SUPPORT AND LOCK-UP
AGREEMENT
This Support and Lock-up Agreement (as
the same may be modified, amended, or supplemented from time to
time in accordance with the terms hereof, this “
Agreement ”) is made and entered into as of August 18,
2006, by and among U.S. Bank National Association, successor in
interest to State Street Bank and Trust Company (the “
Trustee ”), as indenture trustee for holders of the
9-5/8% Senior Notes of the Issuers due 2007 (the “
Notes ”) under the Indenture between the Issuers and
the Trustee dated as of November 19, 1997 (the “
Indenture ”), Inland Fiber Group, LLC, a Delaware
limited liability company (“ IFG ”), Fiber
Finance Corp., IFG’s wholly-owned subsidiary (“Fiber
Finance,” and, together with IFG, the “ Issuers
”), American Forest Resources LLC (“ AFR
”), John M. Rudey (“ Rudey ”), and the
undersigned holders (each a “ Consenting Holder,
” and collectively, the “ Consenting Holders
”). The Trustee, the Issuers, AFR, Rudey, and the
Consenting Holders are collectively referred to herein as the
“ Parties ” and individually as a “
Party. ”
Recitals
WHEREAS, the Trustee commenced litigation
(the “ Litigation ”) against the Issuers, AFR,
U.S. Timberlands Holdings Group, LLC, n/k/a Cascade Resource
Holdings Group, LLC, U.S. Timberlands Services Company, LLC, n/k/a
Timber Resource Services, LLC, Rudey, Alan B. Abramson, Aubrey L.
Cole, George R. Hornig, Robert F. Wright, and William A. Wyman
(each a “ Defendant ,” and collectively, the
“ Defendants ”) regarding the Issuers’
transfer of approximately $71,900,000 in timberlands and timber
deeds to AFR in exchange for preferred equity interests. The
action (the “ Action ”) is entitled U.S. Bank
National Association v. U.S. Timberlands Klamath Falls, L.L.C., et
al. , and is currently pending in the Court of Chancery of the
State of Delaware in and for New Castle County, Civil Action No.
112-N;
WHEREAS, the Trustee has reached a
tentative agreement with the Defendants to settle the Litigation
(the “ Settlement ”). The Settlement is
intended to resolve all existing defaults under the Indenture,
including the Issuers’ failure to make semi-annual interest
payments due on May 15, 2005, November 15, 2005, and May 15,
2006;
WHEREAS, the Trustee advised holders of
the Notes of the proposed Settlement at a meeting of holders on
March 16, 2006;
WHEREAS, the Defendants, the Trustee, and
certain of the Consenting Holders have engaged in good-faith
negotiations regarding the Settlement and an agreement to
restructure the Issuers’ business and/or sell their assets
(the “ Financial Restructuring ”), and the
Parties now wish to memorialize and implement the Settlement and
the Financial Restructuring pursuant to a pre-negotiated plan of
reorganization (as the same may be modified, amended, or
supplemented with the agreement of the Parties hereto in accordance
with Section 14 hereof, the “ Plan ”) under
chapter 11 of title 11 of the United States Code (as amended, the
“ Bankruptcy Code ”) consistent in all material
respects with the form of plan of reorganization attached hereto
(the “ Form Plan ”).
WHEREAS, in furtherance thereof, (i) the
Issuers are prepared, as promptly as practicable, to file the Plan
and a corresponding disclosure statement (the “ Disclosure
Statement ”), to seek expeditious approval, confirmation,
and consummation thereof, as applicable, and to perform their other
obligations hereunder, and (ii) each of the Consenting Holders is
prepared to vote its Consenting Holder Claims (as defined below) to
accept the Plan and to perform its other obligations
hereunder.
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NOW, THEREFORE, in consideration of the
promises and the mutual covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, hereby agree as
follows:
1.
Implementation of the Settlement
and
the Financial Restructuring; Form
Plan
In order to implement the Settlement and
the Financial Restructuring, the Issuers agree, subject to the
terms and conditions of this Agreement, that the Plan Documents
shall be consistent in all material respects with the Form Plan and
that they shall (i) commence cases (the “ Chapter 11
Cases ”) under chapter 11 of the Bankruptcy Code by
filing voluntary petitions for relief in the United States
Bankruptcy Court for the District of Delaware (the “
Bankruptcy Court ”) (the date on which such Chapter 11
Cases are so commenced is referred to herein as the “
Filing Date ”), (ii) file the Plan, the Disclosure
Statement, and any other necessary documents (collectively, and
together with the Plan and the Disclosure Statement, the “
Plan Documents ”) in the Chapter 11 Cases on or as
soon as practicable after the Filing Date, and (iii) use
commercially reasonable efforts to have the Disclosure Statement
approved and the Plan confirmed and consummated in the most
expeditious manner practicable.
2.
Forbearance; Direction to
Trustee
(a)
Each Consenting Holder agrees to forbear,
during the period commencing on the date hereof and ending on the
earlier of the effective date of the Plan (the “ Effective
Date ”) and the termination of this Agreement (the
“ Forbearance Period ”), from exercising any
rights or remedies (including with respect to any acceleration of
the Notes) it may have under the Indenture, applicable law, or
otherwise with respect to any default in existence as of the date
hereof or arising under the Indenture or from pursuing any claim,
at law or in equity, pertaining to the Notes or the subject matter
of the Action. In particular, among other things, each of the
Consenting Holders hereby agrees that, so long as this Agreement
has not been terminated with respect to such Consenting Holder in
accordance with the terms hereof, it shall not, and it shall use
its best efforts to cause the Trustee not to: (i) file or
join in the filing of any involuntary petition in bankruptcy with
respect to the Issuers or any affiliates thereof, or initiate or
participate in any similar proceedings for the benefit of
creditors, including any proceeding for the dismissal of the
Chapter 11 Cases or for their conversion to Chapter 7, the
appointment of a trustee, receiver, conservator, examiner, or
liquidator of the Issuers or any portion of their assets; (ii) seek
to collect or enforce by litigation or otherwise any payment
obligations under the Notes or any damages pertaining to the
purchase, sale, or ownership thereof, or under the Consenting
Holder Claims; (iii) declare a default or event of default under,
or exercise or enforce any right or remedy relating to the Notes or
the Consenting Holder Claims; (iv) bring or intervene in and
continue any suit to enforce payment under the Notes; (v) exercise
any other rights or remedies it may have under the Indenture,
applicable law, or otherwise with respect to any default in
existence or arising under the Indenture; or (vi) pursue any claim,
at law or in equity, pertaining to the Notes or the subject matter
of the Action. Except as expressly set forth in this
Agreement, nothing in this Section 2 shall be construed to limit or
prohibit the right of the Trustee or any Consenting Holder to file
pleadings, take positions, or otherwise participate as a
party-in-interest in the Chapter 11 Cases.
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(b)
Each Consenting Holder hereby directs the
Trustee to forbear, during the Forbearance Period, from exercising
any rights or remedies it may have under the Indenture, applicable
law, or otherwise with respect to any default in existence or
arising under the Indenture or from pursuing any claim, at law or
in equity, pertaining to the Notes or the subject matter of the
Action.
(c)
Nothing in this Section 2 shall be deemed
to waive or cure any past Default or Events of Default (each as
defined in the Indenture) or impair, implicate, or modify any past
notices of Default or Event of Default sent to the Issuers or any
notice of acceleration provided to the Issuers under the terms of
the Indenture. If this Agreement is terminated for any
reason, the Trustee and the Consenting Holders may proceed with any
and all remedies under the Indenture, and any forbearance under
this Agreement shall not impair or implicate any existing or future
claim against the Issuers or the Defendants; provided however, that
the Issuers and the Defendants reserve any and all rights, claims,
and defenses relating to the Trustee’s or the Consenting
Holders’ enforcement of remedies.
(d)
The Issuers and AFR shall comply with the
restrictions, prohibitions, and covenants set forth in the
Stipulation and Order filed with the Court of Chancery of the State
of Delaware in and for New Castle County on June 29, 2006, and any
extensions of such Stipulation and Order. Those restrictions,
prohibitions, and covenants are incorporated herein by reference,
and the Parties shall cause such restrictions, prohibitions, and
covenants to remain in full force and effect until the earlier of
the date on which the Action is resolved or dismissed and the date
thirty (30) days after this Agreement is terminated by its terms.
Notwithstanding anything contained in this Section 2(d) or in
the Stipulation and Order to the contrary, the Issuers may engage
in any transactions necessary to consummate the Plan, which such
transaction may be consummated only in conjunction with
confirmation of the Plan.
3.
Holdings by Consenting
Holders
Each Consenting Holder represents and
warrants that, as of the date hereof, it (i) either (A) is the sole
legal and beneficial owner of the principal amount of Notes set
forth below its name on the applicable signature page hereof and
all related claims, rights, and causes of action arising out of or
in connection with or otherwise relating thereto (for each such
Consenting Holder, the “ Consenting Holder Claims
”), in each case free and clear of all claims, liens, and
encumbrances, except for those grants of security interests to
lenders of leveraged funds in accordance with the Consenting
Holders’ customary business practices, or (B) has sole
investment or voting discretion with respect to such Notes and
Consenting Holder Claims and has the power and authority to bind
the beneficial owner(s) of such Notes and/or Consenting Holder
Claims to the terms of this Agreement, (ii) has accurately provided
the information requested below its name on the applicable
signature page hereof, and (iii) has full power and authority to
vote on and consent to matters concerning such Notes and Consenting
Holder Claims, including acceptance of the Plan.
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4.
Subsequent Transfers
Each of the Consenting Holders agrees
that, so long as this Agreement remains in effect, it shall not
sell, transfer, participate, or assign any of its Notes or
Consenting Holder Claims or any option thereon or any right or
interest (voting or otherwise) therein, unless the transferee
thereof agrees in writing to be bound by all of the terms of this
Agreement by executing a counterpart signature page of this
Agreement and the transferor promptly provides the Trustee and
Issuers with a copy thereof, in which event the Issuers shall be
deemed to have acknowledged their obligations to such Consenting
Holder hereunder without any further action by the other Parties to
this Agreement.
5.
Agreement to Support and Vote in Favor
of the Plan
(a)
As long as this Agreement shall not have
terminated pursuant to Section 6, and except as otherwise provided
herein (including, without limitation, in Sections 9 and 15), the
Trustee and each Consenting Holder shall, on the terms and subject
to the conditions of this Agreement, support the Plan, and, when
properly solicited to do so, each Consenting Holder shall timely
vote its Consenting Holder Claims to accept the Plan and shall
otherwise support the Disclosure Statement, the Plan, and all other
Plan Documents; provided, however, that no Consenting Holder shall
be required to solicit the support of another holder of Notes.
As long as this Agreement shall not have terminated pursuant
to Section 6, and except as otherwise provided herein, each
Consenting Holder (together with its affiliates, subsidiaries,
parent, officers, directors, stockholders, members, partners,
employees, representatives, and agents), in any capacity, whether
as a holder of Notes or other securities or claims against the
Issuers, shall not: (A) object to the Disclosure Statement or the
Plan or to any efforts to obtain acceptance of, and to confirm and
implement, the Disclosure Statement, the Plan, or any other Plan
Document; (B) vote for, consent to, or participate in the
formulation of any plan other than the Plan or the filing of any
involuntary bankruptcy or insolvency case or proceeding involving
the Issuers or any affiliates thereof; (C) solicit or engage in any
inquiries, discussions, offers or proposals, or enter into any
agreements, relating to any disposition of the equity or assets of
the Issuers and their affiliates or any plan of reorganization or
liquidation, or any other recapitalization or investment
transaction for the Issuers and their affiliates other than this
Agreement, the Plan or any amendment thereto, and any documents in
support hereof or thereof; (D) support or encourage in any fashion
any person or entity to vote against the Plan or to take any other
action prohibited by the Consenting Holders under, or inconsistent
with the intent or purpose of, this Agreement; (E) revoke or
withdraw such Consenting Holder’s vote to accept the Plan; or
(F) take any other action directly or indirectly for the purpose
of, or that results in, delaying, preventing, frustrating, or
impeding acceptance, confirmation, or implementation of the
Disclosure Statement, the Plan, or any other Plan Document (as
applicable). Such support shall extend to all debt, claims,
or equity securities, or any interests therein or rights thereto,
of the Issuers held (directly or indirectly) or controlled by the
Consenting Holder. Notwithstanding the foregoing or anything
in this Agreement to the contrary, the Trustee and the Consenting
Holders shall be free to discuss amongst themselves any matter
related to the Issuers, the Defendants, this Agreement, the Chapter
11 Cases, or otherwise, subject to the terms and conditions of any
applicable confidentiality agreements.
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(b)
As long as this Agreement shall not have
terminated pursuant to Section 6, and except as otherwise provided
herein (including, without limitation, in Section 9), AFR and Rudey
(together with their affiliates, subsidiaries, parents, officers,
directors, stockholders, members, partners, employees,
representatives, and agents) shall, on the terms and subject to the
conditions of this Agreement, support the Plan and all other Plan
Documents and shall not: (A) consent to, or participate in the
formulation of any plan other than the Plan; (B) solicit or engage
in any inquiries, discussions, offers, or proposals, or enter into
any agreements relating to any disposition of the equity or assets
of the Issuers or any plan of reorganization or liquidation, or any
other recapitalization or investment transaction for the Issuers
and their affiliates other than this Agreement, the Plan, or any
amendment thereto, and any document in support hereof or thereof;
(C) support or encourage in any fashion any person or entity to
vote against the Plan or take any other action prohibited by or
inconsistent with the intent or purpose of this Agreement; or (D)
take any other action directly or indirectly for the purpose of, or
that results in, delaying, preventing, frustrating, or impeding
acceptance, confirmation, or implementation of the Disclosure
Statement, the Plan, or any other Plan Document (as applicable).
6.
Termination of
Agreement
(a)
The Issuers may terminate this Agreement
as to any or all other Parties upon the occurrence of the events
set forth in subsections (i), (ii), and (iii) of this Section 6(a),
and the Trustee and/or any Consenting Holder may terminate this
Agreement as to itself only upon the occurrence of any of the
following events, in each case by providing written notice to all
other Parties:
(i)
The Trustee, the Issuers, AFR, and Rudey,
amon
