filings dated January 1, 1991; and Deed of Trust, Security Agreement and Fixture Filing dated June 8, 1989 recorded in Kittitas County, Washington; all of which were executed by Plum Creek Manufacturing, Inc. in favor of Wells Fargo Bank, National Association (as successor by merger to First Interstate Bank of Washington, N.A.), as Trustee, to secure the indebtedness evidenced by the Mortgage Note Agreement dated May 31, 1989 among Plum Creek Manufacturing, LP. (as successor in interest to Plum Creek Manufacturing, Inc.) ("Manufacturing"), Plum Creek Timber Company, L.P. as guarantor, and each of the purchasers of the Mortgage Notes, as amended by (a) the Mortgage Note Agreement Amendment, Consent and Waiver dated as of January 1, 1991, (b) the letter agreement dated April 22, 1993, (c) the Mortgage Note Agreement Amendment dated as of September 1, 1993, (d) the Mortgage Note Agreement Amendment dated as of May 20, 1994, (e) the Amendment to Mortgage Note Agreement dated as of June 15, 1995 and (f) the Mortgage Note Agreements Amendment dated as of May 31, 1996 (as amended, the "Mortgage Note Agreement"). As a result of Manufacturing's October 11, 1996 sale of its sawmill near Colville, Washington, Manufacturing is required, pursuant to the terms of the Mortgage Note Agreement, to grant to or secure for the benefit of the Mortgage Note Agreement Trustee, a first mortgage lien on and first priority perfected security interest in its sawmill in Huttig, Union County, Arkansas, acquired as part of the Riverwood Assets. EXHIBIT D (to Senior Note Agreement) 139 Plum Creek Timber Company, L.P. Permitted Investments 1. Plum Creek Manufacturing, L.P. (98% interest) 2. Plum Creek Marketing, Inc. (96% interest) 3. Plum Creek Land Company (100% interest) 4. PCTC Limited Liability Company (100% interest, 99% direct and 1% indirect) 5. For purposes of effecting the Company's 1031 tax deferred exchanges, PCTC Limited Liability Company has made loans to the following purchasers of real property from the Company, in the amounts listed below. Each of the loans is evidenced by a Promissory Note secured by a Deed of Trust in Favor of PCTC Limited Liability Company: a. Jack McCann Co., Inc. ($229,059.00) b. Jack McCann Co., Inc. ($300,945.00) c. First South Properties, L.L.C. ($240,000.00) d. Beaconsfield Associates II ($337,500.00) e. Jeld-Wen, Inc. ($9,983,507.00) 6. In conjunction with the Company's in-woods chipping operations, the Company has made loans or guaranteed loans to three of its contractors in order that such contractors could purchase chipping equipment, in the following amounts: a. Knoles Fiber, L.L.C. (loan of $587,454.12) b. Richards Logging, Inc. (loans of $541,636.00) c. Joe A. McDougall and Robert Suhoversnik, dba M&S Logging (guarantee of $568,516.00 promissory note) EXHIBIT E (to Senior Note Agreement) 140 Environmental Notices Environmental notices from Federal, State and Local Environmental Agencies to the Company citing environmental violations that have not been finally resolved and disposed of: 1. In June 1995, the Company received a Compliance Order ("Order") from the Environmental Protection Agency ("EPA") under the Clean Air Act. The Order alleges that the startup in 1990 of a boiler at the Company's Pablo sawmill did not meet new source performance standards ("NSPS"). Work on the boiler project commenced in March 1989, when NSPS did not apply to boilers of this size. Prior to final startup of the boiler, however, new rules were proposed that, if applicable, would have required meeting these standards. The EPA has taken the position that the new rules applied, and is seeking compliance with NSPS. In December 1995, the Company voluntarily installed a pollution control device and an opacity monitor on the boiler at a cost of $700,000 without waiving any defenses to the EPA claim. The Company believes it is in full compliance with both the Order and NSPS. On March 12, 1996, the Department of Justice, on behalf of the EPA, filed suit in federal court seeking civil penalties and injunctive relief for the alleged violation of NSPS in accordance with the Clean Air Act which contemplates civil penalties. The Company believes it has meritorious defenses to the claim. However, due to the inherent nature of litigation, the Company cannot predict the outcome of the enforcement case. If not resolved earlier, it is likely that the matter will go to trial in 1997. The General Partner believes, based upon available information and current EPA enforcement policies, that the ultimate outcome of this action will not have a material adverse effect on the Company's financial position, results of operations or liquidity. 2. The Company has worked with the State of Washington Department of Ecology ("DOE") concerning opacity above permitted levels associated with emissions at the Arden Sawmill that may have occurred prior to the sale of the mill described below. Prior to the sale of the Arden Sawmill, the Company received a letter from DOE requesting information concerning such emissions. DOE has not taken any other compliance actions with respect to this matter. As part of the Newport Asset Sale, on October 11, 1996 the Company sold the Arden Sawmill to Stimson Lumber Company, an Oregon corporation ("Stimson"), and will be required to indemnify Stimson for any liabilities that arise relating to the period when the Company owned the Arden Sawmill. However, based upon its past experience with similar compliance issues, the Company believes that this matter will not materially affect the Company's financial position, results of operations or liquidity. 3. The State of Washington Department of Ecology ("DOE") alleged in March 1990 that a release or threatened release of a hazardous substance had occurred in an area designated "The Old Landsburg Mine," which is owned by Palmer Coking Coal Company ("Palmer") and Plum Creek. Plum Creek and other parties are required to respond to the DOE regarding a high priority clean up of the site under the model Toxics Control Act. The Plum Creek portion of the site was leased to Palmer from 1978 through 1983 by Burlington Northern Railroad and its successors for disposal of certain demolition debris. From 1991 to the present, Plum Creek has participated on a Potentially Liable Party ("PLP") task force which cooperated with the DOE and voluntarily conducted removal of EXHIBIT F (to Senior Note Agreement) 141 barrels and fencing from the site. In 1992, Plum Creek participated in negotiations regarding an Agreed Order and in planning for a Remedial Investigation/Feasibility Study ("RI/FS"). From 1993 to the present, Plum Creek has participated in the ongoing RI/FS. Plum Creek does not believe it will be ultimately liable for disposal of barrels or hazardous waste at the site and is vigorously defending its position. Plum Creek believes that it is an innocent landowner and that any liability will ultimately be borne by the parties responsible for the waste disposal. To the extent liability is assessed against Plum Creek as a landowner, the Company believes that Palmer, by virtue of the terms of the lease, and/or Burlington Northern Inc., by virtue of an indemnity contained in the deed that transferred the property to Plum Creek, will be responsible. It is not known at this time what the cost of ultimate cleanup will be or what portion, if any, will be funded by Plum Creek. F-2 142 Other Subsidiaries Plum Creek Land Company (100% interest) PCTC Limited Liability Company (100% direct and indirect interest) Plum Creek Foreign Sales Corporation (inactive Guam corporation) (100% interest held by Plum Creek Marketing, Inc.) Plum Creek Remanufacturing, Inc. (a Washington corporation) (100% interest held by Plum Creek Marketing, Inc.) Plum Creek Remanufacturing Joint Venture (50% general partner interest) EXHIBIT 8C (to Senior Note Agreement) 143 Subsequent to December 31, 1995, neither the Company nor the Facilities Subsidiary has incurred any material liabilities or obligations or entered into any material transactions not in the ordinary course of business, other than the Company's sale of the Newport Assets and acquisition of the Riverwood Assets, including the financing thereof, all as described in the Placement Memorandum dated October 1996. Subsequent to December 31, 1995, there has not been any material adverse change in the financial condition or operations of the Company or the Facilities Subsidiary. Subsequent to December 31, 1995, there have been the following Restricted Payments declared, paid or made by the Company: 1. Fourth Quarter 1995 Distribution of Available Cash in the amount of $25.9 million paid to Unitholders in the first quarter of 1996; 2. First Quarter 1996 Distribution of Available Cash in the amount of $25.9 million paid to Unitholders in the second quarter of 1996; 3. Second Quarter 1996 Distribution of Available Cash in the amount of $27.2 million paid to Unitholders in the third quarter of 1996; 4. Third Quarter 1996 Distribution of Available Cash in the amount of $31.0 million payable to Unitholders on November 29, 1996. EXHIBIT 8G (to Senior Note Agreement) 144 The Company's title to the timberlands it acquired during its formation in 1989 includes the related hard rock mineral interests. However, the Company did not obtain the hard rock mineral interest to most of the 865,000 acres of timberland purchased in 1993 from Champion International Corporation. In addition, the Company does not own oil and gas mineral interests to any of its timberlands. The title to the Company's timberlands is subject to presently existing easements, rights of way, flowage and flooding rights, servitudes, cemeteries, camping sites, hunting and other leases, licenses and permits, none of which materially adversely affect the value of the timberlands or materially restrict the harvesting of timber or other operations of the Company. EXHIBIT 8K (to Senior Note Agreement) 145 NONE EXHIBIT 8T (to Senior Note Agreement) 146 April 5, 1993 Corporate Investment Policy I. Objective This policy provides guidelines for the management of the Company's cash. It is essential that these assets be invested in a high quality portfolio which: o Preserves principal o Meets liquidity needs o Allows for appropriate diversification of investments o Delivers good yield in relationship to the guidelines and market conditions The Company is adverse to incurring market risk or credit risk, and will generally sacrifice yield in the interest of safety. Care must always be taken to insure that the Company's reported financial statements are never materially affected by decreases in the market value of securities held. II. Maturity or Put Within the constraints provided throughout this document, or by addendum to this document, the maximum maturity or put of any investment instrument will be within two years from the purchase settlement date; however, the total portfolio must have an average maturity of less than 12 months. III. Permissible Investments A. Investments will be made in U.S. dollars only. B. The Company may own, purchase or acquire marketable direct obligations in the following: 1. Obligations (fixed and floating rate) issued by, or unconditionally guaranteed by the U.S. Treasury, or any agency thereof, or issued by any political subdivision of any state or public agency. 2. Commercial paper rated as A-1 or better by Standard & Poor's, and P-1 or better by Moody's (or equivalent). EXHIBIT 10B(1) (to Senior Note Agreement) 147 3. Floating rate and fixed rate obligations of corporations, banks and agencies including: medium term notes and bonds, deposit notes, and euro dollar/yankee notes and bonds. 4. Certificates of deposit, bankers acceptances and time deposits of commercial banks, domestic or foreign, whose short term credit ratings are A-1/P-1 (or equivalent). 5. Repurchase agreements collateralized by U.S. Treasury and agency securities. 6. Insurance company Funding Agreements, Investment Contracts, or similar obligations. 7. Asset backed and mortgage backed securities. 8. Master Notes. 9. Taxable money market preferreds. 10. Tax exempt securities including municipal bonds/notes, money market preferreds, and variable rate demand notes. C. Issuing institutions shall be Corporations, Trusts, Partnerships, and Banks domiciled in the U.S., Canada, Japan and Western Europe, or Insurance Companies domiciled in the U.S. IV. Credit Requirements Safety shall always be a primary consideration in structuring the Company's investment portfolio. Credit ratings should be tied to duration as prescribed below in order to combine safety, liquidity and acceptable market performance: MINIMUM CREDIT RATING DURATION S&P Moody's 6 months or less A- A3 6 - 18 months AA Aa2 18 months or more AAA Aaa Original issue securities allowable under this policy with less than twelve months to maturity may substitute the issuers, short term credit rating if that rating is A-1/P-1 or better. -2- 148 V. Diversification To diversify risk, no more than $2 million or 10% of the portfolio can be invested with any one issuer. Exceptions are issues of the U.S. Treasury or agency securities, insured or government collateralized issues and daily money market funds. -3- EX-10.1 3 REVOLVING CREDIT & BRIDGE LOAN AGREEMENT 1 EXHIBIT 10.1 REVOLVING CREDIT AND BRIDGE LOAN AGREEMENT Dated as of October 17, 1996 among PLUM CREEK TIMBER COMPANY, L.P. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO 2 TABLE OF CONTENTS
Page ---- Table of Schedules and Exhibits..............................................vi 1. Definitions................................................................1 1.1 Defined Terms.......................................................1 1.2 Other Interpretive Provisions......................................32 1.3 Accounting Principles..............................................33 2. The Credits...............................................................34 2.1 Amounts and Terms of Revolving Commitments.........................34 2.2 Amounts and Terms of Bridge Commitments............................34 2.3 Loan Accounts......................................................34 2.4 Procedure for Borrowing Revolving Loans............................35 2.5 Procedure for Borrowing Bridge Loans...............................36 2.6 Conversion and Continuation Elections for Borrowings...............37 2.7 Voluntary Termination or Reduction of Commitments..................38 2.8 Optional Prepayments...............................................39 2.9 Mandatory Prepayments of Loans; Mandatory Commitment Reductions....39 2.10 Repayment.........................................................42 2.11 Interest..........................................................42 2.12 Swingline Loans...................................................43 2.13 Fees..............................................................45 2.14 Computation of Fees and Interest..................................46 2.15 Payments by the Company...........................................46 2.16 Payments by the Banks to the Agent................................47 2.17 Sharing of Payments, Etc..........................................48 2.18 Loan Tranches.....................................................49 3. The Letters Of Credit.....................................................50 3.1 The Letter of Credit Facility......................................50 3.2 Issuance, Amendment and Renewal of Letters of Credit...............51
i 3 3.3 Risk Participations, Drawings and Reimbursements...................54 3.4 Repayment of Participations........................................56 3.5 Role of the Issuing Bank...........................................56 3.6 Obligations Absolute...............................................57 3.7 Cash Collateral Pledge.............................................58 3.8 Letter of Credit Fees..............................................59 3.9 Uniform Customs and Practice.......................................59 4. Taxes, Yield Protection And Illegality....................................60 4.1 Taxes..............................................................60 4.2 Illegality.........................................................63 4.3 Increased Costs and Reduction of Return............................63 4.4 Funding Losses.....................................................64 4.5 Inability to Determine Rates.......................................65 4.6 Certificate of Bank................................................65 4.7 Survival...........................................................65 5. Conditions Precedent......................................................66 5.1 Conditions of Initial Credit Extensions............................66 5.2 Conditions to All Credit Extensions................................68 6. Representations And Warranties............................................69 6.1 Corporate Existence and Power......................................69 6.2 Authorization; No Contravention....................................69 6.3 Governmental Authorization.........................................70 6.4 Binding Effect.....................................................70 6.5 Litigation.........................................................70 6.6 No Default.........................................................71 6.7 ERISA Compliance...................................................71 6.8 Use of Proceeds; Margin Regulations................................73 6.9 Title to Properties................................................73 6.10 Taxes.............................................................73 6.11 Financial Condition...............................................73
ii 4 6.12 Environmental Matters.............................................74 6.13 Regulated Entities................................................75 6.14 No Burdensome Restrictions........................................75 6.15 Solvency..........................................................75 6.16 Labor Relations...................................................75 6.17 Copyrights, Patents, Trademarks and Licenses, Etc.................75 6.18 Subsidiaries......................................................76 6.19 Partnership Interests.............................................76 6.20 Broker's, Transaction Fees........................................76 6.21 Insurance.........................................................76 6.22 Full Disclosure...................................................77 7. Affirmative Covenants.....................................................77 7.1 Financial Statements...............................................77 7.2 Certificates; Other Information....................................78 7.3 Notices............................................................79 7.4 Preservation of Partnership Existence, Etc.........................81 7.5 Maintenance of Property............................................81 7.6 Insurance..........................................................81 7.7 Payment of Obligations.............................................82 7.8 Compliance with Laws...............................................82 7.9 Inspection of Property and Books and Records.......................82 7.10 Environmental Laws................................................83 7.11 Use of Proceeds...................................................83 7.12 Solvency..........................................................83 8. Negative Covenants........................................................83 8.1 Limitation on Liens................................................83 8.2 Merger; Disposition of Assets......................................85 8.3 Harvesting Restrictions............................................88 8.4 Loans and Investments..............................................89 8.5 Limitation on Indebtedness.........................................90 8.6 Transactions with Affiliates.......................................93
iii 5 8.7 Use of Proceeds....................................................93 8.8 Sale of Stock and Indebtedness of Subsidiaries.....................94 8.9 Certain Contracts..................................................94 8.10 Joint Ventures....................................................95 8.11 Compliance with ERISA.............................................95 8.12 Sale and Leaseback................................................96 8.13 Restricted Payments...............................................96 8.14 Change in Business................................................97 8.15 Issuance of Stock by Subsidiaries.................................97 8.16 Amendments........................................................97 8.17 Available Cash....................................................98 8.18 Interest Coverage Ratio...........................................98 9. Events Of Default.........................................................99 9.1 Event of Default...................................................99 9.2 Remedies..........................................................102 9.3 Rights Not Exclusive..............................................103 10. The Agent...............................................................103 10.1 Appointment and Authorization....................................103 10.2 Delegation of Duties.............................................104 10.3 Liability of Agent...............................................104 10.4 Reliance by Agent................................................104 10.5 Notice of Default................................................105 10.6 Credit Decision..................................................105 10.7 Indemnification of Agent.........................................106 10.8 Agent in Individual Capacity.....................................107 10.9 Successor Agent..................................................107 11. Miscellaneous...........................................................108 11.1 Amendments and Waivers...........................................108 11.2 Notices..........................................................109 11.3 No Waiver; Cumulative Remedies...................................110
iv 6 11.4 Costs and Expenses...............................................110 11.5 Indemnity........................................................110 11.6 Marshalling; Payments Set Aside..................................111 11.7 Successors and Assigns...........................................111 11.8 Assignments, Participations, Etc.................................111 11.9 Set-off..........................................................115 11.10 Automatic Debits of Fees........................................115 11.11 Notification of Addresses, Lending Offices, Etc.................115 11.12 Counterparts....................................................115 11.13 Severability....................................................116 11.14 No Third Parties Benefited......................................116 11.15 Time............................................................116 11.16 Governing Law and Jurisdiction..................................116 11.17 Arbitration; Reference..........................................116 11.18 Entire Agreement................................................117
v 7 TABLE OF SCHEDULES AND EXHIBITS Schedules Schedule 1.1 -- Corporate Investment Policy Schedule 2.1 -- Commitments Schedule 6.7 -- Plans Schedule 6.12 -- Environmental Matters Schedule 6.18 -- Subsidiaries Schedule 8.1 -- Permitted Liens Schedule 8.4 -- Permitted Investments Schedule 11.2 -- Addresses for Notices, Domestic and Offshore Lending Offices Exhibits Exhibit A -- Notice of Borrowing Exhibit B -- Notice of Conversion/Continuation Exhibit C-1 -- Legal Opinion of Counsel for the Company Exhibit C-2 -- Legal Opinion of Perkins Coie Exhibit D -- Compliance Certificate Exhibit E --Form of Cash Collateral Account Agreement Exhibit F -- Form of Assignment and Acceptance Agreement vi 8 REVOLVING CREDIT AND BRIDGE LOAN AGREEMENT This REVOLVING CREDIT AND BRIDGE LOAN AGREEMENT is entered into as of October 17, 1996, among PLUM CREEK TIMBER COMPANY, L.P., a Delaware limited partnership (the "Company"), the several financial institutions from time to time party to this Agreement (collectively, the "Banks"; individually, a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a letter of credit issuing bank and as agent for the Banks. WHEREAS, the Banks have agreed to make available to the Company a bridge loan and a revolving credit facility with a letter of credit subfacility upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: 1. DEFINITIONS 1.1 DEFINED TERMS In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of 5% or more of the equity of a Person shall for the purposes of this Agreement, be deemed to control the other Person. Notwithstanding the foregoing, no Bank shall be deemed an "Affiliate" of the Company or of any Subsidiary of the Company. "Agent" means BofA in its capacity as agent for the Banks hereunder, and any successor agent. "Agent's Payment Office" means the address for payments set forth on Schedule 11.2 in relation to the Agent or such other address as the Agent may from time to time specify in accordance with Section 11.2. "Agent-Related Persons" means BofA, the Arranger, and any successor agent arising under Section 10.9 and any successor to BofA as letter of credit issuing bank or Swingline Bank hereunder, together with their respective Affiliates, and 1 9 the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Aggregate Revolving Commitment" means the combined Revolving Commitments of the Banks, in the initial amount of four hundred million dollars ($400,000,000), as such amount may be reduced from time to time pursuant to this Agreement. "Agreement" means this Agreement, as amended from time to time in accordance with the terms hereof. "Applicable Margin" means, in respect of all Loans outstanding on any date (A) for the period from the Closing Date through the earlier of (i) the Equity Closing and (ii) March 31, 1997, 0.5500% for Offshore Rate Loans and 0.0000% for Base Rate Loans, (B) from the calendar day after the Equity Closing through March 31, 1997, 0.4500% for Offshore Rate Loans and 0.0000% for Base Rate Loans, and (C) from April 1, 1997, the percentage specified below opposite the Interest Coverage Ratio (which ratio shall be calculated on a four quarter rolling basis for the relevant fiscal quarter) calculated for the periods described below.
================================================================================ INTEREST COVERAGE RATIO AT END OF APPLICABLE MARGIN FISCAL QUARTER - - -------------------------------------------------------------------------------- Offshore Rate Base Rate - - -------------------------------------------------------------------------------- Greater than or equal to 4.0 0.3500% 0.0000% - - -------------------------------------------------------------------------------- Less than 4.0 but greater than or equal to 3.7 0.4000% 0.0000% - - -------------------------------------------------------------------------------- Less than 3.7 but greater than or equal to 3.4 0.4500% 0.0000% - - -------------------------------------------------------------------------------- Less than 3.4 but greater than or equal to 3.1 0.5500% 0.0000% - - -------------------------------------------------------------------------------- Less than 3.1 but greater than or equal to 2.8 0.6500% 0.0000% - - -------------------------------------------------------------------------------- Less than 2.8 but greater than or equal to 2.5 0.8750% 0.0000% - - -------------------------------------------------------------------------------- Less than 2.5 1.1250% 0.0000% ================================================================================
2 10 The Applicable Margin for each fiscal quarter commencing on and after April 1, 1997 shall be calculated in reliance on the financial reports delivered pursuant to subsections 7.1(a) and 7.1(c) and the certificate delivered pursuant to subsection 7.2(b) with respect to the fiscal quarter ending one fiscal quarter before the fiscal quarter in question (e.g., June 30 financials determine the Applicable Margin for the fiscal quarter beginning October 1). If the Company fails to deliver such financial reports and certificate to the Agent for any fiscal quarter by the beginning of the next succeeding fiscal quarter (e.g., by October 1 for the fiscal quarter ending June 30), then the Applicable Margin for the following fiscal quarter (e.g., October 1 through December 31) shall equal the next higher Applicable Margin as set forth in the chart above immediately below the previously effective Applicable Margin; thus if the Applicable Margin had previously been 0.6500% for Offshore Rate Loans and 0.0000% for Base Rate Loans, a failure to deliver quarterly financials by the first day of the next fiscal quarter would cause the Applicable Margin to be 0.8750%, 1.000% and 0.0000%, respectively, for the duration of that quarter. In addition, if such financial reports and certificate when delivered indicate that the Applicable Margin for such period should have been higher than the Applicable Margin provided for in the previous sentence, then the Company shall pay on the date of delivery of such financial reports and certificate an amount equal to the positive difference, if any, between the interest that the Company should have paid hereunder had the financial reports and certificate been delivered on a timely basis over what the Company actually paid. The Applicable Margin shall be adjusted automatically as to all Loans then outstanding (without regard to the timing of Interest Periods) as of the effective date of any change in the Applicable Margin. "Arranger" means BA Securities, Inc., a Delaware corporation. "Assignee" has the meaning specified in subsection 11.8(a). "Assignment and Acceptance" has the meaning specified in subsection 11.8(a). "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "Available Cash" means, with respect to any calendar quarter, (i) the sum of: (a) the Company's net income (or net loss) (excluding gain on the sale of any Capital Asset) for such quarter, (b) the amount of depletion, depreciation, amortization and other noncash charges utilized in determining net income of the Company for such quarter, 3 11 (c) the amount of any reduction in reserves of the Company of the types referred to in clause (ii)(d) below, (d) proceeds received by the Company from the sale of Designated Acres, and (e) any Cash from Capital Transactions received by the Company during such quarter in specific contemplation that such Cash from Capital Transactions will be used to refund or refinance any payment of Indebtedness of the type specified in clause (ii)(a) below which was made in either of the two immediately preceding quarters, less (ii) the sum of: (a) all payments of principal on Indebtedness made by the Company in such quarter (excluding any payments of principal on Indebtedness made with Cash from Capital Transactions received by the Company during such quarter or, to the extent such Cash from Capital Transactions remains available, received by the Company during the four immediately preceding quarters), (b) capital expenditures made by the Company during such quarter (excluding any capital expenditures for such quarter made with Cash from Capital Transactions received by the Company during such quarter or, to the extent such Cash from Capital Transactions remains available, received by the Company during the four immediately preceding quarters, and capital expenditures which the General Partner reasonably anticipates will be financed with Cash from Capital Transactions within 90 days from the end of such quarter), (c) the amount of any capital expenditures made by the Company in a prior quarter which was anticipated would be financed from Cash from Capital Transactions but which have not been financed from such source within 90 days from the end of such quarter, (d) the amount of any reserves of the Company established during such quarter which are necessary or appropriate (1) to provide funds for the future payment of items of the types specified in clauses (ii)(a) and (ii)(b) above, (2) to provide additional working capital, (3) to provide funds for cash distributions with respect to any one or more of the next four quarters, or (4) to provide funds for the future payment of interest in an amount equal to the interest to be accrued in the next quarter, (e) the amount of any noncash items of income utilized in determining net income of the Company for such quarter, (f) the amount of any Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under 4 12 such guarantees, contingent liabilities or endorsements) made by the Company during such quarter pursuant to subsections 8.4(a), (h) or (i) (or in the case of any Subsidiary, Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) of similar type) to the extent not included in capital expenditures or payments on principal on Indebtedness made by the Company during such quarter (excluding any such Investments for such quarter made with Cash from Capital Transactions received by the Company during such quarter or, to the extent such Cash from Capital Transactions remains available, received by the Company during the four immediately preceding quarters, and Investments which the General Partner reasonably anticipates will be financed with Cash from Capital Transactions within 90 days from the end of such quarter), and (g) the amount of any Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) made by the Company in a prior quarter pursuant to subsections 8.4(a), (h) or (i) (or in the case of any Subsidiary, Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) of similar type) to the extent not included in capital expenditures made by the Company during such quarter which was anticipated would be financed from Cash from Capital Transactions but which have not been financed from such source within 90 days from the end of such quarter. Notwithstanding the foregoing, "Available Cash" shall not take into account any reductions in reserves or disbursements made or reserves established after commencement of the dissolution and liquidation of the Company. In determining "Available Cash," (i) all items under clauses (i)(a), (b), (c), (d) and (e) above and all items under clauses (ii)(a), (b), (c), (d), (e), (f) and (g) above shall be calculated on a combined basis with any Subsidiary of the Company whose income is accounted for on a consolidated or combined basis with the Company and, in accordance therewith, "Available Cash" shall include a percentage of each such item of each such Subsidiary equal to the Company's percentage ownership interest in such Subsidiary, provided, however, that the items under clauses (i)(a), (b), (c), (d) and (e) above shall only be included in Available Cash to the extent that the General Partner determines such amount to be legally available for dividends or distributions to the Company by such Subsidiary; (ii) the amount of net income and the amount of depletion, depreciation, amortization and other noncash charges utilized in determining net income shall be determined, with respect to the Company, by the General Partner in accordance with generally accepted accounting principals and, with respect to any Subsidiary, by its Board of Directors (or by such other body or person which has the ultimate management authority of such Subsidiary) in accordance with generally accepted accounting principles; (iii) the 5 13 net income of any Subsidiary shall be determined on an after-tax basis; (iv) the amount of any reductions in, or additions to, reserves for purposes of clauses (i)(c) and (ii)(d) above shall be determined, with respect to the Company, by the General Partner in its reasonable good faith judgment and, with respect to any Subsidiary, by its Board of Directors (or by such other body or person which has the ultimate management authority of such Subsidiary) in its reasonable good faith judgment; and (v) any determination of whether any capital expenditures or Investments are financed, or anticipated to be financed, with Cash from Capital Transactions for purposes of clause (ii)(b) or (ii)(f) above shall be made, with respect to the Company, by the General Partner in its reasonable good faith judgment and, with respect to any Subsidiary, by its Board of Directors (or by such other body or person which has the ultimate management authority of such Subsidiary) in its reasonable good faith judgment. "Bank" has the meaning specified in the introductory clause hereto. References to the "Banks" shall include BofA in its capacity as a Swingline Bank and an Issuing Bank, for purposes of clarification only, to the extent that BofA may have any rights or obligations in addition to those of the Banks due to its status as a Swingline Bank or an Issuing Bank, its status as such will be specifically referenced. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, et seq.). "Base Rate" means, for any day, the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." It is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate; and (b) 0.50% per annum above the latest Federal Funds Rate. Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan or an L/C Advance that bears interest based on the Base Rate. "BofA" means Bank of America National Trust and Savings Association, a national banking association. 6 14 "Board Foot" means a unit of measurement one foot square and one inch thick. "Borrowing" means a borrowing hereunder consisting of Loans of the same Type made to the Company on the same day by the Banks, or a Swingline Loan or Loans made to the Company on the same day by the Swingline Bank, in each case pursuant to Article II, and, other than in the case of Base Rate Loans, having the same Interest Period. "Bridge Commitment" has the meaning specified in Section 2.2. "Bridge Loan" has the meaning specified in Section 2.2 and may be an Offshore Rate Loan or a Base Rate Loan. "Bridge Termination Date" means April 17, 1998. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Capital Asset" means any asset on the Company's or any Subsidiary's balance sheet, as the case may be, other than inventory, accounts receivable or any other current asset and assets disposed of in connection with normal retirements or replacements. "Capital Expenditure Tranche" has the meaning specified in Section 2.18. "Capital Expenditure Tranche Loan" means a Loan allocated by the Company to the Capital Expenditure Tranche as provided in Section 2.18. "Capital Lease" has the meaning specified in the definition of "Capital Lease Obligations." "Capital Lease Obligations" means all monetary obligations of the Company or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, is classified as a capital lease ("Capital Lease"). "Capital Transaction" means (i) borrowings and sales of debt securities (other than for working capital purposes and other than for items purchased on open 7 15 account in the ordinary course of business) by the Company, (ii) sales of equity interests by the Company and (iii) sales or other voluntary or involuntary dispositions of any assets of the Company (other than (x) sales or other dispositions of inventory in the ordinary course of business, (y) sales or other dispositions of other current assets including receivables and accounts and (z) sales or other dispositions of assets as a part of normal retirements or replacements), in each case prior to the commencement of the dissolution and liquidation of the Company, provided that in determining Cash from Capital Transactions, items (i), (ii) and (iii) above shall include, with respect to each Subsidiary of the Company whose income is accounted for on a consolidated or combined basis with the Company, a percentage of each such item of such Subsidiary equal to the Company's percentage ownership interest in such Subsidiary. "Cash Collateral Account Agreement" means an agreement or agreements entered into between the Company and the Agent substantially in the form of Exhibit E. "Cash Collateralize" means to pledge and deposit with or deliver to the Agent, for the benefit of (i) in the case of L/C Obligations, the Agent, the Issuing Banks and the Banks, (ii) in the case of Offshore Rate Loans, the Agent and the Banks, and (iii) in the case of Swingline Loans, the Agent, the Swingline Bank and the Banks, in each case as collateral for the L/C Obligations, the Loans or the Swingline Loans, as the case may be, cash or deposit account balances pursuant to a Cash Collateral Account Agreement. Derivatives of such term shall have corresponding meaning. "Cash from Capital Transactions" means at any date, such amounts of cash as are determined by the General Partner to be cash made available to the Company from or by reason of a Capital Transaction. "CERCLA" has the meaning specified in the definition of "Environmental Laws." "Closing Date" means the date on which all conditions precedent set forth in Section 5.1 are satisfied or waived by all Banks. "Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder. "Commitment," with respect to each Bank, means such Bank's Revolving Commitment, such Bank's Bridge Commitment or both, as the case may be. "Commitment Fee Percentage" means (A) for the period from the Closing Date through the earlier of (i) the Equity Closing and (ii) March 31, 1997, 0.1750%, (B) from the calendar day after the Equity Closing through March 31, 8 16 1997, 0.1500% and (C) from April 1, 1997, the percentage specified below opposite the Interest Coverage Ratio (which ratio shall be calculated on a rolling four quarter basis for the relevant fiscal quarter) calculated for the periods described below.
================================================================================ INTEREST COVERAGE RATIO AT END OF FISCAL QUARTER COMMITMENT FEE PERCENTAGE - - -------------------------------------------------------------------------------- Greater than or equal to 4.0 0.1250% - - -------------------------------------------------------------------------------- Less than 4.0 but greater than or equal to 3.7 0.1375% - - -------------------------------------------------------------------------------- Less than 3.7 but greater than or equal to 3.4 0.1500% - - -------------------------------------------------------------------------------- Less than 3.4 but greater than or equal to 3.1 0.1750% - - -------------------------------------------------------------------------------- Less than 3.1 but greater than or equal to 2.8 0.2000% - - -------------------------------------------------------------------------------- Less than 2.8 but greater than or equal to 2.5 0.2750% - - -------------------------------------------------------------------------------- Less than 2.5 0.3250% ================================================================================
The Commitment Fee Percentage for each fiscal quarter commencing on and after April 1, 1997, shall be calculated in reliance on the financial reports delivered pursuant to subsections 7.1(a) and 7.1(c) and the certificate delivered pursuant to subsection 7.2(b) with respect to the fiscal quarter before the fiscal quarter in question (e.g., June 30 financials determine the Commitment Fee Percentage for the fiscal quarter beginning October 1). If the Company fails to deliver such financial reports and certificate to the Agent for any fiscal quarter by the beginning of the next succeeding fiscal quarter (e.g., by October 1 for the fiscal quarter ending June 30), then the Commitment Fee Percentage for the following fiscal quarter (e.g., October 1 through December 31) shall equal the next higher Commitment Fee Percentage as set forth in the chart above immediately below the previously effective Commitment Fee Percentage; thus if the Commitment Fee Percentage had previously been 0.2000%, a failure to deliver quarterly financials by the first day of the next fiscal quarter would cause the Commitment Fee Percentage to be 0.2750% for the duration of that quarter. In addition, if such financial reports and certificate when delivered indicate that the Commitment Fee Percentage for such period should have been higher than the Commitment Fee Percentage provided for in the previous sentence, then the Company shall pay on the date of delivery of such financial reports and certificate an amount equal to the positive difference, if any, between the interest that the Company should have paid hereunder had the financial reports and certificate been delivered on a timely basis over what the Company actually paid. 9 17 "Commitment Percentage" means, as to any Bank, the percentage equivalent of the aggregate of such Bank's Revolving Commitment divided by the Aggregate Revolving Commitment. "Company's Knowledge" or "Knowledge of the Company" shall mean the actual knowledge of (i) Rick R. Holley, President and Chief Executive Officer, Charles P. Grenier, Executive Vice President, Diane M. Irvine, Vice President and Chief Financial Officer, James A. Kraft, Vice President, General Counsel and Secretary, Susanna N. Duke, Director, Law and Human Resources, William R. Brown, Vice President, Resource Management, and Mitchell Leu, Environmental Engineer, and any successor to the offices and officers, such persons being the principal persons employed by the Company ultimately responsible for environmental operations and compliance, ERISA and legal matters relating to the Company and (ii) the Treasurer or any other person having the primary responsibility for the day-to-day administration of, and dealings with the Agent and the Banks in connection with, this Agreement. "Contractual Obligations" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Controlled Group" means the Company and all Persons (whether or not incorporated) under common control or treated as a single employer with the Company pursuant to Section 414(b), (c), (m) or (o) of the Code. "Conversion/Continuation Date" means any date on which, under Section 2.6, the Company (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date. "Credit Extension" means and includes (a) the making of any Loan hereunder, including any conversion or continuation thereof, and (b) the Issuance of any Letter of Credit hereunder. "Cunit" means 100 cubic feet of wood. "Debt Proceeds" means the proceeds of Indebtedness permitted by subsection 8.5(i), net of customary expenses payable to Persons that are not Affiliates of the Company. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. 10 18 "Designated Acres" means up to an aggregate of 200,000 acres owned by the Company which (based on the good faith determination of the Responsible Representatives that such acres have at the time such determination is made a higher value as recreational, residential, grazing or agricultural property than for 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 $1 of additional Funded Debt pursuant to subsection 8.5(i), and (b) no condition or event shall exist which constitutes an Event of Default or Material Default, (iii) the Company is permitted to make the Investment in such entity resulting from such designation pursuant to, and within the limitations specified in, subsection 8.4(i), treating the aggregate book value (including equity in retained earnings) of the Investments of the Company and its Subsidiaries in such entity immediately prior to such designation as the cost of such Investment, and provided, further, that if at any time all Designated Immaterial Subsidiaries on a combined basis would be a "significant subsidiary" (assuming the Company is the registrant) within the meaning of Regulation S-X (17 C.F.R. Part 210) the Company shall designate one or more Designated Immaterial Subsidiaries which are directly owned by the Company and its Restricted Subsidiaries as Restricted Subsidiaries such that the condition in this proviso is no longer applicable and the entities so designated shall no longer be Designated Immaterial Subsidiaries. Any entity which has been designated a Designated Immaterial Subsidiary shall not thereafter become a Restricted Subsidiary except pursuant to a designation required by the last proviso in the preceding sentence, and any Designated Immaterial Subsidiary which has been designated a Restricted Subsidiary pursuant to the last proviso of the preceding sentence shall not thereafter be redesignated as a Designated Immaterial Subsidiary. "Designated Repurchases" means and includes purchases, redemptions or other acquisitions, in each case at a price not to exceed fair market value, of the publicly traded limited partnership interests in the Company, which are retired by the Company within six months of such purchase, redemption or other acquisition. "Dollars," "dollars" and "$" each mean lawful money of the United States. 11 19 "Domestic Lending Office" means, with respect to each Bank and the Swingline Bank, the office of that Bank and the Swingline Bank designated as such in Schedule 11.2 or such other office of the Bank and the Swingline Bank as it may from time to time specify to the Company and the Agent. "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), plus or minus, as applicable, (e) in connection with any Timber previously acquired within such period, an amount equal to a good faith estimate of such additional amounts as would be included in clauses (a), (b), (c), or (d) above had such Timber been owned by the Company or one of its Subsidiaries for the entirety of such period, as certified (in a certificate containing such detail as the Required Banks may reasonably request) by a Responsible Officer of the Company based upon such Responsible Officer's good faith estimates of applicable revenues and expenses arising from such Timber and assuming aggregate timber harvests in an amount that does not require application of the proceeds thereof to the purchase of Timber or the repayment of Qualified Debt under Section 8.3; provided, however, that net income (or loss) shall be computed for purposes of computing EBITDA without giving effect to extraordinary losses or extraordinary gains. "Effective Amount" means (i) with respect to any Loans or Swingline Loans, as the case may be, on any date, the aggregate outstanding principal amount thereof after giving effect to any Borrowings and prepayments or repayments thereof occurring on such date; and (ii) with respect to any outstanding L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any Issuances of Letters of Credit occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date. "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 12 20 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), 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. "Equity Closing" means the receipt by the Company after the Closing Date of Equity Proceeds in one or more transactions totaling at least $100,000,000. "Equity Proceeds" means the proceeds of the issuance of new limited partnership interests by the Company, net of underwriting commissions and other customary expenses payable to Persons that are not Affiliates of the Company. "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. 13 21 "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 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 9.1. "Exchange Act" means the Securities and Exchange Act of 1934, as amended, and regulations promulgated thereunder. "Existing Credit Agreements" means the Amended and Restated Credit Agreement and the Credit Agreement, each dated as of November 15, 1994 and by and among the Company, the banks signatories thereto, ABN Amro Bank N.V. as co-agent and BofA as agent for those banks. "Facilities Subsidiary" means, collectively, Plum Creek Manufacturing, L.P., a Delaware limited partnership, and Plum Creek Marketing, Inc., a Delaware corporation. "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. 14 22 "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 4.1(f). "Form 4224" has the meaning specified in subsection 4.1(f). "Funded Debt" means, without duplication, any Indebtedness payable more than one year from the date of the creation thereof; provided that any Indebtedness shall be treated as Funded Debt, regardless of its term, if such Indebtedness is renewable at the option of the Company pursuant to the terms thereof or of a revolving credit or similar agreement effective for more than one year after the date of the creation of such Indebtedness, or may be payable out of the proceeds of similar Indebtedness pursuant to the terms of such Indebtedness or any such agreement. "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 15 23 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. "Guarantee" means the guarantee in paragraph 7 of the Mortgage Note Agreements. "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. "Honor Date" has the meaning specified in subsection 3.3(b). "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) the Swap Termination Value with respect to Swap Contracts, and 16 24 (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 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. "Indemnified Person" has the meaning specified in subsection 11.5. "Indemnified Liabilities" has the meaning specified in subsection 11.5. "Independent Auditor" has the meaning specified in subsection 7.1(a). "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 Coverage Ratio" means, as measured quarterly on the last day of each fiscal quarter for the four fiscal quarter period then ending, the ratio of (i)EBITDA; to (ii)the combined interest expense (including capitalized interest) of the Company and its Subsidiaries for the four fiscal quarter period then ending calculated in accordance with GAAP, plus interest expense that would have been 17 25 payable during such four fiscal quarters had any Indebtedness incurred during such period for the purpose of acquiring Timber and related assets been incurred at the beginning of such period, based upon the interest rate applicable to such Indebtedness at the end of such period. "Interest Payment Date" means, (a) with respect to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan, (b) with respect to any Base Rate Loan, the last Business Day of each calendar quarter and each date a Base Rate Loan is converted into another Type of Loan, and (c) with respect to any Swingline Loan, the Business Day agreed upon by the Company and the Swingline Bank, which will not be later than the fourteenth Business Day following the Borrowing date thereof or, if sooner, the Revolving Termination Date; provided, however, that if any Interest Period for an 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, with respect to any Offshore Rate Loan, the period commencing on the Business Day the Loan is disbursed or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date that is one week or one, two, three or six months thereafter, as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation, as the case may be; provided that: (i)if any Interest Period 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; (iii)no Interest Period for any Revolving Loan shall extend beyond the Revolving Termination Date; (iv)no Interest Period for any Bridge Loan shall extend beyond the Bridge Termination Date; and 18 26 (v)no Interest Period for any Revolving Loan shall extend beyond the third anniversary of the date hereof unless the Effective Amount of Base Rate Loans and of Offshore Rate Loans having Interest Periods expiring on or before such date is less than or equal to the amount by which the Effective Amount of Loans and L/C Obligations exceeds $350,000,000. "Investment Policy" means the Corporate Investment Policy of the Company, as it existed on April 5, 1993 and as attached hereto as Schedule 1.1 (without giving effect to any later amendments thereto). "Investments" has the meaning specified in Section 8.4. "Issuance Date" has the meaning specified in subsection 3.1(a). "Issue" means, with respect to any Letter of Credit, to issue or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding meanings. "Issuing Bank" means BofA in its capacity as issuer of one or more Letters of Credit hereunder, together with any replacement letter of credit issuer arising under subsection 10.1(b) or Section 10.9. "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. "L/C Advance" means each Bank's participation in any L/C Borrowing in accordance with its Commitment Percentage. "L/C Amendment Application" means an application form for amendment of outstanding standby letters of credit as shall at any time be in use at an Issuing Bank, as such Issuing Bank shall require. "L/C Application" means an application form for issuances of standby letters of credit as shall at any time be in use at an Issuing Bank, as such Issuing Bank shall require. "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made nor converted into a Borrowing of Revolving Loans under subsection 3.3(c). "L/C Commitment" means the commitment of the Issuing Banks to Issue, and the commitment of the Banks severally to participate in, Letters of Credit from 19 27 time to time Issued or outstanding under Article III, in an aggregate amount not to exceed on any date twenty million dollars ($20,000,000), as the same shall be reduced as a result of a reduction in the L/C Commitment pursuant to Section 2.7; provided that the L/C Commitment is a part of the Aggregate Revolving Commitment, rather than a separate, independent commitment. "L/C Obligations" means at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of all unreimbursed drawings under all Letters of Credit, including all outstanding L/C Borrowings. "L/C-Related Documents" means the Letters of Credit, the L/C Applications, the L/C Amendment Applications and any other document relating to any Letter of Credit, including any Issuing Bank's standard form documents for letter of credit issuances. "Lending Office" means, with respect to any Bank and the Swingline Bank, the office or offices of the Bank and the Swingline Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office," as the case may be, opposite its name on Schedule 11.2, or such other office or offices of the Bank and the Swingline Bank as it may from time to time notify the Company and the Agent. "Letters of Credit" means any standby letters of credit Issued by the Issuing Bank pursuant to Article III. "Letter of Credit Rate" means, for any period, a rate per annum equal to (A) for the period from the Closing Date through the earlier of (i) the Equity Closing and (ii) March 31, 1997, 0.5500%, (B) from the calendar day after the Equity Closing through March 31, 1997, 0.4500%, and (C) from April 1, 1997, the percentage specified below opposite the Interest Coverage Ratio (which ratio shall be calculated on a rolling four quarter basis for the relevant fiscal quarter) calculated for the periods described below.
================================================================================ INTEREST COVERAGE RATIO AT END OF FISCAL QUARTER LETTER OF CREDIT RATE - - -------------------------------------------------------------------------------- Greater than or equal to 4.0 0.3500% - - -------------------------------------------------------------------------------- Less than 4.0 but greater than or equal to 3.7 0.4000% - - -------------------------------------------------------------------------------- Less than 3.7 but greater than or equal to 3.4 0.4500% - - -------------------------------------------------------------------------------- Less than 3.4 but greater than or equal to 3.1 0.5500% ================================================================================
20 28 ================================================================================ Less than 3.1 but greater than or equal to 2.8 0.6500% - - -------------------------------------------------------------------------------- Less than 2.8 but greater than or equal to 2.5 0.8750% - - -------------------------------------------------------------------------------- Less than 2.5 1.1250% ================================================================================
The Letter of Credit Rate for each fiscal quarter commencing on and after April 1, 1997, shall be calculated in reliance on the financial reports delivered pursuant to subsections 7.1(a) and 7.1(c) and the certificate delivered pursuant to subsection 7.2(b) with respect to the fiscal quarter before the fiscal quarter in question (e.g., June 30 financials determine the Letter of Credit Rate for the fiscal quarter beginning October 1). If the Company fails to deliver such financial reports and certificate to the Agent for any fiscal quarter by the beginning of the next succeeding fiscal quarter (e.g., by October 1 for the fiscal quarter ending June 30), then the Letter of Credit Rate for the following fiscal quarter (e.g., October 1 through December 31) shall equal the next higher Letter of Credit Rate as set forth in the chart above immediately below the previously effective Letter of Credit Rate; thus if the Letter of Credit Rate had previously been 0.6500%, a failure to deliver quarterly financials by the first day of the next fiscal quarter would cause the Letter of Credit Rate to be 0.8750% for the duration of that quarter. In addition, if such financial reports and certificate when delivered indicate that the Letter of Credit Rate for such period should have been higher than the Letter of Credit Rate provided for in the previous sentence, then the Company shall pay on the date of delivery of such financial reports and certificate an amount equal to the positive difference, if any, between the interest that the Company should have paid hereunder had the financial reports and certificate been delivered on a timely basis over what the Company actually paid. "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 or the Swingline Bank, as the case may be, to the Company under Article II or Article III, and may be a Revolving Loan, a Bridge Loan, a Swingline Loan or an L/C Advance. "Loan Documents" means this Agreement, the L/C-Related Documents, and all documents delivered to the Agent in connection herewith and therewith. "Majority Banks" means (a) at any time that Loans are outstanding, any Banks holding at least 66-2/3% of the then aggregate unpaid principal amount of the 21 29 Loans, and (b) at any other time, Banks holding at least 66-2/3% of the Revolving Commitments or, if the Revolving Commitments have been terminated or expired, Banks that held at least 66-2/3% of the Revolving Commitments as in effect immediately before such termination or expiration. "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; (b) a material impairment of the ability of the Company to perform under any Loan 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. "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 Revolving Termination 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. "MCCF" means one thousand Cunits. 22 30 "MMBF" means one million Board Feet. "Mortgage Note Agreements" means the Mortgage Note Agreement, 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) that certain Mortgage Note Agreement Amendment, Consent and Waiver dated as of January 1, 1991, (b) that certain letter agreement dated April 22, 1993, (c) that certain Mortgage Note Agreement Amendment dated as of September 1, 1993, (d) that certain Mortgage Note Agreement Amendment dated as of May 20, 1994, (e) that certain Amendment to Mortgage Note Agreement dated as of June 15, 1995 and (f) that certain Mortgage Note Agreements Amendment dated as of May 31, 1996. "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. "1994 Notes" means the 8.73% Senior Notes due August 1, 2009 in the aggregate principal amount of $150,000,000 issued and sold pursuant to the 1994 Senior Note Agreements. "1994 Senior Note Agreements" means that certain Senior Note Agreement dated as of August 1, 1994 providing for the issuance and sale by the Company of the 1994 Senior Notes to the purchasers listed in the schedule of purchasers attached thereto, as amended by (a) that certain Senior Note Agreement Amendment dated as of October 15, 1995 and (b) that certain Senior Note Agreements Amendment dated as of May 31, 1996. "Notes" means those certain senior promissory notes in the aggregate principal amount of $165,000,000 issued and sold pursuant to the Note Agreements. 23 31 "Note Agreements" means that certain Senior Note Agreement 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) that certain Senior Note Agreement Amendment, Consent and Waiver dated as of January 1, 1991, (b) that certain letter agreement dated April 22, 1993, (c) that certain Senior Note Agreement Amendment dated as of September 1, 1993 (d) that certain Senior Note Agreement Amendment dated as of May 20, 1994, and by that certain Senior Note Agreements Amendment dated as of May 31, 1996. "Notice of Borrowing" means a notice given by the Company to the Agent pursuant to Sections 2.4, 2.5, or 2.12, as the case may be, in substantially the form of Exhibit A. "Notice of Conversion/Continuation" means a notice given by the Company to the Agent pursuant to Section 2.6, 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, the Issuing Banks, the Swingline Bank, 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 Schedule 11.2 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 24 32 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 "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 to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Loan" means any 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 4.1(b). 25 33 "Participant" has the meaning specified in subsection 11.8(d). "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, pulp and paper manufacturing and any business substantially similar or related to any such business. "Permitted Liens" has the meaning specified in Section 8.1. "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. "Principal Repayment Proviso" means that for any period of calculation, the aggregate amount of scheduled principal repayment on Indebtedness (x) shall not include voluntary prepayments of Indebtedness except to the extent such voluntary prepayments includes any amounts that would have been scheduled principal repayments during such period, and (y) shall not include the amount of any scheduled principal repayment to the extent the Company refinanced or rescheduled such scheduled repayments and the scheduled principal repayments due before the Revolving Termination Date under the refinancing or rescheduling 26 34 have been or will be included in the calculation of the aggregate amount of scheduled principal repayments for the periods in which they are due. "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) noncash items of income, and (c) any distributions or other income received from, or equity of the Company or any Restricted Subsidiary in the earnings of, any entity which is not a Restricted Subsidiary) for the period of four consecutive fiscal quarters immediately prior to such date (such period of four consecutive fiscal quarters being the "Measurement Period"), determined in accordance with 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 the Measurement Period, to maintain their respective operations; provided, however, if (A) the Company or a Restricted Subsidiary is acquiring a Restricted Subsidiary or assets and (B) Pro Forma Free Cash Flow is being determined in connection therewith, such Restricted Subsidiary shall be considered to have been a Restricted Subsidiary during the entire Measurement Period and such assets shall be considered to have been owned by the Company during the entire Measurement Period if net income attributable to such Restricted Subsidiary or such assets (as the case may be) for the entire Measurement Period is readily determinable and confirmed pursuant to an audit or a certification prepared in good faith by the Company's chief financial officer; further provided, however, that portion of Pro Forma Free Cash Flow allocable to such Restricted Subsidiary or assets shall be reduced on a pro rata basis to the extent Timber has been harvested by such Restricted Subsidiary or from such assets during the Measurement Period at a rate greater than the rate at which the Company has harvested Timber from its Timberlands during the Measurement Period, as certified in good faith by the chief financial officer of the Company; and finally provided, however, if Pro Forma Free Cash Flow is being determined for any Measurement Period and a Restricted Subsidiary or assets have been sold or otherwise disposed of at any time during such Measurement Period by the Company or any Restricted Subsidiary, such Restricted Subsidiary shall not be considered to have been a Restricted Subsidiary during any part of such Measurement Period and such assets shall not be considered to have been owned by the Company during any part of such Measurement Period, and the net income that otherwise would have been attributable to such Restricted Subsidiary or asset during such Measurement Period shall be certified in good faith by the chief financial officer of the Company. "Pro Rata Share" means, with respect to the payment of principal or interest on account of Revolving Loans, Bridge Loans, or L/C Advances, each Bank's pro 27 35 rata share of the outstanding principal balance of the Loans or L/C Advances with respect to which such payment is being made. "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 Indebtedness represented by the Notes, the 1994 Senior Notes and this Agreement (including L/C Borrowings and Loans used to repay L/C Borrowings, but excluding L/C Obligations with respect to undrawn Letters of Credit). "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. "Reportable Event" means, as to any Plan, (a) any of the events set forth in Section 4043(c) 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 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. 28 36 "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 Facilities Subsidiary and its Subsidiaries shall become and be Restricted Subsidiaries. "Revolving Commitment," with respect to each Bank, has the meaning specified in Section 2.1. "Revolving Facility Tranche" has the meaning specified in Section 2.18. "Revolving Facility Tranche Loan" means a Loan allocated by the Company to the Revolving Facility Tranche as provided in Section 2.18. "Revolving Loan" has the meaning specified in Section 2.1, and may be an Offshore Rate Loan or a Base Rate Loan. "Revolving Termination Date" means the earlier to occur of: (a)October 17, 2001; and (b)the date on which the Aggregate Revolving Commitment shall terminate in accordance with the provisions of this Agreement. "Riverwood Assets" means approximately 538,000 acres of timberlands (approximately 432,000 acres in northern Louisiana and approximately 115,000 in southern Arkansas), together with two mills and a plywood plant, to be purchased by the Company from Riverwood International pursuant to the Riverwood Purchase Agreement. 29 37 "Riverwood Purchase Agreement" means the Asset Purchase Agreement dated August 6, 1996, among Riverwood International Corporation, New River Timber, LLC, and the Company. "Riverwood Supply Agreement" means the Supply Agreement to be entered into on or about October 18, 1996, between Riverwood International Corporation and the Company. "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) (i) in the case of a Person that is not a partnership, 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), and (ii) in the case of a Person that is a partnership, the sum of (A) the fair value of the Property of such Person plus (B) the sum of the excess of the fair value of each general partner's non-partnership Property over such partner's non-partnership debts (together, the "Applicable Property") is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities), as such value for purposes of both clauses (i) and (ii) 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 (or, in the case of a partnership, the Applicable Property for 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. "Subsidiary" of a Person means any corporation, partnership or other entity a majority of (i) the total combined voting power of all classes of Voting Stock of which or (ii) the outstanding equity interests of which shall, at the time of which any determination is being made, be owned by the Company either directly or through Subsidiaries. "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or 30 38 floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined by the Company (or, for purposes of subsection 9.1(e), by the Majority Banks) based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Bank). "Swingline Bank" means BofA or its assignee under Section 11.8. "Swingline Clean-Up Day" has the meaning specified in subsection 2.9(a)(iv). "Swingline Commitment" has the meaning specified in Section 2.12. "Swingline Loan" has the meaning specified in Section 2.12. "Taxes" has the meaning specified in subsection 4.1(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 11.8(e). "Type" means either an Offshore Rate Loan or a Base Rate Loan. "UCC" means the Uniform Commercial Code as in effect in the State of California. "UCP" has the meaning specified in Section 3.9. "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 of the Code for the applicable plan year. 31 39 "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). "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 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. 1.2 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." 32 40 (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". 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. 1.3 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. 33 41 (b)References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. 2. THE CREDITS 2.1 AMOUNTS AND TERMS OF REVOLVING COMMITMENTS Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make loans to the Company (each such loan, a "Revolving Loan") from time to time on any Business Day from the Closing 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 2.1 under the heading "Revolving Commitment" (such amount as the same may be reduced pursuant to Section 2.7 or Section 2.9, or as a result of one or more assignments pursuant to Section 11.8, the Bank's "Revolving Commitment"); provided, however, that, after giving effect to any Borrowings, the Effective Amount of all Revolving Loans, Swingline Loans, and L/C Obligations shall not at any time exceed the Aggregate Revolving Commitment; and provided, further, that the Effective Amount of the Revolving Loans of any Bank plus such Bank's Commitment Percentage of the Effective Amount of all L/C Obligations and Swingline Loans shall not at any time exceed such Bank's Revolving Commitment. Within the limits of each Bank's Revolving Commitment, and subject to the other terms and conditions hereof, until the Revolving Termination Date, the Company may borrow under this Section 2.1, prepay pursuant to Section 2.8 and reborrow pursuant to this Section 2.1. 2.2 AMOUNTS AND TERMS OF BRIDGE COMMITMENTS Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make loans to the Company (collectively, the "Bridge Loans") on the Closing Date, in an aggregate amount not to exceed the amount set forth opposite the Bank's name in Schedule 2.1 under the heading "Bridge Commitment" (such amount as the same may be reduced pursuant to Section 2.9, or as a result of one or more assignments pursuant to Section 11.8, the Bank's "Bridge Commitment"). Amounts borrowed by the Company as Bridge Loans which are repaid or prepaid by the Company may not be reborrowed. The Company may prepay Bridge Loans pursuant to Section 2.8. 2.3 LOAN ACCOUNTS The Loans made by each Bank (including the Swingline Bank) and the Letters of Credit Issued by an Issuing Bank shall be evidenced by one or more loan accounts maintained by such Bank or Issuing Bank, as the case may be, in the ordinary course of business. The loan accounts or records maintained by the Agent, the Swingline Bank, each Issuing Bank and each such Bank shall be 34 42 conclusive absent manifest error of the amount of the Loans made by the Banks to the Company and the Letters of Credit issued for the account of 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 or any Letter of Credit. 2.4 PROCEDURE FOR BORROWING REVOLVING LOANS (a)Each Borrowing of Revolving Loans shall be made upon the Company's irrevocable written notice delivered to the Agent in accordance with Section 11.2 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; and (ii) on the requested Borrowing date, in the case of Base Rate Loans, specifying: (A)that the Borrowing comprises Revolving Loans; (B)the amount of the Borrowing, which shall be in an aggregate minimum principal amount of three million dollars ($3,000,000) except in the case of Offshore Rate Loans with a proposed Interest Period of one week, in which case the aggregate minimum principal amount shall be twelve million dollars ($12,000,000) or, in either case, any multiple of five hundred thousand dollars ($500,000) in excess thereof; (C)the requested Borrowing date, which shall be a Business Day; (D)whether the Borrowing is to comprise Offshore Rate Loans or Base Rate Loans; (E)the duration of the Interest Period applicable to the Borrowing described in such notice. If the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Borrowing comprising Offshore Rate Loans, such Interest Period shall be 90 days or three months, respectively; and (F)with respect to any Borrowing after the date the Company gives the notice regarding allocation of Loans pursuant to Section 2.18, whether the Borrowing shall be allocated to the Revolving Facility Tranche or the Capital Expenditure Tranche. (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. 35 43 (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 Revolving 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, unless on the date of the Borrowing all or any portion of the proceeds thereof shall then be required to be applied to the repayment of any outstanding Swingline Loans pursuant to Section 2.12 or the reimbursement of any outstanding drawings under Letters of Credit pursuant to Section 3.3, in which case such proceeds or portion thereof shall be applied to the repayment of such Swingline Loans or the reimbursement of such Letter of Credit drawings, as the case may be. (d)Unless the Majority Banks shall otherwise agree, during the existence of a Default or an Event of Default, the Company may not elect to have a Loan made as an Offshore Rate Loan. (e)After giving effect to any Borrowing, there shall not be more than six different Interest Periods in effect in respect of all Loans (other than Swingline Loans) then outstanding. 2.5 PROCEDURE FOR BORROWING BRIDGE LOANS (a)Three Business Days prior to the Closing Date, the Company shall deliver irrevocable written notice to the Agent in accordance with Section 11.2 in the form of a Notice of Borrowing specifying: (A)that the Borrowing comprises the Bridge Loans; (B)whether the Borrowing is to comprise Offshore Rate Loans or Base Rate Loans or a combination thereof; and (C)the duration of the Interest Period applicable to the Borrowing described in such notice. If the Notice of Borrowing shall fail to specify the duration of the Interest Period for the Bridge Loans and the Borrowing comprises Offshore Rate Loans, such Interest Period shall be three months. (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 36 44 Payment Office by 12:00 noon (San Francisco time) on the Closing Date in funds immediately available to the Agent. The proceeds of the Bridge 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 an Event of Default, the Company may not elect to have a Loan made as an Offshore Rate Loan. (e)After giving effect to any Borrowing, there shall not be more than six different Interest Periods in effect in respect of all Loans (other than Swingline Loans) then outstanding. 2.6 CONVERSION AND CONTINUATION ELECTIONS FOR BORROWINGS (a)The Company may upon irrevocable written notice to the Agent in accordance with subsection 2.6(b): (i)elect to convert on any Business Day, any Base Rate Loans other than Swingline Loans (or any part thereof in an amount not less than $3,000,000 except in the case of a conversion into an Offshore Rate Loans with a proposed Interest Period of one week, which shall be in an amount not less than $12,000,000, or that is in an integral multiple of $500,000 in excess thereof) into Offshore Rate Loans; (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 $3,000,000, or that is in an integral multiple of $500,000 in excess thereof) into Base Rate Loans; (iii)elect to continue 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 $3,000,000 except in the case of a continuation of an Offshore Rate Loans with a proposed Interest Period of one week, which shall be in an amount not less than $12,000,000, or that is in an integral multiple of $500,000 in excess thereof); provided, that if the aggregate amount of Offshore Rate Loans in respect of any Borrowing shall have been reduced, by payment, prepayment, or conversion of part thereof to be less than $500,000, such 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 shall terminate. 37 45 (b)The Company shall deliver a Notice of Conversion/Continuation in accordance with Section 11.2 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/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) on the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A)the proposed Conversion/Continuation Date; (B)the aggregate amount of Loans to be converted or continued; (C)the nature of the proposed conversion or continuation; and (D)other than in the case of Base Rate Loans, the duration of the requested Interest Period. (c)If upon the expiration of any Interest Period applicable to Offshore Rate Loans, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Loans or if any Default or Event of Default shall then exist, the Company shall be deemed to have elected to convert such 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. (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 six different Interest Periods in effect in respect of all Loans (other than Swingline Loans) then outstanding. 2.7 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS The Company may, upon not less than five Business Days prior notice to the Agent, terminate or permanently reduce the Aggregate Revolving Commitment (and, to the extent provided in subsection 2.9(b), the L/C Commitment and the Swingline Commitment) by an aggregate minimum amount of $5,000,000 or any 38 46 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 Effective Amount of Revolving Loans, Swingline Loans and L/C Obligations would exceed the Aggregate Revolving Commitment then in effect. Once reduced in accordance with this Section 2.7, the Aggregate Revolving Commitment may not be increased. Any reduction of the Aggregate Revolving Commitment shall be applied to each Bank's Revolving Commitment in accordance with such Bank's Commitment Percentage. All accrued commitment fees to the effective date of any reduction or termination of the Aggregate Revolving Commitment shall be paid on the effective date of such reduction or termination. 2.8 OPTIONAL PREPAYMENTS Subject to Section 4.4, the Company may, at any time or from time to time, by written notice delivered to the Agent at least three Business Days prior to the proposed prepayment date in the case of Offshore Rate Loans, on the proposed prepayment date in the case of Base Rate Loans, and on the proposed prepayment date (which notice must be received by the Agent not later than 9:00 a.m. (San Francisco time)) in the case of Swingline Loans, (i) ratably prepay Bridge Loans or Revolving Loans, in whole or in part, in minimum principal amounts of $5,000,000 or any multiple of $1,000,000 in excess thereof, and (ii) prepay in whole or in part Swingline Loans in minimum principal amounts of $250,000 or any multiple of $100,000 in excess thereof, or in such other amounts with the consent of the Swingline Bank. Such notice of prepayment shall specify (i) the date and amount of such prepayment, (ii) whether such prepayment is of Base Rate Loans or Offshore Rate Loans, or any combination thereof, and whether such Loans constitute Bridge Loans, Swingline Loans, or Revolving Loans, and (iii) if applicable, whether such prepayment is of a Revolving Facility Tranche Loan or a Capital Expenditure Tranche Loan, or both. Such notice shall not thereafter be revocable by the Company and the Agent will promptly notify (i) in the case of Bridge Loans and Revolving Loans, each Bank thereof and of such Bank's Pro Rata Share of such prepayment, and (ii) in the case of Swingline Loans, the Swingline Bank thereof and of the amount 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 4.4. 2.9 MANDATORY PREPAYMENTS OF LOANS; MANDATORY COMMITMENT REDUCTIONS (a)Mandatory Prepayments. 39 47 (i)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 8.2(i), or harvest excess Timber permitted by Section 8.3, then (A) the Net Proceeds of such sale shall either be paid pro rata by the Company as a prepayment of Qualified Debt or be reinvested in accordance with subsection 8.2(i), or (B) the Net Proceeds from such excess harvest shall either be paid pro-rata by the Company as a prepayment of Qualified Debt or be reinvested in accordance with Section 8.3. Prepayments to Banks under this subsection 2.9(a) shall be applied first to repay the outstanding principal amount of the Bridge Loans, and second, following payment in full of the Bridge Loans, to repay the outstanding principal amount of the Revolving Loans. (ii)Equity and Debt Issuance. The Company shall prepay the outstanding principal balance of the Bridge Loans promptly upon, and in no event later than three Business Days after, each receipt by the Company of Equity Proceeds or Debt Proceeds in an amount equal to the lesser of such Equity Proceeds or Debt Proceeds, as applicable, and the outstanding principal balance of the Bridge Loans. (iii)L/C Obligations. If on any date the Effective Amount of L/C Obligations exceeds the L/C Commitment, the Company shall Cash Collateralize on such date the outstanding Letters of Credit in an amount equal to the excess of the Effective Amount of L/C Obligations over the L/C Commitment. Subject to Section 4.4, if on any date after giving effect to any Cash Collateralization made on such date pursuant to the preceding sentence, the Effective Amount of all Revolving Loans, Swingline Loans, and L/C Obligations exceeds the Aggregate Revolving Commitment, the Company shall immediately, and without notice or demand, prepay the outstanding principal amount of the Revolving Loans, Swingline Loans and L/C Advances by an amount equal to the applicable excess. (iv)Swingline Loans. The Company shall be required to prepay Swingline Loans (A) if following any reduction of the Swingline Commitment pursuant to subsection 2.9(b) the Effective Amount of Swingline Loans would exceed the Swingline Commitment as reduced, the Company shall prepay on the reduction date the Swingline Loans in an amount equal to the amount of such excess, and (B) so that for one Business Day during each successive two calendar week period the aggregate principal amount of Swingline Loans shall be $0 (a "Swingline Clean-Up Day"), the Company shall prepay on the Swingline Clean-Up Day the outstanding principal amount of the Swingline Loans (which Swingline Loans may not be reborrowed until such Swingline Clean-Up Day has ended). (v)Revolving Loans. The Company shall prepay the Revolving Loans on or before the third anniversary of the date hereof so as to cause the Effective Amount of Revolving Loans not to exceed $350,000,000. 40 48 (vi)Revolving Facility Tranche Loans. If the Company has given a notice pursuant to Section 2.18 allocating all or a portion of the Loans to the Revolving Facility Tranche, the Company shall cause, for a period of at least 45 consecutive days during the 12 calendar month period after the effective date of such notice and during each successive 12 calendar month period prior to the Revolving Termination Date, no L/C Obligations to be outstanding and the aggregate principal amount of Revolving Facility Tranche Loans to be $0. (b)Mandatory Commitment Reductions. (i)The Aggregate Revolving Commitments shall be reduced from time to time by the amount of any mandatory prepayment that would be required by subsections 2.9(a)(i) if Revolving Loans were outstanding, whether or not any Revolving Loans are outstanding at such time. Such reduction shall be applied pro rata among the respective Revolving Commitments of the Banks and shall be effective as of the earlier of the date that such prepayment is made or the date by which such prepayment is (or would be) due and payable hereunder. All accrued commitment fees to the effective date of any reduction or termination of the Aggregate Revolving Commitment shall be paid on the effective date of such reduction or termination. (ii)No reduction in the Aggregate Revolving Commitment pursuant to Section 2.7 or subsection 2.9(b)(i) shall reduce the L/C Commitment unless and until the Aggregate Revolving Commitment has been reduced to $20,000,000; thereafter, any reduction in the Aggregate Revolving Commitment pursuant to Section 2.7 shall equally reduce the L/C Commitment. (iii)At no time shall the Swingline Commitment exceed the Aggregate Revolving Commitment, and any reduction of the Aggregate Revolving Commitment which reduces the Aggregate Revolving Commitment below the then current amount of the Swingline Commitment shall result in an automatic corresponding reduction of the Swingline Commitment to the amount of the Aggregate Revolving Commitment, as so reduced, without any action on the part of the Swingline Bank. (iv)The Aggregate Revolving Commitment shall reduce on the third anniversary of the date hereof to $350,000,000 if not previously reduced to or below such amount. Such reduction shall be applied pro rata among the respective Revolving Commitments of the Banks. All accrued commitment fees to the effective date of such reduction of the Aggregate Revolving Commitment shall be paid on the date of such reduction. (c)General. Any prepayments of Loans pursuant to subsection 2.9(a) shall be applied (within the allocation to Bridge Loans or Revolving Loans as indicated in subsection 2.9(a)) first to any Base Rate Loans then outstanding, second to Cash 41 49 Collateralize or to prepay Swingline Loans as directed by the Swingline Bank in its sole discretion, and third, at the Company's option, to Cash Collateralize or to prepay in the inverse order of their stated maturity Offshore Rate Loans. Subject to the foregoing and so long as no default or Event of Default shall then exist, if applicable, any such prepayments shall be applied to Revolving Facility Tranche Loans and Capital Expenditure Tranche Loans as directed by the Company. The Company shall pay, together with each prepayment under this Section 2.9, accrued interest on the amount prepaid and any amounts required pursuant to Section 4.4. 2.10 REPAYMENT (a)The Company shall repay to the Banks in full on the Bridge Termination Date the Effective Amount of all Bridge Loans. (b)The Company shall repay to the Banks in full on the Revolving Termination Date the Effective Amount of all Revolving Loans. (c)The Company shall repay to the Swingline Bank in full on the Revolving Termination Date the Effective Amount of all Swingline Loans. 2.11 INTEREST (a)Subject to subsection 2.11(c): (i) each Loan (other than any Swingline 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 Offshore Rate or the Base Rate, as the case may be, plus the Applicable Margin; and (ii) each Swingline Loan shall bear interest on the principal amount thereof from the date when made until it becomes due at a rate per annum equal to the Base Rate plus the Applicable Margin or any other rate agreed to by the Swingline Bank in its sole discretion. (b)Interest on each Loan shall be paid in arrears on each Interest Payment Date and in the case of a Swingline Loan bearing an interest rate other than the Base Rate, on the date agreed to by the Swingline Bank in its sole discretion. Interest shall also be paid on the date of any prepayment of Loans pursuant to Section 2.8 and 2.9 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 of the Agent at the request or with the consent of the Majority Banks. (c)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 Obligations due and unpaid, at a rate per annum that is determined, in the case of Loans other than Base Rate Loans, by adding 2% per annum to the Applicable Margin then in effect for such Loans 42 50 and, in the case of other Obligations, at a rate equal to the Base Rate plus 2% per annum. (d)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. 2.12 SWINGLINE LOANS (a)Subject to the terms and conditions hereof, the Swingline Bank severally agrees to make a portion of the Aggregate Revolving Commitment available to the Company by making swingline loans (individually, a "Swingline Loan"; collectively, the "Swingline Loans") to the Company on any Business Day during the period from the Closing Date to the Revolving Termination Date in accordance with the procedures set forth in this Section in an aggregate principal amount at any one time outstanding not to exceed $25,000,000, notwithstanding the fact that such Swingline Loans, when aggregated with the Swingline Bank's outstanding Loans, may exceed the Swingline Bank's Revolving Commitment (the amount of such commitment of the Swingline Bank to make Swingline Loans to the Company pursuant to this subsection 2.12(a), as the same shall be reduced pursuant to subsection 2.9(b) or as a result of any assignment pursuant to Section 11.8, the Swingline Bank's "Swingline Commitment"); provided, that at no time shall (i) the Effective Amount of all Revolving Loans, Swingline Loans and L/C Obligations exceed the Aggregate Revolving Commitment, or (ii) the Effective Amount of all Swingline Loans exceed the Swingline Commitment. Additionally, no more than four Swingline Loans may be outstanding at any one time. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow under this subsection 2.12(a), prepay pursuant to subsection 2.8 and reborrow pursuant to this subsection 2.12(a). The Company shall provide the Agent (with a copy to the Swingline Bank) irrevocable written notice (including notice via facsimile confirmed immediately by a telephone call) in the form of a Notice of Borrowing of any Swingline Loan requested hereunder (which notice must be received by the Swingline Bank and the Agent prior to 12:00 noon (San Francisco time) on the requested Borrowing date) specifying (i) the amount to be borrowed, (ii) the requested Borrowing date, which must be a Business Day, and (iii) with respect to any requested Swingline Loan after the date the Company gives the notice regarding allocation of Loans pursuant to Section 2.18, whether the requested 43 51 Swingline Loan shall be allocated to the Revolving Facility Tranche or the Capital Expenditure Tranche. Upon receipt of the Notice of Borrowing, the Swingline Bank will immediately confirm with the Agent (by telephone or in writing) that the Agent has received a copy of the Notice of Borrowing from the Company and, if not, the Swingline Bank will provide the Agent with a copy thereof. Unless the Swingline Bank has received notice prior to 2:00 p.m. on such Borrowing date from the Agent (A) directing the Swingline Bank not to make the requested Swingline Loan as a result of the limitations set forth in the proviso set forth in the first sentence of subsection 2.12(a); or (B) that one or more conditions specified in Article V are not then satisfied; then, subject to the terms and conditions hereof, the Swingline Bank will, not later than 3:00 p.m. (San Francisco time) on the Borrowing date specified in such Notice, make the amount of its Swingline Loan available to the Agent for the account of the Company at the Agent's Payment Office in funds immediately available to the Agent. The proceeds of such Swingline Loan will then promptly be made available to the Company by the Agent crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Swingline Bank and in like funds as received by the Agent. Each Borrowing pursuant to this Section shall be in an aggregate principal amount equal to two hundred fifty thousand dollars ($250,000) or an integral multiple of one hundred thousand dollars ($100,000) in excess thereof, unless otherwise agreed by the Swingline Bank. (b)If (i) any Swingline Loans shall remain outstanding at 9:00 a.m. (San Francisco time) on the Business Day immediately prior to a Swingline Clean-Up Day and by such time on such Business Day the Agent shall have received neither (A) a Notice of Borrowing delivered pursuant to Section 2.4 requesting that Revolving Loans be made pursuant to Section 2.1 on the Swingline Clean-Up Day in an amount at least equal to the aggregate principal amount of such Swingline Loans, nor (B) any other notice indicating the Company's intent to repay such Swingline Loans with funds obtained from other sources, or (ii) any Swingline Loans shall remain outstanding during the existence of a Default or Event of Default and the Swingline Bank shall in its sole discretion notify the Agent that the Swingline Bank desires that such Swingline Loans be converted into Revolving Loans, then the Agent shall be deemed to have received a Notice of Borrowing from the Company pursuant to Section 2.4 requesting that Base Rate Loans be made pursuant to Section 2.1 on such Swingline Clean-Up Day (in the case of the circumstances described in clause (i) above) or on the first Business Day subsequent to the date of such notice from the Swingline Bank (in the case of the circumstances described in clause (ii) above) in an amount equal to the aggregate amount of such Swingline Loans, and the procedures set forth in subsections 2.4(b) and 2.4(c) shall be followed in making such Base Rate Loans; provided, that such Base Rate Loans shall be made notwithstanding the Company's failure to comply with subsections 5.2(b) and 5.2(c); and provided, further, that if a Borrowing of Revolving Loans becomes legally impracticable and if so required by the Swingline 44 52 Bank at the time such Revolving Loans are required to be made by the Banks in accordance with this subsection 2.12(c), each Bank agrees that in lieu of making Revolving Loans as described in this subsection 2.12(c), such Bank shall purchase a participation from the Swingline Bank in the applicable Swingline Loans in an amount equal to such Bank's Commitment Percentage of such Swingline Loans, and the procedures set forth in subsections 11.8 shall be followed in connection with the purchases of such participations. Upon such purchases of participations, the prepayment requirements of subsection 2.9(a)(iii) shall be deemed waived with respect to such Swingline Loans. The proceeds of such Base Rate Loans, or participations purchased, shall be applied to repay such Swingline Loans. A copy of each notice given by the Agent to the Banks pursuant to this subsection 2.12(c) with respect to the making of Revolving Loans, or the purchases of participations, shall be promptly delivered by the Agent to the Company. Each Bank's obligation in accordance with this Agreement to make the Revolving Loans, or purchase the participations, as contemplated by this subsection 2.12(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Swingline Bank, the Company or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default, an Event of Default or a Material Adverse Effect; or (3) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 2.13 FEES In addition to certain fees described in Section 3.8: (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, BofA and the Arranger dated August 30, 1996. 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 Revolving 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 the Commitment Fee Percentage. For purposes of calculating utilization under this subsection, (i) the Aggregate Revolving Commitment shall be deemed used to the extent of the Effective Amount of all Revolving Loans and L/C Obligations, and (ii) with respect to the Revolving Commitment of the Swingline Bank, the making of any Swingline Loan shall not be considered a use of a portion of such Swingline Bank's Revolving Commitment. Such commitment fee shall accrue from the Closing 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 45 53 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 the Aggregate Revolving Commitment pursuant to Section 2.7 or Section 2.9, 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 V are not met. 2.14 COMPUTATION OF FEES AND INTEREST (a)All computations of interest payable in respect of Base Rate Loans at all times that 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. (b)The Agent will, with reasonable promptness, notify the Company and the Banks of each determination of an Offshore 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. 2.15 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 46 54 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 Pro Rata Share (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 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. 2.16 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 47 55 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 2.16(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 such 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. (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. 2.17 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 proportionate share (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 2.17 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 11.9) 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 2.17 and will in each case notify the Banks following any such purchases or repayments. 48 56 2.18 LOAN TRANCHES The Company may, at any time and from time to time, upon at least five Business Days notice to the Agent, allocate all or a portion of Borrowings, including with respect to Swingline Loans and L/C Obligations, to a revolving credit facility tranche (the "Revolving Facility Tranche") or a capital expenditure tranche (the "Capital Expenditure Tranche"), or both; provided that (A)at no time shall the Effective Amount of all Revolving Loans and Swingline Loans allocated to the Revolving Facility Tranche plus the Effective Amount of all L/C Obligations exceed $15,000,000; (B)at no time shall the Effective Amount of all Revolving Loans and Swingline Loans allocated to the Capital Expenditure Tranche exceed $20,000,000; (C)upon allocation to the Revolving Facility Tranche or the Capital Expenditure Tranche, as case may be, Loans shall remain so allocated notwithstanding any conversion or continuation of Loans pursuant to Section 2.4; (D)the Company and each of the Banks agree that the establishment of the Revolving Facility Tranche and the Capital Expenditure Tranche is intended to assist the Company in its compliance with Section 8.5 and the corresponding provisions of the Note Agreements, the 1994 Senior Note Agreements and the Mortgage Note Agreements. Accordingly, neither the failure by the Company to comply in any respect with this Section 2.18 nor the failure by the Agent or any Bank to identify or remedy such noncompliance shall give rise to any liability against the Agent or any Bank or any defense to compliance by the Company with Section 8.5; and (E)all Letters of Credit shall be deemed allocated to the Revolving Facility Tranche. Such notice of allocation shall specify (i) the effective date of such allocation which shall not be a date earlier than the date of such notice, (ii) the aggregate principal amount of Loans (identified by Type of Loan) and L/C Obligations to be allocated to the Revolving Facility Tranche, the Capital Expenditure Tranche, or both, as the case may be, and (iii) in the case of allocations to the Capital Expenditure Tranche, the Company shall represent and warrant that the proceeds of all Loans allocated thereto have been used solely to finance capital improvements, expansions and additions to the Company's property (including Timberlands), plant and equipment. The Agent will promptly notify the Banks of such notice of allocation of Loans and L/C Obligations. 49 57 THE LETTERS OF CREDIT 3.1 THE LETTER OF CREDIT FACILITY (a)On the terms and conditions set forth herein, (i) each Issuing Bank agrees, (A) from time to time on any Business Day during the period from the Closing Date until 30 days before the Revolving Termination Date to issue Letters of Credit for the account of the Company or the Facilities Subsidiary, and to amend or renew Letters of Credit previously issued by it, in accordance with subsections 3.2(c) and 3.2(d), and (B) to honor drafts under the Letters of Credit; and (ii) the Banks severally agree to participate in Letters of Credit Issued for the account of the Company or the Facilities Subsidiary; provided, that the Issuing Banks shall not be obligated to Issue, and no Bank shall be obligated to participate in, any Letter of Credit if as of the date of Issuance of such Letter of Credit (the "Issuance Date") (1) the Effective Amount of all Revolving Loans, Swingline Loans, and L/C Obligations exceeds the Aggregate Revolving Commitment, (2) the Effective Amount of all Revolving Loans of such Bank plus the participation of such Bank, if any, in the Effective Amount of all Swingline Loans and L/C Obligations exceeds such Bank's Revolving Commitment, or (3) the Effective Amount of L/C Obligations exceeds the L/C Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company's ability to obtain Letters of Credit shall be fully revolving, and, accordingly, the Company may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn upon and reimbursed. The Company shall be primarily liable for all obligations hereunder and under the L/C-Related Documents with respect to any Letter of Credit Issued for the account of the Facilities Subsidiary. (b)Each of the Issuing Banks is under no obligation to Issue any Letter of Credit if: (i)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from Issuing such Letter of Credit, or any Requirement of Law applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such Issuing Bank in good faith deems material to it; 50 58 (ii)such Issuing Bank has received written notice from any Bank, the Agent or the Company, on or prior to the Business Day prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Article V is not then satisfied; (iii)the expiry date of any requested Letter of Credit is (A) more than one year after the date of Issuance, unless the Majority Banks have approved such expiry date in writing, or (B) after the Revolving Termination Date, unless all of the Banks have approved such expiry date in writing; (iv)the expiry date of any requested Letter of Credit is prior to the maturity date of any financial obligation to be supported by the requested Letter of Credit, unless such Letter of Credit is issued in connection with worker's compensation or to secure self-insurance deductibles or certain payments required in connection with export log yards, or all of the Banks have approved such expiry date in writing; (v)any requested Letter of Credit does not provide for drafts, or is not otherwise in form and substance reasonably acceptable to such Issuing Bank, or the Issuance of a Letter of Credit may violate any policies of such Issuing Bank applicable to customers and credits of a type similar to the Company and the transactions contemplated in this Agreement; (vi)any standby Letter of Credit is for the purpose of supporting the issuance of any letter of credit by any other Person; (vii)such Letter of Credit is in a face amount less than $100,000 or to be denominated in a currency other than Dollars; or (viii)the requested Letter of Credit provides for payment thereunder sooner than the Business Day following the presentation to such Issuing Bank of the documentation required thereunder. 3.2 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT (a)Each Letter of Credit shall be issued upon the irrevocable written request of the Company (or, if such Letter of Credit is to be for the account of the Facilities Subsidiary, the joint and several irrevocable written request of the Company and the applicable Facilities Subsidiary) received by an Issuing Bank (with a copy sent by the Company to the Agent) at least five days (or such shorter time as such Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of issuance. Each such request for issuance of a Letter of Credit shall be made by an original writing or by facsimile, confirmed immediately in an original writing, in the form of an L/C Application, and shall specify in form and detail satisfactory to such Issuing Bank: 51 59 (i)the proposed date of issuance of the Letter of Credit (which shall be a Business Day); (ii)the face amount of the Letter of Credit; (iii)the expiry date of the Letter of Credit; (iv)the name and address of the beneficiary thereof; (v)the documents to be presented by the beneficiary of the Letter of Credit in case of any drawing thereunder; (vi)the full text of any certificate to be presented by the beneficiary in case of any drawing thereunder; and (vii)such other usual and customary matters as the Issuing Bank may require. (b)At least three Business Days prior to the Issuance of any Letter of Credit or any amendment or renewal of a Letter of Credit, the Issuing Bank issuing such Letter of Credit will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of the L/C Application or L/C Amendment Application from the Company and, if not, such Issuing Bank will provide the Agent with a copy thereof. Unless such Issuing Bank has received notice on or before the Business Day immediately preceding the date such Issuing Bank is to issue, amend or renew a requested Letter of Credit from the Agent (A) directing such Issuing Bank not to issue, amend or renew such Letter of Credit because such issuance amendment or renewal is not then permitted under subsection 3.1(a) as a result of the limitations set forth in clauses (1) through (3) thereof or subsection 3.1(b)(ii); or (B) that one or more conditions specified in Article V are not then satisfied; then, subject to the terms and conditions hereof, such Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the Company or amend or renew a Letter of Credit, as the case may be, in accordance with such Issuing Bank's usual and customary business practices. (c)From time to time while a Letter of Credit is outstanding and prior to the Revolving Termination Date, an Issuing Bank shall, upon the written request of the Company received by such Issuing Bank (with a copy sent by the Company to the Agent) at least five days (or such shorter time as such Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of amendment, amend any Letter of Credit issued by it. Each such request for amendment of a Letter of Credit shall be made by an original writing or by facsimile, confirmed immediately in an original writing, made in the form of an L/C Amendment Application and shall specify in form and detail satisfactory to such Issuing Bank: 52 60 (i)the Letter of Credit to be amended; (ii)the proposed date of amendment of the Letter of Credit (which shall be a Business Day); (iii)the nature of the proposed amendment; and (iv)such other usual and customary matters as such Issuing Bank may require. Such Issuing Bank shall be under no obligation to amend any Letter of Credit if: (A) such Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms of this Agreement; or (B) the beneficiary of any such letter of Credit does not accept the proposed amendment to the Letter of Credit. The Agent will promptly notify the Banks of the receipt by it of any L/C Application or L/C Amendment Application. (d)Each Issuing Bank and the Banks agree that, while a Letter of Credit is outstanding and prior to the Revolving Termination Date, at the option of the Company and upon the written request of the Company received by an Issuing Bank (with a copy sent by the Company to the Agent) at least five days (or such shorter time as such Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of notification of renewal, such Issuing Bank shall be entitled to authorize the automatic renewal of any Letter of Credit issued by it. Each such request for renewal of a Letter of Credit shall be made by an original writing or by facsimile, confirmed immediately in an original writing, in the form of an L/C Amendment Application, and shall specify in form and detail satisfactory to such Issuing Bank: (i)the Letter of Credit to be renewed; (ii)the proposed date of notification of renewal of the Letter of Credit (which shall be a Business Day); (iii)the revised expiry date of the Letter of Credit; and (iv)such other usual and customary matters as the Issuing Bank may require. Such Issuing Bank shall be under no obligation so to renew any Letter of Credit if: (A) such Issuing Bank would have no obligation at such time to issue or amend such Letter of Credit in its renewed form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed renewal of the Letter of Credit. If any outstanding Letter of Credit shall provide that it shall be automatically renewed unless the beneficiary thereof receives notice 53 61 from such Issuing Bank that such Letter of Credit shall not be renewed, and if at the time of renewal such Issuing Bank would be entitled to authorize the automatic renewal of such Letter of Credit in accordance with this subsection 3.2(d) upon the request of the Company but such Issuing Bank shall not have received any L/C Amendment Application from the Company with respect to such renewal or other written direction by the Company with respect thereto, such Issuing Bank shall nonetheless be permitted to allow such Letter of Credit to renew, and the Company and the Banks hereby authorize such renewal, and, accordingly, such Issuing Bank shall be deemed to have received an L/C Amendment Application from the Company requesting such renewal. (e)In connection with Letters of Credit that automatically renew or extend their expiry date, each Issuing Bank may, at its election (or as required by the Agent at the direction of the Majority Banks), deliver any notices of termination or other communications to any Letter of Credit beneficiary or transferee, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than the Revolving Termination Date. (f)This Agreement shall control in the event of any conflict with any L/C-Related Document (other than any Letter of Credit). (g)Each Issuing Bank will also deliver to the Agent, concurrently or promptly following its delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and complete copy of each such Letter of Credit or amendment to or renewal of a Letter of Credit. (h)Each Issuing Bank shall deliver to the Agent such reports with respect to the Letters of Credit as the Agent may reasonably request from time to time. 3.3 RISK PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS (a)Immediately upon the Issuance of each Letter of Credit, each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank issuing such Letter of Credit a participation in such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) the Commitment Percentage of such Bank, times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of Section 2.1, each Issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Bank by an amount equal to the amount of such participation. (b)In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Issuing Bank which issued such Letter of Credit will promptly notify the Company. The Company shall reimburse such 54 62 Issuing Bank, directly or with the proceeds of a Loan, prior to 10:00 a.m. (San Francisco time), on each date that any amount is paid by such Issuing Bank under any Letter of Credit (each such date, an "Honor Date"), in an amount equal to the amount so paid by such Issuing Bank. If the Company fails to reimburse such Issuing Bank for the full amount of any drawing under any Letter of Credit by 10:00 a.m. (San Francisco time) on the Honor Date, such Issuing Bank will promptly notify the Agent and the Agent will promptly notify each Bank thereof, and the Company shall be deemed to have requested that Base Rate Loans be made by the Banks to be disbursed on the Honor Date under such Letter of Credit, subject to the aggregate amount of the un-utilized portion of the Aggregate Revolving Commitment and subject to the conditions set forth in Section 5.2. Any notice given by such Issuing Bank or the Agent pursuant to this subsection 3.3(b) may be oral if immediately confirmed in writing (including by facsimile); provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (c)Each Bank shall upon any notice pursuant to subsection 3.3(b) make available to the Agent for the account of the relevant Issuing Bank an amount in Dollars and in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Banks shall (subject to subsection 3.3(d)) each be deemed to have made a Loan consisting of a Base Rate Loan to the Company in that amount. If any Bank so notified fails to make available to the Agent for the account of such Issuing Bank the amount of such Bank's Commitment Percentage of the amount of the drawing by no later than 12:00 noon (San Francisco time) on the Honor Date, then interest shall accrue on such Bank's obligation to make such payment, from the Honor Date to the date such Bank makes such payment, at a rate per annum equal to the Federal Funds Rate in effect from time to time during such period. The Agent will promptly give notice of the occurrence of the Honor Date, but failure of the Agent to give any such notice on the Honor Date or in sufficient time to enable any Bank to effect such payment on such date shall not relieve such Bank from its obligations under this Section 3.3. (d)With respect to any unreimbursed drawing that is not converted into Loans consisting of Base Rate Loans to the Company in whole or in part, because of the Company's failure to satisfy the conditions set forth in Section 5.2 or for any other reason, the Company shall be deemed to have incurred from the relevant Issuing Bank an L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate per annum equal to the Base Rate plus 2% per annum, and each Bank's payment to such Issuing Bank pursuant to subsection 3.3(c) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Bank in satisfaction of its participation obligation under this Section 3.3. 55 63 (e)Each Bank's obligation in accordance with this Agreement to make the Loans or L/C Advances, as contemplated by this Section 3.3, as a result of a drawing under a Letter of Credit, shall be absolute and unconditional and without recourse to the relevant Issuing Bank and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against such Issuing Bank, the Company or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, an Event of Default or a Material Adverse Effect; or (iii) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided, however, that each Bank's obligation to make Revolving Loans under this Section 3.3 is subject to the conditions set forth in Section 5.2. 3.4 REPAYMENT OF PARTICIPATIONS (a)Upon (and only upon) receipt by the Agent for the account of an Issuing Bank of immediately available funds from the Company (i) in reimbursement of any payment made by such Issuing Bank under the Letter of Credit with respect to which any Bank has paid the Agent for the account of such Issuing Bank for such Bank's participation in the Letter of Credit pursuant to Section 3.3 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in the same funds as those received by the Agent for the account of such Issuing Bank, the amount of such Bank's Commitment Percentage of such funds, and such Issuing Bank shall receive the amount of the Commitment Percentage of such funds of any Bank that did not so pay the Agent for the account of such Issuing Bank. (b)If the Agent or an Issuing Bank is required at any time to return to the Company, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of the payments made by the Company to the Agent for the account of such Issuing Bank pursuant to subsection 3.4(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the Agent or such Issuing Bank the amount of its Commitment Percentage of any amounts so returned by the Agent or such Issuing Bank plus interest thereon from the date such demand is made to the date such amounts are returned by such Bank to the Agent or such Issuing Bank, at a rate per annum equal to the Federal Funds Rate in effect from time to time. 3.5 ROLE OF THE ISSUING BANK (a)Each Bank and the Company agree that, in paying any drawing under a Letter of Credit, each of the Issuing Banks shall not have any responsibility to obtain any document (other than any sight draft and certificates expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of 56 64 any such document or the authority of the Person executing or delivering any such document. (b)No Agent-Related Person nor any of the respective correspondents, participants or assignees of the Issuing Banks shall be liable to any Bank for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Banks (including the Majority Banks, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any L/C-Related Document. (c)The Company hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Company's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No Agent-Related Person nor any of the respective correspondents, participants or assignees of an Issuing Bank, shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 3.6; provided, however, anything in such clauses to the contrary notwithstanding, that the Company may have a claim against an Issuing Bank, and such Issuing Bank may be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Company which the Company proves were caused by such Issuing Bank's willful misconduct or gross negligence or such Issuing Bank's willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing: (i) each Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; and (ii) such Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. 3.6 OBLIGATIONS ABSOLUTE The obligations of the Company under this Agreement and any L/C-Related Document to reimburse each Issuing Bank for a drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing under a Letter of Credit converted into Loans shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C-Related Document under all circumstances, including the following: 57 65 (i)any lack of validity or enforceability of this Agreement or any L/C-Related Document; (ii)any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Company in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from all or any of the L/C-Related Documents; (iii)the existence of any claim, set-off, defense or other right that the Company may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Issuing Banks or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the L/C-Related Documents or any unrelated transaction; (iv)any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit; (v)any payment by an Issuing Bank under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of any Letter of Credit; or any payment made by such Issuing Bank under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any Insolvency Proceeding; (vi)any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the obligations of the Company in respect of any Letter of Credit; or (vii)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor. 3.7 CASH COLLATERAL PLEDGE Upon (i) the request of the Agent, (A) if an Issuing Bank has honored any full or partial drawing request on any Letter of Credit and such drawing has resulted in an L/C Borrowing hereunder, or (B) if, as of the Revolving Termination Date, any Letters of Credit may for any reason remain outstanding and partially or wholly undrawn, or (ii) the occurrence of the circumstances described in subsection 2.9 requiring the Company to Cash Collateralize Letters of Credit, then, the Company 58 66 shall immediately Cash Collateralize the L/C Obligations in an amount equal to the L/C Obligations. The Company hereby grants to the Agent, for the benefit of the Agent, the Issuing Banks and the Banks, a security interest in all such cash and deposit account balances used to Cash Collateralize the Company's obligations hereunder. 3.8 LETTER OF CREDIT FEES (a)The Company shall pay to the Agent for the account of each of the Banks a letter of credit fee with respect to the Letters of Credit on the average daily maximum amount available to be drawn of the outstanding Letters of Credit, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit outstanding for that quarter as calculated by the Agent, equal to the Letter of Credit Rate. Such letter of credit fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during which Letters of Credit are outstanding, commencing on the first such quarterly date to occur after the Closing Date, through the Revolving Termination Date (or such later date upon which the outstanding Letters of Credit shall expire), with the final payment to be made on the Revolving Termination Date (or such later expiration date). (b)The Company shall pay to the Agent for the account of each Issuing Bank a letter of credit fronting fee per annum with respect to the outstanding Letters of Credit issued by such Issuing Bank equal to 0.125% per annum of the average daily maximum amount available to be drawn under such outstanding Letters of Credit, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit issued by such Issuing Bank outstanding for that quarter as calculated by the Agent. Such fronting fees shall be calculated on the basis of a 360-day year and actual days elapsed and shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during which Letters of Credit are outstanding, commencing on the first such quarterly date to occur after the Closing Date, through the Revolving Termination Date (or such later date upon which the outstanding Letters of Credit shall expire), with the final payment to be made on the Revolving Termination Date (or such later expiration date). (c)The Company shall pay to each Issuing Bank from time to time on demand the normal issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such Issuing Bank relating to letters of credit as from time to time in effect. 3.9 UNIFORM CUSTOMS AND PRACTICE The Uniform Customs and Practice for Documentary Credits as published by the International Chamber of Commerce ("UCP") most recently at the time of 59 67 issuance of any Letter of Credit shall (unless otherwise expressly provided in the Letters of Credit) apply to the Letters of Credit. 4. TAXES, YIELD PROTECTION AND ILLEGALITY 4.1 TAXES (a)Subject to subsection 4.1(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 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 4.1(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 4.1) 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. Each Bank and the Agent, severally with respect to the amounts received by it from the Company as indemnification under this subsection 4.1(c), agrees upon the request of the Company and at the Company's expense, to use commercially reasonable efforts to obtain a refund of any Taxes or Other Taxes for which it received indemnification hereunder if such Taxes or Other Taxes were incorrectly or illegally asserted. (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 4.1(g): 60 68 (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 4.1) 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. (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 11.8 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 61 69 (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 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 4.1(d), subsection 4.1(a) or subsection 4.1(c) 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 4.1(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 4.1(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 4.1(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 4.1(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. (i)If the Company is required to pay additional amounts to any Bank or the Agent pursuant to subsection 4.1(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 62 70 Company which may thereafter accrue if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. 4.2 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 exist. (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 4.4. If the Company is required to so prepay any Offshore Rate Loan, then concurrently with such prepayment, the Company may borrow from the affected Bank, in the amount of such repayment, a Base Rate Loan. (c)If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, the Company may elect, by giving notice to the Bank through the Agent that all Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans. (d)Before giving any notice to the Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank. 4.3 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 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 63 71 the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loans or participating in Letters of Credit, or, in the case of an Issuing Bank, any increase in the cost to such Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit or of agreeing to make or making, funding or maintaining any unpaid drawing under any Letter of Credit, then the Company shall be liable 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 Bridge Commitment, Revolving 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. 4.4 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 (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 of any Loan after the Company has given a notice in accordance with Section 2.8; 64 72 (d)the prepayment (including pursuant to Section 2.8 or 2.9) of an Offshore Rate Loan on a day which is not the last day of the Interest Period with respect thereto; or (e)the conversion pursuant to Section 2.6 of any Offshore Rate Loan to a 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 hereunder or from fees payable to terminate the deposits from which such funds were obtained. 4.5 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 for any requested Interest Period with respect to a proposed Offshore Rate Loan or that the Offshore Rate applicable pursuant to subsection 2.11(a) for any requested Interest Period with respect to a proposed Offshore 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 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 Offshore Rate Loans. 4.6 CERTIFICATE OF BANK Each Bank, if claiming reimbursement or compensation pursuant to this Article IV, 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. 4.7 SURVIVAL The covenants, agreements and obligations of the Company in this Article IV shall survive the payment of all other Obligations. 65 73 CONDITIONS PRECEDENT 5.1 CONDITIONS OF INITIAL CREDIT EXTENSIONS The obligation of each Bank to make its initial Credit Extension 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 5.1(h) and (i), the Majority Banks, and in sufficient copies for each Bank: (a)Revolving Credit and Bridge Loan 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, 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 66 74 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, provided, however, that if the Company is unable to deliver on the Closing Date any such bring down certificate (other than the bring down certificate from the state of incorporation or formation of such Person) because bring down certificates are not readily provided by the applicable Secretary of State, the Company shall not be required to deliver such bring down certificate on the Closing Date but instead shall deliver it to the Agent within five days of the Closing Date; (d)Legal Opinions. An opinion of (i) James A. Kraft, Vice President, General Counsel and Secretary 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 2.13, 4.1 and 11.4; (f)Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i)the representations and warranties contained in Article VI 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 Credit Extension; 67 75 (iii)there has not occurred or existed since December 31, 1995 any event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and (iv)the transactions contemplated by the Riverwood Purchase Agreement have been or, upon application of the proceeds of the initial Loans hereunder, will be consummated in accordance with the Riverwood Purchase Agreement. (g)Credit Agreements. Copies certified by a Responsible Officer of the Note Agreements, the Mortgage Note Agreements, and the 1994 Senior Note Agreements; (h)Termination of Existing Credit Agreements. On or before the Closing Date, the Company shall have terminated the commitments of the lenders under the Existing Credit Agreements in accordance with their respective terms and either repaid in full all amounts outstanding thereunder or irrevocably directed the Agent to apply the initial proceeds of Loans hereunder toward such repayment in full; and (i)Other Documents. Such other approvals, opinions, documents or materials as the Agent or the Majority Banks may reasonably request. 5.2 CONDITIONS TO ALL CREDIT EXTENSIONS The obligation of each Bank and the Swingline Bank to make any Loans to be made by it (including its initial Loan) or to continue or convert any Loan pursuant to Section 2.6, and the obligation of each Issuing Bank to Issue any Letter of Credit (including the initial Letter of Credit) is subject to the satisfaction of the following conditions precedent on the relevant date of Borrowing, Conversion/Continuation Date or Issuance Date: (a)Notice, Application. As to any Loan, 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 Conversion/Continuation, as applicable, or in the case of any Issuance of any Letter of Credit, the relevant Issuing Bank and the Agent shall have received an L/C Application or L/C Amendment Application, as required under Section 3.2; (b)Continuation of Representations and Warranties. The representations and warranties made by the Company contained in Article VI shall be true and correct on and as of such date of Borrowing or Conversion/Continuation Date with the same effect as if made on and as of such date of Borrowing or Conversion/Continuation 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 68 76 (c)No Existing Default. No Default or Event of Default shall exist or shall result from such Credit Extension. Each Notice of Borrowing, Notice of Conversion/Continuation and L/C Application or L/C Amendment Application submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice, request or application and as of the date of each Borrowing, each Conversion/Continuation Date, or Issuance Date, as applicable, that the conditions in Section 5.2 are satisfied. 6. REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that, both before and after giving effect to the consummation of the transactions contemplated by the Riverwood Purchase Agreement: 6.1 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. 6.2 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 69 77 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. 6.3 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. 6.4 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. 6.5 LITIGATION There are no actions, suits, proceedings, claims or disputes pending, or to the Company's Knowledge and the knowledge of 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 (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 70 78 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. 6.6 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 9.1(e). 6.7 ERISA COMPLIANCE (a)Schedule 6.7 lists all Plans and separately identifies Plans intended to be Qualified Plans and Multiemployer Plans. (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 6.7, 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 Company's Knowledge nothing has occurred which would cause the loss of such qualification or tax-exempt status. (d)Except as specifically disclosed in Schedule 6.7, there is no outstanding liability under Title IV of ERISA (other than premiums due but not delinquent under Section 4007 of ERISA) with respect to any Plan maintained or sponsored by the Company or any ERISA Affiliate, nor with respect to any Plan to which the Company or any ERISA Affiliate contributes or is obligated to contribute, and which liability would reasonably be expected to have a Material Adverse Effect. (e)Except as specifically disclosed in Schedule 6.7, no Plan subject to Title IV of ERISA has any Unfunded Pension Liability which would reasonably be expected to have a Material Adverse Effect. (f)Except as specifically disclosed in Schedule 6.7, the Company and its ERISA Affiliates have not ever represented, promised or contracted (whether in 71 79 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 the Company or its ERISA Affiliates, with life insurance or employee welfare plan benefits (within the meaning of section 3(1) of ERISA) following retirement or termination of employment, other than benefits mandated by applicable law, including but not limited to, continuation coverage required to be provided under Section 4980B of the Code or Title I, Subtitle B, Part 6 of ERISA, and which cost would reasonably be expected to have a Material Adverse Effect. To the extent that the Company or its ERISA Affiliates have made any such representation, promise or contract, they have expressly reserved the right to amend or terminate such life insurance or employee welfare plan benefits with respect to claims not yet incurred. (g)The Company and its ERISA Affiliates 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 6.7, no ERISA Event has occurred or, to the Company's Knowledge is reasonably expected to occur with respect to any Plan which would reasonably be expected to have a Material Adverse Effect. (i)There are no pending or, to the Company's Knowledge, 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) the Company or its ERISA Affiliates with respect to any Qualified Plan, or (iii) any fiduciary with respect to any Plan for which the Company or its ERISA Affiliates may be directly or indirectly liable, through indemnification obligations or otherwise and which claim, action or lawsuit would reasonably be expected to have a Material Adverse Effect. This representation is not made with respect to any Multiemployer Plan. (j)Except as specifically disclosed in Schedule 6.7, neither the Company nor any ERISA Affiliate has incurred nor, to the Company's Knowledge, reasonably expects to incur (i) any liability (and, to the Company's knowledge, 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 ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan, and which liability would reasonably be expected to have a Material Adverse Effect. (k)Except as specifically disclosed in Schedule 6.7, neither the Company nor any ERISA Affiliate has transferred any Unfunded Pension Liability to a Person 72 80 other than the Company or an ERISA Affiliate or otherwise engaged in a transaction that is 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. 6.8 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 7.11, and are intended to be and shall be used in compliance with Section 8.7. 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. 6.9 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. 6.10 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. 6.11 FINANCIAL CONDITION (a)The audited combined financial statements of financial condition of the Company and its Subsidiaries dated December 31, 1995, and the related combined statements of income and combined statement of cash flows for the fiscal year ended on that date: 73 81 (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, 1995, there has been no Material Adverse Effect. 6.12 ENVIRONMENTAL MATTERS (a)Except as specifically disclosed in Schedule 6.12, 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 6.12, 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 6.12, none of the Company, the Partner Entities, 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 6.12, 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, 74 82 circumstance or Property. In addition, except as specifically disclosed in Schedule 6.12 (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. 6.13 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. 6.14 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. 6.15 SOLVENCY The Company, the General Partner, the Facilities Subsidiary, and the Restricted Subsidiaries are each Solvent. 6.16 LABOR RELATIONS There are no material strikes, lockouts or other labor disputes against the Company or any of its Subsidiaries, or, to 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 Company's Knowledge, threatened against any of them before any Governmental Authority. 6.17 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, 75 83 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 Company's Knowledge, 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 6.5, no claim or litigation regarding any of the foregoing is pending or, to the Company's Knowledge, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the Company's Knowledge, proposed, which, in either case, would reasonably be expected to have a Material Adverse Effect. 6.18 SUBSIDIARIES The Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.18 hereto and has no equity investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 6.18. Except as disclosed in part (a) of Schedule 6.18, 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. 6.19 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 partner of the General Partner is the PCMC General Partner. The only general partner of the PCMC General Partner is the PC Advisory General Partner. 6.20 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. 6.21 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. 76 84 6.22 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. 7. AFFIRMATIVE COVENANTS The Company covenants and agrees that, so long as any Bank shall have any Bridge Commitment or Revolving Commitment hereunder, or the Swingline Bank shall have any Swingline Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit remains outstanding, unless the Majority Banks waive compliance in writing: 7.1 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 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 ("Independent Auditor") 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 Independent Auditor 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 Independent Auditor 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 77 85 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 7.1; (c)as soon as available, but not later than 45 days after the end of each of the first three fiscal quarters 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 of the first three fiscal quarters 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 7.1; (e)as soon as available, but not later than September 30 of each year, a business plan which shall include consolidated five year pro-forma projections of the Company's balance sheet, income statement and statement of cash flows, accompanied byappropriate assumptions on which such projections are based. 7.2 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 7.1(a) above, a certificate of the Independent Auditor 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 7.1(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 the Applicable Margin to be in effect for the immediately following fiscal quarter, and (iii) showing in detail the calculations supporting such statement in respect of 78 86 subsection 8.2(h), Section 8.3, subsection 8.4(i), Section 8.5 and Section 8.13, and supporting the computation of the Interest Coverage 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. 7.3 NOTICES The Company shall promptly upon becoming aware thereof notify the Agent and each Bank: (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 Credit Extension set forth in subsection 5.2(b) not to be satisfied if a Credit Extension 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 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 could 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 79 87 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; (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 ERISA Affiliate (but in no event more than 20 days after such event or, in the case of an event relating to a Multiemployer Plan, no more than 30 days after the Company obtains knowledge of the occurrence of such an event), together with (except in the case of a Multiemployer Plan) 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 ERISA Affiliate with respect to such event: (i)an ERISA Event which would reasonably be expected to have a Material Adverse Effect; (ii)the adoption of any new Qualified Plan that is subject to Title IV of ERISA or section 412 of the Code that would reasonably be expected to generate annual liabilities in excess of $10,000,000 by the Company or an ERISA Affiliate; (iii)the adoption of any amendment to a Qualified Plan that is subject to Title IV of ERISA or section 412 of the Code that would reasonably be expected to generate annual liabilities in excess of $10,000,000, if such amendment results in a material increase in benefits or unfunded liabilities; or (iv)the commencement of contributions by the Company or an ERISA Affiliate to any Plan that is subject to Title IV of ERISA or section 412 of the Code that would reasonably be expected to generate annual liabilities in excess of $10,000,000; (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 7.1(a) or 5.1(g); and 80 88 (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 7.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated. 7.4 PRESERVATION OF PARTNERSHIP EXISTENCE, ETC. The Company shall, except as permitted by Section 8.2, and shall cause each of its Restricted 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. 7.5 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. 7.6 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 81 89 such types and in such amounts as are customarily carried under similar circumstances by such other Persons. 7.7 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; and (b)all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 7.8 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. 7.9 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. 82 90 7.10 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 notice or report required pursuant to subsection 7.3(d), that could, individually or in the aggregate, result in liability in excess of $25,000,000. 7.11 USE OF PROCEEDS The Company shall use the proceeds of the Loans solely as follows: (a) to acquire the Riverwood Assets, (b) to refinance existing Indebtedness, (c) to pay related fees and expenses, and (d) to finance working capital and other general partnership purposes, including acquisitions, not in contravention of any Requirement of Law or of any Loan Document. 7.12 SOLVENCY The Company shall at all times be, and shall cause each of its Restricted Subsidiaries to be, Solvent. 8. NEGATIVE COVENANTS The Company hereby covenants and agrees that, so long as any Bank shall have any Bridge Commitment or Revolving Commitment hereunder, or the Swingline Bank shall have any Swingline Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, unless the Majority Banks waive compliance in writing: 8.1 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"): 83 91 (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 7.7; (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 (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, leases, sub-leases 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 84 92 is not prohibited by the provisions of Section 8.5, (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) from June 30, 1996 to June 8, 1999, exceeds $25,000,000, and (b) from June 9, 1999 to 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 permitted by subsection 8.5(d) and any extension, renewal, refunding or refinancing thereof; (i)any Lien existing on the Property of the Company or its Restricted Subsidiaries on the Closing Date and set forth in Schedule 8.1 securing Indebtedness outstanding on such date; (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; and (k)Liens, other than those set forth above, that secure amounts that in the aggregate do not exceed $1,000,000. 8.2 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; 85 93 (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 provided that, after giving effect on a pro forma basis to such merger or consolidation, the gross revenue contribution of pulp and paper manufacturing activities of the Company and its Subsidiaries on a combined basis for the 12 months preceding such merger or consolidation does not exceed 33% of the total revenues of the Company and its Subsidiaries on a combined basis; (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 any state of the United States and shall expressly assume in writing all of the obligations of the Company under this Agreement, the Note Agreements, the 1994 Senior 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, the 1994 Senior 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 8.5(i), 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 provided that, after giving effect on a pro forma basis to such merger or consolidation, the gross revenue contribution of pulp and paper manufacturing activities of the merged or consolidated entity and its Subsidiaries on a combined basis for the 12 months preceding such merger or consolidation does not exceed 33% of total revenues of such merged or consolidated entity and its Subsidiaries on a combined basis; (e)the Company or any Restricted Subsidiary may make dispositions of inventory in the Ordinary Course of Business; 86 94 (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 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 under the Note Agreements, the 1994 Senior 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 8.2; (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 1996, $20,000,000 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; and (i)the Company and its Restricted Subsidiaries may otherwise sell Properties for cash 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, within 180 days after such sale to repayment of Qualified Debt, with a percentage of such repayment being applied to the Loans in an amount equal to or greater than the pro rata share of the Loans as a percentage of the outstanding principal of other 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) if the Net Proceeds of (x) any such sale exceed $50,000,000, and if such Net Proceeds are not applied immediately as set forth in (ii)(x) or (y) above, then the entire amount of such Net Proceeds are 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 95 satisfactory to holders of greater than 50% of the outstanding principal balance of the Qualified Debt, for the purpose of application in accordance with clause (ii) above, and (y) all such Net Proceeds which are not then held in escrow or cash collateral accounts pursuant to subclause (iii)(x) and which have not been applied to the purchase of productive assets in the same line of business or distributed to the holders of Qualified Debt for application to the repayment of such Qualified Debt exceed $100,000,000 in the aggregate at any time, all such Net Proceeds in excess of $100,000,000 are 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 greater than 50% 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 incur $1 of additional Funded Debt pursuant to subsection 8.5(i). 8.3 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:
================================================================================ CALENDAR YEAR MAXIMUM MCCF TO BE HARVESTED - - -------------------------------------------------------------------------------- 1996 (representing a carryover of 2,130 MCCF from 3,600 MCCF prior years and an estimated 1996 harvest of 1,470 MCCF) - - -------------------------------------------------------------------------------- 1997-2000 1,970 MCCF - - -------------------------------------------------------------------------------- 2001-2009 1,910 MCCF ================================================================================
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 (a) the Net Proceeds from such excess harvest are either (i) applied, within 180 days after any such excess harvest to repayment of Qualified Debt, with a percentage of such repayment being applied to Loans in an amount equal to or greater than the pro rata share of the Loans as a percentage of the outstanding principal of other Qualified Debt or (ii) applied, within 180 days after any such excess harvest, to purchase Timber (including Timber on Timberlands purchased) 88 96 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. For purposes of computing maximum harvest, Board Feet will be converted into Cunits at a ratio of 2.1 MCCF for each MMBF. 8.4 LOANS AND INVESTMENTS The Company shall not, and 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 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 8.13 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 8.4) 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 8.4; (e)endorse negotiable instruments for collection in the Ordinary Course of Business; 89 97 (f)become and be obligated under the Guarantee and under the guarantees permitted by subsections 8.5(f) 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 8.1(c), advances to employees for travel, relocation and other employment related expenses, advances to contractors performing services for the Company or such Restricted Subsidiary, advances to owners of timber or timber properties to acquire rights to harvest timber and other similar advances; (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 8.4 in entities engaged solely in a Permitted Business, provided that (x) the aggregate cumulative amount of such Investments, to the extent that such Investments are attributable to pulp and paper manufacturing (as proportionately attributed by multiplying the amount of an Investment by the percentage of revenues of the Person in whom such Investment is made during the 12 months preceding such Investment that are contributed by pulp and paper manufacturing), does not exceed the sum of $50,000,000 (without giving effect to any write-down of such Investments), and (y) the cumulative aggregate amount of all such Investments including those subject to clause (x) at original cost (including the principal amount of any obligations guaranteed to the extent such guarantees are not otherwise permitted by this Section 8.4) outstanding from time to time 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. 8.5 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)Funded Debt represented by the Notes and the 1994 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 1994 Notes and the documentation relating thereto; (b)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 90 98 the aggregate outstanding principal amount of such Funded Debt shall at no time exceed $20,000,000; (c)Indebtedness of any Restricted Subsidiary owing to the Company or to a Restricted Subsidiary; (d)Indebtedness pursuant to a bank credit facility which is unsecured or is secured by Liens permitted by subsection 8.1(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 (d) 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 (d); (e)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; (f)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; (g)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; (h)Funded Debt of the Company or any Restricted Subsidiary secured by a Lien permitted by subsection 8.1(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 the Indebtedness secured by such Lien), the Company could incur at least $1 of additional Funded Debt pursuant to subsection (i) below; 91 99 (i) 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 8.5, including guarantees of Indebtedness to the extent permitted by Section 8.4 and not otherwise permitted by the foregoing subsections of this Section 8.5, 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 (but not including Funded Debt incurred under this Agreement) shall not exceed (i) until the Equity Closing, $150,000,000 and (ii) from the Equity Closing, $150,000,000 plus any amount equal to the aggregate of Equity Proceeds received by the Company from the Closing Date to such date of determination; (j) 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 8.1(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 (j) 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 (j); (k) 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 to subsection (i) 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 92 100 Indebtedness, in each case, secured by Liens permitted by subsection 8.1(g) does not violate subclause (iv) to the proviso to such subsection (g); and (l) Indebtedness representing the Swap Termination Value of Swap Contracts entered into in the ordinary course of business as bona fide hedging transactions. 8.6 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. 8.7 USE OF PROCEEDS (a) The Company shall not and shall not suffer or permit any of its Subsidiaries to use any portion of the proceeds of the Loans or other Credit Extension, 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. (b) The Company shall not and shall not suffer or permit any of its Subsidiaries to use any portion of the proceed of the Loans or other Credit Extension, directly or indirectly, (i) knowingly to purchase Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Company or any Affiliate of the Company. As used in this Section, "Section 20 Subsidiary" means the Subsidiary of the bank holding company controlling any Bank, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (as U.S.C. Section 24, Seventh), as amended. 93 101 (c) After the date the Company has notified the Agent that the Company intends to allocate Loans to the Capital Expenditure Tranche and to qualify such Capital Expenditure Tranche Loans as Indebtedness permitted under subsection 8.5(b), the Company shall not and shall not suffer any of its Subsidiaries to use the proceeds of Capital Expenditure Tranche Loans for purposes other than to finance capital improvements, expansions and additions to the Company's property (including Timberlands), plant and equipment. 8.8 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, provided that the assets of such Subsidiary do not include any assets which could not be disposed of pursuant to the provisions of Section 8.2 unless the conditions to the sale of such assets set forth in Section 8.2 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 8.8). 8.9 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 (x) take-or-pay contracts in the Ordinary Course of 94 102 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 (y) the Riverwood Supply Agreement, 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 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 8.4(a), (e), (f), (g), (h) or (i). 8.10 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. 8.11 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 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 95 103 Majority Banks) increase in its liability with respect to such Plan, or (v) permit the present value of all nonforfeitable accrued benefits under any Qualified Plan (determined using the actuarial assumptions utilized by the Plan's actuaries for funding the Plan pursuant to Section 412 of the Code) 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. 8.12 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 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 8.12 shall not apply to any property sold pursuant to subsection 8.2(h). 8.13 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 and the 1994 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, (iii) 25% of the aggregate amount of all principal in respect of the Notes and the 1994 Notes scheduled to be paid (determined in accordance with the Principal Repayment Proviso) during the 12 calendar months immediately 96 104 following such immediately preceding calendar quarter, and (iv) for the final four full calendar quarters preceding the Revolving Termination Date, 25% of the average Effective Amount of Revolving Loans, Swingline Loans and L/C Obligations outstanding at any time during such quarter of computation, 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 subsection 8.13(a), the amount of the reserves so included exceeds fifty percent (50%) of the Effective Amount of Revolving Loans, L/C Obligations and Swingline Loans at the end of such quarter of computation; 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. 8.14 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. 8.15 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. 8.16 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 impair the Agent's or the Banks' rights hereunder or the ability of the Company to perform its obligations under any Loan Document. 97 105 8.17 Available Cash The Company shall not at any time permit Available Cash to be less than zero. For purposes of this Section 8.17, 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 and the 1994 Notes to be paid on the interest date immediately following such immediately preceding calendar 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, (c) 25% of the aggregate amount of all principal in respect of the Notes and the 1994 Notes scheduled to be paid (determined in accordance with the Principal Repayment Proviso) during the 12 calendar months immediately following such immediately preceding calendar quarter, and (d) for the final four full calendar quarters preceding the Revolving Termination Date, 25% of the average Effective Amount of Revolving Loans, Swingline Loans and L/C Obligations outstanding at any time during such quarter of computation, 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 8.17, the amount of the reserves so included exceeds fifty percent (50%) of the Effective Amount of Revolving Loans, L/C Obligations and Swingline Loans at the end of such quarter of computation. 8.18 INTEREST COVERAGE RATIO The Company shall not permit its Interest Coverage Ratio at the end of any fiscal quarter ending during the periods set forth below to be equal to or less than the values indicated below for such periods:
Period Interest Coverage Ratio ------ ----------------------- 1 2.40 2 2.75 3 3.00
Period 1 shall extend from the Closing Date until the end of the sixth (6th) fiscal quarter ending after the Closing Date; Period 2 shall extend from the end of Period 1 until the end of the twelfth (12th) fiscal quarter ending after the Closing Date; and Period 3 shall extend from the end of Period 2 until the Revolving Termination Date. 98 106 9. EVENTS OF DEFAULT 9.1 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 of any L/C Obligation, 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 (c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in Sections 7.3 or 7.9 or Article VIII; 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. (i) The Company or any of its Subsidiaries (A) fails to make any payment in respect of any Indebtedness (other than in respect of Swap Contracts) 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 (B) 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 (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (1) any event of default under 99 107 such Swap Contract as to which the Company or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (2) any Termination Event (as so defined) as to which the Company or any Subsidiary is an Affected Party (as so defined), and, in either event, the Swap Termination Value owed by the Company or such Subsidiary as a result thereof is greater than $5,000,000, 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 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) The Company or an ERISA Affiliate 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) 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 100 108 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 the Company or its ERISA Affiliates 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, the Company or an ERISA Affiliate which commencement, increase or amendment shall result in a net increase in unfunded liabilities to the Company and the ERISA Affiliates in excess of $10,000,000; (viii) the Company or an ERISA Affiliate engages in or otherwise becomes liable for a non-exempt 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 Company or its ERISA Affiliates 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 would reasonably be expected to result in a net increase to the Company and its ERISA Affiliates 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) Auditors. The Agent or any Bank shall receive notice from the Independent Auditor that the Agent and the Banks should no longer use or rely upon any audit report or other financial data provided by the Independent Auditor; or (l) Adverse Change. One of the following has occurred and the Agent, at the direction of the Majority Banks, shall so notify the Company: (i) a material 101 109 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; or (m) Equity Issuance. The Company shall not have received aggregate Equity Proceeds of at least $100,000,000 on or before April 17, 1998. 9.2 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 Bridge Commitment and Revolving Commitment of each Bank and the Swingline Commitment of the Swingline Bank to make Loans and any obligation of the Issuing Banks to issue Letters of Credit to be terminated, whereupon such Commitments and obligations shall forthwith be terminated; (b) declare an amount equal to the maximum aggregate amount that is or at any time thereafter may become available for drawing under any outstanding Letters of Credit (whether or not any beneficiary shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit) to be immediately due and payable, and 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 9.1 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 and the Swingline Bank to make Loans and any obligation of the Issuing Banks to Issue Letters of Credit 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, the Issuing Banks, the Swingline Bank, or any Bank. 102 110 9.3 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. 10. THE AGENT 10.1 APPOINTMENT AND AUTHORIZATION (a) Each Bank and each Issuing Bank hereby irrevocably (subject to Section 10.9) 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 accordance with this Agreement, and to release funds to the Company in accordance with Section 1(b) of the Cash Collateral Account Agreement and, if applicable, 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 or any Issuing 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. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) Each Issuing Bank shall act on behalf of the Banks with respect to any Letters of Credit Issued by it and the documents associated therewith until such time and except for so long as the Agent may agree at the request of the Majority Banks to act for such Issuing Bank with respect thereto; provided, however, that each Issuing Bank shall have all of the benefits and immunities (i) provided to the Agent in this Article X with respect to any acts taken or omissions suffered by such Issuing Bank in connection with Letters of Credit Issued by it or proposed to be Issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Agent," as used in this Article X, 103 111 included such Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to the Issuing Banks. 10.2 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. 10.3 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 or the transactions contemplated hereby (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. 10.4 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, 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 104 112 be fully protected in acting, or in refraining from acting, under this Agreement or any ther 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 5.1, 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 Credit Extension 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 Credit Extension. 10.5 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". The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Banks in accordance with Article IX; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not 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. 10.6 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 any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person 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 hereby, 105 113 and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person 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. 10.7 INDEMNIFICATION OF AGENT Whether or not the transactions contemplated hereby are 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), pro rata from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities 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 hereunder (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 undertaking in this Section shall survive the 106 114 payment of all Obligations hereunder and the resignation or replacement of the Agent. 10.8 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, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent, Swingline Bank or an Issuing Bank hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans and participation in Letters of Credit, 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. 10.9 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 the Agent resigns 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 and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article X and Sections 11.4 and 11.5 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. Notwithstanding the foregoing, however, BofA may not be removed as the Agent at the request of the Majority Banks unless BofA shall also simultaneously be replaced as an "Issuing Bank" hereunder pursuant to documentation in form and substance satisfactory to BofA. 107 115 11. MISCELLANEOUS 11.1 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 Bridge Commitment or Revolving Commitment of any Bank or the Swingline Commitment of the Swingline Bank (or reinstate any such Commitment terminated pursuant to subsection 9.2(a)), including, without limitation, any amendment to or waiver of subsection 2.9(b) or any other provision providing for a mandatory commitment reduction, 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 other Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (iii) below) of any fees or other amounts payable hereunder or under any other 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 (e) amend this Section 11.1 or Section 2.17 or any provision providing for consent or other action by all Banks; and, provided further that (i) no amendment, waiver or consent shall, unless in writing signed by the relevant Issuing Bank in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of such Issuing Bank under this Agreement or any L/C-Related Document relating to any Letter of Credit Issued or to be Issued by it, (ii) 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, (iii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Bank in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Swingline Bank 108 116 under this Agreement or any other Loan Document, and (iv) the fee letter between the Company and BofA may be amended, or rights and privileges thereunder waived, in a writing executed by the parties thereto. 11.2 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 Schedule 11.2, 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 Schedule 11.2; 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, notwithstanding the foregoing, notices pursuant to Article III to an Issuing Bank shall not be effective until actually received by the Issuing Bank at the address specified for the "Issuing Bank" on Schedule 11.2, and notices to the Company or the Agent shall not be effective until actually received by the Company or the Agent, respectively. (c) The Company acknowledges and agrees that any agreement of the Agent, the Issuing Banks, and the Banks at Article II and Article III herein to receive certain notices by telephone and facsimile is solely for the convenience and at the request of the Company. The Agent, the Issuing Banks, 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, the Issuing Banks 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, the Issuing Banks or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans and L/C Obligations shall not be affected in any way or to any extent by any failure by the Agent, the Issuing Banks, and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent, the Issuing Banks and the Banks of a confirmation which is at variance with the terms understood by the Agent, the Issuing Banks, and the Banks to be contained in the telephonic or facsimile notice. 109 117 11.3 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. 11.4 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) and the Arranger within five Business Days after demand (subject to subsection 5.1(e)) for all reasonable costs and expenses incurred by BofA (including in its capacity as Agent) or Arranger 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, the initial assignments by BofA of its Loans and Commitments hereunder, and the consummation of the transactions contemplated hereby and thereby, including expenses of outside experts, printing costs, and the reasonable Attorney Costs incurred by BofA (including in its capacity as Agent) or Arranger 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, the Agent, and the Arranger within five Business Days after demand (subject to subsection 5.1(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 costs, fees and expenses, incurred by the Agent, the Arranger and any Bank. 11.5 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 110 118 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, claims, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including reasonable Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, any 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 Letters of Credit 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. 11.6 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. 11.7 SUCCESSORS AND ASSIGNS The provisions of this Agreement shall be binding upon and inure to the benefit of 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. 11.8 ASSIGNMENTS, PARTICIPATIONS, ETC. (a) 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 shall not be unreasonably withheld or delayed, at any time assign and delegate to 111 119 one or more Eligible Assignees (each, an "Assignee") (provided that no written consent of the Company or the Agent shall be required in connection with (i) any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank or (ii) any assignment by BofA to an Eligible Assignee to reduce the sum of its Bridge Loans (or if the Closing Date has not occurred, Bridge Commitment) and Revolving Commitment to seventy-five million dollars ($75,000,000)) all, or any ratable part of all its interest in the Loans, its Bridge Loans (or if the Closing Date has not occurred, Bridge Commitment), its Revolving Commitment, the L/C Obligations and the other rights and obligations of such Bank hereunder; provided, however, that (i) no assignment shall in any event be less than $10,000,000 of the combined Bridge Loans (or if the Closing Date has not occurred, Bridge Commitment) and Revolving Commitment of the assigning Bank under this Agreement unless as a result of such assignment the assigning Bank's rights and obligations hereunder shall be reduced to zero; (ii) if a Bank assigns less than all of its rights and obligations hereunder, such Bank's aggregate remaining Bridge Loans (or if the Closing Date has not occurred, Bridge Commitment) and Revolving Commitment, after giving effect to such assignment, shall not be less than $10,000,000; (iii) 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; and (iv) no assignment of Bridge Loans (or if the Closing Date has not occurred, Bridge Commitment), on one hand, or Revolving Commitment and Revolving Loans, on the other hand, shall be effective, and shall instead be void and of no effect, unless performed simultaneously with an assignment of an identical percentage of the rights and obligations of the assigning Bank with respect to its Revolving Loans and Revolving Commitment or its Bridge Loans or Bridge Commitment, respectively, thereby causing each Bank at all times to hold identical percentage of Bridge Loans and Revolving Loans. In connection with any assignment by BofA, its Swingline Commitment may be in whole but not in part included as part of the assignment transaction, and the Assignment and Acceptance may be appropriately modified to include an assignment and delegation of its Swingline Commitment and any outstanding Swingline Loans. (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 obligations of a Bank under the Loan Documents, and 112 120 (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 Bridge Commitment and Revolving Commitment arising therefrom. The Bridge Commitment and Revolving Commitment allocated to each Assignee shall reduce such Bridge Commitment and Revolving Commitment 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 of the Loans, the Bridge Commitment or the Revolving 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, the Issuing Banks 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, (iv) no such participation of Bridge Loans (or if the Closing Date has not occurred, Bridge Commitment), on one hand, or Revolving Commitment and Revolving Loans, on the other hand, shall be effective, and shall instead be void and of no effect, unless performed simultaneously with a participation of an identical percentage of the rights and obligations of the selling Bank with respect to its Revolving Loans and Revolving Commitment or its Bridge Loans or Bridge Commitment, respectively, thereby causing each Bank at all times to hold identical beneficial interests in Bridge Loans and Revolving Loans. and (v) 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 11.1, or the right to grant subparticipations in Loans or the Commitments except in strict compliance with the immediately preceding clause (iv) applied mutatis mutandis to such subparticipation. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 4.1, 4.3 and 11.5 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 113 121 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 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 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 and (I) to such Bank's Affiliates. 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. 114 122 11.9 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 11.9 are in addition to the other rights and remedies (including other rights of set-off) which the Bank may have. 11.10 AUTOMATIC DEBITS OF FEES With respect to any commitment fee, facility fee, letter of credit fee or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent, the Issuing Banks, the Swingline Bank 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 11.10 shall be deemed a setoff. 11.11 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. 11.12 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 115 123 of this Agreement signed by all the parties shall be lodged with the Company and the Agent. 11.13 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. 11.14 NO THIRD PARTIES BENEFITED This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Issuing Banks, the Swingline Bank, 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, the Swingline Bank, the Issuing Bank nor any Bank shall have any obligation to any Person not a party to this Agreement or other Loan Documents. 11.15 TIME Time is of the essence as to each term or provision of this Agreement and each of the other Loan Documents. 11.16 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. 11.17 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 116 124 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 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. 11.18 ENTIRE AGREEMENT This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks, the Swingline Bank, the Issuing 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 subsections 2.13(a) and (c), and any prior arrangements made with respect to the payment by the Company of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Agent or the Banks. 117 125 126 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: /s/ Diane M. Irvine ---------------------------------- Name: Diane M. Irvine Title: Vice President and Chief Financial Officer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: ---------------------------------- Name: Michael J. Balok Title: Managing Director BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank, as the Swingline Bank and as an Issuing Bank By: ---------------------------------- Name: Michael J. Balok Title: Managing Director S-1 127 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: --------------------------------- Name: Diane Irvine Title: Vice President and Chief Financial Officer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: Michael Balok --------------------------------- Name: Michael Balok Title: Managing Director BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank, as the Swingline Bank and as an Issuing Bank By: Michael Balok --------------------------------- Name: Michael Balok Title: Managing Director S-1 128 SCHEDULE 2.1 COMMITMENTS
Revolving Bridge Commitment Bank Commitment Commitment Percentage ================================================================================ Bank of America National $400,000,000.00 $250,000,000.00 100.0000% Trust and Savings Association ================================================================================
EX-10.2 4 AMENDED & RESTATED REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.2 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT Dated as of December 13, 1996 among PLUM CREEK TIMBER COMPANY, L.P. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent NATIONSBANK OF NORTH CAROLINA, as Senior Co-Agent and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO 2 TABLE OF CONTENTS
Page Table of Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 1.3 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2. The Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.1 Amounts and Terms of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.3 Procedure for Borrowing Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.4 Conversion and Continuation Elections for Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.5 Voluntary Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.6 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.7 Mandatory Prepayments of Loans; Mandatory Commitment Reductions . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.8 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.9 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.10 Swingline Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 2.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.12 Computation of Fees and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2.13 Payments by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2.14 Payments by the Banks to the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.15 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2.16 Loan Tranches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 3. The Letters Of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 3.1 The Letter of Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 3.2 Issuance, Amendment and Renewal of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 3.3 Risk Participations, Drawings and Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 3.4 Repayment of Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
i 3 3.5 Role of the Issuing Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 3.7 Cash Collateral Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3.8 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 3.9 Uniform Customs and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 4. Taxes, Yield Protection And Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 4.1 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 4.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 4.3 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 4.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 4.5 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 4.6 Certificate of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 4.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 5.1 Conditions of Initial Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 5.2 Conditions to All Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6. Representations And Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6.1 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6.2 Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 6.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 6.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 6.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 6.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 6.7 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 6.8 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 6.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 6.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 6.11 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 6.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 6.13 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ii 4 6.14 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 6.15 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 6.16 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 6.17 Copyrights, Patents, Trademarks and Licenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 6.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 6.19 Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 6.20 Broker's, Transaction Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 6.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 6.22 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 7.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 7.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 7.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 7.4 Preservation of Partnership Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 7.5 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 7.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 7.7 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 7.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 7.9 Inspection of Property and Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 7.10 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 7.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 7.12 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 8.1 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 8.2 Merger; Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 8.3 Harvesting Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 8.4 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 8.5 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 8.6 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 8.7 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
iii 5 8.8 Sale of Stock and Indebtedness of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 8.9 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.10 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 8.11 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 8.12 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 8.13 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 8.14 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 8.15 Issuance of Stock by Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 8.16 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 8.17 Available Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 8.18 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9. Events Of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 9.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 10. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 10.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 10.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 10.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 10.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 10.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 10.7 Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 10.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 10.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 10.10 Senior Co-Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 11.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 11.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 11.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
iv 6 11.5 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 11.6 Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11.8 Assignments, Participations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11.9 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.10 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.11 Notification of Addresses, Lending Offices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.14 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.15 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.16 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.17 Arbitration; Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
v 7 TABLE OF SCHEDULES AND EXHIBITS Schedules Schedule 1.1 -- Corporate Investment Policy Schedule 2.1 -- Commitments Schedule 6.7 -- Plans Schedule 6.12 -- Environmental Matters Schedule 6.18 -- Subsidiaries Schedule 8.1 -- Permitted Liens Schedule 8.4 -- Permitted Investments Schedule 11.2 -- Addresses for Notices Exhibits Exhibit A -- Notice of Borrowing Exhibit B -- Notice of Conversion/Continuation Exhibit C-1 -- Legal Opinion of Counsel for the Company Exhibit C-2 -- Legal Opinion of Perkins Coie Exhibit D -- Compliance Certificate Exhibit E --Form of Cash Collateral Account Agreement Exhibit F -- Form of Assignment and Acceptance Agreement vi 8 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is entered into as of December 13, 1996, among PLUM CREEK TIMBER COMPANY, L.P., a Delaware limited partnership (the "Company"), the several financial institutions from time to time party to this Agreement (collectively, the "Banks"; individually, a "Bank"), NATIONSBANK, N.A., as senior co-agent for the Banks, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a letter of credit issuing bank and as agent for the Banks. WHEREAS, the Company and Bank of America National Trust and Savings Association entered into a Revolving Credit and Bridge Loan Agreement dated as of October 17, 1996 (the "Existing Credit Agreement"); WHEREAS, the Banks have agreed to make available to the Company a revolving credit facility with a letter of credit subfacility upon the terms and conditions set forth in this Agreement; WHEREAS, to give effect to the foregoing, the Company, the Banks, the Senior Co-Agent and the Agent desire to amend and restate the Existing Credit Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereby amend and restate the Existing Credit Agreement in its entirety as follows: 1. DEFINITIONS 1.1 DEFINED TERMS In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of 5% or more of the equity of a Person shall for the purposes of this Agreement, be deemed to control the other Person. Notwithstanding the foregoing, no Bank shall be deemed an "Affiliate" of the Company or of any Subsidiary of the Company. 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 Schedule 11.2 in relation to the Agent or such other address as the Agent may from time to time specify in accordance with Section 11.2. "Agent-Related Persons" means BofA, the Arranger, and any successor agent arising under Section 10.9 and any successor to BofA as letter of credit issuing bank or Swingline Bank hereunder, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Aggregate Commitment" means the combined Revolving Commitments of the Banks, in the initial amount of two hundred twenty-five million dollars ($225,000,000), as such amount may be reduced from time to time pursuant to this Agreement. "Agreement" means this Amended and Restated Revolving Credit Agreement, as amended from time to time in accordance with the terms hereof. "Applicable Margin" means, in respect of all Loans outstanding on any date (A) for the period from the Closing Date through March 31, 1997, 0.4500% for Offshore Rate Loans and 0.0000% for Base Rate Loans, and (B) from April 1, 1997, the percentage specified below opposite the Interest Coverage Ratio (which ratio shall be calculated on a four quarter rolling basis for the relevant fiscal quarter) calculated for the periods described below.
INTEREST COVERAGE RATIO AT END OF FISCAL QUARTER APPLICABLE MARGIN ------------------------------------------------ ----------------- Offshore Rate Base Rate ------------- --------- Greater than or equal to 4.0 0.3500% 0.0000% Less than 4.0 but greater than or equal to 3.7 0.4000% 0.0000% Less than 3.7 but greater than or equal to 3.4 0.4500% 0.0000% Less than 3.4 but greater than or equal to 3.1 0.5500% 0.0000%
2 10 Less than 3.1 but greater than or equal to 2.8 0.6500% 0.0000% Less than 2.8 but greater than or equal to 2.5 0.8750% 0.0000% Less than 2.5 1.1250% 0.0000%
The Applicable Margin for each fiscal quarter commencing on and after April 1, 1997 shall be calculated in reliance on the financial reports delivered pursuant to subsections 7.1(a) and 7.1(c) and the certificate delivered pursuant to subsection 7.2(b) with respect to the fiscal quarter ending one fiscal quarter before the fiscal quarter in question (e.g., June 30 financials determine the Applicable Margin for the fiscal quarter beginning October 1). If the Company fails to deliver such financial reports and certificate to the Agent for any fiscal quarter by the beginning of the next succeeding fiscal quarter (e.g., by October 1 for the fiscal quarter ending June 30), then the Applicable Margin for the following fiscal quarter (e.g., October 1 through December 31) shall equal the next higher Applicable Margin as set forth in the chart above immediately below the previously effective Applicable Margin; thus if the Applicable Margin had previously been 0.6500% for Offshore Rate Loans and 0.0000% for Base Rate Loans, a failure to deliver quarterly financials by the first day of the next fiscal quarter would cause the Applicable Margin to be 0.8750% and 0.0000%, respectively, for the duration of that quarter. In addition, if such financial reports and certificate when delivered indicate that the Applicable Margin for such period should have been higher than the Applicable Margin provided for in the previous sentence, then the Company shall pay on the date of delivery of such financial reports and certificate an amount equal to the positive difference, if any, between the interest that the Company should have paid hereunder had the financial reports and certificate been delivered on a timely basis over what the Company actually paid. The Applicable Margin shall be adjusted automatically as to all Loans then outstanding (without regard to the timing of Interest Periods) as of the effective date of any change in the Applicable Margin. "Arranger" means BA Securities, Inc., a Delaware corporation. "Assignee" has the meaning specified in subsection 11.8(a). "Assignment and Acceptance" has the meaning specified in subsection 11.8(a). 3 11 "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "Available Cash" means, with respect to any calendar quarter, (i) the sum of: (a) the Company's net income (or net loss) (excluding gain on the sale of any Capital Asset) for such quarter, (b) the amount of depletion, depreciation, amortization and other noncash charges utilized in determining net income of the Company for such quarter, (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, 4 12 (d) the amount of any reserves of the Company established during such quarter which are necessary or appropriate (1) to provide funds for the future payment of items of the types specified in clauses (ii)(a) and (ii)(b) above, (2) to provide additional working capital, (3) to provide funds for cash distributions with respect to any one or more of the next four quarters, or (4) to provide funds for the future payment of interest in an amount equal to the interest to be accrued in the next quarter, (e) the amount of any noncash items of income utilized in determining net income of the Company for such quarter, (f) the amount of any Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) made by the Company during such quarter pursuant to subsections 8.4(a), (h) or (i) (or in the case of any Subsidiary, Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) of similar type) to the extent not included in capital expenditures or payments on principal on Indebtedness made by the Company during such quarter (excluding any such Investments for such quarter made with Cash from Capital Transactions received by the Company during such quarter or, to the extent such Cash from Capital Transactions remains available, received by the Company during the four immediately preceding quarters, and Investments which the General Partner reasonably anticipates will be financed with Cash from Capital Transactions within 90 days from the end of such quarter), and (g) the amount of any Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) made by the Company in a prior quarter pursuant to subsections 8.4(a), (h) or (i) (or in the case of any Subsidiary, Investments (other than guarantees, contingent liabilities or endorsements, except to the extent payments are actually made under such guarantees, contingent liabilities or endorsements) of similar type) to the extent not included in capital expenditures made by the Company during such quarter which was anticipated would be financed from Cash from Capital Transactions but which have not been financed from such source within 90 days from the end of such quarter. Notwithstanding the foregoing, "Available Cash" shall not take into account any reductions in reserves or disbursements made or reserves established after commencement of the dissolution and liquidation of the Company. In determining "Available Cash," (i) all items under clauses (i)(a), (b), (c), (d) and (e) above and all items under clauses (ii)(a), (b), (c), (d), (e), (f) and (g) above shall be calculated on a combined basis with any Subsidiary of the Company whose income is 5 13 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; (iv) the amount of any reductions in, or additions to, reserves for purposes of clauses (i)(c) and (ii)(d) above shall be determined, with respect to the Company, by the General Partner in its reasonable good faith judgment and, with respect to any Subsidiary, by its Board of Directors (or by such other body or person which has the ultimate management authority of such Subsidiary) in its reasonable good faith judgment; and (v) any determination of whether any capital expenditures or Investments are financed, or anticipated to be financed, with Cash from Capital Transactions for purposes of clause (ii)(b) or (ii)(f) above shall be made, with respect to the Company, by the General Partner in its reasonable good faith judgment and, with respect to any Subsidiary, by its Board of Directors (or by such other body or person which has the ultimate management authority of such Subsidiary) in its reasonable good faith judgment. "Bank" has the meaning specified in the introductory clause hereto. References to the "Banks" shall include BofA in its capacity as a Swingline Bank and an Issuing Bank, for purposes of clarification only, to the extent that BofA may have any rights or obligations in addition to those of the Banks due to its status as a Swingline Bank or an Issuing Bank, its status as such will be specifically referenced. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, et seq.). "Base Rate" means, for any day, the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." It is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for 6 14 pricing some loans, which may be priced at, above, or below such announced rate; and (b) 0.50% per annum above the latest Federal Funds Rate. Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan or an L/C Advance that bears interest based on the Base Rate. "BofA" means Bank of America National Trust and Savings Association, a national banking association. "Board Foot" means a unit of measurement one foot square and one inch thick. "Borrowing" means a borrowing hereunder consisting of Loans of the same Type made to the Company on the same day by the Banks, or a Swingline Loan or Loans made to the Company on the same day by the Swingline Bank, in each case pursuant to Article II, and, other than in the case of Base Rate Loans, having the same Interest Period. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Capital Asset" means any asset on the Company's or any Subsidiary's balance sheet, as the case may be, other than inventory, accounts receivable or any other current asset and assets disposed of in connection with normal retirements or replacements. "Capital Expenditure Tranche" has the meaning specified in Section 2.16. "Capital Expenditure Tranche Loan" means a Loan allocated by the Company to the Capital Expenditure Tranche as provided in Section 2.16. 7 15 "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 and (iii) sales or other voluntary or involuntary dispositions of any assets of the Company (other than (x) sales or other dispositions of inventory in the ordinary course of business, (y) sales or other dispositions of other current assets including receivables and accounts and (z) sales or other dispositions of assets as a part of normal retirements or replacements), in each case prior to the commencement of the dissolution and liquidation of the Company, provided that in determining Cash from Capital Transactions, items (i), (ii) and (iii) above shall include, with respect to each Subsidiary of the Company whose income is accounted for on a consolidated or combined basis with the Company, a percentage of each such item of such Subsidiary equal to the Company's percentage ownership interest in such Subsidiary. "Cash Collateral Account Agreement" means an agreement or agreements entered into between the Company and the Agent substantially in the form of Exhibit E. "Cash Collateralize" means to pledge and deposit with or deliver to the Agent, for the benefit of (i) in the case of L/C Obligations, the Agent, the Issuing Banks and the Banks, (ii) in the case of Offshore Rate Loans, the Agent and the Banks, and (iii) in the case of Swingline Loans, the Agent, the Swingline Bank and the Banks, in each case as collateral for the L/C Obligations, the Loans or the Swingline Loans, as the case may be, cash or deposit account balances pursuant to a Cash Collateral Account Agreement. Derivatives of such term shall have corresponding meaning. "Cash from Capital Transactions" means at any date, such amounts of cash as are determined by the General Partner to be cash made available to the Company from or by reason of a Capital Transaction. "CERCLA" has the meaning specified in the definition of "Environmental Laws." "Closing Date" means the date on which all conditions precedent set forth in Section 5.1 are satisfied or waived by all Banks. 8 16 "Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder. "Commitment," with respect to each Bank, has the meaning specified in Section 2.1. "Commitment Fee Percentage" means (A) for the period from the Closing Date through March 31, 1997, 0.1500% and (B) from April 1, 1997, the percentage specified below opposite the Interest Coverage Ratio (which ratio shall be calculated on a rolling four quarter basis for the relevant fiscal quarter) calculated for the periods described below.
INTEREST COVERAGE RATIO AT END OF FISCAL QUARTER COMMITMENT FEE PERCENTAGE - - ------------------------------------------------------------------------------------------------------ Greater than or equal to 4.0 0.1250% - - ------------------------------------------------------------------------------------------------------ Less than 4.0 but greater than or equal to 3.7 0.1375% - - ------------------------------------------------------------------------------------------------------ Less than 3.7 but greater than or equal to 3.4 0.1500% - - ------------------------------------------------------------------------------------------------------ Less than 3.4 but greater than or equal to 3.1 0.1750% - - ------------------------------------------------------------------------------------------------------ Less than 3.1 but greater than or equal to 2.8 0.2000% - - ------------------------------------------------------------------------------------------------------ Less than 2.8 but greater than or equal to 2.5 0.2750% - - ------------------------------------------------------------------------------------------------------ Less than 2.5 0.3250% - - ------------------------------------------------------------------------------------------------------
The Commitment Fee Percentage for each fiscal quarter commencing on and after April 1, 1997, shall be calculated in reliance on the financial reports delivered pursuant to subsections 7.1(a) and 7.1(c) and the certificate delivered pursuant to subsection 7.2(b) with respect to the fiscal quarter before the fiscal quarter in question (e.g., June 30 financials determine the Commitment Fee Percentage for the fiscal quarter beginning October 1). If the Company fails to deliver such financial reports and certificate to the Agent for any fiscal quarter by the beginning of the next succeeding fiscal quarter (e.g., by October 1 for the fiscal quarter ending June 30), then the Commitment Fee Percentage for the following fiscal quarter (e.g., October 1 through December 31) shall equal the next higher Commitment Fee Percentage as set forth in the chart above immediately below the previously effective Commitment Fee Percentage; thus if the Commitment Fee Percentage had previously been 0.2000%, a failure to deliver quarterly financials by the first day of the next fiscal quarter would cause the Commitment Fee Percentage to be 0.2750% for the duration of that quarter. In addition, if such 9 17 financial reports and certificate when delivered indicate that the Commitment Fee Percentage for such period should have been higher than the Commitment Fee Percentage provided for in the previous sentence, then the Company shall pay on the date of delivery of such financial reports and certificate an amount equal to the positive difference, if any, between the interest that the Company should have paid hereunder had the financial reports and certificate been delivered on a timely basis over what the Company actually paid. "Commitment Percentage" means, as to any Bank, the percentage equivalent of the aggregate of such Bank's Commitment divided by the Aggregate Commitment. "Company's Knowledge" or "Knowledge of the Company" shall mean the actual knowledge of (i) Rick R. Holley, President and Chief Executive Officer, Charles P. Grenier, Executive Vice President, Diane M. Irvine, Vice President and Chief Financial Officer, James A. Kraft, Vice President, General Counsel and Secretary, Susanna N. Duke, Director, Law and Human Resources, William R. Brown, Vice President, Resource Management, and Mitchell Leu, Environmental Engineer, and any successor to the offices and officers, such persons being the principal persons employed by the Company ultimately responsible for environmental operations and compliance, ERISA and legal matters relating to the Company and (ii) the Treasurer or any other person having the primary responsibility for the day-to-day administration of, and dealings with the Agent and the Banks in connection with, this Agreement. "Contractual Obligations" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Controlled Group" means the Company and all Persons (whether or not incorporated) under common control or treated as a single employer with the Company pursuant to Section 414(b), (c), (m) or (o) of the Code. "Conversion/Continuation Date" means any date on which, under Section 2.4, the Company (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date. "Credit Extension" means and includes (a) the making of any Loan hereunder, including any conversion or continuation thereof, and (b) the Issuance of any Letter of Credit hereunder. "Cunit" means 100 cubic feet of wood. 10 18 "Debt Proceeds" means the proceeds of Indebtedness permitted by subsection 8.5(i), net of customary expenses payable to Persons that are not Affiliates of the Company. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "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 $1 of additional Funded Debt pursuant to subsection 8.5(i), and (b) no condition or event shall exist which constitutes an Event of Default or Material Default, (iii) the Company is permitted to make the Investment in such entity resulting from such designation pursuant to, and within the limitations specified in, subsection 8.4(i), treating the aggregate book value (including equity in retained earnings) of the Investments of the Company and its Subsidiaries in such entity immediately prior to such designation as the cost of such Investment, and provided, further, that if at any time all Designated Immaterial Subsidiaries on a combined basis would be a "significant subsidiary" (assuming the Company is the registrant) within the meaning of Regulation S-X (17 C.F.R. Part 210) the Company shall designate one or more Designated Immaterial Subsidiaries which are directly owned by the Company and its Restricted Subsidiaries as Restricted Subsidiaries such that the condition in this proviso is no longer applicable and the entities so designated shall no longer be Designated Immaterial Subsidiaries. Any entity which has been designated a Designated Immaterial Subsidiary shall not thereafter become a Restricted Subsidiary except pursuant to a designation required by the last proviso in the preceding sentence, and any Designated Immaterial Subsidiary which has been designated a Restricted Subsidiary pursuant to the last proviso of the preceding sentence shall not thereafter be redesignated as a Designated Immaterial Subsidiary. 11 19 "Designated Repurchases" means and includes purchases, redemptions or other acquisitions, in each case at a price not to exceed fair market value, of the publicly traded limited partnership interests in the Company, which are retired by the Company within six months of such purchase, redemption or other acquisition. "Dollars," "dollars" and "$" each mean lawful money of the United States. "Domestic Lending Office" means, with respect to each Bank and the Swingline Bank, the office of that Bank and the Swingline Bank designated as such in Schedule 11.2 or such other office of the Bank and the Swingline Bank as it may from time to time specify to the Company and the Agent. "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), plus or minus, as applicable, (e) in connection with any Timber previously acquired within such period, an amount equal to a good faith estimate of such additional amounts as would be included in clauses (a), (b), (c), or (d) above had such Timber been owned by the Company or one of its Subsidiaries for the entirety of such period, as certified (in a certificate containing such detail as the Required Banks may reasonably request) by a Responsible Officer of the Company based upon such Responsible Officer's good faith estimates of applicable revenues and expenses arising from such Timber and assuming aggregate timber harvests in an amount that does not require application of the proceeds thereof to the purchase of Timber or the repayment of Qualified Debt under Section 8.3; provided, however, that net income (or loss) shall be computed for purposes of computing EBITDA without giving effect to extraordinary losses or extraordinary gains. "Effective Amount" means (i) with respect to any Loans or Swingline Loans, as the case may be, on any date, the aggregate outstanding principal amount thereof after giving effect to any Borrowings and prepayments or repayments thereof occurring on such date; and (ii) with respect to any outstanding L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any Issuances of Letters of Credit occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date. 12 20 "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), 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. 13 21 "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 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 9.1. "Exchange Act" means the Securities and Exchange Act of 1934, as amended, and regulations promulgated thereunder. "Existing Credit Agreement" has the meaning specified in the recitals hereto. "Facilities Subsidiary" means, collectively, Plum Creek Manufacturing, L.P., a Delaware limited partnership, and Plum Creek Marketing, Inc., a Delaware corporation. "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 14 22 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 4.1(f). "Form 4224" has the meaning specified in subsection 4.1(f). "Funded Debt" means, without duplication, any Indebtedness payable more than one year from the date of the creation thereof; provided that any Indebtedness shall be treated as Funded Debt, regardless of its term, if such Indebtedness is renewable at the option of the Company pursuant to the terms thereof or of a revolving credit or similar agreement effective for more than one year after the date of the creation of such Indebtedness, or may be payable out of the proceeds of similar Indebtedness pursuant to the terms of such Indebtedness or any such agreement. "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 15 23 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. "Guarantee" means the guarantee in paragraph 7 of the Mortgage Note Agreements. "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. "Honor Date" has the meaning specified in subsection 3.3(b). "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) the Swap Termination Value with respect to Swap Contracts, and (h) any obligations of any other Person of the type described in the above 16 24 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 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. "Indemnified Person" has the meaning specified in subsection 11.5. "Indemnified Liabilities" has the meaning specified in subsection 11.5. "Independent Auditor" has the meaning specified in subsection 7.1(a). "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 Coverage Ratio" means, as measured quarterly on the last day of each fiscal quarter for the four fiscal quarter period then ending, the ratio of (i)EBITDA; to (ii)the combined interest expense (including capitalized interest) of the Company and its Subsidiaries for the four fiscal quarter period then ending calculated in accordance with GAAP, plus interest expense that would have been payable during such four fiscal quarters had any Indebtedness incurred during such 17 25 period for the purpose of acquiring Timber and related assets been incurred at the beginning of such period, based upon the interest rate applicable to such Indebtedness at the end of such period. "Interest Payment Date" means, (a) with respect to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan, (b) with respect to any Base Rate Loan, the last Business Day of each calendar quarter and each date a Base Rate Loan is converted into another Type of Loan, and (c) with respect to any Swingline Loan, the Business Day agreed upon by the Company and the Swingline Bank, which will not be later than the fourteenth Business Day following the Borrowing date thereof or, if sooner, the Revolving Termination Date; provided, however, that if any Interest Period for an Offshore Rate Loan exceeds three months, the date which falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter shall also be an Interest Payment Date. "Interest Period" means, with respect to any Offshore Rate Loan, the period commencing on the Business Day the Loan is disbursed or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date that is one week or one, two, three or six months thereafter, as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation, as the case may be; provided that: (i) if any Interest Period 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 Revolving Loan shall extend beyond the Revolving Termination Date. "Investment Policy" means the Corporate Investment Policy of the Company, as it existed on April 5, 1993 and as attached hereto as Schedule 1.1 (without giving effect to any later amendments thereto). 18 26 "Investments" has the meaning specified in Section 8.4. "Issuance Date" has the meaning specified in subsection 3.1(a). "Issue" means, with respect to any Letter of Credit, to issue or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding meanings. "Issuing Bank" means BofA in its capacity as issuer of one or more Letters of Credit hereunder, together with any replacement letter of credit issuer arising under subsection 10.1(b) or Section 10.9. "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. "L/C Advance" means each Bank's participation in any L/C Borrowing in accordance with its Commitment Percentage. "L/C Amendment Application" means an application form for amendment of outstanding standby letters of credit as shall at any time be in use at an Issuing Bank, as such Issuing Bank shall require. "L/C Application" means an application form for issuances of standby letters of credit as shall at any time be in use at an Issuing Bank, as such Issuing Bank shall require. "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made nor converted into a Borrowing of Revolving Loans under subsection 3.3(c). "L/C Commitment" means the commitment of the Issuing Banks to Issue, and the commitment of the Banks severally to participate in, Letters of Credit from time to time Issued or outstanding under Article III, in an aggregate amount not to exceed on any date twenty million dollars ($20,000,000), as the same shall be reduced as a result of a reduction in the L/C Commitment pursuant to Section 2.5; provided that the L/C Commitment is a part of the Aggregate Commitment, rather than a separate, independent commitment. "L/C Obligations" means at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of all unreimbursed drawings under all Letters of Credit, including all outstanding L/C Borrowings. 19 27 "L/C-Related Documents" means the Letters of Credit, the L/C Applications, the L/C Amendment Applications and any other document relating to any Letter of Credit, including any Issuing Bank's standard form documents for letter of credit issuances. "Lending Office" means, with respect to any Bank and the Swingline Bank, the office or offices of the Bank and the Swingline Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office," as the case may be, opposite its name on Schedule 11.2, or such other office or offices of the Bank and the Swingline Bank as it may from time to time notify the Company and the Agent. "Letters of Credit" means any standby letters of credit Issued by the Issuing Bank pursuant to Article III. "Letter of Credit Rate" means, for any period, a rate per annum equal to (A) for the period from the Closing Date through March 31, 1997, 0.4500%, and (B) from April 1, 1997, the percentage specified below opposite the Interest Coverage Ratio (which ratio shall be calculated on a rolling four quarter basis for the relevant fiscal quarter) calculated for the periods described below.
INTEREST COVERAGE RATIO AT END OF FISCAL QUARTER LETTER OF CREDIT RATE - - ---------------------------------------------------------------------------------------------------- Greater than or equal to 4.0 0.3500% - - ---------------------------------------------------------------------------------------------------- Less than 4.0 but greater than or equal to 3.7 0.4000% - - ---------------------------------------------------------------------------------------------------- Less than 3.7 but greater than or equal to 3.4 0.4500% - - ---------------------------------------------------------------------------------------------------- Less than 3.4 but greater than or equal to 3.1 0.5500% - - ---------------------------------------------------------------------------------------------------- Less than 3.1 but greater than or equal to 2.8 0.6500% - - ---------------------------------------------------------------------------------------------------- Less than 2.8 but greater than or equal to 2.5 0.8750% - - ---------------------------------------------------------------------------------------------------- Less than 2.5 1.1250% - - ----------------------------------------------------------------------------------------------------
The Letter of Credit Rate for each fiscal quarter commencing on and after April 1, 1997, shall be calculated in reliance on the financial reports delivered pursuant to subsections 7.1(a) and 7.1(c) and the certificate delivered pursuant to subsection 7.2(b) with respect to the fiscal quarter before the fiscal quarter in question (e.g., June 30 financials determine the Letter of Credit Rate for the fiscal quarter beginning October 1). If the Company fails to deliver such financial 20 28 reports and certificate to the Agent for any fiscal quarter by the beginning of the next succeeding fiscal quarter (e.g., by October 1 for the fiscal quarter ending June 30), then the Letter of Credit Rate for the following fiscal quarter (e.g., October 1 through December 31) shall equal the next higher Letter of Credit Rate as set forth in the chart above immediately below the previously effective Letter of Credit Rate; thus if the Letter of Credit Rate had previously been 0.6500%, a failure to deliver quarterly financials by the first day of the next fiscal quarter would cause the Letter of Credit Rate to be 0.8750% for the duration of that quarter. In addition, if such financial reports and certificate when delivered indicate that the Letter of Credit Rate for such period should have been higher than the Letter of Credit Rate provided for in the previous sentence, then the Company shall pay on the date of delivery of such financial reports and certificate an amount equal to the positive difference, if any, between the interest that the Company should have paid hereunder had the financial reports and certificate been delivered on a timely basis over what the Company actually paid. "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 or the Swingline Bank, as the case may be, to the Company under Article II or Article III, and may be a Revolving Loan, a Swingline Loan or an L/C Advance. "Loan Documents" means this Agreement, the L/C-Related Documents, and all documents delivered to the Agent in connection herewith and therewith. "Majority Banks" means (a) at any time that Loans are outstanding, any Banks holding at least 66-2/3% of the then aggregate unpaid principal amount of the Loans, and (b) at any other time, Banks holding at least 66-2/3% of the Commitments or, if the Commitments have been terminated or expired, Banks that held at least 66-2/3% of the Commitments as in effect immediately before such termination or expiration. "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; (b) a material impairment of the ability of the Company to perform under any Loan Document and avoid any Event of Default; or 21 29 (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. "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 Revolving Termination 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. "MCCF" means one thousand Cunits. "MMBF" means one million Board Feet. "Mortgage Note Agreements" means the Mortgage Note Agreement, 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) that certain Mortgage Note Agreement Amendment, Consent and Waiver dated as of January 1, 1991, (b) that certain letter agreement dated April 22, 1993, (c) that certain Mortgage Note Agreement Amendment dated as of September 1, 1993, (d) that certain Mortgage Note Agreement Amendment dated as of May 20, 1994, (e) that certain Amendment to Mortgage Note Agreement dated as of June 15, 1995 and (f) that certain Mortgage Note Agreements Amendment dated as of May 31, 1996. 22 30 "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. "1994 Notes" means the 8.73% Senior Notes due August 1, 2009 in the aggregate principal amount of $150,000,000 issued and sold pursuant to the 1994 Senior Note Agreements. "1994 Senior Note Agreements" means that certain Senior Note Agreement dated as of August 1, 1994 providing for the issuance and sale by the Company of the 1994 Senior Notes to the purchasers listed in the schedule of purchasers attached thereto, as amended by (a) that certain Senior Note Agreement Amendment dated as of October 15, 1995 and (b) that certain Senior Note Agreements Amendment dated as of May 31, 1996. "1996 Notes" means those certain senior promissory notes in the aggregate principal amount of $200,000,000 issued and sold pursuant to the 1996 Senior Note Agreements. "1996 Senior Note Agreement" means that certain Senior Note Agreement dated as of November 13, 1996, providing for the issuance and sale by the Company of the 1996 Notes to the purchasers listed in the schedule of purchasers attached thereto. "Notes" means those certain senior promissory notes in the aggregate principal amount of $165,000,000 issued and sold pursuant to the Note Agreements. "Note Agreements" means that certain Senior Note Agreement 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) that certain Senior Note Agreement Amendment, Consent and Waiver dated as of January 1, 1991, (b) that certain letter agreement dated April 22, 1993, (c) that 23 31 certain Senior Note Agreement Amendment dated as of September 1, 1993 (d) that certain Senior Note Agreement Amendment dated as of May 20, 1994, and by that certain Senior Note Agreements Amendment dated as of May 31, 1996. "Notice of Borrowing" means a notice given by the Company to the Agent pursuant to Sections 2.3, or 2.10, as the case may be, in substantially the form of Exhibit A. "Notice of Conversion/Continuation" means a notice given by the Company to the Agent pursuant to Section 2.4, 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, the Senior Co-Agent, the Issuing Banks, the Swingline Bank, 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 Schedule 11.2 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 24 32 requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "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 to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Loan" means any 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 4.1(b). "Participant" has the meaning specified in subsection 11.8(d). "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of the Company, as in effect on the Closing Date, and as the 25 33 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, pulp and paper manufacturing and any business substantially similar or related to any such business. "Permitted Liens" has the meaning specified in Section 8.1. "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. "Principal Repayment Proviso" means that for any period of calculation, the aggregate amount of scheduled principal repayment on Indebtedness (x) shall not include voluntary prepayments of Indebtedness except to the extent such voluntary prepayments includes any amounts that would have been scheduled principal repayments during such period, and (y) shall not include the amount of any scheduled principal repayment to the extent the Company refinanced or rescheduled such scheduled repayments and the scheduled principal repayments due before the Revolving Termination Date under the refinancing or rescheduling have been or will be included in the calculation of the aggregate amount of scheduled principal repayments for the periods in which they are due. 26 34 "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) noncash items of income, and (c) any distributions or other income received from, or equity of the Company or any Restricted Subsidiary in the earnings of, any entity which is not a Restricted Subsidiary) for the period of four consecutive fiscal quarters immediately prior to such date (such period of four consecutive fiscal quarters being the "Measurement Period"), determined in accordance with 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 the Measurement Period, to maintain their respective operations; provided, however, if (A) the Company or a Restricted Subsidiary is acquiring a Restricted Subsidiary or assets and (B) Pro Forma Free Cash Flow is being determined in connection therewith, such Restricted Subsidiary shall be considered to have been a Restricted Subsidiary during the entire Measurement Period and such assets shall be considered to have been owned by the Company during the entire Measurement Period if net income attributable to such Restricted Subsidiary or such assets (as the case may be) for the entire Measurement Period is readily determinable and confirmed pursuant to an audit or a certification prepared in good faith by the Company's chief financial officer; further provided, however, that portion of Pro Forma Free Cash Flow allocable to such Restricted Subsidiary or assets shall be reduced on a pro rata basis to the extent Timber has been harvested by such Restricted Subsidiary or from such assets during the Measurement Period at a rate greater than the rate at which the Company has harvested Timber from its Timberlands during the Measurement Period, as certified in good faith by the chief financial officer of the Company; and finally provided, however, if Pro Forma Free Cash Flow is being determined for any Measurement Period and a Restricted Subsidiary or assets have been sold or otherwise disposed of at any time during such Measurement Period by the Company or any Restricted Subsidiary, such Restricted Subsidiary shall not be considered to have been a Restricted Subsidiary during any part of such Measurement Period and such assets shall not be considered to have been owned by the Company during any part of such Measurement Period, and the net income that otherwise would have been attributable to such Restricted Subsidiary or asset during such Measurement Period shall be certified in good faith by the chief financial officer of the Company. "Pro Rata Share" means, with respect to the payment of principal or interest on account of Revolving Loans or L/C Advances, each Bank's pro rata share of the outstanding principal balance of the Loans or L/C Advances with respect to which such payment is being made. "Property" means any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. 27 35 "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 Indebtedness represented by the Notes, the 1994 Notes, the 1996 Notes, and this Agreement (including L/C Borrowings and Loans used to repay L/C Borrowings, but excluding L/C Obligations with respect to undrawn Letters of Credit). "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. "Reportable Event" means, as to any Plan, (a) any of the events set forth in Section 4043(c) 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 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 28 36 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 Facilities Subsidiary and its Subsidiaries shall become and be Restricted Subsidiaries. "Revolving Facility Tranche" has the meaning specified in Section 2.16. "Revolving Facility Tranche Loan" means a Loan allocated by the Company to the Revolving Facility Tranche as provided in Section 2.16. "Revolving Loan" has the meaning specified in Section 2.1, and may be an Offshore Rate Loan or a Base Rate Loan. "Revolving Termination Date" means the earlier to occur of: (a)December 13, 2001; and (b)the date on which the Aggregate Commitment shall terminate in accordance with the provisions of this Agreement. "Riverwood Supply Agreement" means the Supply Agreement dated October 18, 1996, between Riverwood International Corporation and the Company. "SEC" means the Securities and Exchange Commission, or any entity succeeding to any of its principal functions. "Senior Co-Agent" means NationsBank, N.A. in its capacity as Senior Co-Agent for the Banks hereunder. "Solvent" means, as to any Person at any time, that (a) (i) in the case of a Person that is not a partnership, 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), and (ii) in the case of a Person that is a partnership, the sum of (A) the fair value of the Property of such Person plus (B) the sum of the 29 37 excess of the fair value of each general partner's non-partnership Property over such partner's non-partnership debts (together, the "Applicable Property") is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities), as such value for purposes of both clauses (i) and (ii) 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 (or, in the case of a partnership, the Applicable Property for 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. "Subsidiary" of a Person means any corporation, partnership or other entity a majority of (i) the total combined voting power of all classes of Voting Stock of which or (ii) the outstanding equity interests of which shall, at the time of which any determination is being made, be owned by the Company either directly or through Subsidiaries. "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined by the Company (or, for purposes of subsection 9.1(e), by the Majority Banks) based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Bank). 30 38 "Swingline Bank" means BofA or its assignee under Section 11.8. "Swingline Clean-Up Day" has the meaning specified in subsection 2.7(a)(iii). "Swingline Commitment" has the meaning specified in Section 2.10. "Swingline Loan" has the meaning specified in Section 2.10. "Taxes" has the meaning specified in subsection 4.1(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 11.8(e). "Type" means either an Offshore Rate Loan or a Base Rate Loan. "UCC" means the Uniform Commercial Code as in effect in the State of California. "UCP" has the meaning specified in Section 3.9. "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 of the Code 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). "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 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. 31 39 "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. 1.2 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". 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. 32 40 (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, the Senior Co-Agent or the Agent merely because of the Agent's, the Senior Co-Agent's or Banks' involvement in the preparation of such documents and agreements. 1.3 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. 2. THE CREDITS 2.1 AMOUNTS AND TERMS OF COMMITMENTS Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make loans to the Company (each such loan, a "Revolving Loan") from time to time on any Business Day from the Closing 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 2.1 under the heading "Commitment" (such amount as the same may be reduced pursuant to Section 2.5 or Section 2.7, or as a result of one or more assignments pursuant to Section 11.8, the Bank's "Commitment"); provided, however, that, after giving effect to any Borrowings, the Effective Amount of all Revolving Loans, Swingline Loans, and L/C Obligations shall not at any time exceed the Aggregate Commitment; and provided, further, 33 41 that the Effective Amount of the Revolving Loans of any Bank plus such Bank's Commitment Percentage of the Effective Amount of all L/C Obligations and Swingline Loans shall not at any time exceed such Bank's Commitment. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, until the Revolving Termination Date, the Company may borrow under this Section 2.1, prepay pursuant to Section 2.8 and reborrow pursuant to this Section 2.1. 2.2 LOAN ACCOUNTS The Loans made by each Bank (including the Swingline Bank) and the Letters of Credit Issued by an Issuing Bank shall be evidenced by one or more loan accounts maintained by such Bank or Issuing Bank, as the case may be, in the ordinary course of business. The loan accounts or records maintained by the Agent, the Swingline Bank, each Issuing Bank and each such Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Company and the Letters of Credit issued for the account of 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 or any Letter of Credit. 2.3 PROCEDURE FOR BORROWING REVOLVING LOANS (a) Each Borrowing of Revolving Loans shall be made upon the Company's irrevocable written notice delivered to the Agent in accordance with Section 11.2 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; and (ii) on the requested Borrowing date, in the case of Base Rate Loans, specifying: (A) that the Borrowing comprises Revolving Loans; (B) the amount of the Borrowing, which shall be in an aggregate minimum principal amount of three million dollars ($3,000,000) except in the case of Offshore Rate Loans with a proposed Interest Period of one week, in which case the aggregate minimum principal amount shall be twelve million dollars ($12,000,000) or, in either case, any multiple of five hundred thousand dollars ($500,000) in excess thereof; (C) the requested Borrowing date, which shall be a Business Day; (D) whether the Borrowing is to comprise Offshore Rate Loans or Base Rate Loans; 34 42 (E) the duration of the Interest Period applicable to the Borrowing described in such notice. If the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Borrowing comprising Offshore Rate Loans, such Interest Period shall be 90 days or three months, respectively; and (F) with respect to any Borrowing after the date the Company gives the notice regarding allocation of Loans pursuant to Section 2.16, whether the Borrowing shall be allocated to the Revolving Facility Tranche or the Capital Expenditure Tranche. (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 Revolving 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, unless on the date of the Borrowing all or any portion of the proceeds thereof shall then be required to be applied to the repayment of any outstanding Swingline Loans pursuant to Section 2.10 or the reimbursement of any outstanding drawings under Letters of Credit pursuant to Section 3.3, in which case such proceeds or portion thereof shall be applied to the repayment of such Swingline Loans or the reimbursement of such Letter of Credit drawings, as the case may be. (d) Unless the Majority Banks shall otherwise agree, during the existence of a Default or an Event of Default, the Company may not elect to have a Loan made as an Offshore Rate Loan. (e) After giving effect to any Borrowing, there shall not be more than six different Interest Periods in effect in respect of all Loans (other than Swingline Loans) then outstanding. 2.4 CONVERSION AND CONTINUATION ELECTIONS FOR BORROWINGS (a) The Company may upon irrevocable written notice to the Agent in accordance with subsection 2.4(b): (i) elect to convert on any Business Day, any Base Rate Loans other than Swingline Loans (or any part thereof in an amount not less than $3,000,000 except in the case of a conversion into an Offshore Rate Loans with a proposed Interest 35 43 Period of one week, which shall be in an amount not less than $12,000,000, or that is in an integral multiple of $500,000 in excess thereof) into Offshore Rate Loans; (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 $3,000,000, or that is in an integral multiple of $500,000 in excess thereof) into Base Rate Loans; (iii) elect to continue 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 $3,000,000 except in the case of a continuation of an Offshore Rate Loans with a proposed Interest Period of one week, which shall be in an amount not less than $12,000,000, or that is in an integral multiple of $500,000 in excess thereof); provided, that if the aggregate amount of Offshore Rate Loans in respect of any Borrowing shall have been reduced, by payment, prepayment, or conversion of part thereof to be less than $500,000, such 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 shall terminate. (b) The Company shall deliver a Notice of Conversion/Continuation in accordance with Section 11.2 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/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) on the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or continued; (C) the nature of the proposed conversion or continuation; and (D) other than in the case of Base Rate Loans, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to Offshore Rate Loans, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Loans or if any Default or Event of Default shall then exist, the Company shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 36 44 (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. (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 six different Interest Periods in effect in respect of all Loans (other than Swingline Loans) then outstanding. 2.5 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS The Company may, upon not less than five Business Days prior notice to the Agent, terminate or permanently reduce the Aggregate Commitment (and, to the extent provided in subsection 2.7(b), the L/C Commitment and the Swingline 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 Effective Amount of Revolving Loans, Swingline Loans and L/C Obligations would exceed the Aggregate Commitment then in effect. Once reduced in accordance with this Section 2.5, the Aggregate 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 the effective date of any reduction or termination of the Aggregate Commitment shall be paid on the effective date of such reduction or termination. 2.6 OPTIONAL PREPAYMENTS Subject to Section 4.4, the Company may, at any time or from time to time, by written notice delivered to the Agent at least three Business Days prior to the proposed prepayment date in the case of Offshore Rate Loans, on the proposed prepayment date in the case of Base Rate Loans, and on the proposed prepayment date (which notice must be received by the Agent not later than 9:00 a.m. (San Francisco time)) in the case of Swingline Loans, (i) ratably prepay Revolving Loans, in whole or in part, in minimum principal amounts of $5,000,000 or any multiple of $1,000,000 in excess thereof, and (ii) prepay in whole or in part Swingline Loans in minimum principal amounts of $250,000 or any multiple of $100,000 in excess thereof, or in such other amounts with the consent of the 37 45 Swingline Bank. Such notice of prepayment shall specify (i) the date and amount of such prepayment, (ii) whether such prepayment is of Base Rate Loans or Offshore Rate Loans, or any combination thereof, and whether such Loans constitute Swingline Loans or Revolving Loans, and (iii) if applicable, whether such prepayment is of a Revolving Facility Tranche Loan or a Capital Expenditure Tranche Loan, or both. Such notice shall not thereafter be revocable by the Company and the Agent will promptly notify (i) in the case of Revolving Loans, each Bank thereof and of such Bank's Pro Rata Share of such prepayment, and (ii) in the case of Swingline Loans, the Swingline Bank thereof and of the amount 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 4.4. 2.7 MANDATORY PREPAYMENTS OF LOANS; MANDATORY COMMITMENT REDUCTIONS (a) Mandatory Prepayments. (i) 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 8.2(i), or harvest excess Timber permitted by Section 8.3, then (A) the Net Proceeds of such sale shall either be paid pro rata by the Company as a prepayment of Qualified Debt or be reinvested in accordance with subsection 8.2(i), or (B) the Net Proceeds from such excess harvest shall either be paid pro-rata by the Company as a prepayment of Qualified Debt or be reinvested in accordance with Section 8.3. Prepayments to Banks under this subsection 2.7(a) shall be applied to repay the outstanding principal amount of the Revolving Loans. (ii) L/C Obligations. If on any date the Effective Amount of L/C Obligations exceeds the L/C Commitment, the Company shall Cash Collateralize on such date the outstanding Letters of Credit in an amount equal to the excess of the Effective Amount of L/C Obligations over the L/C Commitment. Subject to Section 4.4, if on any date after giving effect to any Cash Collateralization made on such date pursuant to the preceding sentence, the Effective Amount of all Revolving Loans, Swingline Loans, and L/C Obligations exceeds the Aggregate Commitment, the Company shall immediately, and without notice or demand, prepay the outstanding principal amount of the Revolving Loans, Swingline Loans and L/C Advances by an amount equal to the applicable excess. (iii) Swingline Loans. The Company shall be required to prepay Swingline Loans (A) if following any reduction of the Swingline Commitment pursuant to subsection 2.7(b) the Effective Amount of Swingline Loans would 38 46 exceed the Swingline Commitment as reduced, the Company shall prepay on the reduction date the Swingline Loans in an amount equal to the amount of such excess, and (B) so that for one Business Day during each successive two calendar week period the aggregate principal amount of Swingline Loans shall be $0 (a "Swingline Clean-Up Day"), the Company shall prepay on the Swingline Clean-Up Day the outstanding principal amount of the Swingline Loans (which Swingline Loans may not be reborrowed until such Swingline Clean-Up Day has ended). (iv) Revolving Facility Tranche Loans. If the Company has given a notice pursuant to Section 2.16 allocating all or a portion of the Loans to the Revolving Facility Tranche, the Company shall cause, for a period of at least 45 consecutive days during the 12 calendar month period after the effective date of such notice and during each successive 12 calendar month period prior to the Revolving Termination Date, no L/C Obligations to be outstanding and the aggregate principal amount of Revolving Facility Tranche Loans to be $0. (b) Mandatory Commitment Reductions. (i) The Aggregate Commitments shall be reduced from time to time by the amount of any mandatory prepayment that would be required by subsection 2.7(a)(i) if Revolving Loans were outstanding, whether or not any Revolving Loans are outstanding at such time. Such reduction shall be applied pro rata among the respective Commitments of the Banks and shall be effective as of the earlier of the date that such prepayment is made or the date by which such prepayment is (or would be) due and payable hereunder. All accrued commitment fees to the effective date of any reduction or termination of the Aggregate Commitment shall be paid on the effective date of such reduction or termination. (ii) No reduction in the Aggregate Commitment pursuant to Section 2.5 or subsection 2.7(b)(i) shall reduce the L/C Commitment unless and until the Aggregate Commitment has been reduced to $20,000,000; thereafter, any reduction in the Aggregate Commitment pursuant to Section 2.5 shall equally reduce the L/C Commitment. (iii) At no time shall the Swingline Commitment exceed the Aggregate Commitment, and any reduction of the Aggregate Commitment which reduces the Aggregate Commitment below the then current amount of the Swingline Commitment shall result in an automatic corresponding reduction of the Swingline Commitment to the amount of the Aggregate Commitment, as so reduced, without any action on the part of the Swingline Bank. (c) General. Any prepayments of Loans pursuant to subsection 2.7(a) shall be applied first to any Base Rate Loans then outstanding, second to Cash Collateralize or to prepay Swingline Loans as directed by the Swingline Bank in its sole discretion, and third, at the Company's option, to Cash Collateralize or to 39 47 prepay in the inverse order of their stated maturity Offshore Rate Loans. Subject to the foregoing and so long as no default or Event of Default shall then exist, if applicable, any such prepayments shall be applied to Revolving Facility Tranche Loans and Capital Expenditure Tranche Loans as directed by the Company. The Company shall pay, together with each prepayment under this Section 2.7, accrued interest on the amount prepaid and any amounts required pursuant to Section 4.4. 2.8 REPAYMENT (a) The Company shall repay to the Banks in full on the Revolving Termination Date the Effective Amount of all Revolving Loans. (b) The Company shall repay to the Swingline Bank in full on the Revolving Termination Date the Effective Amount of all Swingline Loans. 2.9 INTEREST (a) Subject to subsection 2.9(c): (i) each Loan (other than any Swingline 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 Offshore Rate or the Base Rate, as the case may be, plus the Applicable Margin; and (ii) each Swingline Loan shall bear interest on the principal amount thereof from the date when made until it becomes due at a rate per annum equal to the Base Rate plus the Applicable Margin or any other rate agreed to by the Swingline Bank in its sole discretion. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date and in the case of a Swingline Loan bearing an interest rate other than the Base Rate, on the date agreed to by the Swingline Bank in its sole discretion. Interest shall also be paid on the date of any prepayment of Loans pursuant to Section 2.6 and 2.7 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 of the Agent at the request or with the consent of the Majority Banks. (c) 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 Obligations due and unpaid, at a rate per annum that is determined, in the case of Loans other than Base Rate Loans, by adding 2% per annum to the Applicable Margin then in effect for such Loans and, in the case of other Obligations, at a rate equal to the Base Rate plus 2% per annum. (d) Anything herein to the contrary notwithstanding, the obligations of the Company hereunder shall be subject to the limitation that payments of interest shall 40 48 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. 2.10 SWINGLINE LOANS (a) Subject to the terms and conditions hereof, the Swingline Bank severally agrees to make a portion of the Aggregate Commitment available to the Company by making swingline loans (individually, a "Swingline Loan"; collectively, the "Swingline Loans") to the Company on any Business Day during the period from the Closing Date to the Revolving Termination Date in accordance with the procedures set forth in this Section in an aggregate principal amount at any one time outstanding not to exceed $25,000,000, notwithstanding the fact that such Swingline Loans, when aggregated with the Swingline Bank's outstanding Loans, may exceed the Swingline Bank's Commitment (the amount of such commitment of the Swingline Bank to make Swingline Loans to the Company pursuant to this subsection 2.10(a), as the same shall be reduced pursuant to subsection 2.7(b) or as a result of any assignment pursuant to Section 11.8, the Swingline Bank's "Swingline Commitment"); provided, that at no time shall (i) the Effective Amount of all Revolving Loans, Swingline Loans and L/C Obligations exceed the Aggregate Commitment, or (ii) the Effective Amount of all Swingline Loans exceed the Swingline Commitment. Additionally, no more than four Swingline Loans may be outstanding at any one time. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow under this subsection 2.10(a), prepay pursuant to subsection 2.6 and reborrow pursuant to this subsection 2.10(a). (b) The Company shall provide the Agent (with a copy to the Swingline Bank) irrevocable written notice (including notice via facsimile confirmed immediately by a telephone call) in the form of a Notice of Borrowing of any Swingline Loan requested hereunder (which notice must be received by the Swingline Bank and the Agent prior to 12:00 noon (San Francisco time) on the requested Borrowing date) specifying (i) the amount to be borrowed, (ii) the requested Borrowing date, which must be a Business Day, and (iii) with respect to any requested Swingline Loan after the date the Company gives the notice regarding allocation of Loans pursuant to Section 2.16, whether the requested Swingline Loan shall be allocated to the Revolving Facility Tranche or the Capital Expenditure Tranche. Upon receipt of the Notice of Borrowing, the Swingline Bank will immediately confirm with the Agent (by telephone or in writing) that the Agent has received a copy of the Notice of Borrowing from the Company and, if not, the Swingline Bank will provide the Agent with a copy thereof. Unless the 41 49 Swingline Bank has received notice prior to 2:00 p.m. on such Borrowing date from the Agent (A) directing the Swingline Bank not to make the requested Swingline Loan as a result of the limitations set forth in the proviso set forth in the first sentence of subsection 2.10(a); or (B) that one or more conditions specified in Article V are not then satisfied; then, subject to the terms and conditions hereof, the Swingline Bank will, not later than 3:00 p.m. (San Francisco time) on the Borrowing date specified in such Notice, make the amount of its Swingline Loan available to the Agent for the account of the Company at the Agent's Payment Office in funds immediately available to the Agent. The proceeds of such Swingline Loan will then promptly be made available to the Company by the Agent crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Swingline Bank and in like funds as received by the Agent. Each Borrowing pursuant to this Section shall be in an aggregate principal amount equal to two hundred fifty thousand dollars ($250,000) or an integral multiple of one hundred thousand dollars ($100,000) in excess thereof, unless otherwise agreed by the Swingline Bank. (c) If (i) any Swingline Loans shall remain outstanding at 9:00 a.m. (San Francisco time) on the Business Day immediately prior to a Swingline Clean-Up Day and by such time on such Business Day the Agent shall have received neither (A) a Notice of Borrowing delivered pursuant to Section 2.3 requesting that Revolving Loans be made pursuant to Section 2.1 on the Swingline Clean-Up Day in an amount at least equal to the aggregate principal amount of such Swingline Loans, nor (B) any other notice indicating the Company's intent to repay such Swingline Loans with funds obtained from other sources, or (ii) any Swingline Loans shall remain outstanding during the existence of a Default or Event of Default and the Swingline Bank shall in its sole discretion notify the Agent that the Swingline Bank desires that such Swingline Loans be converted into Revolving Loans, then the Agent shall be deemed to have received a Notice of Borrowing from the Company pursuant to Section 2.3 requesting that Base Rate Loans be made pursuant to Section 2.1 on such Swingline Clean-Up Day (in the case of the circumstances described in clause (i) above) or on the first Business Day subsequent to the date of such notice from the Swingline Bank (in the case of the circumstances described in clause (ii) above) in an amount equal to the aggregate amount of such Swingline Loans, and the procedures set forth in subsections 2.3(b) and 2.3(c) shall be followed in making such Base Rate Loans; provided, that such Base Rate Loans shall be made notwithstanding the Company's failure to comply with subsections 5.2(b) and 5.2(c); and provided, further, that if a Borrowing of Revolving Loans becomes legally impracticable and if so required by the Swingline Bank at the time such Revolving Loans are required to be made by the Banks in accordance with this subsection 2.10(c), each Bank agrees that in lieu of making Revolving Loans as described in this subsection 2.10(c), such Bank shall purchase a participation from the Swingline Bank in the applicable Swingline Loans in an amount equal to such Bank's Commitment Percentage of such Swingline Loans, 42 50 and the procedures set forth in subsections 11.8 shall be followed in connection with the purchases of such participations. Upon such purchases of participations, the prepayment requirements of subsection 2.7(a)(ii) shall be deemed waived with respect to such Swingline Loans. The proceeds of such Base Rate Loans, or participations purchased, shall be applied to repay such Swingline Loans. A copy of each notice given by the Agent to the Banks pursuant to this subsection 2.10(c) with respect to the making of Revolving Loans, or the purchases of participations, shall be promptly delivered by the Agent to the Company. Each Bank's obligation in accordance with this Agreement to make the Revolving Loans, or purchase the participations, as contemplated by this subsection 2.10(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Swingline Bank, the Company or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default, an Event of Default or a Material Adverse Effect; or (3) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 2.11 FEES In addition to certain fees described in Section 3.8: (a) Agency Fees. The Company shall pay, to the extent not previously paid, to BofA for BofA's own account fees in the amounts and at the times set forth in a letter agreement between the Company, BofA and the Arranger dated October 8, 1996. 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 the Commitment Fee Percentage. For purposes of calculating utilization under this subsection, (i) the Aggregate Commitment shall be deemed used to the extent of the Effective Amount of all Revolving Loans and L/C Obligations, and (ii) with respect to the Commitment of the Swingline Bank, the making of any Swingline Loan shall not be considered a use of a portion of such Swingline Bank's Commitment. Such commitment fee shall accrue from the Closing 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 the Aggregate Commitment pursuant to Section 2.5 or Section 2.7, 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 43 51 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 V are not met. 2.12 COMPUTATION OF FEES AND INTEREST (a) All computations of interest payable in respect of Base Rate Loans at all times that 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. (b) The Agent will, with reasonable promptness, notify the Company and the Banks of each determination of an Offshore 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. 2.13 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 Pro Rata Share (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 44 52 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 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. 2.14 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 2.14(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 such 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 45 53 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. (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. 2.15 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 proportionate share (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 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 11.9) 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 2.15 and will in each case notify the Banks following any such purchases or repayments. 2.16 LOAN TRANCHES The Company may, at any time and from time to time, upon at least five Business Days notice to the Agent, allocate all or a portion of Borrowings, including with respect to Swingline Loans and L/C Obligations, to a revolving 46 54 credit facility tranche (the "Revolving Facility Tranche") or a capital expenditure tranche (the "Capital Expenditure Tranche"), or both; provided that (A) at no time shall the Effective Amount of all Revolving Loans and Swingline Loans allocated to the Revolving Facility Tranche plus the Effective Amount of all L/C Obligations exceed $15,000,000; (B) at no time shall the Effective Amount of all Revolving Loans and Swingline Loans allocated to the Capital Expenditure Tranche exceed $20,000,000; (C) upon allocation to the Revolving Facility Tranche or the Capital Expenditure Tranche, as case may be, Loans shall remain so allocated notwithstanding any conversion or continuation of Loans pursuant to Section 2.3; (D) the Company and each of the Banks agree that the establishment of the Revolving Facility Tranche and the Capital Expenditure Tranche is intended to assist the Company in its compliance with Section 8.5 and the corresponding provisions of the Note Agreements, the 1994 Senior Note Agreements and the Mortgage Note Agreements. Accordingly, neither the failure by the Company to comply in any respect with this Section 2.16 nor the failure by the Agent or any Bank to identify or remedy such noncompliance shall give rise to any liability against the Agent or any Bank or any defense to compliance by the Company with Section 8.5; and (E) all Letters of Credit shall be deemed allocated to the Revolving Facility Tranche. Such notice of allocation shall specify (i) the effective date of such allocation which shall not be a date earlier than the date of such notice, (ii) the aggregate principal amount of Loans (identified by Type of Loan) and L/C Obligations to be allocated to the Revolving Facility Tranche, the Capital Expenditure Tranche, or both, as the case may be, and (iii) in the case of allocations to the Capital Expenditure Tranche, the Company shall represent and warrant that the proceeds of all Loans allocated thereto have been used solely to finance capital improvements, expansions and additions to the Company's property (including Timberlands), plant and equipment. The Agent will promptly notify the Banks of such notice of allocation of Loans and L/C Obligations. 3. THE LETTERS OF CREDIT 3.1 THE LETTER OF CREDIT FACILITY (a) On the terms and conditions set forth herein, (i) each Issuing Bank agrees, (A) from time to time on any Business Day during the period from the Closing Date until 30 days before the Revolving Termination Date to issue Letters of Credit 47 55 for the account of the Company or the Facilities Subsidiary, and to amend or renew Letters of Credit previously issued by it, in accordance with subsections 3.2(c) and 3.2(d), and (B) to honor drafts under the Letters of Credit; and (ii) the Banks severally agree to participate in Letters of Credit Issued for the account of the Company or the Facilities Subsidiary; provided, that the Issuing Banks shall not be obligated to Issue, and no Bank shall be obligated to participate in, any Letter of Credit if as of the date of Issuance of such Letter of Credit (the "Issuance Date") (1) the Effective Amount of all Revolving Loans, Swingline Loans, and L/C Obligations exceeds the Aggregate Commitment, (2) the Effective Amount of all Revolving Loans of such Bank plus the participation of such Bank, if any, in the Effective Amount of all Swingline Loans and L/C Obligations exceeds such Bank's Commitment, or (3) the Effective Amount of L/C Obligations exceeds the L/C Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company's ability to obtain Letters of Credit shall be fully revolving, and, accordingly, the Company may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn upon and reimbursed. The Company shall be primarily liable for all obligations hereunder and under the L/C-Related Documents with respect to any Letter of Credit Issued for the account of the Facilities Subsidiary. (b) Each of the Issuing Banks is under no obligation to Issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from Issuing such Letter of Credit, or any Requirement of Law applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such Issuing Bank in good faith deems material to it; (ii) such Issuing Bank has received written notice from any Bank, the Agent or the Company, on or prior to the Business Day prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Article V is not then satisfied; (iii) the expiry date of any requested Letter of Credit is (A) more than one year after the date of Issuance, unless the Majority Banks have approved such 48 56 expiry date in writing, or (B) after the Revolving Termination Date, unless all of the Banks have approved such expiry date in writing; (iv) the expiry date of any requested Letter of Credit is prior to the maturity date of any financial obligation to be supported by the requested Letter of Credit, unless such Letter of Credit is issued in connection with worker's compensation or to secure self- insurance deductibles or certain payments required in connection with export log yards, or all of the Banks have approved such expiry date in writing; (v) any requested Letter of Credit does not provide for drafts, or is not otherwise in form and substance reasonably acceptable to such Issuing Bank, or the Issuance of a Letter of Credit may violate any policies of such Issuing Bank applicable to customers and credits of a type similar to the Company and the transactions contemplated in this Agreement; (vi) any standby Letter of Credit is for the purpose of supporting the issuance of any letter of credit by any other Person; (vii) such Letter of Credit is in a face amount less than $100,000 or to be denominated in a currency other than Dollars; or (viii) the requested Letter of Credit provides for payment thereunder sooner than the Business Day following the presentation to such Issuing Bank of the documentation required thereunder. 3.2 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT (a) Each Letter of Credit shall be issued upon the irrevocable written request of the Company (or, if such Letter of Credit is to be for the account of the Facilities Subsidiary, the joint and several irrevocable written request of the Company and the applicable Facilities Subsidiary) received by an Issuing Bank (with a copy sent by the Company to the Agent) at least five days (or such shorter time as such Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of issuance. Each such request for issuance of a Letter of Credit shall be made by an original writing or by facsimile, confirmed immediately in an original writing, in the form of an L/C Application, and shall specify in form and detail satisfactory to such Issuing Bank: (i) the proposed date of issuance of the Letter of Credit (which shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit; 49 57 (iv) the name and address of the beneficiary thereof; (v) the documents to be presented by the beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the full text of any certificate to be presented by the beneficiary in case of any drawing thereunder; and (vii) such other usual and customary matters as the Issuing Bank may require. (b) At least three Business Days prior to the Issuance of any Letter of Credit or any amendment or renewal of a Letter of Credit, the Issuing Bank issuing such Letter of Credit will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of the L/C Application or L/C Amendment Application from the Company and, if not, such Issuing Bank will provide the Agent with a copy thereof. Unless such Issuing Bank has received notice on or before the Business Day immediately preceding the date such Issuing Bank is to issue, amend or renew a requested Letter of Credit from the Agent (A) directing such Issuing Bank not to issue, amend or renew such Letter of Credit because such issuance amendment or renewal is not then permitted under subsection 3.1(a) as a result of the limitations set forth in clauses (1) through (3) thereof or subsection 3.1(b)(ii); or (B) that one or more conditions specified in Article V are not then satisfied; then, subject to the terms and conditions hereof, such Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the Company or amend or renew a Letter of Credit, as the case may be, in accordance with such Issuing Bank's usual and customary business practices. (c) From time to time while a Letter of Credit is outstanding and prior to the Revolving Termination Date, an Issuing Bank shall, upon the written request of the Company received by such Issuing Bank (with a copy sent by the Company to the Agent) at least five days (or such shorter time as such Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of amendment, amend any Letter of Credit issued by it. Each such request for amendment of a Letter of Credit shall be made by an original writing or by facsimile, confirmed immediately in an original writing, made in the form of an L/C Amendment Application and shall specify in form and detail satisfactory to such Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of amendment of the Letter of Credit (which shall be a Business Day); (iii) the nature of the proposed amendment; and 50 58 (iv) such other usual and customary matters as such Issuing Bank may require. Such Issuing Bank shall be under no obligation to amend any Letter of Credit if: (A) such Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms of this Agreement; or (B) the beneficiary of any such letter of Credit does not accept the proposed amendment to the Letter of Credit. The Agent will promptly notify the Banks of the receipt by it of any L/C Application or L/C Amendment Application. (d) Each Issuing Bank and the Banks agree that, while a Letter of Credit is outstanding and prior to the Revolving Termination Date, at the option of the Company and upon the written request of the Company received by an Issuing Bank (with a copy sent by the Company to the Agent) at least five days (or such shorter time as such Issuing Bank may agree in a particular instance in its sole discretion) prior to the proposed date of notification of renewal, such Issuing Bank shall be entitled to authorize the automatic renewal of any Letter of Credit issued by it. Each such request for renewal of a Letter of Credit shall be made by an original writing or by facsimile, confirmed immediately in an original writing, in the form of an L/C Amendment Application, and shall specify in form and detail satisfactory to such Issuing Bank: (i) the Letter of Credit to be renewed; (ii) the proposed date of notification of renewal of the Letter of Credit (which shall be a Business Day); (iii) the revised expiry date of the Letter of Credit; and (iv) such other usual and customary matters as the Issuing Bank may require. Such Issuing Bank shall be under no obligation so to renew any Letter of Credit if: (A) such Issuing Bank would have no obligation at such time to issue or amend such Letter of Credit in its renewed form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed renewal of the Letter of Credit. If any outstanding Letter of Credit shall provide that it shall be automatically renewed unless the beneficiary thereof receives notice from such Issuing Bank that such Letter of Credit shall not be renewed, and if at the time of renewal such Issuing Bank would be entitled to authorize the automatic renewal of such Letter of Credit in accordance with this subsection 3.2(d) upon the request of the Company but such Issuing Bank shall not have received any L/C Amendment Application from the Company with respect to such renewal or other written direction by the Company with respect thereto, such Issuing Bank shall nonetheless be permitted to allow such Letter of Credit to renew, and the Company 51 59 and the Banks hereby authorize such renewal, and, accordingly, such Issuing Bank shall be deemed to have received an L/C Amendment Application from the Company requesting such renewal. (e) In connection with Letters of Credit that automatically renew or extend their expiry date, each Issuing Bank may, at its election (or as required by the Agent at the direction of the Majority Banks), deliver any notices of termination or other communications to any Letter of Credit beneficiary or transferee, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than the Revolving Termination Date. (f) This Agreement shall control in the event of any conflict with any L/C-Related Document (other than any Letter of Credit). (g) Each Issuing Bank will also deliver to the Agent, concurrently or promptly following its delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and complete copy of each such Letter of Credit or amendment to or renewal of a Letter of Credit. (h) Each Issuing Bank shall deliver to the Agent such reports with respect to the Letters of Credit as the Agent may reasonably request from time to time. 3.3 RISK PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS (a) Immediately upon the Issuance of each Letter of Credit, each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank issuing such Letter of Credit a participation in such Letter of Credit and each drawing thereunder in an amount equal to the product of (i) the Commitment Percentage of such Bank, times (ii) the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively. For purposes of Section 2.1, each Issuance of a Letter of Credit shall be deemed to utilize the Commitment of each Bank by an amount equal to the amount of such participation. (b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Issuing Bank which issued such Letter of Credit will promptly notify the Company. The Company shall reimburse such Issuing Bank, directly or with the proceeds of a Loan, prior to 10:00 a.m. (San Francisco time), on each date that any amount is paid by such Issuing Bank under any Letter of Credit (each such date, an "Honor Date"), in an amount equal to the amount so paid by such Issuing Bank. If the Company fails to reimburse such Issuing Bank for the full amount of any drawing under any Letter of Credit by 10:00 a.m. (San Francisco time) on the Honor Date, such Issuing Bank will promptly notify the Agent and the Agent will promptly notify each Bank thereof, 52 60 and the Company shall be deemed to have requested that Base Rate Loans be made by the Banks to be disbursed on the Honor Date under such Letter of Credit, subject to the aggregate amount of the un-utilized portion of the Aggregate Commitment and subject to the conditions set forth in Section 5.2. Any notice given by such Issuing Bank or the Agent pursuant to this subsection 3.3(b) may be oral if immediately confirmed in writing (including by facsimile); provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (c) Each Bank shall upon any notice pursuant to subsection 3.3(b) make available to the Agent for the account of the relevant Issuing Bank an amount in Dollars and in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Banks shall (subject to subsection 3.3(d)) each be deemed to have made a Loan consisting of a Base Rate Loan to the Company in that amount. If any Bank so notified fails to make available to the Agent for the account of such Issuing Bank the amount of such Bank's Commitment Percentage of the amount of the drawing by no later than 12:00 noon (San Francisco time) on the Honor Date, then interest shall accrue on such Bank's obligation to make such payment, from the Honor Date to the date such Bank makes such payment, at a rate per annum equal to the Federal Funds Rate in effect from time to time during such period. The Agent will promptly give notice of the occurrence of the Honor Date, but failure of the Agent to give any such notice on the Honor Date or in sufficient time to enable any Bank to effect such payment on such date shall not relieve such Bank from its obligations under this Section 3.3. (d) With respect to any unreimbursed drawing that is not converted into Loans consisting of Base Rate Loans to the Company in whole or in part, because of the Company's failure to satisfy the conditions set forth in Section 5.2 or for any other reason, the Company shall be deemed to have incurred from the relevant Issuing Bank an L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate per annum equal to the Base Rate plus 2% per annum, and each Bank's payment to such Issuing Bank pursuant to subsection 3.3(c) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Bank in satisfaction of its participation obligation under this Section 3.3. (e) Each Bank's obligation in accordance with this Agreement to make the Loans or L/C Advances, as contemplated by this Section 3.3, as a result of a drawing under a Letter of Credit, shall be absolute and unconditional and without recourse to the relevant Issuing Bank and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against such Issuing Bank, the Company or any 53 61 other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default, an Event of Default or a Material Adverse Effect; or (iii) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided, however, that each Bank's obligation to make Revolving Loans under this Section 3.3 is subject to the conditions set forth in Section 5.2. 3.4 REPAYMENT OF PARTICIPATIONS (a) Upon (and only upon) receipt by the Agent for the account of an Issuing Bank of immediately available funds from the Company (i) in reimbursement of any payment made by such Issuing Bank under the Letter of Credit with respect to which any Bank has paid the Agent for the account of such Issuing Bank for such Bank's participation in the Letter of Credit pursuant to Section 3.3 or (ii) in payment of interest thereon, the Agent will pay to each Bank, in the same funds as those received by the Agent for the account of such Issuing Bank, the amount of such Bank's Commitment Percentage of such funds, and such Issuing Bank shall receive the amount of the Commitment Percentage of such funds of any Bank that did not so pay the Agent for the account of such Issuing Bank. (b) If the Agent or an Issuing Bank is required at any time to return to the Company, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of the payments made by the Company to the Agent for the account of such Issuing Bank pursuant to subsection 3.4(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the Agent or such Issuing Bank the amount of its Commitment Percentage of any amounts so returned by the Agent or such Issuing Bank plus interest thereon from the date such demand is made to the date such amounts are returned by such Bank to the Agent or such Issuing Bank, at a rate per annum equal to the Federal Funds Rate in effect from time to time. 3.5 ROLE OF THE ISSUING BANK (a) Each Bank and the Company agree that, in paying any drawing under a Letter of Credit, each of the Issuing Banks shall not have any responsibility to obtain any document (other than any sight draft and certificates expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. (b) No Agent-Related Person, the Senior Co-Agent, nor any of the respective correspondents, participants or assignees of the Issuing Banks shall be liable to any Bank for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Banks (including the Majority Banks, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful 54 62 misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any L/C-Related Document. (c) The Company hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Company's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No Agent-Related Person, the Senior Co- Agent, nor any of the respective correspondents, participants or assignees of an Issuing Bank, shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 3.6; provided, however, anything in such clauses to the contrary notwithstanding, that the Company may have a claim against an Issuing Bank, and such Issuing Bank may be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Company which the Company proves were caused by such Issuing Bank's willful misconduct or gross negligence or such Issuing Bank's willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing: (i) each Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; and (ii) such Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. 3.6 OBLIGATIONS ABSOLUTE The obligations of the Company under this Agreement and any L/C-Related Document to reimburse each Issuing Bank for a drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing under a Letter of Credit converted into Loans shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C-Related Document under all circumstances, including the following: (i) any lack of validity or enforceability of this Agreement or any L/C-Related Document; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Company in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from all or any of the L/C-Related Documents; 55 63 (iii) the existence of any claim, set-off, defense or other right that the Company may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Issuing Banks or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by the L/C-Related Documents or any unrelated transaction; (iv) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit; (v) any payment by an Issuing Bank under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of any Letter of Credit; or any payment made by such Issuing Bank under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any Insolvency Proceeding; (vi) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the obligations of the Company in respect of any Letter of Credit; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor. 3.7 CASH COLLATERAL PLEDGE Upon (i) the request of the Agent, (A) if an Issuing Bank has honored any full or partial drawing request on any Letter of Credit and such drawing has resulted in an L/C Borrowing hereunder, or (B) if, as of the Revolving Termination Date, any Letters of Credit may for any reason remain outstanding and partially or wholly undrawn, or (ii) the occurrence of the circumstances described in subsection 2.7(a) requiring the Company to Cash Collateralize Letters of Credit, then, the Company shall immediately Cash Collateralize the L/C Obligations in an amount equal to the L/C Obligations. The Company hereby grants to the Agent, for the benefit of the Agent, the Issuing Banks and the Banks, a security interest in all such cash and deposit account balances used to Cash Collateralize the Company's obligations hereunder. 56 64 3.8 Letter of Credit Fees (a) The Company shall pay to the Agent for the account of each of the Banks a letter of credit fee with respect to the Letters of Credit on the average daily maximum amount available to be drawn of the outstanding Letters of Credit, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit outstanding for that quarter as calculated by the Agent, equal to the Letter of Credit Rate. Such letter of credit fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during which Letters of Credit are outstanding, commencing on the first such quarterly date to occur after the Closing Date, through the Revolving Termination Date (or such later date upon which the outstanding Letters of Credit shall expire), with the final payment to be made on the Revolving Termination Date (or such later expiration date). (b) The Company shall pay to the Agent for the account of each Issuing Bank a letter of credit fronting fee per annum with respect to the outstanding Letters of Credit issued by such Issuing Bank equal to 0.125% per annum of the average daily maximum amount available to be drawn under such outstanding Letters of Credit, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit issued by such Issuing Bank outstanding for that quarter as calculated by the Agent. Such fronting fees shall be calculated on the basis of a 360-day year and actual days elapsed and shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during which Letters of Credit are outstanding, commencing on the first such quarterly date to occur after the Closing Date, through the Revolving Termination Date (or such later date upon which the outstanding Letters of Credit shall expire), with the final payment to be made on the Revolving Termination Date (or such later expiration date). (c) The Company shall pay to each Issuing Bank from time to time on demand the normal issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such Issuing Bank relating to letters of credit as from time to time in effect. 3.9 UNIFORM CUSTOMS AND PRACTICE The Uniform Customs and Practice for Documentary Credits as published by the International Chamber of Commerce ("UCP") most recently at the time of issuance of any Letter of Credit shall (unless otherwise expressly provided in the Letters of Credit) apply to the Letters of Credit. 57 65 4. Taxes, Yield Protection And Illegality 4.1 TAXES (a) Subject to subsection 4.1(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 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 4.1(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 4.1) 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. Each Bank and the Agent, severally with respect to the amounts received by it from the Company as indemnification under this subsection 4.1(c), agrees upon the request of the Company and at the Company's expense, to use commercially reasonable efforts to obtain a refund of any Taxes or Other Taxes for which it received indemnification hereunder if such Taxes or Other Taxes were incorrectly or illegally asserted. (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 4.1(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 4.1) 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; 58 66 (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. (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 11.8 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 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. 59 67 (g) The Company will not be required to pay any additional amounts in respect of United States Federal income tax pursuant to subsection 4.1(d), subsection 4.1(a) or subsection 4.1(c) 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 4.1(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 4.1(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 4.1(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 4.1(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. (i) If the Company is required to pay additional amounts to any Bank or the Agent pursuant to subsection 4.1(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. 60 68 4.2 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 exist. (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 4.4. If the Company is required to so prepay any Offshore Rate Loan, then concurrently with such prepayment, the Company may borrow from the affected Bank, in the amount of such repayment, a Base Rate Loan. (c) If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, the Company may elect, by giving notice to the Bank through the Agent that all Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice to the Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank. 4.3 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 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 participating in Letters of Credit, or, in the case of an Issuing Bank, any increase in the cost to such Issuing Bank of agreeing to issue, 61 69 issuing or maintaining any Letter of Credit or of agreeing to make or making, funding or maintaining any unpaid drawing under any Letter of Credit, then the Company shall be liable 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. 4.4 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 (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 of any Loan after the Company has given a notice in accordance with Section 2.6; (d) the prepayment (including pursuant to Section 2.6 or 2.7) of an Offshore Rate Loan on a day which is not the last day of the Interest Period with respect thereto; or (e) the conversion pursuant to Section 2.4 of any Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the respective Interest Period; 62 70 including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained. 4.5 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 for any requested Interest Period with respect to a proposed Offshore Rate Loan or that the Offshore Rate applicable pursuant to subsection 2.9(a) for any requested Interest Period with respect to a proposed Offshore 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 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 Offshore Rate Loans. 4.6 CERTIFICATE OF BANK Each Bank, if claiming reimbursement or compensation pursuant to this Article IV, 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. 4.7 SURVIVAL The covenants, agreements and obligations of the Company in this Article IV shall survive the payment of all other Obligations. 5. CONDITIONS PRECEDENT 5.1 CONDITIONS OF INITIAL CREDIT EXTENSIONS The obligation of each Bank to make its initial Credit Extension 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 5.1(h) and (i), the Majority Banks, and in sufficient copies for each Bank: 63 71 (a) Revolving Credit Agreement. This Agreement executed by the Company, the Agent, the Senior Co-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 that the certificate delivered at the closing of the Existing Credit Agreement with respect to 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, remains in each case true and correct as of the Closing Date; (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 a certificate of the Secretary or Assistant Secretary of the PC Advisory General Partner confirming that the certified copies of the partnership agreement of each of the Company, the General Partner, and the PCMC General Partner delivered at the closing of the Existing Credit Agreement remain true, correct, and complete as of the Closing Date; (ii) a certificate of the Secretary or Assistant Secretary of the PC Advisory General Partner confirming that the certified copies of the articles or certificate of incorporation of the PC Advisory General Partner and the bylaws of the PC Advisory General Partner delivered at the closing of the Existing Credit Agreement remain true, correct, and complete 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 as of a recent date; 64 72 (d) Legal Opinions. An opinion of (i) James A. Kraft, Vice President, General Counsel and Secretary 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 2.11, 4.1 and 11.4; (f) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article VI 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 Credit Extension; and (iii) there has not occurred or existed since December 31, 1995 any event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; (g) Credit Agreements. A certificate of a Responsible Officer attaching a true, correct, and complete copy of the 1996 Senior Note Agreement and confirming that the certified copies of the Note Agreements, the Mortgage Note Agreements, and the 1994 Senior Note Agreements delivered at the closing of the Existing Credit Agreement remain true, correct, and complete as of the Closing Date; (h) Repayment of Existing Loans. On the Closing Date, the Company shall have repaid in full all amounts outstanding under the Existing Credit Agreement, including accrued interest and fees not yet due, or have irrevocably directed the Agent to apply the initial proceeds of Loans hereunder toward such repayment in full; and (i) Other Documents. Such other approvals, opinions, documents or materials as the Agent or the Majority Banks may reasonably request. 65 73 5.2 CONDITIONS TO ALL CREDIT EXTENSIONS The obligation of each Bank and the Swingline Bank to make any Loans to be made by it (including its initial Loan) or to continue or convert any Loan pursuant to Section 2.4, and the obligation of each Issuing Bank to Issue any Letter of Credit (including the initial Letter of Credit) is subject to the satisfaction of the following conditions precedent on the relevant date of Borrowing, Conversion/Continuation Date or Issuance Date: (a) Notice, Application. As to any Loan, 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 Conversion/Continuation, as applicable, or in the case of any Issuance of any Letter of Credit, the relevant Issuing Bank and the Agent shall have received an L/C Application or L/C Amendment Application, as required under Section 3.2; (b) Continuation of Representations and Warranties. The representations and warranties made by the Company contained in Article VI shall be true and correct on and as of such date of Borrowing or Conversion/Continuation Date with the same effect as if made on and as of such date of Borrowing or Conversion/Continuation 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 (c) No Existing Default. No Default or Event of Default shall exist or shall result from such Credit Extension. Each Notice of Borrowing, Notice of Conversion/Continuation and L/C Application or L/C Amendment Application submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice, request or application and as of the date of each Borrowing, each Conversion/Continuation Date, or Issuance Date, as applicable, that the conditions in Section 5.2 are satisfied. 6. REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 6.1 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; 66 74 (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. 6.2 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. 6.3 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. 67 75 6.4 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. 6.5 LITIGATION There are no actions, suits, proceedings, claims or disputes pending, or to the Company's Knowledge and the knowledge of 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 (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. 6.6 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 9.1(e). 6.7 ERISA COMPLIANCE (a) Schedule 6.7 lists all Plans and separately identifies Plans intended to be Qualified Plans and Multiemployer Plans. 68 76 (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 6.7, 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 Company's Knowledge nothing has occurred which would cause the loss of such qualification or tax-exempt status. (d) Except as specifically disclosed in Schedule 6.7, there is no outstanding liability under Title IV of ERISA (other than premiums due but not delinquent under Section 4007 of ERISA) with respect to any Plan maintained or sponsored by the Company or any ERISA Affiliate, nor with respect to any Plan to which the Company or any ERISA Affiliate contributes or is obligated to contribute, and which liability would reasonably be expected to have a Material Adverse Effect. (e) Except as specifically disclosed in Schedule 6.7, no Plan subject to Title IV of ERISA has any Unfunded Pension Liability which would reasonably be expected to have a Material Adverse Effect. (f) Except as specifically disclosed in Schedule 6.7, the Company and its ERISA Affiliates have not 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 the Company or its ERISA Affiliates, with life insurance or employee welfare plan benefits (within the meaning of section 3(1) of ERISA) following retirement or termination of employment, other than benefits mandated by applicable law, including but not limited to, continuation coverage required to be provided under Section 4980B of the Code or Title I, Subtitle B, Part 6 of ERISA, and which cost would reasonably be expected to have a Material Adverse Effect. To the extent that the Company or its ERISA Affiliates have made any such representation, promise or contract, they have expressly reserved the right to amend or terminate such life insurance or employee welfare plan benefits with respect to claims not yet incurred. (g) The Company and its ERISA Affiliates 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 6.7, no ERISA Event has occurred or, to the Company's Knowledge is reasonably expected to occur with 69 77 respect to any Plan which would reasonably be expected to have a Material Adverse Effect. (i) There are no pending or, to the Company's Knowledge, 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) the Company or its ERISA Affiliates with respect to any Qualified Plan, or (iii) any fiduciary with respect to any Plan for which the Company or its ERISA Affiliates may be directly or indirectly liable, through indemnification obligations or otherwise and which claim, action or lawsuit would reasonably be expected to have a Material Adverse Effect. This representation is not made with respect to any Multiemployer Plan. (j) Except as specifically disclosed in Schedule 6.7, neither the Company nor any ERISA Affiliate has incurred nor, to the Company's Knowledge, reasonably expects to incur (i) any liability (and, to the Company's knowledge, 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 ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan, and which liability would reasonably be expected to have a Material Adverse Effect. (k) Except as specifically disclosed in Schedule 6.7, 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 is 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. 6.8 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 7.11, and are intended to be and shall be used in compliance with Section 8.7. 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. 70 78 6.9 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. 6.10 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. 6.11 FINANCIAL CONDITION (a) The audited combined financial statements of financial condition of the Company and its Subsidiaries dated December 31, 1995, 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, 1995, there has been no Material Adverse Effect. 71 79 6.12 ENVIRONMENTAL MATTERS (a) Except as specifically disclosed in Schedule 6.12, 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 6.12, 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 6.12, none of the Company, the Partner Entities, 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 6.12, 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, except as specifically disclosed in Schedule 6.12 (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. 72 80 6.13 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. 6.14 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. 6.15 SOLVENCY The Company, the General Partner, the Facilities Subsidiary, and the Restricted Subsidiaries are each Solvent. 6.16 LABOR RELATIONS There are no material strikes, lockouts or other labor disputes against the Company or any of its Subsidiaries, or, to 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 Company's Knowledge, threatened against any of them before any Governmental Authority. 6.17 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 Company's Knowledge, 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 6.5, no claim or litigation regarding any of the foregoing is pending or, to the Company's Knowledge, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is 73 81 pending or, to the Company's Knowledge, proposed, which, in either case, would reasonably be expected to have a Material Adverse Effect. 6.18 SUBSIDIARIES The Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.18 hereto and has no equity investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 6.18. Except as disclosed in part (a) of Schedule 6.18, 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. 6.19 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 partner of the General Partner is the PCMC General Partner. The only general partner of the PCMC General Partner is the PC Advisory General Partner. 6.20 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. 6.21 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. 6.22 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. 74 82 7. AFFIRMATIVE COVENANTS The Company covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or the Swingline Bank shall have any Swingline Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit remains outstanding, unless the Majority Banks waive compliance in writing: 7.1 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 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 ("Independent Auditor") 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 Independent Auditor 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 Independent Auditor 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 7.1; (c) as soon as available, but not later than 45 days after the end of each of the first three fiscal quarters 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; 75 83 (d) as soon as available, but not later than 45 days after the end of each of the first three fiscal quarters 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 7.1; (e) as soon as available, but not later than September 30 of each year, a business plan which shall include consolidated five year pro-forma projections of the Company's balance sheet, income statement and statement of cash flows, accompanied by appropriate assumptions on which such projections are based. 7.2 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 7.1(a) above, a certificate of the Independent Auditor 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 7.1(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 the Applicable Margin to be in effect for the immediately following fiscal quarter, and (iii) showing in detail the calculations supporting such statement in respect of subsection 8.2(h), Section 8.3, subsection 8.4(i), Section 8.5 and Section 8.13, and supporting the computation of the Interest Coverage 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. 76 84 7.3 NOTICES The Company shall promptly upon becoming aware thereof notify the Agent and each Bank: (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 Credit Extension set forth in subsection 5.2(b) not to be satisfied if a Credit Extension 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 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 could 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; 77 85 (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 ERISA Affiliate (but in no event more than 20 days after such event or, in the case of an event relating to a Multiemployer Plan, no more than 30 days after the Company obtains knowledge of the occurrence of such an event), together with (except in the case of a Multiemployer Plan) 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 ERISA Affiliate with respect to such event: (i) an ERISA Event which would reasonably be expected to have a Material Adverse Effect; (ii) the adoption of any new Qualified Plan that is subject to Title IV of ERISA or section 412 of the Code that would reasonably be expected to generate annual liabilities in excess of $10,000,000 by the Company or an ERISA Affiliate; (iii) the adoption of any amendment to a Qualified Plan that is subject to Title IV of ERISA or section 412 of the Code that would reasonably be expected to generate annual liabilities in excess of $10,000,000, if such amendment results in a material increase in benefits or unfunded liabilities; or (iv) the commencement of contributions by the Company or an ERISA Affiliate to any Plan that is subject to Title IV of ERISA or section 412 of the Code that would reasonably be expected to generate annual liabilities in excess of $10,000,000; (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 7.1(a) or 5.1(g); and (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 7.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated. 78 86 7.4 PRESERVATION OF PARTNERSHIP EXISTENCE, ETC. The Company shall, except as permitted by Section 8.2, and shall cause each of its Restricted 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. 7.5 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. 7.6 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. 7.7 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; and 79 87 (b) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 7.8 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. 7.9 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. 7.10 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 notice or report required pursuant to subsection 7.3(d), that could, individually or in the aggregate, result in liability in excess of $25,000,000. 80 88 7.11 USE OF PROCEEDS The Company shall use the proceeds of the Loans solely as follows: (a) to refinance existing Indebtedness, (b) to pay related fees and expenses, and (c) to finance working capital and other general partnership purposes, including acquisitions, not in contravention of any Requirement of Law or of any Loan Document. 7.12 SOLVENCY The Company shall at all times be, and shall cause each of its Restricted Subsidiaries to be, Solvent. 8. NEGATIVE COVENANTS The Company hereby covenants and agrees that, so long as any Bank shall have any Commitment hereunder, or the Swingline Bank shall have any Swingline Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, unless the Majority Banks waive compliance in writing: 8.1 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 7.7; (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 (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 81 89 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, leases, sub-leases 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 8.5, (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) from June 30, 1996 to June 8, 1999, exceeds $25,000,000, and (b) from June 9, 1999 to 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 permitted by subsection 8.5(d) and any extension, renewal, refunding or refinancing thereof; 82 90 (i) any Lien existing on the Property of the Company or its Restricted Subsidiaries on the Closing Date and set forth in Schedule 8.1 securing Indebtedness outstanding on such date; (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; and (k) Liens, other than those set forth above, that secure amounts that in the aggregate do not exceed $1,000,000. 8.2 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; (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 provided that, after giving effect on a pro forma basis to such merger or consolidation, the gross revenue contribution of pulp and paper manufacturing activities of the Company and its Subsidiaries on a combined basis for the 12 months preceding such merger or consolidation does not exceed 33% of the total revenues of the Company and its Subsidiaries on a combined basis; (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 83 91 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 any state of the United States and shall expressly assume in writing all of the obligations of the Company under this Agreement, the Note Agreements, the 1994 Senior 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, the 1994 Senior 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 8.5(i), 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 provided that, after giving effect on a pro forma basis to such merger or consolidation, the gross revenue contribution of pulp and paper manufacturing activities of the merged or consolidated entity and its Subsidiaries on a combined basis for the 12 months preceding such merger or consolidation does not exceed 33% of total revenues of such merged or consolidated entity and its Subsidiaries on a combined basis; (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 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 under the Note Agreements, the 1994 Senior 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 8.2; 84 92 (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 $20,000,000; and (i) the Company and its Restricted Subsidiaries may otherwise sell Properties for cash 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, within 180 days after such sale to repayment of Qualified Debt, with a percentage of such repayment being applied to the Loans in an amount equal to or greater than the pro rata share of the Loans as a percentage of the outstanding principal of other 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) if (x) the Net Proceeds of any such sale exceed $50,000,000, and if such Net Proceeds are not applied immediately as set forth in (ii)(x) or (y) above, then the entire amount of such Net Proceeds are 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 greater than 50% of the outstanding principal balance of the Qualified Debt, for the purpose of application in accordance with clause (ii) above, and (y) all such Net Proceeds which are not then held in escrow or cash collateral accounts pursuant to subclause (iii)(x) and which have not been applied to the purchase of productive assets in the same line of business or distributed to the holders of Qualified Debt for application to the repayment of such Qualified Debt exceed $100,000,000 in the aggregate at any time, all such Net Proceeds in excess of $100,000,000 are 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 greater than 50% 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 incur $1 of additional Funded Debt pursuant to subsection 8.5(i). 8.3 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: 85 93
Calendar Year Maximum MCCF To Be Harvested - - ----------------------------------------------------------------------------------------------------- 1996 (representing a carryover of 2,130 MCCF from prior years 3,600 MCCF and 1,470 MCCF for 1996) - - ----------------------------------------------------------------------------------------------------- 1997-2000 1,970 MCCF - - ----------------------------------------------------------------------------------------------------- 2001-2009 1,910 MCCF - - -----------------------------------------------------------------------------------------------------
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 (a) the Net Proceeds from such excess harvest are either (i) applied, within 180 days after any such excess harvest to repayment of Qualified Debt, with a percentage of such repayment being applied to Loans in an amount equal to or greater than the pro rata share of the Loans as a percentage of the outstanding principal of other Qualified Debt 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. For purposes of computing maximum harvest, Board Feet will be converted into Cunits at a ratio of 2.1 MCCF for each MMBF. 8.4 LOANS AND INVESTMENTS The Company shall not, and 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 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 8.13 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 8.4) 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 86 94 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 8.4; (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 8.5(f) 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 8.1(c), advances to employees for travel, relocation and other employment related expenses, advances to contractors performing services for the Company or such Restricted Subsidiary, advances to owners of timber or timber properties to acquire rights to harvest timber and other similar advances; (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 8.4 in entities engaged solely in a Permitted Business, provided that (x) the aggregate cumulative amount of such Investments, to the extent that such Investments are attributable to pulp and paper manufacturing (as proportionately attributed by multiplying the amount of an Investment by the percentage of revenues of the Person in whom such Investment is made during the 12 months preceding such Investment that are contributed by pulp and paper manufacturing), does not exceed the sum of $50,000,000 (without giving effect to any write-down of such Investments), and (y) the cumulative aggregate amount of all such Investments including those subject to clause (x) at original cost (including the principal amount of any obligations guaranteed to the extent such guarantees are not otherwise permitted by this 87 95 Section 8.4) outstanding from time to time 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. 8.5 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) Funded Debt represented by the Notes, the 1994 Notes, and the 1996 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, the 1994 Notes, and the 1996 Notes and the documentation relating thereto; (b) 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; (c) Indebtedness of any Restricted Subsidiary owing to the Company or to a Restricted Subsidiary; (d) Indebtedness pursuant to a bank credit facility which is unsecured or is secured by Liens permitted by subsection 8.1(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 (d) 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 (d); (e) 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; (f) 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 88 96 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; (g) 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; (h) Funded Debt of the Company or any Restricted Subsidiary secured by a Lien permitted by subsection 8.1(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 the Indebtedness secured by such Lien), the Company could incur at least $1 of additional Funded Debt pursuant to subsection (i) below; (i) 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 8.5, including guarantees of Indebtedness to the extent permitted by Section 8.4 and not otherwise permitted by the foregoing subsections of this Section 8.5, 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 (but not including Funded Debt incurred under this Agreement) shall not exceed $300,000,000; (j) 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 8.1(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 89 97 subsection (j) 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 (j); (k) 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 90 98 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 to subsection (i) 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 8.1(g) does not violate subclause (iv) to the proviso to such subsection (g); and (l) Indebtedness representing the Swap Termination Value of Swap Contracts entered into in the ordinary course of business as bona fide hedging transactions. 8.6 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. 8.7 USE OF PROCEEDS (a) The Company shall not and shall not suffer or permit any of its Subsidiaries to use any portion of the proceeds of the Loans or other Credit Extension, 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. 91 99 (b) The Company shall not and shall not suffer or permit any of its Subsidiaries to use any portion of the proceed of the Loans or other Credit Extension, directly or indirectly, (i) knowingly to purchase Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Company or any Affiliate of the Company. As used in this Section, "Section 20 Subsidiary" means the Subsidiary of the bank holding company controlling any Bank, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (as U.S.C. Section 24, Seventh), as amended. (c) After the date the Company has notified the Agent that the Company intends to allocate Loans to the Capital Expenditure Tranche and to qualify such Capital Expenditure Tranche Loans as Indebtedness permitted under subsection 8.5(b), the Company shall not and shall not suffer any of its Subsidiaries to use the proceeds of Capital Expenditure Tranche Loans for purposes other than to finance capital improvements, expansions and additions to the Company's property (including Timberlands), plant and equipment. 8.8 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, provided that the assets of such Subsidiary do not include any assets which could not be disposed of pursuant to the provisions of Section 8.2 unless the conditions to the sale of such assets set forth in Section 8.2 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 8.8). 8.9 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 (x) 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 (y) the Riverwood Supply Agreement, 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 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 8.4(a), (e), (f), (g), (h) or (i). 92 100 8.10 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. 8.11 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 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) increase in its liability with respect to such Plan, or (v) permit the present value of all nonforfeitable accrued benefits under any Qualified Plan (determined using the actuarial assumptions utilized by the Plan's actuaries for funding the Plan pursuant to Section 412 of the Code) 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. 8.12 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 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 8.12 shall not apply to any property sold pursuant to subsection 8.2(h). 8.13 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: 93 101 (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 and the 1994 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, (iii) 25% of the aggregate amount of all principal in respect of the Notes and the 1994 Notes scheduled to be paid (determined in accordance with the Principal Repayment Proviso) during the 12 calendar months immediately following such immediately preceding calendar quarter, and (iv) for the final four full calendar quarters preceding the Revolving Termination Date, 25% of the average Effective Amount of Revolving Loans, Swingline Loans and L/C Obligations outstanding at any time during such quarter of computation, 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 subsection 8.13(a), the amount of the reserves so included exceeds fifty percent (50%) of the Effective Amount of Revolving Loans, L/C Obligations and Swingline Loans at the end of such quarter of computation; 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. 8.14 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. 94 102 8.15 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. 8.16 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 impair the Agent's or the Banks' rights hereunder or the ability of the Company to perform its obligations under any Loan Document. 8.17 AVAILABLE CASH The Company shall not at any time permit Available Cash to be less than zero. For purposes of this Section 8.17, 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 and the 1994 Notes to be paid on the interest date immediately following such immediately preceding calendar 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, (c) 25% of the aggregate amount of all principal in respect of the Notes and the 1994 Notes scheduled to be paid (determined in accordance with the Principal Repayment Proviso) during the 12 calendar months immediately following such immediately preceding calendar quarter, and (d) for the final four full calendar quarters preceding the Revolving Termination Date, 25% of the average Effective Amount of Revolving Loans, Swingline Loans and L/C Obligations outstanding at any time during such quarter of computation, 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 8.17, the amount of the reserves so included exceeds fifty 95 103 percent (50%) of the Effective Amount of Revolving Loans, L/C Obligations and Swingline Loans at the end of such quarter of computation. 8.18 INTEREST COVERAGE RATIO The Company shall not permit its Interest Coverage Ratio at the end of any fiscal quarter ending during the periods set forth below to be equal to or less than the values indicated below for such periods:
Period Interest Coverage Ratio ------ ----------------------- 1 2.40 2 2.75 3 3.00
Period 1 shall extend from the Closing Date until the end of the sixth (6th) fiscal quarter ending after the Closing Date; Period 2 shall extend from the end of Period 1 until the end of the twelfth (12th) fiscal quarter ending after the Closing Date; and Period 3 shall extend from the end of Period 2 until the Revolving Termination Date. 9. EVENTS OF DEFAULT 9.1 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 of any L/C Obligation, 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 (c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in Sections 7.3 or 7.9 or Article VIII; 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 96 104 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. (i) The Company or any of its Subsidiaries (A) fails to make any payment in respect of any Indebtedness (other than in respect of Swap Contracts) 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 (B) 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 (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (1) any event of default under such Swap Contract as to which the Company or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (2) any Termination Event (as so defined) as to which the Company or any Subsidiary is an Affected Party (as so defined), and, in either event, the Swap Termination Value owed by the Company or such Subsidiary as a result thereof is greater than $5,000,000, 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 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 97 105 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) The Company or an ERISA Affiliate 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 the Company or its ERISA Affiliates 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, the Company or an ERISA Affiliate which commencement, increase or amendment shall result in a net increase in unfunded liabilities to the Company and the ERISA Affiliates in excess of $10,000,000; (viii) the Company or an ERISA Affiliate engages in or otherwise becomes liable for a non-exempt 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 Company or its ERISA Affiliates 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 would reasonably be expected to result in a net increase to the Company and its ERISA Affiliates in aggregate Unfunded Pension Liabilities, unfunded liabilities, or any combination thereof, in excess of $10,000,000; or 98 106 (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) Auditors. The Agent or any Bank shall receive notice from the Independent Auditor that the Agent and the Banks should no longer use or rely upon any audit report or other financial data provided by the Independent Auditor; or (l) Adverse Change. One of the following has occurred and the Agent, at the direction of the Majority Banks, shall so notify the Company: (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. 9.2 REMEDIES If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Majority Banks do any one or more of the following: (a) declare the Commitment of each Bank and the Swingline Commitment of the Swingline Bank to make Loans and any obligation of the Issuing Banks to issue Letters of Credit to be terminated, whereupon such Commitments and obligations shall forthwith be terminated; (b) declare an amount equal to the maximum aggregate amount that is or at any time thereafter may become available for drawing under any outstanding Letters of Credit (whether or not any beneficiary shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit) to be immediately due and payable, and 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 99 107 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 9.1 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 and the Swingline Bank to make Loans and any obligation of the Issuing Banks to Issue Letters of Credit 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, the Issuing Banks, the Swingline Bank, or any Bank. 9.3 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. 10. THE AGENT 10.1 APPOINTMENT AND AUTHORIZATION (a) Each Bank and each Issuing Bank hereby irrevocably (subject to Section 10.9) 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 accordance with this Agreement, and to release funds to the Company in accordance with Section 1(b) of the Cash Collateral Account Agreement and, if applicable, 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 or any Issuing 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. Without limiting the generality of the foregoing 100 108 sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) Each Issuing Bank shall act on behalf of the Banks with respect to any Letters of Credit Issued by it and the documents associated therewith until such time and except for so long as the Agent may agree at the request of the Majority Banks to act for such Issuing Bank with respect thereto; provided, however, that each Issuing Bank shall have all of the benefits and immunities (i) provided to the Agent in this Article X with respect to any acts taken or omissions suffered by such Issuing Bank in connection with Letters of Credit Issued by it or proposed to be Issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Agent," as used in this Article X, included such Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to the Issuing Banks. 10.2 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. 10.3 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 or the transactions contemplated hereby (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 101 109 Document, or to inspect the Properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 10.4 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, 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 5.1, 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 Credit Extension 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 Credit Extension. 10.5 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". The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority 102 110 Banks in accordance with Article IX; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not 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. 10.6 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 any Agent-Related Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person 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 hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person 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. 10.7 INDEMNIFICATION OF AGENT Whether or not the transactions contemplated hereby are 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), pro rata from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting 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, 103 111 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 hereunder (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 undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 10.8 AGENT IN INDIVIDUAL CAPACITY BofA, NationsBank,N.A., and any of their respective 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, underwriting or other business with the Company and its Subsidiaries and Affiliates as though neither BofA nor NationsBank, N.A. was the Agent and the Senior Co- Agent, respectively, the Swingline Bank or an Issuing Bank hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans and participation in Letters of Credit, each of BofA and NationsBank, N.A. 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 or the Senior Co-Agent, as the case may be, and the terms "Bank" and "Banks" shall include each of BofA and NationsBank, N.A. in its individual capacity. 10.9 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 the Agent resigns 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 104 112 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 and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article X and Sections 11.4 and 11.5 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. Notwithstanding the foregoing, however, BofA may not be removed as the Agent at the request of the Majority Banks unless BofA shall also simultaneously be replaced as an "Issuing Bank" hereunder pursuant to documentation in form and substance satisfactory to BofA. 10.10 SENIOR CO-AGENT The Bank identified on the facing page or signature pages of this Agreement as a "senior co-agent" shall have no right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Each Bank acknowledges that it has not relied, and will not rely, on the Bank so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. 11. MISCELLANEOUS 11.1 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 the Swingline Commitment of the Swingline Bank (or reinstate any such Commitment terminated pursuant to subsection 9.2(a)), including, without limitation, any amendment to or 105 113 waiver of subsection 2.7(b) or any other provision providing for a mandatory commitment reduction, 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 other Loan Document; (c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (iii) below) of any fees or other amounts payable hereunder or under any other 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 (e) amend this Section 11.1 or Section 2.15 or any provision providing for consent or other action by all Banks; and, provided further that (i) no amendment, waiver or consent shall, unless in writing signed by the relevant Issuing Bank in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of such Issuing Bank under this Agreement or any L/C-Related Document relating to any Letter of Credit Issued or to be Issued by it, (ii) 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, (iii) no amendment, waiver or consent shall, unless in writing and signed by the Swingline Bank in addition to the Majority Banks or all the Banks, as the case may be, affect the rights or duties of the Swingline Bank under this Agreement or any other Loan Document, and (iv) the fee letter between the Company and BofA may be amended, or rights and privileges thereunder waived, in a writing executed by the parties thereto. 11.2 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 Schedule 11.2, 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 Schedule 11.2; 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. 106 114 (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, notwithstanding the foregoing, notices pursuant to Article III to an Issuing Bank shall not be effective until actually received by the Issuing Bank at the address specified for the "Issuing Bank" on Schedule 11.2, and notices to the Company or the Agent shall not be effective until actually received by the Company or the Agent, respectively. (c) The Company acknowledges and agrees that any agreement of the Agent, the Issuing Banks, and the Banks at Article II and Article III herein to receive certain notices by telephone and facsimile is solely for the convenience and at the request of the Company. The Agent, the Issuing Banks, 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, the Issuing Banks 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, the Issuing Banks or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans and L/C Obligations shall not be affected in any way or to any extent by any failure by the Agent, the Issuing Banks, and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent, the Issuing Banks and the Banks of a confirmation which is at variance with the terms understood by the Agent, the Issuing Banks, and the Banks to be contained in the telephonic or facsimile notice. 11.3 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. 11.4 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) and the Arranger within five Business Days after demand (subject to subsection 5.1(e)) for all reasonable costs and expenses incurred by BofA (including in its capacity as Agent) or Arranger 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 107 115 Loan Document and any other documents prepared in connection herewith or therewith, the initial assignments by BofA of its Loans and Commitments hereunder, and the consummation of the transactions contemplated hereby and thereby, including expenses of outside experts, printing costs, and the reasonable Attorney Costs incurred by BofA (including in its capacity as Agent) or Arranger 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, the Agent, and the Arranger within five Business Days after demand (subject to subsection 5.1(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 costs, fees and expenses, incurred by the Agent, the Arranger and any Bank. 11.5 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, claims, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including reasonable Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, any 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 Letters of Credit 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. 108 116 11.6 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. 11.7 SUCCESSORS AND ASSIGNS The provisions of this Agreement shall be binding upon and inure to the benefit of 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. 11.8 ASSIGNMENTS, PARTICIPATIONS, ETC. (a) 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 shall not be unreasonably withheld or delayed, at any time assign and delegate to one or more Eligible Assignees (each, an "Assignee") (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) all or any ratable part of all of the Loans, the Commitments, the L/C Obligations and all other rights and obligations of such Bank hereunder; provided, however, that (i) no assignment shall in any event be less than $10,000,000 of the Commitment of the assigning Bank under this Agreement unless as a result of such assignment the assigning Bank's rights and obligations hereunder shall be reduced to zero; (ii) if a Bank assigns less than all of its rights and obligations hereunder, such Bank's aggregate remaining Commitment, after giving effect to such assignment, shall not be less than $10,000,000; and (iii) 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 109 117 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. In connection with any assignment by BofA, its Swingline Commitment may be in whole but not in part included as part of the assignment transaction, and the Assignment and Acceptance may be appropriately modified to include an assignment and delegation of its Swingline Commitment and any outstanding Swingline Loans. (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 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 Commitment arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitment 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 of the 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, the Issuing Banks 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 11.1. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 4.1, 4.3 and 11.5 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 110 118 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 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 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 and (I) to such Bank's Affiliates. 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 111 119 assigned Loans to the extent of such payment. No such assignment shall release the assigning Bank from its obligations hereunder. 11.9 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 and any of its Affiliates 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 11.9 are in addition to the other rights and remedies (including other rights of set-off) which the Bank may have. 11.10 AUTOMATIC DEBITS OF FEES With respect to any commitment fee, facility fee, letter of credit fee or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent, the Issuing Banks, the Swingline Bank 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 11.10 shall be deemed a setoff. 11.11 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. 112 120 11.12 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 signed by all the parties shall be lodged with the Company and the Agent. 11.13 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. 11.14 NO THIRD PARTIES BENEFITED This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Issuing Banks, the Swingline Bank, the Senior Co-Agent, 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, the Senior Co-Agent, the Swingline Bank, the Issuing Bank nor any Bank shall have any obligation to any Person not a party to this Agreement or other Loan Documents. 11.15 TIME Time is of the essence as to each term or provision of this Agreement and each of the other Loan Documents. 11.16 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. 11.17 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 113 121 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 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. 11.18 ENTIRE AGREEMENT This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks, the Swingline Bank, the Issuing Banks, the Senior Co-Agent 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 that (a) the fee letter referenced in subsection 2.11(a), (b) any prior arrangements made with respect to the payment by the Company of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Agent or the Banks, and (c) the representations and warranties (as of the dates made and deemed made) and the indemnities of the Company set forth in the 114 122 Existing Credit Agreement and the "Loan Documents" as defined therein shall, in each case, survive the execution and delivery of this Agreement. 115 123 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: /s/ DIANE M. IRVINE ------------------------------- Name: Diane M. Irvine Title: Vice President and Chief Financial Officer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ MICHAEL J. BALOK ------------------------------- Name: Michael J. Balok Title: Managing Director BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank, as the Swingline Bank and as an Issuing Bank By: /s/ MICHAEL J. BALOK ------------------------------- Name: Michael J. Balok Title: Managing Director NATIONSBANK N.A. By: /s/ MICHAEL SHORT ------------------------------- Name: Michael Short Title: Vice President 124 ABN AMRO BANK N.V. SEATTLE BRANCH By: /s/ DAVID MCGINNIS ------------------------------- Name: David McGinnis Title: Vice President and Director By: /s/ ERRET E. HUMMEL ------------------------------- Name: Erret E. Hummel Title: Vice President and Director UNITED STATES NATIONAL BANK OF OREGON By: /s/ WADE BLACK ------------------------------- Name: Wade Black Title: Vice President BANK OF AMERICA NW, N.A., dba SEAFIRST BANK By: /s/ PAUL R. ROLLINS, JR. ------------------------------- Name: Paul R. Rollins, Jr. Title: Senior Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., SEATTLE BRANCH By: /s/ DAVID M. PURCELL ------------------------------- Name: David M. Purcell Title: Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ KEVIN SULLIVAN ------------------------------- Name: Kevin Sullivan Title: Vice President S-2 125 CREDIT LYONNAIS NEW YORK BRANCH By: /s/ ROD HURST ------------------------------- Name: Rod Hurst Title: Vice President THE SUMITOMO BANK, LIMITED By: /s/ TATSUO UEDA ------------------------------- Name: Tatsuo Ueda Title: General Manager 126 SCHEDULE 2.1 COMMITMENTS
COMMITMENT BANK COMMITMENT PERCENTAGE - - ------------------------------------- ------------ --------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION 30,000,000 13.33333334% NATIONSBANK, N.A. 35,000,000 15.55555556% ABN AMRO BANK N.V. SEATTLE BRANCH 32,500,000 14.44444444% UNITED STATES NATIONAL BANK OF OREGON 32,500,000 14.44444444% THE BANK OF TOKYO-MITSUBISHI, LTD. SEATTLE BRANCH 22,500,000 10.00000000% CREDIT LYONNAIS NEW YORK BRANCH 22,500,000 10.00000000% THE SUMITOMO BANK, LIMITED 20,000,000 8.88888889% UNION BANK OF CALIFORNIA, N.A. 20,000,000 8.88888889% BANK OF AMERICA NW, DBA SEAFIRST BANK 10,000,000 4.44444444% ============ ============= 225,000,000 100.00000000%
EX-10.8 5 DIRECTOR UNIT OWNERSHIP & DEFERRAL PLAN 1 EXHIBIT 10.8 PLUM CREEK DIRECTOR UNIT OWNERSHIP AND DEFERRAL PLAN 1. Purpose. The purpose of this Director Unit Ownership and Deferral Plan ("Plan") is to encourage directors of PC Advisory Corp. I, the general partner of PC Advisory Partners I, L.P., which serves as the general partner of Plum Creek Management Company, L.P., a Delaware limited partnership ("General Partner") which serves as the general partner of Plum Creek Timber Company, L.P. ("Company"), to have an ongoing ownership interest in the Company by providing to such directors opportunities to use director compensation to acquire depositary units representing limited partner interests in the Company ("Units") on a current or deferred basis. 2. Participants. The participants ("Participants") under this Plan are the directors of PC Advisory Corp. I who are not employees of the Company or the General Partner. 3. Administration. This Plan will be administered by a committee ("Committee") which shall be comprised of not fewer than two (2) persons as the board of PC Advisory Corp. I (the "Board") may from time to time designate. The Committee shall interpret this Plan and make all determinations necessary or advisable for administration of the Plan. Any such action by the Committee shall be final and conclusive on all persons having any interest in such action. Any determination of the Committee under this Plan may be made by a majority of the Committee members. The Committee may delegate such authority to the Vice President, General Counsel and Secretary of the General Partner as it deems necessary or appropriate to administer the Plan. 4. Terms and Conditions of Conversion Rights. Each Participant shall have until December 15 each year to elect to receive Unit Conversion Rights ("Conversion Rights"), as calculated herein, in lieu of cash for his or her director retainer fees ("Retainer Fees") and director meeting fees ("Meeting Fees") payable during the subsequent calendar year ("Plan Year"). The election shall be made on a form prescribed by the Committee and shall be revocable only upon six months written notice to the Committee, except that Participants electing to defer the receipt of Units under the Plan, as described below, may not revoke their election to participate in the Plan during a Plan Year. On the date each payment of a Retainer Fee or a Meeting Fee would otherwise be 2 paid (a "Fee Event"), a Participant's Conversion Rights shall represent the right to receive a number of Units calculated by dividing the amount of the Participant's Retainer Fee or Meeting Fee by the Unit Average Price, rounded down to the nearest whole Unit. The Unit Average Price is the average price, excluding commissions, of Units purchased by a broker designated by the Committee (the "Designated Broker") with respect to all Conversion Rights for such Fee Event. Purchases of Units by the Designated Broker to satisfy Conversion Rights, upon which Unit Average Price will be calculated, will be made following the General Partner's transmission of funds to the Designated Broker as a result of the Fee Event. 4.1 Cash in Lieu of Fractional Units. Funds representing the difference between the total amount of the Retainer Fee or Meeting Fee and the total actual cost of the Units received ("Cash in Lieu of Fractional Units") shall be deposited into an account with the Designated Broker and applied at the time of subsequent deposits of Cash in Lieu of Fractional Units to purchase additional Units. 5. Deferral Option. A Participant may elect for each Plan Year, concurrently with his or her election to receive Unit Conversion Rights, to defer receipt of Units under the Plan (the "Deferral Option") until the conclusion of such Participant's service as a director of PC Advisory Corp. I. 5.1 Shadow Unit Account. The Company shall establish a ledger account ("Shadow Unit Account") for each Participant electing to defer receipt of Units for the purpose of reflecting the Company's obligation to deliver the deferred Units as provided in Section 5.4. 5.2 Conversion of Unit Conversion Rights to Shadow Units. A Participant's Conversion Rights arising from a Fee Event shall be converted into Shadow Units to be credited to the Participant's Shadow Unit Account as follows: As to Retainer Fees, on the date such Retainer would otherwise be paid, and in a number of Shadow Units equal to (A) the amount of the Retainer Fee, divided by 2 3 (B) the closing reported sales price, regular way, per Unit on the New York Stock Exchange on the date the Retainer Fee would otherwise be paid; As to Meeting Fees, on the date a Meeting Fee would otherwise be paid, and in a number of Shadow Units equal to (A) the amount of the Meeting Fee, divided by (B) the closing reported sales price, regular way, per Unit on the New York Stock Exchange on the date the Meeting Fee would otherwise be paid. 5.3 Shadow Units Credited for Subsequent Partnership Distributions. On the Distribution Date of any Partnership Distribution, Shadow Units shall be credited to a Participant's Shadow Unit Account in an amount equal to (A) the product of the Shadow Units credited to the Participant's Shadow Unit Account as of the Record Date for such Distribution and the amount of the Partnership Distribution determined on a per Unit basis, divided by (B) the closing reported sales price, regular way, per Unit on the New York Stock Exchange on the Distribution Date. For purposes of this section 5.3 and section 5.2 above, if the appropriate day for determining closing reported sales price is a day that Units are not traded, the closing reported price shall be determined as of the first succeeding day that Units are traded. 5.4 Delivery of Units. Whole Units will be delivered in settlement of the Shadow Units credited to a Participant's Shadow Unit Account, along with cash equal to the value of any fraction of a Unit credited to such Shadow Unit Account, prior to the expiration of 60 (sixty) days following the last day of such Participant's service as a director of PC Advisory Corp. I. 5.5 Funding of Deferral Option to Plan. Although the Company may cause Units subject to be transferred pursuant to the terms of the Deferral Option to be held under a grantor trust 3 4 agreement, the Plan's Deferral Option is unfunded. A Trust, which shall be intended to be a "grantor trust" within the meaning of section 671 of the Code, may be used to assist the Company in meeting its obligations under the Plan. Nothing contained in this Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company, 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 the future distribution of Units 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. 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 Shadow Unit 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. 6. Legal and Other Requirements. The obligation to deliver Units under this Plan shall be subject to all applicable laws, regulations, rules and approvals, including, but not limited to, the effectiveness of a registration statement under the Securities Act of 1933, as amended, if deemed necessary or appropriate by the Committee, covering the Units acquired pursuant to Conversion Rights. A Participant shall have no rights as a holder of Units with respect to any Units covered by Conversion Rights or Shadow Units until the date of delivery of a certificate to the Participant for such Units. Units issued hereunder may be legended as the Committee shall deem appropriate to reflect the restrictions imposed under this Plan or by securities laws generally. 7. Indemnification of Committee. The Company shall indemnify each member of the Committee (which, for purposes of this Section 7, 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 4 5 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. 8. Amendment and Termination of Plan. The Plan may be terminated with respect to any or all Participants at any time by the Board and may be amended by the Board from time to time in any respect. 9. Intentions. This Plan is intended to comply with Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and any provision which would prevent compliance with Rule 16b-3 shall be deemed invalid to the extent permitted by law and deemed necessary by the Committee. 10. Taxes. The Committee may, at its sole discretion, determine to withhold, or instruct the Trustee to withhold, a number of Units otherwise to be distributed under the Plan, the market value of which on the date of such distribution is determined by the Committee to be sufficient to satisfy any federal, state, local and other withholding tax requirements under applicable law. 11. Washington Law to Govern. This Plan shall be governed by and construed in accordance with the laws of the State of Washington. 5 6 12. Effective Date of Plan. This Plan shall become effective upon the approval of the Board. PLUM CREEK MANAGEMENT COMPANY, L.P. /s/ James A. Kraft January 21, 1996 ------------------------------------- ------------------------- James A. Kraft Date Vice President, General Counsel and Secretary 6 EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary information extracted from the Combined Financial Statements of Plum Creek Timber Company, L.P. for the year ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 1000 12-MOS DEC-31-1996 DEC-31-1996 123,892 0 25,122 1,425 53,884 222,485 1,212,338 116,998 1,336,434 69,497 763,400 0 0 0 491,648 1,336,434 633,741 633,741 429,897 468,753 0 0 50,141 224,990 1,391 223,599 0 0 0 223,599 4.71 0
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