UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 10-Q
___________________________________________________
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(Mark One)
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x
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2013
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OR
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o
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from
to
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Commission file number 000-53193
CATCHMARK TIMBER TRUST, INC.
(Exact name of registrant as specified in its charter)
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Maryland
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20-3536671
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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6200 The Corners Parkway
Norcross, Georgia 30092
(Address of principal executive offices)
(Zip Code)
(770) 449-7800
(Registrant’s telephone number, including area code)
N/A
________________________________________________
(Former name, former address, and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files)
Yes
x
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one).
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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x
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(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
x
Number of shares outstanding of the registrant’s only
class of common stock, as of
October 25, 2013
: 12,691,390 shares
FORM 10-Q
CATCHMARK TIMBER TRUST, INC.
TABLE OF CONTENTS
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Page No.
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PART I. FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II. OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q of
CatchMark Timber Trust, Inc.
and subsidiaries (“
CatchMark Timber Trust
,” “we,” “our,” or “us”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that this report is filed with the Securities and Exchange Commission (“SEC”). We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this report, and we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Any such forward-looking statements are subject to unknown risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders and maintain the value of our real estate properties, may be significantly hindered. See Item 1A herein, as well as Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2012 and in our quarterly reports on Form 10-Q for the periods ended March 31, 2013 and June 30, 2013, for a discussion of some of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements. The risk factors described herein, in our Annual Report on Form 10-K for the year ended December 31, 2012 and in our quarterly reports on Form 10-Q for the periods ended March 31, 2013 and June 30, 2013, are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also harm our business.
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PART I.
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FINANCIAL INFORMATION
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ITEM 1.
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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The information furnished in the accompanying consolidated balance sheets and related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows reflects all normal and recurring adjustments that are, in management’s opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.
The accompanying consolidated financial statements should be read in conjunction with the condensed notes to
CatchMark Timber Trust
’s consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this quarterly report on Form 10-Q and with
CatchMark Timber Trust
’s Annual Report on Form 10-K for the year ended
December 31, 2012
.
CatchMark Timber Trust
’s results of operations for the
three months and nine months ended
ended
September 30, 2013
are not necessarily indicative of the operating results expected for the full year.
CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
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September 30, 2013
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December 31, 2012
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Assets:
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Cash and cash equivalents
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$
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11,179,843
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$
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11,221,092
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Restricted cash and cash equivalents
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1,287,201
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2,050,063
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Accounts receivable
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594,561
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658,355
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Prepaid expenses and other assets
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1,942,485
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1,098,268
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Deferred financing costs, less accumulated amortization of $232,312 and $58,626
as of September 30, 2013 and December 31, 2012, respectively
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1,181,737
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1,311,770
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Timber assets, at cost (Note 3):
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Timber and timberlands, net
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327,981,204
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333,805,295
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Intangible lease assets, less accumulated amortization of $926,571 and $841,686
as of September 30, 2013 and December 31, 2012, respectively
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30,514
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115,399
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Total assets
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$
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344,197,545
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$
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350,260,242
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Liabilities:
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Accounts payable and accrued expenses
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$
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3,489,380
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$
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1,689,288
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Due to affiliates (Note 9)
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310,000
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1,326,255
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Other liabilities
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4,350,728
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4,801,387
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Note payable and line of credit (Note 4)
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132,356,123
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132,356,123
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Total liabilities
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140,506,231
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140,173,053
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Commitments and Contingencies (Note 6)
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—
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—
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Stockholders’ Equity:
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Preferred stock, $0.01 par value; 100,000,000 shares authorized:
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Series A preferred stock, $1,000 liquidation preference; 27,585 shares issued
and outstanding as of September 30, 2013 and December 31, 2012
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36,682,006
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36,476,063
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Series B preferred stock, $1,000 liquidation preference; 9,807 shares issued
and outstanding as of September 30, 2013 and December 31, 2012
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12,197,142
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12,123,992
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Class A common stock, $0.01 par value; 889,500,000 shares authorized; 3,172,454 and 3,180,063 shares issued and outstanding as of September 30, 2013 and
December 31, 2012, respectively
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31,725
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31,801
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Class B-1 common stock, $0.01 par value; 3,500,000 shares authorized; 3,172,454 and 3,180,063 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively
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31,725
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31,801
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Class B-2 common stock, $0.01 par value; 3,500,000 shares authorized; 3,172,453 and 3,180,063 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively
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31,725
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31,801
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Class B-3 common stock, $0.01 par value; 3,500,000 shares authorized; 3,172,453 and 3,180,062 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively
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31,724
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31,800
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Additional paid-in capital
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300,816,466
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301,538,949
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Accumulated deficit and distributions
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(146,569,699
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)
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(139,491,344
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)
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Accumulated other comprehensive income (loss)
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438,500
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(687,674
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Total stockholders’ equity
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203,691,314
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210,087,189
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Total liabilities and stockholders’ equity
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$
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344,197,545
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$
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350,260,242
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See accompanying notes.
CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited)
Three Months Ended
September 30,
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(Unaudited)
Nine Months Ended
September 30,
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2013
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2012
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2013
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2012
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Revenues:
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Timber sales
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$
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6,427,654
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$
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7,840,893
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$
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19,846,750
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$
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22,125,589
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Timberland sales
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645,436
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420,260
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2,498,757
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10,972,440
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Other revenues
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784,156
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673,549
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2,151,949
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2,014,830
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7,857,246
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8,934,702
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24,497,456
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35,112,859
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Expenses:
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Contract logging and hauling costs
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3,153,943
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3,941,977
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10,198,051
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11,788,361
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Depletion
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1,941,548
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2,670,288
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6,234,805
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8,144,576
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Cost of timberland sales
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401,858
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282,037
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1,745,010
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7,849,652
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Advisor fees and expense reimbursements
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930,000
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—
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3,311,608
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2,393,745
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Forestry management fees
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567,444
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557,396
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1,713,306
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1,700,475
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General and administrative expenses
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1,613,956
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569,949
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3,023,088
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1,697,464
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Land rent expense
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242,301
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469,141
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810,253
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1,482,438
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Other operating expenses
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585,445
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670,061
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1,854,919
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1,936,419
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9,436,495
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9,160,849
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28,891,040
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36,993,130
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Operating loss
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(1,579,249
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(226,147
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(4,393,584
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(1,880,271
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)
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Other income (expense):
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Interest income
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669
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310
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2,668
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619
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Interest expense
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(949,323
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)
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(2,274,272
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(2,687,170
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)
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(4,235,665
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)
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Loss on interest rate swap
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—
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(19,706
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)
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(474
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)
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(122,871
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)
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(948,654
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)
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(2,293,668
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(2,684,976
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)
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(4,357,917
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)
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Net loss
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(2,527,903
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)
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(2,519,815
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)
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(7,078,560
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)
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(6,238,188
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)
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Dividends to preferred stockholder
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(93,990
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)
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(93,992
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(279,093
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(280,003
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Net loss available to common stockholders
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$
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(2,621,893
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$
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(2,613,807
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$
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(7,357,653
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$
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(6,518,191
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)
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Per-share information—basic and diluted:
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Net loss available to common stockholders
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$
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(0.21
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$
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(0.21
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$
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(0.58
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$
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(0.51
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)
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Weighted-average common shares outstanding
—basic and diluted
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12,696,755
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12,739,390
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12,705,791
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12,744,956
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See accompanying notes.
CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
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(Unaudited)
Three Months Ended
September 30,
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(Unaudited)
Nine Months Ended
September 30,
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2013
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2012
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2013
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2012
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Net loss
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$
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(2,527,903
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)
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$
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(2,519,815
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$
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(7,078,560
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)
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$
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(6,238,188
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)
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Other comprehensive income (loss):
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Market value adjustment to interest rate swap
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(423,280
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)
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—
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1,126,174
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—
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Comprehensive loss
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$
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(2,951,183
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)
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$
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(2,519,815
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)
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$
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(5,952,386
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)
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$
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(6,238,188
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)
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See accompanying notes.
CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
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Class A Common Stock
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Class B Common Stock
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Preferred Stock
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Additional
Paid-In
Capital
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Accumulated
Deficit and Distributions
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Accumulated Other Comprehensive Income (Loss)
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Total
Stockholders’
Equity
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Shares
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Amount
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Shares
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Amount
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Shares
|
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Amount
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Balance, December 31, 2012
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3,180,063
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|
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$
|
31,801
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|
|
9,540,188
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|
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$
|
95,402
|
|
|
37,392
|
|
|
$
|
48,600,055
|
|
|
$
|
301,538,949
|
|
|
$
|
(139,491,344
|
)
|
|
$
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(687,674
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)
|
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$
|
210,087,189
|
|
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Issuance of common stock
|
300
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|
3
|
|
|
900
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9
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—
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|
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—
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36,654
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|
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—
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|
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—
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36,666
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Forfeiture of restricted stock award
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(202
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)
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(2
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)
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(606
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)
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(6
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)
|
|
—
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|
|
—
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|
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(197
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)
|
|
205
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|
|
—
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|
|
—
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Redemptions of common stock
|
(7,707
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)
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(77
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)
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|
(23,122
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)
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(231
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)
|
|
—
|
|
|
—
|
|
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(479,847
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)
|
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—
|
|
|
—
|
|
|
(480,155
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)
|
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Dividends on preferred stock
|
—
|
|
|
—
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|
|
—
|
|
|
—
|
|
|
—
|
|
|
279,093
|
|
|
(279,093
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,078,560
|
)
|
|
—
|
|
|
(7,078,560
|
)
|
|
Market value adjustment to interest rate swap
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,126,174
|
|
|
1,126,174
|
|
|
Balance, September 30, 2013
|
3,172,454
|
|
|
$
|
31,725
|
|
|
9,517,360
|
|
|
$
|
95,174
|
|
|
37,392
|
|
|
$
|
48,879,148
|
|
|
$
|
300,816,466
|
|
|
$
|
(146,569,699
|
)
|
|
$
|
438,500
|
|
|
$
|
203,691,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
|
Class B Common Stock
|
|
Preferred Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit and Distributions
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total
Stockholders’
Equity
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
Balance, December 31, 2011
|
3,146,527
|
|
|
$
|
31,466
|
|
|
9,439,583
|
|
|
$
|
94,396
|
|
|
37,748
|
|
|
$
|
48,685,499
|
|
|
$
|
271,617,462
|
|
|
$
|
(130,620,551
|
)
|
|
$
|
—
|
|
|
$
|
189,808,272
|
|
|
Issuance of common stock
|
41,445
|
|
|
414
|
|
|
124,331
|
|
|
1,243
|
|
|
—
|
|
|
—
|
|
|
4,133,145
|
|
|
(61
|
)
|
|
—
|
|
|
4,134,741
|
|
|
Redemptions of common stock
|
(7,909
|
)
|
|
(79
|
)
|
|
(23,726
|
)
|
|
(237
|
)
|
|
—
|
|
|
—
|
|
|
(742,799
|
)
|
|
—
|
|
|
—
|
|
|
(743,115
|
)
|
|
Dividends on preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
280,003
|
|
|
(280,003
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Redemptions of preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(356
|
)
|
|
(459,436
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(459,436
|
)
|
|
Commissions and discounts on stock sales and related dealer-manager fees
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(361,364
|
)
|
|
—
|
|
|
—
|
|
|
(361,364
|
)
|
|
Other offering costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,752
|
)
|
|
—
|
|
|
—
|
|
|
(48,752
|
)
|
|
Write-off of due to affiliates
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,315,249
|
|
|
—
|
|
|
—
|
|
|
27,315,249
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,238,188
|
)
|
|
—
|
|
|
(6,238,188
|
)
|
|
Balance, September 30, 2012
|
3,180,063
|
|
|
$
|
31,801
|
|
|
9,540,188
|
|
|
$
|
95,402
|
|
|
37,392
|
|
|
$
|
48,506,066
|
|
|
$
|
301,632,938
|
|
|
$
|
(136,858,800
|
)
|
|
$
|
—
|
|
|
$
|
213,407,407
|
|
See accompanying notes.
CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
Nine Months Ended
September 30,
|
|
|
2013
|
|
2012
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
Net loss
|
$
|
(7,078,560
|
)
|
|
$
|
(6,238,188
|
)
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
Depletion
|
6,234,805
|
|
|
8,144,576
|
|
|
Unrealized gain on interest rate swaps
|
(128,934
|
)
|
|
(665,009
|
)
|
|
Other amortization
|
136,142
|
|
|
220,232
|
|
|
Stock-based compensation expense
|
36,666
|
|
|
28,333
|
|
|
Noncash interest expense
|
182,848
|
|
|
1,674,257
|
|
|
Basis of timberland sold
|
1,569,543
|
|
|
7,187,733
|
|
|
Basis of casualty loss
|
—
|
|
|
25,541
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
Decrease (increase) in accounts receivable
|
63,794
|
|
|
(300,651
|
)
|
|
Decrease (increase) in prepaid expenses and other assets
|
200,586
|
|
|
(417,195
|
)
|
|
Increase in accounts payable and accrued expenses
|
1,735,091
|
|
|
565,375
|
|
|
Decrease in due to affiliates
|
(1,016,255
|
)
|
|
(1,480,196
|
)
|
|
Increase in other liabilities
|
481,949
|
|
|
1,748,345
|
|
|
Net cash provided by operating activities
|
2,417,675
|
|
|
10,493,153
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
Investment in timber, timberland, and related assets
|
(2,155,132
|
)
|
|
(22,962,057
|
)
|
|
Funds released from escrow accounts
|
762,862
|
|
|
5,149,589
|
|
|
Net cash used in investing activities
|
(1,392,270
|
)
|
|
(17,812,468
|
)
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
Proceeds from CoBank loan
|
—
|
|
|
133,000,000
|
|
|
Financing costs paid
|
(43,653
|
)
|
|
(1,229,558
|
)
|
|
Repayment of Mahrt loan
|
—
|
|
|
(122,025,672
|
)
|
|
Issuance of common stock
|
—
|
|
|
4,062,647
|
|
|
Redemptions of common stock
|
(480,155
|
)
|
|
(743,115
|
)
|
|
Redemptions of preferred stock
|
—
|
|
|
(356,000
|
)
|
|
Dividends paid on preferred stock redeemed
|
—
|
|
|
(103,436
|
)
|
|
Commissions on stock sales and related dealer-manager fees paid
|
—
|
|
|
(447,744
|
)
|
|
Other offering costs paid
|
(542,846
|
)
|
|
(83,739
|
)
|
|
Net cash (used in) provided by financing activities
|
(1,066,654
|
)
|
|
12,073,383
|
|
|
Net (decrease) increase in cash and cash equivalents
|
(41,249
|
)
|
|
4,754,068
|
|
|
Cash and cash equivalents, beginning of period
|
11,221,092
|
|
|
6,848,973
|
|
|
Cash and cash equivalents, end of period
|
$
|
11,179,843
|
|
|
$
|
11,603,041
|
|
See accompanying notes.
CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013 (unaudited)
On September 18, 2013, Wells Timberland REIT, Inc. changed its name to CatchMark Timber Trust, Inc. ("CatchMark Timber Trust").
CatchMark Timber Trust
primarily engages in the ownership, management, acquisition, and disposition of timberlands located in the southeastern United States and has elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes.
CatchMark Timber Trust
was incorporated in Maryland in 2005 and commenced operations in 2007.
CatchMark Timber Trust
conducts substantially all of its business through CatchMark Timber Operating Partnership, L.P. (“CatchMark Timber OP”), a Delaware limited partnership formerly known as Wells Timberland Operating Partnership, L.P.
CatchMark Timber Trust
is the general partner of CatchMark Timber OP, possesses full legal control and authority over its operations, and owns
99.99%
of its common partnership units. Wells Timberland Management Organization, LLC (“Wells TIMO”), a wholly owned subsidiary of Wells Capital, Inc. (“Wells Capital”), is the sole limited partner of CatchMark Timber OP. In addition, on January 1, 2006, CatchMark Timber OP formed CatchMark Timber TRS, Inc. (“CatchMark TRS”), formerly known as Wells Timberland TRS, Inc., a wholly owned subsidiary organized as a Delaware corporation. Unless otherwise noted, references herein to
CatchMark Timber Trust
shall include
CatchMark Timber Trust
and all of its subsidiaries, including CatchMark Timber OP, and the subsidiaries of CatchMark Timber OP, including CatchMark TRS.
CatchMark Timber Trust
previously operated as an externally advised REIT pursuant to an advisory agreement, as amended and restated (the "Advisory Agreement"), under which Wells TIMO, a subsidiary of Wells Real Estate Funds, Inc. ("Wells REF"), performed certain key functions on behalf of
CatchMark Timber Trust
, including, among others, managing the day-to-day operations, investing capital proceeds and arranging financing. On September 18, 2013,
CatchMark Timber Trust
and
CatchMark Timber OP
entered into a Master Self-Management Transition Agreement (the “Master Agreement”), along with a series of other agreements and transactions, with Wells REF and Wells TIMO (together with their respective affiliates, “Wells”), pursuant to which
CatchMark Timber Trust
began its transition to a self-managed company. On October 24, 2013, the Master Agreement was amended (the "Master Agreement Amendment") to advance the date of the transition to October 25, 2013 (the "Self-Management Transition Date"), and
CatchMark Timber Trust
completed its transition to self-management on that date. Pursuant to the Master Agreement, as of the Self-Management Transition Date, CatchMark LP Holder, LLC (“CatchMark LP Holder”), a recently formed, wholly-owned subsidiary of CatchMark Timber Trust, purchased all of Wells TIMO’s common limited partnership units in CatchMark Timber OP for an aggregate purchase price of
$1,312
. Following the acquisition of the common limited partnership units, CatchMark LP Holder and CatchMark Timber Trust entered into an amended and restated limited partnership agreement of CatchMark Timber OP, pursuant to which CatchMark LP Holder became the sole limited partner of CatchMark Timber OP. Leo F. Wells, III resigned as Chairman of the Board and President of CatchMark Timber Trust, and Douglas P. Williams resigned as Executive Vice President, Secretary and Treasurer of CatchMark Timber Trust, each effective on the Self-Management Transition Date. CatchMark Timber Trust’s board of directors has elected Jerry Barag as Chief Executive Officer and President and John F. Rasor as Chief Operating Officer and Secretary. For additional details about the related agreements, please refer to Note 9.
As of
September 30, 2013
,
CatchMark Timber Trust
owned approximately
247,200
acres of timberland and held long-term leasehold interests in approximately
32,800
acres of additional timberland, all of which is located on the Lower Piedmont and Upper Coastal Plains of East Central Alabama and West Central Georgia. CatchMark Timber Trust generates recurring income and cash flow from the harvest and sale of timber, as well as from non-timber related revenue sources, such as recreational leases. CatchMark Timber Trust also periodically generates income and cash flow from the sale of timberland properties that have a higher-value use beyond growing timber, such as properties that can be sold for development, conservation, recreational or other rural purposes at prices in excess of traditional timberland values. CatchMark Timber Trust expects to realize additional long-term returns from the potential appreciation in value of its timberlands as well as from the potential biological growth of its standing timber inventory in excess of its timber harvest.
From August 2006 to December 2011,
CatchMark Timber Trust
raised proceeds from
two
continuous non-listed public offerings of its common stock (the "Public Offerings"). From February 2010 to August 2011,
CatchMark Timber Trust
offered its common stock to non-U.S. persons (the "2010 German Offering").
CatchMark Timber Trust
raised gross offering proceeds from the sale of common stock in the Public Offerings and the 2010 German Offering of approximately
$307.2 million
. After deductions for payments of selling commissions and dealer-manager fees of approximately
$24.7 million
, other organization and offering expenses of approximately
$1.4 million
, approximately
$0.4 million
in placement and structuring agent fees, and common stock redemptions of approximately
$2.6 million
under the share redemption plan, as amended (the "SRP”),
CatchMark Timber Trust
received aggregate net offering proceeds of approximately
$278.1 million
, which was used to partially fund the acquisition of timberlands, service acquisition-related debt, redeem shares of its preferred stock, and fund accrued dividends on redeemed shares of preferred stock. In connection with the execution of the Master Agreement, on September 18, 2013,
CatchMark Timber Trust
's distribution reinvestment plan ("DRP") was terminated, effective as of September 18, 2013, and
CatchMark Timber Trust
's share redemption plan will be terminated effective as of October 31, 2013. On September 23, 2013,
CatchMark Timber Trust
filed a Registration Statement on Form S-11 with the SEC for a public offering of up to
$172.5 million
of its Class A common stock. These shares may not be sold until the Registration Statement is effective.
On October 24, 2013, CatchMark Timber Trust effectuated a
ten-to-one
reverse stock split of its then outstanding common stock. Also on October 24, 2013, CatchMark Timber Trust redesignated all of its common stock as Class A common stock. On October 25, 2013, CatchMark Timber Trust paid a stock dividend pursuant to which each outstanding share of its Class A common stock on October 24, 2013, after effectiveness of the reverse stock split, received one share of Class B-1 common stock; plus one share of Class B-2 common stock; plus one share of Class B-3 common stock. These transactions are referred to as the Recapitalization. All common stock share and per share data included in these consolidated financial statements give retroactive effect to the Recapitalization. See Note 10 for more information on the Recapitalization.
CatchMark Timber Trust
’s common stock is not listed on a national securities exchange.
CatchMark Timber Trust
’s charter requires that in the event its common stock is not listed on a national securities exchange by
August 11, 2018
,
CatchMark Timber Trust
must either (i) seek stockholder approval of an extension or amendment of this listing deadline or (ii) seek stockholder approval to begin liquidating investments and distributing the resulting proceeds to the stockholders. In the event that
CatchMark Timber Trust
seeks stockholder approval for an extension or amendment to this listing date and does not obtain it,
CatchMark Timber Trust
will then be required to seek stockholder approval to liquidate. In this circumstance, if
CatchMark Timber Trust
seeks and does not obtain approval to liquidate,
CatchMark Timber Trust
will not be required to list or liquidate and could continue to operate indefinitely as an unlisted company.
|
|
|
|
2.
|
Summary of Significant Accounting Policies
|
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of
CatchMark Timber Trust
have been prepared in accordance with the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, the statements for these unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Results for these interim periods are not necessarily indicative of results for a full year.
CatchMark Timber Trust
owns a controlling financial interest in CatchMark Timber OP, CatchMark LP Holder and CatchMark TRS and, accordingly, includes the accounts of these entities in its consolidated financial statements. The financial statements of CatchMark Timber OP, CatchMark LP Holder and CatchMark TRS are prepared using accounting policies consistent with those used by
CatchMark Timber Trust
. All intercompany balances and transactions have been eliminated in consolidation.
For further information, refer to the audited financial statements and footnotes included in
CatchMark Timber Trust
’s Annual Report on Form 10-K for the year ended
December 31, 2012
.
Fair Value Measurements
CatchMark Timber Trust
estimates the fair value of its assets and liabilities (where currently required under GAAP) consistent with the provisions of the accounting standard for fair value measurements and disclosures. Under this guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. While various techniques and assumptions can be used to estimate fair value depending on the nature of the asset or liability, the accounting standard for fair value measurements and disclosures provides the following fair value technique parameters and hierarchy, depending upon availability:
Level 1 — Assets or liabilities for which the identical term is traded on an active exchange, such as publicly-traded instruments or futures contracts.
Level 2 — Assets and liabilities valued based on observable market data for similar instruments.
Level 3 — Assets or liabilities for which significant valuation assumptions are not readily observable in the market. Such assets or liabilities are valued based on the best available data, some of which may be internally developed. Significant assumptions may include risk premiums that a market participant would require.
Fair Value of Debt Instruments
CatchMark Timber Trust
applied the provisions of the accounting standard for fair value measurements and disclosures in estimations of fair value of its debt instruments based on Level 2 assumptions. See Note 4 for additional information.
Interest Rate Swaps
CatchMark Timber Trust
has entered into interest rate swap contracts to mitigate its exposure to changing interest rates on variable rate debt instruments.
CatchMark Timber Trust
does not enter into derivative or interest rate transactions for speculative purposes; however, certain of its derivatives may not qualify for hedge accounting treatment. The fair values of interest rate swaps are recorded as either prepaid expenses and other assets or other liabilities in the accompanying consolidated balance sheets. Changes in the fair value of the effective portion of interest rate swaps that are designated as hedges are recorded as other comprehensive income (loss), while changes in the fair value of the ineffective portion of hedges, if any, are recognized in current earnings. Changes in the fair value of interest rate swaps that do not qualify for hedge accounting treatment are recorded as gain (loss) on interest rate swap in the consolidated statements of operations. Amounts received or paid under interest rate swaps are recorded as interest expense for contracts that qualify for hedge accounting treatment and as gain (loss) on interest rate swaps for contracts that do not qualify for hedge accounting treatment.
CatchMark Timber Trust
applied the provisions of the accounting standard for fair value measurements and disclosures in recording its interest rate swaps at fair value. The fair values of interest rate swaps, classified under Level 2, were determined using a third-party proprietary model that is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate ("LIBOR") information, consideration of CatchMark Timber Trust's credit standing, credit risk of counterparties, and reasonable estimates about relevant future market conditions.
The following table presents information about
CatchMark Timber Trust
’s interest rate swaps measured at fair value as of
September 30, 2013
and
December 31, 2012
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value as of
|
|
Instrument Type
|
Balance Sheet Classification
|
|
September 30, 2013
|
|
December 31, 2012
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate swap contract
|
Prepaid expenses and other assets
(Other liabilities)
|
|
$
|
438,500
|
|
|
$
|
(687,674
|
)
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate swap contract
|
Other liabilities
|
|
$
|
—
|
|
|
$
|
(128,934
|
)
|
For additional information about
CatchMark Timber Trust
's interest rate swaps, see Note 5.
Stock Dividends
Stock dividends are assigned a value based on the then current fair value and recorded against accumulated deficit. The par value of a stock dividend declared and issued is recorded as common stock and the remaining value is recorded as additional paid-in capital. The par value of a stock dividend declared but not issued is recorded as other liabilities in the accompanying consolidated balance sheets and the remaining value is recorded as additional paid-in capital. Basic and diluted per-share information presented in the accompanying consolidated statements of operations is retroactively adjusted for all periods presented to reflect the impact of the additional shares of common stock issued and outstanding as a result of a stock dividend.
Income Taxes
CatchMark Timber Trust
has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), and has operated as such beginning with its taxable year ended
December 31, 2009
. To qualify to be taxed as a REIT,
CatchMark Timber Trust
must meet certain organizational and operational requirements, including a requirement to distribute at least
90%
of its ordinary taxable income to its stockholders. As a REIT,
CatchMark Timber Trust
generally is not subject to federal income tax on taxable income it distributes to stockholders.
CatchMark Timber Trust
is subject to certain state and local taxes related to the operations of timberland properties in certain locations, which have been provided for in the accompanying consolidated financial statements.
CatchMark Timber Trust
records interest and penalties related to uncertain tax positions as general and administrative expense in the accompanying consolidated statements of operations.
As of
January 1, 2009
, the beginning of the taxable year in which
CatchMark Timber Trust
qualified for and elected to be taxed as a REIT (the "REIT Commencement Date"),
CatchMark Timber Trust
had net built-in gains on its timber assets of approximately
$18.3 million
.
CatchMark Timber Trust
has elected not to take such net built-in gains into income immediately prior to the REIT Commencement Date, but rather subsequently recognize gain on the disposition of any assets it holds at the REIT Commencement Date, if disposed of within the
ten
-year period beginning on the REIT Commencement Date.
CatchMark Timber Trust
will be subject to tax on such net built-in gains at the highest regular corporate rate during the
ten
-year period beginning on the REIT Commencement Date on the lesser of (a) the excess of the fair market value of the asset disposed of as of the REIT Commencement Date over its basis in the asset as of the REIT Commencement Date (the built-in gain with respect to that asset as of the REIT Commencement Date); (b) the amount of gain
CatchMark Timber Trust
would otherwise recognize on the disposition; or (c) the amount of net built-in gain in its assets as of the REIT commencement date not already recognized during the
ten
-year period. As of December 31, 2012,
CatchMark Timber Trust
had net built-in gains of approximately
$17.6 million
.
At December 31, 2012,
CatchMark Timber Trust
had federal and state net operating loss carryforwards of approximately
$104.0 million
and
$87.6 million
, respectively. Such net operating loss carryforwards may be utilized, subject to certain
limitations, to offset future taxable income, including net built-in gains. If not utilized, the federal net operating loss carryforwards will begin to expire in
2027
, and the state net operating loss carryforwards will begin to expire in
2022
.
CatchMark Timber Trust
has elected to treat CatchMark TRS as a taxable REIT subsidiary.
CatchMark Timber Trust
may perform certain non-customary services, including real estate or non-real-estate related services, through CatchMark TRS. Earnings from services performed through CatchMark TRS are subject to federal and state income taxes irrespective of the dividends paid deduction available to REITs for federal income tax purposes. In addition, for
CatchMark Timber Trust
to continue to qualify to be taxed as a REIT,
CatchMark Timber Trust
’s investment in CatchMark TRS may not exceed
25%
of the value of the total assets of
CatchMark Timber Trust
.
Deferred tax assets and liabilities represent temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on the enacted rates expected to be in effect when the temporary differences reverse. Deferred tax expense or benefit is recognized in the financial statements according to the changes in deferred tax assets or liabilities between years. Valuation allowances are established to reduce deferred tax assets when it becomes more likely than not that such assets, or portions thereof, will not be realized.
No
provision for federal income taxes has been made in the accompanying consolidated financial statements, other than the provision relating to CatchMark TRS, as
CatchMark Timber Trust
did not generate taxable income for the periods presented.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2013-02,
Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income
("ASU 2013-02"). ASU 2013-02 requires an entity to disclose information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to disclose significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified to net income in its entirety in the same reporting period is required under GAAP. For amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. ASU 2013-02 was effective for
CatchMark Timber Trust
for the period beginning January 1, 2013. The adoption of ASU 2013-02 has not had a material impact on
CatchMark Timber Trust
's financial statements or disclosures.
In June 2013, FASB issued Accounting Standards Update 2013-08,
Financial Services - Investment Companies: Amendments to the Scope, Measurement, and Disclosure Requirements
("ASU 2013-08"). ASU 2013-08 clarifies the characteristics of an investment company and requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting. In addition, an entity is required to disclose (a) the fact that it is an investment company applying the guidance in the Financial Services - Investment Companies Topic, (b) information about any changes in the entity's status as an investment company, and (c) information about financial support provided to its investees. ASU 2013-08 will be effective for
CatchMark Timber Trust
for the period beginning on January 1, 2014.
CatchMark Timber Trust
expects that the adoption of ASU 2013-08 will not have a material impact on its financial statements or disclosures.
In July 2013, FASB issued Accounting Standards Update 2013-10,
Derivatives and Hedging: Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes
("ASU 2013-10"). ASU 2013-10 permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes under the Derivatives and Hedging Topic, in addition to the U.S. Treasury rate and LIBOR. In addition, the restriction on using different benchmark rates for similar hedges is removed. ASU 2013-10 became effective prospectively for
CatchMark Timber Trust
for qualifying new hedging relationships entered into on or after July 17, 2013. The adoption of ASU 2013-10 has not had a material impact on
CatchMark Timber Trust
's financial statements or disclosures.
In July 2013, FASB issued Accounting Standards Update 2013-11,
Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
("ASU 2013-11"). ASU 2013-11 requires an entity to present an unrecognized tax benefit in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date or not intended to be used to settle any additional income taxes that would result in the dis-allowance of a tax position in which case the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 will be effective prospectively for
CatchMark Timber Trust
for the period beginning on January 1, 2014.
CatchMark Timber Trust
expects that the adoption of ASU 2013-11 will not have a material impact on its financial statements or disclosures.
During the
three months ended
September 30, 2013
and 2012,
CatchMark Timber Trust
sold approximately
300
acres and
200
acres of timberland, respectively, for approximately
$0.6 million
and
$0.4 million
, respectively.
CatchMark Timber Trust
’s cost basis in the timberland sold was approximately
$0.4 million
and
$0.2 million
, respectively.
During the
nine months ended
September 30, 2013
and 2012,
CatchMark Timber Trust
sold approximately
1,200
acres and
6,000
acres of timberland, respectively, for approximately
$2.5 million
and
$11.0 million
, respectively.
CatchMark Timber Trust
’s cost basis in the timberland sold was approximately
$1.6 million
and
$7.2 million
, respectively.
As of
September 30, 2013
and
December 31, 2012
, timber and timberlands consisted of the following, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013
|
|
|
Gross
|
|
Accumulated
Depletion or
Amortization
|
|
Net
|
|
Timber
|
$
|
149,841,457
|
|
|
$
|
6,234,805
|
|
|
$
|
143,606,652
|
|
|
Timberlands
|
184,113,814
|
|
|
—
|
|
|
184,113,814
|
|
|
Mainline roads
|
483,536
|
|
|
222,798
|
|
|
260,738
|
|
|
Timber and timberlands
|
$
|
334,438,807
|
|
|
$
|
6,457,603
|
|
|
$
|
327,981,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
Gross
|
|
Accumulated
Depletion or
Amortization
|
|
Net
|
|
Timber
|
$
|
161,878,914
|
|
|
$
|
11,677,229
|
|
|
$
|
150,201,685
|
|
|
Timberlands
|
183,349,545
|
|
|
—
|
|
|
183,349,545
|
|
|
Mainline roads
|
428,688
|
|
|
174,623
|
|
|
254,065
|
|
|
Timber and timberlands
|
$
|
345,657,147
|
|
|
$
|
11,851,852
|
|
|
$
|
333,805,295
|
|
Timberland Acquisition
On
July 30, 2013
, CatchMark Timber Trust acquired a fee simple interest in approximately
1,800
acres of timberland located in Taylor County, Georgia, in which it previously held a leasehold interest, for approximately
$1.4 million
, exclusive of closing costs.
|
|
|
|
4.
|
Note Payable and Line of Credit
|
CatchMark Timber Trust
entered into a first mortgage loan agreement (the "CoBank Loan") on
September 28, 2012
with a syndicate of banks with CoBank, ACB ("CoBank") serving as administrative agent. Under the CoBank Loan,
CatchMark Timber Trust
initially could borrow up to
$148.0 million
in principal, including
$133.0 million
through a
term loan facility ("CoBank Term Loan") and up to
$15.0 million
through a revolving credit facility (the "CoBank Revolver"). On
August 11, 2018
, all outstanding principal, interest, and any fees or other obligations on the CoBank Loan will be due and payable in full. The CoBank Loan is secured by a first mortgage in the CatchMark Timber Trust's timberlands, a first priority security interest in all bank accounts held by CatchMark Timber Trust and a first priority security interest on all other assets of
CatchMark Timber Trust
. As of
September 30, 2013
, the outstanding balance of the CoBank Loan was
$132.4 million
, all of which was outstanding under the CoBank Term Loan.
The CoBank Loan contains certain financial covenants.
CatchMark Timber Trust
believes it was in compliance with the financial covenants of the CoBank Loan as of
September 30, 2013
.
During the
three months ended
September 30, 2013
and
2012
,
CatchMark Timber Trust
made interest payments on its borrowings of approximately
$0.8 million
and
$0.8 million
, respectively. During the
nine months ended
September 30, 2013
and
2012
, interest payments on its borrowings totaled approximately
$2.3 million
and
$2.5 million
, respectively.
As of
September 30, 2013
, the weighted-average interest rate on these borrowings, after consideration of an interest rate swap (see Note 5), was
2.62%
. As of
September 30, 2013
and December 31, 2012, the fair value of
CatchMark Timber Trust
's outstanding debt approximated its book value. The fair value was estimated based on discounted cash flow analysis using the current market borrowing rates for similar types of borrowing arrangements as of the measurement dates.
5. Interest Rate Swaps
CatchMark Timber Trust
entered into interest rate swap contracts in order to mitigate its interest rate risk on related financial instruments.
CatchMark Timber Trust
does not enter into derivative or interest rate contracts for speculative purposes; however,
CatchMark Timber Trust
’s derivatives may not qualify for hedge accounting treatment.
Interest Rate Swap Designated as Hedging Instrument
As required by the terms of the CoBank Loan, on
October 23, 2012
,
CatchMark Timber Trust
entered into an interest rate swap agreement with Rabobank Group ("Rabobank") to hedge its exposure to changing interest rates on
$80.0 million
of the CoBank Loan that is subject to a variable interest rate (the “Rabobank Forward Swap”). The Rabobank Forward Swap had an effective date of
March 28, 2013
and matures on
September 30, 2017
. Under the terms of the Rabobank Forward Swap,
CatchMark Timber Trust
pays interest at a fixed rate of
0.9075%
per annum to Rabobank and receives
one
-month LIBOR-based interest payments from Rabobank. The Rabobank Forward Swap qualifies for hedge accounting treatment.
During the
three months and nine months ended
September 30, 2013
,
CatchMark Timber Trust
recognized a change in fair value of the Rabobank Forward Swap of approximately
$(0.4) million
and
$1.1 million
, respectively, as other comprehensive income (loss). There was
no
hedge ineffectiveness on the Rabobank Forward Swap required to be recognized in current earnings. Net payments of approximately
$0.1 million
and
$0.3 million
made under the Rabobank Forward Swap by
CatchMark Timber Trust
during the three months and nine months ended
September 30, 2013
, respectively, were recorded as interest expense.
Interest Rate Swap Not Designated as Hedging Instrument
On
March 24, 2010
, as required by the terms of its loan agreement,
CatchMark Timber Trust
entered into an interest rate swap agreement with Rabobank to hedge its exposure to changing interest rates on a portion of its
$211.0 million
senior loan (the “Rabobank Interest Rate Swap”). The Rabobank Interest Rate Swap was effective from
September 30, 2010
to
March 28, 2013
. During the term of the Rabobank Interest Rate Swap, CatchMark Timber Trust paid interest at a fixed rate of
2.085%
per annum and received variable LIBOR-based interest payments from Rabobank on the following notional amounts during the periods presented:
|
|
|
|
|
|
|
|
|
Start Date
|
|
End Date
|
|
Notional Amount
|
|
December 30, 2011
|
|
March 30, 2012
|
|
$62,500,000
|
|
March 30, 2012
|
|
June 29, 2012
|
|
$57,500,000
|
|
December 31, 2012
|
|
March 28, 2013
|
|
$28,500,000
|
The detail of loss on the Rabobank Interest Rate Swap, which was recorded as loss on interest rate swaps in the accompanying consolidated statements of operations, is provided below for the
three months and nine months ended
September 30, 2013
and
2012
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Noncash gain on Rabobank Interest Rate Swap
|
$
|
—
|
|
|
$
|
213,293
|
|
|
$
|
128,934
|
|
|
$
|
665,009
|
|
|
Net payments on Rabobank Interest Rate Swap
|
—
|
|
|
(232,999
|
)
|
|
(129,408
|
)
|
|
(787,880
|
)
|
|
Loss on Rabobank Interest Rate Swap
|
$
|
—
|
|
|
$
|
(19,706
|
)
|
|
$
|
(474
|
)
|
|
$
|
(122,871
|
)
|
6. Commitments and Contingencies
MeadWestvaco Timber Agreements
In connection with the acquisition of its timberlands,
CatchMark Timber Trust
entered into a fiber supply agreement and a master stumpage agreement (collectively, the “Timber Agreements”) with a wholly owned subsidiary of MeadWestvaco Corporation (“MeadWestvaco”). The fiber supply agreement provides that MeadWestvaco will purchase specified tonnage of timber from CatchMark TRS at specified prices per ton, depending upon the type of timber. The fiber supply agreement is subject to quarterly market pricing adjustments based on an index published by Timber Mart-South, a quarterly trade publication that reports raw forest product prices in
11
southern states. The master stumpage agreement provides that
CatchMark Timber Trust
will sell specified amounts of timber and make available certain portions of its timberlands to CatchMark TRS for harvesting. The initial term of the Timber Agreements is
October 9, 2007
through
December 31, 2032
, subject to extension and early termination provisions. The Timber Agreements ensure a long-term source of supply of wood fiber products for MeadWestvaco in order to meet its paperboard and lumber production requirements at specified mills and provide
CatchMark Timber Trust
with a reliable customer for the wood products from its timberlands.
FRC Timberland Operating Agreement
CatchMark Timber Trust
is party to a timberland operating agreement with Forest Resource Consultants, Inc. (“FRC”). Pursuant to the terms of the timberland operating agreement, FRC manages and operates
CatchMark Timber Trust
's timberlands and related timber operations, including ensuring delivery of timber to MeadWestvaco in compliance with the Timber Agreements. In consideration for rendering the services described in the timberland operating agreement,
CatchMark Timber Trust
pays FRC (i) a monthly management fee based on the actual acreage FRC manages, which is payable monthly in advance, and (ii) an incentive fee based on net revenues generated by the timberlands. The incentive fee is payable annually in arrears. The timberland operating agreement, as amended, is effective through
December 31, 2013
, with the option to extend for
one
-year periods and may be terminated by either party with mutual consent or by
CatchMark Timber Trust
with or without cause upon providing
120
days’ prior written notice.
Litigation
From time to time,
CatchMark Timber Trust
may be a party to legal proceedings, claims, and administrative proceedings that arise in the ordinary course of its business. Management makes assumptions and estimates concerning the likelihood and amount of any reasonably possible loss relating to these matters using the latest information available.
CatchMark Timber Trust
records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range,
CatchMark Timber Trust
accrues the best estimate within the range. If no amount within the range is a better
estimate than any other amount,
CatchMark Timber Trust
accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated,
CatchMark Timber Trust
discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material,
CatchMark Timber Trust
discloses the nature and estimate of the possible loss of the litigation.
CatchMark Timber Trust
does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote.
CatchMark Timber Trust
is not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the results of operations or financial condition of
CatchMark Timber Trust
, nor is
CatchMark Timber Trust
aware of any such legal proceedings contemplated by governmental authorities.
7. Share Redemption Plan
CatchMark Timber Trust
's SRP allows stockholders who hold their shares for more than
one
year to sell their shares back to
CatchMark Timber Trust
, subject to certain limitations and penalties. The SRP is funded through a combination of proceeds received from the sale of shares through the DRP plus any additional amounts reserved for redemptions by CatchMark Timber Trust’s board of directors. As of September 30, 2013, CatchMark Timber Trust had not received any proceeds from the sale of shares through its DRP, but
CatchMark Timber Trust
's board of directors has approved a monthly, non-cumulative reserve of
$150,000
for redemptions in connection with death, qualifying disability, or qualification for federal assistance for confinement to a long-term care facility (“Qualified Special Redemptions”). As of September 30, 2013,
CatchMark Timber Trust
had not redeemed any shares under the SRP other than Qualified Special Redemptions. Qualified Special Redemptions do not require a one-year holding period.
Effective
January 1, 2013
, the price paid for shares redeemed under the SRP equaled
$15.58
per share, which represented
95%
of the estimated per-share value of
CatchMark Timber Trust
's common stock as of September 30, 2012. While
CatchMark Timber Trust
is required by Financial Industry Regulatory Authority ("FINRA") rules to update this estimate 18 months from the date of last valuation, it may elect to do so sooner. As disclosed in connection with
CatchMark Timber Trust
's initial publication of its estimated per-share value, the estimated value of its common stock will fluctuate over time in response to market conditions, capital markets activities, attributes specific to its timberlands and other factors. Therefore, the estimated per-share value of
CatchMark Timber Trust
's common stock as of September 30, 2012 does not represent current value.
During the
three months and nine months ended
September 30, 2013
, approximately
12,736
and
30,829
shares of common stock, respectively, were redeemed for approximately
$198,355
and
$480,155
, respectively. The board of directors may amend, suspend, or terminate the SRP upon
30
days' written notice and without stockholder approval. In connection with the execution of the Master Agreement (see Note 1 and Note 9), on September 18, 2013,
CatchMark Timber Trust
's board of directors approved the termination of the SRP effective as of October 31, 2013.
8. Supplemental Disclosures of Noncash Activities
Outlined below are significant noncash investing and financing transactions for the
nine months ended
September 30, 2013
and
2012
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2013
|
|
2012
|
|
Write-off of due to affiliates
|
|
$
|
—
|
|
|
$
|
27,315,249
|
|
|
Dividends accrued on preferred stock
|
|
$
|
279,093
|
|
|
$
|
280,003
|
|
|
Discounts applied to issuance of common stock
|
|
$
|
—
|
|
|
$
|
43,761
|
|
|
Cancellation of stock dividends
|
|
$
|
—
|
|
|
$
|
(329
|
)
|
|
Forfeiture of restricted stock award
|
|
$
|
205
|
|
|
$
|
—
|
|
|
Market value adjustment to interest rate swap that qualifies for hedge accounting treatment
|
|
$
|
1,126,174
|
|
|
$
|
—
|
|
|
Issuance of stock-based compensation
|
|
$
|
19,680
|
|
|
$
|
55,000
|
|
|
Other liabilities assumed upon acquisition of timberland
|
|
$
|
125,163
|
|
|
$
|
1,156,317
|
|
|
Deferred financing costs payable
|
|
$
|
—
|
|
|
$
|
99,936
|
|
|
|
|
|
9.
|
Related-Party Transactions and Agreements
|
Advisory Agreement
CatchMark Timber Trust
and
CatchMark Timber OP
were party to the Advisory Agreement with Wells TIMO, pursuant to which Wells TIMO acted as
CatchMark Timber Trust
's external advisor and performed certain key functions on behalf of
CatchMark Timber Trust
, including, among others, management of day-to-day operations and investment of capital proceeds. As discussed in detail below, in connection with
CatchMark Timber Trust
's transition to self-management, the Advisory Agreement terminated on the Self-Management Transition Date.
During the periods presented, the amount of advisor fees and expense reimbursements Wells TIMO was entitled to as
CatchMark Timber Trust
's external advisor was determined pursuant to various amendments and restatements of the advisory agreement, as described below:
|
|
|
|
•
|
Effective July 1, 2013 through the Self-Management Transition Date, pursuant to an amended and restated advisory agreement (the “Restated Advisory Agreement”), the monthly advisor fee payable by
CatchMark Timber Trust
to Wells TIMO is equal to one-twelfth of 1% of the aggregate value of
CatchMark Timber Trust
's interest in properties and joint ventures as established in connection with the most recent estimated valuation conducted pursuant to applicable FINRA rules (“Assets Under Management”). Upon the sale of any properties for an amount greater than
$5.0 million
in aggregate since the most recent valuation, Assets Under Management shall be reduced by the cost basis of the properties sold. Upon the acquisition of any properties for an amount greater than
$5.0 million
in aggregate since the most recent valuation, Assets Under Management shall be increased by the value of the properties acquired as determined by a forestry appraisal firm. However, aggregate advisor fees payable for fiscal year 2013 shall not exceed
1.0%
of Assets Under Management as of September 30, 2012.
|
The advisor fee was payable monthly in arrears by
CatchMark Timber Trust
in cash. If payment of the advisor fee for any calendar month would have caused an event of default under
CatchMark Timber Trust
's loan agreement, the advisor fee would have been accrued but not paid to Wells TIMO for such calendar month.
In addition, the Restated Advisory Agreement eliminated the reimbursement by
CatchMark Timber Trust
of administrative service expenses that Wells TIMO incurs in fulfilling its duties as advisor, including personnel costs and
CatchMark Timber Trust
's allocable share of other overhead of Wells TIMO.
|
|
|
|
•
|
Between April 1, 2012 and June 30, 2013, a second amendment to the advisory agreement (“Advisory Agreement Amendment No. 2”), provided that as of and for each quarter, the amount of fees and expense reimbursements payable to Wells TIMO was limited to the lesser of (i)
1.0%
of assets under management as of the last day of the quarter less advisor fees paid for the preceding three quarters, and (ii) free cash flow for the
four
quarters then ended in excess of an amount equal to
1.25
multiplied by
CatchMark Timber Trust
’s interest expense for the four quarters then ended. Free cash flow was defined as EBITDA (as defined in
CatchMark Timber Trust
's loan agreements), less all capital expenditures paid by
CatchMark Timber Trust
on a consolidated basis, less any cash distributions (except for the payments of accrued but unpaid dividends as a result of any redemptions of
CatchMark Timber Trust
's outstanding preferred stock).
|
|
|
|
|
•
|
During the first quarter of 2012, an amendment to the advisory agreement (“Advisory Agreement Amendment No. 1”) limited the amount of fees and expense reimbursements as of and for each quarter to the least of: (1) an asset management fee equal to one fourth of 1.0% of asset under management plus reimbursements for all costs and expenses Wells TIMO incurred in fulfilling its duties as the asset manager, (2) one quarter of
1.5%
of assets under management, or (3) free cash flow in excess of an amount equal to
1.05
multiplied by interest on outstanding debt. Free cash flow was defined as EBITDA (as defined in
CatchMark Timber Trust
's loan agreements), less all capital expenditures paid by
CatchMark Timber Trust
on a consolidated basis, less any cash distributions (except for the payments of accrued but unpaid dividends as a result of any redemptions of
CatchMark Timber Trust
's outstanding preferred stock), less any cash proceeds from timberland sales equal to the cost basis of the properties sold.
|
Under the Advisory Agreement, Wells TIMO was also entitled to receive the following:
|
|
|
|
•
|
Reimbursement of organization and offering costs paid by Wells TIMO and its affiliates on behalf of
CatchMark Timber Trust
, not to exceed
1.2%
of gross offering proceeds. CatchMark Timber Trust incurred and charged to additional paid-in capital cumulative organization and offering costs of approximately
$3.6 million
, representing approximately
1.2%
of cumulative gross proceeds raised by
CatchMark Timber Trust
under the Public Offerings. As of
December 31, 2011
, approximately
$2.2 million
of organization and offering costs incurred by
CatchMark Timber Trust
and due to Wells TIMO had been deferred by the terms of
CatchMark Timber Trust
's loan agreements. On
January 27, 2012
, Wells TIMO forgave the deferred organization and offering expenses. After adjusting for this write-off, organization and offering costs represents approximately
0.5%
of cumulative gross proceeds raised under the Public Offerings.
|
|
|
|
|
•
|
For any property sold by
CatchMark Timber Trust
, if Wells TIMO provided a substantial amount of services in connection with the sale (as determined by
CatchMark Timber Trust
’s independent directors), a fee equal to (i) for each property sold at a contract price up to
$20.0 million
, up to
2.0%
of the sales price, and (ii) for each property sold at a contract price in excess of
$20.0 million
, up to
1.0%
of the sales price. The precise amount of the fee within the preceding limits will be determined by
CatchMark Timber Trust
’s board of directors, including a majority of the independent directors, based on the level of services provided and market norms. The real estate disposition fee may be in addition to real estate commissions paid to third parties. However, the total real estate commissions (including such disposition fee) may not exceed the lesser of (i)
6.0%
of the sales price of each property or (ii) the level of real estate commissions customarily charged in light of the size, type, and location of the property.
|
No
payments were permitted under the Advisory Agreement if they would have caused a default under
CatchMark Timber Trust
's loan agreements.
On
January 20, 2012
,
CatchMark Timber Trust
entered into an agreement with Wells TIMO to forgive approximately
$25.1 million
of accrued but unpaid asset management fees and expense reimbursements that were previously deferred
due to restrictions under
CatchMark Timber Trust
's loan agreements. Due to the related-party nature of these transactions, this amount, along with the organizational and offering costs forgiven by Wells TIMO on
January 27, 2012
, were recorded as additional paid-in capital during 2012.
Master Self-Management Transition Agreement
On September 18, 2013, CatchMark Timber Trust, CatchMark Timber OP, Wells REF and Wells TIMO entered into the Master Agreement, which sets forth the framework for CatchMark Timber Trust’s separation from Wells and its transition to self-management. On October 24, 2013, the parties entered into the Master Agreement Amendment to advance the Self-Management Transition Date to October 25, 2013.
Pursuant to the Master Agreement, Wells has agreed to facilitate and support CatchMark Timber Trust’s efforts to hire up to
eight
employees of Wells identified by CatchMark Timber Trust who, as of the date of the Master Agreement, performed substantial services for CatchMark Timber Trust pursuant to the Advisory Agreement (collectively, the “Targeted Personnel”). CatchMark Timber Trust hired the Targeted Personnel selected by CatchMark Timber Trust on the Self-Management Transition Date with such compensation and benefits as determined by CatchMark Timber Trust.
Pursuant to the Master Agreement, upon the termination of the Advisory Agreement, the special limited partnership units held by Wells TIMO in CatchMark Timber OP were automatically redeemed by CatchMark Timber OP, and Wells TIMO was not entitled to any consideration in connection with such redemption. For further information on the special limited partnership units, refer to the consolidated financial statements and accompanying notes included in
CatchMark Timber Trust
's Annual Report on Form 10-K for the year ended December 31, 2012.
Pursuant to the Master Agreement, upon termination of the Advisory Agreement on the Self-Management Transition Date, CatchMark LP Holder, a wholly-owned subsidiary of CatchMark Timber Trust, purchased all of Wells TIMO’s common limited partnership units in CatchMark Timber OP for an aggregate purchase price of
$1,312
.
Preferred Stock Redemption Agreement
Pursuant to the Master Agreement, on September 18, 2013, CatchMark Timber Trust, Wells REF, Leo F. Wells, III, the President and Chairman of the Board of CatchMark Timber Trust, and Douglas P. Williams, Executive Vice President, Secretary, Treasurer and director of CatchMark Timber Trust, entered into a Preferred Stock Redemption Agreement, and on September 20, 2013, the Company, Wells REF and Messrs. Wells and Williams entered into an Amendment to the Preferred Stock Redemption Agreement (as amended, the “Preferred Stock Redemption Agreement”). Pursuant to the Preferred Stock Redemption Agreement, upon the closing of CatchMark Timber Trust’s underwritten public offering of common stock pursuant to the Registration Statement on Form S-11 (the “Registration Statement”) initially filed by CatchMark Timber Trust with the SEC on September 23, 2013 (the “Redemption Date”), CatchMark Timber Trust will purchase the issued and outstanding shares of its Series A Preferred Stock,
$0.01
par value per share, and Series B Preferred Stock,
$0.01
par value per share, held by Wells REF (collectively, the “Preferred Shares”) for $1,000 per share plus accrued but unpaid distributions through the date immediately preceding the Redemption Date (the “Redemption Price”). Notwithstanding the foregoing, the Preferred Stock Redemption Agreement will terminate if the Preferred Shares are not redeemed by CatchMark Timber Trust on or before December 31, 2014. As previously reported, effective as of May 9, 2011, Wells REF waived the requirement that dividends on the Preferred Shares accrue daily at an annual rate of
8.5%
of the issue price and agreed that dividends on the Preferred Shares will instead accrue daily at an annual rate of
1.0%
of the issue price (the “Dividend Waivers”). The Preferred Stock Redemption Agreement provides that the Dividend Waivers will continue to be in effect through the earlier of the Redemption Date or June 30, 2014, subject to extension by CatchMark Timber Trust until December 31, 2014 in certain circumstances described in the Preferred Stock Redemption Agreement, and thereafter until otherwise revoked by Wells REF.
Pursuant to the Preferred Stock Redemption Agreement, effective as of the date that CatchMark Timber Trust hired the Targeted Personnel (the “Employment Date”), Mr. Wells agreed to resign as President and Chairman of the Board of CatchMark Timber Trust and Mr. Williams agreed to resign as Executive Vice President, Secretary and Treasurer of CatchMark Timber Trust. In addition, if a Redemption Price has been agreed upon, each of Messrs. Wells and
Williams has agreed to resign as a director of CatchMark Timber Trust, effective immediately prior to the time that the SEC declares the Registration Statement effective; provided, however, that the board of directors will not fill the vacancies on the board created by the resignations of Messrs. Wells and Williams until the Redemption Date and will reelect Messrs. Wells and Williams as directors if the Redemption Date does not occur within
ten
days of such resignations.
Transition Services Agreement
Pursuant to the Master Agreement, upon termination of the Advisory Agreement on the Self-Management Transition Date,
CatchMark Timber Trust
,
CatchMark Timber OP
and Wells REF entered into a Transition Services Agreement (the “TSA”) pursuant to which Wells REF and its affiliates will provide certain consulting, support and transitional services as set forth in the TSA to
CatchMark Timber Trust
at the direction of
CatchMark Timber Trust
in order to facilitate its successful transition to self-management. See Note 10 for more information on the TSA.
Sublease Agreement
Pursuant to the Master Agreement, upon termination of the Advisory Agreement on the Self-Management Transition Date, Wells REF and
CatchMark Timber OP
entered into a sublease (the “Sublease”) pursuant to which
CatchMark Timber OP
will sublet from Wells REF a portion of the office space located in Norcross, Georgia currently used and occupied by Wells REF. See Note 10 for more information on the sublease agreement.
Indemnification Agreements
On September 18, 2013, CatchMark Timber Trust entered into indemnification agreements, effective as of September 18, 2013, with each of CatchMark Timber Trust’s current directors and executive officers and Jerry Barag and John F. Rasor (collectively, the “Indemnitees”). Pursuant to the indemnification agreements, CatchMark Timber Trust will indemnify each Indemnitee to the maximum extent permitted by Maryland law against any judgments, damages, liabilities, losses or expenses incurred by such Indemnitee by reason of such Indemnitee's status as a present or former director, officer, employee or agent of CatchMark Timber Trust.
Structuring Agent Agreement
CatchMark Timber Trust is party to a structuring agent agreement (the “Structuring Agent Agreement”) whereby Wells Germany GmbH, a limited partnership organized under the laws of Germany ("Wells Germany"), served as the structuring agent in connection with the 2010 German Offering. CatchMark Timber Trust paid a structuring agent fee to Wells Germany of
$0.20
per share sold under the 2010 German Offering. The Structuring Agent Agreement expired upon the conclusion of the 2010 German Offering, provided, however, that with respect to the ongoing services contemplated by the parties, the Structuring Agent Agreement will terminate upon the earlier of (i) a liquidity event or (ii)
December 31, 2018
.
Related-Party Costs
Pursuant to the terms of the agreements described above, CatchMark Timber Trust incurred the following related-party costs for the three months and nine months ended
September 30, 2013
and
2012
, respectively:
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|
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|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Advisor fees and expense reimbursements
|
$
|
930,000
|
|
|
$
|
—
|
|
|
$
|
3,311,608
|
|
|
$
|
2,393,745
|
|
|
Disposition fees
|
12,909
|
|
|
8,405
|
|
|
39,096
|
|
|
219,449
|
|
|
Commissions
(1)(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
246,546
|
|
|
Dealer-manager fees
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
71,057
|
|
|
Other offering costs
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
48,752
|
|
|
Total
|
$
|
942,909
|
|
|
$
|
8,405
|
|
|
$
|
3,350,704
|
|
|
$
|
2,979,549
|
|
|
|
|
|
(1)
|
Commissions, dealer-manager fees, and other offering costs were charged against stockholders’ equity as incurred.
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(2)
|
Substantially all commissions were re-allowed to participating broker/dealers.
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Due to Affiliates
As of
September 30, 2013
and December 31, 2012, CatchMark Timber Trust had a due to affiliates balance of approximately
$0.3 million
and
$1.3 million
, respectively, both of which consisted entirely of advisor fees and expense reimbursements due to Wells TIMO.
Conflicts of Interest
As of
September 30, 2013
, Wells TIMO had
eight
employees. Wells TIMO has contracted with Wells Capital to perform many of its obligations under the Advisory Agreement. Wells TIMO has relied upon employees of Wells Capital to perform many of its obligations. Wells Capital, the parent company and manager of Wells TIMO, also is a general partner or advisor of the various affiliated public real estate investment programs (“Wells Real Estate Funds”). As such, in connection with serving as a general partner or advisor for Wells Real Estate Funds and managing Wells TIMO’s activities under the Advisory Agreement, Wells Capital may have encountered conflicts of interest with regard to allocating human resources and making decisions related to investments, operations, and disposition-related activities for CatchMark Timber Trust and Wells Real Estate Funds.
As of
September 30, 2013
,
one
member of CatchMark Timber Trust's board of directors served on the board of Wells Core Office Income REIT, Inc., a REIT sponsored by Wells REF. Accordingly, he may encounter certain conflicts of interest regarding investment and operational decisions.
Reverse Stock Split and Stock Dividend
In preparation for a potential listing of shares of CatchMark Timber Trust’s common stock on a national securities exchange, on October 24, 2013, CatchMark Timber Trust board of directors approved a
ten-to-one
reverse stock split of CatchMark Timber Trust’s outstanding common stock (the “Reverse Stock Split”), which was effected on October 24, 2013, and declared a stock dividend which was paid on October 25, 2013 (the “Stock Dividend” and, together with the Reverse Stock Split, the “Recapitalization”) pursuant to which each share of common stock outstanding as of October 24, 2013, following the Reverse Stock Split, received:
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|
•
|
one
share of Class B-1 common stock; plus
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|
|
|
•
|
one
share of Class B-2 common stock; plus
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|
|
•
|
one
share of Class B-3 common stock.
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Immediately following the reverse stock split, CatchMark Timber Trust redesignated all of its common stock as Class A Common Stock. The Class B common stock is identical to the Class A common stock except that (1) CatchMark Timber Trust does not intend to list the Class B common stock on a national securities exchange and (2) shares of the Class B common stock will convert automatically into shares of the Class A common stock, pursuant to provisions of the charter, on the following schedule: (i)
six
months following the listing, in the case of the Class B-1 common stock; (ii) the earlier of
12
months following the listing and such earlier date as determined by the board of directors, but not earlier than
nine
months following the listing, in the case of the Class B-2 common stock; and (iii) the earlier of
18
months following the listing and such earlier date as determined by the board of directors, but not earlier than
12
months following the listing, in the case of the Class B-3 common stock.
On the
18
-month anniversary of the listing, all shares of the Class B common stock will have converted into the Class A common stock. If CatchMark Timber Trust has not listed the Class A common stock by December 31, 2015, all of the outstanding shares of Class B common stock will automatically convert to Class A common stock.
Amendments to the Charter
On October 24, 2013, CatchMark Timber Trust filed Articles of Amendment to the charter in order to effect the Reverse Stock Split (the “Reverse Split Articles”). The Reverse Split Articles redesignate the currently outstanding shares of common stock as shares of Class A common stock and combined every
ten
shares of the issued and outstanding Class A common stock,
$0.01
par value per share, into one share of Class A common stock,
$0.10
par value per share. On October 24, 2013, following the effectiveness of the Reverse Split Articles, CatchMark Timber Trust also filed Articles of Amendment changing the par value of the issued and outstanding shares of Class A common stock back to
$0.01
per share (the “Par Value Articles”). Following effectiveness of the Par Value Articles, CatchMark Timber Trust filed Articles Supplementary to the charter designating the terms of the Class B common stock, as described above.
Amendment to the Master Agreement
On October 24, 2013, CatchMark Timber Trust, CatchMark Timber OP, Wells TIMO and Wells REF entered into the Master Agreement Amendment pursuant to which the parties agreed to terminate the Restated Advisory Agreement effective on October 25, 2013.
Termination of Advisory Agreement
Pursuant to the Master Agreement, as amended by the Master Agreement Amendment, the Restated Advisory Agreement terminated on October 25, 2013.
Transition Services Agreement
Pursuant to the Master Agreement, CatchMark Timber Trust, CatchMark Timber OP and Wells REF entered into the TSA on October 25, 2013, pursuant to which Wells REF and its affiliates will provide certain consulting, support and transitional services (as set forth in the TSA) to CatchMark Timber Trust at its direction in order to facilitate CatchMark Timber Trust’s successful transition to self management.
In exchange for the services provided by Wells REF under the TSA, CatchMark Timber Trust or CatchMark Timber OP will pay Wells REF a monthly consulting fee of
$22,875
(the “Consulting Fee”). In addition to the Consulting Fee, CatchMark Timber Trust or CatchMark Timber OP will pay directly or reimburse Wells REF for any third-party expenses paid or incurred by Wells REF and its affiliates on CatchMark Timber Trust’s behalf or CatchMark Timber OP behalf in connection with the services provided pursuant to the TSA; provided, however, that (1) Wells REF will obtain written approval from CatchMark Timber Trust or CatchMark Timber OP prior to incurring any third-party expenses for the account of, or reimbursable by, CatchMark Timber Trust or CatchMark Timber OP and (2) CatchMark
Timber Trust will not be required to reimburse Wells REF for any administrative service expenses, including Wells REF’s overhead, personnel costs and costs of goods used in the performance of services under the TSA.
The TSA will remain in effect until June 30, 2014 unless otherwise terminated in accordance with the terms of the TSA. The TSA may be terminated (1) immediately by CatchMark Timber Trust or Wells REF for Cause (as defined in the TSA) or (2) by CatchMark Timber Trust or Wells REF upon
60
days’ written notice for any reason. Following the termination of the TSA, Wells REF will not be entitled to continue to receive the Consulting Fee; provided, however, that (1) Wells REF will be entitled to receive from CatchMark Timber Trust within
30
days after the termination date all unpaid reimbursements of expenses and all earned but unpaid Consulting Fees payable to Wells REF prior to the termination date, and (2) if CatchMark Timber Trust terminates the TSA without Cause prior to June 30, 2014, Wells REF will be entitled to receive the Consulting Fee through June 30, 2014.
Amendment No. 2 to the Preferred Stock Redemption Agreement
Pursuant to the Master Agreement, on October 25, 2013, CatchMark Timber Trust, Wells REF, Leo F. Wells, III and Douglas P. Williams entered into Amendment No. 2 to the Preferred Stock Redemption Agreement, (the “Stock Redemption Agreement Amendment No. 2”), pursuant to which CatchMark Timber Trust agreed to purchase the issued and outstanding shares of the Series A Preferred Stock,
$0.01
par value per share, and Series B Preferred Stock,
$0.01
par value per share, held by Wells REF for $
1,000
per share plus accrued but unpaid distributions through the date immediately preceding the redemption date.
Sublease Agreement
Pursuant to the Master Agreement, Wells REF and CatchMark Timber OP entered into the Sublease on October 25, 2013, pursuant to which CatchMark Timber OP will sublet from Wells REF a portion of the office space located in Norcross, Georgia currently used and occupied by Wells REF. The term of the Sublease commenced on October 25, 2013, and will terminate on March 31, 2014; provided that CatchMark Timber OP may terminate the Sublease upon
ten
business days’ written notice to Wells REF. CatchMark Timber OP will pay Wells REF a monthly rent of
$5,961
pursuant to the Sublease, provided that no rent will be payable by our operating partnership for October, November and December 2013.
Agreement of Limited Partnership
Redemption of Special Partnership Units.
Pursuant to the Master Agreement and upon the termination of the Advisory Agreement, the special limited partnership units held by Wells TIMO were redeemed by CatchMark Timber OP on October 25, 2013. Wells TIMO did not receive any consideration in connection with the redemption of its special limited partnership units.
Purchase of Common Partnership Units.
Pursuant to the Master Agreement, on October 25, 2013, CatchMark LP Holder, CatchMark Timber Trust’s wholly owned subsidiary, purchased all of Wells TIMO’s common limited partnership units for an aggregate purchase price of
$1,312
.
Amended and Restated Agreement of Limited Partnership.
On October 25, 2013, CatchMark Timber Trust entered into an amended and restated agreement of limited partnership of CatchMark Timber OP (the “Amended Partnership Agreement”) with CatchMark LP Holder. Under the Amended Partnership Agreement, CatchMark LP Holder replaces Wells TIMO as the sole limited partner of CatchMark Timber OP and removes the provisions relating to our former advisor and the issuance and redemption of the special limited partnership units. In all other respects, the Amended Partnership Agreement contains the same terms and conditions as the third amended and restated agreement of limited partnership dated August 5, 2009.
Executive Compensation Arrangements
Employment Agreements.
On October 30, 2013, CatchMark Timber Trust entered into an employment agreement with each of Messrs. Barag, Rasor and Davis, the terms of which commenced on October 25, 2013 and will terminate on December 31, 2017 for each of the executives. Each of the agreements provides for an automatic
one
-year renewal period, unless either party provides notice to the other of its intent not to renew the agreement. The employment agreements provide for a base salary of
$325,000
,
$305,000
, and
$305,000
, for each of Messrs. Barag, Rasor and Davis, respectively. Pursuant to the employment agreements, CatchMark Timber Trust will provide or pay for health benefits for each of the executives, and the executives are entitled to participate in all incentive, savings and retirement plans and programs available to senior executives of CatchMark Timber Trust.
The employment agreements provide for certain severance benefits if the executive’s employment is terminated by CatchMark Timber Trust without cause or if the executive resigns for good reason, as follows:
• severance equal to
two
times his then-current base salary, payable in installments over a
24
-month period, or, if the termination occurs during the period commencing
90
days prior to a change in control and concluding on the
one
-year anniversary of a change in control, severance equal to
three
times his then-current base salary, payable in a single lump sum;
• for Messrs. Barag and Davis, monthly payments for
18
months equal to the excess of (i) the COBRA cost of group health benefits over (ii) the active employee rate for such coverage, except that CatchMark Timber Trust’s obligation to provide this benefit will end if the executive becomes employed by another employer that provides him with group health benefits, and for Mr. Rasor, 18 monthly payments of
$1,413
; and
• expiration of the restrictions on the executive's outstanding equity awards that expire solely on the executive's continuous service with CatchMark Timber Trust, accelerated vesting of all of the executive’s outstanding equity awards that vest based on continuous service with CatchMark Timber Trust, and, to the extent any awards held by the executive are exercisable in nature, the executive may exercise such awards through the end of the term of such award.
Equity Awards
. The following chart summarizes the equity awards that Messrs. Barag, Rasor and Davis will receive in connection with the commencement of their employment with CatchMark Timber Trust.
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Time-Based
Restricted Shares
(1)
|
|
Performance-Based Restricted Shares
(2)
|
|
IPO RSUs
(3)
|
|
Mr. Barag
|
13,200
|
|
|
19,800
|
|
|
39,000
|
|
|
Mr. Rasor
|
10,400
|
|
|
15,600
|
|
|
26,000
|
|
|
Mr. Davis
|
10,400
|
|
|
15,600
|
|
|
26,000
|
|
(1)
The restricted shares vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, subject to the executive’s continued employment with CatchMark Timber Trust on each vesting date, or on the earlier occurrence of a change in control or the executive’s termination of employment (i) by CatchMark Timber Trust without cause, (ii) by the executive for good reason, or (iii) by reason of the executive’s death or disability.
(2)
The number of restricted shares earned will be based upon achievement of performance goals for 2014 to be established by the Compensation Committee, and the earned shares will vest on each of December 31, 2014, December 31, 2015, December 31, 2016 and December 31, 2017, subject to the executive's continued employment with CatchMark Timber Trust on each vesting date. In the event of a change in control, these shares will vest as of the date of the change in control.
(3)
The restricted stock units will vest and convert to shares of Class A common stock on the closing date of this offering, subject to the executive’s continued employment with CatchMark Timber Trust on such date.
Amended and Restated Long-Term Incentive Plan
On October 24, 2013, CatchMark Timber Trust’s board of directors approved the Amended and Restated CatchMark Timber Trust, Inc. 2005 Long-Term Incentive Plan (the “Plan”), effective on October 25, 2013, to (i) increase the number of shares of common stock available for issuance thereunder to
1,150,000
shares of Class A common stock and
50,000
shares of each of the Class B-1, Class B-2 and Class B-3 common stock, (ii) extend the term of the Plan to
October 25
, 2023, (iii) incorporate into the plan document previously-approved, stand-alone amendments and (iv) make certain additional ministerial changes.
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ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I, as well as our consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2012.
Overview
We primarily engage in the ownership, management, acquisition and disposition of timberland properties located in the timber-producing regions of the southeastern United States. We have elected to be taxed as a REIT for federal income tax purposes. As of
September 30, 2013
, we owned interests in approximately
280,000
acres of timberland located on the Lower Piedmont and Upper Coastal Plains of East Central Alabama and West Central Georgia. Based on acreage, our timberland inventory consisted of approximately 75% pine and approximately 25% hardwood as of December 31, 2012.
The focus of our business is to invest in timberlands and to actively manage such investments to provide attractive long-term returns to our stockholders. We generate recurring income and cash flow from the harvest and sale of timber, as well as from non-timber related revenue sources, such as recreational leases. When and where we believe it is appropriate, we also periodically generate income and cash flow from the sale of higher-and-better-use ("HBU") lands. HBU refers to properties that have a higher-value use beyond growing timber, such as properties that can be sold for development, conservation or recreational and other rural purposes at prices in excess of traditional timberland values. We also expect to realize additional long-term returns from the potential appreciation in value of our timberlands as well as from the biological growth of our standing timber inventory in excess of our timber harvest. Approximately 54% of our net timber sales revenue for 2012 was derived from the Timber Agreements, under which we sell specified amounts of timber to MeadWestvaco, subject to market pricing adjustments. The initial term of the Timber Agreements is from October 9, 2007 through December 31, 2032, subject to extension and early termination provisions. See Note 6 of our accompanying consolidated financial statements for additional information regarding the material terms of the Timber Agreements.
In September 2013, we began the process of transitioning to a self-managed company. On October 25, 2013, following the execution of a series of agreements, we became a self-administered and self-managed company. We entered into the Master Agreement on September 18, 2013, which provided the framework for our separation from Wells REF and its affiliates and our transition to self-management. We entered into the Master Agreement Amendment on October 24, 2013 to advance the transition date. Pursuant to the Master Agreement, as amended by the Master Agreement Amendment, the Advisory Agreement terminated on October 25, 2013, and immediately following its termination, we entered into the TSA with Wells REF, pursuant to which Wells REF and its affiliates will provide us with consulting, support and transitional services at the direction of our officers and other personnel until June 30, 2014. In consideration for the services rendered under the TSA, we will pay Wells REF a consulting fee equal to $22,875 per month. The TSA may be terminated at an earlier date by either party under certain circumstances; however, if we terminate without cause prior to June 30, 2014, Wells REF shall be entitled to payment of the consulting fee through June 30, 2014. We also entered into the Sublease with Wells REF pursuant to which we will sublease office space from Wells REF on a month-to-month basis until March 31, 2014 for $5,961 per month, which will not be payable for the months of November
and December 2013. We have the ability to terminate the sublease prior to the expiration of its term, and cease monthly rent payments by providing 10 days’ prior written notice to Wells REF. The early termination of these agreements or the failure of Wells REF to provide these services to us could adversely impact our operations. Although we expect Wells REF to have the financial resources to continue to provide services to us, there is no guarantee that Wells REF will be able to do so during the entire eight-month period of the TSA, and a decline in the level of service provided by Wells REF could impair our operating results.
As a result of our transition to self-management, our future results of operations will be impacted in the following ways:
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•
|
We have incurred and expect to continue to incur significant general and administrative expenses in connection with negotiating and executing the Master Agreement, the Preferred Stock Redemption Agreement, the TSA, the Sublease, Employment Agreements and various other agreements related to our transition to self-management;
|
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|
•
|
As a self-managed company, we intend to utilize different accounting software, which we expect will result in increased general and administrative expenses during the short-term implementation phase and reduced general and administrative expenses thereafter; and
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•
|
Our general and administrative expenses will increase as a result of the employment-related costs and other costs we will incur as a self-managed company, which will be at least partially offset by the elimination of the advisory fees and expenses we currently pay to Wells TIMO as an externally managed company. The net effect of our increased employment-related costs and the elimination of the advisory fees and expenses payable to Wells TIMO is not expected to be material.
|
In connection with the execution of the Master Agreement on September 18, 2013, the Board terminated the DRP, effective as of September 18, 2013, and approved the termination of the SRP effective as of October 31, 2013.
Prior to the transition as a self-managed company we had no paid employees and were externally advised and managed by Wells TIMO, a wholly owned subsidiary of Wells Capital. Effective July 1, 2013, we entered into the Restated Advisory Agreement with Wells TIMO under which the monthly advisor fee payable by us was equal to one-twelfth of 1% of Assets Under Management. Upon the sale or acquisition of any properties for an amount greater than $5 million in aggregate, Assets Under Management was adjusted according to terms of the Restated Advisory Agreement. However, aggregate advisor fees payable for fiscal year 2013 shall not exceed 1.0% of Assets under Management as of September 30, 2012. The Restated Advisory Agreement eliminated our requirement to reimburse administrative service expenses incurred by Wells TIMO in fulfilling its duties as advisor, including personnel costs and our allocable share of other overhead of Wells TIMO. All other terms were materially consistent with the Amended Advisory Agreement in effect through June 30, 2013.
On March 16, 2012, we entered into Advisory Agreement Amendment No. 2 to amend certain provisions related to fees and expense reimbursements. Between April 1, 2012 and June 30, 2013, Advisory Agreement Amendment No. 2 provided that as of and for each quarter, the amount of advisor fees and expense reimbursements payable to Wells TIMO would be limited to the lesser of (1) 1.0% of assets under management as of the last day of the quarter less advisor fees paid for the preceding three quarters, and (2) free cash flow for the four quarters then ended in excess of an amount equal to 1.25 multiplied by our interest expense. Under Advisory Agreement Amendment No. 2, free cash flow was defined as EBITDA (as defined in our loan agreements), less all capital expenditures paid by us on a consolidated basis, less any cash distributions (except for the payments of accrued but unpaid dividends as a result of any redemptions of our outstanding preferred stock). Advisory Agreement Amendment No. 2, which was effective April 1, 2012, superseded a previous amendment to our Advisory Agreement entered into on April 1, 2011, referred to herein as Advisory Agreement Amendment No. 1, which provided that, as of and for each quarter, the amount of fees and expense reimbursements payable to Wells TIMO were limited to the least of: (1) an asset management fee equal to one fourth of 1.0% of asset under management plus reimbursements for all costs and expenses Wells TIMO incurred in fulfilling its duties as the asset manager, (2) one-fourth of 1.5% of assets under management, or (3) free
cash flow in excess of an amount equal to 1.05 multiplied by our interest expense. Under Advisory Agreement Amendment No. 1, free cash flow was defined as EBITDA (as defined in our loan agreements), less all capital expenditures paid by us on a consolidated basis, less any cash distributions (except for the payments of accrued but unpaid dividends as a result of any redemptions of our outstanding preferred stock), less any cash proceeds from timberland sales equal to the cost basis of the properties sold.
Our operating strategy to date has entailed the funding of expenditures related to the recurring operations of our timberlands, including interest on outstanding indebtedness and certain capital expenditures (excluding timberland acquisitions), with operating cash flows; assessing the amount of operating cash flows that will be required for additional timberland acquisitions; and distributing residual operating cash flows, if any, to our stockholders. Our operating and financial plans for 2013 were established to meet volume obligations under the Timber Agreements, to meet the debt service requirements of our debt facility, and to continue to maximize the production capacity and long-term value of our timberlands. We continue to practice intensive forest management and silvicultural techniques that increase the biological growth of the forest. We intend to capitalize on the operational flexibility afforded to timberland owners in order to take advantage of then-prevailing market prices, including, but not limited to, adjusting harvest levels in context of supply and demand for wood in the local wood markets. We plan to harvest approximately
0.9 million
million tons of timber in 2013, down modestly from the 1.1 million-ton harvest in 2012.
Our most significant risks and challenges include our ability to access a sufficient amount of capital that will allow us to further grow and diversify our portfolio of timberlands, to fund the expenses associated with being self-managed, and to repay or refinance our outstanding debt facility. To the extent that significant capital is not raised, we may not be able to achieve sufficient economies of scale and diversification to guard against the general economic, industry-specific, financing, and operational risks generally associated with individual investments, operate as a self-managed company or repay the CoBank Loan. Although we believe that our timberlands are well-positioned to weather current market conditions, we are not immune to the adverse effects of a prolonged downturn in the economy, weak real estate fundamentals, or disruptions in the credit markets. Such conditions would likely adversely affect the value of our portfolio, our results of operations and our liquidity.
Per the terms of our charter, we presently intend to effect a transaction that will provide liquidity to all of our stockholders by August 11, 2018. However, a transaction well in advance of 2018 may be in our best interest. We currently anticipate listing our shares of common stock on a national securities exchange as early as November 2013. Notwithstanding such a listing, our shares remain illiquid and we may not effect a liquidity event before or even by our original targeted date of August 11, 2018.
Liquidity and Capital Resources
Overview
On September 23, 2013, we filed a Registration Statement on Form S-11 with the SEC for a public offering of up to $172.5 million our Class A common stock. These shares may not be sold until the Registration Statement is effective.
We ceased offering shares for sale under the Follow-On Offering effective December 31, 2011. On
September 28, 2012
, we entered into the CoBank Loan under which we can initially borrow up to
$148.0 million
in principal, including
$133.0 million
through the CoBank Term Loan, and up to $15.0 million through the CoBank Revolver. During the term of the CoBank Loan, we also have the ability to increase the amount of the CoBank Term Loan by up to $50.0 million (the "CoBank Incremental Loan"). The CoBank Loan bears interest at an adjustable rate based on the one-, two-, or three-month LIBOR plus an applicable margin ranging from 2.00% to 2.75% (the "LIBOR Rate") that varies based on the loan-to-collateral-value ratio (the "LTV Ratio") at the time of determination. As of
October 25, 2013
and
September 30, 2013
, the outstanding balance of the CoBank Loan was approximately $132.4 million, all of which was outstanding under the CoBank Term Loan. We intend to maintain substantial amounts outstanding on the CoBank Loan in order to have more funds available for working capital and investment in timberland properties. On
August 11, 2018
, all outstanding principal, interest, and any fees or other obligations on the CoBank Loan will be due and payable in full.
The CoBank Loan is subject to mandatory prepayment from proceeds generated from dispositions of timberland and lease terminations. The mandatory prepayment excludes (1) the first
$4.0 million
of cost basis of timberland dispositions in any fiscal year if (a) the LTV Ratio calculated on a pro forma basis after giving effect to such disposition does not exceed
40%
, and (b) such cost basis is used as permitted under the CoBank Loan; and (2) lease termination proceeds of less than
$2.0 million
in a single termination until aggregate lease termination proceeds during the term of the CoBank Loan exceeds
$5.0 million
. We may make voluntary prepayments at any time without premium or penalty.
The CoBank Loan prohibits us from declaring, setting aside funds for, or paying any dividend, distribution or other payment to our stockholders other than as required to maintain our REIT qualification if our LTV Ratio is greater than or equal to 40%. So long as our LTV Ratio remains below 40% and we maintain a minimum fixed-charge coverage ratio of 1.05:1:00, we have the ability to declare, set aside funds for, pay dividends or distributions, or make other payments to our stockholders from operating cash flows on a discretionary basis. The amount of distributions that we may pay to our common stockholders will be determined by our board of directors and is dependent upon a number of factors, including, but not limited to, our financial condition, our capital requirements, our expectations of future sources of liquidity, current and future economic conditions and market demand for timber and timberlands, and tax considerations.
Pursuant to the Master Agreement, we entered into a Preferred Stock Redemption Agreement that, upon the closing of a public offering of common stock, calls for our redemption of the Preferred Shares for $
1,000
per share plus accrued but unpaid distributions to the redemption date. Notwithstanding the foregoing, the Preferred Stock Redemption Agreement will terminate if the Preferred Shares are not redeemed by us on or before December 31, 2014. As previously reported, effective as of May 9, 2011, Wells REF waived the requirement that dividends on the Preferred Shares accrue daily at an annual rate of 8.5% of the issue price and agreed that dividends on the Preferred Shares will instead accrue daily at an annual rate of 1.0% of the issue price, or the Dividend Waivers. The Preferred Stock Redemption Agreement provides that the Dividend Waivers will continue to be in effect through the earlier of the Redemption Date or June 30, 2014, subject to extension by us until December 31, 2014 in certain circumstances described in the Preferred Stock Redemption Agreement, and thereafter until otherwise revoked by Wells REF.
We expect our primary sources of future capital will be derived from the operations of our timberlands, proceeds from the CoBank Revolver and the CoBank Incremental Loan, and proceeds from underwritten public offerings of common stock. The amount of cash available for distribution to stockholders and the level of discretionary distributions declared will depend primarily upon the amount of cash generated from our operating activities, our determination of funding needs for near-term capital and debt service requirements, redemptions of our common stock through October 31, 2013 and our expectations of future cash flows.
Short-Term Liquidity and Capital Resources
Net cash provided by operating activities for the
nine months ended
September 30, 2013
was approximately
$2.4 million
, which was primarily comprised of net cash receipts from timber and timberland sales and recreational leases in excess of payments for operating expenses, interest expense, advisor fees and expense reimbursements, forestry management fees, and general and administrative expenses. We intend to use the majority of future cash flows from operating activities, after payments of operating expenses and interest expense, to fund certain capital expenditures and redemptions of our common stock under the SRP through its termination date of October 31, 2013.
For the
nine months ended
September 30, 2013
, we invested approximately
$2.2 million
in timber and timberland assets and received approximately
$0.8 million
that was released from lender-required escrow accounts. Net cash used in financing activities for the
nine months ended
September 30, 2013
was approximately
$1.1 million
and primarily represented outflows of funds used to pay offering costs related to the Registration Statement and to redeem our common stock pursuant to the SRP. We expect to utilize the residual cash balance of approximately
$11.2 million
as of
September 30, 2013
to satisfy current and future liabilities and fund future capital expenditures.
We believe that we have access to adequate liquidity and capital resources, including cash flow generated from operations, cash on-hand and borrowing capacity, necessary to meet our current and future obligations that become due over the next twelve months.
The CoBank Loan contains, among others, the following financial covenants:
|
|
|
|
•
|
limits the LTV Ratio to
45%
at the end of each fiscal quarter and upon the sale or acquisition of any property; and
|
|
|
|
|
•
|
requires a fixed-charge coverage ratio of not less than 1.05:1.00 at the end of each fiscal quarter.
|
As of
September 30, 2013
, we believe we were in compliance and expect to remain in compliance with the financial covenants of the CoBank Loan. Additionally, the CoBank Loan requires funding of an account under the control of CoBank equal to approximately six months of interest on the CoBank Loan during any time the LTV Ratio is 35% or greater, or approximately three months of interest if the LTV Ratio is less than 35%.
Long-Term Liquidity and Capital Resources
Over the long-term, we expect our primary sources of capital to include net cash flows from operations, including proceeds from strategic property sales, proceeds from secured or unsecured financings from banks and other lenders, and public offerings of our common stock. Our principal demands for capital include operating expenses, interest expense on any outstanding indebtedness, certain capital expenditures (other than timberland acquisitions), repayment of debt, timberland acquisitions, redemptions of preferred stock, and stockholder distributions, if any.
In determining how to allocate cash resources in the future, we will initially consider the source of the cash. We anticipate using a substantial portion of cash generated from operations, after payments of periodic operating expenses and interest expense, to fund certain capital expenditures required for our timberland. Any remaining cash generated from operations may be used to partially fund timberland acquisitions, redeem common and preferred stock and, finally, pay distributions to stockholders. Therefore, to the extent that cash flows from operations are lower, timberland acquisitions and stockholder distributions, if any, are anticipated to be lower as well. Proceeds from future equity offerings and debt financings may be used to acquire timberlands, fund capital expenditures, pay down existing and future borrowings, and to redeem preferred stock.
Our bylaws preclude us from incurring debt in excess of 200% of our net assets. As of
September 30, 2013
, our debt-to-net-assets ratio, defined as our total debt as a percentage of our total gross assets (other than intangibles) less total liabilities, was approximately
45%
. Our debt-to-net-assets ratio will vary based on our level of current and future borrowings, which will depend on the level of net cash flows from operations and proceeds raised from public offerings of our common stock. Before additional borrowings and equity issuances, principal payments, timberland acquisitions or dispositions, we expect our debt-to-net-assets ratio to remain relatively stable in the near future.
Contractual Obligations and Commitments
As of
September 30, 2013
, our contractual obligations are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
Contractual Obligations
|
|
Total
|
|
2013
|
|
2014-2015
|
|
2016-2017
|
|
Thereafter
|
|
Debt obligations
(1)
|
|
$
|
132,356,123
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
132,356,123
|
|
|
Estimated interest on debt obligations
(1) (2)
|
|
16,376,130
|
|
|
886,104
|
|
|
6,934,727
|
|
|
6,792,460
|
|
|
1,762,839
|
|
|
Operating lease obligations
(3)
|
|
5,761,382
|
|
|
187,040
|
|
|
1,456,189
|
|
|
1,314,064
|
|
|
2,804,089
|
|
|
Other liabilities
(4)
|
|
884,550
|
|
|
5,179
|
|
|
257,881
|
|
|
217,953
|
|
|
403,537
|
|
|
Total
|
|
$
|
155,378,185
|
|
|
$
|
1,078,323
|
|
|
$
|
8,648,797
|
|
|
$
|
8,324,477
|
|
|
$
|
137,326,588
|
|
|
|
|
|
(1)
|
Represents respective obligations under the CoBank Loan as of September 30, 2013.
|
|
|
|
|
(2)
|
Amounts include impact of an interest rate swap. See Note 5 of our accompanying consolidated financial statements for additional information.
|
|
|
|
|
(3)
|
Includes payment obligation on approximately 7,330 acres that are subleased to a third party.
|
|
|
|
|
(4)
|
Represents net present value of future payments to satisfy a liability assumed upon a timberland acquisition.
|
Results of Operations
Overview
Our results of operations are materially impacted by the fluctuating nature of timber prices, changes in the levels and composition of our harvest volumes, the level of timberland sales, changes to associated depletion rates, and varying interest expense based on the amount and cost of outstanding borrowings. Timber prices, harvest volumes, and changes in the levels and composition of each for our timberlands for the
three months and nine months ended
September 30, 2013
and
2012
is shown in the following tables:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Change
|
|
|
2013
|
|
2012
|
|
%
|
|
Timber sales volume (tons)
|
|
|
|
Pulpwood
|
183,231
|
|
|
195,810
|
|
|
(6
|
)%
|
|
Sawtimber
(1)
|
61,569
|
|
|
90,781
|
|
|
(32
|
)%
|
|
|
244,800
|
|
|
286,591
|
|
|
(15
|
)%
|
|
Net timber sales price (per ton)
(2)
|
|
|
|
Pulpwood
|
$
|
11
|
|
|
$
|
10
|
|
|
9
|
%
|
|
Sawtimber
|
$
|
20
|
|
|
$
|
21
|
|
|
(4
|
)%
|
|
Timberland sales
|
|
|
|
|
|
|
Gross sales
|
$
|
645,436
|
|
|
$
|
420,260
|
|
|
|
|
Sales volumes (acres)
|
290
|
|
|
213
|
|
|
|
|
Sales price (per acre)
|
$
|
2,226
|
|
|
$
|
1,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
Change
|
|
|
2013
|
|
2012
|
|
%
|
|
Timber sales volume (tons)
|
|
|
|
Pulpwood
|
498,108
|
|
|
498,592
|
|
|
0
|
%
|
|
Sawtimber
(1)
|
203,573
|
|
|
256,239
|
|
|
(21
|
)%
|
|
|
701,681
|
|
|
754,831
|
|
|
(7
|
)%
|
|
Net timber sales price (per ton)
(2)
|
|
|
|
Pulpwood
|
$
|
11
|
|
|
$
|
10
|
|
|
11
|
%
|
|
Sawtimber
|
$
|
20
|
|
|
$
|
20
|
|
|
(2
|
)%
|
|
Timberland sales
|
|
|
|
|
|
|
Gross sales
|
$
|
2,498,757
|
|
|
$
|
10,972,440
|
|
|
|
|
Sales volumes (acres)
|
1,167
|
|
|
6,016
|
|
|
|
|
Sales price (per acre)
|
$
|
2,141
|
|
|
$
|
1,824
|
|
|
|
|
|
|
|
(1)
|
Includes sales of chip-n-saw and sawtimber.
|
|
|
|
|
(2)
|
Prices per ton are rounded to the nearest dollar and shown on a stumpage basis (i.e., net of contract logging and hauling costs) and, as such, the sum of these prices multiplied by the tons sold does not equal timber sales in the accompanying consolidated statements of operations for the
three months and nine months ended
September 30, 2013
and
2012
.
|
In addition, our results of operations for the historical periods presented may not be indicative of our future results of operations to the extent our future results of operations are impacted by our transition to self-management.
Comparison of the three months ended
September 30, 2013
versus the three months ended
September 30, 2012
Revenue.
Revenues decreased to approximately
$7.9 million
for the
three months ended
September 30, 2013
from approximately
$8.9 million
for the
three months ended
September 30, 2012
due to a decrease in timber sales revenue of approximately
$1.4 million
, partially offset by an increase in timberland sales revenue of approximately
$0.2 million
.
Timber sales revenue decreased primarily due to lower volume in the third quarter of 2013 as compared to the third quarter of 2012. Timberland sales revenue increased slightly due to selling 290 acres of timberland in the third quarter of 2013 as compared to selling 213 acres in the third quarter of 2012 and higher average pricing of timberland in the third quarter of 2013 as compared to the third quarter of 2012. Details of timber sales by product for the
three months ended
September 30, 2013
and
2012
are shown in the following table:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
September 30, 2012
|
|
Changes attributable to:
|
|
For the Three Months Ended
September 30, 2013
|
|
|
|
Price
|
|
Volume
|
|
|
Timber sales
(1)
|
|
|
|
|
|
|
|
|
Pulpwood
|
$
|
4,895,211
|
|
|
$
|
147,573
|
|
|
$
|
(679,390
|
)
|
|
$
|
4,363,395
|
|
|
Sawtimber
(2)
|
2,945,682
|
|
|
13,393
|
|
|
(894,815
|
)
|
|
2,064,259
|
|
|
|
$
|
7,840,893
|
|
|
$
|
160,966
|
|
|
$
|
(1,574,205
|
)
|
|
$
|
6,427,654
|
|
|
|
|
|
(1)
|
Timber sales are presented on a gross basis.
|
|
|
|
|
(2)
|
Includes sales of chip-n-saw and sawtimber.
|
Upon completion of a public offering, we intend to implement a revised business strategy that will increase our annual harvest volume based on a sustainable harvest plan and establish annual HBU sales targets in the range of 1% to 2% of our fee timberland acreage. As such, future quarterly revenue from timber and timberland sales are expected to be higher than the same periods in 2013.
Operating expenses.
Contract logging and hauling costs decreased to approximately
$3.2 million
for the quarter ended
September 30, 2013
from approximately
$3.9 million
for the quarter ended
September 30, 2012
as a result of an approximately 20% decrease in delivered sales volume. Depletion expense decreased by
27%
to approximately
$1.9 million
for the third quarter of 2013 from approximately
$2.7 million
for the third quarter of
2012
due to a lower blended depletion rate and a
15%
decrease in harvest volumes. Our blended depletion rate was lower in 2013 due to a decrease in harvests of timber from leased tracts as a percentage of our total harvest to 22% in 2013 from 29% in
2012
. As a result of an acquisition of approximately 30,000 acres of timberland during 2012 where we previously held leasehold interests, approximately 12% of our merchantable timber inventory was recategorized as fee timber, which is depleted at much lower rates than timber from leased tracts. Cost of timberland sales increased due to selling more acres. Forestry management fees were comparable to the second quarter of
2012
. General and administrative expenses increased by
$1.0 million
primarily due to an increase in legal and consulting fees in preparation for a potential listing of shares of our common stock on a national securities exchange. Land rent expense decreased to approximately
$0.2 million
in 2013 from
$0.5 million
in
2012
primarily due to expiration of leases and the acquisition described above.
Future contract logging and hauling costs and depletion expense are expected to fluctuate with harvest volumes. Cost of timberland sales is directly correlated to the number of acres sold. Forestry management expense and land rent expense will vary based on the number of acres under management. General and administrative expenses are expected to increase as a result of the employment-related costs and other costs we will incur as a self-managed company, which will be at least partially offset by the elimination of the advisory fees and expenses we paid to Wells TIMO as an externally managed company. The net effect of our increased employment-related costs and the elimination of the advisory fees and expenses is not expected to be material.
Advisor fees and expense reimbursements
. Advisor fees and expense reimbursements increased by
$0.9 million
for the quarter ended
September 30, 2013
as compared to the quarter ended
September 30, 2012
due to no advisor fees being payable under the advisory agreement in effect in the third quarter of 2012. In connection with our transition to self-management, the Advisory Agreement was terminated effective October 25, 2013. As such, we will not incur additional advisor fees and expense reimbursements subsequent to October 25, 2013.
Interest expense.
Interest expense decreased to approximately
$0.9 million
for the
three months ended
September 30, 2013
from approximately
$2.3 million
for the
three months ended
September 30, 2012
primarily due a non-recuriing write-off of approximately $1.3 million of deferred financing costs in connection with the closing of the CoBank Loan in the third quarter of 2012. Interest expense in future periods will vary based on our level of current and future borrowings, the cost of future borrowings, and the opportunities to acquire timber assets fitting our investment objectives. Before additional borrowings, principal payments, and significant changes to the LIBOR Rate, we expect future interest expense to remain stable.
Net loss.
Our net loss of approximately
$2.5 million
for the
three months ended
September 30, 2013
was comparable to the net loss of approximately
$2.5 million
for
three months ended
September 30, 2012
as a result of an approximately $1.4 million increase in our operating loss, offset by an approximately $1.3 million decrease in our interest expense. Our operating loss increased due to the increase in general and administrative costs. Interest expense decreased primarily due to a non-recurring write-off of approximately $1.3 million of deferred financing costs in the third quarter of 2012 in connection with the closing of the CoBank Loan. We sustained a net loss for the three months ended September 30, 2013 primarily as a result of incurring an operating loss of approximately $1.6 million and interest expense of approximately $0.9 million. Our net loss per share available to common stockholders for the quarters ended
September 30, 2013
and
2012
was
$0.21
and
$0.21
, respectively. We anticipate future net losses to fluctuate with timber prices, harvest volumes, timberland sales, and interest expense based on our level of current and future borrowings.
Comparison of the
nine months ended
September 30, 2013
versus the
nine months ended
September 30, 2012
Revenue.
Revenues decreased to approximately
$24.5 million
for the
nine months ended
September 30, 2013
from approximately
$35.1 million
for the
nine months ended
September 30, 2012
due to a decrease in timberland sales revenue of approximately
$8.5 million
and a decrease in timber sales revenue of approximately
$2.3 million
. Timberland sales revenue decreased due to selling fewer acres. Timber sales revenue decreased primarily due to lower harvest volumes. Details of timber sales by product for the
nine months ended
September 30, 2013
and
2012
is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
September 30, 2012
|
|
Changes attributable to:
|
|
For the Nine Months Ended
September 30, 2013
|
|
|
|
Price
|
|
Volume
|
|
|
Timber sales
(1)
|
|
|
|
|
|
|
|
|
Pulpwood
|
$
|
13,111,828
|
|
|
$
|
514,997
|
|
|
$
|
(840,286
|
)
|
|
$
|
12,786,539
|
|
|
Sawtimber
(2)
|
9,013,761
|
|
|
76,210
|
|
|
(2,029,760
|
)
|
|
7,060,211
|
|
|
|
$
|
22,125,589
|
|
|
$
|
591,207
|
|
|
$
|
(2,870,046
|
)
|
|
$
|
19,846,750
|
|
|
|
|
|
(1)
|
Timber sales are presented on a gross basis.
|
|
|
|
|
(2)
|
Includes sales of chip-n-saw and sawtimber.
|
Upon completion of a public offering, we intend to implement a revised business strategy that will increase our annual harvest volume based on a sustainable harvest plan and establish annual HBU sales targets in the range of 1% to 2% of our fee timberland acreage. As such, future quarterly revenue from timber and timberland sales are expected to be higher than the same periods in 2013.
Operating expenses.
Contract logging and hauling costs decreased to approximately
$10.2 million
for the
nine months ended
ended
September 30, 2013
from approximately
$11.8 million
for the
nine months ended
September 30, 2012
as a result of a decrease of approximately 13% in delivered wood volume. Depletion expense decreased by
23%
to approximately
$6.2 million
for the
nine months ended
September 30, 2013
from approximately
$8.1 million
for the six months ended
September 30, 2012
due to a 7% decrease in harvest volumes and a lower blended depletion rate.
Our blended depletion rate was lower in 2013 due to a decrease in harvests of timber from leased tracts as a percentage of our total harvest to 37% in 2013 from 55% in
2012
. As a result of an acquisition of approximately 30,000 acres of timberland during
2012
where we previously held leasehold interests, approximately 12% of our merchantable timber inventory was recategorized as fee timber, which is depleted at much lower rates than timber from leased tracts. Cost of timberland sales decreased due to selling fewer acres of timberland through the first nine months of 2013 as compared to the first nine months of
2012
. Land rent expense decreased to approximately
$0.8 million
in 2013 from
$1.5 million
in
2012
primarily due to expiration of leases and the acquisition described above. General and administrative expenses increased by
$1.3 million
primarily due to an increase in legal and consulting fees in preparation for a potential listing of shares of our common stock on a national securities exchange. Forestry management fees and other operating expenses were comparable to the first nine months of
2012
.
Future contract logging and hauling costs and depletion expense are expected to fluctuate with harvest volumes. Cost of timberland sales is directly correlated to the number of acres sold. Forestry management expense and land rent expense will vary based on the number of acres under management. General and administrative expenses are expected to increase as a result of the employment-related costs and other costs we will incur as a self-managed company, which will be at least partially offset by the elimination of the advisory fees and expenses we paid to Wells TIMO as an externally managed company. The net effect of our increased employment-related costs and the elimination of the advisory fees and expenses is not expected to be material.
Advisor fees and expense reimbursements
. Advisor fees and expense reimbursements increased to approximately
$3.3 million
for the
nine months ended
September 30, 2013
from approximately
$2.4 million
for the
nine months ended
September 30, 2012
as a result of no advisor fees being payable under the advisory agreement in effect in the third quarter of 2012. In connection with our transition to self-management, the Advisory Agreement was terminated effective October 25, 2013. As such, we will not incur additional advisor fees and expense reimbursements subsequent to October 25, 2013.
Interest expense.
Interest expense decreased to approximately
$2.7 million
for the
nine months ended
September 30, 2013
from approximately
$4.2 million
for the
nine months ended
September 30, 2012
primarily due a non-recurring write-off of approximately $1.3 million of deferred financing costs in connection with the closing of the CoBank Loan in the third quarter of 2012. Interest expense in future periods will vary based on our level of current and future borrowings, the cost of future borrowings, and the opportunities to acquire timber assets fitting our investment objectives. Before additional borrowings, principal payments, and significant changes to the LIBOR Rate, we expect future interest expense to remain stable.
Net loss.
Our net loss increased to approximately
$7.1 million
for the
nine months ended
September 30, 2013
from approximately
$6.2 million
for the
nine months ended
September 30, 2012, primarily as a result of an approximately $2.5 million increase in our operating loss, offset by an approximately $1.5 million decrease in our interest expense. Our operating loss increased due to a decrease in net timberland sales revenue of approximately
$2.4 million
and an increase in general and administrative expenses, partially offset by an increase in net timber sales revenue of approximately
$1.2 million
. Interest expense decreased primarily due to a non-recurring write-off of approximately $1.3 million of deferred financing costs in the third quarter of 2012 in connection with the closing of the CoBank Loan. We sustained a net loss for the
nine months ended
September 30, 2013
primarily as a result of incurring an operating loss of approximately
$4.4 million
and interest expense of approximately
$2.7 million
. Our net loss per share available to common stockholders for the
nine months ended
September 30, 2013
and
2012
was
$0.58
and
$0.51
, respectively. We anticipate future net losses to fluctuate with timber prices, harvest volumes, timberland sales, and interest expense based on our level of current and future borrowings.
Adjusted EBITDA
The discussion below is presented to enhance the reader’s understanding of our liquidity, ability to generate cash, and ability to satisfy lender requirements. Earnings from Continuing Operations before Interest, Taxes, Depletion, and Amortization (“EBITDA”) is a non-GAAP measure of our operating performance and cash-generating capacity. EBITDA is defined by the SEC; however, we have excluded certain other expenses due to their noncash nature, and we refer to this measure as Adjusted EBITDA. As such, Adjusted EBITDA, may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA should not be viewed as an alternative to net income or cash from operations as a measurement of our operating performance, as it excludes certain expenses related to fixed-asset investments required to generate revenues. Due to our significant amount of debt, management views operating income as the most appropriate earnings measure of our underlying timber operations. Management considers Adjusted EBITDA to be an important measure of our financial condition and cash-generating ability due to the significant amount of fixed assets subject to depletion and the significant amount of financing subject to interest and amortization expense. Our credit agreement, as amended, contains a minimum debt service coverage ratio based, in part, on Adjusted EBITDA since the measure is representative of adjusted income available for interest payments.
For the three months ended
September 30, 2013
, Adjusted EBITDA was approximately
$0.7 million
, an approximately
$2.1 million
decrease from the quarter ended
September 30, 2012
, primarily due to an approximately
$1.0 million
increase in general and administrative expenses and an approximately
$0.9 million
increase in advisor fees and expense reimbursements.
For the
nine months ended
September 30, 2013
, Adjusted EBITDA was approximately
$3.5 million
, an approximately
$10.1 million
decrease from the
nine months ended
September 30, 2012
, primarily due to an approximately
$8.0 million
decrease in net revenues from timberland sales, an approximately
$1.3 million
increase in general and administrative expenses and an approximately
$0.9 million
increase in advisor fees and expense reimbursements. Our reconciliation of net loss to Adjusted EBITDA for the
three months and nine months ended
September 30, 2013
, and
2012
is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Net loss
|
$
|
(2,527,903
|
)
|
|
$
|
(2,519,815
|
)
|
|
(7,078,560
|
)
|
|
(6,238,188
|
)
|
|
Add:
|
|
|
|
|
|
|
|
|
Depletion
|
1,941,548
|
|
|
2,670,288
|
|
|
6,234,805
|
|
|
8,144,576
|
|
|
Unrealized gain on interest rate swaps that do not qualify for hedge accounting treatment
|
—
|
|
|
(213,293
|
)
|
|
(128,934
|
)
|
|
(665,009
|
)
|
|
Interest expense
|
890,965
|
|
|
1,092,534
|
|
|
2,633,731
|
|
|
3,349,288
|
|
|
Amortization
(1)
|
80,728
|
|
|
1,523,793
|
|
|
318,990
|
|
|
1,894,489
|
|
|
Basis of timberland sold
|
355,900
|
|
|
225,460
|
|
|
1,569,543
|
|
|
7,187,733
|
|
|
Basis of casualty loss
|
—
|
|
|
25,541
|
|
|
—
|
|
|
25,541
|
|
|
Adjusted EBITDA
|
$
|
741,238
|
|
|
$
|
2,804,508
|
|
|
$
|
3,549,575
|
|
|
$
|
13,698,430
|
|
|
|
|
|
(1)
|
For the purpose of the above reconciliation, amortization includes amortization of deferred financing costs, amortization of intangible lease assets, amortization of mainline road costs, depreciation of machinery, and amortization of other liabilities; these items are included in either interest expense, land rent expense, or other operating expenses in the accompanying consolidated statements of operations.
|
Election as a REIT
We have elected to be taxed as a REIT under the Code, and have operated as such beginning with our taxable year ended December 31, 2009. To qualify to be taxed as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our adjusted taxable income, as defined in the Code, to our stockholders, computed without regard to the dividends-paid deduction and by excluding our net capital gain. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.
If we fail to qualify to be taxed as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for that year and for the four years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT for federal income tax purposes.
Inflation
In connection with the acquisition of our timberlands, we entered into the Timber Agreements with MeadWestvaco. The Timber Agreements provide that we will sell to MeadWestvaco specified amounts of timber subject to quarterly market pricing adjustments and monthly fuel pricing adjustments, which are intended to protect us from, and mitigate the risk of, the impact of inflation. The price of timber has generally increased with increases in inflation; however, we have not noticed a significant impact from inflation on our revenues, net sales, or income from continuing operations.
Application of Critical Accounting Policies
Our accounting policies have been established to conform to GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied or different amounts of assets, liabilities, revenues, and expenses would have been recorded, thus resulting in a different presentation of the financial statements or different amounts reported in the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.
A discussion of the accounting policies that management deems critical because they may require complex judgment in their application or otherwise require estimates about matters that are inherently uncertain, is provided below.
Timber Assets
Timber and timberlands, including logging roads, are stated at cost less accumulated depletion for timber harvested and accumulated amortization. We capitalize timber and timberland purchases. Reforestation costs, including all costs associated with stand establishment, such as site preparation, costs of seeds or seedlings, planting, fertilization and herbicide application, are capitalized. Timber carrying costs, such as real estate taxes, insect control, wildlife control, leases of timberlands, and forestry management personnel salaries and fringe benefits, are expensed as incurred. Costs of major roads are capitalized and amortized over their estimated useful lives. Costs of roads built to access multiple logging sites over numerous years are capitalized and amortized over seven years. Costs of roads built to access a single logging site are expensed as incurred.
Depletion
Depletion, or costs attributed to timber harvested, is charged against income as trees are harvested. Fee-simple timber tracts owned longer than one year and similarly managed are pooled together for depletion calculation purposes. Depletion rates are determined at least annually by dividing (a) the sum of (i) net carrying value of the timber, which equals the original cost of the timber less previously recorded depletion, and (ii) capitalized silviculture costs incurred and the projected silviculture costs, net of inflation, to be capitalized over the harvest cycle, by (b) the total timber volume estimated to be available over the harvest cycle. The harvest cycle for the Mahrt Timberland is 30 years. Our methods of estimating our timber inventory are consistent with industry practices. We must use significant assumptions and judgments to determine both our current timber inventory and the timber inventory that will be available over the harvest cycle; therefore, the physical quantity of such timber may vary significantly from our estimates. Our estimated inventory is calculated for each tract by utilizing growth formulas based on representative sample tracts and tree counts
for various diameter classifications. The calculation of inventory is subject to periodic adjustments based on sample cruises, actual volumes harvested and other timber activity, including timberland sales. In addition to growth, the inventory calculation takes into account in-growth, which is the annual transfer of oldest pre-merchantable age class into merchantable inventory. The age at which timber is considered merchantable is reviewed periodically and updated for changing harvest practices, future harvest age profiles and biological growth factors. The capitalized silviculture cost is limited to the expenditures that relate to establishing stands of timber. For each fee-simple timber tract owned less than one year, depletion rates are determined by dividing the acquisition cost attributable to its timber by the volume of timber acquired. Depletion rates for lease tracts, which are generally limited to one harvest, are calculated by dividing the acquisition cost attributable to its timber by the volume of timber acquired. Net carrying value of the timber and timberlands is used to compute the gain or loss in connection with timberland sales. No book basis is allocated to the sale of conservation easements.
Evaluating the Recoverability of Timber Assets
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our timber assets may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of timber assets may not be recoverable, we assess the recoverability of these assets by determining whether the carrying value will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. Impairment losses would be recognized for (i) long-lived assets used in our operations when the carrying value of such assets exceeds the undiscounted cash flows estimated to be generated from the future operations of those assets, and (ii) long-lived assets held for sale when the carrying value of such assets exceeds an amount equal to their fair value less selling costs. Estimated fair values are calculated based on the following information in order of preference, dependent upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. We intend to use one harvest cycle for the purpose of evaluating the recoverability of timber and timberlands used in our operations. Future cash flow estimates are based on probability-weighted projections for a range of possible outcomes and are discounted at risk-free rates of interest. We consider assets to be held for sale at the point at which a sale contract is executed and the buyer has made a nonrefundable earnest money deposit against the contracted purchase price. We have determined that there has been no impairment of our long-lived assets to date.
Allocation of Purchase Price of Acquired Assets
Upon the acquisition of timberland properties, we allocate the purchase price to tangible assets, consisting of timberland and timber, and identified intangible assets and liabilities, which may include values associated with in-place leases or supply agreements, based in each case on our estimate of their fair values.The fair values of timberland and timber are determined based on available market information and estimated cash flow projections that utilize appropriate discount factors and capitalization rates. Estimates of future cash flows are based on a number of factors including the historical operating results, known and anticipated trends, and market and economic conditions. The values are then allocated to timberland and timber based on our determination of the relative fair value of these assets.
Intangible Lease Assets
In-place ground leases with us as the lessee have value associated with effective contractual rental rates that are below market rates. Such values are calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place lease and (ii) our estimate of fair market lease rates for the corresponding in-place lease, measured over a period equal to the remaining term of the lease. The capitalized below-market in-place lease values are recorded as intangible lease assets and are amortized as adjustments to land rent expense over the weighted-average remaining term of the respective leases.
Revenue Recognition
Revenue from the sale of timber is recognized when the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) legal ownership and the risk of loss are transferred to the purchaser, (iii) price and quantity are determinable, and (iv) collectibility is reasonably assured. Our primary sources of revenue are recognized as follows:
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|
|
(1)
|
For delivered sales contracts, which include amounts sufficient to cover costs of logging and hauling of timber, revenues are recognized upon delivery to the customer.
|
|
|
|
|
(2)
|
For pay-as-cut contracts, the purchaser acquires the right to harvest specified timber on a tract, at an agreed-upon price per unit. Payments and contract advances are recognized as revenue as the timber is harvested based on the contracted sale rate per unit.
|
|
|
|
|
(3)
|
Revenues from the sale of higher-and-better use timberland and nonstrategic timberlands are recognized when title passes and full payment or a minimum down payment is received and full collectibility is assured. If a down payment of less than the minimum down payment is received at closing, we will record revenue based on the installment method.
|
|
|
|
|
(4)
|
For recreational leases, rental income collected in advance is recorded as other liabilities in the accompanying consolidated balance sheets until earned over the term of the respective recreational lease and recognized as other revenue.
|
In addition to the sources of revenue noted above, we also may enter into lump-sum sale contracts, whereby the purchaser generally pays the purchase price upon execution of the contract. Title to the timber and risk of loss transfers to the buyer at the time the contract is consummated. Revenues are recognized upon receipt of the purchase price. When the contract expires, ownership of the remaining standing timber reverts to us; however, adjustments are not made to the revenues previously recognized. Any extensions of time will be negotiated under a new or amended contract.
Related-Party Transactions and Agreements
We have engaged Wells REF, Wells TIMO and its affiliates to perform certain services under agreements that require us to pay fees and reimbursements to Wells TIMO or its affiliates, including advisor fees and expense reimbursements, disposition fees, subject to certain limitations, consulting fees for transition services and rent under the Sublease. In addition, we have entered into a preferred stock redemption agreement that calls for the redemption of our outstanding preferred stock held by Wells REF, subject to certain conditions. See Note 9 of our accompanying consolidated financial statements for a detailed discussion of our related-party agreements and transactions.
Commitments and Contingencies
We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Notes 1, 6, 9, and 10 of our accompanying consolidated financial statements for further explanation. Examples of such commitments and contingencies include:
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|
|
|
•
|
MeadWestvaco Timber Agreements;
|
|
|
|
|
•
|
FRC Timberland Operating Agreement;
|
|
|
|
|
•
|
Master Self-Management Transition Agreement;
|
|
|
|
|
•
|
Preferred Stock Redemption Agreement;
|
|
|
|
|
•
|
Transition Services Agreement;
|
|
|
|
|
•
|
Common Partnership Unit Purchase Agreement; and
|
|
|
|
|
•
|
Structuring Agent Agreement.
|
Subsequent Events
See Note 10 to our consolidated financial statements and Part II, Item 5 - Other Information for details of events and transactions occurring after the quarter ended September 30, 2013.
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|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
As a result of entering into our loan agreements, we are exposed to interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we have entered into interest rate swap agreements, and may enter into other interest rate swaps, caps, or other arrangements in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes; however, certain of our derivatives may not qualify for hedge accounting treatment. All of our debt was entered into for other than trading purposes. We manage our ratio of fixed-to-floating-rate debt with the objective of achieving a mix that we believe is appropriate in light of anticipated changes in interest rates. We closely monitor interest rates and will continue to consider the sources and terms of our borrowing facilities to determine whether we have appropriately guarded ourselves against the risk of increasing interest rates in future periods.
As of
September 30, 2013
, we had approximately
$132.4 million
outstanding on the CoBank Loan, which matures on August 11, 2018 and bears interest at an adjustable rate based on one-, two-, or three-month LIBOR Rate plus a margin ranging from 2.00% to 2.75% based upon the then-current LTV Ratio.
The Rabobank Forward Swap entered into on October 23, 2012 became effective on March 28, 2013. Under the Rabobank Forward Swap, we pay interest at a fixed rate of 0.9075% per annum and receive variable LIBOR-based interest payments from Rabobank on $80.0 million between March 28, 2013 and September 30, 2017. As of
September 30, 2013
, the weighted-average interest rate of the CoBank Loan, after consideration of the Rabobank Forward Swap, was
2.62%
.
Approximately $80.0 million of our total debt outstanding as of
September 30, 2013
is subject to an effectively fixed-interest rate when coupled with Rabobank Forward Swap. As of
September 30, 2013
, this balance incurred interest expense at an average rate of
2.9075%
. A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio; however, it has no impact on interest incurred or cash flows.
As of
September 30, 2013
, after consideration of the Rabobank Forward Swap, approximately
$52.4 million
of our total debt outstanding is subject to an effectively variable-interest rate. This balance incurred interest expense at an average rate of
2.18%
as of
September 30, 2013
. A 1.0% change in interest rates would result in a change in interest expense of approximately $0.5 million per year. The amount of effectively variable-rate debt outstanding in the future will be largely dependent upon the level of cash from operations and the rate at which we are able to employ such proceeds toward repayment of the CoBank Loan and acquisition of timberland properties.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended
September 30, 2013
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II.
|
OTHER INFORMATION
|
|
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|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to be material to our business or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.
We are subject to the following additional risks, which hereby add or replace the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013.
Risks Related to Our Business and Operations
We are substantially dependent on our business relationship with MeadWestvaco, and our continued success will depend on its economic performance.
We entered into the Timber Agreements with MeadWestvaco in connection with the acquisition of our timberlands. The Timber Agreements provide that we will sell (through CatchMark Timber TRS) specified amounts of timber to a subsidiary of MeadWestvaco, subject to market pricing adjustments and certain early termination rights of the parties. The Timber Agreements are intended to ensure a long-term source of supply of wood fiber products for MeadWestvaco in order to meet its paperboard and lumber production requirements at specified mills and provide us with a reliable customer for the wood products from our timberlands. Our financial performance is substantially dependent on the economic performance of MeadWestvaco as a consumer of our wood products. Approximately 54% of our net timber sales revenue for 2012 was derived from the Timber Agreements, which significantly exceeded the minimum amount of timber that MeadWestvaco was required to purchase pursuant to the Timber Agreements. If MeadWestvaco does not continue to purchase significantly more than the minimum amount of timber it is required to purchase from us, or if MeadWestvaco becomes unable to purchase the required minimum amount of timber from us, there could be a material adverse effect on our business and financial condition.
In addition, in the event of a force majeure impacting MeadWestvaco, which is defined by the Timber Agreements to include, among other things, lightning, fires, storms, floods, infestation, other acts of God or nature, power failures and labor strikes or lockouts by employees, the amount of timber that MeadWestvaco is required to purchase in the calendar year would be reduced pro rata based on the period during which the force majeure was in effect and continuing. If the force majeure is in effect and continuing for 15 days or more, MeadWestvaco would not be required to purchase the timber that was not purchased during the force majeure period. If the force majeure is in effect and continuing for fewer than 15 days, MeadWestvaco would have up to 180 days after the termination of the force majeure period to purchase the timber that was not purchased during the force majeure period. As a result, the occurrence of a force majeure under the terms of the Timber Agreements could adversely impact our business and financial condition.
We have completed only two significant timberland property acquisitions and may be unsuccessful in executing our investment strategy.
We have completed only two significant acquisitions of timberland properties and we intend to pursue investments in strategic timberlands when market conditions warrant. Our ability to identify and acquire desirable timberlands depends upon the performance of our management team in the selection of our investments. As with any investment, our future acquisitions, if any, may not perform in accordance with our expectations. In addition, we anticipate financing such acquisitions through proceeds from equity or debt offerings (including offerings of partnership units by our operating partnership), borrowings, cash from operations, proceeds from asset dispositions, or any combination thereof. Our
inability to finance future acquisitions on favorable terms or the failure of any acquisitions to conform to our expectations, could adversely affect our results of operations.
We depend on external sources of capital for future growth and our ability to access the capital markets is unproven.
Our ability to finance our growth is dependent to a significant degree on external sources of capital and as a company that has not listed any of its shares on a national securities exchange, our ability to access the capital markets is unproven. Our ability to access such capital on favorable terms could be hampered by a number of factors, many of which are outside of our control, including, without limitation, a decline in general market conditions, decreased market liquidity, increases in interest rates, an unfavorable market perception of our growth potential, a decrease in our current or estimated future earnings or a decrease in the market price of our common stock. In addition, our ability to access additional capital may be limited by the terms of our bylaws, which restrict our incurrence of debt, and by our existing indebtedness, which, among other things, restricts our incurrence of debt and the payment of dividends. Any of these factors, individually or in combination, could prevent us from being able to obtain the capital we require on terms that are acceptable to us, and the failure to obtain necessary capital could materially adversely affect our future growth.
As a relatively small public company, our operating expenses are a larger percentage of our total revenues than many other public companies.
Our total assets as of September 30, 2013 were $344.2 million and our revenues for the nine months ended September 30, 2013 were $24.5 million. Because our company is smaller than many other publicly traded REITs, our operating expenses are, and we expect will continue to be, a larger percentage of our total revenues than many other public companies. If we are unable to access external sources of capital and grow our business, our operating expenses will have a greater effect on our financial performance and may reduce the amount of cash flow available to distribute to our stockholders.
Continued economic weakness from the severe recession that the U.S. economy recently experienced may materially and adversely affect our financial condition and results of operations.
The U.S. economy is still experiencing weakness from the severe recession that it recently experienced, which resulted in increased unemployment and a decline in timberland values. Although the U.S. economy has emerged from the recent recession, high levels of unemployment have persisted, and timberland values have not fully recovered to pre-recession levels and may not for a number of years. If the economic recovery slows or stalls, we may continue to experience downward pressure on the amounts we are able to charge our customers.
We are dependent on FRC to manage our timberlands.
We and CatchMark Timber TRS are parties to a timberland operating agreement with FRC, which we renew on a yearly basis. Pursuant to this agreement, we depend upon FRC to manage and operate our timberlands and related timber operations, and to ensure delivery of timber to MeadWestvaco and other timber purchasers. To the extent we lose the services of FRC, we are unable to obtain the services of FRC at a reasonable price or FRC does not perform the services in accordance with the timberland operating agreement, our results of operations may be adversely affected.
Our timberlands are located in Georgia and Alabama, and adverse economic and other developments in that area could have a material adverse effect on us.
All of our timberlands are located in Georgia and Alabama. As a result, we may be susceptible to adverse economic and other developments in this region, including industry slowdowns, business layoffs or downsizing, relocations of businesses, changes in demographics, increases in real estate and other taxes and increased regulation, any of which could have a material adverse effect on us.
In addition, the geographic concentration of our property makes us more susceptible to adverse impacts from a single natural disaster such as fire, hurricane, earthquake, insect infestation, drought, disease, ice storms, windstorms, flooding and other factors that could negatively impact our timber production.
We have only recently completed our transition to self-management, and therefore we do not have a track record with our new management team.
On October 25, 2013, we completed our transition to self-management and hired a management team and other employees to run our company. Two of our executive officers, Jerry Barag (our Chief Executive Officer and President) and John F. Rasor (our Chief Operating Officer and Secretary) had no affiliation with us or Wells TIMO until they commenced providing consulting services to us in August 2013. As a result, we have a limited track record with the new members of our management team and we may experience difficulties in integrating these individuals into our company. In addition, two of our three executive officers have not previously served as executive officers of a publicly traded company. If our management team does not perform as we expect, our results of operations will be adversely affected.
Our results of operations could be negatively impacted by our transition to self-management and the listing of our shares on the NYSE.
As a result of our transition to self-management, we no longer bear the costs of the various fees and expense reimbursements previously paid to Wells TIMO; however, our expenses now include the compensation and benefits of our officers, employees and consultants, as well as overhead previously paid by Wells TIMO. Furthermore, these employees provide us services historically provided by Wells TIMO. We cannot assure you that we will be able to provide those services at the same level as were provided to us prior to our transition to self-management, and our costs for these services may be greater than these costs were prior to our transition to self-management. In addition, there may be unforeseen costs, expenses and difficulties associated with providing those services on a self-managed basis. We will also be obligated to incur additional costs if and when we list our shares of Class A common stock on the NYSE, such as listing fees and other compliance costs. If the expenses we incur as a result of our transition to self-management and the listing of our shares of common stock on the NYSE are higher than we anticipate, our results of operations may be adversely affected.
In connection with our transition to self-management, we and our operating partnership entered into a transition services agreement and an office sublease with Wells REF for Wells REF to provide services to us, and the termination of these agreements or the failure of Wells REF to provide these services could adversely impact our operations.
In connection with our transition to self-management, we and our operating partnership entered into a transition services agreement with Wells REF for Wells REF and its affiliates to provide services to us that enable us to operate as an independent company. This agreement requires Wells REF to provide services to us that include accounting, financial reporting, investor relations and stockholder support, information technology services, various administrative functions and other services for eight months. Our operating partnership has also entered into a sublease with Wells REF pursuant to which Wells REF subleases our corporate headquarters to us for up to five months. The early termination of these agreements or the failure of Wells REF to provide these services to us could adversely impact our operations.
A large portion of Wells REF’s income is derived under a consulting agreement with Columbia. Columbia is a mature real estate investment program sponsored by Wells REF that reported $5.6 billion of assets as of June 30, 2013. Effective February 28, 2013, Columbia transitioned to self-management and no longer relies on Wells REF other than for consulting and investor relations services, which services are performed pursuant to agreements that expire on December 31, 2013. Wells REF does not expect to receive significant compensation from Columbia beyond December 31, 2013. Wells REF does not expect to replace that income from other sources. There is no guarantee that Wells REF will continue to have the financial resources to continue to provide services to us. A decline in the level of service provided by Wells REF could impair our operating results and could ultimately have an adverse effect on the value of our Class A common stock.
If we fail to maintain an effective system of disclosure controls and procedures and integrated internal controls, we may not be able to report our financial results accurately, which could have a material adverse effect on us.
We are required to report our operations on a consolidated basis under GAAP. If we fail to maintain proper overall business controls, our results of operations could be harmed or we could fail to meet our reporting obligations. In addition, the existence of a material weakness or significant deficiency could result in errors in our financial statements that could require a restatement, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, which could have a material adverse effect on us. In addition, we
recently modified our disclosure controls and procedures and internal controls in connection with our transition to self-management, which may increase the risk to us of experiencing a significant deficiency or material weakness in our internal controls or failing to maintain effective disclosure controls and procedures. If we fail to establish and maintain such new controls effectively, we may experience inaccuracies or delays in our financial reporting. In the case of any joint ventures we might enter into, we may also be subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputation damage relating to, overall business controls, that are not under our control which could have a material adverse effect on us. In addition, we rely on FRC and its systems to provide us with certain information related to our operations, including our timber sales. Although we review such information prior to incorporating it into our accounting systems, we cannot assure the accuracy of such information. If FRC’s systems fail to accurately report to us the information on which we rely, we may not be able to accurately report our financial results, which could have a material adverse effect on us.
If issues arise during our transition to a new vendor of certain of our information technology systems, including our accounting technology, our operating results and ability to manage our business effectively could be adversely affected.
As a result of our transition to self-management, we are implementing a new information technology system which includes new accounting software. As we implement the new system, we may experience temporary interruptions or failures in our systems that could adversely impact our operating results and our ability to report accurate financial results in a timely manner. There is no assurance that the new systems will operate as designed, which could result in an adverse impact on our operating results, cash flows and financial condition.
We have experienced aggregate net losses attributable to our common stockholders, including approximately $49.6 million between January 1, 2010 and September 30, 2013, and we may experience future losses.
We had net losses attributable to our common stockholders of approximately $7.4 million, $9.2 million, $13.5 million and $19.5 million for the nine months ended September 30, 2013 and for the years ended December 31, 2012, 2011 and 2010, respectively. If we continue to incur net losses in the future or such losses increase, our financial condition, results of operations, cash flow and our ability to service our indebtedness and make distributions to our stockholders would be materially and adversely affected.
We intend to sell portions of our timberlands, either because they are HBU properties or in response to changing conditions, but if we are unable to sell these timberlands promptly or at the price that we anticipate, our land sale revenues may be reduced, which could reduce the cash available for distribution to our stockholders.
On an annual basis, we intend to sell approximately 1% to 2% of our fee timberland acreage, specifically timberlands that we have determined have become more valuable for development, recreational, conservation and other uses than for growing timber, which we refer to as HBU
properties. We intend to use the proceeds from these sales to support our distributions to our stockholders. We may also sell portions of our timberland from time to time in response to changing economic, financial or investment conditions. Because timberlands are relatively illiquid investments, our ability to promptly sell timberlands is limited. The following factors, among others, may adversely affect the timing and amount of our income generated by sales of our timberlands:
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general economic conditions;
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availability of funding for governmental agencies, developers, conservation organizations, individuals and others to purchase our timberlands for recreational, conservation, residential or other purposes;
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local real estate market conditions, such as oversupply of, or reduced demand for, properties sharing the same or similar characteristics as our timberlands;
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competition from other sellers of land and real estate developers;
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weather conditions or natural disasters having an adverse effect on our properties;
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relative illiquidity of real estate investments;
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forestry management costs associated with maintaining and managing timberlands;
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changes in interest rates and in the availability, cost and terms of debt financing;
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impact of federal, state and local land use and environmental protection laws;
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changes in governmental laws and regulations, fiscal policies and zoning ordinances, and the related costs of compliance with laws and regulations, fiscal policies and ordinances; or
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it may be necessary to delay sales in order to minimize the risk that gains would be subject to the 100% prohibited transactions tax.
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In acquiring timberlands and in entering into long-term supply agreements, we may agree to lock-out provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These factors and any others that would impede our ability to respond quickly to market opportunities could adversely impact our results of operations and reduce our cash available to pay distributions to our stockholders.
Harvesting our timber may be subject to limitations that could adversely affect our results of operations.
Our primary assets are our timberlands. Weather conditions, timber growth cycles, property access limitations, availability of contract loggers and haulers, and regulatory requirements associated with the protection of wildlife and water resources may restrict our ability to harvest our timberlands. Other factors that may restrict our timber harvest include damage to our standing timber by fire, hurricane, earthquake, insect infestation, drought, disease, ice storms, windstorms, flooding and other weather conditions and natural disasters. Changes in global climate conditions could intensify one or more of these factors. Although damage from such causes usually is localized and affects only a limited percentage of standing timber, there can be no assurance that any damage affecting our timberlands will in fact be so limited. As is common in the forest products industry, we do not maintain insurance coverage for damage to our timberlands. Furthermore, we may choose to invest in timberlands that are intermingled with sections of federal land managed by the U.S.D.A. Forest Service or other private owners. In many cases, access might be achieved only through a road or roads built across adjacent federal or private land. In order to access these intermingled timberlands, we would need to obtain either temporary or permanent access rights to these lands from time to time. Our revenue, net income, and cash flow from our operations will be dependent to a significant extent on the continued ability to harvest timber on our timberlands at adequate levels and in a timely manner. Therefore, if we were to be restricted from harvesting on a significant portion of our timberlands for a prolonged period of time, or if material damage to a significant portion of our standing timber were to occur, then our results of operations could be adversely affected.
We face possible liability for environmental clean-up costs and wildlife protection laws related to the timberlands we acquire, which could increase our costs and reduce our profitability and cash distributions to our stockholders.
Our business is subject to laws, regulations, and related judicial decisions and administrative interpretations relating to, among other things, the protection of timberlands, endangered species, timber harvesting practices, recreation and aesthetics and the protection of natural resources, air and water quality that are subject to change and frequently enacted. These changes may adversely affect our ability to harvest and sell timber, and remediate contaminated properties. We are subject to regulation under, among other laws, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act of 1980, the National Environmental Policy Act, and the Endangered Species Act, as well as comparable state laws and regulations. Violations of various statutory and regulatory programs that apply to our operations could result in civil penalties; damages, including natural resource damages; remediation expenses; potential injunctions; cease-and-desist orders; and criminal penalties.
Laws and regulations protecting the environment have generally become more stringent in recent years and could become more stringent in the future. Some environmental statutes impose strict liability, rendering a person liable for
environmental damage without regard to the person’s negligence or fault. We may acquire timberlands subject to environmental liabilities, such as clean-up of hazardous substance contamination and other existing or potential liabilities of which we are not aware, even after investigations of the properties. We may not be able to recover any of these liabilities from the sellers of these properties. The cost of these clean-ups could therefore increase our operating costs and reduce our profitability and cash available to make distributions to our stockholders. The existence of contamination or liability also may materially impair our ability to use or sell affected timberlands.
The Endangered Species Act and comparable state laws protect species threatened with possible extinction. At least one species present on our timberlands has been, and in the future more may be, protected under these laws. Protection of threatened and endangered species may include restrictions on timber harvesting, road-building, and other forest practices on private, federal, and state land containing the affected species. The size of the area subject to restriction varies depending on the protected species at issue, the time of year, and other factors, but can range from less than one acre to several thousand acres.
The Clean Water Act regulates the direct and indirect discharge of pollutants into the waters of the United States. Under the Clean Water Act, it is unlawful to discharge any pollutant from a “point source” into navigable waters of the United States without a permit obtained under the National Pollutant Discharge Elimination System permit program of the Environmental Protection Agency (the “EPA”). Storm water from roads supporting timber operations that is conveyed through ditches, culverts and channels are exempted by EPA rule from this permit requirement, leaving these sources of water discharge to state regulation. The scope of these state regulations vary by state and are subject to change, and the EPA’s exemption has recently been subject to legal challenges and legislative responses. To the extent we are subject to future federal or state regulation of storm water runoff from roads supporting timber operations, our operational costs to comply with such regulations could increase and our results of operations could be adversely affected.
Actions of a joint venture partner could reduce the returns on our joint venture investments and adversely affect our results of operations.
We may participate in joint venture transactions from time to time, including but not limited to joint ventures involving the ownership and management of timberlands. Any joint venture involves risks including, but not limited to, the risk that one or more of our joint venture partners takes actions that are contrary to our agreed upon terms, our instructions to them or to our policies or objectives, any one of which could cause adverse consequences for us.
The impacts of any climate-related legislation or regulation remain uncertain at this time.
There are several international, federal and state-level proposals addressing domestic and global climate issues. Generally, such proposals in the United States could impose regulation or taxation on the production of carbon dioxide and other “greenhouse gases” in an attempt to reduce emissions to the atmosphere, and provide tax and other incentives to produce and use more “clean energy.” Any future legislative and regulatory activity in this area could, in some way, affect us, but it is unclear at this time whether any such impact would be positive, negative or significant.
Risks Related to Our Organizational Structure
Our board of directors may change significant corporate policies without stockholder approval.
Our investment, financing, borrowing and distribution policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, are determined by our board of directors. These policies may be amended or revised at any time and from time to time at the discretion of our board of directors without a vote of our stockholders. As a result, the ability of our stockholders to control our policies and practices is extremely limited. We could make investments and engage in business activities that are different from, and possibly riskier than, the investments and businesses described in this prospectus. In addition, our board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal and regulatory requirements, including the listing standards of the NYSE. A change in these policies could have an adverse effect on our financial condition, results of operations, cash flows, per share trading price of our Class A common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders.
Our board of directors may increase the number of authorized shares of stock and issue stock without stockholder approval.
Subject to applicable legal and regulatory requirements, our charter authorizes our board of directors, without stockholder approval, to amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock into other classes or series of stock and to set the preferences, rights and other terms of such classified or unclassified shares. As a result, we may issue series or classes of common stock or preferred stock with preferences, dividends, powers and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our common stock.
Certain provisions of Maryland law could inhibit changes in control of us, which could lower the value of our Class A common stock.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of inhibiting or deterring a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:
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“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose supermajority stockholder voting requirements unless certain minimum price conditions are satisfied; and
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“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
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We have opted out of these provisions of the MGCL, in the case of the business combination provisions of the MGCL by resolution of our board of directors, and in the case of the control share provisions of the MGCL pursuant to a provision in our bylaws. However, following our opt out, in the future, our board of directors may by resolution elect to opt in to the business combination provisions of the MGCL and our board of directors may, by amendment to our bylaws and without stockholder approval, opt in to the control share provisions of the MGCL.
Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, including adopting a classified board. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our stockholders with the opportunity to realize a premium over the then current market price.
In addition, the advance notice provisions of our bylaws could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or that our stockholders may believe to be in their best interests. Likewise, if our board of directors were to opt in to the business combination provisions of the MGCL or the provisions of Title 3, Subtitle 8 of the MGCL, or if the provision in our bylaws opting out of the control share acquisition provisions of the MGCL were rescinded by our board of directors, these provisions of the MGCL could have similar anti-takeover effects.
Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions that you do not believe are in your best interests.
Maryland law provides that a director or officer has no liability in that capacity if he or she satisfies his or her duties to us. As permitted by the MGCL, our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:
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actual receipt of an improper benefit or profit in money, property or services; or
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a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.
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In addition, our charter obligates us to indemnify our directors and officers for actions taken by them in that capacity to the maximum extent permitted by Maryland law. The indemnification agreements that we entered into with our directors and certain of our officers also require us to indemnify these directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist. Accordingly, in the event that actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director or officer will be limited. In addition, we are obligated to advance the defense costs incurred by our directors and our officers, and may, in the discretion of our board of directors, advance the defense costs incurred by our employees and other agents in connection with legal proceedings.
Risks Related to Our Debt Financing
We have a substantial amount of indebtedness outstanding, which could adversely affect our financial health and operating flexibility.
In September 2012, we borrowed approximately $133.0 million from CoBank to refinance the outstanding loan balance and to partially fund a property acquisition related to a portion of our timberlands that we held pursuant to a ground lease. As of September 30, 2013, the CoBank Loan had a principal balance of approximately $132.4 million, which we must repay on or before August 11, 2018. The CoBank Loan is secured by, among other things, a first priority security interest in our timberlands.
Our substantial indebtedness and any indebtedness we may incur in the future could have important consequences to us and the trading price of our Class A common stock, including:
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limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our growth strategy or other purposes;
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limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service the debt;
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increasing our vulnerability to general adverse economic and industry conditions, including increases in interest rates;
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limiting our ability to capitalize on business opportunities, including the acquisition of additional properties, and to react to competitive pressures and adverse changes in government regulation;
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limiting our ability or increasing the costs to refinance indebtedness;
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limiting our ability to enter into marketing and hedging transactions by reducing the number of counterparties with whom we can enter into such transactions as well as the volume of those transactions;
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forcing us to dispose of one or more properties, possibly on disadvantageous terms;
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forcing us to sell additional equity securities at prices that may be dilutive to existing stockholders;
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causing us to default on our obligations or violate restrictive covenants, in which case the lenders or mortgagees may accelerate our debt obligations, foreclose on the properties that secure their loans and take control of our properties that secure their loans and collect rents and other property income; and
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in the event of a default under any of our recourse indebtedness or in certain circumstances under our mortgage indebtedness, we would be liable for any deficiency between the value of the property securing such loan and the principal and accrued interest on the loan.
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If any one of these events were to occur, our financial condition, results of operations, cash flow and our ability to satisfy our principal and interest obligations could be materially and adversely affected.
Our financial condition could be adversely affected by financial and other covenants and other provisions under the CoBank Loan or other debt agreements.
The CoBank Loan agreement requires compliance with certain financial and operating covenants, including, among other things, covenants that require us to maintain certain leverage and coverage ratios and covenants that prohibit or restrict our ability to incur additional indebtedness, grant liens on our real or personal property, make certain investments, dispose of our assets and enter into certain other types of transactions. The CoBank Loan also prohibits us from declaring, setting aside funds for, or paying any dividend, distribution, or other payment to our stockholders other than as required to maintain our REIT qualification if our LTV Ratio is greater than or equal to 40%. So long as our LTV Ratio remains below 40% and we maintain a minimum fixed-charge coverage ratio of 1.05:1:00, we have the ability to declare, set aside funds for, pay dividends or distributions, or make other payments to our stockholders from operating cash flows on a discretionary basis after making scheduled payments of principal and interest on the loans and funding certain reserve accounts. These provisions could limit our ability to make distributions to our stockholders, obtain additional funds needed to address cash shortfalls or pursue growth opportunities or transactions that would provide substantial returns to our stockholders. The restrictions in the CoBank Loan agreement may also prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. In addition, a breach of these covenants or other event of default would allow CoBank to accelerate payment of the loan. If payment is accelerated, our assets may not be sufficient to repay such debt in full and, as a result, such an event may have a material adverse effect on our financial condition. Given the restrictions in our debt covenants on these and other activities, we may be significantly limited in our operating and financial flexibility and may be limited in our ability to respond to changes in our business or competitive activities in the future.
Our decision to hedge against interest rate changes may have a material adverse effect on our financial results and condition, and there is no assurance that our hedges will be effective.
We have used interest rate hedging arrangements in the past in order to manage our exposure to interest rate volatility, and may in the future do so again. These hedging arrangements involve risk, including the risk that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes, that the amount of income that we may earn from hedging transactions may be limited by federal tax provisions governing REITs, and that these arrangements may result in higher interest rates than we would otherwise pay. Moreover, no amount of hedging activity can completely insulate us from the risks associated with changes in interest rates. Failure to hedge effectively against interest rate changes may materially adversely affect our results of operations and financial condition.
Federal Income Tax Risks
Failure to continue to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders and materially and adversely affect our financial condition and results of operations.
We believe that we have been organized, owned and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and that our intended manner of ownership and operation will enable us to
continue to meet the requirements for qualification and taxation as a REIT for federal income tax purposes. Our qualification as a REIT depends upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets, and other tests imposed by the Code. We cannot assure you that we will satisfy the requirements for REIT qualification in the future. Future legislative, judicial or administrative changes to the federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.
Stockholders should be aware that qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. In 2012, we entered into an option agreement with a prospective buyer relating to the sale of a timberlands parcel and received a substantial option premium in connection therewith. If that option were to lapse unexercised, we would be required to include the premium in gross income. While an existing IRS regulation purports to treat premium income from a lapsed option on real estate as nonqualifying gross income for REIT purposes, at the time we entered into the option agreement, we obtained an opinion from one of our tax advisors concluding that if the option lapsed unexercised, the premium income more likely than not would be treated as gain from the sale of real property, and therefore qualifying income, for purposes of the 75% and 95% gross income tests. Such opinion is based, in part, on the subsequent enactment of a statutory provision which treats income from the lapse of an option on property as gain from the sale of a capital asset if the underlying property is a capital asset. If the option were to lapse unexercised, a court were to disagree with such opinion and the resulting nonqualifying gross income caused us to fail to satisfy either or both gross income tests, we would not lose our REIT status if we reasonably relied on a reasoned opinion of our tax advisor, and instead we would be subject to a tax equal to the amount by which such nonqualifying gross income causes us to fail the gross income tests, multiplied by a fraction intended to reflect our profitability. We believe this reasonable cause exception should apply in that event, although there can be no assurance that the IRS or the courts would agree.
If we fail to qualify as a REIT for any taxable year, we will be subject to federal and state income tax on our taxable income, if any, at corporate rates and, possibly, penalties. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. To the extent we have taxable net income, losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends-paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. Our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our common stock.
Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on stockholders’ investments.
As a REIT, we are subject to a 100% tax on any net income from “prohibited transactions.” In general, prohibited transactions are sales or other dispositions of property to customers in the ordinary course of business. Delivered logs, if harvested and sold by a REIT directly, would likely constitute property held for sale to customers in the ordinary course of business and would, therefore, be subject to the prohibited transactions tax if sold at a gain. Accordingly, under the Timber Agreements, we sell standing timber to CatchMark Timber TRS under pay as cut contracts which generate capital gain to us under Section 631(b) of the Code (to the extent the timber has been held by us for more than one year), and CatchMark Timber TRS, in turn, harvests such timber and sells logs to MeadWestvaco. This structure should avoid the prohibited transactions tax, and we use a similar structure for the sale of delivered logs to other customers. However, if the IRS were to successfully disregard CatchMark Timber TRS’ role as the harvester and seller of such logs for federal income tax purposes, our income, if any, from such sales could be subject to the 100% penalty tax. In addition, sales by us of HBU property at the REIT level could, in certain circumstances, constitute prohibited transactions. We intend to avoid the 100% prohibited transaction tax by satisfying safe harbors in the Code, structuring dispositions as non-taxable like-kind exchanges or making sales that otherwise would be prohibited transactions through one or more TRSs whose taxable income is subject to regular corporate income tax. We may not, however, always be able to identify properties that might be treated as part of a “dealer” land sales business. For example, if we sell any HBU properties at the REIT level that we incorrectly identify as property not held for sale to
customers in the ordinary course of business or that subsequently become properties held for sale to customers in the ordinary course of business, we may be subject to the 100% prohibited transactions tax.
The taxable income of CatchMark Timber TRS is subject to federal and applicable state and local income tax. While we seek to structure the pricing of our timber sales to CatchMark Timber TRS at market rates, the IRS could assert that such pricing does not reflect arm’s-length pricing and impute additional taxable income to CatchMark Timber TRS.
Even though we intend to maintain our REIT status, our cash dividends are not guaranteed and may fluctuate
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Generally, REITs are required to distribute 90% of their ordinary taxable income. We have substantial net operating losses that, subject to possible limitations, will reduce our taxable income. In addition, capital gains may be retained by us but would be subject to income taxes. If capital gains are retained rather than distributed, our stockholders would be notified and they would be deemed to have received a taxable distribution, with a refundable credit for any federal income tax paid by us. Accordingly, we will not be required to distribute material amounts of cash if substantially all of our taxable income is income from timber-cutting contracts or sales of timberland that is treated as capital gains income. Our board of directors, in its sole discretion, determines the amount of quarterly dividends to be provided to our stockholders based on consideration of a number of factors, including but not limited to, tax considerations. Consequently, our dividend levels may fluctuate.
We may be limited in our ability to fund distributions on our capital stock and pay our indebtedness using cash generated through our TRSs
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Our ability to receive dividends from our TRSs is limited by the rules with which we must comply to maintain our status as a REIT. In particular, at least 75% of gross income for each taxable year as a REIT must be derived from passive real estate sources including sales of our standing timber and other types of qualifying real estate income, and no more than 25% of our gross income may consist of dividends from TRSs and other non-real estate income. This limitation on our ability to receive dividends from our TRSs may affect our ability to fund cash distributions to our stockholders or make payments on our borrowings using cash flows from our TRSs. The net income of our TRSs is not required to be distributed, and income that is not distributed will not be subject to the REIT income distribution requirement.
We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the market price of our common stock.
At any time, the federal income tax laws governing REITs or the administrative and judicial interpretations of those laws may be amended. We cannot predict when or if any new federal income tax law, regulation, or administrative and judicial interpretation, or any amendment to any existing federal income tax law, regulation or administrative or judicial interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative and judicial interpretation.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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(a)
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On August 9, 2013, we granted 1,200 shares of restricted common stock to our independent directors upon their re-election to the board of directors pursuant to our amended and restated independent directors compensation plan. The shares of restricted stock vest in thirds on each of the first three anniversaries of the date of grant. These shares were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act for transactions not involving a public offering.
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(c)
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During the quarter ended
September 30, 2013
, we redeemed shares as follows:
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Period
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Total Number of
Shares Redeemed
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Average Price
Paid per Share
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Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan
or Program
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Approximate Dollar
Value of Shares
Available That May
Yet Be Redeemed
Under the Program
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July 2013
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6,740
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$
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15.58
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6,740
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(1)
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August 2013
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2,014
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$
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15.58
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2,014
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(1)
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September 2013
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3,982
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$
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15.58
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3,982
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(1)
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(1)
Our share redemption plan commenced on August 11, 2006 and was amended on November 8, 2010, March 16, 2012, August 6, 2012, and September 18, 2013. The Amended SRP limits redemptions of our common stock as follows: the shares redeemed under the share redemption plan cannot exceed the lesser of (i) the amount redeemable from the sum of net proceeds from the sale of shares through the DRP plus any additional amounts reserved for redemptions by our board of directors, or (ii) in any calendar year, 5% of the weighted-average common shares outstanding during the preceding year. The terms of the our debt agreements prohibit us from making redemptions, other than the Qualified Special Redemptions, during any period in which the LTV ratio exceeds 40%. Qualified Special Redemptions do not require a one-year holding period and are subject only to the overall limitation that during any calendar year. Aggregate redemptions may not exceed 100% of the net proceeds from our DRP and any additional amounts reserved for such purpose by our board of directors. Our board of directors may amend, suspend, or terminate the share redemption plan upon 30 days notice. Currently, our LTV Ratio does not exceed 40%; however, our board of directors has not yet declared any cash distributions and, therefore, there are no proceeds available under the DRP. However, our board of directors approved a monthly, noncumulative reserve of $150,000 funded with operating cash flows for Qualified Special Redemptions. Because we had not received any proceeds from the sales of shares through the DRP as of September 30, 2013, we are currently restricted from redeeming shares other than Qualified Special Redemptions. Effective January 2013, the redemption price for all redemptions, including the Qualified Special Redemptions, equals
95%
of the published estimated per-share value of our common stock, plus or minus any valuation adjustment as provided in the Amended SRP. Based on the estimated per-share value calculated as of September 30, 2012 and published on December 14, 2012, the redemption price during the three months ended
September 30, 2013
was
$15.58
. We are not obligated under FINRA rules to update the estimated per-share value of our common stock until 18 months from the date of the last valuation, although we may elect to do so sooner. As disclosed in connection with the initial publication of our estimated per-share value, the estimated value of our common stock will fluctuate over time in response to market conditions, capital markets activities, attributes specific to Mahrt Timberland, and other factors. Therefore, the estimated per-share value of our common stock as of September 30, 2012 does not represent current value. As of
September 30, 2013
, all qualified shares tendered for redemption had been redeemed. In connection with the execution of the Master Agreement, on September 18, 2013, our board of directors terminated the SRP, effective as of October 31, 2013.
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ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
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(a)
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There have been no defaults with respect to any of our indebtedness.
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ITEM 4.
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MINE SAFETY DISCLOSURES
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Not applicable.
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ITEM 5.
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OTHER INFORMATION
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(a)
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During the third quarter of 2013, there was no information that was required to be disclosed in a report on Form 8-K that was not disclosed in a report on Form 8-K.
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Reverse Stock Split and Stock Dividend
In preparation for the listing of shares of CatchMark Timber Trust’s common stock on a national securities exchange, on October 24, 2013, CatchMark Timber Trust board of directors approved a ten-to-one reverse stock split of CatchMark Timber Trust’s outstanding common stock (the “Reverse Stock Split”), which was effected on October 24, 2013, and declared a stock dividend which was paid on October 25, 2013 (the “Stock Dividend”) pursuant to which each share of common stock outstanding as of October 24, 2013, following the Reverse Stock Split, received:
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•
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one share of Class B-1 common stock; plus
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•
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one share of Class B-2 common stock; plus
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•
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one share of Class B-3 common stock.
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The Class B common stock is identical to the Class A common stock except that (1) CatchMark Timber Trust does not intend to list the Class B common stock on a national securities exchange and (2) shares of the Class B common stock will convert automatically into shares of the Class A common stock, pursuant to provisions of the charter, on the following schedule: (i) six months following the listing, in the case of the Class B-1 common stock; (ii) the earlier of 12 months following the listing and such earlier date as determined by the board of directors, but not earlier than nine months following the listing, in the case of the Class B-2 common stock; and (iii) the earlier of 18 months following the listing and such earlier date as determined by the board of directors, but not earlier than 12 months following the listing, in the case of the Class B-3 common stock.
On the 18-month anniversary of the listing, all shares of the Class B common stock will have converted into the Class A common stock. If CatchMark Timber Trust has not listed the Class A common stock by December 31, 2015, all of the outstanding shares of Class B common stock will automatically convert to Class A common stock.
Amendments to the Charter
On October 24, 2013, CatchMark Timber Trust filed Articles of Amendment to the charter in order to effect the Reverse Stock Split (the “Reverse Split Articles”). The Reverse Split Articles redesignate the currently outstanding shares of common stock as shares of Class A common stock and combined every ten shares of the issued and outstanding Class A common stock, $0.01 par value per share, into one share of Class A common stock, $0.10 par value per share. On October 24, 2013, following the effectiveness of the Reverse Split Articles, CatchMark Timber Trust also filed Articles of Amendment changing the par value of the issued and outstanding shares of Class A common stock back to $0.01 per share (the “Par Value Articles”). Following effectiveness of the Par Value Articles, CatchMark Timber Trust filed Articles Supplementary to the charter designating the terms of the Class B common stock, as described above (the Articles Supplementary, together with the Reverse Split Articles and the Par Value Articles, are collectively referred to as the “Recapitalization Articles”).
The information set forth herein with respect to the Recapitalization Articles does not purport to be complete and is qualified in its entirety by the full text of the Recapitalization Articles, copies of which are filed as Exhibits 3.3, 3.4 and Exhibit 3.5 hereto and are incorporated herein by reference.
Amendment and Restatement of Bylaws
On October 24, 2013, our board of directors authorized and approved the Amended and Restated Bylaws effective October 25, 2013, which amend and restate the Fourth Amended and Restated Bylaws, adopted by our board of directors on August 9, 2013. The Amended and Restated Bylaws include the following amendments:
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•
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Advance Notice Requirements for Stockholder-Requested Special Meetings
. The Amended and Restated Bylaws set forth more detailed procedures for calling stockholder-requested special meetings. Stockholders who desire to call a special meeting must send a notice to our secretary to request the board to fix a record date (the “Request Record Date”) to determine the stockholders entitled to request a special meeting. This record date request notice must set forth the purpose of the meeting, be signed by a stockholder of record and set forth all information about the requesting stockholder and each matter to be voted upon that would be required to be disclosed in a proxy statement relating to an election of directors under the federal securities laws. The Amended and Restated Bylaws specify that compliance with the above procedures is the only way for a stockholder to propose business to be brought before a special meeting.
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•
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Advance Notice Requirements for Annual Meetings of Stockholders.
The Amended and Restated Bylaws revise the procedures required for a stockholder to nominate directors or propose other matters to be considered at an annual meeting and expand upon the information that must be included in the notice about the requesting stockholder, the proposed nominee and any stockholder associated person. With respect to any stockholder-proposed nominee for election at an annual meeting, the notice of the nomination must be accompanied by a certificate from the proposed nominee regarding the nominee’s willingness to serve and must attach a completed nominee questionnaire including all of the information that would be required to be disclosed in a proxy statement relating to an election of directors under the federal securities laws.
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•
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Election of Directors.
The Amended and Restated Bylaws provide that a majority of the votes cast at a meeting of stockholders at which a quorum is present is required to elect a director in an uncontested election, and a plurality of the votes cast at a meeting of stockholders at which a quorum is present is required to elect a director in a contested election.
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•
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Independent Director Vacancies.
The Amended and Restated Bylaws remove the provision requiring independent directors nominate replacements for vacancies among independent directors’ position.
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•
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Composition of Committees.
The Amended and Restated Bylaws remove the provision requiring that a majority of the members of each committee be independent directors.
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The information set forth above with respect to the Amended and Restated Bylaws does not purport to be complete in scope and is qualified in its entirety by the full text of the Amended and Restated Bylaws, which is filed as Exhibit 3.6 hereto and are incorporated into this report by reference.
Amendment to the Master Agreement
On October 24, 2013, we, our operating partnership, Wells TIMO and Wells REF entered into the Master Agreement Amendment, pursuant to which the parties agreed to terminate the Restated Advisory Agreement effective on October 25, 2013. The information set forth herein with respect to the Master Agreement Amendment does not purport to be complete and is qualified in its entirety by the full text of the Master Agreement Amendment, a copy of which is filed as Exhibit 10.3 hereto and is incorporated herein by reference.
Termination of Advisory Agreement
Pursuant to the Master Agreement, as amended by the Master Agreement Amendment, the Restated Advisory Agreement terminated on October 25, 2013.
Transition Services Agreement
Pursuant to the Master Agreement we, our operating partnership and Wells REF entered into the Transition Services Agreement (the “TSA”) on October 25, 2013, pursuant to which Wells REF and its affiliates will
provide certain consulting, support and transitional services (as set forth in the TSA) to us at our direction in order to facilitate our successful transition to self‑management.
In exchange for the services provided by Wells REF under the TSA, we or our operating partnership will pay Wells REF a monthly consulting fee of $22,875 (the “Consulting Fee”). In addition to the Consulting Fee, we or our operating partnership will pay directly or reimburse Wells REF for any third-party expenses paid or incurred by Wells REF and its affiliates on our behalf or our operating partnership’s behalf in connection with the services provided pursuant to the TSA; provided, however, that (1) Wells REF will obtain written approval from us or our operating partnership prior to incurring any third-party expenses for the account of, or reimbursable by, us or our operating partnership and (2) we will not be required to reimburse Wells REF for any administrative service expenses, including Wells REF’s overhead, personnel costs and costs of goods used in the performance of services under the TSA.
The TSA will remain in effect until June 30, 2014 unless otherwise terminated in accordance with the terms of the TSA. The TSA may be terminated (1) immediately by us or Wells REF for Cause (as defined in the TSA) or (2) by us or Wells REF upon 60 days’ written notice for any reason. Following the termination of the TSA, Wells REF will not be entitled to continue to receive the Consulting Fee; provided, however, that (1) Wells REF will be entitled to receive from us within 30 days after the termination date all unpaid reimbursements of expenses and all earned but unpaid Consulting Fees payable to Wells REF prior to the termination date, and (2) if we terminate the TSA without Cause prior to June 30, 2014, Wells REF will be entitled to receive the Consulting Fee through June 30, 2014.
The information set forth herein with respect to the TSA does not purport to be complete and is qualified in its entirety by the full text of the TSA, a copy of which is filed as Exhibit 10.7 hereto and is incorporated herein by reference.
Amendment No. 2 to the Preferred Stock Redemption Agreement
Pursuant to the Master Agreement, on October 25, 2013, we, Wells REF, Leo F. Wells, III and Douglas P. Williams entered into Amendment No. 2 to the Preferred Stock Redemption Agreement, (the “Stock Redemption Agreement Amendment No. 2”), pursuant to which we agreed to purchase the issued and outstanding shares of our Series A Preferred Stock, $0.01 par value per share, and Series B Preferred Stock, $0.01 par value per share, held by Wells REF for $
1,000
per share plus accrued but unpaid distributions through the date immediately preceding the redemption date.
The information set forth herein with respect to the Stock Redemption Agreement Amendment No. 2 does not purport to be complete and is qualified in its entirety by the full text of the Stock Redemption Agreement Amendment, a copy of which is filed as Exhibit 10.6 hereto and is incorporated herein by reference.
Sublease Agreement
Pursuant to the Master Agreement, Wells REF and our operating partnership entered into a Sublease (the “Sublease”) on October 25, 2013, pursuant to which our operating partnership will sublet from Wells REF a portion of the office space located in Norcross, Georgia currently used and occupied by Wells REF. The term of the Sublease commenced on October 25, 2013, and will terminate on March 31, 2014; provided that our operating partnership may terminate the Sublease upon ten business days’ written notice to Wells REF. Our operating partnership will pay Wells REF a monthly rent of $5,961 pursuant to the Sublease, provided that no rent will be payable by our operating partnership for October, November and December 2013.
Amendment to Agreement of Limited Partnership
Redemption of Special Partnership Units.
Pursuant to the Master Agreement and upon the termination of the Advisory Agreement, the special limited partnership units held by Wells TIMO were redeemed by our operating partnership on October 25, 2013. Wells TIMO did not receive any consideration in connection with the redemption of its special limited partnership units.
Purchase of Common Partnership Units.
Pursuant to the Master Agreement, on October 25, 2013, CatchMark LP Holder, LLC (“LP Holder”), our wholly owned subsidiary, purchased all of Wells TIMO’s common limited partnership units for an aggregate purchase price of $1,312.
Amended and Restated Agreement of Limited Partnership.
On October 25, 2013, we entered into an amended and restated agreement of limited partnership of our operating partnership (the “Amended Partnership Agreement”) with LP Holder. Under the Amended Partnership Agreement, LP Holder replaces Wells TIMO as the sole limited partner of our operating partnership, and the Amended Partnership Agreement removes the provisions relating to our former advisor and the issuance and redemption of the special limited partnership units. In all other respects, the Amended Partnership Agreement contains the same terms and conditions as the third amended and restated agreement of limited partnership dated August 5, 2009.
Resignation and Election of Certain Executive Officers
Effective as of October 25, 2013, Leo F. Wells, III resigned from his positions as President and Chairman of the Board. Mr. Wells did not have any disagreements with us on any matters related to our operations, policies or practices.
Effective as of October 25, 2013, Douglas P. Williams resigned from his positions as Executive Vice President, Secretary and Treasurer. Mr. Williams did not have any disagreements with us on any matters related to our operations, policies or practices.
Effective as of October 25, 2013, our board of directors appointed Jerry Barag to serve as our Chief Executive Officer and President.
Jerry Barag
has served as a consultant to us since August 2013. Mr. Barag brings over 30 years of real estate, timberland and investment experience, including expertise in acquisitions, divestitures, asset management, property management and financing. Since September 2011, Mr. Barag has served as a Principal with Mr. Rasor of TimberStar Advisors, an Atlanta-based timberland investment consulting firm, where he specialized in acquiring and managing timberlands in the United States. From 2004 to September 2011, Mr. Barag served as Managing Director of TimberStar, a timberland investment joint venture among Messrs. Barag and Rasor, iStar Financial, Inc. and other institutional investors. While at TimberStar, he oversaw the acquisition of over $1.4 billion of timberlands in Arkansas, Louisiana, Maine and Texas. From 2003 to 2004, he served as Chief Investment Officer of TimberVest, LLC, or TimberVest, an investment manager specializing in timberland investment planning. Prior to joining TimberVest, Mr. Barag served as Chief Investment Officer and Chairman of the Investment Committees for Lend Lease, a subsidiary of Lend Lease Corp., a construction, development and real estate investment management advisory company traded on the Australian Securities Exchange. Mr. Barag received his Bachelor of Science from The University of Pennsylvania, Wharton School.
Effective as of October 25, 2013, our board of directors appointed John F. Rasor to serve as our Chief Operating Officer and Secretary.
John F. Rasor
has served as a consultant to us since August 2013. Mr. Rasor brings over 45 years of experience in the timberland and forest products industries, including expertise in manufacturing, fiber procurement and log merchandising, sales and distribution. Since September 2011, Mr. Rasor has served as a Principal with Mr. Barag of TimberStar Advisors. From 2004 to September 2011, he served as Managing Director of TimberStar. During his 40-year career with Georgia-Pacific Corporation, or Georgia Pacific, from 1996 to 2003, Mr. Rasor served as an Executive Vice President of Georgia-Pacific, where he was responsible for all of Georgia-Pacific’s timberland and the procurement of all the wood and fiber needed to operate Georgia-Pacific’s mills. He also played a key role in the separation of Georgia-Pacific’s timberland assets into a separate operating entity in 1997 that subsequently merged with Plum Creek Timber Company, Inc. in 2001. Following the separation of Georgia Pacific’s timberland assets, Mr. Rasor assumed responsibility for several of Georgia Pacific’s building products business units and staff positions
in addition to serving as a member of the Executive Management Committee of the company. Mr. Rasor attended Willamette University and the University of Oregon.
Executive Compensation Arrangements
Employment Agreements. On October 30, 2013, we entered into an employment agreement with each of Messrs. Barag, Rasor and Davis, the terms of which commenced on October 25, 2013 and will terminate on December 31, 2017 for each of the executives. Each of the agreements provides for an automatic one-year renewal period, unless either party provides notice to the other of its intent not to renew the agreement. The employment agreements provide for a base salary of $325,000, $305,000, and $305,000, for each of Messrs. Barag, Rasor and Davis, respectively. Pursuant to the employment agreements, we will provide or pay for health benefits for each of the executives, and the executives are entitled to participate in all incentive, savings and retirement plans and programs available to senior executives of our company.
The employment agreements provide for certain severance benefits if the executive’s employment is terminated by us without cause or if the executive resigns for good reason, as follows:
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severance equal to two times his then-current base salary, payable in installments over a 24-month period, or, if the termination occurs during the period commencing 90 days prior to a change in control and concluding on the one-year anniversary of a change in control, severance equal to three times his then-current base salary, payable in a single lump sum;
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•
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for Messrs. Barag and Davis, monthly payments for 18 months equal to the excess of (i) the COBRA cost of group health benefits over (ii) the active employee rate for such coverage, except that our obligation to provide this benefit will end if the executive becomes employed by another employer that provides him with group health benefits, and for Mr. Rasor, 18 monthly payments of $1,413; and
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expiration of the restrictions on the executive's outstanding equity awards that expire solely on the executive's continuous service with us, accelerated vesting of all of the executive’s outstanding equity awards that vest based on continuous service with us, and, to the extent any awards held by the executive are exercisable in nature, the executive may exercise such awards through the end of the term of such award.
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In order to receive the severance benefits, the executive must sign and not revoke a release of claims and comply with the restrictive covenants in his employment agreement. Each of the employment agreements contains noncompetition, employee nonsolicitation and customer nonsolicitation covenants that apply during the executive's employment and for two years after termination of executive’s employment during the term of the employment agreement, as well as covenants regarding confidentiality and ownership of property.
The employment agreements do not provide for any severance benefits in the event of the executive’s termination (i) by us for cause, (ii) by the executive without good reason or (iii) by reason of his death or disability except that, in the event of the executive’s death or disability, his outstanding equity awards that vest based on continuous service with us will become fully-vested. In addition, the employment agreements provide that if any payments or benefits would be subject to the excise tax imposed on “parachute payments” under Section 4999 of the Code, the payments will be limited to the maximum amount that could be paid without triggering the excise tax.
Equity Awards.
The following chart summarizes the equity awards that Messrs. Barag, Rasor and Davis will receive in connection with the commencement of their employment with us.
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Time-Based
Restricted Shares
(1)
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Performance-Based Restricted Shares
(2)
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IPO RSUs
(3)
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Mr. Barag
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13,200
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19,800
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39,000
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Mr. Rasor
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10,400
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15,600
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26,000
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Mr. Davis
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10,400
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15,600
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26,000
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(1)
The restricted shares vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, subject to the executive’s continued employment with us on each vesting date, or on the earlier occurrence of a change in control or the executive’s termination of employment (i) by us without cause, (ii) by the executive for good reason, or (iii) by reason of the executive’s death or disability.
(2)
The number of restricted shares earned will be based upon achievement of performance goals for 2014 to be established by the Compensation Committee, and the earned shares will vest on each of December 31, 2014, December 31, 2015, December 31, 2016 and December 31, 2017, subject to the executive's continued employment with us on each vesting date. In the event of a change in control, these shares will vest as of the date of the change in control.
(3)
The restricted stock units will vest and convert to shares of Class A common stock on the closing date of this offering, subject to the executive’s continued employment with us on such date. The shares underlying the restricted stock units are subject to a mandatory holding period, pursuant to which the executive must hold, on an after-tax basis, 100% of the shares through the first anniversary of the date of grant, two-thirds of the shares through the second anniversary of the date of grant and one-third of the shares through the third anniversary of the date of grant. During the holding period, the executive may not sell, pledge, encumber or hypothecate the shares to or in favor of any party other than our company, or subject the shares to any lien, obligation, or liability of another party other than our company. The holding period will expire immediately upon termination of the executive’s employment (i) by us without cause, (ii) by the executive for good reason, or (iii) by reason of the executive’s death or disability.
Amended and Restated Long-Term Incentive Plan
On October 24, 2013, our board of directors approved the Amended and Restated CatchMark Timber Trust, Inc. 2005 Long-Term Incentive Plan (the “Plan”), effective on October 25, 2013, to (i) increase the number of shares of our common stock available for issuance thereunder to 1,150,000 shares of Class A common stock and 50,000 shares of each of the Class B-1, Class B-2 and Class B-3 common stock, (ii) extend the term of the Plan to October 25, 2023, (iii) incorporate into the plan document previously-approved, stand-alone amendments and (iv) make certain additional ministerial changes.
The information set forth herein with respect to the Plan does not purport to be complete and is qualified in its entirety by the full text of the Plan, a copy of which is filed as Exhibit 10.12 hereto and is incorporated herein by reference.
Amended and Restated Code of Ethics
On October 24, 2013, our board of directors approved the Amended and Restated Code of Ethics (the “Amended Code of Ethics”), effective on October 25, 2013. The Amended Code of Ethics revised the provisions regarding conflicts of interest to provide that the Chief Executive Officer or President has the authority to approve any deviation or waiver from the Amended Code of Ethics for all employees. Any deviation or waiver with respect to CatchMark Timber Trust’s executive officers and directors will continue to be subject to approval by a majority of the members of CatchMark Timber Trust’s board of directors not otherwise interested in the transaction. The Amended Code of Ethics also includes conforming or clarifying changes and other ministerial revisions.
Legal Matters
The SEC is conducting a non-public, formal, fact finding investigation regarding WIS, the former dealer-manager for our previous non-listed public offerings, and our company. The investigation relates to whether
there have been violations of certain provisions of the federal securities laws regarding valuation, potential distributions, marketing and suitability.
We have not been accused of any wrongdoing by the SEC. We also have been informed by the SEC that the existence of this investigation does not mean that the SEC has concluded that anyone has violated any laws or regulations or that the SEC has a negative opinion of any person, entity or security. We have received a formal subpoena for documents and information and we have been cooperating fully with the SEC. We cannot reasonably estimate the timing of the conclusion of the investigation, nor can we predict whether or not the SEC will take any action against us as a result of the investigation and if they do, what the ultimate outcome will be.
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(b)
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There are no material changes to the procedures by which stockholders may recommend nominees to our board of directors since the filing of our Schedule 14A except as described above in this Item 5 under "Amendment and Restatement of Bylaws - Advance Notice Requirements for Annual Meetings of Stockholders".
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The exhibits required to be filed with this report are set forth on the Exhibit Index hereto and incorporated by reference herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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CATCHMARK TIMBER TRUST, INC.
(Registrant)
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Date:
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October 30, 2013
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By:
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/s/ BRIAN M. DAVIS
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Brian M. Davis
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
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EXHIBIT INDEX TO
THIRD QUARTER 2013 FORM 10-Q OF
CATCHMARK TIMBER TRUST, INC.
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Exhibit
Number
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Description
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3.1
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Sixth Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed on August 9, 2013)
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3.2
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First Articles of Amendment to the Sixth Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-11, Commission File No. 333-191322, filed on September 23, 2013 (the “September 2013 Registration Statement”))
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3.3
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Articles of Amendment to the Sixth Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on October 25, 2013 (the "October 25 Form 8-K"))
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3.4
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Articles of Amendment to the Sixth Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.2 to the October 25 Form 8-K)
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3.5
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Articles Supplementary to the Sixth Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.2 to the October 25 Form 8-K)
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3.6
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Amended and Restated Bylaws (incorporated by reference to Exhibit 3.6 to the Registration Statement on Form S-8, Commission File No. 333-191916, filed on October 25, 2013 (the "S-8 Registration Statement"))
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4.1
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Third Amended and Restated Share Redemption Plan (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 filed on August 7, 2012)
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10.1
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Amended and Restated Advisory Agreement among Wells Timberland REIT, Inc., Wells Timberland Operating Partnership, L.P., and Wells Timberland Management Organization, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K dated July 1, 2013 and filed on July 2, 2013)
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10.2
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Master Self-Management Transition Agreement dated as of September 18, 2013 by and among CatchMark Timber Trust, Inc., CatchMark Timber Operating Partnership, L.P., Wells Timberland Management Organization, LLC and Wells Real Estate Funds, Inc. (incorporated by reference to Exhibit 10.2 to the September 2013 Registration Statement)
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10.3*
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Amendment No. 1 to the Master Self-Management Transition Agreement dated as of October 24, 2013 by and among CatchMark Timber Trust, Inc., CatchMark Timber Operating Partnership, L.P., Wells Timberland Management Organization, LLC and Wells Real Estate Funds, Inc.
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10.4
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Preferred Stock Redemption Agreement dated as of September 18, 2013 by and among CatchMark Timber Trust, Inc., Wells Real Estate Funds, Inc., Leo F. Wells, III and Douglas P. Williams (incorporated by reference to Exhibit 10.4 to the September 2013 Registration Statement)
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10.5
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Amendment to the Preferred Stock Redemption Agreement dated as of September 20, 2013 by and among CatchMark Timber Trust, Inc., Wells Real Estate Funds, Inc., Leo F. Wells, III and Douglas P. Williams (incorporated by reference to Exhibit 10.5 to the September 2013 Registration Statement)
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10.6*
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Amendment No. 2 to the Preferred Stock Redemption Agreement dated as of October 25, 2013 by and among CatchMark Timber Trust, Inc., Wells Real Estate Funds, Inc., Leo F. Wells, III and Douglas P. Williams
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10.7*
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Transition Services Agreement dated as of October 25, 2013 by and among CatchMark Timber Trust, Inc., CatchMark Timber Operating Partnership, L.P. and Wells Real Estate Funds, Inc.
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10.8
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Form of Indemnification Agreement (incorporated by reference to Exhibit 10.12 to the September 2013 Registration Statement)
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10.9*
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Employment Agreement by and between CatchMark Timber Trust, Inc. and Jerry Barag
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10.10*
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Employment Agreement by and between CatchMark Timber Trust, Inc. and John F. Rasor
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10.11*
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Employment Agreement by and between CatchMark Timber Trust, Inc. and Brian M. Davis
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10.12
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Amended and Restated CatchMark Timber Trust, Inc. 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the S-8 Registration Statement)
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10.13
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CatchMark Timber Trust, Inc. Amended and Restated Independent Director Compensation Plan (incorporated by reference to Exhibit 10.3 to the S-8 Registration Statement)
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31.1*
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Certification of the Principal Executive Officer of the Company, pursuant to Securities Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2*
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Certification of the Principal Financial Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1*
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Statement of the Principal Executive Officer and Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB*
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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* Filed herewith
AMENDMENT NO. 1 TO THE
MASTER SELF-MANAGEMENT TRANSITION AGREEMENT
This Amendment No. 1 is made and entered into as of October 25, 2013 (this “
Amendment No. 1
”) and amends the Master Self-Management Transition Agreement
(the “
Agreement
”) effective as of September 18, 2013 by and among CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”), CatchMark Timber Operating Partnership, L.P., a Delaware limited partnership (the “
OP
”), Wells Real Estate Funds, Inc., a Georgia corporation (“
Wells REF
”), and Wells Timberland Management Organization, LLC, a Georgia limited liability company (“
Wells TIMO
”). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.
WHEREAS, each of the Company, the OP, Wells REF and Wells TIMO desire to amend the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Section 1 of the Agreement is hereby deleted in its entirety and replaced with the following:
1.
Termination of Advisory Agreement
.
The parties agree that the Advisory Agreement shall terminate as of 5:00 p.m. Eastern time on October 25, 2013, subject to the survival provisions of Section 13(B)(iv) of the Advisory Agreement.
2. Except to the extent amended hereby, the provisions of the Agreement shall remain unmodified, and the Agreement, as amended by this Amendment No. 1, shall remain in full force and effect in accordance with its terms.
3. This Amendment No. 1 may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature page follows.]
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment No. 1 as of the date first written above.
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CATCHMARK TIMBER TRUST, INC.
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By:
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/s/WILLIS J. POTTS, JR.
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Willis J. Potts, Jr.
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Chairman of the Special
Committee of the Board of
Directors
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CATCHMARK TIMBER OPERATING PARTNERSHIP, L.P.
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By: CATCHMARK TIMBER TRUST, INC., its General Partner
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By:
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/s/BRIAN M. DAVIS
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Brian M. Davis
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Senior Vice President, Chief Financial Officer and Assistant Secretary
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WELLS TIMBERLAND MANAGEMENT ORGANIZATION, LLC
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By:
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WELLS REAL ESTATE FUNDS, INC., its sole managing member
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By:
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/s/LEO F. WELLS, III
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Name:
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Leo F.Wells, III
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Title:
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Chief Executive Officer
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WELLS REAL ESTATE FUNDS, INC.
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By:
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/s/LEO F. WELLS, III
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Name:
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Leo F. Wells, III
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Title:
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Chief Executive Officer
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AMENDMENT NO. 2 TO THE
PREFERRED STOCK REDEMPTION AGREEMENT
This Amendment No. 2 is made and entered into as of October 25, 2013 (this “
Amendment No. 2
”) and amends the Preferred Stock Redemption Agreement
(the “
Agreement
”) effective as of September 18, 2013 by and among Wells Real Estate Funds, Inc., a Georgia corporation (“
Wells REF
”), CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”), Leo F. Wells, III, President and Chairman of the Board of the Company, and Douglas P. Williams, Executive Vice President, Secretary, Treasurer and director of the Company, as amended by the Amendment to the Agreement effective as of September 20, 2013 by and among Wells REF, the Company and Messrs. Wells and Williams. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.
WHEREAS, each of the Company, Wells REF and Messrs. Wells and Williams desire to amend the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Section 2 of the Agreement is hereby deleted in its entirety and replaced with the following:
2.
Redemption of Preferred Shares
. Wells REF hereby agrees to sell, transfer, grant, convey and assign the Preferred Shares to the Company, and the Company hereby agrees to purchase, receive, acquire and redeem the Preferred Shares and their respective accrued and unpaid dividends from Wells REF, upon the closing date of the Company’s underwritten public offering of shares of Class A common stock (the “
Redemption Date
”), for an aggregate redemption price equal to the Series A Redemption Price (as defined in the Company’s Sixth Articles of Amendment and Restatement (the “
Charter
”)) for 100% of the outstanding Series A Preferred Stock, calculated as of the end of the day immediately preceding the Redemption Date, plus the Series B Redemption Price (as defined in the Charter) for 100% of the outstanding Series B Preferred Stock, calculated as of the end of the day immediately preceding the Redemption Date (collectively, the “
Redemption Price
”); provided, however, that this Agreement shall automatically terminate and be of no further force or effect without further action by any Party if the Preferred Shares are not redeemed on or before December 31, 2014. Wells REF hereby agrees that the Dividend Waivers shall continue to be in effect through at least the earlier of the Redemption Date or June 30, 2014 (provided, however, that this period may be extended by the Company until December 31, 2014 so long as the Company is using good faith efforts to complete a listed public offering of its shares or other liquidity event that would result in the redemption of the Preferred Shares at the previously agreed-upon Redemption Price); and, thereafter, until such time as the Dividend Waivers may be prospectively revoked in writing by Wells REF.
2. Section 5(c) of the Agreement is hereby deleted in its entirety and replaced with the following:
(c) Messrs. Wells and Williams shall resign as directors of the Company immediately prior to the effective time of the registration statement for the underwritten public offering referenced in Section 2 hereof; provided that the Company shall not fill the vacancies created by such resignations until the Redemption Date and will reelect Messrs. Wells and Williams if the Redemption Date does not occur within 10 days of their resignation.
3. Except to the extent amended hereby, the provisions of the Agreement shall remain unmodified, and the Agreement, as amended by this Amendment No. 2, shall remain in full force and effect in accordance with its terms.
4. This Amendment No. 2 may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 as of date and year first above written.
WELLS REAL ESTATE FUNDS, INC.
By:
/s/ LEO F. WELLS, III
Name: Leo F. Wells, III
Title: Chief Executive Officer
CATCHMARK TIMBER TRUST, INC.
By:
/s/ BRIAN M. DAVIS
Brian M. Davis
Senior Vice President, Chief Financial Officer and Assistant Secretary
LEO F. WELLS, III
/s/ LEO F. WELLS, III
Leo F. Wells, III
DOUGLAS P. WILLIAMS
/s/ DOUGLAS P. WILLIAMS
Douglas P. Williams
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this “
Agreement
”), effective as of October 25, 2013 (the “
Effective Date
”), is made and entered into by and among CATCHMARK TIMBER TRUST, INC., formerly known as WELLS TIMBERLAND REIT, INC., a Maryland corporation (the “
Company
”), CATCHMARK TIMBER OPERATING PARTNERSHIP, L.P., formerly known as WELLS TIMBERLAND OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the “
OP
”), and WELLS REAL ESTATE FUNDS, INC., a Georgia corporation (“
Wells REF
”). Certain capitalized terms shall have the meanings given to such terms in
Section 1
hereof.
W I T N E S S E T H
WHEREAS, the Company has elected to be taxed as a REIT, and to invest its funds in investments permitted by the terms of the Charter and Sections 856 through 860 of the Code;
WHEREAS, the Company is the general partner of the OP and conducts all of its business and makes all investments through the OP;
WHEREAS, the Company is now self-managed as a result of its hiring of the Targeted Personnel (as defined in the Master Self-Management Transition Agreement dated as of September 18, 2013 (the “
Master Transition Agreement
”)) to direct and perform the day-to-day business affairs of the Company;
WHEREAS, the Company, the OP and Wells Timberland Management Organization LLC (“
Wells TIMO
”), which is owned and controlled by Wells REF, were party to an Amended and Restated Advisory Agreement (the “
Advisory Agreement
”) effective as of July 1, 2013, which agreement has now terminated, and the parties hereto, together with Wells TIMO, remain party to the Master Transition Agreement and certain related agreements;
WHEREAS, the Company and the OP desire to avail themselves of the experience, sources of information and advice of Wells REF and its Affiliates to assist the Company in a successful transition from being externally managed to being self‑managed and to have Wells REF and its Affiliates undertake the services hereinafter set forth, at the request and subject to the supervision of the Company, all as provided herein; and
WHEREAS, Wells REF is willing to undertake to render such services upon the request and subject to the supervision of the Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Definitions
. As used in this Agreement, the following terms have the definitions hereinafter indicated:
Advisory Agreement
. As such term is defined in the recitals of this Agreement.
Affiliate
or
Affiliated
. An Affiliate of another person includes only the following: (i) any person directly or indirectly controlling, controlled by, or under common control with such other person; (ii) any person directly or indirectly owning, controlling or holding with the power to vote 10% or more of the outstanding voting securities of such other person; (iii) any legal entity for which such person acts as an executive officer, director, trustee or general partner, (iv) any person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other person; and (v) any executive officer, director, trustee or general partner of such other person. An entity shall not be deemed to control or be under common control with an advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board (or equivalent governing body) of such program is comprised of Affiliates of the entity.
Board of Directors
or
Board
. The persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors.
Bylaws
. The Fourth Amended and Restated Bylaws of the Company, as amended from time to time.
Cause
. With respect to the termination of this Agreement, (i) fraud, criminal conduct, willful misconduct or willful or grossly negligent breach of fiduciary duty or (ii) a material breach of this Agreement, provided that (a) the breaching party does not cure any such material breach within 60 days of receiving notice of such material breach from the other parties, or (b) such material breach is not of a nature that can be remedied within such period.
Code
. The Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
Company
. As such term is defined in the preamble of this Agreement.
Consulting Fee
. As such term is defined in Section 6(a) of this Agreement.
Charter
. The Sixth Articles of Amendment and Restatement Charter of the Company, as amended from time to time.
Director
. A member of the Board of Directors.
Effective Date
. As such term is defined in the preamble of this Agreement.
Independent Directors
. Until such time as the Shares are listed on a national securities exchange, the term “Independent Director” shall mean a Director who satisfies the independence requirements under the rules and regulations of the New York Stock Exchange as in effect from time to time. Upon a listing on a national securities exchange, the term “Independent Director” shall mean a Director who satisfies the independence requirements under the rules and regulations of the national securities exchange on which the Shares are listed.
OP
. As such term is defined in the preamble of this Agreement.
REIT
. A real estate investment trust under Section 856 of the Code.
Stockholders
. The registered holders of the Shares.
Shares
. Shares of the Company’s common stock, par value $0.01 per share.
Termination Date
. The date of termination of this Agreement.
Wells REF
. As such term is defined in the preamble of this Agreement.
Wells TIMO
. As such term is defined in the recitals of this Agreement.
2.
Appointment
. Each of the Company and the OP hereby retains Wells REF to provide consulting, support and transitional services to them on the terms and conditions set forth in this Agreement, and Wells REF hereby accepts such appointment. Each of the Company and the OP agree that this appointment does not render Wells REF an advisor to the Company because, among other reasons, the Company’s employees are the persons responsible for directing and performing the day-to-day business affairs of the Company.
3.
Duties of Wells REF
. As requested by the Company, Wells REF, either directly or by engaging an Affiliate, shall provide consulting, support and transitional services to the Company as set forth on
Schedule A
hereto.
Wells REF may delegate any of the foregoing duties to any person so long as Wells REF or any Affiliate remains responsible for the performance of such duties.
4.
Obligations of the Company and the OP
. The Company and the OP shall, to the extent the Company deems necessary and appropriate to enable the provision of such consulting, support and transitional services by Wells REF and its Affiliates and designees, use commercially reasonable efforts to, in accordance with applicable law: (i) provide timely responses to any information requested by Wells REF and its Affiliates and designees; (ii) provide access to the Company’s and the OP’s facilities, employees, assets and information and records regarding employment and personnel matters or otherwise as reasonably requested by Wells REF and its Affiliates and designees; and (iii) obtain and maintain all hardware and other equipment, leases and contracts in the ordinary course of business consistent with past practice. Wells REF and its Affiliates and designees, when on the property of the Company or the OP or when given access to any equipment, computer, software, network or files owned or controlled by the Company or the OP, will conform to, and abide by, the reasonable policies and procedures of the Company and the OP concerning health, safety, security and privacy which have been made known to Wells REF or its applicable Affiliates or designees in advance. Wells REF and its Affiliates and designees shall be entitled to rely on any instructions or other information provided by authorized personnel designated by the Company, including on instructions and other information provided by the Board, and Wells REF shall not be in breach of or default under this Agreement solely as a result of any such reliance and, subject to Section 14 hereof, Wells REF shall not have any liability to the Company or the OP for acting in accordance with such instructions.
5.
Obligations of Wells REF
. The performance of services pursuant to this Agreement shall be consistent with the standards applicable under the Advisory Agreement, and Wells REF shall maintain sufficiently skilled personnel during the term of this Agreement to ensure that Wells REF performs under this Agreement satisfactorily, including the retention of any third-party contractors retained in accordance with Section 3 hereof. Notwithstanding the foregoing, the parties acknowledge and agree that the scope of services to be provided by Wells REF and its Affiliates hereunder include services considered outside the scope of the Advisory Agreement and is limited to the services set forth on
Schedule A
hereto, which are substantially less than the day-to-day management services provided pursuant to the Advisory Agreement.
6.
Fees
.
Commencing on the Effective Date, Wells REF shall be entitled to receive a consulting fee in consideration for the services rendered under this Agreement in an amount equal to $22,875 per month; provided that for the period from the Effective Date through October 31, 2013, Wells REF shall be entitled to receive a prorated amount equal to $4,428.00 (the “
Consulting Fee
”). The Consulting Fee shall be payable monthly in arrears by the Company in cash.
7.
Expenses
.
(a)
In addition to the compensation paid to Wells REF pursuant to Section 6, the Company or the OP shall pay directly or reimburse Wells REF for any third-party expenses paid or incurred by Wells REF and its Affiliates on behalf of the Company or the OP in connection with the services it provides to the Company pursuant to this Agreement; provided, however, that Wells REF shall obtain the Company’s or the OP’s written approval prior to incurring any third-party expenses for the account of, or reimbursable by, the Company or the OP. In the event that Wells REF does not obtain the Company’s or the OP’s written approval prior to incurring any third-party expenses for the account of, or reimbursable by, the Company or the OP, Wells REF shall be responsible for the payment of any fees paid to and expenses incurred by a third-party consultant engaged by Wells REF to perform services otherwise required to be provided by Wells REF.
(b)
Notwithstanding anything else in this Agreement to the contrary, the Company shall not be required to reimburse Wells REF for any administrative service expenses, including Wells REF overhead, personnel costs and costs of goods used in the performance of services hereunder.
(c)
Expenses incurred by Wells REF on behalf of the Company or the OP and payable pursuant to this Section 7 shall be reimbursed no less than monthly to Wells REF. Wells REF shall deliver a statement within 20 days of the end of any calendar month documenting the expenses of the Company during such month which are to be reimbursed pursuant to this Section 7 and shall also deliver such statement to the Company within 20 days of the Termination Date.
8.
Other Activities of Wells REF
. Nothing herein contained shall prevent Wells REF or any of its Affiliates from engaging in or earning fees from other activities, including, without limitation, the rendering of advice to other persons (including other REITs) and the management of other programs advised, sponsored or organized by Wells REF or its Affiliates; nor shall this Agreement limit or restrict the right of any director, officer, employee or stockholder of Wells REF or its Affiliates to engage in or earn fees from any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association. Wells REF and its Affiliates may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein.
9.
Relationship of Wells REF and Company
. The Company and the OP, on the one hand, and Wells REF, on the other hand, are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers or impose any liability as such on either of them.
10.
Term
. The term of this Agreement shall commence on the Effective Date and shall continue until June 30, 2014 unless otherwise terminated in accordance with this Agreement. Notwithstanding the foregoing, this Agreement may be terminated (i) by the Company immediately for Cause, (ii) by Wells REF immediately for Cause, or (iii) by the Company or Wells REF upon 60 days’ written notice without Cause.
11.
Assignment to an Affiliate
. This Agreement may be assigned by Wells REF to an Affiliate with the approval of the Board, including a majority of the Independent Directors. Wells REF may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company or the OP without the consent of Wells REF, except in the case of an assignment by the Company or the OP to a corporation or other organization which is a successor to all of the assets, rights and obligations of the Company or the OP, as the case may be, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company and the OP is bound by this Agreement.
12.
Payments to and Duties of Wells REF upon Termination
.
(a)
After the Termination Date, Wells REF shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the Termination Date all unpaid reimbursements of expenses and all earned but unpaid Consulting Fees payable to Wells REF prior to termination of this Agreement. Notwithstanding the foregoing, if the Company terminates this Agreement without Cause pursuant to Section 10 prior to June 30, 2014, Wells REF shall be entitled to payment of the Consulting Fees through June 30, 2014, with such compensation to be paid pursuant to this Section 12.
(b)
Wells REF shall promptly upon termination:
(i) pay over to the Company all money collected and held for the account of the Company pursuant to this Agreement, after deducting any earned but unpaid fees and reimbursement for its expenses to which it is then entitled;
(ii) deliver to the Company a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Company; and
(iii) deliver to the Company all assets and documents of the Company then in the custody of Wells REF, and any reasonable expenses associated with delivery of such assets and documents shall be reimbursed by the Company to Wells REF.
13.
Indemnification by the Company
. The Company shall indemnify and hold harmless Wells REF and its Affiliates, including their respective officers, directors, managers, partners and employees, from all liability, claims, damages, taxes or losses and related expenses, including reasonable attorneys’ fees and costs (collectively, “
Losses
”), arising in the performance of their duties hereunder, subject to any limitations imposed by the laws of the State of Maryland. Notwithstanding the foregoing, Wells REF shall not be entitled to indemnification or be held harmless pursuant to this Section 13 for any activity for which Wells REF shall be required to indemnify or hold harmless the Company pursuant to Section 14.
14.
Indemnification by Wells REF
. Wells REF shall indemnify and hold harmless the Company and its Affiliates, including their respective officers, directors, managers, partners and employees, from all Losses to the extent that such Losses are incurred by reason of Wells REF’s bad faith, fraud, willful misconduct, gross negligence or reckless disregard of its duties under this Agreement.
15.
Limitation on Liability
. Notwithstanding any other provision contained in this Agreement, the Company, the OP and Wells REF agree that neither Wells REF, on one hand, or the Company and the OP, on the other hand, will be liable to the other party, whether based on contract, tort (including negligence), warranty or any other legal or equitable grounds, for any special, indirect, punitive, incidental or consequential losses, damages or expenses of such party.
16.
Notices
. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Bylaws, or accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
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|
To the Board and the Company:
|
|
CatchMark Timber Trust, Inc.
6200 The Corners Parkway
Norcross, Georgia 30097-3365
Attention: Chief Executive Officer
|
|
To the OP:
|
|
CatchMark Timber Operating Partnership, L.P.
6200 The Corners Parkway
Norcross, Georgia 30097-3365
Attention: Chief Executive Officer
of CatchMark Timber Trust, Inc.,
General Partner
|
|
To Wells REF:
|
|
Wells Real Estate Funds, Inc.
6200 The Corners Parkway
Norcross, Georgia 30097-3365
Attention: President
|
Any party may at any time give notice in writing to the other parties of a change in its address for the purposes of this Section 16.
17.
Modification
. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees.
18.
Severability
. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
19.
Governing Law
. This Agreement will be governed by the laws of the State of Georgia, without regard to the conflicts of law principles of such State. The parties hereto consent and submit to the exclusive jurisdiction of the courts (State and federal) located in the State of Georgia in connection with any controversy arising under this Agreement or its subject matter. The parties hereby waive any objection they may have in any such action based on lack of personal jurisdiction, improper venue or inconvenient forum. The parties further agree that service of any process, summons, notice or document by U.S. registered mail to its respective address set forth below shall be effective local service for any litigation brought in such courts.
20.
Construction
. The parties have participated jointly in the drafting of this Agreement, and each party was represented by counsel in the negotiation of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
21.
Entire Agreement
. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.
22.
Indulgences, not Waivers
. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
23.
Gender
. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
24.
Titles not to Affect Interpretation
. The titles of paragraphs and subparagraphs contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
25.
Execution in Counterparts
. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when the counterparts hereof, taken together, bear the signatures of all of the parties reflected hereon as the signatories.
26.
Survival
. The provisions of Sections 1, 12 through 24 and 26 shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Transition Services Agreement as of the date and year first above written.
CATCHMARK TIMBER TRUST, INC.
By:
/s/ BRIAN M. DAVIS
Brian M. Davis
Senior Vice President, Chief Financial Officer and Assistant Secretary
CATCHMARK TIMBER OPERATING PARTNERSHIP, L.P.
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By:
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CatchMark Timber Trust, Inc., its
General Partner
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By:
/s/ BRIAN M. DAVIS
Brian M. Davis
Senior Vice President, Chief Financial Officer and Assistant Secretary
WELLS REAL ESTATE FUNDS, INC.
By:
/s/ LEO F. WELLS, III
Leo F. Wells, III
Chief Executive Officers
SCHEDULE A
TRANSITION SERVICES:
Information technology infrastructure design and implementation
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Support the selection and implementation of a new financial application toolset.
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Create a financial data history archive.
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Establish service contracts with technology utility service providers.
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Migrate legacy email and files to the new utility platforms.
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Support the marketing web identity launch.
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Email under new web domain
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Human Resources
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Vendor selection and setup for payroll and human resources information system (HRIS).
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Selection and implantation of all health, welfare and retirement programs.
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Establish all HR related policies and procedures. Documentation via Employee Handbook and applicable Plan Documents (i.e. PTO, Severance).
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Establish/document guidelines and best practices for recruiting, employee relations performance management.
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Training of Target Employees on all HRIS and related systems.
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Treasury and cash management infrastructure design and implementation
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Procuring and implementing remote deposit console, check printer with signature card, check stock and postage machine.
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Creating new bank accounts and updating company information.
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Updating bank account access/permissions.
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Training Target Employees on accounts payable and treasury functions.
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Marketing and Investor Communications Support
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Update website and other electronic media to represent CatchMark name change.
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Other website updates, as necessary, due to transition to publicly listed company.
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Oversight of copywriting, ongoing edits, etc.
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Working with and transitioning duties with vendors for specific projects and mail house needs.
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Physical Move of CatchMark from 6200 The Corners Parkway to new office location
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Site selection and planning (technology specific).
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Establish internet and phone circuits.
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Select and implement telephony solution.
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Build out local network and wireless solutions.
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Select and implement imaging solution (print, scan, copy, fax, etc.).
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Deploy new workstations (computers).
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Establish site security measures (technology specific).
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Establish relationships and contracts with technology support providers for site specific services.
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SUPPORT SERVICES:
Client Services and DST on-going support services
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Escalated service issues.
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Inbound investor emails.
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DST call center training and oversight.
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Proxy oversight and support.
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Tax form preparation oversight, validation and approval.
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DST Vision & FANmail approvals.
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DST project management oversight.
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DST work queue oversight and review.
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DST invoice review and reconciliation.
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Product accounting support.
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Compliance and risk management support
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Information requests and data reporting requests.
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Written inquiry response support.
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Quarterly statement oversight and approval.
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Investor Communications services
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Provide oversight and review of investor and FA communications.
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Coordinate investor communications with transfer agent.
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Validate investor and FA mailing lists.
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Coordinate statement inserts.
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Investor forms- updates and reviews.
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Infrastructure support (while residing at current office location)
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Utilities support – Phones, Network, Imaging, Desktops/Laptops.
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LISTING SERVICES:
Listing Project Management
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Negotiations of Post-Listing contract with DST and/or other parties.
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Contract oversight and management.
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Listing plan project management.
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Provide consultative services for listing decisions.
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Reverse split oversight and validation.
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B to A share conversion oversight.
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Broker Dealer and Financial Advisor back-office support.
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Cost basis reporting, production and validation.
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Training Targeted Personnel to transition DST relationship internally
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Administrative support following listing process
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Provide consultative services for post-listing environment
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “
Agreement
”) is made and entered into this 30th day of October, 2013 by and between CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”), and Jerrold Barag (“
Executive
”), to be effective as of the Effective Date, as defined in Section 1.
BACKGROUND
The Company desires to engage Executive as the Chief Executive Officer (“
CEO
”) and President of the Company from and after the Effective Date, in accordance with the terms of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Effective Date and Term
. Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby employs Executive, and Executive hereby accepts such employment, for the term commencing on October 25, 2013, at 5:30 p.m. Eastern time (the “
Effective Date
”) and, unless otherwise earlier terminated pursuant to Section 5 hereof, ending on December 31, 2017 (the “
Term
”). Upon expiration of the Term, this Agreement shall automatically renew for a one-year period until December 31, 2018 (the “
Renewal Period
”), unless either party notifies the other party in writing prior to the end of the Term that the Agreement shall not be renewed. If this Agreement is renewed in accordance with this Section, the Renewal Period shall be included in the definition of “Term” for purposes of this Agreement. If this Agreement is not renewed in accordance with this Section or if the Renewal Period expires, then this Agreement will be of no further force and effect, with the exception of Section 15 and Section 7(c) (and any other provisions of this Agreement necessary for the interpretation or enforcement of Section 7(c)), which shall survive the expiration of the Term and continue to be in full force and effect in accordance with its terms.
2.
Employment
. Executive is hereby employed on the Effective Date as the CEO and President of the Company. In his capacity as the CEO and President of the Company, Executive shall have the duties, responsibilities and authority commensurate with such position as shall be assigned to him by the Board of Directors of the Company (the “
Board
”). At the request of the Board, Executive shall also serve as an officer, director, manager or other representative with respect to any subsidiary, affiliate or joint venture of the Company (each a “
Subsidiary
”) consistent with Executive’s position with the Company. Executive shall serve as a member of the Board (subject to Executive’s nomination and election as a member of the Board for subsequent terms) and, at the request of the Board, as a member of the board of directors (or equivalent) of any Subsidiary, without additional compensation. In his capacity as the CEO and President of the Company, Executive will report directly to the Board.
3.
Extent of Service
. During the Term, and excluding any periods of vacation or sick leave to which Executive is entitled, Executive agrees to (a) devote substantially all of his business effort, time, energy, and skill to fulfill his employment duties; (ii) faithfully, loyally and diligently perform such duties, subject to the control and supervision of the Board; and (iii) diligently follow and implement all lawful management policies and decisions of the Company that are communicated to Executive. During the Term, it shall not be a violation of this Agreement for Executive to (y) serve on corporate, civic or charitable boards or committees; or (z) manage personal investments, so long as such activities do not significantly interfere with the performance of Executive’s responsibilities as an employee of the
Company in accordance with this Agreement and do not give rise to any conflict of interest with the Company or its affiliates. Executive shall perform his duties at the principal office of the Company.
4.
Compensation and Benefits
.
(a)
Base Salary
. During the Term, the Company will pay to Executive base salary at the rate of U.S. $325,000.00 per year (“
Base Salary
”), less normal withholdings, payable in approximately equal bi-weekly or other installments as are or become customary under the Company’s payroll practices for its executives from time to time. The Compensation Committee of the Board (the “
Compensation Committee
”) shall review Executive’s Base Salary annually and may increase or, but only with Executive’s written consent, decrease Executive’s Base Salary from year to year. Such adjusted salary then shall become Executive’s Base Salary for purposes of this Agreement.
(b)
Bonus
. During the Term, Executive shall be eligible to participate in any bonus plans, practices, policies and programs available to senior executive officers of the Company (“
Peer Executives
”), and on the same basis as such Peer Executives, provided that nothing herein shall obligate the Company to establish any such bonus plans, policies or programs or limit the ability of the Company to amend, modify or terminate any such bonus plans, policies or programs at any time and from time to time.
(c)
Incentive and Retirement Plans
. During the Term, Executive shall be entitled to participate in all incentive and retirement plans, practices, policies and programs available to Peer Executives, and on the same basis as such Peer Executives, provided that nothing herein shall limit the ability of the Company to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time. Without limiting the foregoing, the following shall apply:
(i)
2013 Restricted Stock Award
. The Company will grant to Executive 33,000 restricted shares of its Class A common stock (the “
2013 Restricted Stock Award
”), pursuant to, and subject to the terms and conditions of, the CatchMark Timber Trust, Inc. Second Amended and Restated 2005 Long-Term Incentive Plan (the “
Equity Incentive Plan
”). Forty percent (40%) of the 2013 Restricted Stock Award will vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, conditioned upon Executive’s continued employment on each vesting date (the “
Time-Based Restricted Shares
”). Sixty percent (60%) of the 2013 Restricted Stock Award will vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, based solely upon achievement of performance metrics established by the Compensation Committee for 2014 and based on Executive’s continued employment on each vesting date (the “
Performance-Based Restricted Shares
”). The Time-Based Restricted Shares will be granted within three business days following the date of this Agreement and the Performance-Based Restricted Shares will be granted no later than the close of business on December 6, 2013. The 2013 Restricted Stock Award will be subject to other terms and conditions set forth in the award certificate memorializing the 2013 Restricted Stock Award.
(ii)
IPO Award
. Within three business days following the date of this Agreement, the Company will grant to Executive 39,000 restricted stock units (the “
IPO Award
”), pursuant to, and subject to the terms and conditions of, the Equity Incentive Plan, which IPO Award will vest and convert to shares of the Company’s Class A common stock on the closing date of the Company’s initial listing of its Class A common stock on the New York Stock Exchange and the completion of its underwritten offering of its Class A common stock (the “
IPO Closing Date
”), conditioned upon Executive’s continuing employment on the IPO Closing Date, and subject to other terms and conditions set forth in the award certificate memorializing the IPO Award, including a requirement that the shares
of Class A common stock underlying the IPO Award (the “
RSU Shares
”) be subject to a mandatory holding period, pursuant to which Executive must hold, on an after-tax basis, one hundred percent (100%) of the RSU Shares through the first anniversary of the IPO Closing Date, two-thirds of the RSU Shares through the second anniversary of the IPO Closing Date, and one-third of the RSU Shares through the third anniversary of the IPO Closing Date.
(iii)
Future Stock-Based Awards
. During the Term, Executive may be eligible for additional stock-based awards under the Company’s long-term incentive plan, as determined by the Compensation Committee in its sole discretion. Nothing herein requires the Board or the Compensation Committee to make additional grants of stock-based awards in any year.
(d)
Welfare Benefit Plans
. During the Term, Executive and Executive’s eligible dependents shall be eligible for participation in the welfare benefit plans, practices, policies and programs provided by the Company, if any, to the extent available to other Peer Executives and subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of the Company to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time.
(e)
Expenses
. During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in the course of performing his duties and responsibilities under this Agreement, in accordance with the policies, practices and procedures of the Company to the extent available to other Peer Executives with respect to travel and other business expenses.
(f)
Vacation
. During the Term, Executive is entitled to the maximum amount of paid vacation days per calendar year allowed by the Company’s policies and practices as well as all holidays observed by the Company; provided, however, that nothing herein shall limit the ability of the Company to amend, modify or terminate any such policies and practices at any time and from time to time. Executive’s vacation time may be increased at the discretion of the Board.
5.
Termination of Employment
.
(a)
Death or Disability
.
(i) Executive’s employment shall terminate automatically upon Executive’s death.
(ii) If the Company determines in good faith that the Disability (as defined below) of Executive has occurred during the Term, it may give to Executive written notice of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the “
Disability Effective Date
”), provided that, within the thirty (30) days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. “
Disability
” shall mean the inability of Executive, as reasonably determined by the Board, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted for a period of six (6) consecutive months. At the request of Executive or his personal representative, the Board’s determination that the Disability of Executive has occurred shall be certified by a physician mutually agreed upon by Executive, or his personal representative, and the Company.
(b)
Termination by Company
. The Company may terminate Executive’s employment during the Term with or without Cause immediately on written notice to Executive, provided that, if the Executive is terminated for Cause, the Executive’s Date of Termination as defined below must occur within a period of ninety (90) days after receipt by the Board of clear notice of an event of Cause, provided, however, that for any event or action for which there is a potential cure period, the
Date of Termination shall be the date on which the applicable cure period expires (unless the event of Cause is based on a continuing or repeating course of conduct that, when taken as a whole, constitutes Cause, in which case Executive’s Date of Termination must occur within a period of ninety (90) days after receipt of the Board of clear notice of the most recent event or action that is part of the continuing or repeating course of conduct). “
Cause
” shall mean:
(i)
the willful failure of Executive to follow the reasonable directions of the Board if Executive does not begin to cure such failure within ten (10) days after receipt of written notice from the Board specifying the particulars of the failure and complete such cure without any further failure to follow the reasonable direction in question. Notwithstanding anything to the contrary set forth in this subsection, and for purposes of clarity, Executive’s failure to meet any performance standards or expectations shall not constitute Cause;
(ii)
theft, fraud, embezzlement, or material dishonesty in connection with Executive’s employment, or intentional falsification of any employment or Company records;
(iii)
the conviction by Executive of, or Executive’s pleading guilty or nolo contendere to, a felony or a crime involving moral turpitude, whether or not such felony or crime is connected with the business of the Company;
(iv)
breach of fiduciary duty or any willful violation of law by Executive in connection with the Company’s or any Subsidiary’s business or relating to Executive’s duties hereunder, or willful misconduct for personal profit by Executive in connection with the Company’s or any Subsidiary’s business or relating to Executive’s duties hereunder;
(v)
Executive’s material failure to abide by the Company’s code of conduct, code of ethics, or other employment or corporate governance policies;
(vi)
except as set forth in Section 5(b)(vii) below, a material breach of this Agreement by Executive which is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company; or
(vii)
a material breach by Executive of Section 7(c) of this Agreement which, if such breach is capable of being cured, is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company
.
(c)
Termination by Executive
. Executive’s employment may be terminated by Executive with or without Good Reason by delivering a Notice of Termination (as defined below) to the Company thirty (30) days prior to the desired Date of Termination (as defined below) (with the thirty (30) day period to be referred to as the “
Notice Period
”). A termination by Executive shall not constitute termination for Good Reason unless Executive shall first have delivered to the Company written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than thirty (30) days after the initial occurrence of such event) (the “
Good Reason Notice
”), and the Company has not taken action to correct, rescind or otherwise
substantially reverse the occurrence supporting termination for Good Reason as identified by Executive within thirty (30) days following its receipt of such Good Reason Notice. Good Reason shall not include Executive’s death or Disability. Executive’s Date of Termination for Good Reason must occur within a period of ninety (90) days after the occurrence of an event of Good Reason.
During the Notice Period, and at the sole discretion of the Company, Executive may be required to assist the Company with identifying a successor and in transitioning his duties and responsibilities to that successor.
Moreover, during the Notice Period, and at the sole discretion of the Company, Executive may be relieved of all duties and/or prohibited from physically working at the offices of Company. For purposes of this Agreement, “
Good Reason
” shall mean any of the following, without Executive’s written consent: (i) a material diminution in Executive’s Base Salary; (ii) a material diminution in Executive’s authority, duties, or responsibilities; or (iii) the relocation of the Company’s principal office to a location that is more than fifty (50) miles from the location of the Company’s principal office on the Effective Date. The parties intend, believe and take the position that a resignation by Executive for Good Reason as defined above effectively constitutes an involuntary separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “
Code
”) and Treas. Reg. Section 1.409A-1(n)(2).
(d)
Notice of Termination
. Any termination by the Company with or without Cause and any termination by Executive shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 18(d) of this Agreement. A “
Notice of Termination
” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) specifies the Date of Termination (as defined below). The Company may not subsequently assert a new basis for Cause that was not asserted in the Notice of Termination; provided, however, that, in connection with any dispute relating to the termination of Executive’s employment, the Company may rely on evidence obtained after the Date of Termination that further supports any specific basis for Cause that was included in the Notice of Termination.
“
Date of Termination
” means (i) if Executive’s employment is terminated other than by reason of death or Disability, the date of receipt of the Notice of Termination, or any later date specified therein, or (ii) if Executive’s employment is terminated by reason of death or Disability, the Date of Termination will be the date of death or the Disability Effective Date, as the case may be.
6.
Obligations of the Company upon Termination
.
(a)
Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death, or Disability
. During the Term, if Executive terminates employment for Good Reason or the Company terminates Executive’s employment other than for Cause, death, or Disability, then:
(i) the Company shall pay to Executive in a lump sum in cash within thirty (30) days after the Date of Termination, the exact payment date to be determined by the Company, Executive’s Base Salary through the Date of Termination to the extent not theretofore paid (the “
Accrued Salary
”);
(ii) the Company shall pay to Executive an amount equal to (A) two (2) times Executive’s then current Base Salary, if such termination occurs outside the Change in Control Period (as defined herein) or (B) three (3) times Executive’s then current Base Salary, if such termination occurs during the Change in Control Period (in either case, the “
Severance Amount
”). Subject to Section 13 hereof, (A) if such termination occurs outside the Change in Control Period, the Severance Amount shall be paid in approximately equal monthly installments during the twenty-four month period following
the Date of Termination, commencing on the first payroll date to occur after the sixtieth (60
th
) day following the Date of Termination; provided, that the first such payment shall consist of all amounts payable to Executive pursuant to this Section 6(a)(ii) between the Date of Termination and the first payroll date to occur after the sixtieth (60
th
) day following the Date of Termination; and (B) if such termination occurs during the Change in Control Period, the Severance Amount shall be paid in a single lump sum within sixty (60) days following the Date of Termination; provided, further, that, in either case, any obligation of the Company to pay the Severance Amount shall cease upon Executive’s breach of any of his obligations set forth in Section 7 hereof. For purposes of this Agreement, the “
Change in Control Period
” means the period beginning ninety (90) days prior to a Change in Control (as defined in the Equity Incentive Plan) and ending three hundred sixty five (365) days after such Change in Control;
(iii) if Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which Executive and/or Executive’s eligible dependents would be entitled under Section 4980B of the Code (COBRA), then for eighteen (18) months following the Date of Termination (the “
COBRA Reimbursement Period
”), the Company shall pay to Executive monthly payments of an amount equal to the excess of (i) the COBRA cost of such coverage over (ii) the amount that Executive would have had to pay for such coverage if he had remained employed during the COBRA Reimbursement Period and paid the active employee rate for such coverage, less withholding for taxes and other similar items; provided, however, that (A) that if Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to Executive’s spouse), the Company’s obligation to pay any portion of the cost of health coverage as described herein shall cease, except as otherwise provided by law; (B) the COBRA Reimbursement Period shall only run for the period during which Executive is eligible to elect health coverage under COBRA and timely elects such coverage; (C) nothing herein shall prevent the Company from amending, changing, or canceling any group medical, dental, vision and/or prescription drug plans during the COBRA Reimbursement Period; (D) during the COBRA Reimbursement Period, the benefits provided in any one calendar year shall not affect the amount of benefits provided in any other calendar year (other than the effect of any overall coverage benefits under the applicable plans); (E) the reimbursement of an eligible taxable expense shall be made as soon as practicable but not later than December 31 of the year following the year in which the expense was incurred; (F) Executive’s rights pursuant to this Section 6(a)(iii) shall not be subject to liquidation or exchange for another benefit; and (G) any obligation of the Company to make such payments shall cease upon Executive’s breach of any of his obligations set forth in Section 7 hereof;
(iv) as of the Date of Termination, the restrictions on any outstanding equity awards held by Executive that expire solely on Executive’s continuous service with the Company, if any, shall expire, and any other outstanding equity awards held by Executive that vest solely on Executive’s continuous service with the Company shall immediately become fully vested;
(v) the portion of any equity awards held by Executive that is exercisable as of the Date of Termination, if any, shall remain exercisable by Executive through the end of the term of such equity award;
(vi) outstanding equity awards, other than those described in Section 6(a)(iv) above, held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO Award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award; and
(vii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies and in accordance with the terms thereof, including, but not limited to, any expense reimbursements and accrued but unused vacation (which shall be paid out, if at all, in accordance with the Company’s then current policy regarding accrual and payment for unused vacation pay) (such amounts and benefits shall be hereinafter referred to as the “
Other Benefits
”).
Notwithstanding the foregoing, the Company shall be obligated to provide the payments described in clauses (ii)-(vi) of this Section 6(a) only if (A) within forty-five (45) days after the Date of Termination Executive shall have executed a separation and release of claims/covenant not to sue agreement in the form attached hereto as
Exhibit A
(the “
Release Agreement
”) and such Release Agreement shall not have been revoked within the revocation period specified in the Release Agreement, and (B) Executive fully complies with the obligations set forth in Section 7 hereof.
(b)
Death or Disability
. If Executive’s employment is terminated by reason of Executive’s death or Disability during the Term, the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits. Accrued Salary shall be paid to Executive or Executive’s estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 6(b) shall include without limitation, and Executive or Executive’s estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. In addition, if Executive’s employment is terminated by reason of Executive’s death or Disability during the Term, the restrictions on any outstanding equity awards held by Executive that expire solely on Executive’s continuous service with the Company, if any, shall expire, and any other outstanding equity awards held by Executive that vest solely on Executive’s continuous service with the Company shall immediately become fully vested, as of the Date of Termination. Other outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(c)
Termination by the Company for Cause; Resignation by Executive Other than for Good Reason
. If the Company terminates Executive’s employment for Cause during the Term, or Executive shall resign other than for Good Reason, the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits. Accrued Salary shall be paid to Executive in a lump sum in cash within thirty (30) days after the Date of Termination. Outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(d)
Expiration of Term
. If Executive’s employment ends because (i) this Agreement is not renewed in accordance with Section 1, or (ii) the Renewal Period expires, then the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits, and this Agreement will be of no further force and effect, with the exception of Section 7(c) (and any other provisions of this Agreement necessary for the interpretation or enforcement of Section 7(c)). Accrued Salary shall be paid to Executive in a lump sum in cash within thirty (30) days after the Date of
Termination. Outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(e)
Resignations
. Termination of Executive’s employment for any reason whatsoever shall constitute Executive’s resignation from the Board and the boards of directors of any Subsidiary on which he serves, and resignation as an officer of the Company
and of any of the Subsidiaries for which he serves as an officer.
7.
Protective Covenants
.
(a)
Acknowledgments
.
(i)
Condition of Employment and Other Consideration
. Executive acknowledges and agrees that he has received good and valuable consideration for entering into this Agreement and further acknowledges that the Company would not employ or continue to employ him in the absence of his execution of and compliance with this Agreement.
(ii)
Access to Confidential Information, Relationships, and Goodwill
. Executive acknowledges and agrees that he is being provided and entrusted with Confidential Information (as that term is defined below), including highly confidential customer information that is subject to extensive measures to maintain its secrecy within the Company, is not known in the trade or disclosed to the public, and would materially harm the Company’s legitimate business interests if it was disclosed or used in violation of this Agreement. Executive also acknowledges and agrees that he is being provided and entrusted with access to the Company’s customer and employee relationships and goodwill. Executive further acknowledges and agrees that the Company would not provide access to the Confidential Information, customer and employee relationships, and goodwill in the absence of Executive’s execution of and compliance with this Agreement. Executive further acknowledges and agrees that the Company’s Confidential Information, customer and employee relationships, and goodwill are valuable assets of the Company and are legitimate business interests that are properly subject to protection through the covenants contained in this Agreement.
(iii)
Potential Unfair Competition
. Executive acknowledges and agrees that as a result of his employment with the Company, his knowledge of and access to Confidential Information, and his relationships with the Company’s customers and employees, Executive would have an unfair competitive advantage if Executive were to engage in activities in violation of this Agreement.
(iv)
No Undue Hardship
. Executive acknowledges and agrees that, in the event that his employment with the Company terminates, Executive possesses marketable skills and abilities that will enable Executive to find suitable employment without violating the covenants set forth in this Agreement.
(v)
Voluntary Execution
. Executive acknowledges and affirms that he is executing this Agreement voluntarily, that he has read this Agreement carefully and had a full and reasonable opportunity to consider this Agreement (including an opportunity to consult with legal counsel), and that he has not been pressured or in any way coerced, threatened or intimidated into signing this Agreement.
(b)
Definitions
. The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:
(i) “
Competitive Services
” means the business of investing in, managing, buying, and/or selling commercial timberland, harvesting and selling timber, and leasing the right to access land and harvest timber.
(ii) “
Confidential Information
” means any and all data and information relating to the Company and/or any of its Subsidiaries, their activities, business, or clients that (i) is disclosed to Executive or of which Executive becomes aware as a consequence of his employment with the Company and/or any of its Subsidiaries; (ii) has value to the Company and/or any of its Subsidiaries; and (iii) is not generally known outside of the Company and/or its Subsidiaries. “Confidential Information” shall include, but is not limited to the following types of information regarding, related to, or concerning the Company and/or any of its Subsidiaries: trade secrets (as defined by O.C.G.A. § 10-1-761); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information. “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Company and/or its Subsidiaries, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company and/or its Subsidiaries. In addition to data and information relating to the Company and/or any of its Subsidiaries, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company and/or any of its Subsidiaries by such third party, and that the Company and/or the relevant Subsidiary has a duty or obligation to keep confidential. This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law. “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company and/or any of its Subsidiaries.
(iii) “
Date of Termination
” means the date of the Termination.
(iv) “
Material Contact
” means contact between Executive and a customer or potential customer of the Company (i) with whom or which Executive has or had dealings on behalf of the Company; (ii) whose dealings with the Company are or were coordinated or supervised by Executive; (iii) about whom Executive obtains Confidential Information in the ordinary course of business as a result of his employment with the Company; or (iv) who receives products or services of the Company, the sale or provision of which results or resulted in compensation, commissions, or earnings for Executive within the two (2) years preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable.
(v) “
Person
” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.
(vi) “
Principal or Representative
” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.
(vii) “
Protected Customer
” means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom Executive has had Material Contact on behalf of the Company during his employment with the Company.
(viii) “
Protected Work
” means any and all ideas, inventions, formulas, source codes, object codes, techniques, processes, concepts, systems, programs, software, software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, and whether or not subject to copyright or trademark or trade secret protection, conceived, developed or produced by Executive, or by others working with Executive or under his direction, during the period of his employment, or conceived, produced or used or intended for use by or on behalf of the Company or its customers.
(ix) “
Restricted Period
” means any time during Executive’s employment with the Company, as well as two (2) years from the Date of Termination, provided, however, that if this Agreement is not renewed in accordance with Section 1 or if the Renewal Period expires, then no Restricted Period shall apply.
(x) “
Restricted Territory
” means (A) the area within one-hundred fifty (150) miles from the external boundary of any property owned by the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable, and (B) any other territory where Executive is working on behalf of the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable.
(xi) “
Restrictive Covenants
” means the restrictive covenants contained in Section 7 hereof.
(xii) “
Termination
” means the termination of Executive’s employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.
(c)
Restriction on Disclosure and Use of Confidential Information
. Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information. Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not
be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. For the avoidance of doubt, Executive’s obligations under this Section 7(c) shall survive any termination of this Agreement and Executive’s employment hereunder.
(d)
Non-Competition
. Executive agrees that, during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory; provided, however, that notwithstanding the foregoing, this subsection (d) shall not prohibit Executive from engaging in the following activities, as long as he continues to abide by all of his other obligations under the Restrictive Covenants: (i) teaching or research at an educational institution in the field of forestry or natural resources; (ii) consulting on behalf of any person or entity that does not compete against any business of the Company, including, but not limited to, consulting within the forestry (including forest products), and/or the natural resources industries; (iii) providing services for or on behalf of any forestry or natural resources trade organization; and (iv) providing services to any state or federal agency involved in forestry or natural resources, including, but not limited to, the U.S. Forest Service. Executive acknowledges that the Restricted Territory is reasonable.
(e)
Non-Solicitation of Protected Customers
. Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.
(f)
Non-Recruitment of Employees and Independent Contractors
. Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, solicit or induce or attempt to solicit or induce any employee or independent contractor of the Company to terminate his/her engagement relationship with the Company or to enter into employment or an independent contractor engagement with Executive or any other Person.
(g)
Proprietary Rights
.
(i)
Ownership and Assignment of Protected Works
. Executive agrees that any and all Protected Works are the sole property of the Company, and that no compensation in addition to Executive’s base salary is due to Executive for development or transfer of such Protected Works. Executive agrees that he shall promptly disclose in writing to the Company the existence of any Protected Works. Executive hereby assigns and agrees to assign all of his rights, title and interest in any and all Protected Works, including all patents or patent applications, and all copyrights therein, to the Company. Executive shall not be entitled to use Protected Works for his own benefit or the benefit of anyone except the Company without written permission from the Company and then only subject to the terms of such permission. Executive further agrees that he will communicate to the Company any facts known to him and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisionals, continuations, continuations-in-part, foreign counterparts, or reissue applications, all assignments, all
registration applications, and all other instruments or papers to carry into full force and effect the assignment, transfer, and conveyance hereby made or to be made and generally do everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by the Company. Executive agrees that he will not oppose or object in any way to applications for registration of Protected Works by the Company or others designated by the Company. Executive agrees to exercise reasonable care to avoid making Protected Works available to any third party and shall be liable to the Company for all damages and expenses, including reasonable attorneys’ fees, if Protected Works are made available to third parties by him without the express written consent of the Company.
Anything herein to the contrary notwithstanding, Executive will not be obligated to assign to the Company any Protected Work for which no equipment, supplies, facilities, or Confidential Information of the Company was used and which was developed entirely on Executive’s own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company’s actual or demonstrably anticipated research or development; or (b) the invention results from any work performed by Executive for the Company. Executive likewise will not be obligated to assign to the Company any Protected Work that is conceived by Executive after Executive leaves the employ of the Company, except that Executive is so obligated if the same relates to or is based on Confidential Information to which Executive had access by virtue of his employment with the Company. Similarly, Executive will not be obligated to assign any Protected Work to the Company that was conceived and reduced to practice prior to his employment, regardless of whether such Protected Work relates to or would be useful in the business of the Company. Executive acknowledges and agrees that there are no Protected Works conceived and reduced to practice by him prior to his employment with the Company.
(ii)
No Other Duties
. Executive acknowledges and agrees that there is no other contract or duty on his part now in existence to assign Protected Works to anyone other than the Company.
(iii)
Works Made for Hire
. The Company and Executive acknowledge that in the course of his employment with the Company, Executive may from time to time create for the Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without the Company’s facilities and before, during or after normal business hours. All such works related to or useful in the business of the Company are specifically intended to be works made for hire by Executive, and Executive shall cooperate with the Company in the protection of the Company’s copyrights in such works and, to the extent deemed desirable by the Company, the registration of such copyrights.
(h)
Return of Materials
. Executive agrees that he will not retain or destroy, and will immediately return to the Company on or prior to the Date of Termination, or at any other time the Company requests such return, any and all property of the Company that is in his possession or subject to his control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Protected Works and Confidential Information belonging to the Company or that Executive received from or through his employment with the Company. Executive will not make, distribute, or retain copies of any such information or property. Executive agrees that he will reimburse the Company for all of its costs, including reasonable attorneys’ fees, of recovering the above materials and otherwise enforcing compliance with this provision if he does not return the materials to the Company
on or prior to the Date of Termination or at any other time the materials are requested by the Company or if Executive otherwise fails to comply with this provision.
(i)
Enforcement of Restrictive Covenants
.
(i)
Rights and Remedies Upon Breach
. The parties specifically acknowledge and agree that the remedy at law for any breach of the Restrictive Covenants will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Restrictive Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Executive understands and agrees that if he violates any of the obligations set forth in the Restrictive Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.
(ii)
Severability and Modification of Covenants
. Executive acknowledges and agrees that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Restrictive Covenant. If any portion of any of the Restrictive Covenants is found to be invalid or unenforceable because its duration, geographic territory, scope of activities, or information covered is considered to be unreasonable in scope, the invalid or unenforceable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforced to the fullest extent permitted by law.
(j)
Existing Covenants
. Executive represents and warrants that his employment with the Company does not and will not breach any agreement that Executive has with any former employer to keep in confidence proprietary or confidential information or not to compete with any such former employer. Executive will not disclose to the Company or use on its behalf any proprietary or confidential information of any other party required to be kept confidential by Executive.
(k)
Disclosure of Agreement
. Executive acknowledges and agrees that, during the Restricted Period, he will disclose the existence and terms of this Agreement to any prospective employer, business partner, investor or lender prior to entering into an employment, partnership or other business relationship with such prospective employer, business partner, investor or lender. Executive further agrees that the Company shall have the right to make any such prospective employer, business partner, investor or lender of Executive aware of the existence and terms of this Agreement.
8.
Non-exclusivity of Rights
. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any employee benefit plan, program, policy or practice provided by Parent or its affiliated companies and for which Executive may qualify, except as specifically provided herein. Amounts that are vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement.
9.
Full Settlement; No Mitigation
. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment.
10.
Limitation of Benefits
.
(a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether payable or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as “
Payments
”) would, if paid, be subject to the excise tax (the “
Excise Tax
”) imposed by Section 4999 of the Code, then the aggregate present value of the Payments shall be reduced (but not below zero) to an amount expressed in present value that maximizes the aggregate present value of the Payments without causing the Payments or any part thereof to be subject to the Excise Tax and therefore nondeductible by the Company because of Section 280G of the Code (the “
Reduced Amount
”). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the change of control, as determined by the Determination Firm (as defined in Section 10(b) below). For purposes of this Section 10, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 10, the “
Parachute Value
” of a Payment means the present value as of the date of the change of control of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(b) All determinations required to be made under this Section 10, including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by an independent, nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Company and Executive (the “
Determination Firm
”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that a Payment is due to be made, or such earlier time as is requested by the Company. All fees and expenses of the Determination Firm shall be borne solely by the Company. Any determination by the Determination Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments hereunder will have been unnecessarily limited by this Section 10 (“
Underpayment
”), consistent with the calculations required to be made hereunder. The Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code, but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.
(c) In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 10 shall be of no further force or effect.
11.
Successors
.
(a) This Agreement is personal to Executive and shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(b) This Agreement can be assigned by the Company and shall be binding and inure to the benefit of the Company, its successors and assigns.
12.
Cooperation
. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement. For any such cooperation that occurs after the Date of Termination, the Company shall compensate Executive at a rate of Executive’s Base Salary at the time of termination divided by 2,080 on a per hour basis for services provided, which payments shall be made on a monthly basis, and shall reimburse Executive for any reasonable out-of-pocket expenses incurred, in connection with Executive’s performance of obligations under this Section 12 at the request of the Company.
If Executive is entitled to be reimbursed for any expenses under this Section 12, the amount reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. Executive’s obligations under this Section 12, and Executive’s rights to payment or reimbursement of expenses pursuant to this Section 12, shall expire at the end of two (2) years after the Date of Termination and such rights shall not be subject to liquidation or exchange for another benefit.
13.
Code Section 409A
.
(a)
General
. This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder (and any applicable transition relief under Section 409A of the Code). Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed. Neither the Company nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Executive as a result of the application of Section 409A of the Code.
(b)
Definitional Restrictions
. Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code (“
Non-Exempt Deferred Compensation
”) would otherwise be payable or distributable hereunder, or a different form of payment of such Non-Exempt Deferred Compensation would be effected, by reason of a Change in Control or Executive’s termination of employment, such Non-Exempt Deferred Compensation will not be payable or distributable to Executive, and/or such different form of payment will not be effected, by reason of such circumstance unless the circumstances giving rise to such Change in Control or termination of employment, as the case may be, meet any description or definition of “change in control event” or “separation from service,” as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not affect the dollar amount or prohibit the
vesting
of any Non-Exempt Deferred
Compensation upon a Change in Control or termination of employment, however defined. If this provision prevents the payment or distribution of any Non-Exempt Deferred Compensation, or the application of a different form of payment, such payment or distribution shall be made at the time and in the form that would have applied absent the non-409A-conforming event.
(c)
Six-Month Delay in Certain Circumstances
. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable under this Agreement by reason of Executive’s separation from service during a period in which he is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): (i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following Executive’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Executive’s separation from service (or, if Executive dies during such period, within 30 days after Executive’s death) (in either case, the “
Required Delay Period
”); and (ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.
(d)
Treatment of Installment Payments
. Each payment of termination benefits under Section 6 of this Agreement shall be considered a separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.
(e)
Timing of Release of Claims
. Whenever in this Agreement a payment or benefit is conditioned on Executive’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the Date of Termination; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject to subsection (c) above, such payment or benefit (including any installment payments) that would have otherwise been payable during such 60-day period shall be accumulated and paid on the 60
th
day after the Date of Termination provided such release shall have been executed and such revocation periods shall have expired. If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such period.
(f)
Timing of Reimbursements and In-kind Benefits
. If Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, including, without limitation, Section 4(e), and such payments or reimbursements are includible in Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under Section 4(e) shall be subject to liquidation or exchange for another benefit.
(g)
Permitted Acceleration
. The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to Executive of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).
(h)
Payroll Dates
. Any payroll dates referenced in this Agreement refer to the Company’s payroll dates in effect as of the Effective Date and cannot be changed thereafter.
14.
Compensation Recoupment Policy
. Any cash incentive bonus awarded to Executive by the Company shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to Executive. In addition, the Compensation Committee may specify in any written documentation memorializing a cash incentive bonus award that Executive’s rights, payments and benefits with respect to such award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable conditions of such award. Such events may include, but shall not be limited to, (i) termination of employment for Cause, (ii) violation of material Company policies, (iii) breach of noncompetition, confidentiality or other restrictive covenants, (iv) other conduct by Executive that is detrimental to the business or reputation of the Company or any affiliate, or (v) a later determination that the amount realized from a performance-based award was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not Executive caused or contributed to such material inaccuracy. The reduction, cancellation, forfeiture and recoupment rights associated with any equity awards or similar awards granted to Executive, if any, shall be as provided in the award certificate memorializing any such award.
15.
Indemnification
. The Company shall indemnify Executive for liabilities incurred by him while acting in good faith in his capacity as a director or an officer to the fullest extent provided for any other officer or director of the Company. To the extent the Company maintains director and officer liability insurance, such insurance shall cover Executive to the same extent as any other officer or director of the Company. The Company’s obligations under this Section shall survive any termination of this Agreement and Executive’s employment hereunder.
16.
Attorneys’ Fees
. In the event of litigation relating to this Agreement, the prevailing party shall be entitled to recover its or his reasonable attorneys’ fees and costs of litigation, in addition to all other remedies available at law or in equity. If Executive is awarded the right to recover his reasonable attorneys’ fees and costs of litigation under this Section 16, the reimbursement of attorneys’ fees and costs of litigation shall be made within ten (10) business days following the date on which such rights are established.
17.
Damages for Breach of Contract
. In the event of any contest arising under or in connection with this Agreement, the parties agree that Executive shall not be required to wait until the expiration of the Term to sue for breach of this Agreement, and if Executive proves such breach, the Company shall pay Executive damages to which Executive is entitled, including, but not limited to, the Base Salary and other compensation owed to Executive under this Agreement through the end of the Term.
18.
Miscellaneous
.
(a)
Applicable Law; Forum Selection; Consent to Jurisdiction
. The parties agree that this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Georgia without giving effect to its conflicts of law principles. Executive agrees that the exclusive forum for any action to enforce this Agreement, as well as any action relating to or arising out of this Agreement, shall be the Superior Court of Gwinnett County, Georgia or United States District Court for the Northern District of Georgia, Atlanta Division. With respect to any such court action, the parties hereby (i) irrevocably submits to the personal jurisdiction of such courts; (ii) consents to service of process; (iii) consents to venue; and (iv) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue. The parties further agree that the above-listed courts are convenient forums for any dispute that may arise herefrom and that no party shall raise as a defense that such courts are not convenient forums.
(b)
Captions
. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
(c)
Amendments
. This Agreement may not be amended or modified otherwise than-by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(d)
Notices
. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
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If to Executive
:
Jerrold Barag
427 Langley Oaks Drive
Marietta, Georgia 30067
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If to the Company
:
CatchMark Timber Trust, Inc.
6200 The Corners Parkway
Norcross, Georgia 3009
Attention
: Chairman of the Board of Directors
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or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(e)
Severability
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(f)
Withholding
. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(g)
Waivers
. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.
(h)
Entire Agreement
. This Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the date hereof, this Agreement shall supersede any other agreement, written or oral, between the parties relating to the subject matter of this Agreement.
(i)
Construction
. The parties understand and agree that because they both have been given the opportunity to have counsel review and revise this Agreement, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement shall be construed as a whole, and according to its fair meaning, and not strictly for or against either of the parties.
(j)
Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
/s/ JERROLD BARAG
Jerrold Barag
CATCHMARK TIMBER TRUST, INC.
By:
/s/ DONALD S. MOSS
Name: Donald S. Moss
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Title:
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Chairman of the Compensation Committee of the Board of Directors
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Exhibit A
Release Agreement
SEPARATION AGREEMENT, GENERAL RELEASE OF ALL CLAIMS
AND COVENANT NOT TO SUE
THIS AGREEMENT (the “
Agreement
”) is entered into as of the Effective Date, as defined in Section 8 hereof, by and between CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”) and __________________ (“
Executive
”).
In consideration of the payments, covenants and releases described below, and in consideration of other good and valuable consideration, the receipt and sufficiency of all of which is hereby acknowledged, the Company and Executive agree as follows:
1.
Termination of Employment
. Executive’s employment with the Company terminated effective _________________ (the “
Termination Date
”) based on [description of reason for termination] pursuant to the terms of the Employment Agreement executed between the parties on or about [date of Employment Agreement] (the “
Employment Agreement
”). Executive acknowledges and agrees that he has been paid all wages and accrued benefits to which he is entitled through the date of execution of this Agreement or that the Company has promised to pay such wages and accrued benefits within thirty (30) days of the Termination Date. Other than the payments set forth in this Agreement and the continuing rights of Executive described on Exhibit A (the “
Continuing Rights
”), the parties agree that the Company owes no additional amounts to Executive for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason. With the sole exception of the Continuing Rights, this Agreement is intended to and does settle and resolve all claims of any nature that Executive might have against the Company arising out of their employment relationship or the termination of employment or relating to any other matter.
2.
Severance Benefits
. In consideration of Executive’s promises and the Release of All Claims and Potential Claims and Covenant Not To Sue contained in this Agreement, the Company will pay or provide to Executive:
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(a)
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A total gross amount of _____________ ($_______.__), less applicable withholdings, payable [in approximately equal monthly installments during the twenty-four month period following the Termination Date, commencing on the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date; provided, that the first such payment shall consist of all amounts payable to Executive pursuant to this Section 2(a) between the Termination Date and the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date] [
Applicable only in the context of a qualifying termination during Change in Control Period as defined in the employment agreement:
in a lump sum on the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date]; and provi
ded, further, that any obligation of the Company to
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make such payments shall cease upon Executive’s breach of any of his obligations contained in the Restrictive Covenants in the Employment Agreement;
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(b)
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If Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which Executive and/or Executive’s eligible dependents would be entitled under Section 4980B of the Code (COBRA), then for eighteen (18) months following the Date of Termination (the “
COBRA Reimbursement Period
”), the Company shall pay to Executive monthly payments of an amount equal to the excess of (i) the COBRA cost of such coverage over (ii) the amount that Executive would have had to pay for such coverage if he had remained employed during the COBRA Reimbursement Period and paid the active employee rate for such coverage, less withholding for taxes and other similar items;
provided, however
, that (A) that if Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to Executive’s spouse), the Company’s obligation to pay any portion of the cost of health coverage as described herein shall cease, except as otherwise provided by law;
(B) the COBRA Reimbursement Period shall only run for the period during which Executive is eligible to elect health coverage under COBRA and timely elects such coverage;
(C) nothing herein shall prevent the Company from amending, changing, or canceling any group medical, dental, vision and/or prescription drug plans during the COBRA Reimbursement Period; (D) during the COBRA Reimbursement Period, the benefits provided in any one calendar year shall not affect the amount of benefits provided in any other calendar year (other than the effect of any overall coverage benefits under the applicable plans); (E) the reimbursement of an eligible taxable expense shall be made as soon as practicable but not later than December 31 of the year following the year in which the expense was incurred; (F) Executive’s rights pursuant to this Section shall not be subject to liquidation or exchange for another benefit; and (G) that any obligation of the Company to make such payments shall cease upon Executive’s breach of any of his obligations contained in the Restrictive Covenants in the Employment Agreement; and
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(c)
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Equity benefits provided in the Employment Agreement or any award certificate issued to Executive.
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The Company’s agreement to provide all of the consideration set forth in this Section 2 is specifically contingent upon you executing this Agreement and not revoking the Agreement pursuant to the terms of Section 8.
Executive and the Company acknowledge and agree that these agreements, terms and amounts have been negotiated and agreed upon voluntarily by both parties and represent a compromise providing value to both parties. The parties also acknowledge and agree that these agreements and amounts exceed any and all actions, pay, and benefits that the Company might otherwise have owed to Executive by law and that they constitute good, valuable, and sufficient consideration for Executive’s release and agreements herein.
3.
General Release Of All Claims And Potential Claims and Covenant Not To Sue
. In consideration of the payments made to him by the Company and the promises contained in this
Agreement, Executive on behalf of himself and his agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries, parent companies, assigns, joint ventures, and affiliated companies and their respective agents, legal representatives, shareholders, attorneys, employees, members, managers, officers and directors (collectively, the “
Releasees
”) from ALL CLAIMS, LIABILITIES, DEMANDS AND CAUSES OF ACTION which he may by law release, as well as all contractual obligations not expressly set forth in this Agreement, whether known or unknown, fixed or contingent, that he may have or claim to have against any Releasee for any reason as of the date of execution of this Agreement; provided, however, that this release shall not apply to any payments or benefits under this Agreement or to the Continuing Rights. This release includes, but is not limited to, claims arising under federal, state or local laws prohibiting employment discrimination, claims arising under severance plans and contracts, and claims growing out of any legal restrictions on the Company’s rights to terminate its employees or to take any other employment action, whether statutory, contractual or arising under common law or case law. Executive specifically acknowledges and agrees that he is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act (“
ADEA
”), the Older Workers Benefit Protection Act (“
OWBPA
”), Title VII of the Civil Rights Act of 1964, , 42 U.S.C. § 1981, the Americans With Disabilities Act (“
ADA
”), the Family and Medical Leave Act (“
FMLA
”), the Genetic Information Nondiscrimination Act (“
GINA
”), the Executive Retirement Income Security Act (“
ERISA
”), the Equal Pay Act (“
EPA
”), the Occupational Safety and Health Act (“
OSHA
”), and any and all other local, state, and federal law claims arising under statute or common law. Executive further agrees that if anyone (including, but not limited to the Equal Employment Opportunity Commission (“
EEOC
”) or any other government agency or similar such body) makes a claim or undertakes an investigation involving Executive in any way (other than with respect to the Continuing Rights), Executive waives any and all right and claim to financial recovery resulting from such claim or investigation. Except with respect to the Continuing Rights and except to the extent that applicable law requires that Executive be allowed to file a charge of discrimination with the EEOC or other administrative charge or complaint, Executive further hereby AGREES NOT TO FILE A LAWSUIT or other legal claim or charge to assert against any of the Releasees any claim released by this Agreement. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except those that cannot be released by law. By signing this Agreement, Executive acknowledges that he is doing so knowingly and voluntarily, that he understands that he may be releasing claims he may not know about, and that he is waiving all rights he may have had under any law that is intended to protect him from waiving unknown claims. Executive warrants that he has not filed any notices, claims, complaints, charges, or lawsuits of any kind whatsoever against the Company or any of the Releasees as of the date of execution of this Agreement.
4.
No Reemployment
. Executive waives any right to employment with the Company or any parent or subsidiary company of the Company, agrees not to seek employment with the Company or any parent or subsidiary of the Company at any time in the future, and agrees that any denial of employment by the Company or any parent or subsidiary company of the Company is in keeping with the intent of this Agreement and shall not be a legitimate basis for a cause of action by Executive.
5.
Non-Admission of Liability and Acknowledgment of Reporting
. This Agreement and the fact that it was offered are not and shall not in any way be construed as admissions by the Company or any Releasee that it violated any federal, state or local law, statute or regulation, or that it acted wrongfully with respect to Executive or to any other person or entity in any manner. The Company and the Releasees specifically disclaim any liability to or wrongful acts against Executive or any other person or entity. Executive affirms that he has reported to the Company in writing all compliance issues and possible violations of federal, state and local laws or regulations or Company policy of which he had knowledge during the term of his employment, if any. Executive represents and acknowledges that he has no further or additional knowledge or information regarding compliance issues or possible violations of federal, state or local laws or regulations or Company policy other than what he has previously disclosed to the Company in writing, if any.
6.
Acknowledgment
. The Company hereby advises Executive to consult with an attorney prior to executing this Agreement and Executive acknowledges and agrees that the Company has advised, and hereby does advise, him of his opportunity to consult an attorney or other advisor and has not in any way discouraged him from doing so. Executive expressly acknowledges and agrees that he has been offered at least twenty-one (21) days to consider this Agreement before signing it, that he has read this Agreement and Release carefully, that he has had sufficient time and opportunity to consult with an attorney or other advisor of his choosing concerning his execution of this Agreement. Executive acknowledges and agrees that he fully understands that the Agreement is final and binding, that it contains a full release of all claims and potential claims, and that the only promises or representations he has relied upon in signing this Agreement are those specifically contained in the Agreement itself. Executive acknowledges and agrees that he is signing this Agreement voluntarily, with the full intent of releasing the Company from all claims.
7.
Return of Materials
. In further consideration of the promises and payments made by the Company hereunder, Executive agrees to return immediately, and before receiving payment under this Agreement, all documents, confidential information, other information, materials, equipment (including, but not limited to, cell phones, laptops, computers, or other personal computing devices) and other things in his possession or control provided to him by the Company, created during his employment with the Company or otherwise relating to or belonging to the Company, without retaining or providing to anyone else copies, summaries, excerpts, portions or other representations thereof.
8.
Revocation and Effective Date
. The parties agree Executive may revoke the Agreement at will within seven (7) days after he executes the Agreement by giving written notice of revocation to Company. Such notice must be delivered to _____________, and must actually be received by him at or before the above-referenced seven-day deadline. The Agreement may not be revoked after the expiration of the seven-day deadline. Assuming that Executive does not revoke this Agreement within the revocation period described above, the effective date of this Agreement (the “
Effective Date
”) shall be the eighth (8
th
) day following the date on which Executive executes the Agreement.
9.
Severability
. If any provision or covenant, or any part thereof, of this Agreement, except Executive’s general release and covenant not to sue set forth in Section 3 of this Agreement, should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants of this Agreement, all of which shall remain in full force and effect. If the general release and covenant not to sue set forth in Section 3 of this Agreement is found to be unenforceable, this Agreement shall be null and void and all consideration originally paid shall be returned by Executive to the Company.
10.
Final Agreement
. The parties agree that this document was negotiated, is their entire Agreement regarding Executive’s separation from employment with the Company and Executive’s release of claims, and supersedes all prior agreements between the parties, except that the Restrictive Covenants contained in the Employment Agreement shall remain in full force and effect in accordance with their terms, as well as any other provisions of the Employment Agreement that are necessary to enforce or interpret the Restrictive Covenants. The parties agree that neither party shall be considered the drafter for the purpose of construing any ambiguity or disagreement. The parties agree that this Agreement may not be modified except by a written document signed by both parties. The parties agree that this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.
14.
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the state of Georgia without giving effect to its conflict of law principles.
The parties hereby signify their agreement to these terms by their signatures below.
EXECUTIVE
[Executive Name]
Date:
CATCHMARK TIMBER TRUST, INC.
By:
[Name], [Title]
Date:
Exhibit A
Continuing Rights
The “Continuing Rights” referenced in the Agreement shall be as follows:
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1.
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[To be inserted at time of execution, if there are any continuing rights that need to be preserved such as workers’ compensation, unemployment, COBRA, participation under ERISA plans, etc.]
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “
Agreement
”) is made and entered into this 30th day of October, 2013 by and between CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”), and John F. Rasor (“
Executive
”), to be effective as of the Effective Date, as defined in Section 1.
BACKGROUND
The Company desires to engage Executive as the Chief Operating Officer (“
COO
”) and Secretary of the Company from and after the Effective Date, in accordance with the terms of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Effective Date and Term
. Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby employs Executive, and Executive hereby accepts such employment, for the term commencing on October 25, 2013, at 5:30 p.m. Eastern time (the “
Effective Date
”) and, unless otherwise earlier terminated pursuant to Section 5 hereof, ending on December 31, 2017 (the “
Term
”). Upon expiration of the Term, this Agreement shall automatically renew for a one-year period until December 31, 2018 (the “
Renewal Period
”), unless either party notifies the other party in writing prior to the end of the Term that the Agreement shall not be renewed. If this Agreement is renewed in accordance with this Section, the Renewal Period shall be included in the definition of “Term” for purposes of this Agreement. If this Agreement is not renewed in accordance with this Section or if the Renewal Period expires, then this Agreement will be of no further force and effect, with the exception of Section 15 and Section 7(c) (and any other provisions of this Agreement necessary for the interpretation or enforcement of Section 7(c)), which shall survive the expiration of the Term and continue to be in full force and effect in accordance with its terms.
2.
Employment
. Executive is hereby employed on the Effective Date as the COO and Secretary of the Company. In his capacity as the COO and Secretary of the Company, Executive shall have the duties, responsibilities and authority commensurate with such position as shall be assigned to him by the CEO. At the request of the CEO, Executive shall also serve as an officer, director, manager or other representative with respect to any subsidiary, affiliate or joint venture of the Company (each a “
Subsidiary
”) consistent with Executive’s position with the Company. Executive shall serve as a member of the Board (subject to Executive’s nomination and election as a member of the Board for subsequent terms) and, at the request of the Board, as a member of the board of directors (or equivalent) of any Subsidiary, without additional compensation. In his capacity as the COO and Secretary of the Company, Executive will report directly to the CEO.
3.
Extent of Service
. During the Term, and excluding any periods of vacation or sick leave to which Executive is entitled, Executive agrees to (a) devote substantially all of his business effort, time, energy, and skill to fulfill his employment duties; (ii) faithfully, loyally and diligently perform such duties, subject to the control and supervision of the CEO or his designee; and (iii) diligently follow and implement all lawful management policies and decisions of the Company that are communicated to Executive. During the Term, it shall not be a violation of this Agreement for Executive to (y) serve on corporate, civic or charitable boards or committees; or (z) manage personal investments, so long as such activities do not significantly interfere with the performance of Executive’s responsibilities as an employee of the Company
in accordance with this Agreement and do not give rise to any conflict of interest with the Company or its affiliates. Executive shall perform his duties at the principal office of the Company.
4.
Compensation and Benefits
.
(a)
Base Salary
. During the Term, the Company will pay to Executive base salary at the rate of U.S. $305,000.00 per year (“
Base Salary
”), less normal withholdings, payable in approximately equal bi-weekly or other installments as are or become customary under the Company’s payroll practices for its executives from time to time. The Compensation Committee (the “
Compensation Committee
”) of the Board of Directors of the Company (the “
Board
”) shall review Executive’s Base Salary annually and may increase or, but only with Executive’s written consent, decrease Executive’s Base Salary from year to year. Such adjusted salary then shall become Executive’s Base Salary for purposes of this Agreement.
(b)
Bonus
. During the Term, Executive shall be eligible to participate in any bonus plans, practices, policies and programs available to senior executive officers of the Company (“
Peer Executives
”), and on the same basis as such Peer Executives, provided that nothing herein shall obligate the Company to establish any such bonus plans, policies or programs or limit the ability of the Company to amend, modify or terminate any such bonus plans, policies or programs at any time and from time to time.
(c)
Additional Payment
. During the Term, the Company will pay to Executive an additional payment of U.S. $1,413.00 per month (the “
Additional Payment
”), less normal withholdings, payable in approximately equal bi-weekly or other installments as are or become customary under the Company’s payroll practices for its executives from time to time.
(d)
Incentive and Retirement Plans
. During the Term, Executive shall be entitled to participate in all incentive and retirement plans, practices, policies and programs available to Peer Executives, and on the same basis as such Peer Executives, provided that nothing herein shall limit the ability of the Company to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time. Without limiting the foregoing, the following shall apply:
(i)
2013 Restricted Stock Award
. The Company will grant to Executive 26,000 restricted shares of its Class A common stock (the “
2013 Restricted Stock Award
”), pursuant to, and subject to the terms and conditions of, the CatchMark Timber Trust, Inc. Second Amended and Restated 2005 Long-Term Incentive Plan (the “
Equity Incentive Plan
”). Forty percent (40%) of the 2013 Restricted Stock Award will vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, conditioned upon Executive’s continued employment on each vesting date (the “
Time-Based Restricted Shares
”). Sixty percent (60%) of the 2013 Restricted Stock Award will vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, based solely upon achievement of performance metrics established by the Compensation Committee for 2014 and based on Executive’s continued employment on each vesting date (the “
Performance-Based Restricted Shares
”). The Time-Based Restricted Shares will be granted within three business days following the date of this Agreement and the Performance-Based Restricted Shares will be granted no later than the close of business on December 6, 2013. The 2013 Restricted Stock Award will be subject to other terms and conditions set forth in the award certificate memorializing the 2013 Restricted Stock Award.
(ii)
IPO Award
. Within three business days following the date of this Agreement, the Company will grant to Executive 26,000 restricted stock units (the “
IPO Award
”), pursuant to, and subject to the terms and conditions of, the Equity Incentive Plan, which IPO Award will vest and convert to shares of the Company’s Class A common stock on the closing date of the Company’s initial
listing of its Class A common stock on the New York Stock Exchange and the completion of its underwritten offering of its Class A common stock (the “
IPO Closing Date
”), conditioned upon Executive’s continuing employment on the IPO Closing Date, and subject to other terms and conditions set forth in the award certificate memorializing the IPO Award, including a requirement that the shares of Class A common stock underlying the IPO Award (the “
RSU Shares
”) be subject to a mandatory holding period, pursuant to which Executive must hold, on an after-tax basis, one hundred percent (100%) of the RSU Shares through the first anniversary of the IPO Closing Date, two-thirds of the RSU Shares through the second anniversary of the IPO Closing Date, and one-third of the RSU Shares through the third anniversary of the IPO Closing Date.
(iii)
Future Stock-Based Awards
. During the Term, Executive may be eligible for additional stock-based awards under the Company’s long-term incentive plan, as determined by the Compensation Committee in its sole discretion. Nothing herein requires the Board or the Compensation Committee to make additional grants of stock-based awards in any year.
(e)
Welfare Benefit Plans
. During the Term, Executive and Executive’s eligible dependents shall be eligible for participation in the welfare benefit plans, practices, policies and programs provided by the Company, if any, to the extent available to other Peer Executives and subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of the Company to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time.
(f)
Expenses
. During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in the course of performing his duties and responsibilities under this Agreement, in accordance with the policies, practices and procedures of the Company to the extent available to other Peer Executives with respect to travel and other business expenses.
(g)
Vacation
. During the Term, Executive is entitled to the maximum amount of paid vacation days per calendar year allowed by the Company’s policies and practices as well as all holidays observed by the Company; provided, however, that nothing herein shall limit the ability of the Company to amend, modify or terminate any such policies and practices at any time and from time to time. Executive’s vacation time may be increased at the discretion of the Board.
5.
Termination of Employment
.
(a)
Death or Disability
.
(i) Executive’s employment shall terminate automatically upon Executive’s death.
(ii) If the Company determines in good faith that the Disability (as defined below) of Executive has occurred during the Term, it may give to Executive written notice of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the “
Disability Effective Date
”), provided that, within the thirty (30) days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. “
Disability
” shall mean the inability of Executive, as reasonably determined by the Board, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted for a period of six (6) consecutive months. At the request of Executive or his personal representative,
the Board’s determination that the Disability of Executive has occurred shall be certified by a physician mutually agreed upon by Executive, or his personal representative, and the Company.
(b)
Termination by Company
. The Company may terminate Executive’s employment during the Term with or without Cause immediately on written notice to Executive, provided that, if the Executive is terminated for Cause, the Executive’s Date of Termination as defined below must occur within a period of ninety (90) days after receipt by the Board of clear notice of an event of Cause, provided, however, that for any event or action for which there is a potential cure period, the
Date of Termination shall be the date on which the applicable cure period expires (unless the event of Cause is based on a continuing or repeating course of conduct that, when taken as a whole, constitutes Cause, in which case Executive’s Date of Termination must occur within a period of ninety (90) days after receipt of the Board of clear notice of the most recent event or action that is part of the continuing or repeating course of conduct). “
Cause
” shall mean:
(i)
the willful failure of Executive to follow the reasonable directions of the Board if Executive does not begin to cure such failure within ten (10) days after receipt of written notice from the Board specifying the particulars of the failure and complete such cure without any further failure to follow the reasonable direction in question. Notwithstanding anything to the contrary set forth in this subsection, and for purposes of clarity, Executive’s failure to meet any performance standards or expectations shall not constitute Cause;
(ii)
theft, fraud, embezzlement, or material dishonesty in connection with Executive’s employment, or intentional falsification of any employment or Company records;
(iii)
the conviction by Executive of, or Executive’s pleading guilty or nolo contendere to, a felony or a crime involving moral turpitude, whether or not such felony or crime is connected with the business of the Company;
(iv)
breach of fiduciary duty or any willful violation of law by Executive in connection with the Company’s or any Subsidiary’s business or relating to Executive’s duties hereunder, or willful misconduct for personal profit by Executive in connection with the Company’s or any Subsidiary’s business or relating to Executive’s duties hereunder;
(v)
Executive’s material failure to abide by the Company’s code of conduct, code of ethics, or other employment or corporate governance policies;
(vi)
except as set forth in Section 5(b)(vii) below, a material breach of this Agreement by Executive which is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company; or
(vii)
a material breach by Executive of Section 7(c) of this Agreement which, if such breach is capable of being cured, is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company
.
(c)
Termination by Executive
. Executive’s employment may be terminated by Executive with or without Good Reason by delivering a Notice of Termination (as defined below) to the Company thirty (30) days prior to the desired Date of Termination (as defined below) (with the thirty (30) day period to be referred to as the “
Notice Period
”). A termination by Executive shall not constitute
termination for Good Reason unless Executive shall first have delivered to the Company written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than thirty (30) days after the initial occurrence of such event) (the “
Good Reason Notice
”), and the Company has not taken action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by Executive within thirty (30) days following its receipt of such Good Reason Notice. Good Reason shall not include Executive’s death or Disability. Executive’s Date of Termination for Good Reason must occur within a period of ninety (90) days after the occurrence of an event of Good Reason.
During the Notice Period, and at the sole discretion of the Company, Executive may be required to assist the Company with identifying a successor and in transitioning his duties and responsibilities to that successor.
Moreover, during the Notice Period, and at the sole discretion of the Company, Executive may be relieved of all duties and/or prohibited from physically working at the offices of Company. For purposes of this Agreement, “
Good Reason
” shall mean any of the following, without Executive’s written consent: (i) a material diminution in Executive’s Base Salary; (ii) a material diminution in Executive’s authority, duties, or responsibilities; or (iii) the relocation of the Company’s principal office to a location that is more than fifty (50) miles from the location of the Company’s principal office on the Effective Date. The parties intend, believe and take the position that a resignation by Executive for Good Reason as defined above effectively constitutes an involuntary separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “
Code
”) and Treas. Reg. Section 1.409A-1(n)(2).
(d)
Notice of Termination
. Any termination by the Company with or without Cause and any termination by Executive shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 18(d) of this Agreement. A “
Notice of Termination
” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) specifies the Date of Termination (as defined below). The Company may not subsequently assert a new basis for Cause that was not asserted in the Notice of Termination; provided, however, that, in connection with any dispute relating to the termination of Executive’s employment, the Company may rely on evidence obtained after the Date of Termination that further supports any specific basis for Cause that was included in the Notice of Termination.
“
Date of Termination
” means (i) if Executive’s employment is terminated other than by reason of death or Disability, the date of receipt of the Notice of Termination, or any later date specified therein, or (ii) if Executive’s employment is terminated by reason of death or Disability, the Date of Termination will be the date of death or the Disability Effective Date, as the case may be.
6.
Obligations of the Company upon Termination
.
(a)
Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death, or Disability
. During the Term, if Executive terminates employment for Good Reason or the Company terminates Executive’s employment other than for Cause, death, or Disability, then:
(i) the Company shall pay to Executive in a lump sum in cash within thirty (30) days after the Date of Termination, the exact payment date to be determined by the Company, Executive’s Base Salary through the Date of Termination to the extent not theretofore paid (the “
Accrued Salary
”);
(ii) the Company shall pay to Executive an amount equal to (A) two (2) times Executive’s then current Base Salary, if such termination occurs outside the Change in Control Period (as defined herein) or (B) three (3) times Executive’s then current Base Salary, if such termination occurs during the Change in Control Period (in either case, the “
Severance Amount
”). Subject to Section 13 hereof, (A)
if such termination occurs outside the Change in Control Period, the Severance Amount shall be paid in approximately equal monthly installments during the twenty-four month period following the Date of Termination, commencing on the first payroll date to occur after the sixtieth (60
th
) day following the Date of Termination; provided, that the first such payment shall consist of all amounts payable to Executive pursuant to this Section 6(a)(ii) between the Date of Termination and the first payroll date to occur after the sixtieth (60
th
) day following the Date of Termination; and (B) if such termination occurs during the Change in Control Period, the Severance Amount shall be paid in a single lump sum within sixty (60) days following the Date of Termination; provided, further, that, in either case, any obligation of the Company to pay the Severance Amount shall cease upon Executive’s breach of any of his obligations set forth in Section 7 hereof. For purposes of this Agreement, the “
Change in Control Period
” means the period beginning ninety (90) days prior to a Change in Control (as defined in the Equity Incentive Plan) and ending three hundred sixty five (365) days after such Change in Control;
(iii) for eighteen (18) months following the Date of Termination, the Company shall pay to Executive the Additional Payment;
(iv) as of the Date of Termination, the restrictions on any outstanding equity awards held by Executive that expire solely on Executive’s continuous service with the Company, if any, shall expire, and any other outstanding equity awards held by Executive that vest solely on Executive’s continuous service with the Company shall immediately become fully vested;
(v) the portion of any equity awards held by Executive that is exercisable as of the Date of Termination, if any, shall remain exercisable by Executive through the end of the term of such equity award;
(vi) outstanding equity awards, other than those described in Section 6(a)(iv) above, held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO Award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award; and
(vii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies and in accordance with the terms thereof, including, but not limited to, any expense reimbursements and accrued but unused vacation (which shall be paid out, if at all, in accordance with the Company’s then current policy regarding accrual and payment for unused vacation pay) (such amounts and benefits shall be hereinafter referred to as the “
Other Benefits
”).
Notwithstanding the foregoing, the Company shall be obligated to provide the payments described in clauses (ii)-(vi) of this Section 6(a) only if (A) within forty-five (45) days after the Date of Termination Executive shall have executed a separation and release of claims/covenant not to sue agreement in the form attached hereto as
Exhibit A
(the “
Release Agreement
”) and such Release Agreement shall not have been revoked within the revocation period specified in the Release Agreement, and (B) Executive fully complies with the obligations set forth in Section 7 hereof.
(b)
Death or Disability
. If Executive’s employment is terminated by reason of Executive’s death or Disability during the Term, the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits. Accrued Salary shall be paid to Executive or Executive’s
estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 6(b) shall include without limitation, and Executive or Executive’s estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. In addition, if Executive’s employment is terminated by reason of Executive’s death or Disability during the Term, the restrictions on any outstanding equity awards held by Executive that expire solely on Executive’s continuous service with the Company, if any, shall expire, and any other outstanding equity awards held by Executive that vest solely on Executive’s continuous service with the Company shall immediately become fully vested, as of the Date of Termination. Other outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(c)
Termination by the Company for Cause; Resignation by Executive Other than for Good Reason
. If the Company terminates Executive’s employment for Cause during the Term, or Executive shall resign other than for Good Reason, the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits. Accrued Salary shall be paid to Executive in a lump sum in cash within thirty (30) days after the Date of Termination. Outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(d)
Expiration of Term
. If Executive’s employment ends because (i) this Agreement is not renewed in accordance with Section 1, or (ii) the Renewal Period expires, then the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits, and this Agreement will be of no further force and effect, with the exception of Section 7(c) (and any other provisions of this Agreement necessary for the interpretation or enforcement of Section 7(c)). Accrued Salary shall be paid to Executive in a lump sum in cash within thirty (30) days after the Date of Termination. Outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(e)
Resignations
. Termination of Executive’s employment for any reason whatsoever shall constitute Executive’s resignation from the Board and the boards of directors of any Subsidiary on which he serves, and resignation as an officer of the Company
and of any of the Subsidiaries for which he serves as an officer.
7.
Protective Covenants
.
(a)
Acknowledgments
.
(i)
Condition of Employment and Other Consideration
. Executive acknowledges and agrees that he has received good and valuable consideration for entering into this Agreement and further acknowledges that the Company would not employ or continue to employ him in the absence of his execution of and compliance with this Agreement.
(ii)
Access to Confidential Information, Relationships, and Goodwill
. Executive acknowledges and agrees that he is being provided and entrusted with Confidential Information (as that term is defined below), including highly confidential customer information that is subject to extensive measures to maintain its secrecy within the Company, is not known in the trade or disclosed to the public, and would materially harm the Company’s legitimate business interests if it was disclosed or used in violation of this Agreement. Executive also acknowledges and agrees that he is being provided and entrusted with access to the Company’s customer and employee relationships and goodwill. Executive further acknowledges and agrees that the Company would not provide access to the Confidential Information, customer and employee relationships, and goodwill in the absence of Executive’s execution of and compliance with this Agreement. Executive further acknowledges and agrees that the Company’s Confidential Information, customer and employee relationships, and goodwill are valuable assets of the Company and are legitimate business interests that are properly subject to protection through the covenants contained in this Agreement.
(iii)
Potential Unfair Competition
. Executive acknowledges and agrees that as a result of his employment with the Company, his knowledge of and access to Confidential Information, and his relationships with the Company’s customers and employees, Executive would have an unfair competitive advantage if Executive were to engage in activities in violation of this Agreement.
(iv)
No Undue Hardship
. Executive acknowledges and agrees that, in the event that his employment with the Company terminates, Executive possesses marketable skills and abilities that will enable Executive to find suitable employment without violating the covenants set forth in this Agreement.
(v)
Voluntary Execution
. Executive acknowledges and affirms that he is executing this Agreement voluntarily, that he has read this Agreement carefully and had a full and reasonable opportunity to consider this Agreement (including an opportunity to consult with legal counsel), and that he has not been pressured or in any way coerced, threatened or intimidated into signing this Agreement.
(b)
Definitions
. The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:
(i) “
Competitive Services
” means the business of investing in, managing, buying, and/or selling commercial timberland, harvesting and selling timber, and leasing the right to access land and harvest timber.
(ii) “
Confidential Information
” means any and all data and information relating to the Company and/or any of its Subsidiaries, their activities, business, or clients that (i) is disclosed to Executive or of which Executive becomes aware as a consequence of his employment with the Company and/or any of its Subsidiaries; (ii) has value to the Company and/or any of its Subsidiaries; and (iii) is not generally known outside of the Company and/or its Subsidiaries. “Confidential Information” shall include, but is not limited to the following types of information regarding, related to, or concerning the Company and/or any of its Subsidiaries: trade secrets (as defined by O.C.G.A. § 10-1-761); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel
and compensation policies; new personnel acquisition plans; and other similar information. “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Company and/or its Subsidiaries, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company and/or its Subsidiaries. In addition to data and information relating to the Company and/or any of its Subsidiaries, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company and/or any of its Subsidiaries by such third party, and that the Company and/or the relevant Subsidiary has a duty or obligation to keep confidential. This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law. “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company and/or any of its Subsidiaries.
(iii) “
Date of Termination
” means the date of the Termination.
(iv) “
Material Contact
” means contact between Executive and a customer or potential customer of the Company (i) with whom or which Executive has or had dealings on behalf of the Company; (ii) whose dealings with the Company are or were coordinated or supervised by Executive; (iii) about whom Executive obtains Confidential Information in the ordinary course of business as a result of his employment with the Company; or (iv) who receives products or services of the Company, the sale or provision of which results or resulted in compensation, commissions, or earnings for Executive within the two (2) years preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable.
(v) “
Person
” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.
(vi) “
Principal or Representative
” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.
(vii) “
Protected Customer
” means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom Executive has had Material Contact on behalf of the Company during his employment with the Company.
(viii) “
Protected Work
” means any and all ideas, inventions, formulas, source codes, object codes, techniques, processes, concepts, systems, programs, software, software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, and whether or not subject to copyright or trademark or trade secret protection, conceived, developed or produced by Executive, or by others working with Executive or under his direction, during the period of his employment, or conceived, produced or used or intended for use by or on behalf of the Company or its customers.
(ix) “
Restricted Period
” means any time during Executive’s employment with the Company, as well as two (2) years from the Date of Termination, provided, however, that if this Agreement is not renewed in accordance with Section 1 or if the Renewal Period expires, then no Restricted Period shall apply.
(x) “
Restricted Territory
” means (A) the area within one-hundred fifty (150) miles from the external boundary of any property owned by the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable, and (B) any other territory where Executive is working on behalf of the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable.
(xi) “
Restrictive Covenants
” means the restrictive covenants contained in Section 7 hereof.
(xii) “
Termination
” means the termination of Executive’s employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.
(c)
Restriction on Disclosure and Use of Confidential Information
. Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information. Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. For the avoidance of doubt, Executive’s obligations under this Section 7(c) shall survive any termination of this Agreement and Executive’s employment hereunder.
(d)
Non-Competition
. Executive agrees that, during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory; provided, however, that notwithstanding the foregoing, this subsection (d) shall not prohibit Executive from engaging in the following activities, as long as he continues to abide by all of his other obligations under the Restrictive Covenants: (i) teaching or research at an educational institution in the field of forestry or natural resources; (ii) consulting on behalf of any person or entity that does not compete against any business of the Company, including, but not limited to, consulting within the forestry (including forest products), and/or the natural resources industries; (iii) providing services for or on behalf of any forestry or natural resources trade organization; and (iv) providing services to any state or federal agency involved in forestry or natural resources, including, but not limited to, the U.S. Forest Service. Executive acknowledges that the Restricted Territory is reasonable.
(e)
Non-Solicitation of Protected Customers
. Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on
his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.
(f)
Non-Recruitment of Employees and Independent Contractors
. Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, solicit or induce or attempt to solicit or induce any employee or independent contractor of the Company to terminate his/her engagement relationship with the Company or to enter into employment or an independent contractor engagement with Executive or any other Person.
(g)
Proprietary Rights
.
(i)
Ownership and Assignment of Protected Works
. Executive agrees that any and all Protected Works are the sole property of the Company, and that no compensation in addition to Executive’s base salary is due to Executive for development or transfer of such Protected Works. Executive agrees that he shall promptly disclose in writing to the Company the existence of any Protected Works. Executive hereby assigns and agrees to assign all of his rights, title and interest in any and all Protected Works, including all patents or patent applications, and all copyrights therein, to the Company. Executive shall not be entitled to use Protected Works for his own benefit or the benefit of anyone except the Company without written permission from the Company and then only subject to the terms of such permission. Executive further agrees that he will communicate to the Company any facts known to him and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisionals, continuations, continuations-in-part, foreign counterparts, or reissue applications, all assignments, all registration applications, and all other instruments or papers to carry into full force and effect the assignment, transfer, and conveyance hereby made or to be made and generally do everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by the Company. Executive agrees that he will not oppose or object in any way to applications for registration of Protected Works by the Company or others designated by the Company. Executive agrees to exercise reasonable care to avoid making Protected Works available to any third party and shall be liable to the Company for all damages and expenses, including reasonable attorneys’ fees, if Protected Works are made available to third parties by him without the express written consent of the Company.
Anything herein to the contrary notwithstanding, Executive will not be obligated to assign to the Company any Protected Work for which no equipment, supplies, facilities, or Confidential Information of the Company was used and which was developed entirely on Executive’s own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company’s actual or demonstrably anticipated research or development; or (b) the invention results from any work performed by Executive for the Company. Executive likewise will not be obligated to assign to the Company any Protected Work that is conceived by Executive after Executive leaves the employ of the Company, except that Executive is so obligated if the same relates to or is based on Confidential Information to which Executive had access by virtue of his employment with the Company. Similarly, Executive will not be obligated to assign any Protected Work to the Company that was conceived and reduced to practice prior to his employment, regardless of whether such Protected Work relates to or would be useful in the business of the Company. Executive acknowledges and agrees that there are no Protected Works conceived and reduced to practice by him prior to his employment with the Company.
(ii)
No Other Duties
. Executive acknowledges and agrees that there is no other contract or duty on his part now in existence to assign Protected Works to anyone other than the Company.
(iii)
Works Made for Hire
. The Company and Executive acknowledge that in the course of his employment with the Company, Executive may from time to time create for the Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without the Company’s facilities and before, during or after normal business hours. All such works related to or useful in the business of the Company are specifically intended to be works made for hire by Executive, and Executive shall cooperate with the Company in the protection of the Company’s copyrights in such works and, to the extent deemed desirable by the Company, the registration of such copyrights.
(h)
Return of Materials
. Executive agrees that he will not retain or destroy, and will immediately return to the Company on or prior to the Date of Termination, or at any other time the Company requests such return, any and all property of the Company that is in his possession or subject to his control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Protected Works and Confidential Information belonging to the Company or that Executive received from or through his employment with the Company. Executive will not make, distribute, or retain copies of any such information or property. Executive agrees that he will reimburse the Company for all of its costs, including reasonable attorneys’ fees, of recovering the above materials and otherwise enforcing compliance with this provision if he does not return the materials to the Company on or prior to the Date of Termination or at any other time the materials are requested by the Company or if Executive otherwise fails to comply with this provision.
(i)
Enforcement of Restrictive Covenants
.
(i)
Rights and Remedies Upon Breach
. The parties specifically acknowledge and agree that the remedy at law for any breach of the Restrictive Covenants will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Restrictive Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Executive understands and agrees that if he violates any of the obligations set forth in the Restrictive Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.
(ii)
Severability and Modification of Covenants
. Executive acknowledges and agrees that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Restrictive Covenant. If any portion of any of the Restrictive Covenants is found to be invalid or unenforceable because its duration, geographic territory, scope of activities, or information covered is
considered to be unreasonable in scope, the invalid or unenforceable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforced to the fullest extent permitted by law.
(j)
Existing Covenants
. Executive represents and warrants that his employment with the Company does not and will not breach any agreement that Executive has with any former employer to keep in confidence proprietary or confidential information or not to compete with any such former employer. Executive will not disclose to the Company or use on its behalf any proprietary or confidential information of any other party required to be kept confidential by Executive.
(k)
Disclosure of Agreement
. Executive acknowledges and agrees that, during the Restricted Period, he will disclose the existence and terms of this Agreement to any prospective employer, business partner, investor or lender prior to entering into an employment, partnership or other business relationship with such prospective employer, business partner, investor or lender. Executive further agrees that the Company shall have the right to make any such prospective employer, business partner, investor or lender of Executive aware of the existence and terms of this Agreement.
8.
Non-exclusivity of Rights
. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any employee benefit plan, program, policy or practice provided by Parent or its affiliated companies and for which Executive may qualify, except as specifically provided herein. Amounts that are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement.
9.
Full Settlement; No Mitigation
. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment.
10.
Limitation of Benefits
.
(a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether payable or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as “
Payments
”) would, if paid, be subject to the excise tax (the “
Excise Tax
”) imposed by Section 4999 of the Code, then the aggregate present value of the Payments shall be reduced (but not below zero) to an amount expressed in present value that maximizes the aggregate present value of the Payments without causing the Payments or any part thereof to be subject to the Excise Tax and therefore nondeductible by the Company because of Section 280G of the Code (the “
Reduced Amount
”). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the change of control, as determined by the Determination Firm (as defined in Section 10(b) below). For purposes of this Section 10, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 10, the “
Parachute Value
” of a Payment means the present value as of the date of the change of control of the portion
of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(b) All determinations required to be made under this Section 10, including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by an independent, nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Company and Executive (the “
Determination Firm
”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that a Payment is due to be made, or such earlier time as is requested by the Company. All fees and expenses of the Determination Firm shall be borne solely by the Company. Any determination by the Determination Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments hereunder will have been unnecessarily limited by this Section 10 (“
Underpayment
”), consistent with the calculations required to be made hereunder. The Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code, but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.
(c) In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 10 shall be of no further force or effect.
11.
Successors
.
(a) This Agreement is personal to Executive and shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(b) This Agreement can be assigned by the Company and shall be binding and inure to the benefit of the Company, its successors and assigns.
12.
Cooperation
. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement. For any such cooperation that occurs after the Date of Termination, the Company shall compensate Executive at a rate of Executive’s Base Salary at the time of termination divided by 2,080 on a per hour basis for services provided, which payments shall be made on a monthly basis, and shall reimburse Executive for any reasonable out-of-pocket expenses incurred, in connection with Executive’s performance of obligations under this Section 12 at the request of the Company.
If Executive is entitled to be reimbursed for any expenses under this Section 12, the amount reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. Executive’s obligations under this Section 12, and Executive’s rights to payment or reimbursement of expenses pursuant to this Section 12, shall expire at the end of two (2) years after the Date of Termination and such rights shall not be subject to liquidation or exchange for another benefit.
13.
Code Section 409A
.
(a)
General
. This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder (and any applicable transition relief under Section 409A of the Code). Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed. Neither the Company nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Executive as a result of the application of Section 409A of the Code.
(b)
Definitional Restrictions
. Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code (“
Non-Exempt Deferred Compensation
”) would otherwise be payable or distributable hereunder, or a different form of payment of such Non-Exempt Deferred Compensation would be effected, by reason of a Change in Control or Executive’s termination of employment, such Non-Exempt Deferred Compensation will not be payable or distributable to Executive, and/or such different form of payment will not be effected, by reason of such circumstance unless the circumstances giving rise to such Change in Control or termination of employment, as the case may be, meet any description or definition of “change in control event” or “separation from service,” as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not affect the dollar amount or prohibit the
vesting
of any Non-Exempt Deferred Compensation upon a Change in Control or termination of employment, however defined. If this provision prevents the payment or distribution of any Non-Exempt Deferred Compensation, or the application of a different form of payment, such payment or distribution shall be made at the time and in the form that would have applied absent the non-409A-conforming event.
(c)
Six-Month Delay in Certain Circumstances
. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable under this Agreement by reason of Executive’s separation from service during a period in which he is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): (i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following Executive’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Executive’s separation from service (or, if Executive dies during such period, within 30 days after Executive’s death) (in either case, the “
Required Delay Period
”); and (ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.
(d)
Treatment of Installment Payments
. Each payment of termination benefits under Section 6 of this Agreement shall be considered a separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.
(e)
Timing of Release of Claims
. Whenever in this Agreement a payment or benefit is conditioned on Executive’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the Date of Termination; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject to subsection (c) above, such payment or benefit (including any installment payments) that would
have otherwise been payable during such 60-day period shall be accumulated and paid on the 60
th
day after the Date of Termination provided such release shall have been executed and such revocation periods shall have expired. If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such period.
(f)
Timing of Reimbursements and In-kind Benefits
. If Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, including, without limitation, Section 4(f), and such payments or reimbursements are includible in Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under Section 4(e) shall be subject to liquidation or exchange for another benefit.
(g)
Permitted Acceleration
. The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to Executive of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).
(h)
Payroll Dates
. Any payroll dates referenced in this Agreement refer to the Company’s payroll dates in effect as of the Effective Date and cannot be changed thereafter.
14.
Compensation Recoupment Policy
. Any cash incentive bonus awarded to Executive by the Company shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to Executive. In addition, the Compensation Committee may specify in any written documentation memorializing a cash incentive bonus award that Executive’s rights, payments and benefits with respect to such award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable conditions of such award. Such events may include, but shall not be limited to, (i) termination of employment for Cause, (ii) violation of material Company policies, (iii) breach of noncompetition, confidentiality or other restrictive covenants, (iv) other conduct by Executive that is detrimental to the business or reputation of the Company or any affiliate, or (v) a later determination that the amount realized from a performance-based award was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not Executive caused or contributed to such material inaccuracy. The reduction, cancellation, forfeiture and recoupment rights associated with any equity awards or similar awards granted to Executive, if any, shall be as provided in the award certificate memorializing any such award.
15.
Indemnification
. The Company shall indemnify Executive for liabilities incurred by him while acting in good faith in his capacity as a director or an officer to the fullest extent provided for any other officer or director of the Company. To the extent the Company maintains director and officer liability insurance, such insurance shall cover Executive to the same extent as any other officer or director of the Company. The Company’s obligations under this Section shall survive any termination of this Agreement and Executive’s employment hereunder.
16.
Attorneys’ Fees
. In the event of litigation relating to this Agreement, the prevailing party shall be entitled to recover its or his reasonable attorneys’ fees and costs of litigation, in addition to all other remedies available at law or in equity. If Executive is awarded the right to recover his reasonable attorneys’ fees and costs of litigation under this Section 16, the reimbursement of attorneys’ fees and costs of litigation shall be made within ten (10) business days following the date on which such rights are established.
17.
Damages for Breach of Contract
. In the event of any contest arising under or in connection with this Agreement, the parties agree that Executive shall not be required to wait until the expiration of the Term to sue for breach of this Agreement, and if Executive proves such breach, the Company shall pay Executive damages to which Executive is entitled, including, but not limited to, the Base Salary and other compensation owed to Executive under this Agreement through the end of the Term.
18.
Miscellaneous
.
(a)
Applicable Law; Forum Selection; Consent to Jurisdiction
. The parties agree that this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Georgia without giving effect to its conflicts of law principles. Executive agrees that the exclusive forum for any action to enforce this Agreement, as well as any action relating to or arising out of this Agreement, shall be the Superior Court of Gwinnett County, Georgia or United States District Court for the Northern District of Georgia, Atlanta Division. With respect to any such court action, the parties hereby (i) irrevocably submits to the personal jurisdiction of such courts; (ii) consents to service of process; (iii) consents to venue; and (iv) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue. The parties further agree that the above-listed courts are convenient forums for any dispute that may arise herefrom and that no party shall raise as a defense that such courts are not convenient forums.
(b)
Captions
. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
(c)
Amendments
. This Agreement may not be amended or modified otherwise than-by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(d)
Notices
. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
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If to Executive
:
John F. Rasor
75 Ponce de Leon Avenue NE
# 1107
Atlanta, Georgia 30308
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If to the Company
:
CatchMark Timber Trust, Inc.
6200 The Corners Parkway
Norcross, Georgia 3009
Attention
: Chairman of the Board of Directors
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or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(e)
Severability
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(f)
Withholding
. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(g)
Waivers
. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.
(h)
Entire Agreement
. This Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the date hereof, this Agreement shall supersede any other agreement, written or oral, between the parties relating to the subject matter of this Agreement.
(i)
Construction
. The parties understand and agree that because they both have been given the opportunity to have counsel review and revise this Agreement, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement shall be construed as a whole, and according to its fair meaning, and not strictly for or against either of the parties.
(j)
Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
/s/ JOHN F. RASOR
John F. Rasor
CATCHMARK TIMBER TRUST, INC.
By:
/s/ DONALD S. MOSS
Name: Donald S. Moss
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Title:
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Chairman of the Compensation Committee of the Board of Directors
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Exhibit A
Release Agreement
SEPARATION AGREEMENT, GENERAL RELEASE OF ALL CLAIMS
AND COVENANT NOT TO SUE
THIS AGREEMENT (the “
Agreement
”) is entered into as of the Effective Date, as defined in Section 8 hereof, by and between CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”) and __________________ (“
Executive
”).
In consideration of the payments, covenants and releases described below, and in consideration of other good and valuable consideration, the receipt and sufficiency of all of which is hereby acknowledged, the Company and Executive agree as follows:
1.
Termination of Employment
. Executive’s employment with the Company terminated effective _________________ (the “
Termination Date
”) based on [description of reason for termination] pursuant to the terms of the Employment Agreement executed between the parties on or about [date of Employment Agreement] (the “
Employment Agreement
”). Executive acknowledges and agrees that he has been paid all wages and accrued benefits to which he is entitled through the date of execution of this Agreement or that the Company has promised to pay such wages and accrued benefits within thirty (30) days of the Termination Date. Other than the payments set forth in this Agreement and the continuing rights of Executive described on Exhibit A (the “
Continuing Rights
”), the parties agree that the Company owes no additional amounts to Executive for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason. With the sole exception of the Continuing Rights, this Agreement is intended to and does settle and resolve all claims of any nature that Executive might have against the Company arising out of their employment relationship or the termination of employment or relating to any other matter.
2.
Severance Benefits
. In consideration of Executive’s promises and the Release of All Claims and Potential Claims and Covenant Not To Sue contained in this Agreement, the Company will pay or provide to Executive:
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(a)
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A
total gross amount of _____________ ($_______.__), less applicable withholdings, payable [in approximately equal monthly installments during the twenty-four month period following the Termination Date, commencing on the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date; provided, that the first such payment shall consist of all amounts payable to Executive pursuant to this Section 2(a) between the Termination Date and the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date] [
Applicable only in the context of a qualifying termination during Change in Control Period as defined in the employment agreement:
in a lump sum on the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date]; and provided, further, that any obligation of the Company to make such payments shall cease upon
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Executive’s breach of any of his obligations contained in the Restrictive Covenants in the Employment Agreement;
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(b)
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If Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which Executive and/or Executive’s eligible dependents would be entitled under Section 4980B of the Code (COBRA), then for eighteen (18) months following the Date of Termination (the “
COBRA Reimbursement Period
”), the Company shall pay to Executive monthly payments of an amount equal to the excess of (i) the COBRA cost of such coverage over (ii) the amount that Executive would have had to pay for such coverage if he had remained employed during the COBRA Reimbursement Period and paid the active employee rate for such coverage, less withholding for taxes and other similar items;
provided, however
, that (A) that if Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to Executive’s spouse), the Company’s obligation to pay any portion of the cost of health coverage as described herein shall cease, except as otherwise provided by law;
(B) the COBRA Reimbursement Period shall only run for the period during which Executive is eligible to elect health coverage under COBRA and timely elects such coverage;
(C) nothing herein shall prevent the Company from amending, changing, or canceling any group medical, dental, vision and/or prescription drug plans during the COBRA Reimbursement Period; (D) during the COBRA Reimbursement Period, the benefits provided in any one calendar year shall not affect the amount of benefits provided in any other calendar year (other than the effect of any overall coverage benefits under the applicable plans); (E) the reimbursement of an eligible taxable expense shall be made as soon as practicable but not later than December 31 of the year following the year in which the expense was incurred; (F) Executive’s rights pursuant to this Section shall not be subject to liquidation or exchange for another benefit; and (G) that any obligation of the Company to make such payments shall cease upon Executive’s breach of any of his obligations contained in the Restrictive Covenants in the Employment Agreement; and
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(c)
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Equity benefits provided in the Employment Agreement or any award certificate issued to Executive.
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The Company’s agreement to provide all of the consideration set forth in this Section 2 is specifically contingent upon you executing this Agreement and not revoking the Agreement pursuant to the terms of Section 8.
Executive and the Company acknowledge and agree that these agreements, terms and amounts have been negotiated and agreed upon voluntarily by both parties and represent a compromise providing value to both parties. The parties also acknowledge and agree that these agreements and amounts exceed any and all actions, pay, and benefits that the Company might otherwise have owed to Executive by law and that they constitute good, valuable, and sufficient consideration for Executive’s release and agreements herein.
3.
General Release Of All Claims And Potential Claims and Covenant Not To Sue
. In consideration of the payments made to him by the Company and the promises contained in this Agreement, Executive on behalf of himself and his agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries, parent companies, assigns, joint ventures, and affiliated companies and their respective agents, legal representatives, shareholders, attorneys, employees, members, managers, officers and directors (collectively, the “
Releasees
”) from ALL CLAIMS, LIABILITIES, DEMANDS AND CAUSES OF ACTION which he may by law release, as well as all contractual obligations not expressly set forth in this Agreement, whether known or unknown, fixed or contingent, that he may have or claim to have against any Releasee for any reason as of the date of execution of this Agreement; provided, however, that this release shall not apply to any payments or benefits under this Agreement or to the Continuing Rights. This release includes, but is not limited to, claims arising under federal, state or local laws prohibiting employment discrimination, claims arising under severance plans and contracts, and claims growing out of any legal restrictions on the Company’s rights to terminate its employees or to take any other employment action, whether statutory, contractual or arising under common law or case law. Executive specifically acknowledges and agrees that he is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act (“
ADEA
”), the Older Workers Benefit Protection Act (“
OWBPA
”), Title VII of the Civil Rights Act of 1964, , 42 U.S.C. § 1981, the Americans With Disabilities Act (“
ADA
”), the Family and Medical Leave Act (“
FMLA
”), the Genetic Information Nondiscrimination Act (“
GINA
”), the Executive Retirement Income Security Act (“
ERISA
”), the Equal Pay Act (“
EPA
”), the Occupational Safety and Health Act (“
OSHA
”), and any and all other local, state, and federal law claims arising under statute or common law. Executive further agrees that if anyone (including, but not limited to the Equal Employment Opportunity Commission (“
EEOC
”) or any other government agency or similar such body) makes a claim or undertakes an investigation involving Executive in any way (other than with respect to the Continuing Rights), Executive waives any and all right and claim to financial recovery resulting from such claim or investigation. Except with respect to the Continuing Rights and except to the extent that applicable law requires that Executive be allowed to file a charge of discrimination with the EEOC or other administrative charge or complaint, Executive further hereby AGREES NOT TO FILE A LAWSUIT or other legal claim or charge to assert against any of the Releasees any claim released by this Agreement. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except those that cannot be released by law. By signing this Agreement, Executive acknowledges that he is doing so knowingly and voluntarily, that he understands that he may be releasing claims he may not know about, and that he is waiving all rights he may have had under any law that is intended to protect him from waiving unknown claims. Executive warrants that he has not filed any notices, claims, complaints, charges, or lawsuits of any kind whatsoever against the Company or any of the Releasees as of the date of execution of this Agreement.
4.
No Reemployment
. Executive waives any right to employment with the Company or any parent or subsidiary company of the Company, agrees not to seek employment with the Company or any parent or subsidiary of the Company at any time in the future, and agrees that any denial of employment by the Company or any parent or subsidiary company of the Company is in keeping with the intent of this Agreement and shall not be a legitimate basis for a cause of action by Executive.
5.
Non-Admission of Liability and Acknowledgment of Reporting
. This Agreement and the fact that it was offered are not and shall not in any way be construed as admissions by the Company or any Releasee that it violated any federal, state or local law, statute or regulation, or that it acted wrongfully with respect to Executive or to any other person or entity in any manner. The Company and the Releasees specifically disclaim any liability to or wrongful acts against Executive or any other person or entity. Executive affirms that he has reported to the Company in writing all compliance issues and possible violations of federal, state and local laws or regulations or Company policy of which he had knowledge during the term of his employment, if any. Executive represents and acknowledges that he has no further or additional knowledge or information regarding compliance issues or possible violations of federal, state or local laws or regulations or Company policy other than what he has previously disclosed to the Company in writing, if any.
6.
Acknowledgment
. The Company hereby advises Executive to consult with an attorney prior to executing this Agreement and Executive acknowledges and agrees that the Company has advised, and hereby does advise, him of his opportunity to consult an attorney or other advisor and has not in any way discouraged him from doing so. Executive expressly acknowledges and agrees that he has been offered at least twenty-one (21) days to consider this Agreement before signing it, that he has read this Agreement and Release carefully, that he has had sufficient time and opportunity to consult with an attorney or other advisor of his choosing concerning his execution of this Agreement. Executive acknowledges and agrees that he fully understands that the Agreement is final and binding, that it contains a full release of all claims and potential claims, and that the only promises or representations he has relied upon in signing this Agreement are those specifically contained in the Agreement itself. Executive acknowledges and agrees that he is signing this Agreement voluntarily, with the full intent of releasing the Company from all claims.
7.
Return of Materials
. In further consideration of the promises and payments made by the Company hereunder, Executive agrees to return immediately, and before receiving payment under this Agreement, all documents, confidential information, other information, materials, equipment (including, but not limited to, cell phones, laptops, computers, or other personal computing devices) and other things in his possession or control provided to him by the Company, created during his employment with the Company or otherwise relating to or belonging to the Company, without retaining or providing to anyone else copies, summaries, excerpts, portions or other representations thereof.
8.
Revocation and Effective Date
. The parties agree Executive may revoke the Agreement at will within seven (7) days after he executes the Agreement by giving written notice of revocation to Company. Such notice must be delivered to _____________, and must actually be received by him at or before the above-referenced seven-day deadline. The Agreement may not be revoked after the expiration of the seven-day deadline. Assuming that Executive does not revoke this Agreement within the revocation period described above, the effective date of this Agreement (the “
Effective Date
”) shall be the eighth (8
th
) day following the date on which Executive executes the Agreement.
9.
Severability
. If any provision or covenant, or any part thereof, of this Agreement, except Executive’s general release and covenant not to sue set forth in Section 3 of this Agreement, should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants of this Agreement, all of which shall remain in full force and effect. If the general release and covenant not to sue set forth in Section 3 of this Agreement is found to be unenforceable, this Agreement shall be null and void and all consideration originally paid shall be returned by Executive to the Company.
10.
Final Agreement
. The parties agree that this document was negotiated, is their entire Agreement regarding Executive’s separation from employment with the Company and Executive’s release of claims, and supersedes all prior agreements between the parties, except that the Restrictive Covenants contained in the Employment Agreement shall remain in full force and effect in accordance with their terms, as well as any other provisions of the Employment Agreement that are necessary to enforce or interpret the Restrictive Covenants. The parties agree that neither party shall be considered the drafter for the purpose of construing any ambiguity or disagreement. The parties agree that this Agreement may not be modified except by a written document signed by both parties. The parties agree that this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.
14.
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the state of Georgia without giving effect to its conflict of law principles.
The parties hereby signify their agreement to these terms by their signatures below.
EXECUTIVE
[Executive Name]
Date:
CATCHMARK TIMBER TRUST, INC.
By:
[Name], [Title]
Date:
Exhibit A
Continuing Rights
The “Continuing Rights” referenced in the Agreement shall be as follows:
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1.
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[To be inserted at time of execution, if there are any continuing rights that need to be preserved such as workers’ compensation, unemployment, COBRA, participation under ERISA plans, etc.]
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “
Agreement
”) is made and entered into this 30th day of October, 2013 by and between CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”), and Brian M. Davis (“
Executive
”), to be effective as of the Effective Date, as defined in Section 1.
BACKGROUND
The Company desires to engage Executive as the Chief Financial Officer (“
CFO
”) and Assistant Secretary of the Company from and after the Effective Date, in accordance with the terms of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Effective Date and Term
. Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby employs Executive, and Executive hereby accepts such employment, for the term commencing on October 25, 2013, at 5:30 p.m. Eastern time (the “
Effective Date
”) and, unless otherwise earlier terminated pursuant to Section 5 hereof, ending on December 31, 2017 (the “
Term
”). Upon expiration of the Term, this Agreement shall automatically renew for a one-year period until December 31, 2018 (the “
Renewal Period
”), unless either party notifies the other party in writing prior to the end of the Term that the Agreement shall not be renewed. If this Agreement is renewed in accordance with this Section, the Renewal Period shall be included in the definition of “Term” for purposes of this Agreement. If this Agreement is not renewed in accordance with this Section or if the Renewal Period expires, then this Agreement will be of no further force and effect, with the exception of Section 15 and Section 7(c) (and any other provisions of this Agreement necessary for the interpretation or enforcement of Section 7(c)), which shall survive the expiration of the Term and continue to be in full force and effect in accordance with its terms.
2.
Employment
. Executive is hereby employed on the Effective Date as the CFO and Assistant Secretary of the Company. In his capacity as the CFO and Assistant Secretary of the Company, Executive shall have the duties, responsibilities and authority commensurate with such position as shall be assigned to him by the CEO. At the request of the CEO, Executive shall also serve as an officer, director, manager or other representative with respect to any subsidiary, affiliate or joint venture of the Company (each a “
Subsidiary
”) consistent with Executive’s position with the Company. In his capacity as the CFO and Assistant Secretary of the Company, Executive will report directly to the CEO.
3.
Extent of Service
. During the Term, and excluding any periods of vacation or sick leave to which Executive is entitled, Executive agrees to (a) devote substantially all of his business effort, time, energy, and skill to fulfill his employment duties; (ii) faithfully, loyally and diligently perform such duties, subject to the control and supervision of the CEO or his designee; and (iii) diligently follow and implement all lawful management policies and decisions of the Company that are communicated to Executive. During the Term, it shall not be a violation of this Agreement for Executive to (y) serve on corporate, civic or charitable boards or committees; or (z) manage personal investments, so long as such activities do not significantly interfere with the performance of Executive’s responsibilities as an employee of the Company in accordance with this Agreement and do not give rise to any conflict of interest with the Company or its affiliates. Executive shall perform his duties at the principal office of the Company.
4.
Compensation and Benefits
.
(a)
Base Salary
. During the Term, the Company will pay to Executive base salary at the rate of U.S. $305,000.00 per year (“
Base Salary
”), less normal withholdings, payable in approximately equal bi-weekly or other installments as are or become customary under the Company’s payroll practices for its executives from time to time. The Compensation Committee (the “
Compensation Committee
”) of the Board of Directors of the Company (the “
Board
”) shall review Executive’s Base Salary annually and may increase or, but only with Executive’s written consent, decrease Executive’s Base Salary from year to year. Such adjusted salary then shall become Executive’s Base Salary for purposes of this Agreement.
(b)
Bonus
. During the Term, Executive shall be eligible to participate in any bonus plans, practices, policies and programs available to senior executive officers of the Company (“
Peer Executives
”), and on the same basis as such Peer Executives, provided that nothing herein shall obligate the Company to establish any such bonus plans, policies or programs or limit the ability of the Company to amend, modify or terminate any such bonus plans, policies or programs at any time and from time to time.
(c)
Incentive and Retirement Plans
. During the Term, Executive shall be entitled to participate in all incentive and retirement plans, practices, policies and programs available to Peer Executives, and on the same basis as such Peer Executives, provided that nothing herein shall limit the ability of the Company to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time. Without limiting the foregoing, the following shall apply:
(i)
2013 Restricted Stock Award
. The Company will grant to Executive 26,000 restricted shares of its Class A common stock (the “
2013 Restricted Stock Award
”), pursuant to, and subject to the terms and conditions of, the CatchMark Timber Trust, Inc. Second Amended and Restated 2005 Long-Term Incentive Plan (the “
Equity Incentive Plan
”). Forty percent (40%) of the 2013 Restricted Stock Award will vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, conditioned upon Executive’s continued employment on each vesting date (the “
Time-Based Restricted Shares
”). Sixty percent (60%) of the 2013 Restricted Stock Award will vest in approximately equal annual installments on each of December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, based solely upon achievement of performance metrics established by the Compensation Committee for 2014 and based on Executive’s continued employment on each vesting date (the “
Performance-Based Restricted Shares
”). The Time-Based Restricted Shares will be granted within three business days following the date of this Agreement and the Performance-Based Restricted Shares will be granted no later than the close of business on December 6, 2013. The 2013 Restricted Stock Award will be subject to other terms and conditions set forth in the award certificate memorializing the 2013 Restricted Stock Award.
(ii)
IPO Award
. Within three business days following the date of this Agreement, the Company will grant to Executive 26,000 restricted stock units (the “
IPO Award
”), pursuant to, and subject to the terms and conditions of, the Equity Incentive Plan, which IPO Award will vest and convert to shares of the Company’s Class A common stock on the closing date of the Company’s initial listing of its Class A common stock on the New York Stock Exchange and the completion of its underwritten offering of its Class A common stock (the “
IPO Closing Date
”), conditioned upon Executive’s continuing employment on the IPO Closing Date, and subject to other terms and conditions set forth in the award certificate memorializing the IPO Award, including a requirement that the shares of Class A common stock underlying the IPO Award (the “
RSU Shares
”) be subject to a mandatory holding period, pursuant to which Executive must hold, on an after-tax basis, one hundred percent (100%) of the RSU Shares through the
first anniversary of the IPO Closing Date, two-thirds of the RSU Shares through the second anniversary of the IPO Closing Date, and one-third of the RSU Shares through the third anniversary of the IPO Closing Date.
(iii)
Future Stock-Based Awards
. During the Term, Executive may be eligible for additional stock-based awards under the Company’s long-term incentive plan, as determined by the Compensation Committee in its sole discretion. Nothing herein requires the Board or the Compensation Committee to make additional grants of stock-based awards in any year.
(d)
Welfare Benefit Plans
. During the Term, Executive and Executive’s eligible dependents shall be eligible for participation in the welfare benefit plans, practices, policies and programs provided by the Company, if any, to the extent available to other Peer Executives and subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of the Company to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time.
(e)
Expenses
. During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in the course of performing his duties and responsibilities under this Agreement, in accordance with the policies, practices and procedures of the Company to the extent available to other Peer Executives with respect to travel and other business expenses.
(f)
Prior Service
. Executive’s prior service with Wells Real Estate Funds shall count as credited service for purposes of calculating benefits under any Company benefit plan and/or any benefits described in this Agreement.
(g)
Vacation
. During the Term, Executive is entitled to the maximum amount of paid vacation days per calendar year allowed by the Company’s policies and practices as well as all holidays observed by the Company; provided, however, that nothing herein shall limit the ability of the Company to amend, modify or terminate any such policies and practices at any time and from time to time. Executive’s vacation time may be increased at the discretion of the Board.
5.
Termination of Employment
.
(a)
Death or Disability
.
(i) Executive’s employment shall terminate automatically upon Executive’s death.
(ii) If the Company determines in good faith that the Disability (as defined below) of Executive has occurred during the Term, it may give to Executive written notice of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the “
Disability Effective Date
”), provided that, within the thirty (30) days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. “
Disability
” shall mean the inability of Executive, as reasonably determined by the Board, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted for a period of six (6) consecutive months. At the request of Executive or his personal representative, the Board’s determination that the Disability of Executive has occurred shall
be certified by a physician mutually agreed upon by Executive, or his personal representative, and the Company.
(b)
Termination by Company
. The Company may terminate Executive’s employment during the Term with or without Cause immediately on written notice to Executive, provided that, if the Executive is terminated for Cause, the Executive’s Date of Termination as defined below must occur within a period of ninety (90) days after receipt by the Board of clear notice of an event of Cause, provided, however, that for any event or action for which there is a potential cure period, the
Date of Termination shall be the date on which the applicable cure period expires (unless the event of Cause is based on a continuing or repeating course of conduct that, when taken as a whole, constitutes Cause, in which case Executive’s Date of Termination must occur within a period of ninety (90) days after receipt of the Board of clear notice of the most recent event or action that is part of the continuing or repeating course of conduct). “
Cause
” shall mean:
(i)
the willful failure of Executive to follow the reasonable directions of the Board if Executive does not begin to cure such failure within ten (10) days after receipt of written notice from the Board specifying the particulars of the failure and complete such cure without any further failure to follow the reasonable direction in question. Notwithstanding anything to the contrary set forth in this subsection, and for purposes of clarity, Executive’s failure to meet any performance standards or expectations shall not constitute Cause;
(ii)
theft, fraud, embezzlement, or material dishonesty in connection with Executive’s employment, or intentional falsification of any employment or Company records;
(iii)
the conviction by Executive of, or Executive’s pleading guilty or nolo contendere to, a felony or a crime involving moral turpitude, whether or not such felony or crime is connected with the business of the Company;
(iv)
breach of fiduciary duty or any willful violation of law by Executive in connection with the Company’s or any Subsidiary’s business or relating to Executive’s duties hereunder, or willful misconduct for personal profit by Executive in connection with the Company’s or any Subsidiary’s business or relating to Executive’s duties hereunder;
(v)
Executive’s material failure to abide by the Company’s code of conduct, code of ethics, or other employment or corporate governance policies;
(vi)
except as set forth in Section 5(b)(vii) below, a material breach of this Agreement by Executive which is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company; or
(vii)
a material breach by Executive of Section 7(c) of this Agreement which, if such breach is capable of being cured, is not cured within thirty (30) days of receipt by Executive of reasonably detailed written notice from the Company
.
(c)
Termination by Executive
. Executive’s employment may be terminated by Executive with or without Good Reason by delivering a Notice of Termination (as defined below) to the Company thirty (30) days prior to the desired Date of Termination (as defined below) (with the thirty (30) day period to be referred to as the “
Notice Period
”). A termination by Executive shall not constitute
termination for Good Reason unless Executive shall first have delivered to the Company written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than thirty (30) days after the initial occurrence of such event) (the “
Good Reason Notice
”), and the Company has not taken action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by Executive within thirty (30) days following its receipt of such Good Reason Notice. Good Reason shall not include Executive’s death or Disability. Executive’s Date of Termination for Good Reason must occur within a period of ninety (90) days after the occurrence of an event of Good Reason.
During the Notice Period, and at the sole discretion of the Company, Executive may be required to assist the Company with identifying a successor and in transitioning his duties and responsibilities to that successor.
Moreover, during the Notice Period, and at the sole discretion of the Company, Executive may be relieved of all duties and/or prohibited from physically working at the offices of Company. For purposes of this Agreement, “
Good Reason
” shall mean any of the following, without Executive’s written consent: (i) a material diminution in Executive’s Base Salary; (ii) a material diminution in Executive’s authority, duties, or responsibilities; or (iii) the relocation of the Company’s principal office to a location that is more than fifty (50) miles from the location of the Company’s principal office on the Effective Date. The parties intend, believe and take the position that a resignation by Executive for Good Reason as defined above effectively constitutes an involuntary separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “
Code
”) and Treas. Reg. Section 1.409A-1(n)(2).
(d)
Notice of Termination
. Any termination by the Company with or without Cause and any termination by Executive shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 18(d) of this Agreement. A “
Notice of Termination
” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated, and (iii) specifies the Date of Termination (as defined below). The Company may not subsequently assert a new basis for Cause that was not asserted in the Notice of Termination; provided, however, that, in connection with any dispute relating to the termination of Executive’s employment, the Company may rely on evidence obtained after the Date of Termination that further supports any specific basis for Cause that was included in the Notice of Termination.
“
Date of Termination
” means (i) if Executive’s employment is terminated other than by reason of death or Disability, the date of receipt of the Notice of Termination, or any later date specified therein, or (ii) if Executive’s employment is terminated by reason of death or Disability, the Date of Termination will be the date of death or the Disability Effective Date, as the case may be.
6.
Obligations of the Company upon Termination
.
(a)
Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death, or Disability
. During the Term, if Executive terminates employment for Good Reason or the Company terminates Executive’s employment other than for Cause, death, or Disability, then:
(i) the Company shall pay to Executive in a lump sum in cash within thirty (30) days after the Date of Termination, the exact payment date to be determined by the Company, Executive’s Base Salary through the Date of Termination to the extent not theretofore paid (the “
Accrued Salary
”);
(ii) the Company shall pay to Executive an amount equal to (A) two (2) times Executive’s then current Base Salary, if such termination occurs outside the Change in Control Period (as
defined herein) or (B) three (3) times Executive’s then current Base Salary, if such termination occurs during the Change in Control Period (in either case, the “
Severance Amount
”). Subject to Section 13 hereof, (A) if such termination occurs outside the Change in Control Period, the Severance Amount shall be paid in approximately equal monthly installments during the twenty-four month period following the Date of Termination, commencing on the first payroll date to occur after the sixtieth (60
th
) day following the Date of Termination; provided, that the first such payment shall consist of all amounts payable to Executive pursuant to this Section 6(a)(ii) between the Date of Termination and the first payroll date to occur after the sixtieth (60
th
) day following the Date of Termination; and (B) if such termination occurs during the Change in Control Period, the Severance Amount shall be paid in a single lump sum within sixty (60) days following the Date of Termination; provided, further, that, in either case, any obligation of the Company to pay the Severance Amount shall cease upon Executive’s breach of any of his obligations set forth in Section 7 hereof. For purposes of this Agreement, the “
Change in Control Period
” means the period beginning ninety (90) days prior to a Change in Control (as defined in the Equity Incentive Plan) and ending three hundred sixty five (365) days after such Change in Control;
(iii) if Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which Executive and/or Executive’s eligible dependents would be entitled under Section 4980B of the Code (COBRA), then for eighteen (18) months following the Date of Termination (the “
COBRA Reimbursement Period
”), the Company shall pay to Executive monthly payments of an amount equal to the excess of (i) the COBRA cost of such coverage over (ii) the amount that Executive would have had to pay for such coverage if he had remained employed during the COBRA Reimbursement Period and paid the active employee rate for such coverage, less withholding for taxes and other similar items; provided, however, that (A) that if Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to Executive’s spouse), the Company’s obligation to pay any portion of the cost of health coverage as described herein shall cease, except as otherwise provided by law; (B) the COBRA Reimbursement Period shall only run for the period during which Executive is eligible to elect health coverage under COBRA and timely elects such coverage; (C) nothing herein shall prevent the Company from amending, changing, or canceling any group medical, dental, vision and/or prescription drug plans during the COBRA Reimbursement Period; (D) during the COBRA Reimbursement Period, the benefits provided in any one calendar year shall not affect the amount of benefits provided in any other calendar year (other than the effect of any overall coverage benefits under the applicable plans); (E) the reimbursement of an eligible taxable expense shall be made as soon as practicable but not later than December 31 of the year following the year in which the expense was incurred; (F) Executive’s rights pursuant to this Section 6(a)(iii) shall not be subject to liquidation or exchange for another benefit; and (G) any obligation of the Company to make such payments shall cease upon Executive’s breach of any of his obligations set forth in Section 7 hereof;
(iv) as of the Date of Termination, the restrictions on any outstanding equity awards held by Executive that expire solely on Executive’s continuous service with the Company, if any, shall expire, and any other outstanding equity awards held by Executive that vest solely on Executive’s continuous service with the Company shall immediately become fully vested;
(v) the portion of any equity awards held by Executive that is exercisable as of the Date of Termination, if any, shall remain exercisable by Executive through the end of the term of such equity award;
(vi) outstanding equity awards, other than those described in Section 6(a)(iv) above, held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU
Share Holding Periods (as defined in the IPO Award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award; and
(vii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies and in accordance with the terms thereof, including, but not limited to, any expense reimbursements and accrued but unused vacation (which shall be paid out, if at all, in accordance with the Company’s then current policy regarding accrual and payment for unused vacation pay) (such amounts and benefits shall be hereinafter referred to as the “
Other Benefits
”).
Notwithstanding the foregoing, the Company shall be obligated to provide the payments described in clauses (ii)-(vi) of this Section 6(a) only if (A) within forty-five (45) days after the Date of Termination Executive shall have executed a separation and release of claims/covenant not to sue agreement in the form attached hereto as
Exhibit A
(the “
Release Agreement
”) and such Release Agreement shall not have been revoked within the revocation period specified in the Release Agreement, and (B) Executive fully complies with the obligations set forth in Section 7 hereof.
(b)
Death or Disability
. If Executive’s employment is terminated by reason of Executive’s death or Disability during the Term, the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits. Accrued Salary shall be paid to Executive or Executive’s estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days after the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as used in this Section 6(b) shall include without limitation, and Executive or Executive’s estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death, disability or retirement benefits, if any, as are applicable to Executive on the Date of Termination. In addition, if Executive’s employment is terminated by reason of Executive’s death or Disability during the Term, the restrictions on any outstanding equity awards held by Executive that expire solely on Executive’s continuous service with the Company, if any, shall expire, and any other outstanding equity awards held by Executive that vest solely on Executive’s continuous service with the Company shall immediately become fully vested, as of the Date of Termination. Other outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(c)
Termination by the Company for Cause; Resignation by Executive Other than for Good Reason
. If the Company terminates Executive’s employment for Cause during the Term, or Executive shall resign other than for Good Reason, the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other than for payment of Accrued Salary and the timely payment or provision of Other Benefits. Accrued Salary shall be paid to Executive in a lump sum in cash within thirty (30) days after the Date of Termination. Outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(d)
Expiration of Term
. If Executive’s employment ends because (i) this Agreement is not renewed in accordance with Section 1, or (ii) the Renewal Period expires, then the Company shall have no further obligations to Executive or Executive’s legal representatives under this Agreement, other
than for payment of Accrued Salary and the timely payment or provision of Other Benefits, and this Agreement will be of no further force and effect, with the exception of Section 7(c) (and any other provisions of this Agreement necessary for the interpretation or enforcement of Section 7(c)). Accrued Salary shall be paid to Executive in a lump sum in cash within thirty (30) days after the Date of Termination. Outstanding equity awards held by Executive as of the Date of Termination, if any, shall vest, and any restrictions or RSU Share Holding Periods (as defined in the IPO award certificate) shall expire, as provided in the award certificate memorializing any such outstanding equity award.
(e)
Resignations
. Termination of Executive’s employment for any reason whatsoever shall constitute Executive’s resignation from the Board and the boards of directors of any Subsidiary on which he serves, and resignation as an officer of the Company
and of any of the Subsidiaries for which he serves as an officer.
7.
Protective Covenants
.
(a)
Acknowledgments
.
(i)
Condition of Employment and Other Consideration
. Executive acknowledges and agrees that he has received good and valuable consideration for entering into this Agreement and further acknowledges that the Company would not employ or continue to employ him in the absence of his execution of and compliance with this Agreement.
(ii)
Access to Confidential Information, Relationships, and Goodwill
. Executive acknowledges and agrees that he is being provided and entrusted with Confidential Information (as that term is defined below), including highly confidential customer information that is subject to extensive measures to maintain its secrecy within the Company, is not known in the trade or disclosed to the public, and would materially harm the Company’s legitimate business interests if it was disclosed or used in violation of this Agreement. Executive also acknowledges and agrees that he is being provided and entrusted with access to the Company’s customer and employee relationships and goodwill. Executive further acknowledges and agrees that the Company would not provide access to the Confidential Information, customer and employee relationships, and goodwill in the absence of Executive’s execution of and compliance with this Agreement. Executive further acknowledges and agrees that the Company’s Confidential Information, customer and employee relationships, and goodwill are valuable assets of the Company and are legitimate business interests that are properly subject to protection through the covenants contained in this Agreement.
(iii)
Potential Unfair Competition
. Executive acknowledges and agrees that as a result of his employment with the Company, his knowledge of and access to Confidential Information, and his relationships with the Company’s customers and employees, Executive would have an unfair competitive advantage if Executive were to engage in activities in violation of this Agreement.
(iv)
No Undue Hardship
. Executive acknowledges and agrees that, in the event that his employment with the Company terminates, Executive possesses marketable skills and abilities that will enable Executive to find suitable employment without violating the covenants set forth in this Agreement.
(v)
Voluntary Execution
. Executive acknowledges and affirms that he is executing this Agreement voluntarily, that he has read this Agreement carefully and had a full and reasonable
opportunity to consider this Agreement (including an opportunity to consult with legal counsel), and that he has not been pressured or in any way coerced, threatened or intimidated into signing this Agreement.
(b)
Definitions
. The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:
(i) “
Competitive Services
” means the business of investing in, managing, buying, and/or selling commercial timberland, harvesting and selling timber, and leasing the right to access land and harvest timber.
(ii) “
Confidential Information
” means any and all data and information relating to the Company and/or any of its Subsidiaries, their activities, business, or clients that (i) is disclosed to Executive or of which Executive becomes aware as a consequence of his employment with the Company and/or any of its Subsidiaries; (ii) has value to the Company and/or any of its Subsidiaries; and (iii) is not generally known outside of the Company and/or its Subsidiaries. “Confidential Information” shall include, but is not limited to the following types of information regarding, related to, or concerning the Company and/or any of its Subsidiaries: trade secrets (as defined by O.C.G.A. § 10-1-761); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information. “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Company and/or its Subsidiaries, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company and/or its Subsidiaries. In addition to data and information relating to the Company and/or any of its Subsidiaries, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company and/or any of its Subsidiaries by such third party, and that the Company and/or the relevant Subsidiary has a duty or obligation to keep confidential. This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law. “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company and/or any of its Subsidiaries.
(iii) “
Date of Termination
” means the date of the Termination.
(iv) “
Material Contact
” means contact between Executive and a customer or potential customer of the Company (i) with whom or which Executive has or had dealings on behalf of the Company; (ii) whose dealings with the Company are or were coordinated or supervised by Executive; (iii) about whom Executive obtains Confidential Information in the ordinary course of business as a result of his employment with the Company; or (iv) who receives products or services of the Company, the sale or provision of which results or resulted in compensation, commissions, or earnings for Executive within the two (2) years preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable.
(v) “
Person
” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.
(vi) “
Principal or Representative
” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.
(vii) “
Protected Customer
” means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom Executive has had Material Contact on behalf of the Company during his employment with the Company.
(viii) “
Protected Work
” means any and all ideas, inventions, formulas, source codes, object codes, techniques, processes, concepts, systems, programs, software, software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, and whether or not subject to copyright or trademark or trade secret protection, conceived, developed or produced by Executive, or by others working with Executive or under his direction, during the period of his employment, or conceived, produced or used or intended for use by or on behalf of the Company or its customers.
(ix) “
Restricted Period
” means any time during Executive’s employment with the Company, as well as two (2) years from the Date of Termination, provided, however, that if this Agreement is not renewed in accordance with Section 1 or if the Renewal Period expires, then no Restricted Period shall apply.
(x) “
Restricted Territory
” means (A) the area within one-hundred fifty (150) miles from the external boundary of any property owned by the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable, and (B) any other territory where Executive is working on behalf of the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Executive is still employed by the Company) or the Date of Termination (if the conduct occurs after the Termination), as applicable.
(xi) “
Restrictive Covenants
” means the restrictive covenants contained in Section 7 hereof.
(xii) “
Termination
” means the termination of Executive’s employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.
(c)
Restriction on Disclosure and Use of Confidential Information
. Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information. Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s
obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. For the avoidance of doubt, Executive’s obligations under this Section 7(c) shall survive any termination of this Agreement and Executive’s employment hereunder.
(d)
Non-Competition
. Executive agrees that, during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory; provided, however, that notwithstanding the foregoing, this subsection (d) shall not prohibit Executive from engaging in the following activities, as long as he continues to abide by all of his other obligations under the Restrictive Covenants: (i) teaching or research at an educational institution in the field of forestry or natural resources; (ii) consulting on behalf of any person or entity that does not compete against any business of the Company, including, but not limited to, consulting within the forestry (including forest products), and/or the natural resources industries; (iii) providing services for or on behalf of any forestry or natural resources trade organization; and (iv) providing services to any state or federal agency involved in forestry or natural resources, including, but not limited to, the U.S. Forest Service. Executive acknowledges that the Restricted Territory is reasonable.
(e)
Non-Solicitation of Protected Customers
. Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.
(f)
Non-Recruitment of Employees and Independent Contractors
. Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, solicit or induce or attempt to solicit or induce any employee or independent contractor of the Company to terminate his/her engagement relationship with the Company or to enter into employment or an independent contractor engagement with Executive or any other Person.
(g)
Proprietary Rights
.
(i)
Ownership and Assignment of Protected Works
. Executive agrees that any and all Protected Works are the sole property of the Company, and that no compensation in addition to Executive’s base salary is due to Executive for development or transfer of such Protected Works. Executive agrees that he shall promptly disclose in writing to the Company the existence of any Protected Works. Executive hereby assigns and agrees to assign all of his rights, title and interest in any and all Protected Works, including all patents or patent applications, and all copyrights therein, to the Company. Executive shall not be entitled to use Protected Works for his own benefit or the benefit of anyone except the Company without written permission from the Company and then only subject to the terms of such permission. Executive further agrees that he will communicate to the Company any facts known to him and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisionals,
continuations, continuations-in-part, foreign counterparts, or reissue applications, all assignments, all registration applications, and all other instruments or papers to carry into full force and effect the assignment, transfer, and conveyance hereby made or to be made and generally do everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by the Company. Executive agrees that he will not oppose or object in any way to applications for registration of Protected Works by the Company or others designated by the Company. Executive agrees to exercise reasonable care to avoid making Protected Works available to any third party and shall be liable to the Company for all damages and expenses, including reasonable attorneys’ fees, if Protected Works are made available to third parties by him without the express written consent of the Company.
Anything herein to the contrary notwithstanding, Executive will not be obligated to assign to the Company any Protected Work for which no equipment, supplies, facilities, or Confidential Information of the Company was used and which was developed entirely on Executive’s own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company’s actual or demonstrably anticipated research or development; or (b) the invention results from any work performed by Executive for the Company. Executive likewise will not be obligated to assign to the Company any Protected Work that is conceived by Executive after Executive leaves the employ of the Company, except that Executive is so obligated if the same relates to or is based on Confidential Information to which Executive had access by virtue of his employment with the Company. Similarly, Executive will not be obligated to assign any Protected Work to the Company that was conceived and reduced to practice prior to his employment, regardless of whether such Protected Work relates to or would be useful in the business of the Company. Executive acknowledges and agrees that there are no Protected Works conceived and reduced to practice by him prior to his employment with the Company.
(ii)
No Other Duties
. Executive acknowledges and agrees that there is no other contract or duty on his part now in existence to assign Protected Works to anyone other than the Company.
(iii)
Works Made for Hire
. The Company and Executive acknowledge that in the course of his employment with the Company, Executive may from time to time create for the Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without the Company’s facilities and before, during or after normal business hours. All such works related to or useful in the business of the Company are specifically intended to be works made for hire by Executive, and Executive shall cooperate with the Company in the protection of the Company’s copyrights in such works and, to the extent deemed desirable by the Company, the registration of such copyrights.
(h)
Return of Materials
. Executive agrees that he will not retain or destroy, and will immediately return to the Company on or prior to the Date of Termination, or at any other time the Company requests such return, any and all property of the Company that is in his possession or subject to his control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Protected Works and Confidential Information belonging to the Company or that Executive received from or through his employment with the Company. Executive will not make, distribute, or retain copies of any such information or property. Executive agrees that he will reimburse the Company for all of its costs, including
reasonable attorneys’ fees, of recovering the above materials and otherwise enforcing compliance with this provision if he does not return the materials to the Company on or prior to the Date of Termination or at any other time the materials are requested by the Company or if Executive otherwise fails to comply with this provision.
(i)
Enforcement of Restrictive Covenants
.
(i)
Rights and Remedies Upon Breach
. The parties specifically acknowledge and agree that the remedy at law for any breach of the Restrictive Covenants will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Restrictive Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Executive understands and agrees that if he violates any of the obligations set forth in the Restrictive Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.
(ii)
Severability and Modification of Covenants
. Executive acknowledges and agrees that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Restrictive Covenant. If any portion of any of the Restrictive Covenants is found to be invalid or unenforceable because its duration, geographic territory, scope of activities, or information covered is considered to be unreasonable in scope, the invalid or unenforceable term shall be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforced to the fullest extent permitted by law.
(j)
Existing Covenants
. Executive represents and warrants that his employment with the Company does not and will not breach any agreement that Executive has with any former employer to keep in confidence proprietary or confidential information or not to compete with any such former employer. Executive will not disclose to the Company or use on its behalf any proprietary or confidential information of any other party required to be kept confidential by Executive.
(k)
Disclosure of Agreement
. Executive acknowledges and agrees that, during the Restricted Period, he will disclose the existence and terms of this Agreement to any prospective employer, business partner, investor or lender prior to entering into an employment, partnership or other business relationship with such prospective employer, business partner, investor or lender. Executive further agrees that the Company shall have the right to make any such prospective employer, business partner, investor or lender of Executive aware of the existence and terms of this Agreement.
8.
Non-exclusivity of Rights
. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any employee benefit plan, program, policy or practice provided by Parent or its affiliated companies and for which Executive may qualify, except as specifically provided herein. Amounts that are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program except as explicitly modified by this Agreement.
9.
Full Settlement; No Mitigation
. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment.
10.
Limitation of Benefits
.
(a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether payable or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as “
Payments
”) would, if paid, be subject to the excise tax (the “
Excise Tax
”) imposed by Section 4999 of the Code, then the aggregate present value of the Payments shall be reduced (but not below zero) to an amount expressed in present value that maximizes the aggregate present value of the Payments without causing the Payments or any part thereof to be subject to the Excise Tax and therefore nondeductible by the Company because of Section 280G of the Code (the “
Reduced Amount
”). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the change of control, as determined by the Determination Firm (as defined in Section 10(b) below). For purposes of this Section 10, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 10, the “
Parachute Value
” of a Payment means the present value as of the date of the change of control of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(b) All determinations required to be made under this Section 10, including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by an independent, nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Company and Executive (the “
Determination Firm
”) which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that a Payment is due to be made, or such earlier time as is requested by the Company. All fees and expenses of the Determination Firm shall be borne solely by the Company. Any determination by the Determination Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments hereunder will have been unnecessarily limited by this Section 10 (“
Underpayment
”), consistent with the calculations required to be made hereunder. The Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Code, but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.
(c) In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 10 shall be of no further force or effect.
11.
Successors
.
(a) This Agreement is personal to Executive and shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(b) This Agreement can be assigned by the Company and shall be binding and inure to the benefit of the Company, its successors and assigns.
12.
Cooperation
. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement. For any such cooperation that occurs after the Date of Termination, the Company shall compensate Executive at a rate of Executive’s Base Salary at the time of termination divided by 2,080 on a per hour basis for services provided, which payments shall be made on a monthly basis, and shall reimburse Executive for any reasonable out-of-pocket expenses incurred, in connection with Executive’s performance of obligations under this Section 12 at the request of the Company.
If Executive is entitled to be reimbursed for any expenses under this Section 12, the amount reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. Executive’s obligations under this Section 12, and Executive’s rights to payment or reimbursement of expenses pursuant to this Section 12, shall expire at the end of two (2) years after the Date of Termination and such rights shall not be subject to liquidation or exchange for another benefit.
13.
Code Section 409A
.
(a)
General
. This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder (and any applicable transition relief under Section 409A of the Code). Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed. Neither the Company nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Executive as a result of the application of Section 409A of the Code.
(b)
Definitional Restrictions
. Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code (“
Non-Exempt Deferred Compensation
”) would otherwise be payable or distributable hereunder, or a different form of payment of such Non-Exempt Deferred Compensation would be effected, by reason of a Change in Control or Executive’s termination of employment, such Non-Exempt Deferred Compensation will not be payable or distributable to Executive, and/or such different form of payment will not be effected, by reason of such circumstance unless the
circumstances giving rise to such Change in Control or termination of employment, as the case may be, meet any description or definition of “change in control event” or “separation from service,” as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not affect the dollar amount or prohibit the
vesting
of any Non-Exempt Deferred Compensation upon a Change in Control or termination of employment, however defined. If this provision prevents the payment or distribution of any Non-Exempt Deferred Compensation, or the application of a different form of payment, such payment or distribution shall be made at the time and in the form that would have applied absent the non-409A-conforming event.
(c)
Six-Month Delay in Certain Circumstances
. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable under this Agreement by reason of Executive’s separation from service during a period in which he is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): (i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following Executive’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Executive’s separation from service (or, if Executive dies during such period, within 30 days after Executive’s death) (in either case, the “
Required Delay Period
”); and (ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.
(d)
Treatment of Installment Payments
. Each payment of termination benefits under Section 6 of this Agreement shall be considered a separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.
(e)
Timing of Release of Claims
. Whenever in this Agreement a payment or benefit is conditioned on Executive’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the Date of Termination; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject to subsection (c) above, such payment or benefit (including any installment payments) that would have otherwise been payable during such 60-day period shall be accumulated and paid on the 60
th
day after the Date of Termination provided such release shall have been executed and such revocation periods shall have expired. If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such period.
(f)
Timing of Reimbursements and In-kind Benefits
. If Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, including, without limitation, Section 4(e), and such payments or reimbursements are includible in Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under Section 4(e) shall be subject to liquidation or exchange for another benefit.
(g)
Permitted Acceleration
. The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to Executive of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).
(h)
Payroll Dates
. Any payroll dates referenced in this Agreement refer to the Company’s payroll dates in effect as of the Effective Date and cannot be changed thereafter.
14.
Compensation Recoupment Policy
. Any cash incentive bonus awarded to Executive by the Company shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to Executive. In addition, the Compensation Committee may specify in any written documentation memorializing a cash incentive bonus award that Executive’s rights, payments and benefits with respect to such award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable conditions of such award. Such events may include, but shall not be limited to, (i) termination of employment for Cause, (ii) violation of material Company policies, (iii) breach of noncompetition, confidentiality or other restrictive covenants, (iv) other conduct by Executive that is detrimental to the business or reputation of the Company or any affiliate, or (v) a later determination that the amount realized from a performance-based award was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not Executive caused or contributed to such material inaccuracy. The reduction, cancellation, forfeiture and recoupment rights associated with any equity awards or similar awards granted to Executive, if any, shall be as provided in the award certificate memorializing any such award.
15.
Indemnification
. The Company shall indemnify Executive for liabilities incurred by him while acting in good faith in his capacity as a director or an officer to the fullest extent provided for any other officer or director of the Company. To the extent the Company maintains director and officer liability insurance, such insurance shall cover Executive to the same extent as any other officer or director of the Company. The Company’s obligations under this Section shall survive any termination of this Agreement and Executive’s employment hereunder.
16.
Attorneys’ Fees
. In the event of litigation relating to this Agreement, the prevailing party shall be entitled to recover its or his reasonable attorneys’ fees and costs of litigation, in addition to all other remedies available at law or in equity. If Executive is awarded the right to recover his reasonable attorneys’ fees and costs of litigation under this Section 16, the reimbursement of attorneys’ fees and costs of litigation shall be made within ten (10) business days following the date on which such rights are established.
17.
Damages for Breach of Contract
. In the event of any contest arising under or in connection with this Agreement, the parties agree that Executive shall not be required to wait until the expiration of the Term to sue for breach of this Agreement, and if Executive proves such breach, the Company shall pay Executive damages to which Executive is entitled, including, but not limited to, the Base Salary and other compensation owed to Executive under this Agreement through the end of the Term.
18.
Miscellaneous
.
(a)
Applicable Law; Forum Selection; Consent to Jurisdiction
. The parties agree that this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Georgia without giving effect to its conflicts of law principles. Executive agrees that the exclusive forum for any action to enforce this Agreement, as well as any action relating to or arising out of this Agreement, shall be the Superior Court of Gwinnett County, Georgia or United States District Court for the Northern District of Georgia, Atlanta Division. With respect to any such court action, the parties hereby (i) irrevocably submits to the personal jurisdiction of such courts; (ii) consents to service of process; (iii)
consents to venue; and (iv) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue. The parties further agree that the above-listed courts are convenient forums for any dispute that may arise herefrom and that no party shall raise as a defense that such courts are not convenient forums.
(b)
Captions
. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
(c)
Amendments
. This Agreement may not be amended or modified otherwise than-by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(d)
Notices
. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
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If to Executive
:
Brian M. Davis
5043 Oaktrail Drive
Dunwoody, Georgia 30338
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If to the Company
:
CatchMark Timber Trust, Inc.
6200 The Corners Parkway
Norcross, Georgia 3009
Attention
: Chairman of the Board of Directors
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or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(e)
Severability
. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(f)
Withholding
. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(g)
Waivers
. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.
(h)
Entire Agreement
. This Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the date hereof, this Agreement shall supersede any other agreement, written or oral, between the parties relating to the subject matter of this Agreement.
(i)
Construction
. The parties understand and agree that because they both have been given the opportunity to have counsel review and revise this Agreement, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement. Instead, the language of all parts of this Agreement shall be construed as a whole, and according to its fair meaning, and not strictly for or against either of the parties.
(j)
Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
/s/ BRIAN M. DAVIS
Brian M. Davis
CATCHMARK TIMBER TRUST, INC.
By:
/s/ DONALD S. MOSS
Name: Donald S. Moss
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Title:
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Chairman of the Compensation Committee of the Board of Directors
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Exhibit A
Release Agreement
SEPARATION AGREEMENT, GENERAL RELEASE OF ALL CLAIMS
AND COVENANT NOT TO SUE
THIS AGREEMENT (the “
Agreement
”) is entered into as of the Effective Date, as defined in Section 8 hereof, by and between CatchMark Timber Trust, Inc., a Maryland corporation (the “
Company
”) and __________________ (“
Executive
”).
In consideration of the payments, covenants and releases described below, and in consideration of other good and valuable consideration, the receipt and sufficiency of all of which is hereby acknowledged, the Company and Executive agree as follows:
1.
Termination of Employment
. Executive’s employment with the Company terminated effective _________________ (the “
Termination Date
”) based on [description of reason for termination] pursuant to the terms of the Employment Agreement executed between the parties on or about [date of Employment Agreement] (the “
Employment Agreement
”). Executive acknowledges and agrees that he has been paid all wages and accrued benefits to which he is entitled through the date of execution of this Agreement or that the Company has promised to pay such wages and accrued benefits within thirty (30) days of the Termination Date. Other than the payments set forth in this Agreement and the continuing rights of Executive described on Exhibit A (the “
Continuing Rights
”), the parties agree that the Company owes no additional amounts to Executive for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason. With the sole exception of the Continuing Rights, this Agreement is intended to and does settle and resolve all claims of any nature that Executive might have against the Company arising out of their employment relationship or the termination of employment or relating to any other matter.
2.
Severance Benefits
. In consideration of Executive’s promises and the Release of All Claims and Potential Claims and Covenant Not To Sue contained in this Agreement, the Company will pay or prov
ide to Executive:
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(a)
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A total gross amount of _____________ ($_______.__), less applicable withholdings, payable [in approximately equal monthly installments during the twenty-four month period following the Termination Date, commencing on the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date; provided, that the first such payment shall consist of all amounts payable to Executive pursuant to this Section 2(a) between the Termination Date and the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date] [
Applicable only in the context of a qualifying termination during Change in Control Period as defined in the employment agreement:
in a lump sum on the first payroll date to occur after the sixtieth (60
th
) day following the Termination Date]; and provided, further, that any obligation of the Company to make such
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payments shall cease upon Executive’s breach of any of his obligations contained in the Restrictive Covenants in the Employment Agreement;
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(b)
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If Executive elects to continue participation in any group medical, dental, vision and/or prescription drug plan benefits to which Executive and/or Executive’s eligible dependents would be entitled under Section 4980B of the Code
(COBRA), then for eighteen (18) months following the Date of Termination (the “
COBRA Reimbursement Period
”), the Company shall pay to Executive monthly payments of an amount equal to the excess of (i) the COBRA cost of such coverage over (ii) the amount that Executive would have had to pay for such coverage if he had remained employed during the COBRA Reimbursement Period and paid the active employee rate for such coverage, less withholding for taxes and other similar items;
provided, however
, that (A) that if Executive becomes eligible to receive group health benefits under a program of a subsequent employer or otherwise (including coverage available to Executive’s spouse), the Company’s obligation to pay any portion of the cost of health coverage as described herein shall cease, except as otherwise provided by law;
(B) the COBRA Reimbursement Period shall only run for the period during which Executive is eligible to elect health coverage under COBRA and timely elects such coverage;
(C) nothing herein shall prevent the Company from amending, changing, or canceling any group medical, dental, vision and/or prescription drug plans during the COBRA Reimbursement Period; (D) during the COBRA Reimbursement Period, the benefits provided in any one calendar year shall not affect the amount of benefits provided in any other calendar year (other than the effect of any overall coverage benefits under the applicable plans); (E) the reimbursement of an eligible taxable expense shall be made as soon as practicable but not later than December 31 of the year following the year in which the expense was incurred; (F) Executive’s rights pursuant to this Section shall not be subject to liquidation or exchange for another benefit; and (G) that any obligation of the Company to make such payments shall cease upon Executive’s breach of any of his obligations contained in the Restrictive Covenants in the Employment Agreement; and
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(c)
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Equity benefits provided in the Employment Agreement or any award certificate issued to Executive.
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The Company’s agreement to provide all of the consideration set forth in this Section 2 is specifically contingent upon you executing this Agreement and not revoking the Agreement pursuant to the terms of Section 8.
Executive and the Company acknowledge and agree that these agreements, terms and amounts have been negotiated and agreed upon voluntarily by both parties and represent a compromise providing value to both parties. The parties also acknowledge and agree that these agreements and amounts exceed any and all actions, pay, and benefits that the Company might otherwise have owed to Executive by law and that they constitute good, valuable, and sufficient consideration for Executive’s release and agreements herein.
3.
General Release Of All Claims And Potential Claims and Covenant Not To Sue
. In consideration of the payments made to him by the Company and the promises contained in this Agreement, Executive on behalf of himself and his agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries, parent companies, assigns, joint ventures, and affiliated companies and their respective agents, legal representatives, shareholders, attorneys, employees, members, managers, officers and directors (collectively, the “
Releasees
”) from ALL CLAIMS, LIABILITIES, DEMANDS AND CAUSES OF ACTION which he may by law release, as well as all contractual obligations not expressly set forth in this Agreement, whether known or unknown, fixed or contingent, that he may have or claim to have against any Releasee for any reason as of the date of execution of this Agreement; provided, however, that this release shall not apply to any payments or benefits under this Agreement or to the Continuing Rights. This release includes, but is not limited to, claims arising under federal, state or local laws prohibiting employment discrimination, claims arising under severance plans and contracts, and claims growing out of any legal restrictions on the Company’s rights to terminate its employees or to take any other employment action, whether statutory, contractual or arising under common law or case law. Executive specifically acknowledges and agrees that he is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act (“
ADEA
”), the Older Workers Benefit Protection Act (“
OWBPA
”), Title VII of the Civil Rights Act of 1964, , 42 U.S.C. § 1981, the Americans With Disabilities Act (“
ADA
”), the Family and Medical Leave Act (“
FMLA
”), the Genetic Information Nondiscrimination Act (“
GINA
”), the Executive Retirement Income Security Act (“
ERISA
”), the Equal Pay Act (“
EPA
”), the Occupational Safety and Health Act (“
OSHA
”), and any and all other local, state, and federal law claims arising under statute or common law. Executive further agrees that if anyone (including, but not limited to the Equal Employment Opportunity Commission (“
EEOC
”) or any other government agency or similar such body) makes a claim or undertakes an investigation involving Executive in any way (other than with respect to the Continuing Rights), Executive waives any and all right and claim to financial recovery resulting from such claim or investigation. Except with respect to the Continuing Rights and except to the extent that applicable law requires that Executive be allowed to file a charge of discrimination with the EEOC or other administrative charge or complaint, Executive further hereby AGREES NOT TO FILE A LAWSUIT or other legal claim or charge to assert against any of the Releasees any claim released by this Agreement. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except those that cannot be released by law. By signing this Agreement, Executive acknowledges that he is doing so knowingly and voluntarily, that he understands that he may be releasing claims he may not know about, and that he is waiving all rights he may have had under any law that is intended to protect him from waiving unknown claims. Executive warrants that he has not filed any notices, claims, complaints, charges, or lawsuits of any kind whatsoever against the Company or any of the Releasees as of the date of execution of this Agreement.
4.
No Reemployment
. Executive waives any right to employment with the Company or any parent or subsidiary company of the Company, agrees not to seek employment with the Company or any parent or subsidiary of the Company at any time in the future, and agrees that any denial of employment by the Company or any parent or subsidiary company of the Company is in keeping
with the intent of this Agreement and shall not be a legitimate basis for a cause of action by Executive.
5.
Non-Admission of Liability and Acknowledgment of Reporting
. This Agreement and the fact that it was offered are not and shall not in any way be construed as admissions by the Company or any Releasee that it violated any federal, state or local law, statute or regulation, or that it acted wrongfully with respect to Executive or to any other person or entity in any manner. The Company and the Releasees specifically disclaim any liability to or wrongful acts against Executive or any other person or entity. Executive affirms that he has reported to the Company in writing all compliance issues and possible violations of federal, state and local laws or regulations or Company policy of which he had knowledge during the term of his employment, if any. Executive represents and acknowledges that he has no further or additional knowledge or information regarding compliance issues or possible violations of federal, state or local laws or regulations or Company policy other than what he has previously disclosed to the Company in writing, if any.
6.
Acknowledgment
. The Company hereby advises Executive to consult with an attorney prior to executing this Agreement and Executive acknowledges and agrees that the Company has advised, and hereby does advise, him of his opportunity to consult an attorney or other advisor and has not in any way discouraged him from doing so. Executive expressly acknowledges and agrees that he has been offered at least twenty-one (21) days to consider this Agreement before signing it, that he has read this Agreement and Release carefully, that he has had sufficient time and opportunity to consult with an attorney or other advisor of his choosing concerning his execution of this Agreement. Executive acknowledges and agrees that he fully understands that the Agreement is final and binding, that it contains a full release of all claims and potential claims, and that the only promises or representations he has relied upon in signing this Agreement are those specifically contained in the Agreement itself. Executive acknowledges and agrees that he is signing this Agreement voluntarily, with the full intent of releasing the Company from all claims.
7.
Return of Materials
. In further consideration of the promises and payments made by the Company hereunder, Executive agrees to return immediately, and before receiving payment under this Agreement, all documents, confidential information, other information, materials, equipment (including, but not limited to, cell phones, laptops, computers, or other personal computing devices) and other things in his possession or control provided to him by the Company, created during his employment with the Company or otherwise relating to or belonging to the Company, without retaining or providing to anyone else copies, summaries, excerpts, portions or other representations thereof.
8.
Revocation and Effective Date
. The parties agree Executive may revoke the Agreement at will within seven (7) days after he executes the Agreement by giving written notice of revocation to Company. Such notice must be delivered to _____________, and must actually be received by him at or before the above-referenced seven-day deadline. The Agreement may not be revoked after the expiration of the seven-day deadline. Assuming that Executive does not revoke this Agreement within the revocation period described above, the effective date of this Agreement (the “
Effective Date
”) shall be the eighth (8
th
) day following the date on which Executive executes the Agreement.
9.
Severability
. If any provision or covenant, or any part thereof, of this Agreement, except Executive’s general release and covenant not to sue set forth in Section 3 of this Agreement, should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants of this Agreement, all of which shall remain in full force and effect. If the general release and covenant not to sue set forth in Section 3 of this Agreement is found to be unenforceable, this Agreement shall be null and void and all consideration originally paid shall be returned by Executive to the Company.
10.
Final Agreement
. The parties agree that this document was negotiated, is their entire Agreement regarding Executive’s separation from employment with the Company and Executive’s release of claims, and supersedes all prior agreements between the parties, except that the Restrictive Covenants contained in the Employment Agreement shall remain in full force and effect in accordance with their terms, as well as any other provisions of the Employment Agreement that are necessary to enforce or interpret the Restrictive Covenants. The parties agree that neither party shall be considered the drafter for the purpose of construing any ambiguity or disagreement. The parties agree that this Agreement may not be modified except by a written document signed by both parties. The parties agree that this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.
14.
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the state of Georgia without giving effect to its conflict of law principles.
The parties hereby signify their agreement to these terms by their signatures below.
EXECUTIVE
[Executive Name]
Date:
CATCHMARK TIMBER TRUST, INC.
By:
[Name], [Title]
Date:
Exhibit A
Continuing Rights
The “Continuing Rights” referenced in the Agreement shall be as follows:
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1.
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[To be inserted at time of execution, if there are any continuing rights that need to be preserved such as workers’ compensation, unemployment, COBRA, participation under ERISA plans, etc.]
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EXHIBIT 31.1
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jerry Barag, certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of CatchMark Timber Trust, Inc. for the quarter ended September 30, 2013;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
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defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting
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to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Dated: October 30, 2013
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By:
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/s/ JERRY BARAG
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Jerry Barag
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Principal Executive Officer
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EXHIBIT 31.2
PRINCIPAL FINANCIAL OFFICER CERTIFICATION
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian M. Davis, certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of CatchMark Timber Trust, Inc. for the quarter ended September 30, 2013;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
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defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting
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to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Dated: October 30, 2013
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By:
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/s/ BRIAN M. DAVIS
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Brian M. Davis
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Principal Financial Officer
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EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)
In connection with the Quarterly Report on Form 10-Q of CatchMark Timber Trust, Inc. (the “Registrant”) for the quarter ended
September 30, 2013
, as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Jerry Barag, Principal Executive Officer of the Registrant, and Brian M. Davis, Principal Financial Officer of the Registrant, hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that, to the best of our knowledge and belief:
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
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/s/ JERRY BARAG
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Jerry Barag
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Principal Executive Officer
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October 30, 2013
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/s/ BRIAN M. DAVIS
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Brian M. Davis
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Principal Financial Officer
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October 30, 2013
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