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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------

FORM 10-Q
-------------------------------


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


Commission file number 0-23259
--------

U.S. TIMBERLANDS COMPANY, L.P.
(Exact name of registrant as specified in it charter)

Delaware 91-1842156
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

625 Madison Avenue, Suite 10-B, New York, NY 10022
(Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code: 212-755-1100
--------

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
----- -----



FORM 10-Q

TABLE OF CONTENTS




Part I. Financial Information Page


Item 1. Condensed Consolidated Statements of Operations
for the three months ended September 30, 2002 and 2001 .. . . . . . . . . . . . . 3

Item 1. Condensed Consolidated Statements of Operations
for the nine months ended September 30, 2002 and 2001. . . . . . . . . . . . . . . 4

Item 1. Condensed Consolidated Balance Sheets
at September 30, 2002 and December 31, 2001. . . . . . . . . . . . . . . . . . . . 5

Item 1. Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2002 and 2001. . . . . . . . . . . . . . . 6

Item 1. Notes to Condensed Consolidated Financial Statements. . . . . . . . . . . . . . . . . 7

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . 10

Item 4. Controls and Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


Part II. Other Information

Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 16

Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . 16

Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 17







PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

U.S. TIMBERLANDS COMPANY, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
(UNAUDITED)



Three Months Ended September 30,
--------------------------------
2002 2001
---- ----


Revenues $ 13,323 $ 24,299
Cost of timber harvested (5,664) (5,935)
Depletion, depreciation and road amortization (5,935) (17,600)
Cost of timber and property sales (863) -
Fire loss (657) -
------------ ------------
Gross profit 204 764

Selling, general and administrative expenses (1,723) (1,811)
Equity in net loss of affiliate (2,566) (1,884)
------------ ------------
Operating loss (4,085) (2,931)

Interest expense (5,414) (5,585)
Interest income 4 2
Amortization of deferred financing fees (169) (169)
Other income, net 6 13
------------ ------------

Loss before general partner and minority interest (9,658) (8,670)
Minority interest 34 87
------------ ------------

Net loss (9,624) (8,583)
General partner interest 160 87
------------ ------------

Net loss applicable to common and subordinated units (9,464) $ (8,497)
============ ============

Net loss per each common and subordinated unit-
basic and diluted $ (0.74) $ (0.66)
============ ============

Distributions per Unit $ - $ -
============ ============

Weighted average units outstanding 12,859,607 12,859,607
============ ============


See accompanying notes to the condensed consolidated financial statements




U.S. TIMBERLANDS COMPANY, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
(UNAUDITED)



Nine Months Ended September 30,
-------------------------------
2002 2001
---- ----


Revenues (including $9,900 to an affiliate in 2002) $ 30,939 $ 41,093
Cost of timber harvested (9,963) (12,926)
Depletion, depreciation and road amortization (20,930) (27,787)
Cost of timber and property sales (863) 0
Fire loss (657) 0
------------ ------------
Gross profit (loss) (1,474) 380

Selling, general and administrative expenses (4,619) (6,246)
Equity in net loss of affiliate (8,302) (3,575)
------------ ------------
Operating loss (14,395) (9,441)

Interest expense (16,213) (16,532)
Interest income 9 85
Amortization of deferred financing fees (506) (506)
Other income, net 112 133
------------ ------------

Loss before general partner and minority interest (30,993) (26,261)
Minority interest 247 263
------------ ------------

Net loss (30,746) (25,998)
General partner interest 373 263
------------ ------------

Net loss applicable to common and subordinated units $ (30,373) $ (25,736)
============ ============

Net loss per each common and subordinated unit-
basic and diluted $ (2.36) $ (2.00)
============ ============

Distributions per Unit $ - $ 0.50
============ ============

Weighted average units outstanding 12,859,607 12,859,607
============ ============


See accompanying notes to the condensed consolidated financial statements



U.S. TIMBERLANDS COMPANY, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)



September 30 December 31
2002 2001
---- ----
(Unaudited) *

ASSETS
Current assets:
Cash and cash equivalents $ 950 $ 1,070
Accounts receivable, net 1,589 311
Due from general partner 81
Other receivables 73 280
Notes receivable 459 1,153
Prepaid expenses and other current assets 10 225
--------- ---------

Total current assets 3,162 3,039

Timber and timberlands, net 197,978 214,511
Investment in affiliate 23,307 31,609
Property, plant and equipment, net 772 811
Notes receivable, less current portion 130 428
Deferred financing fees, net 3,468 3,973
--------- ---------

Total assets $ 228,817 $ 254,371
========= =========

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable 1,179 1,334
Accrued liabilities 8,967 3,331
Payable to general partner - 41
--------- ---------

Total current liabilities 10,146 4,706
--------- ---------

Long-term debt 225,000 225,000
--------- ---------

Minority interest - 247
--------- ---------

Partners' capital
General partner interest (126) 247
Limited partner interest (12,859,607 units issued and outstanding) (6,203) 24,171
--------- ---------

(6,329) 24,418
--------- ---------

Total liabilities and partners' capital $ 228,817 $ 254,371
========= =========


* Derived from audited Consolidated Balance Sheet as of December 31, 2001
See accompanying notes to the condensed consolidated financial statements




U.S. TIMBERLANDS COMPANY, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)




Nine Months Ended September 30,
-------------------------------
2002 2001
---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 5,681 $ 12,864
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Timber, timberlands and road additions (5,792) (6,864)
Purchase of property, plant and equipment - net (9) -
Proceeds from sale of assets - 15
------------ ------------
Net cash used in investing activities (5,801) (6,849)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to unitholders, general partner,
and minority interest - (6,561)
------------ ------------
Net cash used in financing activities - (6,561)
------------ ------------

Decrease in cash and cash equivalents (120) (546)
Cash and cash equivalents - beginning of period 1,070 3,168
------------ ------------

Cash and cash equivalents - end of period $ 950 $ 2,622
============ ============

Noncash activities:
Contribution of timber cutting rights for investment in affiliate $ - $ 12,987
Contribution of timberlands for investment in affiliate $ - $ 3,302

Supplemental cash flow information:
Cash paid for interest expense $ 10,828,125 $ 11,158,300




See accompanying notes to the condensed consolidated financial statements



U.S. TIMBERLANDS COMPANY, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS OR AS OTHERWISE INDICATED)
(UNAUDITED)


1. BUSINESS AND BASIS OF PRESENTATION

BUSINESS

U.S. Timberlands Company, LP (the "MLP"), a Delaware limited partnership, was
formed in 1997 to acquire and own 99% of the equity interests in U.S.
Timberlands Klamath Falls, LLC (the "Operating Company") and through the
Operating Company to acquire and own the business and assets of U.S. Timberlands
Management Company, LLC, formerly known as U.S. Timberlands Services Company,
LLC. As used herein, "Company" refers to the consolidated entities of the MLP
and the Operating Company.

The primary activity of the Company is the growing of trees and the sale of logs
and standing timber primarily to third party wood processors. The Company's
timber is primarily located in Oregon, east of the Cascade Range. Logs harvested
from the timberlands are sold to unaffiliated domestic conversion facilities.
These logs are processed for sale as lumber, plywood and other wood products,
primarily for use in new residential home construction, home remodeling and
repair and general industrial applications.

U.S. Timberlands Services Company, LLC (the "General Partner") manages the
businesses of the MLP and the Operating Company. The General Partner owns a 1%
general partner interest in the MLP and a 1% managing member interest in the
Operating Company.

BASIS OF PRESENTATION

These condensed consolidated financial statements have been prepared by the
Company, without audit by independent public accountants, pursuant to the rules
and regulations of the United States Securities and Exchange Commission. In the
opinion of management, the accompanying unaudited financial statements include
all normal recurring adjustments necessary to present fairly the information
required to be set forth therein. Certain information and note disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted from these statements pursuant to such rules and
regulations and, accordingly these condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
included in the Company's 2001 Annual Report on Form 10-K. Operating results for
the quarter and the nine month period ended September 30, 2002 are not
necessarily indicative of the results that may be expected for the full year or
any other period.

There have been no significant changes in the accounting policies of the
Company.





2. TIMBER AND TIMBERLANDS

Timber and Timberlands consisted of the following:




September 30, December 31,
2002 2001
---- ----


Timber and logging roads $312,133 $309,759
Timberlands 35,165 34,566
Seed orchard and nursery stock 1,823 1,437
-------- --------

349,121 345,762
Less accumulated depletion and road amortization 151,143 131,251
-------- --------

$197,978 $214,511
======== ========


3. INVESTMENT IN AFFILIATE

The following is summarized financial information for U.S. Timberlands Yakima,
LLC (USTY), an affiliate of the Company accounted for under the equity method:



QUARTER ENDED QUARTER ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
2002 2001 2002 2001
------------- -------------- ---------------- ----------------

Net sales $ 11,940 $ 993 $ 22,636 $ 6,852
Gross profit (loss) 792 30 (372) 3,230
Net income (loss) (2,704) (2,081) (8,480) (2,459)



On June 12, 2002 the Company sold timber cutting rights for approximately 87.3
million board feet to USTY for $9.9 million. These timber cutting rights expire
in May 2005. On August 30, 2002 the Company purchased timber cutting rights for
approximately 12.0 million board feet from USTY for $1.3 million. These timber
cutting rights expire in August 2003. On September 13, 2002 the Company
purchased timberland for approximately 8.1 million board feet from USTY for $2.6
million. In addition to the preceding, on July 15, 2002 the Company purchased
timber cutting rights for approximately 7.7 million board feet from USTY
Services for $0.8 million. These timber cutting rights expire in July 2005.




4. SHORT-TERM DEBT

The Company had a credit facility with an affiliate of the General Partner (the
"Affiliate Credit Facility") consisting of a revolving line of credit of up to
$12.0 million. Borrowings under the Affiliate Credit Facility bore interest at
the prime lending rate as published in the Wall Street Journal plus applicable
margin, which was based on the Company's leverage ratio. The Affiliate Credit
Facility expired, by its terms, at the end of April 2002. The Company is seeking
to replace the Affiliate Credit Facility with a working capital facility from an
unaffiliated third party. However, there can be no assurance that the Company
will be able to obtain a working capital credit facility in amounts sufficient
to fund its working capital needs from a traditional commercial lender. The
Company and the affiliated lender have also initiated discussions with respect
to a further extension of the credit facility on terms comparable to those that
would be obtained from an unaffiliated financing source. While the Company
continues to seek a credit facility from an unaffiliated source, affiliated
lenders have agreed to make short term advances to the Company, payable on
demand to the affiliates, at an annual interest rate of 10%.

5. LONG-TERM DEBT AND DISTRIBUTIONS

As of September 30, 2002, the Company was not permitted to make any
distributions as it had not exceeded the requisite Consolidated Fixed Charge
Coverage Ratio within the Restricted Payments provisions of the 9 5/8% Senior
Notes issued by the Operating Company.

6. PER UNIT INFORMATION

The Company accounts for income (loss) per unit in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128") "Earnings Per Share".
Under SFAS No. 128, the Company is required to present basic income per common
and subordinated unit, and diluted income per unit information. The weighted
average number of common and subordinated units outstanding for each period
presented totaled 12,859,607, consisting of 9,648,017 common units and 3,211,590
subordinated units.

7. OTHER MATTERS

On October 17, 2002, the Company announced that it had signed a definitive
agreement to be acquired by an acquisition company formed by a group led by
senior management. The definitive agreement contemplates a cash tender offer for
100% of the outstanding common limited partnership units not already owned by
the entity or its affiliates for $3.00 per unit in cash, followed by a merger of
the acquisition company with and into the Company, pursuant to which each common
limited partnership unit not already owned by the entity or its affiliates would
be converted into the right to receive $3.00 per unit in cash. Consummation of
the transaction is subject to receipt of financing and other customary
conditions, as well as the dismissal or satisfactory settlement of any
outstanding litigation.

On April 25, 2002, the Company announced that several purported class action
lawsuits were filed in the Court of Chancery of the State of Delaware for the
County of New Castle against the Company, the general partner of the Company and
the board of directors of the general partner alleging, among other things,
breach of fiduciary duty and self-dealing by the general partner and the board
in connection with the going private transaction.




The lawsuits seek to enjoin the going private transaction, to rescind the going
private transaction if it is consummated, and to recover damages and attorneys'
fees.

On July 12, 2002, the Company was notified that all of the purported class
action lawsuits were consolidated into one class action lawsuit by the Court of
Chancery of the State of Delaware.

On October 17, 2002, the Company announced that it had reached a tentative
settlement of the purported class action lawsuits, subject to court approval and
other customary conditions.

On June 21, 2002, the Company was notified that it was named in a lawsuit filed
in State Court in Oregon as a codefendant seeking medical expenses and up to
$12.0 million in damages for injuries sustained by the minor child of an
employee of the General Partner while riding on equipment owned by the General
Partner. At the time, liability insurance was in place, however, the insurance
underwriter has since gone bankrupt and coverage is limited and is being
administered by the Oregon Guarantee Insurance Association.

In the opinion of management, after consultation with outside counsel, the
pending lawsuits are not expected to have a material adverse effect on the
Company's financial position or results of operations. Management and its
counsel are still reviewing the facts of the injury claims and it is still too
early to assess its effect on the Company.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain information contained in this report may constitute forward-looking
statements within the meaning of the federal securities laws. Although the
Company believes that expectations reflected in such forward-looking statements
are based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved. Forward-looking information is subject to certain
risks, trends and uncertainties that could cause actual results to differ
materially from those projected. Such risks, trends and uncertainties include
the highly cyclical nature of the forest products industry, general economic
conditions, competition, price conditions or trends for the Company's products,
the possibility that timber supply could increase if governmental, environmental
or endangered species policies change, and limitations on the Company's ability
to harvest its timber due to adverse natural conditions or increased
governmental restrictions. These and other risks are described in the Company's
other reports and registration statements, which are available from the United
States Securities and Exchange Commission.




APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company's condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. Certain accounting policies have a significant impact on amounts
reported in the financial statements. A summary of those significant accounting
policies can be found in Note 1 to the Company's financial statements included
in the Company's 2001 Annual Report on Form 10-K. The Company has not adopted
any significant new accounting policies during the nine months ended September
30, 2002.

Among the significant judgments made by management in the preparation of the
Company's financial statements are the determination of the allowance for
doubtful accounts and the rates of depletion applicable to the Company's
merchantable timber. These determinations are made periodically in the ordinary
course of accounting.

OVERVIEW

The Company's principal operations consist of growing and harvesting timber and
selling logs, standing timber and related by-products to third party wood
processors. These logs and by-products are processed for sale as lumber, molding
products, doors, mill work, commodity, specialty and overlaid plywood products,
laminated veneer lumber, engineered wood I-beams, particleboard, hardboard,
paper and other wood products. These products are used in residential,
commercial and industrial construction, home remodeling and repair, general
industrial applications and a variety of paper products. The results of the
Company's operations and its ability to pay quarterly distributions to its
Unitholders depend upon a number of factors, many of which are beyond its
control. These factors include general economic and industry conditions,
domestic and export prices, supply and demand for timber logs, seasonality,
government regulations affecting the manner in which timber may be harvested,
and competition from other supplying regions and substitute products. The
Company is not currently permitted to make any distributions to Unitholders (see
Financial Condition and Liquidity).

SEASONALITY

The Company's log and standing timber sales volumes are generally at their
lowest levels in the first and second quarters of each year. In the first
quarter, heavy snowfalls in higher elevations prevent access to many areas of
the Company's timberlands. This limited access, along with spring break-up
conditions (when warming weather thaws and softens roadbeds) in March or April,
restricts logging operations to lower elevations and areas with rockier soil
types. As a result of these constraints, the Company's sales volumes are
typically at their lowest in the first quarter, improving in the second quarter
and at their highest during the third and fourth quarters. Most customers in the
region react to this seasonality by carrying sufficiently high log inventories
at the end of the calendar year to carry them to the second quarter of the
following year.

CURRENT MARKET CONDITIONS

Third Quarter 2002 prices for finished wood products (e.g. lumber, plywood and
engineered wood products) were flat to lower than Second Quarter 2002 prices.




Log prices for the Third Quarter 2002 remained fairly flat. Some downward
pressure on prices resulted due to burned logs from the Toolbox Fire.

RESULTS OF OPERATIONS

Selected operating statistics for the Company:



SALES VOLUME (MBF) PRICE REALIZATION (MBF)
------------------ -----------------------

Timber Timber
Period Logs Stumpage Deeds Logs Stumpage Deeds
------ ---- -------- ----- ---- -------- -----

2002

Three Months Ended September 30 23,998 - 20,189 $ 329 $ - $ 186
Three Months Ended June 30 14,575 - 88,480 $ 341 $ - $ 114
Three Months Ended March 31 5,024 - 2,333 $ 349 $ - $ 169


2001
Three Months Ended September 30 27,984 - 83,899 $ 347 $ - $ 173
Three Months Ended June 30 9,890 - 28,624 $ 313 $ - $ 138
Three Months Ended March 31 20,939 - 14,744 $ 357 $ - $ 133




QUARTER ENDED SEPTEMBER 30, 2002 COMPARED TO QUARTER ENDED SEPTEMBER 30, 2001

REVENUES

Revenues for the quarter ended September 30, 2002 were $13.3 million, a decrease
of $11.0 million or 45% from revenues of $24.3 million for the same period in
2001. The significant decrease in revenues during the third quarter of 2002 was
caused by planned lower volumes.

Timber deed sales for the third quarter of 2002 were $3.8 million on volume of
20.2 million board feet ("MMBF"), as compared to the same period in 2001, when
timber deed sales were $14.5 million on 83.9 MMBF. The average timber deed price
was $186 per thousand board feet ("MBF") during the third quarter of 2002, as
compared to $173 per MBF for the same period in 2001.




Log sales for the quarter ended September 30, 2002 were $7.9 million on volume
of 24.0 MMBF, as compared to the same period in 2001 when log sales were $9.7
million on 28.0 MMBF. The average sales price was $329 per MBF for the third
quarter of 2002, as compared to an average of $347 per MBF for the same period
in 2001. The decrease in log prices reflects a general decrease in the market
caused by a high volume of fire-damaged logs.

GROSS PROFIT

The Company had a gross profit of $0.2 million in the third quarter of 2002 as
compared to a gross profit of $0.8 million for the same period in 2001. As a
percentage of sales the gross profit was 2% as compared to a gross profit
percentage of 3% in the third quarter of 2001. The decrease in gross profit as a
percentage of sales is a result of the fire loss of $0.7 million in 2002 and
higher logging costs, offset by decreases in depletion rates and increased
profits from by-product sales over the same period in 2001.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased by $0.1 million from $1.8
million in the third quarter of 2001 to $1.7 million in the third quarter of
2002. The decrease was attributable to lower wage and wage related expenses of
$0.1 million and lower property taxes of $0.1 million, offset by higher
professional service expenses of $0.1 million.

EQUITY IN NET LOSS OF AFFILIATE

Equity in net loss of affiliate was approximately $2.6 million for the third
quarter of 2002. This amount reflects the Company's share of the net loss of an
affiliate (USTY) accounted for under the equity method. This compares to equity
in net loss of affiliate of $1.9 million in the third quarter of 2001.

PARTNERS' CAPITAL

During the quarter ended September 30, 2002, the limited partner interests in
the Company declined $9.5 million from $3.3 million to negative $6.2 million.
This decline is the result of the limited partners' $9.5 million share of the
Company's net loss. The General Partner interest in the Company also declined
during the quarter ended September 30, 2002 reflecting its share of the
Company's net loss for the period.

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2001

REVENUES

Revenues for the nine months ended September 30, 2002 were $30.9 million, a
decrease of $10.2 million or 25% from revenues of $41.1 million for the same
period in 2001. The decrease in revenues during the first nine months of 2002
was caused by planned lower volumes.




Timber deed sales for the first nine months of 2002 were $14.3 million on volume
of 111.0 million board feet ("MMBF"), as compared to the same period in 2001,
when timber deed sales were $20.4 million on 127.3 MMBF. The average timber deed
price was $129 per thousand board feet ("MBF") during the first nine months of
2002, as compared to $160 per MBF for the same period in 2001.

Log sales for the nine months ended September 30, 2002 were $14.6 million on
volume of 43.6 MMBF, as compared to the same period in 2001 when log sales were
$20.3 million on 58.8 MMBF. The average sales price was $335 per MBF for the
first nine months of 2002, as compared to an average of $345 per MBF for the
same period in 2001. The decrease in log prices reflects a general decrease in
the market.


GROSS PROFIT

The Company had a gross loss of $1.5 million in the first nine months of 2002 as
compared to a gross profit of $0.4 million for the same period in 2001. As a
percentage of sales, the gross loss was 5% as compared to a gross profit
percentage of 1% in the first nine months of 2001. The increase in gross loss as
a percentage of sales is a result of the fire loss of $0.7 million in 2002 and
higher logging costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased by $1.6 million from $6.2
million in the first nine months of 2001 to $4.6 million in the first nine
months of 2002. The decrease was primarily attributable to lower wage and wage
related expenses of $0.3 million and lower professional service expenses of $0.8
million.

EQUITY IN NET LOSS OF AFFILIATE

Equity in net loss of affiliate was approximately $8.3 million for the first
nine months of 2002. This amount reflects the Company's share of the net loss of
an affiliate (USTY) accounted for under the equity method. This compares to
equity in net loss of affiliate of $3.6 million in the first nine months of
2001.

PARTNERS' CAPITAL

During the nine months ended September 30, 2002, the limited partner interests
in the Company declined $30.4 million from $24.2 million to negative $6.2
million. This decline is the result of the limited partners' $30.4 million share
of the Company's net loss. The General Partner interest in the Company also
declined during the nine months ended September 30, 2002 reflecting its share of
the Company's net loss for the period.

FINANCIAL CONDITION AND LIQUIDITY

OPERATING ACTIVITIES

Cash flows provided by operating activities during the nine months ended
September 30, 2002 were $5.7 million, as compared to cash provided by operating
activities of $12.9 million during the same period in 2001. The $7.2 million
decrease is due primarily to the Company's decrease in sales revenue in
comparison to the same period in 2001.




INVESTING ACTIVITIES

Cash flows used in investing activities were $5.8 million during the first nine
months of 2002, as compared to $6.8 million during the same period in 2001.

FINANCING ACTIVITIES

Cash flows used in financing activities for the first nine months of 2002 were
$0.0 million as compared to cash used in financing activities of $6.6 million
for the same period in 2001. There were no distributions to unitholders in the
2002 period as compared to $6.6 million in distributions to unitholders in the
2001 period.

The Company had a credit agreement with an affiliate of the General Partner (the
"Affiliate Credit Facility"), which allowed the Company to borrow up to $12.0
million. The Affiliate Credit Facility expired on April 30, 2002.

The agreement governing the Operating Company's 9-5/8% Senior Notes (the
"Notes") contains restrictive covenants, including limitations on harvest
levels, land sales, cash distributions and the amount of future indebtedness.
Under the Notes, the Company's average annual adjusted harvest volume over any
period of four consecutive years cannot exceed a volume of approximately 147
MMBF as adjusted for timberlands sales and purchased. The Notes also limit
one-year harvest levels and average annual harvest levels for consecutive
two-and-three year periods. As of September 30, 2002, the Operating Company was
in compliance with the covenants requirements pertaining to the Notes. As of
September 30, 2002, the Operating Company was not permitted to make any
distributions as it had not exceeded the requisite Consolidated Fixed Charge
Coverage Ratio within the Restricted Payments provisions of the Indenture.

Through the first nine months of 2002, the Company funded its operations and met
its cash requirements for debt service from cash on hand.

Cash required to meet the Company's debt service and any cash distributions will
be significant. To meet its working capital requirements, the Company for the
past several years has been selling logs and making timber sales at a rate in
excess of the General Partner's estimate of the current annual board footage
growth on the Company's timberlands. The debt service and, prior to April 2001,
quarterly cash distributions have been funded from operations and borrowings.
Given projected volumes for sales of logs and timber, estimated current board
footage growth on the timberlands and the harvest restrictions in the Notes,
unless prices improve, costs are reduced, new markets are developed or the
Company makes accretive acquisitions, the Company's ability in the future to
make distributions will be adversely affected. On May 10, 2001 the Company
announced an indefinite suspension of distributions. The Company continues to
evaluate means to improve cash flows, including the factors mentioned above.
There can be no assurance that prices will improve or that the Company will be
able to take any of these actions and it is unlikely prices will improve or any
of these actions will take effect within a short-term horizon. The Company will
continue to look to log and timber deed sales as well as the sale of excess
timberlands, and short-term advances from an affiliated lender, to meet its
short term cash needs.




ITEM 4. CONTROLS AND DISCLOSURES

Within 90 days prior to the date of this Form 10-Q, the Company carried out an
evaluation under the supervision and with the participation of management of the
Company's General Partner, including the General Partner's Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the General Partner's
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic Securities and
Exchange Commission filings. There have been no significant changes in the
Company's internal controls or in other factors which could significantly affect
internal controls subsequent to the date that the Company carried out its
evaluation.


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On April 25, 2002 the Company announced that several purported class action
lawsuits were filed in the Court of Chancery of the State of Delaware for the
County of New Castle against the Company, the general partner of the Company and
the board of directors of the general partner alleging, among other things,
breach of fiduciary duty and self-dealing by the general partner and the board
in connection with the going private transaction.

The lawsuits seek to enjoin the going private transaction, to rescind the going
private transaction if it is consummated, and to recover damages and attorney's
fees. The lawsuits also name the Company as a defendant.

On July 12, 2002, the Company was notified that all of the purported class
action lawsuits were consolidated into one class action lawsuit by the Court of
Chancery of the State of Deleware.

On October 17, 2002, the Company announced that it had reached a tentative
settlement of the purported class action lawsuits, subject to court approval and
other customary conditions.

On June 21, 2002, the Company was notified that it was named in a lawsuit filed
in State Court in Oregon as a codefendant seeking medical expenses and up to
$12.0 million in damages for injuries sustained by the minor child of an
employee of the General Partner while riding on equipment owned by the General
Partner. At the time, liability insurance was in place, however, the insurance
underwriter has since gone bankrupt and coverage is limited and is being
administered by the Oregon Guarantee Insurance Association.




In the opinion of management, after consultation with outside counsel, the
pending lawsuits are not expected to have a material adverse effect on the
Company's financial position or results of operations. Management and its
counsel are still reviewing the facts of the injury claims and it is still too
early to assess its effect on the Company.


ITEMS 2, 3, 4, AND 5 OF PART II are not applicable and have been omitted.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a.) EXHIBITS


T3.1 - Amended and Restated Agreement of Limited Partnership of U.S.
Timberlands Company, LP

T3.2 - Second Amended and Restated Operating Agreement of U.S. Timberlands
Klamath Falls, LLC

T10.2 - Indenture among U.S. Timberlands Klamath Falls, LLC, U.S.
Timberlands Finance Corp. and State Street Bank and Trust Company,
as trustee

T10.3 - Contributions, Conveyance and Assumption Agreement among U.S.
Timberlands Company, LP and certain other parties

*10.4 - Form of U.S. Timberlands Company, LP 1997 Long-Term Incentive Plan

*10.5 - Employment Agreement for Mr. Rudey

*10.9 - Supply Agreement between U.S. Timberlands Klamath Falls, LLC and
Collins Products, LLC

++10.10 - Operating Agreement of U.S. Timberlands Yakima, LLC

10,11 - Agreement and Plan of Merger by and among U.S. Timberlands Holdings
Group, LLC, U.S. Timberlands Acquisition Co., LLC and U.S.
Timberlands Company, L.P. Dated as of October 16, 2002 *21.1 - List
of Subsidiaries

99.1 - Sarbanes-Oxley Certification of CEO

99.2 - Sarbanes-Oxley Certification of CFO




* INCORPORATED BY REFERENCE TO THE SAME NUMBERED EXHIBIT TO THE
REGISTRANT'S REGISTRATION STATEMENT ON FORM S-1 FILED NOVEMBER
13, 1997.

T INCORPORATED BY REFERENCE TO THE SAME NUMBERED EXHIBIT TO THE
REGISTRANT'S CURRENT REPORT ON FORM 8-K FILED JANUARY 15, 1998.

++ INCORPORATED BY REFERENCE TO THE SAME NUMBERED EXHIBIT TO THE
REGISTRANT'S FORM 10-Q FILED ON MAY 15, 2000.


(b.) REPORTS ON FORM 8-K

On October 17, 2002, the Company filed a Form 8-K containing a news release
relating to the execution of a definitive agreement with respect to a
privatization and the tentative settlement of certain purported class
action lawsuits.


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it behalf by the
undersigned thereunto duly authorized.



DATE: NOVEMBER 14, 2002 U.S. TIMBERLANDS COMPANY, LP
By: U.S. Timberlands Services Company, LLC
as General Partner


By: /S/ THOMAS C. LUDLOW
--------------------
Thomas C. Ludlow
Chief Financial Officer
(Chief Financial Officer,
Duly Authorized Officer,
And Principal Accounting Officer)




CERTIFICATION

I, John M. Rudey, certify that:

I have reviewed this quarterly report on Form 10-Q of U.S. Timberlands Company,
LP.

1. Based on my knowledge, this quarterly 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 quarterly report;

2. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;

3. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures ( as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

4. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function);

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal control; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

5. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.


Date: November 14, 2002 ______________________________
John M. Rudey
Chairman, Chief Executive Officer
and President




CERTIFICATION

I, Thomas Ludlow, certify that:

I have reviewed this quarterly report on Form 10-Q of U.S. Timberlands Company,
LP.

1. Based on my knowledge, this quarterly 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 quarterly report;

2. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;

3. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures ( as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

4. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function);

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal control; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

5. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.


Date: November 14, 2002 ___________________________
Thomas C. Ludlow
Chief Financial Officer




Exhibit 10.11

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

U.S. TIMBERLANDS HOLDINGS GROUP, LLC,

U.S. TIMBERLANDS ACQUISITION CO., LLC

AND

U.S. TIMBERLANDS COMPANY, L.P.




DATED AS OF OCTOBER 16, 2002






TABLE OF CONTENTS

Page

ARTICLE I THE OFFER..........................................................2
1.1. THE OFFER...................................................2
1.2. ACTION BY COMPANY...........................................3
ARTICLE II THE MERGER........................................................6
2.1. THE MERGER..................................................6
2.2. CLOSING.....................................................6
2.3. EFFECTIVE TIME OF THE MERGER................................6
2.4. EFFECTS OF THE MERGER.......................................6
2.5. ORGANIZATIONAL DOCUMENTS....................................6
2.6. GENERAL PARTNER.............................................6
ARTICLE III EFFECT OF THE MERGER.............................................7
3.1. EFFECT ON EQUITY INTERESTS..................................7
3.2. THE LONG-TERM INCENTIVE PLAN................................7
3.3. EXCHANGE OF CERTIFICATES....................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................9
4.1. ORGANIZATION, STANDING AND CORPORATE POWER..................9
4.2. SUBSIDIARIES................................................9
4.3. CAPITALIZATION..............................................9
4.4. AUTHORITY; NONCONTRAVENTION.................................9
4.5. BROKERS....................................................10
4.6. OPINION OF FINANCIAL ADVISOR...............................10
4.7. REQUIRED COMPANY VOTE......................................10
ARTICLE V REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE BUYER..........10
5.1. ORGANIZATION...............................................10
5.2. AUTHORITY; NONCONTRAVENTION................................11
5.3. BROKERS....................................................11
5.4. FINANCING..................................................11
5.5. OPERATIONS OF THE BUYER....................................11
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER........12
6.1. CONDUCT OF BUSINESS OF COMPANY.............................12
ARTICLE VII ADDITIONAL AGREEMENTS...........................................13
7.1. NOTIFICATION OF RESULTS....................................13
7.2. PARTNERSHIP MEETING........................................13
7.3. ADDITIONAL UNDERTAKINGS....................................14
7.4. INDEMNIFICATION............................................15
7.5. PUBLIC ANNOUNCEMENTS.......................................16
7.6. TRANSACTION PROPOSALS......................................16
7.7. NOTIFICATION OF CERTAIN MATTERS............................17
7.8. STATE TAKEOVER LAWS........................................17
7.9. CONSUMMATION OF FINANCING..................................17



ARTICLE VIII CONDITIONS PRECEDENT...........................................18
8.1. CONDITIONS TO EACH PARTY'S OBLIGATION......................18
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................18
9.1. TERMINATION................................................18
9.2. EFFECT OF TERMINATION......................................19
9.3. AMENDMENT..................................................19
9.4. EXTENSION; WAIVER..........................................20
9.5. SPECIAL COMMITTEE..........................................20
ARTICLE X GENERAL PROVISIONS................................................20
10.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES..............20
10.2. FEES AND EXPENSES..........................................21
10.3. NOTICES....................................................21
10.4. INTERPRETATION.............................................22
10.5. COUNTERPARTS...............................................22
10.6. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.............22
10.7. GOVERNING LAW..............................................22
10.8. ASSIGNMENT.................................................22
10.9. ENFORCEMENT................................................22
APPENDIX I CONDITIONS OF THE OFFER...................24
APPENDIX II DEFINITIONS...............................26






AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into as
of this 16th day of October, 2002, by and among U.S. Timberlands Holdings Group,
LLC, a Delaware limited liability company ("HOLDINGS"), U.S. Timberlands
Acquisition Co., LLC, a Delaware limited liability company and a wholly-owned
subsidiary of Holdings (the "BUYER"), and U.S. Timberlands Company, L.P., a
Delaware limited partnership (the "COMPANY").

RECITALS

WHEREAS, Holdings (in its capacity as the sole member of the Buyer) and
the General Partner (upon the recommendation of the Special Committee) have
determined that the merger of the Buyer with and into the Company (the
"MERGER"), in accordance with Delaware Law and upon the terms and conditions set
forth in this Agreement, is advisable and in the best interests of the sole
member of the Buyer and the Limited Partners;

WHEREAS, in furtherance of the Merger, it is proposed that the Buyer
will make a cash tender offer to acquire all of the issued and outstanding
Common Units (other than Excluded Units) at a price per Common Unit equal to the
Offer Price (the "OFFER");

WHEREAS, pursuant to the Merger, each Unit that is not purchased
pursuant to the Offer and is issued and outstanding immediately prior to the
Effective Time (other than Excluded Units) will be converted into the right to
receive the Merger Consideration;

WHEREAS, consummation of the Merger requires the approval of the
General Partner and Unit Majority Approval;

WHEREAS, a special committee of outside directors of the General
Partner (which special committee also constitutes (and has acted as) the
Conflicts Committee (the "SPECIAL COMMITTEE")), consisting solely of persons who
are independent with respect to the transactions contemplated hereby, was
appointed, and has determined that this Agreement and the transactions
contemplated hereby, including the Merger and the Offer, taken together, are
fair and reasonable to, and in the best interests of, the Company and the
Limited Partners, recommended the approval and adoption of this Agreement and
the transactions contemplated hereby (including but not limited to the Offer and
the Merger) by the board of directors of the General Partner and recommended
that the Limited Partners tender their Units in the Offer and vote in favor of
the approval of this Agreement and the Merger, and has been advised by
independent counsel in connection with such actions;

WHEREAS, Holdings, the Buyer and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various terms of, and conditions to,
the Offer and the Merger; and

WHEREAS, certain terms used in this Agreement are defined in APPENDIX
II of this Agreement.

NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:





THE OFFER

THE OFFER.

GENERAL. PROVIDED THAT THIS AGREEMENT SHALL NOT HAVE BEEN
TERMINATED IN ACCORDANCE WITH SECTION 9.1, THE BUYER SHALL COMMENCE (WITHIN THE
MEANING OF RULE 14D-2 UNDER THE EXCHANGE ACT), THE OFFER AS PROMPTLY AS
REASONABLY PRACTICABLE AFTER THE DATE HEREOF, BUT NO LATER THAN FIFTEEN (15)
BUSINESS DAYS AFTER THE DATE HEREOF, UNLESS THE COMPANY (WITH THE APPROVAL OF
THE SPECIAL COMMITTEE (SUCH APPROVAL NOT TO BE UNREASONABLY WITHHELD, DELAYED OR
CONDITIONED)) OTHERWISE AGREES. THE OFFER SHALL REMAIN OPEN UNTIL THE EXPIRATION
DATE.

The Offer shall be subject only to: (i) the condition that, as
of the Expiration Date, there shall be validly tendered by the Limited Partners
in accordance with the terms of the Offer and not withdrawn a number of Common
Units that equals, or exceeds, the Minimum Number (the "MINIMUM CONDITION") and
(ii) the other conditions set forth in APPENDIX I attached hereto (together with
the Minimum Condition, the "OFFER CONDITIONS"). Subject to SECTION 1.1.1(3),
Holdings and the Buyer expressly reserve the right to waive any of the Offer
Conditions; PROVIDED that, notwithstanding any provision in this Agreement to
the contrary, without the express prior written consent of the Company (granted
upon the recommendation of the Special Committee), neither Holdings nor the
Buyer may waive the Minimum Condition.

Holdings and the Buyer agree that, upon the Expiration Date,
if all of the Offer Conditions have been satisfied or waived, the Buyer shall
promptly accept and pay for the Common Units properly tendered and not withdrawn
pursuant to the Offer.

Without the prior written consent of the Company (granted upon
the recommendation of the Special Committee), no change may be made by Holdings
or the Buyer to the terms of the Offer that (i) changes the Minimum Number, (ii)
reduces the Offer Price, (iii) changes the form of payment of the Offer Price,
(iv) decreases the number of Common Units that the Buyer is offering to purchase
pursuant to the Offer, (v) imposes conditions to the Offer in addition to the
Offer Conditions or modifies the Offer Conditions in a manner adverse to the
Limited Partners (except that a waiver of a condition may be made subject to
terms or conditions that are no more onerous than the condition being waived) or
(vi) amends any other term of the Offer in a manner adverse to the Limited
Partners, other than an extension of the Expiration Date pursuant to SECTION
1.1.3.

The Offer Price shall, subject to reduction for applicable
withholding of taxes, be net to the seller in cash, payable upon the terms and
subject to the conditions of the Offer.

SECURITIES LAW COMPLIANCE. ON THE COMMENCEMENT DATE, THE BUYER
SHALL FILE WITH THE SEC THE SCHEDULE TO AND THE OTHER OFFER DOCUMENTS. THE BUYER
AND HOLDINGS COVENANT AND AGREE THAT: (A) THE OFFER DOCUMENTS WILL COMPLY IN ALL
MATERIAL RESPECTS AS TO FORM AND CONTENT WITH THE REQUIREMENTS OF APPLICABLE
FEDERAL SECURITIES LAWS (INCLUDING RULE 13E-3 UNDER THE EXCHANGE ACT); AND (B)


Page 2 of 34




ON THE DATE FIRST FILED WITH THE SEC AND ON THE DATE FIRST DISSEMINATED TO THE
LIMITED PARTNERS, NONE OF THE OFFER DOCUMENTS (NOR ANY INFORMATION SUPPLIED BY
THE BUYER OR HOLDINGS IN WRITING SPECIFICALLY FOR INCLUSION IN THE SCHEDULE
14D-9 OR THE PROXY STATEMENT) WILL CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL
FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY
TO MAKE THE STATEMENTS CONTAINED THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER
WHICH THEY WERE MADE, NOT MISLEADING (EXCEPT TO THE EXTENT OF SUCH INFORMATION
SUPPLIED BY THE COMPANY IN WRITING SPECIFICALLY FOR INCLUSION THEREIN). HOLDINGS
AND THE BUYER SHALL TAKE ALL STEPS NECESSARY TO CAUSE THE OFFER DOCUMENTS TO BE
DISSEMINATED TO THE LIMITED PARTNERS, AS AND TO THE EXTENT REQUIRED BY
APPLICABLE FEDERAL SECURITIES LAWS. HOLDINGS, THE BUYER AND THE COMPANY AGREE TO
PROMPTLY CORRECT ANY INFORMATION PROVIDED BY ANY OF THEM FOR USE IN THE OFFER
DOCUMENTS THAT SHALL HAVE BECOME FALSE OR MISLEADING IN ANY MATERIAL RESPECT,
AND HOLDINGS AND THE BUYER FURTHER AGREE TO TAKE ALL STEPS NECESSARY TO CAUSE
THE SCHEDULE TO AS SO CORRECTED TO BE FILED WITH THE SEC AND THE OTHER OFFER
DOCUMENTS AS SO CORRECTED TO BE DISSEMINATED TO THE LIMITED PARTNERS, IN EACH
CASE AS AND TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAWS. THE
COMPANY AND ITS COUNSEL SHALL BE GIVEN A REASONABLE OPPORTUNITY TO REVIEW AND
COMMENT UPON THE OFFER DOCUMENTS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO, IN
EACH CASE PRIOR TO THE FILING THEREOF WITH THE SEC OR, IF APPLICABLE, THE
DISSEMINATION THEREOF TO ANY LIMITED PARTNERS. HOLDINGS AND THE BUYER EACH AGREE
TO PROVIDE THE COMPANY WITH A WRITTEN COPY OF ANY COMMENTS OR OTHER
COMMUNICATIONS IT OR ITS COUNSEL MAY RECEIVE FROM TIME TO TIME FROM THE SEC OR
ITS STAFF WITH RESPECT TO THE OFFER DOCUMENTS PROMPTLY AFTER RECEIPT OF SUCH
COMMENTS, CONSULT WITH THE COMPANY AND ITS COUNSEL PRIOR TO RESPONDING TO ANY
SUCH COMMENTS AND PROVIDE THE COMPANY AND ITS COUNSEL WITH A COPY OF ANY WRITTEN
RESPONSES THERETO AND NOTIFICATION OF ANY ORAL RESPONSES THERETO OF HOLDINGS,
THE BUYER OR THEIR COUNSEL.

TERMINATION OF THE OFFER. THE BUYER SHALL NOT, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMPANY (GRANTED UPON THE RECOMMENDATION OF THE
SPECIAL COMMITTEE), (I) TERMINATE THE OFFER, EXCEPT IN ACCORDANCE WITH THE TERMS
OF APPENDIX I ATTACHED HERETO OR (II) EXTEND THE EXPIRATION DATE, OTHER THAN AS
PROVIDED BELOW. NOTWITHSTANDING THE FOREGOING, WITHOUT THE CONSENT OF THE
COMPANY, THE BUYER SHALL HAVE THE RIGHT TO EXTEND THE EXPIRATION DATE (A) FROM
TIME TO TIME IF AT THE SCHEDULED EXPIRATION DATE, ANY OF THE OFFERING CONDITIONS
SHALL NOT HAVE BEEN SATISFIED OR WAIVED, UNTIL SUCH OFFERING CONDITIONS ARE
SATISFIED OR WAIVED AND (B) FOR ANY PERIOD REQUIRED BY ANY RULE, REGULATION,
INTERPRETATION OR POSITION OF THE SEC OR THE STAFF THEREOF APPLICABLE TO THE
OFFER, OR ANY PERIOD REQUIRED BY LAW.


Page 3 of 34




ACTION BY COMPANY.

APPROVAL AND RECOMMENDATION OF THE GENERAL PARTNER. SUBJECT TO
THE FINAL SENTENCE OF THIS SECTION 1.2.1, THE COMPANY HEREBY APPROVES OF AND
CONSENTS TO THE MAKING OF THE OFFER AND REPRESENTS THAT THE GENERAL PARTNER,
ACTING PURSUANT TO UNANIMOUS CONSENT OF ITS BOARD OF DIRECTORS, AT A MEETING
DULY CALLED AND HELD ON OCTOBER 16, 2002, AND IN ACCORDANCE WITH THE
RECOMMENDATION OF THE SPECIAL COMMITTEE, ADOPTED RESOLUTIONS (I) DETERMINING
THAT THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE
MERGER AND THE OFFER, TAKEN TOGETHER, ARE FAIR AND REASONABLE TO, AND IN THE
BEST INTERESTS OF, THE COMPANY AND THE LIMITED PARTNERS, (II) APPROVING AND
ADOPTING THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING BUT
NOT LIMITED TO THE OFFER AND THE MERGER), (III) CONSENTING TO THE ADMISSION OF
THE BUYER AS A LIMITED PARTNER WITH RESPECT TO ANY UNITS PURCHASED IN THE OFFER,
(IV) DIRECTING THAT THE AGREEMENT BE SUBMITTED TO A VOTE OF THE LIMITED PARTNERS
IN ACCORDANCE WITH ARTICLES XIII AND XIV OF THE EXISTING PARTNERSHIP AGREEMENT
AND (V) RECOMMENDING THAT THE LIMITED PARTNERS TENDER THEIR COMMON UNITS
PURSUANT TO THE OFFER AND VOTE IN FAVOR OF THE APPROVAL OF THIS AGREEMENT AND
THE MERGER. UNLESS THE SPECIAL COMMITTEE DETERMINES IN GOOD FAITH, AFTER
CONSULTATION WITH ITS OUTSIDE LEGAL ADVISORS, THAT CONTINUING TO RECOMMEND, OR
FAILING TO WITHDRAW THE APPROVAL OF OR THE DETERMINATIONS WITH RESPECT TO THE
FAIRNESS AND REASONABILITY OF, THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY COULD RESULT IN A BREACH OF FIDUCIARY DUTIES TO THE LIMITED PARTNERS OR
THE COMPANY UNDER APPLICABLE LAW, THE COMPANY HEREBY CONSENTS TO THE INCLUSION
IN THE OFFER DOCUMENTS OF THE RECOMMENDATIONS AND RESOLUTIONS OF THE GENERAL
PARTNER DESCRIBED IN THIS SECTION 1.2.1.

SECURITIES LAW COMPLIANCE. AS SOON AS PRACTICABLE ON OR AFTER
THE DAY OF THE FILING OF THE OFFER DOCUMENTS WITH THE SEC, THE COMPANY SHALL
PREPARE AND FILE WITH THE SEC A SCHEDULE 14D-9, CONTAINING, SUBJECT TO THE FINAL
SENTENCE OF SECTION 1.2.1, THE RECOMMENDATIONS AND RESOLUTIONS OF THE GENERAL
PARTNER DESCRIBED IN SECTION 1.2.1 AND, TO THE EXTENT REQUIRED BY APPLICABLE
LAW, SHALL CAUSE IT TO BE DISSEMINATED TO THE LIMITED PARTNERS. THE COMPANY
COVENANTS AND AGREES THAT: (A) THE SCHEDULE 14D-9 WILL COMPLY IN ALL MATERIAL
RESPECTS AS TO FORM AND CONTENT WITH THE REQUIREMENTS OF APPLICABLE FEDERAL
SECURITIES LAWS; AND (B) ON THE DATE FIRST FILED WITH THE SEC AND ON THE DATE
FIRST DISSEMINATED TO THE LIMITED PARTNERS, THE SCHEDULE 14D-9 (AND ANY
INFORMATION SUPPLIED BY THE COMPANY IN WRITING SPECIFICALLY FOR USE IN THE
SCHEDULE TO OR THE OTHER OFFER DOCUMENTS) WILL NOT CONTAIN ANY UNTRUE STATEMENT
OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO BE STATED
THEREIN OR NECESSARY TO MAKE THE STATEMENTS CONTAINED THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING (EXCEPT TO THE EXTENT
OF SUCH INFORMATION SUPPLIED BY HOLDINGS OR THE BUYER IN WRITING SPECIFICALLY


Page 4 of 34




FOR INCLUSION THEREIN). THE COMPANY SHALL TAKE ALL STEPS NECESSARY TO CAUSE THE
SCHEDULE 14D-9 TO BE DISSEMINATED TO THE LIMITED PARTNERS, AS AND TO THE EXTENT
REQUIRED BY APPLICABLE FEDERAL SECURITIES LAWS. THE COMPANY, HOLDINGS AND THE
BUYER AGREE TO CORRECT PROMPTLY ANY INFORMATION PROVIDED BY ANY OF THEM FOR USE
IN THE SCHEDULE 14D-9 THAT SHALL HAVE BECOME FALSE OR MISLEADING IN ANY MATERIAL
RESPECT, AND THE COMPANY FURTHER AGREES TO TAKE ALL STEPS NECESSARY TO CAUSE THE
SCHEDULE 14D-9 AS SO CORRECTED TO BE FILED WITH THE SEC AND DISSEMINATED TO THE
LIMITED PARTNERS, IN EACH CASE AS AND TO THE EXTENT REQUIRED BY APPLICABLE
FEDERAL SECURITIES LAWS. HOLDINGS, THE BUYER AND THEIR COUNSEL SHALL BE GIVEN A
REASONABLE OPPORTUNITY TO REVIEW AND COMMENT UPON THE SCHEDULE 14D-9 AND ANY
AMENDMENTS OR SUPPLEMENTS THERETO, IN EACH CASE PRIOR TO THE FILING THEREOF WITH
THE SEC OR, IF APPLICABLE, THE DISSEMINATION THEREOF TO ANY LIMITED PARTNERS.
THE COMPANY AGREES TO PROVIDE THE BUYER AND HOLDINGS WITH A WRITTEN COPY OF ANY
COMMENTS OR OTHER COMMUNICATIONS IT OR ITS COUNSEL MAY RECEIVE FROM TIME TO TIME
FROM THE SEC OR ITS STAFF WITH RESPECT TO THE SCHEDULE 14D-9 PROMPTLY AFTER
RECEIPT OF SUCH COMMENTS, CONSULT WITH THE BUYER, HOLDINGS AND THEIR COUNSEL
PRIOR TO RESPONDING TO ANY SUCH COMMENTS, AND PROVIDE THE BUYER, HOLDINGS AND
THEIR COUNSEL WITH A COPY OF ANY WRITTEN RESPONSES THERETO AND NOTIFICATION OF
ANY ORAL RESPONSES THERETO OF THE COMPANY OR ITS COUNSEL.

PARTNER LIST. IN CONNECTION WITH THE OFFER AND THE MERGER, THE
COMPANY WILL PROMPTLY FURNISH OR CAUSE TO BE FURNISHED TO HOLDINGS AND THE BUYER
MAILING LABELS, SECURITY POSITION LISTINGS AND ANY AVAILABLE LISTING, OR
COMPUTER FILE CONTAINING THE NAMES AND ADDRESSES OF ALL LIMITED PARTNERS AS OF
THE MOST RECENT PRACTICABLE DATE AND AS OF THE RECORD DATE FOR THE PARTNERSHIP
MEETING DESCRIBED IN SECTION 7.2.2, AND SHALL FURNISH HOLDINGS AND THE BUYER
WITH SUCH ADDITIONAL INFORMATION (INCLUDING, BUT NOT LIMITED TO, UPDATED LISTS
OF LIMITED PARTNERS WITH THEIR ADDRESSES AND LISTS OF SECURITY POSITIONS) AND
SUCH OTHER ASSISTANCE AS HOLDINGS, THE BUYER OR THEIR AGENTS MAY REASONABLY
REQUEST IN COMMUNICATING THE OFFER TO THE LIMITED PARTNERS AND SOLICITING THE
APPROVAL OF THE LIMITED PARTNERS DESCRIBED IN SECTION 7.2.2. SUBJECT TO THE
REQUIREMENTS OF APPLICABLE LAW AND EXCEPT FOR SUCH STEPS AS ARE NECESSARY TO
DISSEMINATE THE OFFER DOCUMENTS AND ANY OTHER DOCUMENTS NECESSARY TO CONSUMMATE
THE OFFER, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
HOLDINGS AND THE BUYER SHALL, UNTIL CONSUMMATION OF THE OFFER, HOLD IN
CONFIDENCE THE INFORMATION CONTAINED IN ANY OF SUCH LABELS AND LISTS, SHALL USE
SUCH INFORMATION ONLY IN CONNECTION WITH THE OFFER, THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND, IF THIS AGREEMENT SHALL BE
TERMINATED IN ACCORDANCE WITH THE TERMS HEREOF, SHALL DELIVER TO THE COMPANY ALL
COPIES OF SUCH INFORMATION THEN IN THEIR POSSESSION OR UNDER THEIR CONTROL.


Page 5 of 34




THE MERGER

THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with Delaware Law, the Buyer shall be merged
with and into the Company at the Effective Time. Upon the Effective Time, the
separate existence of Buyer shall cease and the Company shall continue as the
surviving entity (the "SURVIVING ENTITY").

CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to SECTION
9.1, and subject to the satisfaction or waiver of the conditions set forth in
ARTICLE VIII, the Closing will take place at 10:00 a.m. on the Closing Date, at
the offices of Swidler Berlin Shereff Friedman, LLP, 405 Lexington Avenue, New
York, New York 10174, unless another date, time or place is agreed to in writing
by the parties hereto.

EFFECTIVE TIME OF THE MERGER. On the Closing Date, the Surviving Entity
shall file the Certificate of Merger with the Secretary of State, and the Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State or at such later time as is specified in the
Certificate of Merger to which the Buyer and the Company shall have agreed (the
time the Merger becomes effective being the "EFFECTIVE TIME").

EFFECTS OF THE MERGER. The Merger shall have the effects set forth by
Delaware Law, including, without limitation, that, at the Effective Time, all
the properties, rights, privileges, powers and franchises of the Company and the
Buyer shall vest in the Surviving Entity, and all debts, liabilities and duties
of the Company and the Buyer shall become the debts, liabilities and duties of
the Surviving Entity.

ORGANIZATIONAL DOCUMENTS.

AS OF THE EFFECTIVE TIME, THE CERTIFICATE OF LIMITED PARTNERSHIP OF THE
COMPANY, AS IN EFFECT IMMEDIATELY PRIOR TO THE EFFECTIVE TIME, SHALL REMAIN THE
CERTIFICATE OF LIMITED PARTNERSHIP OF THE SURVIVING ENTITY UNTIL THEREAFTER
CHANGED OR AMENDED AS PROVIDED THEREIN OR BY APPLICABLE LAW.

AS OF THE EFFECTIVE TIME, THE EXISTING PARTNERSHIP AGREEMENT SHALL
REMAIN THE LIMITED PARTNERSHIP AGREEMENT OF THE SURVIVING ENTITY UNTIL
THEREAFTER CHANGED OR AMENDED AS PROVIDED THEREIN OR BY APPLICABLE LAW.

GENERAL PARTNER. The General Partner shall continue to be the general
partner of the Surviving Entity.


Page 6 of 34




EFFECT OF THE MERGER

EFFECT ON EQUITY INTERESTS. As of the Effective Time, by virtue of the
Merger and without any further action on the part of any partner of the Company
or member of the Buyer:

INTEREST IN BUYER. THE 100% LIMITED LIABILITY COMPANY INTEREST
OF THE BUYER HELD BY HOLDINGS SHALL BE CONVERTED INTO 10 COMMON UNITS AND 10
SUBORDINATED UNITS OF THE SURVIVING ENTITY, WHICH SHALL BE ALL OF THE ISSUED AND
OUTSTANDING UNITS UPON THE EFFECTIVENESS OF THE MERGER, AND HOLDINGS SHALL
BECOME THE SOLE LIMITED PARTNER OF THE COMPANY.

CONVERSION OF UNITS. EACH ISSUED AND OUTSTANDING UNIT (OTHER
THAN EXCLUDED UNITS) SHALL BE CONVERTED INTO THE RIGHT TO RECEIVE THE MERGER
CONSIDERATION, WITHOUT INTEREST, UPON SURRENDER OF THE CERTIFICATES FORMERLY
REPRESENTING SUCH COMMON UNITS PURSUANT TO SECTION 3.3, AND, EXCEPT FOR SUCH
RIGHT TO RECEIVE THE MERGER CONSIDERATION, SUCH COMMON UNIT SHALL BE DEEMED
CANCELED AND RETIRED AND SHALL CEASE TO EXIST.

CANCELLATION AND RETIREMENT OF EXCLUDED UNITS. EACH ISSUED AND
OUTSTANDING EXCLUDED UNIT SHALL BE DEEMED CANCELED AND RETIRED WITHOUT PAYMENT
OF ANY CONSIDERATION THEREFOR AND SHALL CEASE TO EXIST.

THE LONG-TERM INCENTIVE PLAN. As soon as practicable following the date
of this Agreement, the Company shall adopt such resolutions or take such other
actions (if any) as may be required so that, at the Effective Time, each Option
granted under the Long-Term Incentive Plan will automatically be converted into
an option to receive, upon exercise thereof in accordance with the terms and
provisions thereof (including, without limitation, the payment of the applicable
exercise price) and subject to any conditions or restrictions contained therein,
an amount in cash equal to the product of (a) the number of Common Units
issuable upon the exercise of such Option immediately prior to the Effective
Time and (b) the Merger Consideration.

EXCHANGE OF CERTIFICATES.

EXCHANGE. PRIOR TO THE PURCHASE OF UNITS PURSUANT TO THE
OFFER, HOLDINGS AND THE BUYER SHALL APPOINT A BANK OR TRUST COMPANY APPROVED BY
THE COMPANY (WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR
CONDITIONED) TO ACT AS EXCHANGE AND PAYING AGENT (THE "EXCHANGE AGENT") FOR THE
PAYMENT OF THE MERGER CONSIDERATION. AS OF OR PRIOR TO THE EFFECTIVE TIME,
HOLDINGS AND THE BUYER SHALL DEPOSIT WITH THE EXCHANGE AGENT, FOR THE BENEFIT OF
THE LIMITED PARTNERS FOR EXCHANGE IN ACCORDANCE WITH THIS ARTICLE III, THE
AGGREGATE MERGER CONSIDERATION. AS SOON AS REASONABLY PRACTICABLE AFTER THE
EFFECTIVE TIME, THE EXCHANGE AGENT SHALL MAIL TO EACH LIMITED PARTNER OF RECORD
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME: (I) A FORM LETTER OF TRANSMITTAL AND
(II) INSTRUCTIONS FOR USE IN EFFECTING THE SURRENDER OF SUCH LIMITED PARTNER'S
CERTIFICATES IN EXCHANGE FOR THE MERGER CONSIDERATION. UPON SURRENDER TO THE
EXCHANGE AGENT OF A CERTIFICATE, TOGETHER WITH SUCH LETTER OF TRANSMITTAL DULY
EXECUTED AND ANY OTHER REQUIRED DOCUMENTS, THE HOLDER OF SUCH CERTIFICATE SHALL
BE ENTITLED TO RECEIVE IN EXCHANGE THEREFOR THE MERGER CONSIDERATION, AND SUCH
CERTIFICATE SHALL FORTHWITH BE CANCELED. THE MERGER CONSIDERATION DEPOSITED WITH
THE EXCHANGE AGENT PURSUANT HERETO SHALL BE INVESTED BY THE EXCHANGE AGENT IN
PERMITTED INVESTMENTS, AS DIRECTED BY HOLDINGS.


Page 7 of 34




EXCHANGE PROCEDURES.

After the Effective Time, there shall be no further transfer
on the records of the Surviving Entity (or its transfer agent) of Certificates.
If Merger Consideration is to be remitted to a name other than that in which the
Certificates surrendered for exchange are registered, it shall be a condition of
such exchange that the Certificates so surrendered shall be properly endorsed,
with signature guaranteed, or otherwise in proper form for transfer and that the
Person requesting such exchange shall pay to the Surviving Entity (or its
transfer agent) any transfer or other taxes required or establish to the
satisfaction of the Surviving Entity (or its transfer agent) that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
SECTION 3.3.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration applicable thereto as contemplated by SECTION 3.1, and the holder
thereof shall cease to have any other rights with respect to the Units
represented by such Certificate. The right of any Limited Partner to receive the
Merger Consideration shall be subject to reduction to reflect any applicable
withholding obligation for taxes.

In the event that any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Entity, the posting by such Person of a bond in such amount as the
Surviving Entity may direct as indemnity against any claim that may be made
against it with respect to such Certificate, or the provision of other
reasonable assurances requested by the Surviving Entity, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration.

NO FURTHER OWNERSHIP RIGHTS IN UNITS EXCHANGED FOR MERGER
CONSIDERATION. THE MERGER CONSIDERATION PAID UPON THE SURRENDER OR EXCHANGE OF
CERTIFICATES IN ACCORDANCE WITH THE TERMS OF THIS ARTICLE III SHALL BE DEEMED TO
HAVE BEEN ISSUED AND PAID IN FULL SATISFACTION OF ALL RIGHTS PERTAINING TO SUCH
UNITS.

NO LIABILITY. NONE OF HOLDINGS, THE BUYER, THE EXCHANGE AGENT,
THE COMPANY OR THE SURVIVING ENTITY SHALL BE LIABLE TO ANY PERSON IN RESPECT OF
ANY MERGER CONSIDERATION DELIVERED TO A PUBLIC OFFICIAL PURSUANT TO ANY
APPLICABLE ABANDONED PROPERTY, ESCHEAT OR SIMILAR LAW.


Page 8 of 34




REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Holdings and the Buyer as
follows:

ORGANIZATION, STANDING AND CORPORATE POWER. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware.

SUBSIDIARIES. The only Subsidiaries of the Company are those listed in
SECTION 4.2 OF THE DISCLOSURE SCHEDULE. Except as set forth in SECTION 4.2 OF
THE DISCLOSURE SCHEDULE, all of the outstanding shares of capital stock,
membership interests, partnership interests or other equity interests of each
such Subsidiary are owned (of record and beneficially) by the Company and/or one
or more wholly-owned Subsidiaries, free and clear of all Liens. Except for the
ownership interests set forth in SECTION 4.2 OF THE DISCLOSURE SCHEDULE, the
Company does not own, directly or indirectly, any capital stock, membership
interest or other equity interest in any Person.

CAPITALIZATION. As of the date hereof: (i) 9,648,017 Common Units are
issued and outstanding; (ii) 3,211,590 Subordinated Units are issued and
outstanding; (iii) there are no Treasury Units; (iv) 684,007 Common Units are
reserved for issuance pursuant to the exercise of Options granted under the
Long-Term Incentive Plan; (v) there are no Common Units reserved for issuance
pursuant to the vesting of Phantom Units granted under the Long-Term Incentive
Plan; and (vi) the General Partner is the sole general partner of the Company.
Except as set forth above, no Common Units or Subordinated Units are issued,
reserved for issuance or outstanding. All outstanding Common Units and
Subordinated Units are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth above, there are no outstanding bonds,
debentures, notes or other indebtedness or other securities of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which Limited Partners may vote.
Except as set forth above, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any Subsidiary is a party or by which it is
bound obligating it to issue, deliver or sell, or cause to be issued, delivered
or sold, additional Common Units, Subordinated Units or other equity or voting
securities of the Company or any Subsidiary or obligating the Company or any
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding contractual obligations, commitments, understandings or
arrangements of the Company, or its Subsidiaries, to repurchase, redeem or
otherwise acquire Common Units or Subordinated Units. SECTION 4.3 OF THE
DISCLOSURE SCHEDULE, lists, for each issued and outstanding Option under the
Long-Term Incentive Plan, (a) the person to whom such Option was granted, (b)
the number of Common Units issuable upon the exercise of such Option, (c) the
exercise price of such Option and (d) the expiration date of such Option. There
are no accrued and unpaid distributions with respect to any Common Units or
Subordinated Units. To the Knowledge of the Company, there are no irrevocable
proxies with respect to any Common Units or Subordinated Units.

AUTHORITY; NONCONTRAVENTION. The Company has the requisite partnership
power and authority to enter into this Agreement and, subject to Unit Majority
Approval, to consummate the transactions contemplated hereby. The execution and


Page 9 of 34




delivery of this Agreement by the Company, and the consummation by the Company
of the transactions contemplated hereby, have been duly authorized by the
General Partner, which constitutes all necessary action on the part of the
Company, subject, in the case of the Merger, to Unit Majority Approval. This
Agreement has been duly executed and delivered by, and constitutes a valid and
binding obligation of, the Company, enforceable against the Company in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable or fiduciary principles (the "ENFORCEABILITY EXCEPTION"). No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Governmental Entity is required by or with
respect to the Company, or any of its Subsidiaries, in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except for (i) the filing
of a pre-merger notification and report form by the Company under the HSR Act;
(ii) the filing with the SEC of the Proxy Statement, the Schedule 14D-9 and such
other forms and reports under the Securities Act and the Exchange Act as may be
required in connection with the Offer, the Merger, this Agreement and the
transactions contemplated hereby; (iii) the filing of the Certificate of Merger
with the Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business;
and (iv) such other consents, approvals, orders, authorizations, registrations,
declarations, filings or notices as would not reasonably be expected to result
in a Material Adverse Effect on the Company.

BROKERS. The Special Committee has not caused the Company to incur any
liability or obligation to pay any fees or commissions to any broker, finder or
similar agent with respect to the transactions contemplated by this Agreement.

OPINION OF FINANCIAL ADVISOR. The Special Committee has received the
opinion of Dresdner Kleinwort Wasserstein, dated October 10, 2002, that, as of
such date, the consideration to be received by the Limited Partners pursuant to
the Offer and the Merger, taken together, is fair to the Limited Partners from a
financial point of view.

REQUIRED COMPANY VOTE. The approval of the General Partner (which, as
set forth in SECTION 1.2.1, was granted at a meeting duly called on October 16,
2002) and the Unit Majority Approval, are the only votes of the Company's
partners necessary to approve this Agreement, the Offer, the Merger and the
other transactions contemplated hereby.


REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE BUYER

Holdings and the Buyer hereby jointly and severally represent and
warrant to the Company as follows:

ORGANIZATION. Holdings and the Buyer are each duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
Holdings and the Buyer is an Affiliate of the General Partner.


Page 10 of 34




AUTHORITY; NONCONTRAVENTION. Holdings and the Buyer each have the
requisite limited liability company power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Holdings and the Buyer, and the consummation
by the Buyer of the transactions contemplated hereby, have been duly authorized
by all necessary limited liability company action on the part of Holdings and
the Buyer. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Holdings and the Buyer,
enforceable against each of them in accordance with its terms, subject to the
Enforceability Exception. No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any Governmental Entity
is required by or with respect to Holdings or the Buyer in connection with the
execution and delivery of this Agreement by Holdings or the Buyer or the
consummation by Holdings or the Buyer of any of the transactions contemplated by
this Agreement, except for (i) the filing of a pre-merger notification and
report form under the HSR Act; (ii) the filing with the SEC of the Schedule TO,
the other Offer Documents and such other forms reports under the Securities Act
and the Exchange Act as may be required in connection with the Offer, the
Merger, this Agreement and the transactions contemplated hereby; (iii) the
filing of the Certificate of Merger with the Secretary of State; and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations,
filings or notices as would not prevent or materially delay the ability of
Holdings and/or the Buyer to consummate the transactions contemplated by this
Agreement.

BROKERS. Neither Holdings nor the Buyer has any liability or obligation
to pay any fees or commissions to any broker, finder or similar agent with
respect to the transactions contemplated by this Agreement.

FINANCING. Holdings and the Buyer have previously delivered to the
Special Committee a fully executed letter from MBIA confirming that it will
arrange and provide credit support for the financing necessary to consummate the
transactions contemplated by this Agreement and to pay all related fees and
expenses, and describing the terms and conditions upon which it will arrange and
provide credit support for such financing (the "FINANCING LETTER"). The
Financing Letter is in full force and effect on the date hereof, and has not
been amended or modified. There are no facts or circumstances known to Holdings
or the Buyer that could reasonably be expected to prevent (i) the conditions
described in the Financing Letter from being satisfied or (ii) Holdings and the
Buyer from receiving financing pursuant to the terms of the Financing Letter.
The aggregate proceeds of the financing contemplated by the Financing Letter are
sufficient to pay the aggregate Offer Price and Merger Consideration and to pay
all fees and expenses related to the transactions contemplated by this
Agreement.

OPERATIONS OF THE BUYER. Since the date of its organization, the Buyer
has not engaged in any activities other than in connection with or as
contemplated by this Agreement or in connection with arranging for the financing
required to consummate the transactions contemplated hereby.


Page 11 of 34




COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER

CONDUCT OF BUSINESS OF COMPANY. During the period from the date of this
Agreement to the Effective Time (except as otherwise specifically required by
the terms of this Agreement), or the earlier termination of this Agreement, the
Company shall, and shall cause its Subsidiaries to, act and carry on its
business in the ordinary course of business consistent with past practice.
Without limiting the generality of the foregoing, except as otherwise
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, or the earlier termination of this Agreement,
the Company shall not, and shall not permit any of its Subsidiaries to, without
the prior written consent of Holdings and the Buyer, which consent shall not be
unreasonably withheld, delayed or conditioned:

DECLARE, SET ASIDE OR MAKE ANY DISTRIBUTIONS IN RESPECT OF ANY
EQUITY INTEREST IN THE COMPANY OR ANY SUBSIDIARY, EXCEPT FOR (A) DISTRIBUTIONS
REQUIRED UNDER THE COMPANY'S LIMITED PARTNERSHIP AGREEMENT AND (B) DISTRIBUTIONS
BY A SUBSIDIARY OF THE COMPANY TO THE COMPANY OR A WHOLLY-OWNED SUBSIDIARY IN
ACCORDANCE WITH APPLICABLE LAW;

SPLIT, COMBINE OR RECLASSIFY ANY COMMON UNITS, SUBORDINATED
UNITS OR OTHER EQUITY INTEREST IN THE COMPANY OR ANY SUBSIDIARY, OR ISSUE OR
AUTHORIZE THE ISSUANCE OF ANY OTHER SECURITIES IN RESPECT OF, IN LIEU OF OR IN
SUBSTITUTION FOR ANY COMMON UNITS, SUBORDINATED UNITS OR OTHER EQUITY INTEREST
IN THE COMPANY OR ANY SUBSIDIARY;

PURCHASE, REDEEM OR OTHERWISE ACQUIRE ANY COMMON UNITS,
SUBORDINATED UNITS OR OTHER EQUITY INTEREST IN THE COMPANY OR ANY SUBSIDIARY OR
ANY RIGHTS, WARRANTS OR OPTIONS TO ACQUIRE ANY SUCH INTERESTS OR OTHER
SECURITIES OUTSTANDING ON THE DATE OF THIS AGREEMENT;

AUTHORIZE FOR ISSUANCE, ISSUE, DELIVER, SELL, PLEDGE OR
OTHERWISE ENCUMBER ANY OF ITS COMMON UNITS, SUBORDINATED UNITS OR ANY OTHER
EQUITY INTEREST IN THE COMPANY OR ANY SUBSIDIARY, OR ANY RIGHTS, WARRANTS OR
OPTIONS TO ACQUIRE, ANY SUCH EQUITY INTERESTS;

AMEND ITS CERTIFICATE OF LIMITED PARTNERSHIP, LIMITED
PARTNERSHIP AGREEMENT OR OTHER ORGANIZATIONAL DOCUMENTS;

ACQUIRE BY MERGING OR CONSOLIDATING WITH, OR BY PURCHASING A
SUBSTANTIAL PORTION OF THE STOCK OR ASSETS OF, OR BY ANY OTHER MANNER, ANY
BUSINESS OR ANY CORPORATION, PARTNERSHIP, JOINT VENTURE, ASSOCIATION OR OTHER
BUSINESS ORGANIZATION WHICH WOULD BE MATERIAL TO THE COMPANY AND ITS
SUBSIDIARIES AS A WHOLE;


Page 12 of 34




INCUR ANY INDEBTEDNESS FOR BORROWED MONEY OR GUARANTEE ANY
SUCH INDEBTEDNESS OF ANOTHER PERSON IN AN AMOUNT IN EXCESS OF $10 MILLION, ISSUE
OR SELL ANY DEBT SECURITIES OR WARRANTS OR OTHER RIGHTS TO ACQUIRE ANY DEBT
SECURITIES OF THE COMPANY, OR ITS SUBSIDIARIES, GUARANTEE ANY DEBT SECURITIES OF
ANOTHER PERSON, ENTER INTO ANY "KEEP WELL" OR OTHER AGREEMENT TO MAINTAIN ANY
FINANCIAL STATEMENT CONDITION OF ANOTHER PERSON OR ENTER INTO ANY ARRANGEMENT
HAVING THE ECONOMIC EFFECT OF ANY OF THE FOREGOING, EXCEPT FOR BORROWINGS UNDER
CURRENT CREDIT FACILITIES AND FOR LEASE OBLIGATIONS, IN EACH CASE INCURRED IN
THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE;

MAKE ANY LOANS, ADVANCES OR CAPITAL CONTRIBUTIONS TO, OR
INVESTMENTS IN, ANY OTHER PERSON, OTHER THAN TO THE COMPANY OR ANY WHOLLY-OWNED
SUBSIDIARY OF THE COMPANY;

ADOPT RESOLUTIONS PROVIDING FOR OR AUTHORIZING A LIQUIDATION
OR A DISSOLUTION; OR

AUTHORIZE ANY OF, OR COMMIT OR AGREE TO TAKE ANY OF, THE
FOREGOING ACTIONS.


ADDITIONAL AGREEMENTS

NOTIFICATION OF RESULTS. Following the Expiration Date, Holdings and
the Buyer will promptly advise the Company as to the number of Common Units that
have been tendered, and not withdrawn, pursuant to the Offer. At such time,
subject to satisfaction or waiver of the Minimum Condition and the other Offer
Conditions, the Buyer will accept and promptly pay for all validly tendered
Common Units.

PARTNERSHIP MEETING.

As soon as practicable after the consummation of the Offer,
the Company shall prepare and file with the SEC a preliminary Proxy Statement,
respond promptly to any comments made by the SEC with respect to such
preliminary filing and file with the SEC a definitive Proxy Statement and, to
the extent required by applicable law, shall cause such definitive Proxy
Statement to be disseminated to the Limited Partners. The Company covenants and
agrees that: (a) the Proxy Statement will comply in all material respects as to
form and content with the requirements of applicable federal securities laws;
and (b) on the date first filed with the SEC and on the date first disseminated
to the Limited Partners, the Proxy Statement will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading (except to the
extent of such information supplied by Holdings or the Buyer in writing
specifically for inclusion therein). The Company, Holdings and the Buyer agree
to correct promptly any information provided by any of them for use in the Proxy
Statement that shall have become false or misleading in any material respect,
and the Company further agrees to take all steps necessary to cause the Proxy
Statement as so corrected to be filed with the SEC and disseminated to the


Page 13 of 34




Limited Partners, in each case as and to the extent required by applicable
federal securities laws. Holdings, the Buyer and their counsel shall be given a
reasonable opportunity to review and comment upon the preliminary Proxy
Statement, the definitive Proxy Statement, and any amendments or supplements
thereto, in each case prior to the filing thereof with the SEC or, if
applicable, the dissemination thereof to any Limited Partners. The Company
agrees to provide the Buyer and Holdings with a written copy of any comments or
other communications it or its counsel may receive from time to time from the
SEC or its staff with respect to the Proxy Statement promptly after receipt of
such comments, consult with the Buyer, Holdings and their counsel prior to
responding to any such comments, and provide the Buyer, Holdings and their
counsel with a copy of any written responses thereto and notification of any
oral responses thereto of the Company or its counsel.

As promptly as practicable following the SEC's review of the
Proxy Statement, the General Partner shall duly call, give notice of, convene
and hold a Partnership Meeting for the purpose of approving the Merger, this
Agreement and the transactions contemplated hereby. Unless the Special Committee
determines in good faith, after consultation with its outside legal advisors,
that doing so could result in a breach of fiduciary duties to the Limited
Partners or the Company under applicable law, the Company will, through its
General Partner and as set forth in SECTION 1.2.1 of this Agreement, submit each
of the foregoing matters to a vote of the Limited Partners and recommend their
approval of such matters, and (unless an information statement has been filed)
seek to obtain all votes and approvals thereof by the Limited Partners. Subject
to the foregoing, such recommendation, together with a copy of the fairness
opinion referred to in SECTION 4.7, shall be included in the Proxy Statement. At
the Partnership Meeting, Holdings and the Buyer shall cause all Units then owned
by them or any of their Affiliates to be voted in favor of the approval of the
Merger and this Agreement and in favor of any other resolution necessary to
approve the transactions contemplated by this Agreement.

ADDITIONAL UNDERTAKINGS.

Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties hereto agrees to use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Offer, the Merger and the other transactions
contemplated by this Agreement. Holdings, the Buyer and the Company will use all
commercially reasonable efforts and cooperate with one another in promptly: (i)
determining whether any filings are required to be made or consents, approvals,
waivers, licenses, permits or authorizations are required to be obtained (or,
which if not obtained, would result in a breach or violation, or an event of
default, termination or acceleration of any agreement or any "put" or "call"
right under any agreement) under any applicable law or regulation or from any
Governmental Entity or third party in connection with the Offer, the Merger and
the other transactions contemplated by this Agreement; and (ii) making any such
filings, furnishing information required in connection therewith and timely
seeking to obtain any such consents, approvals, permits or authorizations.

At the request of the Buyer, the Company shall make, subject
to the condition that the transactions contemplated herein actually occur, any
undertakings (including undertakings to make divestitures, provided, in any


Page 14 of 34




case, that such divestitures need not themselves be effective or made until
after the transactions contemplated hereby actually occur) required in order to
comply with the antitrust requirements or laws of any Governmental Entity,
including the HSR Act, in connection with the transactions contemplated by this
Agreement. Notwithstanding the foregoing, or any other covenant contained
herein, in connection with the receipt of any necessary approvals under the HSR
Act, neither Holdings nor the Buyer, nor any Affiliate thereof (other than,
pursuant to the preceding sentence, the Company) shall be required to divest or
hold separate or otherwise take or commit to take any action that materially
limits the ownership or operation by the Company, Holdings or any of their
respective Subsidiaries of a material portion of the business or assets of the
Company, Holdings and their Subsidiaries, taken as a whole, or compels the
Company or Holdings or any of their respective Subsidiaries to dispose of or
hold separate a material portion of the business or assets of the Company,
Holdings and their Subsidiaries, taken as a whole.

INDEMNIFICATION.

From the Effective Time through the sixth anniversary of the
Effective Time, the Surviving Entity shall indemnify and hold harmless each
Person who is now, or has been at any time prior to the date hereof, or becomes
prior to the Effective Time, a director, officer, employee or agent of the
Company or any of its Subsidiaries (the "COVERED PARTIES"), against all claims,
losses, liabilities, damages, judgments, fines and reasonable fees, costs and
expenses, including attorneys' fees and disbursements (collectively, "COSTS"),
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to (i) the fact that the Covered Party is or was an
officer, director, employee or agent of the Company or any of its Subsidiaries
or (ii) matters existing or occurring at or prior to the Effective Time
(including this Agreement and the transactions and actions contemplated hereby),
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under applicable law, to the extent such Costs have not
been paid for by insurance. Each Covered Party will be entitled to advancement
of expenses incurred in the defense of any claim, action, suit, proceeding or
investigation from the Surviving Entity within thirty days of receipt by the
Surviving Entity from the Covered Person of a request therefor, along with
appropriate supporting documentation; PROVIDED that any Person to whom expenses
are advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification.

The limited partnership agreement of the Surviving Entity
shall contain provisions no less favorable than those contained in the Existing
Partnership Agreement with respect to indemnification, advancement of expenses
and exculpation of present or former directors, officers, employees and agents
of the Company and its Subsidiaries in connection with matters existing or
occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement).

Subject to the next sentence, the Surviving Entity shall, at
no expense to the beneficiaries, maintain in effect for six years from the
Effective Time the current directors' and officers' liability insurance policies
maintained by the Company with respect to matters existing or occurring at or
prior to the Effective Time (including the transactions contemplated by this
Agreement), so long as the annual premium therefor would not be in excess of
350% of the last annual premium paid prior to the date of this Agreement (such
350%, the "MAXIMUM PREMIUM"). If the Company's existing insurance expires, or is


Page 15 of 34




terminated or canceled, during such six-year period (or the annual premium
therefor would exceed the Maximum Premium) the Surviving Entity shall use
commercially reasonable efforts to obtain, for the remainder of such period,
replacement directors' and officers' liability insurance with the most
advantageous limits, deductibles and other terms and conditions available for an
annualized premium not in excess of the Maximum Premium (as determined by the
Surviving Entity in its reasonable discretion).

Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or after
the Effective Time) of the type described in SECTION 7.4.1 is made against any
Covered Party on or prior to the sixth anniversary of the Effective Time, the
provisions of this SECTION 7.4 shall continue in effect until the final
disposition of such claim, action, suit, proceeding or investigation.

The covenants contained in this SECTION 7.4 are intended to be
for the benefit of, and shall be enforceable by, each of the Covered Parties and
their respective heirs and representatives, and shall not be deemed exclusive of
any other rights to which a Covered Party is entitled, whether pursuant to law,
contract or otherwise.

In the event that the Surviving Entity (i) consolidates with
or merges into any other Person and is not the continuing or surviving entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Entity shall succeed to the obligations set forth in this SECTION 7.4.

PUBLIC ANNOUNCEMENTS. Neither Holdings nor the Buyer, on the one hand,
nor the Company, on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement,
including the Offer and the Merger, without the other party's prior consent,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with, or rule of, any applicable stock
exchange, and in any event, to the extent practicable, Holdings, the Buyer and
the Company will consult with each other before issuing, and provide each other
the opportunity to review and comment upon, any such press release or other
public statements with respect to such transactions. The parties agree that the
initial press release or releases to be issued with respect to the transactions
contemplated by this Agreement shall be mutually agreed upon prior to the
issuance thereof.

TRANSACTION PROPOSALS.

From and after the date hereof until the termination of this
Agreement, neither the Company, the General Partner, the Company's Subsidiaries,
nor any of their respective officers, directors, employees, representatives,
agents or Affiliates (including, without limitation, any investment banker,
attorney or accountant retained by any of them) (collectively, "RESPONSIBLE
PARTIES") shall, directly or indirectly: (i) initiate, solicit, knowingly
encourage or knowingly facilitate (including by way of furnishing information)
the making of any proposal or offer that constitutes, a Transaction Proposal;
(ii) enter into, maintain or continue discussions or negotiate with any Person
in furtherance of, or in order to encourage, a Transaction Proposal; (iii) agree
to, approve, recommend, or endorse a Transaction Proposal; or (iv) disclose any
non-public information relating to the Company or any Subsidiary of the Company
or afford access to the properties, books or records of the Company or any


Page 16 of 34




Subsidiary of the Company to any Person that has made or may reasonably be
expected to make a Transaction Proposal or that has advised the Company that it
is or may be interested in making a Transaction Proposal. Notwithstanding the
foregoing, nothing contained in this Agreement shall prohibit the Special
Committee on behalf of the General Partner from making to the Limited Partners
any recommendation and related filing with the SEC as required by Rules 14e-2
and 14d-9 under the Exchange Act, with respect to any tender offer.
Notwithstanding anything herein to the contrary, at any time during the Company
Applicable Period, the Special Committee and the Company may, in response to a
proposal or offer that constitutes a Transaction Proposal which the Special
Committee determines in good faith, after consultation with the Special
Committee's outside legal and financial advisors, could reasonably be expected
to result in a Company Superior Proposal, (x) furnish information with respect
to the Company and its Subsidiaries to any Person making such a Transaction
Proposal and (y) participate in discussions or negotiations regarding such
Transaction Proposal.

Prior to the withdrawal or modification of any of the
recommendations and resolutions of the General Partner set forth in SECTION
1.2.1 pursuant to SECTION 7.6.1, the Company shall provide Holdings and the
Buyer with a written notice advising them that the Special Committee has
received a Transaction Proposal, specifying the material terms and conditions of
such Transaction Proposal and identifying the Person making such Transaction
Proposal.

NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to Holdings and the Buyer, and Holdings and the Buyer shall give prompt notice
to the Company of: (i) the occurrence or non-occurrence of any event that causes
or could reasonably be expected to cause (a) any representation or warranty made
by it pursuant to this Agreement to be untrue or inaccurate in any material
respect or (b) any covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied by it in any material respect; and (ii) any
material failure to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this SECTION 7.7 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.

STATE TAKEOVER LAWS. If any "fair price" or "control share acquisition"
statute or other similar statute or regulation shall become applicable to the
Offer, the Merger or any of the other transactions contemplated by this
Agreement, the General Partner and the sole member of the Buyer shall use all
commercially reasonable efforts to grant such approvals and to take such other
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
shall otherwise use all commercially reasonable efforts to eliminate the effects
of any such statute or regulation on the transactions contemplated hereby.

CONSUMMATION OF FINANCING. Each of Holdings and the Buyer will use
commercially reasonable efforts to obtain the financing required for the
consummation of the Offer and the Merger pursuant to the Financing Letter, and,
to the extent that all or any portion of such financing becomes unavailable, to
arrange for alternative financing for the Offer and the Merger (to the extent
available on commercially reasonable terms).


Page 17 of 34




CONDITIONS PRECEDENT

CONDITIONS TO EACH PARTY'S OBLIGATION. The respective obligation of
each party to effect the Merger is subject to the satisfaction or waiver of the
following conditions:

UNIT MAJORITY APPROVAL. Unit Majority Approval of this
Agreement, the Merger and transactions contemplated hereby shall have been
obtained, provided that neither Holdings nor the Buyer may assert this condition
unless Holdings, the Buyer and their Affiliates shall vote all Common Units or
Subordinated Units held by any of them in favor of such matters.

HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.

NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity or other legal restraint or prohibition shall be in effect preventing or
prohibiting the acceptance for payment of, or payment for, Common Units pursuant
to the Offer, or the consummation of the Merger; provided, however, that the
parties hereto shall use all commercially reasonable efforts to have any such
injunction, order, restraint or prohibition vacated.

STATUTES; CONSENTS. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any Governmental Entity of
competent jurisdiction that prohibits the consummation of the Merger.

OFFER. The Buyer shall have purchased Common Units pursuant to
the Offer; provided, however, neither Holdings nor the Buyer may assert this
condition if the Buyer shall have failed, in violation of the terms of this
Agreement or the Offer, to purchase the Common Units so tendered and not
withdrawn.


TERMINATION, AMENDMENT AND WAIVER

TERMINATION. This Agreement may be terminated and abandoned at any time
prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the Limited Partners:

by mutual written consent of Holdings, the Buyer and the
Company;

by either Holdings and the Buyer, on one hand, or the Company,
on the other hand, if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting, or if there shall be in effect any other legal restraint
or prohibition preventing or prohibiting, the acceptance for payment of, or
payment for, Common Units pursuant to the Offer or the consummation of the
Merger, and such order, decree, ruling or other action shall have become final
and nonappealable (other than due to the failure of the party seeking to
terminate this Agreement to perform its obligations under this Agreement
required to be performed at or prior to the Effective Time of the Merger);


Page 18 of 34




by the Company, if the Buyer shall not have (i) commenced the
Offer on or before November 25, 2002 or (ii) accepted for payment any Common
Units pursuant to the Offer (other than due to the failure of the Company to
perform its obligations under this Agreement) by January 31, 2003, or, if any
necessary approvals required under the HSR Act shall not have been obtained on
such date, by such date ten Business Days after receipt of all necessary
approvals under the HSR Act;

by Holdings and the Buyer, in the event of a material breach
or failure to perform in any material respect by the Company of any covenant or
other agreement contained in this Agreement or in the event of a breach of any
representation or warranty of the Company that could reasonably be expected to
have a Material Adverse Effect or to materially adversely affect the ability of
the parties to consummate the transactions contemplated hereby, in each case
which cannot be or has not been cured within 10 days after the giving of written
notice to the Company;

by the Company, prior to the Buyer's purchase of any Common
Units pursuant to the Offer, in the event of a material breach or failure to
perform in any material respect by Holdings or the Buyer of any covenant or
other agreement contained in this Agreement or in the event of a breach of any
representation or warranty of Holdings or the Buyer that could reasonably be
expected to materially adversely affect the ability of the parties to consummate
the transactions contemplated hereby, in each case which cannot be or has not
been cured within 10 days after the giving of written notice to Holdings and the
Buyer;

by Holdings and the Buyer, if the Buyer shall not have
accepted for payment any Common Units pursuant to the Offer (other than due to
the failure of Holdings or the Buyer to perform their respective obligations
under this Agreement) by November 25, 2002;

by the Company in response to a Company Superior Proposal, but
only at a time that is during the Company Applicable Period and is after the
fifth Business Day following the Buyer's receipt of written notice advising the
Buyer that the Special Committee is prepared to accept a Company Superior
Proposal, specifying the material terms and conditions of such Company Superior
Proposal and identifying the Person making such Company Superior Proposal; or

by Holdings and the Buyer, if the Special Committee shall,
pursuant to the last sentence of SECTION 1.2.1, withdraw or modify, or resolve
to withdraw or modify, any of the recommendations and resolutions set forth in
SECTION 1.2.1.

EFFECT OF TERMINATION. In the event of termination of this Agreement as
provided in SECTION 9.1, this Agreement shall forthwith become void and have no
effect, without any continuing obligation on the part of Holdings, the Buyer or
the Company, other than the provisions of ARTICLE X.

AMENDMENT. Except as required by law, this Agreement may be amended by
the Company, Holdings and the Buyer at any time prior to the Effective Time.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.


Page 19 of 34




EXTENSION; WAIVER. Subject to the terms of this Agreement to the extent
that they expressly restrict the following, at any time prior to the Effective
Time, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties, (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (iii) subject to the provisions
of SECTION 9.3, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.

SPECIAL COMMITTEE. During the period from the date of this Agreement to
the Effective Time, or the earlier termination of this Agreement, the approval
of the Special Committee shall be required to authorize any termination of this
Agreement by the Company, any amendment or modification of this Agreement
requiring action by the Company or the General Partner, any consent of the
Company or the General Partner under the terms of this Agreement, any extension
of time for performance of any obligation or action hereunder by Holdings or the
Buyer and any waiver of compliance with any of the agreements or conditions
contained herein for the benefit of the Company, the General Partner or the
Limited Partners or other action by the Company or the General Partner hereunder
which could adversely affect the Limited Partners.


GENERAL PROVISIONS

NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.

None of the representations or warranties in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time and all such representations and warranties will be extinguished
on consummation of the Merger; and neither the Company, the General Partner, the
Limited Partners, Holdings, the Buyer or any of their respective officers,
directors, managers, employee, members, Affiliates or representatives shall be
under any liability whatsoever with respect to any such representation or
warranty after such time. This SECTION 10.1 shall not limit any covenant or
agreement of the parties that by its terms contemplates performance after the
Effective Time.

Each of the parties is a sophisticated legal entity that was
advised by knowledgeable counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Accordingly, each of the parties
hereby acknowledges that (i) no party has relied or will rely upon any document
or written or oral information previously furnished to or discovered by it or
its representatives, other than this Agreement, the Disclosure Schedule or any
certificates delivered at the Effective Time pursuant to this Agreement; and
(ii) there are no representations or warranties by or on behalf of any party
hereto or any of its respective Affiliates or representatives other than those
expressly set forth in this Agreement, the Disclosure Schedule or in any
certificates delivered at the Effective Time pursuant to this Agreement


Page 20 of 34




FEES AND EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.

NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given on the day of delivery or transmission, if delivered personally or
transmitted by facsimile, and on the business day after delivery to an overnight
courier service, if delivered by overnight courier, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

if to Holdings or the Buyer, to:

U.S. Timberlands Holdings Group, LLC
U.S. Timberlands Acquisition Co., LLC
625 Madison Avenue
Suite 10-b
New York, New York 10022
Attn: John M. Rudey
Fax: (212) 758-4009

with a copy to:

Swidler Berlin Shereff Friedman, LLP
405 Lexington Avenue
New York, New York 10174
Attn: Martin Nussbaum, Esq.
Fax: (212) 891-9598

if to the Company or the Special Committee, to:

U.S. Timberlands Company, L.P.
c/o U.S. Timberlands Services Company, L.L.C.
625 Madison Avenue
Suite 10-b
New York, New York 10022
Attn: Special Committee of the Board of Directors
Fax: (212) 758-4009

with a copy to:

Alan B. Abramson

and

William W. Wyman

c/o Richards, Layton & Finger
One Rodney Square
Wilmington, Delaware 19899
Attn: Jesse Finkelstein, Esq.
Fax: (302) 651-7701


Page 21 of 34




INTERPRETATION. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."

COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement and the
other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This
Agreement, other than SECTION 7.4, is not intended to confer upon any Person
other than the parties hereto any rights or remedies.

GOVERNING LAW. This agreement shall be governed by, and construed in
accordance with, the internal laws of the state of Delaware, without regard to
conflicts of law principles. The parties hereto agree that any appropriate state
or federal court located in the state of Delaware shall have jurisdiction over
any case or controversy arising hereunder or in connection herewith and shall be
the proper and exclusive forum in which to adjudicate such case or controversy.
Each party hereto agrees to be subject to such jurisdiction and venue.

ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.

ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.


Page 22 of 34





IN WITNESS WHEREOF, Holdings, the Buyer and the Company have caused
this Agreement to be signed as of the date first written above.

U.S. TIMBERLANDS HOLDINGS GROUP, LLC



By:/S/ JOHN M. RUDEY
-----------------
Name: John M. Rudey
Title: President


U.S. TIMBERLANDS ACQUISITION CO., LLC



By:/S/ JOHN M. RUDEY
-----------------
Name: John M. Rudey
Title: President


U.S. TIMBERLANDS COMPANY, L.P.

BY: U.S. TIMBERLANDS SERVICES COMPANY,
L.L.C., ITS GENERAL PARTNER

By:/S/ THOMAS C. LUDLOW
---------------------
Name: Thomas C. Ludlow
Title: Chief Financial Officer


Page 23 of 34





CONDITIONS OF THE OFFER

Notwithstanding any other provision of the Offer or this Agreement, and
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) relating to the Buyer's obligation to pay for or return tendered Common
Units after termination of the Offer, Holdings and the Buyer shall not be
required to accept for payment or pay for any Common Units tendered pursuant to
the Offer and may delay acceptance for payment or may terminate the Offer if
(other than as a result of a breach by Holdings or the Buyer of their respective
obligations under this Agreement):

as of the Expiration Date, less than the Minimum Number of
Common Units have been tendered pursuant to the Offer and not withdrawn;

any applicable waiting period under the HSR Act has not
expired or terminated;

at any time after the date of this Agreement, and before
acceptance for payment of any Common Units, any of the following events shall
occur and be continuing:

there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, promulgated or deemed applicable to the
Offer or the Merger pursuant to authoritative interpretation by or on behalf of
a Governmental Entity that (A) prohibits the acquisition by the Buyer of any the
Common Units under the Offer, or restrains or prohibits the making or
consummation of the Offer or the Merger, (B) prohibits or materially limits the
ownership or operation by the Company, Holdings or any of their respective
Subsidiaries of a material portion of the business or assets of the Company,
Holdings and their Subsidiaries, taken as a whole, or compels the Company or
Holdings or any of their respective Subsidiaries to dispose of or hold separate
any material portion of the business or assets of such Person, in each case as a
result of the Offer or the Merger, (C) imposes material limitations on the
ability of Holdings or the Buyer to acquire or hold, or exercise full rights of
ownership of, any Common Units to be accepted for payment pursuant to the Offer
including, without limitation, the right to vote such Common Units on all
matters properly presented to the limited partners of the Company or (D)
prohibits Holdings or any of its Subsidiaries from effectively controlling in
any material respect any material portion of the business or operations of the
Company, Holdings, or their Subsidiaries, taken as a whole;

there shall be any outstanding litigation with any third
party relating to the Offer, the Merger, this Agreement or the transactions
contemplated hereby which has not been finally dismissed or settled to the
satisfaction of Holdings and the Buyer in their sole discretion, and which is
reasonably likely to have a Material Adverse Effect or a material adverse impact
on the ability of Holdings and Buyer to consummate the Offer or the Merger;

any of the representations and warranties of the Company
contained in the Agreement shall not be true and correct in all material
respects at and as of the date of consummation of the Offer (except to the
extent such representations and warranties speak to an earlier date), as if made
at and as of the date of consummation of the Offer, in each case except as
contemplated or permitted by this Agreement;


Page 24 of 34




the Company shall have failed to perform in all material
respects the obligations required to be performed by it under the Agreement at
or prior to the date of expiration of the Offer, including but not limited to
its obligations pursuant to SECTION 7.6 hereof, except for such failures to
perform as have not had or would not, individually or in the aggregate, have a
Material Adverse Effect or materially adversely affect the ability of the
parties to consummate the transactions contemplated hereby;

the Agreement shall have been terminated in accordance
with its terms;

a material adverse change shall have occurred in the
financial condition, properties, business or results of operations of the
Company and its Subsidiaries taken as a whole; or

The Buyer shall not have received the financing proceeds
contemplated by the Financing Letter or otherwise obtained the funds necessary
to consummate the Offer and the Merger on terms satisfactory to Holdings and the
Buyer; PROVIDED, that Holdings and the Buyer shall have complied with the
provisions of SECTION 7.9.

The foregoing conditions (other than the Minimum Condition) are for the sole
benefit of Holdings and the Buyer and, subject to the Merger Agreement, may be
waived by Holdings or the Buyer, in whole or in part at any time and from time
to time in the sole discretion of Holdings or the Buyer; provided that, without
the express prior written consent of the Company, neither Holdings nor the Buyer
may waive the Minimum Condition.


Page 25 of 34




I
DEFINITIONS

"AFFILIATE" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person. For purposes hereof, "CONTROL"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise; PROVIDED that a
natural person shall not be considered to be an Affiliate of an entity solely as
a result of such natural person's position as an officer, director, manager or
other similar representative of such entity.

"AGREEMENT" shall have the meaning assigned to such term in the
Preamble hereto.

"BUSINESS DAY" means any day, other than Saturday, Sunday or a federal
holiday, and shall consist of the time period from 12:01 a.m. through 12:00
midnight New York City time. In computing any time period under Section 14(d)(5)
or Section 14(d)(6) of the Exchange Act or under Regulation 14D or Regulation
14E, the date of the event which begins the running of such time period shall be
included except that if such event occurs on other than a Business Day such
period shall begin to run on and shall include the first Business Day
thereafter.

"BUYER" shall have the meaning assigned to such term in the Preamble.

"CERTIFICATE" means a certificate representing outstanding Units held
by a Limited Partner immediately prior to the Effective Time.

"CERTIFICATE OF MERGER" means a certificate of merger executed in
accordance with Delaware Law.

"CLOSING" means the consummation of the Merger.

"CLOSING DATE" means the second business day after satisfaction or
waiver of the conditions set forth in ARTICLE VIII.

"COMMENCEMENT DATE" means the date that the Offer is commenced pursuant
to SECTION 1.1.1.

"COMMON UNITS" means the limited partner interests in the Company
designated as "Common Units" in the Existing Partnership Agreement.

"COMPANY" shall have the meaning assigned to such term in the Preamble.

"COMPANY APPLICABLE PERIOD" means the period commencing on the date
hereof and ending at such time as the Buyer pays for all validly tendered Common
Units in the Offer.

"COMPANY SUPERIOR PROPOSAL" means a Transaction Proposal that includes
terms that the Special Committee determines in good faith, after consultation
with its outside legal and financial advisors, to be more favorable to the
Limited Partners than the Offer and the Merger.

"CONFLICTS COMMITTEE" shall have the meaning assigned to such term in
the Existing Partnership Agreement.


Page 26 of 34




"COSTS" shall have the meaning assigned to such term in SECTION 7.4.1.

"COVERED PARTIES" shall have the meaning assigned to such term in
SECTION 7.4.1.

"DELAWARE LAW" means the Delaware Revised Uniform Limited Partnership
Act and the Delaware Limited Liability Company Act.

"DISCLOSURE SCHEDULE" means the disclosure schedule attached to this
Agreement, which contains exceptions to the representations and warranties of
the Company set forth in ARTICLE IV.

"EFFECTIVE TIME" shall have the meaning assigned to such term in
SECTION 2.3.

"ENFORCEABILITY EXCEPTION" shall have the meaning assigned to such term
in SECTION 4.4.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"EXCHANGE AGENT" shall have the meaning assigned to such term in
SECTION 3.3.1.

"EXCLUDED UNITS" means any Units owned by Holdings, the Buyer, the
General Partner or any Affiliates of any of the foregoing.

"EXISTING PARTNERSHIP AGREEMENT" means the Amended and Restated
Agreement of Limited Partnership of the Company, dated as of November 19, 1997.

"EXPIRATION DATE" means the 20th Business Day after the Commencement
Date, subject to extension pursuant to SECTION 1.1.3.

"FINANCING LETTER" shall have the meaning assigned to such term in
SECTION 5.4.

"GENERAL PARTNER" means the general partner of the Company, U.S.
Timberlands Services Company, L.L.C., a Delaware limited liability company.

"GOVERNMENTAL ENTITY" means any Federal, state or local government
administrative agency, commission or other governmental authority or agency,
including any securities exchange or similar quasi-regulatory body.

"HOLDINGS" shall have the meaning assigned to such term in the
Preamble.

"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.

"KNOWLEDGE OF THE COMPANY" means the knowledge, after due inquiry, of
the Board of Directors of the General Partner.

"LIEN" means any pledge, claim, lien, charge, encumbrance or security
interest of any kind or nature whatsoever.

"LIMITED PARTNERS" means any and all holders of the Units; provided,
that the term does not include Holdings, the Buyer, the General Partner or any
Affiliates of any of the foregoing.


Page 27 of 34




"LONG-TERM INCENTIVE PLAN" means the 1997 Long-Term Incentive Plan
established by the General Partner in which certain employees and directors of
the General Partner and its Affiliates are issued Options and/or Phantom Units.

"MATERIAL ADVERSE EFFECT" means, when used in connection with Company,
any effect that either individually or in the aggregate with all other such
effects is materially adverse to the business, financial condition, or results
of operations of the Company and its Subsidiaries taken as a whole; PROVIDED,
however, that a "Material Adverse Effect" with respect to the Company or any of
its Subsidiaries shall not include (i) any adverse change, effect or
circumstance arising out of or resulting from actions contemplated by the
parties in connection with this Agreement or that is attributable to the
announcement or performance of this Agreement or the transactions contemplated
by this Agreement (including, without limitation, a loss of customers or
employees), (ii) changes, effects and circumstances that are the result of
factors generally affecting the industry or specific markets in which the
Company and its Subsidiaries compete, or that are the result of factors
affecting the Company's customers or the industries or markets in which the
Company's customers operate (other than any such change having a materially
disproportionate effect on the Company relative to other industry participants),
(iii) any change, effect or circumstance resulting from changes in general
economic, regulatory or political conditions, conditions in the United States or
worldwide capital markets, any act of terrorism, or any outbreak of hostilities
or war (other than any such condition having a materially disproportionate
effect on the Company relative to other industry participants), (iv) any change
in the trading price or trading volume of the Company's securities (but not any
change, effect or circumstance underlying such change in trading price or
trading volume to the extent such change, effect or circumstance would otherwise
constitute a Material Adverse Effect on the Company), (v) any failure by the
Company to meet any published revenue or earnings projections of a third party
(but not any change, effect or circumstance underlying such failure to the
extent such change, effect or circumstance would otherwise constitute a Material
Adverse Effect on the Company), or (vi) changes, effects or circumstances
resulting from any change in U.S. generally accepted accounting principles or
interpretations thereof.

"MAXIMUM PREMIUM" shall have the meaning assigned to such term in
SECTION 7.4.3.

"MBIA" means MBIA Insurance Corporation, a New York stock insurance
corporation.

"MERGER" shall have the meaning assigned to such term in the Recitals.

"MERGER CONSIDERATION" means an amount of cash per Unit equal to the
Offer Price.

"MINIMUM CONDITION" shall have the meaning assigned to such term in
SECTION 1.1.1 (1).

"MINIMUM NUMBER" means 3,235,776, it being understood that such number
is intended to represent the number of Common Units that, when added to the
Common Units currently held by Holdings and its Affiliates, would exceed fifty
percent (50%) of the aggregate outstanding Common Units.

"OFFER" shall have the meaning assigned to such term in the Recitals.

"OFFER CONDITIONS" shall have the meaning assigned to such term in
SECTION 1.1.1(1).


Page 28 of 34




"OFFER DOCUMENTS" means (i) the Schedule TO and (ii) the offer to
purchase, form of letter of transmittal, summary advertisement and any other
related documents required to be filed as exhibits to the Schedule TO.

"OFFER PRICE" means $3.00.

"OPTIONS" means options to purchase Common Units granted under the
Long-Term Incentive Plan.

"OUTSTANDING" shall have the meaning assigned to such term in the
Existing Partnership Agreement.

"PARTNERSHIP MEETING" shall mean a meeting of the limited partners of
the Company.

"PHANTOM UNITS" means phantom units granted under the Long-Term
Incentive Plan, which, upon vesting, entitle the holder thereof to receive
Common Units.

"PERMITTED INVESTMENTS" means (i) marketable direct obligations having
a term not in excess of 90 days issued or unconditionally guaranteed by the
United States government and backed by the full faith and credit of the United
States; (ii) marketable direct obligations issued by any State of the United
States or any political subdivision of any such state or any public
instrumentality thereof, having the first or second highest rating obtainable
from either Standard & Poor's Ratings Service or Moody's Investor Service, Inc.
and having a term not in excess of 90 days; (iii) certificates of deposit having
a term not in excess of 90 days issued by any commercial bank organized under
the laws of the United States or any State thereof or the District of Columbia
having combined capital and surplus of not less than $100,000,000, provided
that, if such commercial bank is not organized under the laws of the United
States, it must be a member of the Federal Deposit Insurance Corporation; or
(iv) any money market mutual fund, substantially all of which is invested in the
foregoing categories.

"PERSON" means an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization or
other entity.

"PROXY STATEMENT" means the proxy statement relating to the Merger
filed with the SEC, and any amendments and supplements thereto.

"RESPONSIBLE PARTIES" shall have the meaning assigned to such term in
SECTION 7.6.1.

"SCHEDULE 14D-9" means the Solicitation/Recommendation Statement on
Schedule 14D-9 to be filed with the SEC in connection with the Offer, and any
amendments and supplements thereto.

"SCHEDULE TO" means the Tender Offer Statement on Schedule TO to be
filed with the SEC in connection with the Offer, and any amendments and
supplements thereto.

"SEC" means the Securities and Exchange Commission.

"SECRETARY OF STATE" means the Secretary of State of the State of
Delaware.


Page 29 of 34




"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SPECIAL COMMITTEE" shall have the meaning assigned to such term in the
Recitals.

"SUBORDINATED UNITS" means the limited partner interests in the Company
designated as "Subordinated Units" in the Existing Partnership Agreement.

"SUBSIDIARY" means, with respect to any Person, a corporation, limited
liability company, partnership, joint venture or other entity of which such
Person owns, directly or indirectly, more than fifty percent (50%) of the
outstanding equity securities or other interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body or otherwise exercise control of such entity.

"SURVIVING ENTITY" shall have the meaning assigned to such term in
SECTION 2.1.

"TRANSACTION PROPOSAL" means a proposal relating to (or a public
announcement or filing of an intention or plan to engage in) any of the
following involving Company or any of its Subsidiaries (other than the
transactions between the Company, Holdings and the Buyer contemplated by the
Offer and this Agreement): (i) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (ii) except
in the ordinary course of business, any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 10% or more of the assets of the Company and
its Subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for, or the acquisition
of (or right to acquire) "beneficial ownership" by any person, "group" or entity
(as such terms are defined under Section 13 (d) of the Exchange Act), of 20% or
more of the outstanding Common Units; or (iv) any recapitalization, liquidation,
dissolution or similar transaction.

"TREASURY UNITS" means any Units owned by the Company or by any
wholly-owned Subsidiary of the Company.

"UNIT MAJORITY APPROVAL" means the approval of at least (i) a majority
of the Outstanding Common Units, voting as a class and (ii) a majority of the
Outstanding Subordinated Units, voting as a class.

"UNITS" means the Common Units and the Subordinated Units.


Page 30 of 34





DISCLOSURE SCHEDULE


SECTION 4.2


SUBSIDIARIES

SUBSIDIARIES:
- ------------




NAME OWNERSHIP
- ---- ---------

U.S. Timberlands Klamath Falls, LLC 99% owned by the Company; 1% owned by U.S. Timberlands
Services, LLC

U.S. Timberlands Finance Corp. 100% owned by U.S. Timberlands Klamath Falls, LLC

OTHER OWNERSHIP INTERESTS:
- -------------------------

NAME OWNERSHIP
- ---- ---------
UST Yakima Holdings II, LLC 49% owned by the Company; 51% owned by U.S. Timberlands
Holdings Group L.L.C.

UST Yakima Holdings, LLC 100% owned by UST Yakima Holdings II, LLC




Page 31 of 34





DISCLOSURE SCHEDULE


SECTION 4.3


CAPITALIZATION

OPTIONS:
- -------



NUMBER OF COMMON UNITS
OPTIONHOLDER ISSUABLE UPON EXERCISE EXERCISE PRICE EXPIRATION DATE
- ------------ ---------------------- -------------- ---------------

John M. Rudey 93,233 $14.75 n/a
John M. Rudey 13,985 $14.75 n/a
John M. Rudey 50,000 $13.375 n/a
George R. Hornig 93,233 $14.75 n/a
George R. Hornig 13,985 $14.75 n/a
George R. Hornig 50,000 $13.375 n/a
Martin Lugus 55,940 $14.75 n/a
Martin Lugus 8,391 $14.75 n/a
Robert A. Broadhead 29,835 $14.75 n/a
Robert A. Broadhead 4,475 $14.75 n/a
Christopher J. Sokol 29,835 $14.75 n/a
Christopher J. Sokol 4,475 $14.75 n/a
Walter L. Barnes 29,835 $14.75 n/a
Walter L. Barnes 4,475 $14.75 n/a
Alan B. Abramson 50,000 $13.375 n/a
William W. Wyman 50,000 $13.375 n/a
William J. Barnett 1,000 $13.375 n/a
Lon D. Casebeer 1,000 $13.375 n/a
Edward D. DeWitt 1,000 $13.375 n/a
Jeffrey B. Dixon 1,000 $13.375 n/a
Poli L. Hubbard 1,000 $13.375 n/a
Michael S. Garrett 1,000 $13.375 n/a
Catherine M. Gray 1,000 $13.375 n/a
Thomas G. Greenleaf 1,000 $13.375 n/a
Sandra K. Hanford 1,000 $13.375 n/a
Brad A. Johnson 1,000 $13.375 n/a
Cassandra S. Maxwell 1,000 $13.375 n/a
Cheryl A. Ramos (Ellis) 1,000 $13.375 n/a
Dallas L. Suthpin 1,000 $13.375 n/a
Diane M. VanDusen 1,000 $13.375 n/a
Jeffrey J. Vermilya 1,000 $13.375 n/a
Jeffrey Jones 34,310 $11.75 n/a
Thomas C. Ludlow 50,000 $9.813 n/a
Rich Ryder 1,000 $9.75 n/a
Martha Brunnemer 1,000 $6.75 n/a
Maria Corralles 1,000 $5.84 n/a



Page 32 of 34




Exhibit 99.1


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly report of U.S. Timberlands Company,
L.P. (the "Company") on Form 10-Q for the period ending September 30, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, John M. Rudey, Chief Executive Officer of the general partner of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.


/s/ John M. Rudey

John M. Rudey
Chief Executive Officer
November 14, 2002


Page 33 of 34




Exhibit 99.2


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly report of U.S. Timberlands Company,
L.P. (the "Company") on Form 10-Q for the period ending September 30, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Thomas C. Ludlow, Chief Financial Officer of the general partner
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.


/s/ Thomas C. Ludlow

Thomas C. Ludlow
Chief Financial Officer
November 14, 2002



Page 34 of 34