AMENDED AND RESTATED NOTE PURCHASE AGREEMENT DELTIC TIMBER CORPORATION

EXHIBIT 99.1

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

D ELTIC T IMBER C ORPORATION

$40,000,000 P RIVATE P LACEMENT

Series A Senior Notes due December 18, 2016

 

A MENDED AND R ESTATED N OTE P URCHASE A GREEMENT

 

Dated March 30, 2007

Series A Senior Notes due December 18, 2016

March 30, 2007

T O E ACH OF THE P URCHASERS L ISTED IN

S CHEDULE  A H ERETO :

Ladies and Gentlemen:

Deltic Timber Corporation, a Delaware corporation (the “Company” ), agrees with each of the Holders of the Notes whose names appear at the end hereof (also referred to herein as the “ Purchaser ” or “ Purchasers ”) as follows:

Section 1. A MENDMENT AND R ESTATEMENT OF E XISTING N OTE P URCHASE A GREEMENT AND THE E XISTING N OTES .

Subject to the terms and conditions of this Agreement, the Existing Note Purchase Agreement and the Existing Notes shall be amended and restated in their entirety as of the Restatement Closing Date as Series A Senior Notes due December 18, 2016 (the “Series A Notes” , such term to include any such notes issued in substitution therefor pursuant to Section 13 ) hereunder in an aggregate principal amount of the $40,000,000 (the “ Restatement ”). The Existing Notes shall be deemed to be outstanding solely under this Agreement as Series A Notes hereunder and this Agreement and the other Note Documents shall apply to the Existing Notes as amended and restated as Series A Notes. The Series A Notes shall be substantially in the form set out in Exhibit 1 . The Series A Notes shall be guaranteed pursuant to the Subsidiary Guaranty. Certain capitalized and other terms used in this Agreement are defined in Schedule B ; and references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. The Purchasers’ obligations hereunder are several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any obligation by any other Purchaser hereunder.

Section 2. A DDITIONAL S ERIES OF N OTES .

The Company may, from time to time, in its sole discretion but subject to the terms hereof, issue and sell one or more additional Series of its promissory notes under the provisions of this Agreement pursuant to a supplement (a “ Supplement ”) substantially in the form of Exhibit S . Each additional Series of Notes (the “ Additional Notes ”) issued pursuant to a Supplement shall be subject to the following terms and conditions:

 

(a)

each Series of Additional Notes, when so issued, shall be differentiated from all previous series by sequential alphabetical designation inscribed thereon;

 

(b)

Additional Notes of the same Series may consist of more than one different and separate tranches and may differ with respect to outstanding principal amounts, maturity dates, interest rates and premiums, if any, and price and terms of redemption or payment prior to maturity, but all such different and separate tranches of the same Series shall vote as a single class and constitute one Series;

 

(c)

each Series of Additional Notes shall be dated the date of issue, bear interest at such rate or rates, mature on such date or dates, be subject to such mandatory and optional prepayment on the dates and at the premiums, if any, have such additional or different conditions precedent to closing, such representations and warranties and such additional covenants as shall be specified in the Supplement under which such Additional Notes are issued, provided , that any such additional covenants shall inure to the benefit of all Holders of Notes so long as any Additional Notes issued pursuant to such Supplement remain outstanding;

 

(d)

each reference to “you”, “Purchaser” or “Holders of the Notes” in this Agreement shall be deemed to be a reference to each Additional Purchaser, unless otherwise specified herein or in the applicable Supplement or unless the context otherwise requires;

 

(e)

each Series of Additional Notes issued under this Agreement shall be in substantially the form of Exhibit 1 to Exhibit S hereto with such variations, omissions and insertions as are necessary or permitted hereunder;

 

(f)

the minimum principal amount of any Series of Notes issued under a Supplement shall be $10,000,000, except as may be necessary to evidence the outstanding amount of any Note originally issued in a denomination of $1,000,000 or more;

 

(g)

all Additional Notes shall constitute senior Indebtedness of the Company and shall rank pari passu with all other outstanding Notes;

 

(h)

no Additional Notes shall be issued hereunder if at the time of issuance thereof and after giving effect to such issuance and the application of the proceeds thereof, there exists or would exist any Default or Event of Default; and

 

(i)

each Series of Additional Notes issued under this Agreement shall be arranged by the Arranger.

Section 3. R ESTATEMENT C LOSING D ATE .

The Restatement shall occur at the offices of O’Melveny & Myers LLP, 400 South Hope Street, Los Angeles, California, at 9:00 a.m., Pacific Standard time, at a closing on March 30, 2007 or on such other Business Day thereafter on or prior to March 30, 2007 as may be agreed upon by

 

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the Company and the Purchasers (the “ Restatement Closing Date ”). On the Restatement Closing Date, the Company will deliver to each Purchaser the Series A Notes in the form of a single Note (or such greater number of Series A Notes in denominations of at least $100,000 as such Purchaser may request) dated as of the Restatement Closing Date and registered in such Purchaser’s name (or in the name of its nominee), against delivery by such Purchaser to the Company of the Existing Notes held by such Purchaser for cancellation. If the Company shall fail to tender such Series A Notes to any Purchaser as provided above in this Section 3 , or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchaser’s satisfaction, the Existing Note Purchase Agreement and the Existing Notes shall remain in full force and effect, and such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such nonfulfillment.

Section 4. C ONDITIONS TO THE R ESTATEMENT .

The Restatement is subject to the fulfillment to each Purchaser’s satisfaction, prior to or on the Restatement Closing Date, of the following conditions:

Section 4.1. Representations and Warranties . The representations and warranties of the Company in this Agreement shall be true and correct when made and on the Restatement Closing Date, except for such representations and warranties given as of a specific date, all of which were true and correct as of such date.

Section 4.2. Performance; No Default . The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or on the Restatement Closing Date and after giving effect to the amendment and restatement of the Existing Notes as Series A Notes (and the application of the proceeds thereof as contemplated by Section 5.14 ), no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Form 10-K that would have been prohibited by Section 10 had such Section applied since such date.

Section 4.3. Certificates .

 

(a)

Officer’s Certificate . The Company shall have delivered to such Purchaser an Officer’s Certificate, dated the Restatement Closing Date, certifying that the conditions specified in Sections 4.1 , 4.2 and 4.8 have been fulfilled.

 

(b)

Secretary’s Certificate . Company shall have delivered to you:

 

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(i) Copies of the organizational documents of each Note Party, certified by the Secretary of State of its jurisdiction of organization, together with a good standing certificate from the Secretary of State of its jurisdiction of organization and each other state in which such Note Party is qualified to do business, to the extent the failure to be qualified in any such state would reasonably be expected to result in a Material Adverse Effect, and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each dated a recent date prior to the Restatement Closing Date;

(ii) Resolutions of the governing body of each Note Party approving and authorizing the execution, delivery and performance of each Note Document to which it is a party, and any other documents, instruments and certificates required to be executed by the such Note Party in connection herewith and the transactions contemplated hereby certified as of the Restatement Closing Date by the secretary or similar officer of the such Note Party as being in full force and effect without modification or amendment; and

(iii) Signature and incumbency certificates of the officers of the each Note Party and all guarantors dated as of the Restatement Closing Date and certifying the names and true signatures of the officers and employees of the such Note Party authorized to execute, deliver and perform the Note Documents and other documents required to be executed in connection herewith.

 

(c)

Solvency Assurances . On the Restatement Closing Date, you shall have received an Officer’s Certificate of a duly authorized Senior Financial Officer of the Company dated as of the Restatement Closing Date, substantially in the form of Exhibit 2 annexed hereto and with appropriate attachments, demonstrating that, after giving effect to the transactions contemplated herein, the Company will be Solvent.

 

(d)

Compliance Certificate . On the Restatement Closing Date, you shall have received a Compliance Certificate of a duly authorized Senior Financial Officer of the Company dated the date of issue of the Series A Notes, substantially in the form of Exhibit 3 stating that such officer has reviewed the provisions of this Agreement and setting forth the information and computations (in sufficient detail) required in order to establish whether the Company is in compliance with the requirements of Sections 10.5, 10.7, 10.9, 10.15, 10.16, 10.17 and 10.18 on such date, after giving effect to the transactions contemplated herein.

Section 4.4. Opinions of Counsel . Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Restatement Closing Date from (a) Bayless Rowe, in-house counsel to the Note Parties, and (b) Wright, Lindsey & Jennings, LLP, special counsel

 

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for the Note Parties, covering the matters set forth in Exhibit 4 and covering such other matters incident to the transactions contemplated hereby as such Purchaser or its counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to the Purchasers).

Section 4.5. Purchase Permitted By Applicable Law, Etc . On the Restatement Closing Date, the amendment and restatement of the Existing Notes as Series A Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which such Purchaser is subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by such Purchaser, such Purchaser shall have received an Officer’s Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.

Section 4.6. Payment of Fees . Without limiting the provisions of Section 15.1 , the Company shall have paid on or before the Closing the fees, charges and disbursements of the Purchasers’ special counsel, O’Melveny & Myers LLP, to the extent reflected in a statement of such counsel rendered to the Company prior to the Restatement Closing Date and any other fees separately agreed to by Company and Arranger.

Section 4.7. Private Placement Number . A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall have been obtained for the Series A Notes.

Section 4.8. Changes in Corporate Structure . The Company shall not have changed its jurisdiction of incorporation or organization, as applicable, or been a party to any merger or consolidation or succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5 .

Section 4.9. Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated by this Agreement, the Note Documents and all documents and instruments incident to such transactions shall be satisfactory to such Purchaser and its special counsel, and such Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such special counsel may reasonably request.

 

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Section 4.10. UCC Searches . You shall have received a UCC search report certified by a party acceptable to you, dated a recent date prior to the Restatement Closing Date, listing all effective financing statements which name any Note Party (under its present name and any previous names) as the debtor.

Section 4.11. Subsidiary Guaranty. Each Domestic Subsidiary shall execute the Subsidiary Guaranty in favor of the Purchasers, substantially in the form of Exhibit 5 to this Agreement.

Section 4.12. Delivery of Certain Documents . The Purchasers shall have received a copy of each of the Bank Credit Agreement and the MetLife Note Purchase Agreement certified by a Responsible Officer of the Company as true and complete copies of the Bank Credit Agreement and MetLife Note Purchase Agreement as originally executed and delivered, together with all amendments, exhibits and schedules thereto.

Section 4.13. Patriot Act Compliance . Prior to the date of the Closing, the Purchasers shall have received all documentation and other information required by regulatory authorities under the applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the USA Patriot Act.

Section 4.14. Satisfactory Review of Financial Statements and Pro Formas . The Purchasers shall have received and be reasonably satisfied with (i) the consolidated financial statements of the Company and its Subsidiaries for the Fiscal Years 2004, 2005 and 2006, including balance sheets, income and cash flow statements audited by independent public accountants of recognized national standing and prepared in conformity with GAAP, and (ii) such other financial information as the Purchasers may request, including interim financial statements received for periods subsequent to the Fiscal Year 2006 financial statements.

Section 4.15. Consent of the Holders of Existing Notes. Each Holder of Existing Notes shall have consented to the Restatement, evidenced by its execution of this Agreement.

Section 4.16. Conditions to Issuance of Additional Notes . The obligations of the Additional Purchasers to purchase Additional Notes pursuant to Section 2 shall be subject to the following conditions precedent, in addition to the conditions specified in the Supplement pursuant to which such Additional Notes may be issued:

 

(a)

Conditions in Agreement . All conditions precedent set forth in Sections 4.1 through 4.14 shall have been satisfied with respect to such Additional Notes (with (i) the applicable Series of such Additional Notes being deemed substituted for “Series A” in such Sections, and (ii) for the purposes of the confirmation of the representations and warranties in Section 5 , the term

 

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“Agreement” being deemed to mean this Agreement as supplemented by the related Supplement), with such modifications to such Sections, if any, as may be set forth in the Supplement with respect to such Additional Notes.

 

(b)

Compliance Certificate . A duly authorized Senior Financial Officer of the Company shall execute and deliver to each Additional Purchaser a Compliance Certificate dated the date of issue of such Series of Additional Notes, substantially in the form of Exhibit 3 stating that such officer has reviewed the provisions of this Agreement (including any Supplements thereto) and setting forth the information and computations (in sufficient detail) required in order to establish whether the Company are in compliance with the requirements of Sections 10.5, 10.7, 10.9, 10.15, 10.16, 10.17 and 10.18 on such date, after giving pro forma effect to the issuance of such Additional Notes.

 

(c)

Solvency Assurances . A duly authorized Senior Financial Officer of the Company shall execute and deliver to each Additional Purchaser an Officer’s Certificate dated the date of issue of such Series of Additional Notes, substantially in the form of Exhibit 2 annexed hereto and with appropriate attachments, in each case demonstrating that, after giving effect to the consummation of the transactions contemplated by this Agreement (including any Supplements thereto), the Company will be Solvent, after giving effect to the issuance of such Additional Notes.

 

(d)

Execution and Delivery of Supplement . The Company and each such Additional Purchaser shall execute and deliver a Supplement substantially in the form of Exhibit S hereto.

 

(e)

Representations of Additional Purchasers . Each Additional Purchaser shall have confirmed in the Supplement that the representations set forth in Section 6 are true and correct with respect to such Additional Purchaser on and as of the date of issue of the Additional Notes.

Section 5. R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY .

The Company represents and warrants to you on and as of the date of the Restatement Closing Date and, with respect to issuance of each Series of Additional Notes, on and as of the date of such issuance:

Section 5.1. Organization; Power and Authority . Each Note Party is an organization duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Note Party has the corporate power and authority to own or hold under lease the Properties it purports to own or hold under lease, to transact the business it

 

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transacts and proposes to transact, to execute and deliver the Note Documents to which it is party and to perform the provisions thereof.

Section 5.2. Authorization, Etc . Each Document has been duly authorized by all necessary corporate action on the part of each Note Party thereto. Each Note Document constitutes, and in the case of the Company upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of such Note Party enforceable against such Note Party in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 5.3. Disclosure . The Company has delivered to each Purchaser a copy of the Company’s Annual Report on Form 10-K (the “ Form 10-K ”). The Form 10-K fairly describes, in all material respects, the general nature of the business and principal Properties of the Company and its Subsidiaries. This Agreement, the Form 10-K and the documents, certificates or other writings delivered to the Purchasers by or on behalf of the Company in connection with the transactions contemplated hereby and identified in Schedule 5.3 , and the financial statements listed in Schedule 5.5 (this Agreement, the Form 10-K and such documents, certificates or other writings and such financial statements delivered to each Purchaser prior to the date hereof being referred to, collectively, as the “Disclosure Documents” ), taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Disclosure Documents, since December 31, 2006, there has been no material adverse change in the business, assets, liabilities (actual or contingent), operations, Properties, condition (financial or otherwise), or prospects of the Company and its Subsidiaries taken as a whole. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Disclosure Documents.

Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates . (a)  Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company’s Affiliates, other than Subsidiaries, and (iii) of the Company’s directors and senior officers.

 

(b)

All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are

 

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owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4 ).

 

(c)

Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the Properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

 

(d)

No Subsidiary is a party to, or otherwise subject to any legal, regulatory, contractual or other restriction (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

Section 5.5. Financial Statements; Material Liabilities . The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5 . All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). The Company and its Subsidiaries do not have any Material liabilities that are not disclosed on such financial statements or otherwise disclosed in the Disclosure Documents. Neither Company nor any of its Subsidiaries has (and will not have following the issuance of the Notes) any contingent obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that, as of the Restatement Closing Date, is not reflected in the foregoing financial statements or the notes thereto and, as of any date subsequent to the date of the Closing, is not reflected in the most recent financial statements delivered to Lenders pursuant to Section 7.1 or the notes thereto and that, in any such case, is Material in relation to the business, operations, affairs, financial condition, Properties, assets or prospects of Company or its Subsidiaries.

Section 5.6. Compliance with Laws, Other Instruments, Etc . The execution, delivery and performance by the Note Parties of each Note Document to

 

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which it is party will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any Property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective Properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary.

Section 5.7. Governmental Authorizations, Etc . No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority or any third-party is required in connection with the execution, delivery or performance by the Note Parties of the Note Documents.

Section 5.8. Litigation; Observance of Agreements, Statutes and Orders . (a) There are no actions, suits, investigations or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any Property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(b)

Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws or the USA Patriot Act) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Section 5.9. Taxes . The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their Properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the

 

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Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been finally determined (whether by reason of completed audits or the statute of limitations having run) for all fiscal years up to and including the fiscal year ended 2006.

Section 5.10. Title to Property; Leases . The Company and its Subsidiaries have good and sufficient title to their respective Properties that individually or in the aggregate are Material, including all such Properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement or any other Note Document. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects.

Section 5.11. Licenses, Permits, Etc . (a) The Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others.

 

(b)

To the best knowledge of the Company, no product of the Company or any of its Subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, proprietary software, service mark, trademark, trade name or other right owned by any other Person.

 

(c)

To the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, proprietary software, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries.

Section 5.12. Compliance with ERISA . (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, Properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code or section 4068 of ERISA, other than such liabilities or Liens as would not be individually or in the aggregate Material.

 

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(b)

The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan’s most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term “benefit liabilities” has the meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the meaning specified in section 3 of ERISA.

 

(c)

The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

 

(d)

The expected postretirement benefit obligation (determined as of the last day of the Company’s most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material.

 

(e)

The execution and delivery of this Agreement and the other Note Documents, and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company to each Purchaser in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of such Purchaser’s representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser.

Section 5.13. Private Offering by the Company . Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than the Purchasers and not more than 5 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act or to the registration requirements of any securities or blue sky laws of any applicable jurisdiction.

Section 5.14. Use of Proceeds; Margin Regulations . The Company will apply the proceeds of the sale of the Notes for general corporate purposes. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in

 

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any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 5.0% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 5.0% of the value of such assets. As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.

Section 5.15. Existing Indebtedness; Future Liens . (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of March 30, 2007 (including a description of the obligors and obligees, principal amount outstanding and collateral therefor, if any, and Guaranty thereof, if any), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

 

(b)

Except as disclosed in Schedule 5.15 , neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its Property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.6 .

 

(c)

Neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other agreement (including, but not limited to, its charter or other organizational document) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Company, except as specifically indicated in Schedule 5.15 .

Section 5.16. Foreign Assets Control Regulations, Etc . (a) Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.

 

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(b)

Neither the Company nor any Subsidiary (i) is a Person described or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or (ii) engages in any dealings or transactions with any such Person. The Company and its Subsidiaries are in compliance, in all material respects, with the USA Patriot Act.

 

(c)

No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that such Act applies to the Company.

Section 5.17. Status under Certain Statutes . Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 2005, as amended, the ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended.

Section 5.18. Environmental Matters . (a) Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect.

 

(b)

Neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect.

 

(c)

Neither the Company nor any Subsidiary has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and

 

(d)

All buildings on all real properties now owned, leased or operated by the Company or any Subsidiary are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.

 

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Section 5.19. No Restrictions on Harvesting . All timberland currently being harvested by the Company and its Subsidiaries is being harvested pursuant to valid permits obtained from appropriate governmental authorities to the extent permits are required, and there are no material restrictions on such harvesting activities other than (i) restrictions contained in such permits or incidental take permits, and (ii) those imposed generally on similarly situated timberlands.

Section 5.20. Solvency . The Company is and, upon the issuance of the Notes and the incurrence of the obligations hereunder on any date on which this representation is made, will be, Solvent.

Section 5.21. Patronage . The Company represents and warrants that it owns at least $1,000 book value of capital stock of American AgCredit, PCA.

Section 5.22. Labor Relations. There are no strikes, lockouts or other material labor disputes or grievances against the Company or any of its Subsidiaries, or, to the Company’s knowledge, threatened against or affecting the Company or any of its Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against the Company or any of its Subsidiaries, or to the Company’s knowledge, threatened against any of them before any Governmental Authority, which could reasonably be expected to have a Material Adverse Effect. All payments due from the Company or any of its Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of the Company or any such Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

Section 6. R EPRESENTATIONS OF THE P URCHASERS .

Section 6.1. Purchase for Investment . Each Purchaser severally represents that it is purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser’s or their Property shall at all times be within such Purchaser’s or their control. Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.

Section 6.2. Source of Funds . Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:

 

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(a)

the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s Prohibited Transaction Exemption ( “PTE” ) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the “NAIC Annual Statement” )) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

 

(b)

the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

 

(c)

the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

 

(d)

the Source constitutes assets of an “investment fund” (within the meaning of Part V of PTE 84-14 (the “QPAM Exemption” )) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this clause (d); or

 

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(e)

the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of PTE 96-23 (the “INHAM Exemption” )) managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in Section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or

 

(f)

the Source is a governmental plan; or

 

(g)

the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or

 

(h)

the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2 , the terms “employee benefit plan,” “governmental plan,” and “separate account” shall have the respective meanings assigned to such terms in section 3 of ERISA.

Section 7. I NFORMATION AS TO C OMPANY .

Section 7.1. Financial and Business Information . The Company shall deliver to each Holder of Notes that is an Institutional Investor:

 

(a)

Quarterly Statements — within 45 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,

(i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and

(ii) consolidated statements of income, changes in shareholders’ equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments.

 

(b)

Annual Statements — within 90 days after the end of each fiscal year of the Company, duplicate copies of

 

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(i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and

(ii) consolidated statements of income, changes in shareholders’ equity and cash flows of the Company and its Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by

(A) an opinion thereon of independent public accountants of recognized national standing, which opinion shall be unqualified, shall express no doubts, assumptions or qualifications concerning the ability of the Company and its Restricted Subsidiaries to continue as a going concern, and shall state that the consolidated financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and

(B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit).

 

(c)

SEC and Other Reports — promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to its principal lending banks as a whole (excluding information sent to such banks in the ordinary course of administration of a bank facility, such as information relating to pricing and borrowing availability) or to its public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such Holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the SEC and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material;

 

(d)

Notice of Default or Event of Default — promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any

 

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Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f) , a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

 

(e)

ERISA Matters — promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

(i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or

(ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multi-employer Plan that such action has been taken by the PBGC with respect to such Multi-employer Plan; or

(iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, Properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect;

 

(f)

Notices from Governmental Authority — promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and

 

(g)

Litigation or Other Proceedings — promptly upon any officer of Company obtaining knowledge of (1) the institution of, or non-frivolous threat of, any proceeding against or affecting Company or any of its Subsidiaries or any Property of the Company or any of its Subsidiaries not previously disclosed in writing by the Company to the Holders of the Notes or (2) any material development in any proceeding that, in any case:

 

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(i) if adversely determined, has a reasonable possibility after giving effect to the coverage and policy limits of insurance policies issued to the Company and its Subsidiaries of giving rise to a Material Adverse Effect; or

(ii) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby; written notice thereof together with such other information as may be reasonably available to the Company to enable the Holders of the Notes and their counsel to evaluate such matters;

 

(h)

Environmental Disclosure .

(i) As soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character, whether prepared by personnel of the Company or any of its Subsidiaries or by independent consultants, Government Authorities or any other Persons, with respect to significant environmental matters on any of the Properties of the Company and its Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or with respect to any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

(ii) Promptly upon the occurrence thereof, written notice describing in reasonable detail (a) any Release required to be reported to any Government Authority under any applicable Environmental Laws, and (b) any remedial action taken by the Company or any other Person in response to (1) any Hazardous Materials Activities the existence of which could reasonably be expected to result in one or more Environmental Claims having, individually or in the aggregate, a Material Adverse Effect, or (2) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

(iii) As soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all written communications with respect to (a) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, (b) any Release required to be reported to any Government Authority, and (c) any request for information from any Government Authority that suggests such Government Authority is investigating whether the Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity.

(iv) Prompt written notice describing in reasonable detail (a) any proposed acquisition of stock, assets, or Property by the Company or any of its Subsidiaries that could reasonably be expected to (1) expose the Company

 

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or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect or (2) affect the ability of the Company or any of its Subsidiaries to maintain in full force and effect all material Governmental Authorizations required under any Environmental Laws for their respective operations.

 

(i)

Material Adverse Change —Prompt written notice of any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect, accompanied by a written statement of a Responsible Officer setting forth the details of such event or development and any action taken or proposed to be taken with respect thereto.

 

(j)

Supplements — in the event that any Series of Additional Notes is issued under Section 2 , within ten Business Days after execution and delivery, a copy of the Supplement executed with such issuance.

 

(k)

Requested Information — with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or Properties of the Company or any of its Subsidiaries (including, but without limitation, actual copies of the Company’s Form 10-Q and Form 10-K) or relating to the ability of the Company to perform its obligations hereunder, under the other Note Documents and under the Notes or status updates with respect to any of the changes, conditions, events, proceedings or violations reported in compliance with this Section 7 as from time to time may be reasonably requested by any such Holder of Notes.

Section 7.2. Officer’s Certificate . Each set of financial statements delivered to a Holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a Compliance Certificate of a duly authorized Senior Financial Officer of the Company, substantially in the form of Exhibit 3 , setting forth:

 

(a)

Covenant Compliance — the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 10.5, 10.7, 10.9, 10.15, 10.16, 10.17 and 10.18 , inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Sections, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence);

 

(b)

Event of Default — a statement that such Senior Financial Officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the

 

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certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto; and

 

(c)

Change in GAAP — whether any change in GAAP or the application thereof has occurred since the date of the consolidated audited financial statements for the Company delivered in connection with the Restatement Closing Date, and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

Section 7.3. Visitation . The Company shall permit the representatives of each Holder of Notes:

 

(a)

No Default — if no Default or Event of Default then exists, at the expense of such Holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company’s officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and Properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and

 

(b)

Default — if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or Properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.

Section 8. P AYMENT AND P REPAYMENT OF THE N OTES .

Section 8.1. Required Prepayments; Maturity . As provided therein, the entire unpaid principal balance of the Notes shall be due and payable on the stated maturity date thereof.

Section 8.2. Optional Prepayments with Make-Whole Amount . The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes of any Series, provided

 

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that such option prepayment is offered in multiples of $5,000,000, or if less, the remaining balance of the Notes of such Series to be prepaid, and accrued interest thereon, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount; provided that (i) the date fixed for each such prepayment shall be a Business Day, and (ii) after the occurrence and during the continuation of an Event of Default, such prepayments shall be made pro rata to the Holders of the Notes of all Series outstanding. The Company will give each Holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date (which shall be a Business Day), the aggregate principal amount of the Notes of such Series to be prepaid on such date, the principal amount of each Note held by such Holder to be prepaid (determined in accordance with Section 8.3 ), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each Holder of Notes of the Series to be prepaid a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

Section 8.3. Allocation of Partial Prepayments . In the case of each partial prepayment of any Series of Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes of the Series to be prepaid at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment; provided that after the occurrence and during the continuation of an Event of Default, such prepayments shall be made pro rata to the Holders of the Notes of all Series outstanding.

Section 8.4. Maturity; Surrender, Etc . In the case of each prepayment of Notes pursuant to this Section 8 , the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day), together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

Section 8.5. No Other Optional Prepayments or Purchase of Notes . The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding

 

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Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

Section 8.6. Make-Whole Amount .

The term “Make-Whole Amount” means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

“Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1 , as the context requires.

“Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” of the Bloomberg Financial Markets Services Screen (or such other display as may replace Page PX1 on the Bloomberg Financial Markets Services Screen) for the most recently issued actively traded on the run U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date.

In the case of each determination under clause (i) or clause (ii), as the case may be, of the preceding paragraph, such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the applicable U.S. Treasury security with the maturity closest to and greater than

 

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such Remaining Average Life and (2) the applicable U.S. Treasury security with the maturity closest to and less than such Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.

“Remaining Average Life” means, with respect to any Called Principal of any Note, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal (but not of interest thereon) by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or Section 12.1 .

“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1 , as the context requires.

Section 9. A FFIRMATIVE C OVENANTS .

The Company covenants, for the benefit of the Holders of the Notes, that so long as any of the Notes are outstanding:

Section 9.1. Compliance with Law . Without limiting Section 10.4 , the Company will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, ERISA, the USA Patriot Act and Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective Properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 9.2. Insurance . The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective Properties and businesses against such casualties and contingencies, of such types, on such terms and in such

 

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amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

Section 9.3. Maintenance of Properties . The Company will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective Properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its Properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 9.4. Payment of Taxes and Claims . The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their Properties, assets, income or franchises, to the extent the same have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on Properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes, assessments, charges, levies and claims in the aggregate could not reasonably be expected to have a Material Adverse Effect.

Section 9.5. Corporate Existence, Etc . Subject to Section 10.2 , the Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Section 10.2 , the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect.

Section 9.6. Books and Records . The Company will, and will cause each of its Subsidiaries to, maintain proper books of record and account in conformity with GAAP and all applicable requirements of any Governmental Authority

 

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having legal or regulatory jurisdiction over the Company or such Subsidiary, as the case may be.

Section 9.7. Conduct of Timber Business . The Company and each of its Subsidiaries will (a) conduct Timber harvesting in a professional, businesslike manner consistent with good forestry practices, and no waste shall be committed or allowed to occur that materially affects the Timber Market Value (it being understood that reasonable Timber harvesting hereunder does not constitute waste); (b) comply with all current federal, state, and local laws, regulations and ordinances concerning the harvesting of Timber; (c) implement all reasonable measures that are necessary to protect the Timberlands from loss by fire, disease and blight (such measures shall be consistent with generally accepted standards of fire protection practices generally followed on timberland in the same general area, including the maintenance of fire-fighting equipment customary within the industry, proper disposal of slash, maintenance of roads to permit access of fire-fighting equipment to all parts of the Timberlands, and full cooperation with state and federal agencies on matters of fire prevention and control); (d) ensure that all Timber harvested from the Timberlands via pay-as-cut type Timber sales (sales where each load is paid for as it is harvested and delivered to a facility) is scaled (weighed) and monitored pursuant to practices then customary in the industry; and (e) cause Timber harvested from the Timberlands via lump sum Timber sales (sales where Timber is sold standing and full payment is made in advance of harvest) to be scaled or measured using customary Timber inventory techniques while the Timber is standing and prior to sale and harvest.

Section 9.8. Appraisals . Upon request of any Holder of Notes, the Company will obtain an Appraisal of the Timber and/or timberlands from an Approved Appraiser, which shall be conducted at the expense of such requesting Holder, unless an Event of Default has occurred and is continuing, at which time such Appraisal shall be conducted at the expense of the Company as frequently as Required Holders shall request.

Section 9.9. Additional Guarantors . The Company shall notify the Holders of the Notes at the time that any Person becomes a Domestic Subsidiary and promptly thereafter (and in any event within ten Business Days), cause such Person to (i) become a Subsidiary Guarantor by executing and delivering to the each Holder of Notes a counterpart to the Subsidiary Guaranty, and (ii) deliver to the Holders of the Notes documents of the types referred to in Section 4.3 and a favorable opinion of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above), all in form, content and scope reasonably satisfactory to the Required Holders.

 

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Section 10. N EGATIVE C OVENANTS .

The Company covenants for the benefit of the Holders of the Notes that so long as any of the Notes are outstanding:

Section 10.1. Transactions with Affiliates . The Company will not and will not permit any Subsidiary to enter into directly or indirectly any transaction or group of related transactions (including without limitation the purchase, lease, sale or exchange of Properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Company or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Company and its wholly-owned Subsidiaries not involving any other Affiliates and (c) any Restricted Payment permitted by Section 10.8 .

Section 10.2. Fundamental Change.

 

(a)

The Company will not, and will not permit any