Conversion Transaction. The Company proposes to convert its outstanding ownership interests into shares of stock of Plum Creek Timber Company, Inc., a Delaware corporation (the "Corporation"), through the merger (the "Merger") of the Company with and into Plum Creek Acquisition Partners, L.P., a Delaware limited partnership (the "Operating Partnership"). Prior to the Merger, Manufacturing will form Plum Creek Manufacturing Holding Company, Inc. ("Holding") and will contribute a nominal amount to Holding in exchange for 96 percent of Holding's outstanding common stock (which will be non-voting stock), and management of the Company will purchase (the "Management Stock Purchase") the remaining 4 percent of such outstanding common stock (which will be voting stock). Manufacturing and Holding will then form four new Subsidiaries of Holding (the "New Subsidiaries"). Immediately prior to the Merger, Manufacturing will contribute an undivided 75 percent interest in substantially all of its assets (allocated in varying proportions) to the New Subsidiaries in exchange for 75 percent (valued on a fair market value basis at the time of transfer) of the outstanding capital stock of each of the New Subsidiaries (which stock will be non-voting preferred stock) and will contribute an undivided 25 percent interest in substantially all of its assets to Holding. Immediately thereafter, Holding will contribute such undivided 25 percent interest (allocated in the same proportion as Manufacturing's contribution of its undivided interest) to each of the New Subsidiaries in exchange for 25 percent (valued on a fair market value basis at the time of transfer) of the outstanding capital stock of each of the New Subsidiaries (which stock will be voting common stock). The formation of Holding and the New Subsidiaries and the issuance of the capital stock by such entities as described above is herein referred to as the "Facilities Subsidiary Reorganization." The contribution of assets of Manufacturing to Holding and the New Subsidiaries as described above is herein referred to as the "Manufacturing Asset Transfer". Immediately following the Merger, Marketing will become a subsidiary of Manufacturing, with 75 percent of the outstanding capital stock (which will be non-voting preferred stock) owned by Manufacturing and 25 percent of the outstanding capital stock (which will be voting common stock) owned by Holding (the "Marketing Stock Transfer"). In addition, it is proposed that Marketing will be released as an obligor on the Company's 11 1/8% Senior Notes due June 8, 2007 (the "11 1/8% Senior Notes") and the First Mortgage Notes and Marketing and the New Subsidiaries will each assume and become obligated in respect of varying percentages of the Debt represented by the 11 1/8% Senior Notes and the First Mortgage Notes (the "Subsidiary Note Assumption"). The foregoing transactions (herein collectively called the "Conversion Transaction") are to be effected (i) as provided in the Agreement and Plan of Conversion (the "Conversion Agreement"), dated as of June 5, 1998, and amended on July 17, 1998, among the Company, the Corporation and Plum Creek Management Company, L.P. (the sole general partner of the Company), and (ii) as described in the Proxy Statement/Prospectus. After the effectiveness of the Conversion Transaction, the Corporation will elect to be treated as a real estate investment trust for Federal income tax purposes. The Seller acknowledges and agrees that changes in the Conversion Transaction which are acceptable to and approved by the percentage of the holders of the Other Senior Notes which is necessary to effect amendments to the Other Senior Note Agreements shall also be acceptable to the Seller and any SDW Affiliate which is a holder of Notes without any requirement of any further action on the part of the holders of the Notes hereunder, provided that (i) the Notes are not then pledged to secure any obligation, (ii) as a result of the consummation of the Conversion Transaction the issuer and obligor on the Notes will be the direct owner of substantially all of the timber properties currently directly owned by the Company, (iii) the negative covenants in paragraph 6 shall remain in substance as set forth therein with only such changes as are necessary to accommodate the structure of the Conversion Transaction and (iv) the Notes shall remain pari passu with the Other Senior Notes in right of payment.
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Conversion Transaction. The Company proposes to convert its outstanding ownership interests into shares of stock of Plum Creek Timber Company, Inc., a Delaware corporation (the "Corporation"), through the merger (the "Merger") of the Company with and into Plum Creek Acquisition Partners, L.P., a Delaware limited partnership (the "Operating Partnership"). Prior to the Merger, Manufacturing will form Plum Creek Manufacturing Holding Company, Inc. ("Holding") and will contribute a nominal amount to Holding in exchange for 96 percent of Holding's outstanding common stock (which will be non-voting stock), and management of the Company will purchase (the "Management Stock Purchase") the remaining 4 percent of such outstanding common stock (which will be voting stock). Manufacturing and Holding will then form four new Subsidiaries of Holding (the "New Subsidiaries"). Immediately prior to the Merger, Manufacturing will contribute an undivided 75 percent interest in substantially all of its assets (allocated in varying proportions) to the New Subsidiaries in exchange for 75 percent (valued on a fair market value basis at the time of transfer) of the outstanding capital stock of each of the New Subsidiaries (which stock will be non-voting preferred stock) and will contribute an undivided 25 percent interest in substantially all of its assets to Holding. Immediately thereafter, Holding will contribute such undivided 25 percent interest (allocated in the same proportion as Manufacturing's contribution of its undivided interest) to each of the New Subsidiaries in exchange for 25 percent (valued on a fair market value basis at the time of transfer) of the outstanding capital stock of each of the New Subsidiaries (which stock will be voting common stock). The formation of Holding and the New Subsidiaries and the issuance of the capital stock by such entities as described above is herein referred to as the "Facilities Subsidiary Reorganization." The contribution of assets of Manufacturing to Holding and the New Subsidiaries as described above is herein referred to as the "Manufacturing Asset Transfer". Immediately prior to the Merger, the Company will form Plum Creek Southern Timber, L.L.C. as a Restricted Subsidiary ("Southern Timber, L.L.C."), into which the Company will contribute all of its timberlands located in Louisiana and Arkansas in exchange for Southern Timber, L.L.C. assuming (on a joint and several basis) a portion of the indebtedness of the Company. The formation of Southern Timber, L.L.C., transfer of Louisiana and Arkansas timberlands to Southern Timber, L.L.C. and assumption of a portion of the current indebtedness of the Company and future indebtedness of the Operating Partnership by Southern Timber, L.L.C. are herein referred to as the "Southern Timber Transaction." Immediately following the Merger, Marketing will become a subsidiary of Manufacturing, with 75 percent of the outstanding capital stock (which will be non-voting preferred stock) owned by Manufacturing and 25 percent of the outstanding capital stock (which will be voting common stock) owned by Holding (the "Marketing Stock Transfer"). In addition, it is proposed that Marketing will be released as an obligor on the Company's 11 1/8% Senior Notes due June 8, 2007 (the "11 1/8% Senior Notes") and the First Mortgage Notes and Marketing and the New Subsidiaries will each assume and become obligated in respect of varying percentages of the Debt represented by the Company's 11 1/8% Senior Notes due June 8, 2007 and the First Mortgage Notes (the "Subsidiary Note Assumption"). Marketing will form a wholly-owned subsidiary (the "Land Subsidiary") which will purchase from the Operating Partnership, on a seller financed basis, certain real property (the "Better Use Property") of the Operating Partnership that the Operating Partnership has determined has a higher value as recreational, residential, grazing or agricultural property than for timber production (the "HBU Transaction"). The foregoing transactions (herein collectively called the "Conversion Transaction") are to be effected (i) as provided in the Agreement and Plan of Conversion (the "Conversion Agreement"), dated as of June 5, 1998, and amended on July 17, 1998, among the Company, the Corporation and Plum Creek Management Company, L.P. (the sole general partner of the Company), and (ii) as described in the Proxy Statement/Prospectus dated December 9, 1998 (the "Proxy Statement/Prospectus") and (iii) as described above. After the effectiveness of the Conversion Transaction, the Corporation will elect to be treated as a real estate investment trust for Federal income tax purposes. The Seller acknowledges and agrees that changes in the Conversion Transaction which provisions of this paragraph 1 are acceptable to and approved provided by the percentage of Company as background and the holders of Noteholder is not responsible for such provisions nor should there be any implication that the Other Senior Notes Noteholder is agreeing that such statements are accurate, as to which the Company is necessary to effect amendments to the Other Senior Note Agreements shall also be acceptable to the Seller and any SDW Affiliate which is a holder of Notes without any requirement of any further action on the part of the holders of the Notes hereunder, provided that (i) the Notes are not then pledged to secure any obligation, (ii) as a result of the consummation of the Conversion Transaction the issuer and obligor on the Notes will be the direct owner of substantially all of the timber properties currently directly owned by the Company, (iii) the negative covenants in paragraph 6 shall remain in substance as set forth therein with only such changes as are necessary to accommodate the structure of the Conversion Transaction and (iv) the Notes shall remain pari passu with the Other Senior Notes in right of paymentsolely responsible.
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