SCOTIA PACIFIC COMPANY LLC
$160,700,000 6.55% Class A-1 Timber Collateralized Notes
$243,200,000 7.11% Class A-2 Timber Collateralized Notes
$463,348,000 7.71% Class A-3 Timber Collateralized Notes
Note Purchase Agreement
New York, New York
as of July 9, 1998
SALOMON BROTHERS INC
As Representative of the Initial Purchasers
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Scotia Pacific Company LLC, a Delaware limited liability company (the
"Company") and a wholly-owned subsidiary of The Pacific Lumber Company, a
Delaware corporation ("Palco"), proposes to sell to the several parties named in
Schedule I hereto (the "Initial Purchasers"), for whom we are acting as
representative (the "Representative") $160,700,000 initial principal amount of
its 6.55% Class A-1 Timber Collateralized Notes, $243,200,000 initial principal
amount of its 7.11% Class A-2 Timber Collateralized Notes and $463,348,000
initial principal amount of its 7.71% Class A-3 Timber Collateralized Notes,
each with a final maturity date of July 20, 2028 (collectively, the "Timber
Notes") to be issued under an indenture (the "Indenture") to be dated as of July
20, 1998 between the Company and State Street Bank and Trust Company, as trustee
(the "Trustee").
The obligations of the Company under the Timber Notes will be secured
by a Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and
Assignment of Proceeds (the "Deed of Trust"), to be dated on or prior to July
20, 1998, from the Company to Fidelity National Title Insurance Company as
trustee thereunder, for the benefit of State Street Bank and Trust Company, in
its capacity as collateral agent for the Holders of the Timber Notes and the
Liquidity Providers, as beneficiary and agent of the secured parties, covering
(i) certain timberlands and timber (the "Company Timber Property") which the
Company will own on the Closing Date (A) as successor by merger to Scotia
Pacific Holding Company, a Delaware corporation ("Scotia Pacific") or (B) which
are to be transferred pursuant to a Grant Deed dated on or prior to the Closing
Date from Palco, as grantor, to the Company, as grantee, conveying certain
Company Owned Timberlands to the Company (the "Second Pacific Lumber Grant
Deed"), a Quitclaim Deed dated on or prior to the Closing Date from Palco to the
Company conveying to the Company all of Palco's interest in certain timber
rights affecting the Company Owned Timberland (the "Pacific Lumber Quitclaim
Deed"), three Grant Deeds dated on or prior to the Closing Date from Palco, as
grantor, to the Company, as grantee, conveying the Company Timber Rights to the
Company (collectively, the "Pacific Lumber Timber Deeds") and (ii) certain
contractual rights and certain accounts and proceeds thereof which the Company
will own on the Closing Date (A) as successor by merger to Scotia Pacific or (B)
which are to be transferred pursuant to a Xxxx of Sale and General Assignment
dated as of the Closing Date from Palco to the Company (the "New Xxxx of Sale").
On or prior to the Closing Date (i) the Company and Scotia Pacific
will enter into an Agreement and Plan of Merger (the "Merger Agreement"); (ii)
the Company and Palco will enter into a Master Purchase Agreement (the "New
Master Purchase Agreement"), a Services Agreement (the "New Services
Agreement"), an Additional Services Agreement (the "New Additional Services
Agreement"), a Master Lease Agreement (the "Master Lease Agreement"), and an
Environmental Indemnification Agreement (the "New Environmental Indemnification
Agreement"); (iii) the Company, Palco and Salmon Creek will enter into a
Reciprocal Rights Agreement (the "New Reciprocal Rights Agreement") and a
Transfer Agreement (the Transfer Agreement"); (iv) the Company, Bank of America
National Trust and Savings Association and the other financial institutions
party thereto will enter into a Credit Agreement (the "Credit Agreement"); (v)
the Company, Palco, Salmon Creek and U.S. Bank of California will enter into an
Escrow Agreement (the "New Escrow Agreement") and (vi) the Company and the
Representative, as representative of the Initial Purchasers, will enter into a
Registration Rights Agreement (the "Registration Rights Agreement").
The Second Pacific Lumber Grant Deed, the Pacific Lumber Quitclaim Deed,
the Pacific Lumber Timber Deeds, the Transfer Agreement, the New Xxxx of Sale,
the New Environmental Indemnification Agreement and the New Reciprocal Rights
Agreement are sometimes collectively hereinafter referred to as the "1998
Conveyance Documents." The Indenture, the Deed of Trust, the Merger Agreement,
the New Master Purchase Agreement, the New Services Agreement, the New
Additional Services Agreement, the Master Lease Agreement, the Registration
Rights Agreement, the Credit Agreement, the New Escrow Agreement and the 1998
Conveyance Documents are sometimes collectively hereinafter referred to as the
"1998 Operative Documents."
Defined terms used herein but not defined herein (including Section 18
hereof) shall have the meaning given such terms in the Final Memorandum.
The sale of the Timber Notes to the Initial Purchasers will be made
without registration of the Timber Notes under the Act in reliance upon
exemptions from the registration requirements of the Act.
In connection with the sale of the Timber Notes, the Company has
prepared a preliminary offering memorandum, dated June 19, 1998 (including any
and all exhibits thereto and any information incorporated by reference therein,
the "Preliminary Memorandum"), and a final offering memorandum, dated July 9,
1998 (as amended or supplemented at the Execution Time, including any and all
exhibits thereto (the "Final Memorandum"). Each of the Preliminary Memorandum
and the Final Memorandum sets forth certain information concerning the Company
and the Timber Notes. The Company hereby confirms that it has authorized the use
of the Preliminary Memorandum and the Final Memorandum, and any amendment or
supplement thereto, in connection with the offer and sale of the Timber Notes by
the Initial Purchasers in accordance with applicable law. Unless stated to the
contrary, any references herein to the terms "amend", "amendment" or
"supplement" with respect to the Final Memorandum shall be deemed to refer to
and include any information filed under the Exchange Act, subsequent to the
Execution Time which is incorporated by reference therein.
1. Representations and Warranties. The Company and Palco severally and
not jointly represent and warrant to, and agree with, the Initial Purchasers as
set forth below in this Section 1, it being understood, however, that the
Company represents and warrants only with respect to those matters which pertain
to the Company and Palco represents and warrants only with respect to those
matters which pertain to Palco and its subsidiaries. Certain terms used but not
defined in this Agreement have the meaning ascribed to such terms in Schedule A
to the Indenture.
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. As of its date, and at all times
subsequent thereto up to and as of the Closing, the Final Memorandum, as amended
or supplemented to such time, will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company and Palco make no
representation or warranty as to the information contained in or omitted from
the Preliminary Memorandum or the Final Memorandum, or any amendment or
supplement thereto, in reliance upon and in conformity with information
furnished in writing to the Company or Palco by or on behalf of the Initial
Purchasers through the Representative specifically for inclusion therein.
(b) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf has, directly or indirectly, made offers or
sales of any security, or solicited offers to buy any security, under
circumstances that would require the registration of the Timber Notes under the
Act; provided, however, that no representation or warranty is made with respect
to the manner in which the Timber Notes are distributed by the Initial
Purchasers.
(c) Each of the Company and Palco has been duly formed and is
validly existing as a limited liability company or a corporation, as applicable,
in good standing under the laws of its respective jurisdiction of organization
with the requisite power and authority to own, lease and operate its properties,
to conduct its business as described in the Final Memorandum, and to enter into
and perform its obligations under this Agreement and the 1998 Operative
Documents, and each of them is duly qualified to transact business and, if
applicable, is in good standing under the laws of each respective jurisdiction
in which such qualification is required, whether by reason of ownership or
leasing of property or the conduct of business, except where the failure to so
qualify or be in good standing, if applicable, would not have a Material Adverse
Effect.
(d) This Agreement has been duly authorized, executed and
delivered by the Company and by Palco.
(e) The Timber Notes will be duly authorized by the Company for
issuance and sale to the Initial Purchasers pursuant to this Agreement on or
before the Closing Date. The Timber Notes, when executed by the Company and
authenticated by the Trustee in accordance with the Indenture and delivered
against payment therefor in accordance with the terms thereof, will be duly
executed, authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws and court decisions now or hereafter in effect relating to or
affecting creditors' rights and remedies generally and (ii) general principles
of equity (regardless of whether such enforcement is considered in a proceeding
at law or in equity).
(f) The Indenture will be duly authorized by the Company on
or before the Closing Date and, when executed and delivered by the Company, will
have been duly executed and delivered by the Company, and (assuming the due
authorization, execution and delivery thereof by the Trustee) will constitute a
valid and legally binding instrument of the Company, enforceable against the
Company in accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws and court decisions now or hereafter in effect relating to
or affecting creditors' rights and remedies generally and (ii) general
principles of equity (regardless of whether such enforcement is considered in a
proceeding at law or in equity). The Timber Notes and the Indenture will conform
in all material respects to the descriptions thereof contained in the Final
Memorandum under the caption "Description of the Timber Notes."
(g) The Deed of Trust will be duly authorized by the Company on
or before the Closing Date and, when executed and delivered by the Company, will
have been duly executed and delivered by the Company and (assuming the due
authorization, execution and delivery thereof by each of the other parties
thereto) will constitute a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that (i) enforcement may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws and court decisions now or
hereafter in effect relating to or affecting creditors' rights and remedies
generally and (B) general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity) and (ii)
certain of the remedial provisions therein may be unenforceable in whole or in
part, provided, however, that the inclusion of such provisions does not affect
the enforceability of the Deed of Trust as a whole, and the Deed of Trust,
together with applicable law, is sufficient for the practical realization of the
benefits of the security created thereby. On or before the Closing Date, the
Deed of Trust is in proper form for recording and, as of the Closing Date, will
be duly recorded or submitted for recording in the proper public offices
together with all requisite recording fees and, upon such recording, and filing
in the proper public offices of duly executed UCC-1 Financing Statements
describing the Collateral Mortgaged Property (as defined below), will constitute
a valid, perfected, first priority lien on and security interest in all of the
Mortgaged Property, subject only to Permitted Encumbrances. The Deed of Trust
will conform in all material respects to the description thereof in the Final
Memorandum under the caption "Description of the Timber Notes."
(h) Each of the other 1998 Operative Documents to which the
Company or Palco is a party will be duly authorized on or before the Closing
Date, and when executed and delivered by each of the Company and Palco, will be
duly executed by the Company and Palco, as the case may be, and will constitute
a valid and legally binding obligation of each of the Company and Palco, as the
case may be, enforceable against each of the Company and Palco, as the case may
be, in accordance with its terms, except to the extent that enforcement may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws and court decisions now or hereafter in effect relating to or
affecting creditors' rights and remedies generally and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity). Each such 1998 Operative Document will conform
in all material respects to the descriptions thereof in the Final Memorandum
under the caption "Description of the Timber Notes" or "Description of Certain
Principal Agreements," as applicable.
(i) All of the issued membership interests in the Company have
been duly and validly authorized, and all membership interests in the Company
issued and outstanding are fully paid and nonassessable; all outstanding
membership interests in the Company are owned beneficially and of record by
Palco, free and clear of all pledges, liens, security interests, charges,
claims, equities or encumbrances.
(j) There is no pending or, to the knowledge of the Company or
Palco, threatened, action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator to which the Company or Palco is a
party that (i) could reasonably be expected to have a material adverse effect on
the performance by the Company, Palco or any of its subsidiaries of this
Agreement, or the consummation by the Company, Palco or any of its subsidiaries
of any of the transactions contemplated hereby; or (ii) could reasonably be
expected to have a Material Adverse Effect that has not been disclosed in the
Final Memorandum, and the statements in the Final Memorandum under the headings
"Summary -- The Company -- Regulatory and Environmental Matters; The Headwaters
Agreement," "Risk Factors -- Regulatory and Environmental Factors," "Risk
Factors -- Headwaters Agreement," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Trends," "Business of the
Company -- Regulatory and Environmental Matters," "Business of the Company --
Legal Proceedings," "Certain United States Income Tax Consequences," "Annex 2 --
The Pacific Lumber Company -- Business-- Regulatory and Environmental Matters,"
"Annex 2 -- The Pacific Lumber Company -- Legal Proceedings" and "Annex 2 -- The
Pacific Lumber Company -- Business -- Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Trends" adequately summarize
the matters described therein.
(k) No consent, approval, authorization or order of any court or
government agency or body is required for the consummation by the Company, Palco
or any of its subsidiaries of the transactions contemplated by this Agreement or
the 1998 Operative Documents, except such as may be required under the blue sky
laws of any jurisdiction in connection with the purchase and distribution of the
Timber Notes by the Initial Purchasers and except for the filing with the
California Department of Forestry of a notice of transfer and/or amendments to
any Timber Harvesting Plans being transferred to the Company (which shall be
completed promptly following the Closing Date) and except such authorizations,
approvals, consents or orders which would not have a Material Adverse Effect on
the Company or Palco, as the case may be, if not obtained.
(l) Neither the issuance or sale of the Timber Notes, nor the
consummation of any other of the transactions contemplated by this agreement,
conflicts with, results in a breach of, or constitutes a default under, the
articles of incorporation, by-laws, certificate of formation or agreement of
limited liability company, or other organizational documents, as applicable, of
the Company or Palco, or the terms of any indenture or other material agreement
or instrument to which the Company or Palco is a party or by which any of their
properties are bound, or any statute, law, rule or regulation applicable to the
Company or Palco, or any order, judgment or decree applicable to the Company or
Palco of any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company or Palco, where such conflict,
breach or default, singly or in the aggregate, would have a Material Adverse
Effect.
(m) Neither the Company nor Palco is in violation of its
respective articles of incorporation, by-laws, certificate of formation,
agreement of limited liability company or other organization documents, or of
any law, ordinance, administrative or governmental rule or regulation applicable
to the Company or Palco, or of any decree of any court or governmental agency or
body having jurisdiction over the Company or Palco, or in default in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or of any agreement,
indenture, lease or other instrument to which the Company or Palco is a party or
by which either of them or any of their respective properties may be bound,
where such violation or default, singly or in the aggregate, would have a
Material Adverse Effect.
(n) Each of the Company and Palco will, on or before the Closing
Date, have all licenses, consents, approvals, authorizations, permits,
franchises and other agreements as are necessary to own and maintain their
respective properties and to conduct their respective businesses in the manner
described in the Final Memorandum, except where the failure to have any such
licenses, consents, approvals, authorizations, permits, franchises and other
agreements would not have a Material Adverse Effect on the Company or Palco, and
the Company and Palco are in compliance in all material respects with such
licenses, consents, approvals, authorizations, permits, franchises and other
agreements, all of which are in full force and effect (except as set forth in
the Final Memorandum).
(o) The accountants, Xxxxxx Xxxxxxxx LLP, who have certified or
shall certify the financial statements filed or to be filed as part of the Final
Memorandum are independent public accountants.
(p) The financial statements, together with related schedules and
notes thereto forming part of the Final Memorandum, as of its date, will fairly
present the financial position, results of operations and cash flows of the
Company and Palco on the basis stated in the Final Memorandum and at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed or referred to therein; the pro forma
financial statements included in the Final Memorandum will include assumptions
that provide a reasonable basis for presenting the significant effects directly
attributable to the transactions and events described therein, the related pro
forma adjustments give appropriate effect to those assumptions; the pro-forma
financial information included in the Final Memorandum, as of its date, will
comply in all material respects with the requirements of Regulation S-X, and the
pro forma adjustments have been properly applied to the historical amounts in
the compilation of such information; the selected financial data set forth under
the caption "Selected Historical and Pro Forma Financial Data" in the Final
Memorandum, as of its date, will fairly present, on the basis stated in the
Final Memorandum, the information included therein; the other financial
information and data set forth in the Final Memorandum (and any amendments or
supplements thereto), as of its date, will be fairly presented, and have been
prepared on a basis consistent with such financial statements and the books and
records of the Company and Palco; and the Initial Harvest Schedule and the
Scheduled Harvest Schedule (each as defined in the Final Memorandum) and all
other data related to possible future harvesting levels, prices and expenses
included in the Final Memorandum or the Structuring Cash Flows (as defined in
the Final Memorandum) and the assumptions embodied in the Minimum Principal
Amortization Schedules and the Scheduled Amortization Schedules (each as defined
in the Final Memorandum) and the Structuring Cash Flows, have been prepared by
the Company and Palco in good faith and are based upon assumptions the Company
and Palco believe to be reasonable in all material respects under the
circumstances in which they were prepared.
(q) Except as disclosed or referred to in the Final Memorandum,
subsequent to the respective dates as of which such information is given in the
Final Memorandum, neither the Company nor Palco has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company, or to Palco and
its subsidiaries taken as a whole, and there has not been any material change in
the member capital, capital stock or other equity, or material increase in the
short-term debt or long-term debt, of the Company or Palco or any material
adverse change, or any development involving or which may reasonably be expected
to involve, a prospective material adverse change, in the condition (financial
or other), business, net worth, results of operations or prospects of the
Company, or of Palco and its subsidiaries taken as a whole.
(r) Except as disclosed in the Final Memorandum, Palco will have
good title to all property (real and personal) described in the Final Memorandum
as being owned by it that are material to Palco and its subsidiaries taken as a
whole and, upon the consummation of the transactions on or prior to the Closing
Date, the Company will have good and marketable title to all property (real and
personal) described in the Final Memorandum to be owned by it that are material
to the Company, as of the Closing Date, in each case free and clear of all
liens, claims, security interests or other encumbrances except the Lien of the
Deed of Trust and Permitted Encumbrances and such as are described in the Final
Memorandum, or such as are not materially burdensome and do not interfere in any
material respect with the conduct of the business of Palco and its subsidiaries
taken as a whole, or the Company, respectively, and the property held under
lease by each of the Company and Palco is held by it, or will be held by it, as
applicable, under valid and enforceable leases, with only such exceptions as in
the aggregate are not materially burdensome and do not interfere in any material
respect with the conduct of the business of the Company, or of Palco and its
subsidiaries taken as a whole.
(s) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Timber Notes in the United States. The
Company has not distributed, and will not distribute prior to the Closing Date,
any offering material in connection with the offering and sale of the Timber
Notes other than the Preliminary Memorandum and the Final Memorandum. The
Company and its Affiliates and each person acting on its or their behalf has
complied with the offering restrictions of Regulation S; provided, however, that
no representation or warranty is made with respect to the manner in which the
Timber Notes are distributed by the Initial Purchasers.
(t) Other than as described in the Final Memorandum, there are no
outstanding warrants, options or other agreements that constitute the right to
receive or purchase any membership interest in the Company, and there are no
restrictions upon the voting or transfer of, or the declaration or payment of
any dividend or distribution on, any membership interest in the Company.
(u) No holder of securities of the Company has the right to
require the Company to register securities of the Company under the Act except
as set forth in the Registration Rights Agreement.
(v) Neither the Company nor Palco is an "investment company" or
under the "control" of an "investment company" as such terms are defined under
the Investment Company Act of 1940, as amended.
(w) The Company will use the net proceeds received by it from a
sale of the Timber Notes in the manner specified in the Final Memorandum under
"Use of Proceeds and Certain Related Transactions."
(x) Except as disclosed in the Preliminary Memorandum and the
Final Memorandum: (i) the Company and Palco are in compliance in all material
respects with all applicable federal, state, local and foreign laws and
regulations (which compliance includes, without limitation, the possession of
all material permits and other governmental authorizations, and compliance with
the terms and conditions thereof) relating to protection of human health or the
environment or imposing liability or standards of conduct concerning any
Hazardous Materials (including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, as such term
is defined below, or the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of any written Hazardous
Materials) (collectively, "Environmental Laws"), and there are no circumstances
that would prevent or interfere with such compliance in the future, (ii) the
Company and Palco have not received any written notice and there is no pending
or, to the knowledge of the Company and Palco, threatened action, suit or
proceeding before or by any court or governmental agency or body (hereinafter,
"Environmental Claim") alleging potential liability (including, but not limited
to, potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) of the Company, Palco, or any person or entity for whom the
Company or Palco has retained or assumed responsibility contractually, arising
out of, based on, or resulting from the presence, release, discharge, emission
or disposal into the environment, of any Hazardous Materials at any location,
whether or not owned or operated by the Company or Palco or any violation or
alleged violation of any Environmental Law which singly or in the aggregate
would have a Material Adverse Effect on the Company, or Palco and its
subsidiaries taken as a whole, and (iii) there are no past or present actions,
activities, circumstances, conditions, events or incidents that could reasonably
be expected to form the basis for any such Environmental Claim except where such
non-compliance, liability or requirement to take (or refrain from taking)
action, or potential liability (as the case may be), singly or in the aggregate,
would not have a Material Adverse Effect on the Company, or Palco and its
subsidiaries, taken as a whole; the term "Hazardous Materials" means any
"hazardous constituent," "toxic chemical," "toxic substance," "acutely toxic
substance," "pollutant" or "contaminant," or any other formulation intended to
define, list or classify substances by reason of hazardous, dangerous, toxic or
other deleterious properties, such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," as defined in any
Environmental Law (including, without limitation, asbestos, polychlorinated
biphenyls, oil, petroleum, petroleum-related or petroleum-derived products,
natural gas, natural gas liquids, liquified natural gas or synthetic natural
gas), or any similar substances, (b) any substance the presence of which on any
property included in the Company Timber Properties is prohibited by any
Environmental Law, (c) any underground storage tanks, (d) any flammable
substances or explosives or any radioactive materials and (e) any other
substances subject to any rules or regulations (including, without limitation,
any notice requirements or special handling requirements) of any governmental
authority under any Environmental Laws.
(y) Each of the representations and warranties to be made by the
Company in the Deed of Trust are made to the Initial Purchasers, to the same
extent as if fully set forth herein.
(z) The Company is either exempt from or is subject to and in
full compliance with the reporting requirements of Section 13 or Section 15(d)
of the Exchange Act.
(aa) The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any securities of the Company
(except as contemplated by this Agreement).
(bb) There are no material transfer taxes or other similar fees
or charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the execution and
delivery of this Agreement or the issuance by the Company or sale by the Company
of the Timber Notes, except in connection with the real property transfers
described in the Final Memorandum.
(cc) The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a material
adverse effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company, whether or not arising from transactions
in the ordinary course of business, except as set forth in or contemplated in
the Final Memorandum (exclusive of any amendment or supplement thereto) and has
paid all taxes required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is currently being
contested in good faith or as would not have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or properties
of the Company, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Final Memorandum
(exclusive of any amendment or supplement thereto).
(dd) No labor problem or dispute with the employees of the
Company or Palco or any of its subsidiaries exists or is threatened or imminent.
(ee) The Company, Palco and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged; all policies of insurance and fidelity or surety bonds insuring the
Company or its business, assets, employees, officers and directors are in full
force and effect; the Company is in compliance with the terms of such policies
and instruments in all material respects; and there are no claims by the Company
under any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; the Company has not
been refused any insurance coverage sought or applied for; and the Company has
no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company whether
or not arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Final Memorandum (exclusive of any amendment
or supplement thereto).
(ff) The Company owns or leases all such properties as are
necessary to the conduct of its operations as presently conducted.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to Initial Purchasers, and Initial Purchasers agree to purchase
from the Company, at a purchase price of 98.425%, 98.175% and 97.480% (which
price reflects the structuring fee set forth in Section 14 hereof) on the
principal amount of the Class A-1 Timber Notes, Class A-2 Timber Notes and the
Class A-3 Timber Notes, respectively, in the amounts set forth in Schedule I
hereto, plus accrued interest, if any, on such Timber Notes from July 20, 1998
to the Closing Date.
3. Delivery and Payment. Delivery of and payment for the Timber Notes
shall be made at the office of Kramer, Levin, Naftalis & Xxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 AM, New York City time, on July 20, 1998,
which date and time may be modified by agreement between the Representative and
the Company or as provided in Section 9 hereof (such date and time of delivery
and payment for the Timber Notes being herein called the "Closing Date").
Delivery of the Timber Notes shall be made to the Initial Purchasers against
payment by the Initial Purchasers of the aggregate purchase price thereof to or
upon the order of the Company by wire transfer of immediately available funds.
Delivery of the Timber Notes shall be made through the facilities of The
Depository Trust Company unless the Representative shall otherwise instruct.
Certificates for the Timber Notes shall be registered in such names and in such
denominations as the Representative may request not less than three full
business days in advance of the Closing Date.
The Company agrees to have the Timber Notes available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 1:00 p.m. on the business day prior to the Closing Date.
4. Offering by the Initial Purchasers. Each Initial Purchaser,
severally and not jointly, represents and warrants to and agrees with the
Company that:
(a) It has not offered or sold, and will not offer or sell, any
Timber Notes except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Act) and that, in
connection with each such sale, it has taken or will take reasonable steps to
ensure that the purchaser of such Timber Notes is aware that such sale is being
made in reliance on Rule 144A; (ii) to other institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D) who
provide to it and to the Company a letter in the form of Exhibit A hereto or a
letter containing substantially similar representations and agreements; or (iii)
outside the United States to persons other than U.S. persons in accordance with
Regulation S.
(b) Neither it nor any person acting on its behalf has made or
will make offers or sales of the Timber Notes in the United States by means of
any form of general solicitation or general advertising (within the meaning of
Regulation D) in the United States.
5. Agreements. The Company and Palco jointly and severally agree with
each Initial Purchaser that:
(a) The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Timber Notes for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such suspension and, if issued, to obtain
as soon as possible the withdrawal thereof.
(b) The Company will furnish to each Initial Purchaser and to
counsel for the Initial Purchasers, without charge, during the period referred
to in paragraph (d) below, as many copies of the Final Memorandum and any
amendments and supplements thereto as it may reasonably request.
(c) The Company will not amend or supplement the Final
Memorandum, other than by filing documents under the Exchange Act which are
incorporated by reference therein, without the prior written consent of the
Representative; provided, however, that, prior to the Closing Date, the Company
will not file any document under the Exchange Act which is incorporated by
reference in the Final Memorandum unless, prior to such proposed filing, the
Company has furnished the Representative with a copy of such document for its
review and the Representative has not reasonably objected to the filing of such
document. The Company will promptly advise the Representative when any document
filed under the Exchange Act which is incorporated by reference in the Final
Memorandum shall have been filed with the Commission.
(d) If at any time prior to the completion of the sale of the
Timber Notes by the Initial Purchasers (as determined by the Representative),
any event occurs as a result of which the Final Memorandum, as then amended or
supplemented, would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it should
be necessary to amend or supplement the Final Memorandum to comply with
applicable law, the Company promptly (i) will notify the Representative of any
such event and
(ii) subject to the requirements of paragraph (c) of this Section 5, will
prepare an amendment or supplement which will correct such statement or omission
or effect such compliance.
(e) The Company will cooperate with the Initial Purchasers and
their counsel in connection with the qualification of the Timber Notes for offer
and sale under the applicable state securities or blue sky laws of such
jurisdictions as the Initial Purchasers may designate, will maintain such
qualifications in effect for so long as required for the distribution of the
Timber Notes and to facilitate secondary transactions in the Timber Notes, and
will cooperate with the Initial Purchasers in any determination of the legality
of the Timber Notes for purchase by institutional investors; provided, however,
that the Company shall not be obligated to qualify to do business in any
jurisdiction in which it is not so qualified or to take any action that would
subject it to general consent to service of process in any jurisdiction in which
it is not now so subject. The Company will pay the fees in connection with any
review of the offering and the fees of any rating agencies in connection with
the review and rating of the Timber Notes.
(f) Neither the Company, or any Affiliate, nor any person acting
on its or their behalf will, directly or indirectly, make offers or sales of any
security, or solicit offers to buy any security, under circumstances that would
require the registration of the Timber Notes under the Act, except as
contemplated in the Registration Rights Agreement.
(g) Neither the Company, nor any Affiliate, nor any person acting
on their behalf will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with any offer or
sale of the Timber Notes in the United States except as contemplated in the
Registration Rights Agreement.
(h) So long as any of the Timber Notes are restricted securities
within the meaning of Rule 144(a)(3) under the Act, the Company will, during any
period (except any period in which it is either (i) subject to, and in
compliance with, Section 13 or 15(d) of the Exchange Act or (ii) exempt from
such reporting requirements in accordance with Rule 12g3-2(b) under the Exchange
Act), provide to each holder of such restricted securities and to each
prospective purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Act. This
covenant is intended to be for the benefit of the holders, and the prospective
purchasers designated by such holders, from time to time of such restricted
securities.
(i) The Company, its Affiliates, and any person acting on their
behalf will comply with the offering restrictions of Regulation S; provided,
however, that no covenant is made with respect to the manner in which the Timber
Notes are distributed by the Initial Purchasers.
(j) The Company will cooperate with the Representative and use
its best efforts to permit the Timber Notes to be eligible for clearance and
settlement through The Depository Trust Company.
(k) Neither the Company nor any Affiliate will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Timber Notes.
(l) The Company and Palco jointly and severally agree to pay the
costs and expenses relating to the following matters: (i) the preparation of the
1998 Operative Documents, the issuance of the Timber Notes and the fees of the
Trustee; (ii) the preparation, printing or reproduction of the Preliminary
Memorandum and Final Memorandum and each amendment or supplement to either of
them; (iii) the printing (or reproduction) and delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of the
Preliminary Memorandum and Final Memorandum, and all amendments or supplements
to either of them, as may, in each case, be reasonably requested for use in
connection with the offering and sale of the Timber Notes; (iv) the preparation,
printing, authentication, issuance and delivery of certificates for the Timber
Notes, including any stamp or transfer taxes in connection with the original
issuance and sale of the Timber Notes; (v) the reproduction and delivery of this
Agreement, any blue sky memorandum and all other agreements or documents
reproduced and delivered in connection with the offering of the Timber Notes;
(vi) any registration or qualification of the Timber Notes for offer and sale
under the Timber Notes or blue sky laws of the several states (including filing
fees and the reasonable fees and expenses of counsel for the Initial Purchasers
relating to such registration and qualification);(vii) the transportation and
other expenses incurred by or on behalf of Company representatives in connection
with presentations to prospective purchasers of the Timber Notes; (viii) the
fees and expenses of the Company s accountants and the fees and expenses of
counsel (including local and special counsel) for the Company; and (ix) all
other costs and expenses of the Company and Palco incident to the performance of
their obligations hereunder. Notwithstanding anything to the contrary contained
in this subsection (l), neither the Company nor Palco shall be liable for fees
and expenses of counsel to the Initial Purchasers (except pursuant to clauses
(v) and (vi) herein).
(m) The Company, Palco and Salmon Creek shall execute and deliver
all such documents or instruments as the Title Company (as hereinafter defined)
may reasonably request in connection with the recordation of the Deed of Trust
and the issuance of the Title Policy (as hereinafter defined).
(n) The Company shall deliver to the Representative a copy of
each Monthly Trustee Certificate, Note Payment Trustee Certificate and each
statement sent to the Noteholders. The Initial Purchasers acknowledge that the
contents of each Monthly Trustee Certificate and Note Payment Trustee
Certificate are confidential information and agrees to keeps such information
confidential.
6. Conditions to the Obligations of the Initial Purchaser. The
obligations of the Initial Purchasers to purchase the Timber Notes shall be
subject to the accuracy in all material respects of the representations and
warranties on the part of the Company and Palco contained herein as of the
Execution Time and the Closing Date, to the accuracy in all material respects of
the statements of the Company and Palco made in any certificates pursuant to the
provisions hereof, to the performance in all material respects by the Company
and Palco of their obligations hereunder and to the following additional
conditions:
(a) The Company shall have furnished to the Initial Purchasers
and the Trustee the opinions of:
(i) Kramer, Levin, Naftalis & Xxxxxxx, counsel for the Company
and Palco, dated the Closing Date, to the effect that:
(1) each of the Company and Palco has been duly organized
and is validly existing as a limited liability company and a
corporation, respectively, under the laws of the State of Delaware,
with the requisite power and authority to own, lease and operate its
respective properties, to conduct its business as described in the
Final Memorandum, and to enter into and perform its respective
obligations under this Agreement and the 1998 Operative Documents, as
applicable;
(2) this Agreement has been duly authorized, executed and
delivered by the Company and by Palco;
(3) the Timber Notes have been duly authorized by the
Company for issuance and sale to the Initial Purchasers pursuant
to this Agreement. The Timber Notes, when executed by the Company and
authenticated by the Trustee in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers
pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company enforceable against the
Company in accordance with their terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance or
transfer or other laws and court decisions now or hereafter in effect,
relating to or affecting the rights of creditors generally and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief are subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought;
(4) the Indenture has been duly authorized, executed and
delivered by the Company, (assuming the due authorization, execution
and delivery thereof by the Trustee) constitutes a valid and legally
binding instrument of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or transfer or other laws and court
decisions now or hereafter in effect, relating to or affecting the
rights of creditors generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought, and the Timber
Notes and the Indenture conform in all material respects to the
statements relating thereto contained in the Final Memorandum under
the caption "Description of the Timber Notes;"
(5) the Deed of Trust has been duly authorized, executed and
delivered by the Company;
(6) each of the other 1998 Operative Documents to which the
Company or Palco is a party has been duly authorized, executed and
delivered by the Company and by Palco, as the case may be, and the New
Master Purchase Agreement and the New Services Agreement conform in
all material respects to the statements relating thereto contained in
the Final Memorandum under the caption "Description of Certain
Principal Agreements";
(7) no consent, approval, authorization or order of any
court or governmental agency is legally required to be obtained by the
Company or Palco in connection with the sale of the Timber Notes by
the Company to the Initial Purchasers under this Agreement (except, in
each case, such as may be required under state securities or blue sky
laws, as to which no opinion need be expressed), except for the filing
with the California Department of Forestry of a notice of transfer
and/or amendments to any Timber Harvesting Plans being transferred to
the Company (which shall be completed promptly following the Closing
Date) and except such authorizations, approvals, consents or orders
which would not have a Material Adverse Effect on the Company if not
obtained;
(8) neither the issue and sale of the Timber Notes by the
Company to the Initial Purchasers under this Agreement, nor the
execution and delivery by the Company and Palco of this Agreement or
the 1998 Operative Documents, violates any applicable law (other than
state securities or blue sky laws or regulations, as to which no
opinion need be expressed) or the articles of incorporation,
certificate of formation, agreement of limited liability company,
by-laws or other organizational documents, as applicable, of the
Company or Palco, or any judgment, order or decree known to such
counsel to be applicable to the Company or Palco of any court,
regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company or Palco (in each
case, as in effect on the date of the opinion) except, in each case,
where such violation would not have a Material Adverse Effect;
(9) assuming the accuracy of the representations and
warranties and compliance with the agreements contained herein, no
registration of the Timber Notes under the Act, and no qualification
of an indenture under the Trust Indenture Act, are required for the
offer and sale by the Initial Purchasers of the Timber Notes in the
manner contemplated by this Agreement; and
(10) the Company is not required to be registered as an
"investment company" and is not under the "control" of an "investment
company" as such terms are defined under the Investment Company Act of
1940, as amended.
(ii) the General Counsel or a Managing Counsel of the Company,
dated the Closing Date, to the effect that:
(1) to the knowledge of such counsel, after due inquiry, the
Company is duly qualified to transact business and is in good standing
in each jurisdiction in which such qualification is required, except
where the failure to so qualify or be in good standing should not
reasonably be expected to have a Material Adverse Effect on the
Company;
(2) to the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company
which could have a Material Adverse Effect on the Company other than
those that were disclosed in the Preliminary Memorandum and in the
Final Memorandum;
(3) all of the issued and outstanding membership interests
in the Company have been duly authorized and validly issued, are fully
paid and nonassessable and, to the knowledge of such counsel, all
outstanding membership interests of the Company are owned beneficially
and of record by Palco free and clear of all pledges, liens, security
interests, charges, claims, equities, encumbrances, preemptive rights
or other restrictions;
(4) to the knowledge of such counsel, there are no material
franchises, contracts or other instruments to which the Company is a
party or by which it may be bound other than those described in the
Final Memorandum or attached or incorporated by reference as exhibits
thereto;
(5) no authorization, approval, consent or order of any
court or governmental authority or agency is legally required to be
obtained by the Company in connection with the sale of the Timber
Notes to the Initial Purchasers under the Agreement and the other
transactions contemplated by the 1998 Operative Documents (except such
as may be required under state securities or blue sky laws or
regulations, as to which no opinion is expressed), and except for the
filing with the California Department of Forestry of a notice of
transfer and/or amendments to any Timber Harvesting Plans being
transferred to the Company (which shall be completed promptly
following the Closing Date) and except such authorizations, approvals,
consents or orders which would not have a Material Adverse Effect on
the Company if not obtained. The execution and delivery by the Company
of this Agreement and the 1998 Operative Documents and the
consummation by the Company of the transactions contemplated therein
does not conflict with, result in a breach or violation of, or
constitute a default under (i) the provisions of the certificate of
formation, agreement of limited liability company or other
organizational document of the Company, (ii) the terms of any
indenture, agreement or other instrument known to such counsel after
due inquiry, and to which the Company is a party or bound, or (iii)
any applicable law or administrative regulation, the breach or
violation of which have a Material Adverse Effect on the Company
(other than state securities or blue sky laws or regulations, as to
which no opinion is expressed), or administrative or court decree
entered against or applicable to the Company;
(6) to the knowledge of such counsel, after due inquiry, the
descriptions contained in the Final Memorandum under "Summary -- The
Company -- Regulatory and Environmental Matters; The Headwaters
Agreement," "Risk Factors -- Regulatory and Environmental Factors,"
"Risk Factors -- Headwaters Agreement," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Trends,"
and "Business of the Company -- Regulatory and Environmental Matters,"
"Business of the Company - - Legal Proceedings" (other than numerical
computations as to which no opinion is expressed) adequately summarize
in all material respects the matters described therein; and
(iii) the General Counsel or a Managing Counsel of Palco, dated
the Closing Date, to the effect that:
(1) to the knowledge of such counsel, after due inquiry,
Palco is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such
qualification is required, except where the failure to so qualify or
be in good standing could not reasonably be expected to have a
Material Adverse Effect on Palco;
(2) to the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against Palco which
could have a Material Adverse Effect on Palco other than those that
were disclosed in the Preliminary Memorandum and in the Final
Memorandum;
(3) all outstanding membership interests of the Company are
owned beneficially and of record by Palco free and clear of all
pledges, liens, security interests, charges, claims, equities,
encumbrances, preemptive rights or other restrictions;
(4) no authorization, approval, consent or order of
any court or governmental authority or agency is legally required to
be obtained by Palco in connection with the sale of the Timber Notes
to the Initial Purchasers under this Agreement and the other
transactions contemplated by the 1998 Operative Documents (except such
as may be required under state securities or blue sky laws or
regulations, as to which no opinion is expressed), except for the
filing with the California Department of Forestry of a notice of
transfer and/or amendments to any Timber Harvesting Plans being
transferred to the Company (which shall be completed promptly
following the Closing Date) and except such authorizations, approvals,
consents or orders which would not have a Material Adverse Effect on
Palco if not obtained. The execution and delivery by Palco of this
Agreement and the 1998 Operative Documents and the consummation by
Palco of the transactions contemplated therein does not conflict with,
result in a breach or violation of, or constitute a default under (i)
the provisions of the certificate of incorporation, or by-laws, of
Palco, (ii) the terms of any indenture, agreement or other instrument
known to such counsel after due inquiry, and to which Palco is a party
or bound, or (iii) any applicable law or administrative regulation,
the breach or violation of which have a Material Adverse Effect (other
than state securities or blue sky laws or regulations, as to which no
opinion is expressed), or administrative or court decree entered
against or applicable to the Company or Palco;
(5) to the knowledge of such counsel, after due inquiry, the
descriptions contained in the Final Memorandum under "Summary -- The
Company -- Regulatory and Environmental Matters; The Headwaters
Agreement," "Risk Factors -- Regulatory and Environmental Factors,"
"Risk Factors -- Headwaters Agreement," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Trends"
and "Business of the Company -- Regulatory and Environmental Matters,"
"Business of the Company - - Legal Proceedings" (other than numerical
computations as to which no opinion is expressed) adequately
summarizes in all material respects the matters described therein; and
Each counsel referred to in paragraphs (i), (ii) and (iii) shall also
state that he or she has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Initial Purchaser at
which the contents of the Final Memorandum and related material were discussed
and have reviewed certain other documents and, although such counsel is not
passing upon and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Final Memorandum on
the basis of the foregoing, but without independent check or verification, each
such counsel confirms to you that no information has come to his or her
attention which has caused him or her to believe that the Final Memorandum
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. Without limiting the foregoing, such counsel may further state
that he or she assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial statements and
schedules and other financial and statistical data included in or excluded from
the Final Memorandum, and he or she has not examined the accounting, financial
or statistical records from which such financial statements, schedules and data
are derived.
In rendering such opinion, each such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
States of Delaware or New York (with respect to paragraph (i)) or California
(with respect to paragraphs (ii) and (iii)) or the United States, to the extent
he or she deems proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Initial Purchaser and (B) as to matters of fact,
to the extent they deem proper, on certificates of responsible officers of the
Company, Palco and public officials. References to the Final Memorandum in this
paragraph (a) include any amendments or supplements thereto at the Closing Date.
(b) The Initial Purchaser shall have received from Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, counsel for the Initial Purchaser, such opinion or
opinions, dated the Closing Date, with respect to the issuance and sale of the
Timber Notes, the Indenture, the fiduciary duties of the independent managers of
the Company, the Final Memorandum (together with any amendments or supplements
thereto) and other related matters as the Initial Purchaser may reasonably
require, and the Company shall have furnished to such counsel such documents as
they reasonably request for the purpose of enabling them to pass upon such
matters.
(c) The Company shall have furnished to the Initial Purchaser and
the Trustee the opinion of Xxxxxxxx Xxxxxx Xxxxxxx & Xxxxxxx LLP, California
counsel for the Company, Palco, and Salmon Creek dated the Closing Date, to the
effect that:
(i) the Deed of Trust has been duly executed and delivered by the
Company and, assuming due authorization, is a valid and legally binding
obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that (1) enforcement may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or transfer or other laws and court decisions now or hereafter
in effect, relating to or affecting the rights of creditors generally and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief are subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought and (2)
certain of the remedial provisions therein may be unenforceable in whole or
in part, provided, however, that the inclusion of such provisions does not
affect the enforceability of the Deed of Trust as a whole, and the Deed of
Trust, together with applicable law, is sufficient for the practical
realization of the benefits of the security created thereby;
(ii) the Deed of Trust, the 1998 Conveyance Documents, the New
Master Purchase Agreement, the New Services Agreement, the New Additional
Services Agreement, the Master Lease Agreement and the New Escrow Agreement
have been duly executed and delivered by the Company, Palco and Salmon
Creek and, assuming due authorization, each such agreement is a valid and
legally binding obligation of the Company and Palco, as the case may be,
enforceable against the Company and Palco, as the case may be, in
accordance with its terms, except to the extent that enforcement may be
limited by (1) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or transfer or other laws and court decisions now or
hereafter in effect, relating to or affecting the rights of creditors
generally and (2) the remedy of specific performance and injunctive and
other forms of equitable relief are subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought;
(iii) to the knowledge of such counsel, no consent, approval,
authorization or order of any California court or governmental agency or
body is required for the execution and delivery of this Agreement and the
1998 Operative Documents, the Merger and the issue and sale of the Timber
Notes, the transfer of the Transferred Property to the Company or the
creation of the lien described in the Deed of Trust (except such as may be
required under the blue sky laws of such state in connection with the
purchase and distribution of the Timber Notes by the Initial Purchasers, as
to which no opinion need be given), and such other approvals (specified in
such opinion) as have been obtained, except for the filing with the
California Department of Forestry of a notice of transfer and/or amendments
to any Timber Harvesting Plans being transferred to the Company, which will
be obtained promptly following the Closing Date, and except such
authorizations, approvals, consents or orders which would not have a
Material Adverse Effect on the Company, Palco or Salmon Creek, as the
case may be, if not obtained;
(iv) to the knowledge of such counsel, neither the execution and
delivery of this Agreement and the 1998 Operative Documents, the issue and
sale of the Timber Notes, the Merger, the Company Transfer nor the Palco
Transfer (as such terms are defined in the Final Memorandum) or the
creation of the lien described in the Deed of Trust, will conflict with any
California statute, law, rule or regulation;
(v) the Deed of Trust is in proper form for recording, and in
form sufficient to create a valid lien in favor of the trustee thereunder
for the benefit of the Collateral Agent, as beneficiary. Upon the due
execution and delivery and proper recordation of the Deed of Trust in the
Official Records of Humboldt County, California, the Deed of Trust will
provide constructive notice of a valid lien against the real property
described therein in favor of the trustee thereunder for the benefit of the
Collateral Agent, as beneficiary. Except for the recording of a Notice of
Intent to Preserve Security Interest pursuant to California Civil Code
Sections 880.310-880.370, it is not necessary to rerecord the Deed of Trust
in order to maintain the priority of the lien against the real property
created thereby; and
(vi) the UCC-1 financing statement with respect to that portion
of the Mortgaged Property to which Article 9 of the Uniform Commercial Code
applies (the "Collateral Mortgaged Property") is in appropriate form for
filing with the California Secretary of State; upon such filing and the
recording of the Deed of Trust as a fixture filing in the official records
of Humboldt County, all action will have been taken to create and to
perfect the security interest granted by the Deed of Trust in the
Collateral Mortgaged Property.
(d) The Company shall have furnished to the Representative a
certificate, signed by its Chairman of the Board, the President or Vice
President and the Chief Financial Officer, dated the Closing Date, to the effect
that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) since the date of the most recent financial statements
included in the Final Memorandum (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial or
other), earnings, business, prospects or properties of the Company, whether
or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Final Memorandum (exclusive of any
supplement thereto).
(e) Palco shall have furnished to the Representative a
certificate, signed by its Chairman of the Board, the President, Vice President
or the Chief Financial Officer, dated the Closing Date, to the effect that:
(i) the representations and warranties of Palco in this Agreement
are true and correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date and Palco has complied
with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) since the date of the most recent financial statements
included in the Final Memorandum (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial or
other), earnings, business, prospects or properties of Palco and its
subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in
the Final Memorandum (exclusive of any supplement thereto).
(f) As of the date hereof and at the Closing Date, the Company
and Palco shall have requested and caused Xxxxxx Xxxxxxxx LLP to furnish to the
Representative letters, dated respectively as of the date hereof and as of the
Closing Date, in form and substance satisfactory to the Representative,
confirming that they are independent accountants under Rule 101 of the AICPA's
Code of Professional Conduct and its interpretations and rulings, that they have
performed a review of the unaudited interim financial information of the Company
and Palco for the 3- month period ended March 31, 1998 and as of March 31, 1998
and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the Final
Memorandum and reported on by them are fairly stated in accordance with
generally accepted accounting principles;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and Palco and its subsidiaries;
their limited review in accordance with the standards established under
Statement on Auditing Standards No. 71, of the unaudited interim financial
information for the 3-month period ended March 31, 1998, and as of March
31, 1998, carrying out certain specified procedures (but not an examination
in accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of the
directors and/or managers of the Company and Palco; and inquiries of
certain officials of the Company who have responsibility for financial and
accounting matters of the Company as to transactions and events subsequent
to March 31, 1998, nothing came to their attention which caused them to
believe that:
(1) any material modifications should be made to the
unaudited financial statements included in the Final Memorandum, for
them to be in conformity with generally accepted accounting
principles; or
(2) at July 9, 1998 or the Closing Date, as applicable there
was any change in the member capital, capital stock or long-term debt
of the Company or Palco or any decreases in net current assets or net
assets as compared with amounts shown in the March 31, 1998 financial
statements, or for the period from April 1, 1998 to July 9, 1998 or
the Closing Date, as applicable there were any decreases, compared
with the corresponding period in the preceding year, in net sales or
of net income except for changes or decreases that the Final
Memorandum discloses have occurred or may occur.
(iii) they have performed certain other specified procedures as a
result of which they determined that (A) certain information of an
accounting or financial nature (which is limited to accounting or financial
information derived from the general accounting records of the Company and
Palco) set forth in the Final Memorandum, including the information set
forth under the captions "Prospectus Summary," "Overview and Structure of
the Transaction," "Risk Factors," "Use of Proceeds and Certain Related
Transactions," "Other Financings of Pacific Lumber," "Capitalization,"
"Selected Historical and Pro Forma Financial Data," "Notes to Unaudited Pro
Forma Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business of the Company,"
"Management," "Description of the Timber Notes," "Annex 1 - Structuring
Schedule Assumptions" and "Annex 2 - The Pacific Lumber Company" in the
Final Memorandum is mathematically accurate and agrees with the accounting
records of the Company and Palco, or, in the case of Annex 1, is
mathematically accurate and agrees with the financial model prepared by the
Company, in each case excluding any questions of legal interpretation and
(B) certain information of an accounting or financial nature set forth in
certain written presentations provided to the Rating Agencies agrees with
the accounting records of the Company and Palco; and
(iv) they have determined that the pro forma adjustments have
been properly applied to the historical financial statements (but no
comment is made to the propriety or amount of the pro forma adjustments).
References to the Final Memorandum in this paragraph include any
amendment or supplement thereto at the date of the letter.
(g) Subsequent to the date hereof, or, if earlier, the dates as
of which information is given in the Final Memorandum, there shall not have been
(i) any change or decrease specified in the letter or letters referred to in
paragraph (f) of this Section 6 or (ii) any change, or any development involving
a prospective change, in or affecting the business or properties of the Company
and Palco the effect of which, in any case referred to in clause (i) or (ii)
above, is, in the judgment of the Initial Purchasers, so material and adverse as
to make it impractical or inadvisable to proceed with the offering or the
delivery of the Timber Notes as contemplated by the Final Memorandum.
(h) On or before the Closing Date, the Representative shall have
received satisfactory evidence that the Class A-1 Timber Notes, Class A-2 Timber
Notes and Class A-3 Timber Notes shall be rated not less than "X0," "X0" and
"Baa2," respectively, by Xxxxx'x and "A," "A" and "BBB," respectively, by S&P.
(i) On the Closing Date, the Initial Purchasers and the Trustee
shall have received (i) opinions of Kramer, Levin, Naftalis & Xxxxxxx (1) with
respect to matters concerning "nonconsolidation" and "true sale" and (2) to the
effect that, for federal income tax purposes, the Timber Notes will constitute
indebtedness of the Company and (ii) any additional opinions delivered to the
Rating Agencies in connection with the rating of the Timber Notes, all of which
shall be addressed to the Initial Purchasers or accompanied by reliance letters.
(j) On the Closing Date, the Initial Purchasers shall have
received the opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, dated the
Closing Date, to the effect that, for California income tax purposes and subject
to the conditions therein, the Timber Notes will constitute indebtedness of the
Company.
(k) On the Closing Date, the Initial Purchasers shall have
received the opinion, dated the Closing Date, of Xxxxxxx & Xxxxxxx LLP, counsel
for the Trustee, to the effect that:
(i) State Street Bank & Trust Company is validly existing as a
trust company with trust powers and in good standing under the laws of the
Commonwealth of Massachusetts with full power and authority to enter into
and perform its obligations under the Indenture;
(ii) based on the assumption that, in all relevant and material
respects, New York and Massachusetts laws are identical, the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes
the legal, valid and binding obligation of the Trustee enforceable against
the Trustee in accordance with its terms, except that (a) enforceability
thereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought; and
(iii) to their knowledge, neither the execution nor the delivery
by the Trustee of the Indenture nor the consummation of any of the
transactions by the Trustee contemplated thereunder requires the consent or
approval of, the giving of notice to, or the registration with, or the
taking of any other action with respect to, any governmental authority or
agency under any existing federal or Massachusetts law governing the
banking or trust powers of the Trustee, except such as have been made or
obtained.
(l) On or prior to the Closing Date, (i) the Representative shall
have received completed requests for information, listing all effective
financing statements filed as of the date thereof in any jurisdictions necessary
or desirable to protect or perfect the Lien of the Deed of Trust in the
Collateral Mortgaged Property and (ii) UCC-1 financing statements with respect
to the Collateral Mortgaged Property shall have been filed in each such
jurisdiction.
(m) On or prior to the Closing Date, (i) the Merger and the
Merger and the transfer and sale of the Transferred Property shall have been
consummated in the manner described in the Final Memorandum, (ii) the Company or
Palco shall have paid and discharged all encumbrances of record securing
monetary obligations or otherwise specified by the Representative with respect
to the Transferred Property, except as disclosed in the Final Memorandum, and
(iii) the Representative shall have received evidence which is reasonably
available and is reasonably satisfactory to the Initial Purchasers, which may be
a tax lien search, that all past and current (if then delinquent) taxes and
assessments applicable to the Company Timberlands or payable by the Company,
Palco or Salmon Creek in respect thereof have been paid in full.
(n) The initial deposits to the Expense Reserve shall have been
made as described in the Final Memorandum.
(o) The Company shall have entered into the 1998 Operative
Documents as described in the Final Memorandum.
(p) Palco shall have taken all steps necessary to assign all
existing and pending Timber Harvest Plans of Palco to the Company.
(q) On or prior to the Closing Date, (i) Fidelity National Title
Insurance Company (the "Title Company") shall have irrevocably agreed and be
prepared to deliver an ALTA extended coverage first mortgagee's policy of title
insurance insuring, as of the Closing Date, that the Company Owned Timberlands
and the Company Timber Rights are vested of record in the Company and that the
Deed of Trust is a first priority lien encumbering the Company Owned Timberlands
and the Company Timber Rights, subject only to the Permitted Encumbrances, with
endorsements, and otherwise in form and substance, reasonably acceptable to the
Representative, in an amount not less than the aggregate principal balance of
the Timber Notes (the "Title Policy") and (ii) the Company and Palco shall have
executed and delivered such other documents, including escrow instructions
satisfactory to the Initial Purchasers, as may be requested by the Title Company
in connection with the recordation of the Deed of Trust and the issuance of the
Title Policy.
(r) Prior to the Closing Date, the Company shall have furnished
to the Initial Purchasers such further information, certificates and documents
as the Initial Purchasers may reasonably request.
(s) The First Supplemental Indenture dated as of July 8, 1998 to
the Indenture dated as of December 23, 1996, in connection with MAXXAM Group
Holdings Inc. 12% Senior Secured Notes due 2003, shall have become effective.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchasers and counsel for the Initial Purchasers,
this Agreement and all obligations of the Initial Purchasers hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial
Purchasers. Notice of such cancellation shall be given to the Company in writing
or by telephone or telegraph confirmed in writing.
7. Reimbursement of Initial Purchaser' Expenses. If the sale of the
Timber Notes provided for herein is not consummated because any condition to the
obligation of the Initial Purchasers set forth in Section 6 hereof is not
satisfied, because of any termination pursuant to Section 10 hereof or because
of any refusal, inability or failure on the part of the Company or Palco to
perform any agreement herein or comply with any provision hereof other than by
reason of a default by any of the Initial Purchasers, the Company and Palco will
jointly and severally reimburse the Initial Purchasers severally upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Timber Notes and the other transactions contemplated
hereby; provided, however, that the Company and Palco shall not be liable for
such expenses in the event that (i) such failure to consummate the sale of the
Timber Notes is due to the failure of the condition specified in Section 6(h)
hereof and (ii) such failure is not due to the failure of the Company to comply
with a reasonable request, requirement or condition of any Rating Agency;
provided, further, that the determination of reasonableness in the preceding
clause (ii) shall take into account the effect of such request, requirement or
condition on the offering of the Timber Notes, and other relevant
considerations.
8. Indemnification and Contribution. (a) The Company and Palco jointly
and severally agree to indemnify and hold harmless each Initial Purchaser, the
directors, partners, officers, employees and agents of each Initial Purchaser
and each person who controls any Initial Purchaser within the meaning of the Act
or the Securities Exchange Act of 1934, as amended (the "Exchange Act") against
any and all losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum or in any amendment thereof or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein, in light of
the circumstances under which they were made, a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agree to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
loss, claim, damage, liability or action; provided, however, that neither the
Company nor Palco will be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company or Palco by or on behalf of any Initial Purchaser specifically for
use in connection with the preparation thereof. Notwithstanding the foregoing,
the Company and Palco will not be liable to any Initial Purchaser in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission
made in any Preliminary Memorandum if (i) such Initial Purchaser failed to send
or deliver a copy of the Final Memorandum with or prior to the delivery of
written confirmation of the sale of Timber Notes and (ii) the Final Memorandum
would have corrected such untrue statement or alleged untrue statement or
omission; and the Company and Palco shall not be liable to any Initial Purchaser
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the Final Memorandum, if such untrue
statement or alleged untrue statement, omission or alleged omission is corrected
in an amendment or supplement to the Final Memorandum and if, having previously
been furnished by or on behalf of the Company (prior to the date of mailing by
such Initial Purchaser of the applicable confirmation), with a sufficient number
of copies of the Final Memorandum as so amended or supplemented, such Initial
Purchaser thereafter failed to deliver such Final Memorandum as so amended or
supplemented, prior to or concurrently with the sale of Timber Notes to the
person asserting such loss, claim, damage or liability who purchased such Timber
Notes which are the subject thereof from such Initial Purchaser. This indemnity
agreement will be in addition to any liability which the Company or Palco may
otherwise have.
(b) Each Initial Purchaser severally, but not jointly, agrees to
indemnify and hold harmless the Company and Palco, each of their directors,
officers, employees, partners, and agents, and each person who controls the
Company or Palco within the meaning of the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company and Palco to each Initial
Purchaser, but only with reference to written information relating to such
Initial Purchaser furnished to the Company or Palco by or on behalf of such
Initial Purchaser specifically for use in the preparation of the documents
referred to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which any Initial Purchaser may otherwise have. The
Company and Palco acknowledge that the statements set forth in the last
paragraph of the cover page (relating to the delivery of the Timber Notes), and
the table of Initial Purchasers and the first two sentences of the second
paragraph following such table under the heading "Plan of Distribution"
constitute the only information furnished in writing by or on behalf of any
Initial Purchaser for inclusion in any Preliminary Memorandum or the Final
Memorandum, and you confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure to so notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and/or
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
So long as the indemnifying parties are honoring their indemnification
obligations under this Section 8, an indemnified party will not, without the
prior written consent of the indemnifying parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnifying parties
are actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnifying
party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, Palco and the Initial Purchasers
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company,
Palco and any of the Initial Purchasers may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company and Palco,
on the one hand, and by the Initial Purchasers, on the other hand, from the
offering of the Timber Notes; provided, however, that in no case shall any
Initial Purchaser be responsible for any amount in excess of the sum of (i) the
discount applicable to the Timber Notes purchased by such Initial Purchasers
hereunder and (ii) any structuring fee paid to such Initial Purchaser pursuant
to Section 14 hereof. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, Palco and the Initial
Purchasers shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company and
Palco, on the one hand, and of the Initial Purchasers, on the other hand, in
connection with the statement or omissions which resulted in such Losses as well
as any other relevant equitable considerations. Benefits received by the Company
and Palco shall be deemed to be equal to the total net proceeds from the
offering as set forth on the cover page of the Final Memorandum (net of the
structuring fee, but before deducting any other expenses), and benefits received
by the Initial Purchasers shall be deemed to be equal to the sum of (i) the
total purchase discounts and commissions, as set forth on the cover page of the
Final Memorandum, plus (ii) the structuring fee paid pursuant to Section 14
hereof. Relative fault shall be determined by reference to whether any alleged
untrue statement or omission relates to information provided by the Company or
Palco, on the one hand, or the Initial Purchasers, on the other hand. The
Company, Palco and the Initial Purchasers agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Initial Purchaser within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of an Initial
Purchaser shall have the same rights to contribution as such Initial Purchaser,
and each person who controls the Company or Palco within the meaning of either
the Act or the Exchange Act, each executive officer of the Company or Palco and
each manager or director of the Company or Palco shall have the same rights to
contribution as the Company or Palco, as the case may be, subject in each case
to the applicable terms and conditions of this paragraph (d).
9. Default by an Initial Purchaser. If any Initial Purchaser shall
fail to purchase and pay for any of the Timber Notes agreed to be purchased by
such Initial Purchaser hereunder and such failure to purchase shall constitute a
default in the performance of its obligations under this Agreement, the
remaining Initial Purchasers shall be obligated to take up and pay for the
Timber Notes which the defaulting Initial Purchasers agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Timber Notes which the defaulting Initial Purchaser agreed but failed to
purchase shall exceed 10% of the aggregate amount of the Timber Notes set forth
in Schedule I hereto, the remaining Initial Purchasers shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the
Timber Notes, and if such non-defaulting Initial Purchasers do not purchase all
the Timber Notes, this Agreement will terminate without liability to any
non-defaulting Initial Purchaser or the Company. In the event of a default by
any Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding seven days, as the Representative shall
determine in order that the required changes in the Final Memorandum or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Initial Purchaser of its liability, if
any, to the Company or Palco, and any non-defaulting Initial Purchaser, for
damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Initial Purchasers, by notice given to the Company
and Palco prior to delivery of and payment for the Timber Notes, if prior to
such time (i) trading in securities generally on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq Stock Market's National Market shall
have been suspended or limited or minimum prices shall have been established on
either of such Exchanges or Market or (ii) a banking moratorium shall have been
declared by either federal or New York State authorities or (iii) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on the financial markets is such as to make it, in the judgment
of the Initial Purchasers, impracticable or inadvisable to proceed with the
offering or delivery of the Timber Notes as contemplated by the Final Memorandum
(exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or Palco or their officers and of the Initial Purchasers set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of any Initial Purchaser or the
Company or Palco or any of the officers, directors or controlling persons
referred to in Section 8 hereof, and will survive delivery of and payment for
the Timber Notes. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Initial Purchasers, will be
mailed, delivered or telecopied and confirmed to them c/o Salomon Brothers Inc,
Seven Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 attention: Xxxxxx X. Xxxxx,
Structured Finance, telecopy number 212-783- 2316; or, if sent to the Company,
will be mailed, delivered or telecopied and confirmed to it at 000 Xxxx Xxxxxx,
X.X. Xxx 000, Xxxxxx, Xxxxxxxxxx 00000, Attention: Vice President, Finance and
Administration, telecopy number 000-000-0000, with a copy to 0000 Xxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000, attention: General Counsel, telecopy number
000-000-0000; or, if sent to Palco, will be mailed, delivered or telecopied and
confirmed to it at 000 Xxxx Xxxxxx, X.X. Xxx 00, Xxxxxx, Xxxxxxxxxx 00000,
Attention: Vice President, Finance and Administration, telecopy number
000-000-0000, with a copy to 0000 Xxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000,
attention: General Counsel, telecopy number 000-000-0000.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and, except as expressly set forth in Section 6(i) hereof, no
other person will have any right or obligation hereunder.
14. Structuring Fee. Upon the closing of the transactions contemplated
hereby, the Company will pay to Salomon Brothers Inc a structuring fee equal to
0.925% of the aggregate principal balance of the Timber Notes issued and sold
hereunder (which structuring fee shall be reflected in the purchase price
referred to in Section 2).
15. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York, without regard to the
principles of conflicts of laws thereof.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
17. Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.
18. Definitions. The terms which follow, when used in this Agreement,
shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Affiliate" shall have the meaning specified in Rule 501(b) of
Regulation D.
"AICPA" shall mean the American Institute of Certified Public
Accountants.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in The City of New York or the
Commonwealth of Massachusetts.
"Closing Date" has the meaning set forth in Section 3 hereof.
"Commission" shall mean the U.S. Securities and Exchange
Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Execution Time" shall mean, the date and time that this Agreement is
executed and delivered by the parties hereto.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission promulgated
thereunder.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"Material Adverse Effect," when applied to any entity, means any
material adverse effect on the condition (financial or otherwise), earnings,
business, assets, results of operations or prospects of such entity and its
subsidiaries, if any, taken as a whole.
"Regulation D" shall mean Regulation D under the Act.
"Regulation S" shall mean Regulation S under the Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
amended, and the rules and regulations of the Commission promulgated thereunder.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company, Palco and the Initial Purchasers.
Very truly yours,
SCOTIA PACIFIC COMPANY LLC
By: /s/ Xxxx X. Xxxxxxxx
Name: Xxxx X. Xxxxxxxx
Title: Vice President
THE PACIFIC LUMBER COMPANY
By: /s/ Xxxx X. Xxxxxxxx
Name: Xxxx X. Xxxxxxxx
Title: Vice President and
Chief Financial Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SALOMON BROTHERS INC
BANCAMERICA XXXXXXXXX XXXXXXXX
BEAR, XXXXXXX & CO. INC.
XXXXXXXXX, LUFKIN & XXXXXXXX
SECURITIES CORPORATION
By: SALOMON BROTHERS INC
as Representative
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Managing Director
SCHEDULE I
Principal Amount
of Timber Notes to be
Purchased
Initial Purchasers Class A-1 Class A-2 Class A-3
--------- --------- ---------
Salomon Brothers Inc $129,400,000 $195,800,000 $373,048,000
BancAmerica Xxxxxxxxx $14,100,000 $21,300,000 $40,500,000
Xxxxxxx
Bear, Xxxxxxx & Co., $14,100,000 $21,300,000 $40,500,000
Inc.
Xxxxxxxxx, Lufkin &
Xxxxxxxx Securities
Corporation $3,100,000 $4,800,000 $9,300,000
---------- ---------- ----------
Total $160,700,000 $243,200,000 $463,348,000
EXHIBIT A
Non-Distribution Letter for Institutional Accredited Investors
____________, 199_
Salomon Brothers Inc
As Representative of the
Initial Purchasers
Seven World Trade Center
New York, New York
Re: Purchase of approximately $____________ principal amount of ____%
Class [A-1] [A-2] [A-3] Timber Collateralized Notes (the Securities )
of Scotia Pacific Company LLC (the Company )
Ladies and Gentlemen:
In connection with our purchase of the Securities we confirm that:
1. We understand that the Securities are not being and will not
(except as set forth under the heading "Description of the Timber
Notes--Exchange Offer; Registration Rights" in the Offering Memorandum
dated July __, 1998 relating to the Securities (the Final Memorandum )) be
registered under the Securities Act of 1933, as amended (the Act ), and are
being sold to us in a transaction that is exempt from the registration
requirements of the Act.
2. We have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Securities, and we are (or any account for which we are purchasing under
paragraph 3 below is) an institutional accredited investor (within the meaning
of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Act) able to bear
the economic risk of investment in the Securities.
3. We are acquiring the Securities for our own account (or for
accounts as to which we exercise sole investment discretion and have authority
to make, and do make, the statements contained in this letter) and not with a
view to any distribution of the Securities, subject, nevertheless, to the
understanding that the disposition of our property will at all times be and
remain within our control.
4. We understand that (a) the Securities will be in registered form
only and that any certificates delivered to us in respect of the Securities will
bear a legend substantially to the following effect:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES OR ANY
FOREIGN SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES
FOR THE BENEFIT OF THE COMPANY AND THE TRUSTEE THAT THIS NOTE MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH
THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUT10NAL BUYER,
WITHIN THE MEANING OF RULE 144A ("QUALIFIED INSTITUTIONAL BUYER"),
PURCHASING FOR ITS OWN ACCOUNT OR A QUALIFIED INSTITUTIONAL BUYER
PURCHASING FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE, OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (4) IN CERTIFICATED
FORM TO AN "INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF
IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT
PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT, IN THE CASE OF TRANSFERS PURSUANT TO THIS CLAUSE
(4), TO (A) THE RECEIPT BY THE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE
FORM PROVIDED IN THE INDENTURE OR (B) THE RECEIPT BY THE REGISTRAR OF SUCH
OTHER EVIDENCE ACCEPTABLE TO THE REGISTRAR THAT SUCH REOFFER, RESALE,
PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS OR (5) TO THE ISSUER OR ITS AFFILIATES."
and (b) the Company has agreed to reissue such certificates without
the foregoing legend only in the event of a disposition of the Securities in
accordance with the provisions of paragraph 6 below (provided, in the case of a
disposition of the Securities in accordance with paragraph 6(f) below, that the
legal opinion referred to in such paragraph so permits), or at our request at
such time as we would be permitted to dispose of them in accordance with
paragraph 6(a) below.
5. We understand that further offers or sales of these Securities are
subject to certain restrictions, as set forth in the Final Memorandum relating
to these Securities.
6. We agree that in the event that at some future time we wish to
dispose of any of the Securities, we will not do so unless such disposition is
made in accordance with any applicable securities laws of any state of the
United States and:
(a) the Securities are sold in compliance with Rule 144(k) under
the Act; or
(b) the Securities are sold in compliance with Rule 144A under the
Act; or
(c) the Securities are sold in compliance with Rule 904 of Regulation
S under the Act; or
(d) the Securities are sold pursuant to an effective registration
statement under the Act; or
(e) the Securities are sold to the Company or an affiliate (as defined
in Rule 501(b) of Regulation D) of the Company; or
(f) the Securities are disposed of in any other transaction that does
not require registration under the Act, and we theretofore have furnished to the
Company or its designee an opinion of counsel experienced in securities law
matters to such effect or such other documentation as the Company or its
designee may reasonably request.
Very truly yours,
By ______________________
(Authorized Officer)
