UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3203
CHESAPEAKE CORPORATION
Incorporated under the laws I.R.S. Employer
of Virginia Identification No. 54-0166880
1021 East Cary Street
P. O. Box 2350
Richmond, Virginia 23218-2350
Telephone Number (804) 697-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $1 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value on February 26, 1999, of the voting stock
held by non-affiliates of the registrant was $658 million. In determining
this figure, the registrant has assumed that all of its directors and
officers are affiliates. This assumption shall not be deemed conclusive
for any other purpose.
21,473,622 shares of the registrant's common stock, par value $1, were
outstanding as of February 26, 1999.
Portions of the registrant's Annual Report to Stockholders for the year
ended December 31, 1998 are incorporated in Parts I, II and IV by
reference. Portions of the registrant's definitive Proxy Statement for the
annual meeting of stockholders to be held on April 28, 1999, are
incorporated in Part III by reference.
PART I
Item 1. Business
GENERAL
Chesapeake Corporation (the "Company"), a Virginia
corporation organized in 1918, is primarily engaged in the
manufacture and sale of value-added commercial tissue products
and specialty packaging and displays; and Forest Products and
Land Development. The Company conducts its business in three
industry segments. The business units included in each industry
segment and their respective principal products are as follows:
the Tissue segment -- Wisconsin Tissue Mills Inc. and Wisconsin
Tissue de Mexico, S.A. de C.V.(commercial and industrial tissue
products); the Specialty Packaging segment -- Chesapeake Display
and Packaging Company, Chesapeake Europe S.A., and Chesapeake
Packaging Co. (point-of-sale displays, graphic packaging, and
corrugated shipping containers); and the Forest Products/Land
Development segment -- Chesapeake Forest Products Company and
Chesapeake Building Products Company (woodlands operations and
building products) and Delmarva Properties, Inc. and Stonehouse
Inc. (land development).
Chesapeake competes in specialty product markets that
management believes have growth potential or in which the Company
has or may be able to achieve competitive advantages.
Chesapeake's strategy is to utilize its recycling expertise
creatively, to differentiate itself from its competition by
designing and manufacturing products that are distinctive, and to
respond to changing customer requirements by providing a
combination of products and services that it believes other
suppliers cannot provide. Management believes this strategy
allows the Company to achieve greater profits and better utilize
Chesapeake's strengths. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" of the
Company's 1998 Annual Report to Stockholders (the "1998 Annual
Report") incorporated herein by reference.
Information with respect to business segments and
international sales and long-lived assets is presented in "Notes
to Consolidated Financial Statements, Note 15-Business Segment
Information" of the 1998 Annual Report and is incorporated herein
by reference. Information with respect to the Company's working
capital practices is set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations, Liquidity and Capital Resources" of the 1998 Annual
Report and is incorporated herein by reference. Information
regarding the Company's anticipated capital spending is set forth
under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations, 1999 Outlook" of
the 1998 Annual Report and is incorporated herein by reference.
RECENT COMPANY HISTORY
Over the past several years Chesapeake repositioned itself,
reconfiguring its mix of business from that of a natural
resources based, commodity products company to a marketing
focused supplier of specialty products for selected markets.
In 1995, Chesapeake expanded its Tissue segment with the
acquisition of paper mills in Arizona and Illinois, which
increased primary tissue production capacity by 90,000 tons per
year, or approximately 50%. Further expansion of the Tissue
segment occurred in 1996 as new converting facilities in Arizona
and New York began full operation.
Expansion in the Specialty Packaging segment over the last
three years has included: new graphic packaging plants in
California and Mississippi; new custom packing operations in
Tennessee, Pennsylvania, and Ohio; and the acquisitions of point-
of-sale and packaging operations in Kentucky. Capital
expenditures intended to enhance efficiency, and to improve
product quality and productivity, were made at several existing
packaging facilities during the same period.
Chesapeake expanded internationally for the first time
during 1996, acquiring display and packaging facilities in Canada
and France as well as tissue converting operations in Mexico.
Included in these acquisitions were the operations of the former
Display Division of Dyment Limited, with locations in Canada and
the United States. In 1996, Chesapeake also purchased the point-
of-sale display and packaging businesses of Sailliard S.A., a
French manufacturer. The businesses acquired included operations
specializing in the design and manufacture of permanent and
temporary point-of-sale displays; the design and manufacture of
rigid boxes, with a focus on perfume, champagne, and specialty
products customers; and the design, printing, and manufacture of
folding cartons for the luxury goods and pharmaceutical
industries. These businesses, known collectively as Chesapeake
Europe, S.A., complement the Specialty Packaging segment's U.S.
operations by offering customers global packaging solutions. The
Tissue segment's operations located in Mexico were acquired in
late 1996 from Jokel Desarrollos, S.A. de C.V. and Ambitec, S.A.
de C.V.
In February 1998, CP acquired substantially all of the
assets, and assumed certain liabilities, of Rock City Box Co.,
Inc., in Utica, NY. This operation manufactures corrugated
containers, trays, and pallets, as well as wood and foam
packaging products. In November 1998, the Company acquired all of
the outstanding capital stock of Capitol Packaging Corporation, a
specialty packaging company in Denver, CO.
On May 23, 1997, Chesapeake sold the West Point, VA, kraft
products mill, four corrugated container plants, and other
related assets to St. Laurent Paperboard (U.S.) Inc. This sale
was a major step forward in Chesapeake's strategy of focusing on
its faster-growing packaging and tissue operations. The sale also
reduced the capital intensity and cyclicality of the Company's
mix of businesses. See "Notes to Consolidated Financial
Statements, Note 2 - Acquisitions and Divestitures" of the 1998
Annual Report, incorporated herein by reference.
During 1997, the Company recorded restructuring and other
special charges related primarily to its Specialty Packaging
segment that provided for costs associated with management
reorganization and the closures of one point-of-sale display
facility and one graphic packaging facility. See "Notes to
Consolidated Financial Statements, Note 13 - Commitments and
Other Matters" of the 1998 Annual Report, incorporated herein by
reference.
During 1998, the Company recorded a restructuring charge as
a result of a management review of its Tissue and Specialty
Packaging segments, which included organization and cost
structures, facility utilization, and product offerings. See
"Notes to Consolidated Financial Statements, Note 13 -
Commitments and Other Matters" of the 1998 Annual Report,
incorporated herein by reference.
The Company is currently evaluating strategic alternatives
regarding the Forest Products/Land Development segment's
timberlands and building products businesses.
In January 1999, the Company announced plans to build a new
tissue mill and converting facility in Halifax County, North
Carolina. Also, in January 1999, the Company made an offer to
acquire all of the outstanding shares of Field Group plc, a
leading European packaging company with headquarters in the
United Kingdom. In February 1999, the Company increased its
offer. On March 5, 1999, the Company announced it had received
shareholder acceptances, received irrevocable undertakings, or
acquired shares totaling 88% of the outstanding share capital of
Field Group PLC and therefore declared the offer wholly
unconditional. See "Notes to Consolidated Financial Statements,
Note 14 - Subsequent Events" of the 1998 Annual Report,
incorporated herein by reference.
TISSUE SEGMENT
Chesapeake's Tissue segment, which consists of Wisconsin
Tissue Mills Inc. and Wisconsin Tissue de Mexico, S.A. de C.V.
(collectively, "Wisconsin Tissue" or "WT"), produces tissue for
industrial and commercial markets including full-menu and fast-
food restaurants, hotels, motels, clubs, health care facilities,
schools, office locations, and commercial airlines. Print
quality and the ability to deliver a full range of products to
customers quickly throughout North America are critical
capabilities.
Operations of the Tissue segment include: paper mills in
Menasha, WI, Flagstaff, AZ, and Chicago, IL; and converting and
distribution facilities in Neenah, WI, Bellemont, AZ, Greenwich,
NY, and Toluca, Mexico. The combined operations sell over 2,200
products, including napkins, tablecovers, toweling, placemats,
wipers, and facial and bathroom tissue. Wisconsin Tissue's
products are sold throughout the United States, Canada, and
Mexico using a dedicated sales force and independent
distributors.
The raw material for the paper manufactured by Wisconsin
Tissue is 100% recovered paper. Tissue operations require major
investments in paper machines, fiber preparation equipment, and
converting equipment. Wisconsin Tissue's seven paper machines
manufacture various weights and grades of tissue that is
converted on approximately 150 specialized machines. Shipments
of converted products by Wisconsin Tissue were 299,000 tons in
1998, 268,000 tons in 1997, and 253,000 tons in 1996.
SPECIALTY PACKAGING SEGMENT
Chesapeake's Specialty Packaging segment is composed of
Chesapeake Display and Packaging Company ("CD&P"), which designs
and manufactures point-of-sale displays and graphic packaging in
the United States, Canada, and Europe, and Chesapeake Packaging
Co. ("CP"), which produces corrugated shipping containers in the
United States. Specialty Packaging products are sold using a
dedicated sales force. Specialty Packaging operations use
various converting equipment to print, cut, slot, and glue
packaging, displays, or containers to customer specifications.
The primary raw materials for the packaging plants include
linerboard and corrugating medium, which are converted to make
the walls of the packaging unit.
Chesapeake Display and Packaging
CD&P designs, manufactures, and, in some cases, packs and
distributes display and promotional units that are used as
marketing tools in supermarkets, video stores, convenience
stores, and other retail locations. Point-of sale displays are
free-standing and highlight or advertise a specific product or
set of products for customers. Most point-of-sale displays are
temporary and are used to support a specific product
advertisement or roll-out. However, they can also be more
permanent when constructed out of wood and/or plastic. Design
creativity, strength, and high quality printing are critical
capabilities.
CD&P operates a network of sixteen design, manufacturing,
assembly, packaging, and distribution facilities throughout the
United States and Europe and provides its customers with a wide
range of products and services, including graphic and structural
design, in-house manufacturing, project management, assembly,
custom packing, and distribution.
CD&P also designs and manufactures light-weight graphic
packaging that is used by consumer products companies to pack,
store, stack, and display retail products. Litho-laminated,
printed corrugated packaging is preferred by mass merchandisers
because of its superior graphic appearance and stacking strength.
As with point-of sale displays, CD&P offers turn-key service
to its graphic packaging customers by providing CAD-CAM
mechanical design, digital art board, graphic design, die making,
product testing, and full customer support. CD&P operates three
dedicated graphic packaging facilities in Visalia, CA, Richmond,
IN, and Pelahatchie, MS, that are capable of servicing national
accounts.
Chesapeake Europe produces point-of-sale displays, rigid and
luxury boxes, and specialty folding cartons in seven facilities
in France, primarily for consumer and luxury goods producers in
France.
Chesapeake Packaging
CP consists of ten corrugated shipping container plants
located in seven states, which manufacture corrugated boxes and
specialty packaging primarily for customers within each plant's
regional area.
FOREST PRODUCTS/LAND DEVELOPMENT SEGMENT
Chesapeake's Forest Product/Land Development segment
consists of Chesapeake Forest Products Company, Chesapeake
Building Products Company, Delmarva Properties, Inc. and
Stonehouse Inc.
Chesapeake Forest Products
Chesapeake Forest Products Company ("CFPC") owns and
actively manages approximately 321,000 acres of timberland
located in Virginia, Maryland, and Delaware. Chesapeake's
forests are managed to maximize the harvest of sawtimber using
environmentally sound, modern forestry methods.
Approximately 98% of CFPC's external sales consist of
pulpwood sales to St. Laurent. CFPC also produces sawtimber
which it sells internally to Chesapeake Building Products.
Chesapeake Building Products
Chesapeake Building Products Company operates three sawmills
in Virginia and Maryland, which primarily manufacture pine
lumber. Over 50% of the sawtimber processed at the mills is
purchased from CFPC. The remainder is purchased from independent
timber owners. Sawmill products are sold by an internal sales
force to independent brokers and retailers.
Delmarva Properties, Inc. and Stonehouse Inc.
Delmarva Properties, Inc. and Stonehouse Inc. develop and
market land that is expected to be more valuable when used as
developed property than as timberland. Delmarva Properties is
currently developing approximately 5,200 acres in Virginia,
Maryland, and Delaware, primarily for residential housing. Sales
include large lots and acreage for third parties to develop for
both residential and commercial uses. Another major project
involves the development of a 3,200 acre mixed-use site in New
Kent, VA.
Stonehouse Inc. is a 50% partner in a joint venture with
Dominion Capital, Inc. to develop a 7,600 acre planned community
in James City County, VA. The majority of the land currently
being developed by both of Chesapeake's land development entities
was timberland formerly owned by Chesapeake Forest Products
Company.
RISKS AND UNCERTAINITIES
The information presented under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations, Risk Management" and "Notes to Consolidated Financial
Statements, Note 1(j)-Risks and Uncertainties" of the 1998 Annual
Report is incorporated herein by reference.
RAW MATERIALS
Most of the Company's raw materials are readily available at
competitive market prices. The raw material for the paper
manufactured by the Tissue segment is 100% recovered paper
purchased from independent dealers and brokers on the open
market. Prices of recovered paper remained at moderate levels in
1997 and 1998. The primary raw materials for the Specialty
Packaging segment are linerboard and corrugating medium, which is
converted to make the walls of the packaging unit. The raw
materials for the Specialty Packaging segment are purchased from
various suppliers at market prices.
ENVIRONMENTAL
Chesapeake has a strong commitment to protecting the
environment. The Company has an environmental audit program to
monitor compliance with environmental laws and regulations. The
Company is committed to abiding by the environmental, health, and
safety principles of the American Forest & Paper Association.
Each expansion project has been planned to comply with applicable
environmental regulations and to enhance environmental protection
at existing facilities. The Company faces increasing capital
expenditures and operating costs to comply with expanding and
more stringent environmental regulations, although compliance
with existing environmental regulations is not expected to have a
material adverse effect on the Company's earnings, financial
position, cash flows, or competitive position.
The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and similar state "Superfund" laws
impose liability, without regard to fault or to the legality of
the original action, on certain classes of persons (referred to
as potentially responsible parties or "PRPs") associated with a
release or threat of a release of hazardous substances into the
environment. Financial responsibility for the clean-up or other
remediation of contaminated property or for natural resource
damages can extend to previously owned or used properties,
waterways, and properties owned by third parties, as well as to
properties currently owned and used by a company even if
contamination is attributable entirely to prior owners. As
discussed below, the U.S. Environmental Protection Agency ("EPA")
has given notice of its intent to list the lower Fox River in
Wisconsin on the National Priorities List under CERCLA and has
identified WT as a PRP.
Except for the Fox River matter, the Company has not been
identified as a PRP at any CERCLA-related sites. However, there
can be no assurance that the Company will not be named as a PRP
at any other sites in the future, or that the costs associated
with additional sites would not be material to the Company's
financial position, results of operations, or cash flows.
In June 1994, the United States Department of Interior, Fish
and Wildlife Service ("FWS"), a federal natural resources
trustee, notified WT that it had identified WT and four other
companies located along the lower Fox River in northeast
Wisconsin as PRPs for purposes of natural resources liability
under CERCLA arising from alleged releases of polychlorinated
biphenyls ("PCBs") in the Fox River and Green Bay System. Two
other companies subsequently received similar notices from the
FWS. The FWS and other governmental and tribal entities,
including the State of Wisconsin, allege that natural resources,
including endangered species, fish, birds, tribal lands, or lands
held by the United States in trust for various Indian tribes,
have been exposed to PCBs that were released from facilities
located along the lower Fox River. The FWS is proceeding with a
natural resource damage assessment with respect to the alleged
discharges. On January 31, 1997, the FWS notified WT of its
intent to file suit, subject to final approval by the Department
of Justice, against WT to recover alleged natural resource
damages. WT and other PRPs are engaged in discussions with the
parties asserting trusteeship of the natural resources concerning
the damage assessment and the basis for resolution of the natural
resource damage claims.
WT and other PRPs are also engaged in discussions with the
State of Wisconsin with respect to resolving possible state
claims concerning remediation, restoration and natural resource
damages related to the alleged discharge of PCBs into the Fox
River and Green Bay System. Under an interim agreement with the
State of Wisconsin, the PRPs are providing funds for an interim
phase of resource damage assessment and restoration work. WT's
obligation under the agreement is not material to the Company's
financial position or results of operations.
On June 18, 1997, the EPA announced that it was initiating
the process of listing the lower Fox River on the CERCLA National
Priorities List of hazardous waste sites. The EPA identified
several PRPs, including WT. By early 1998, the EPA and the
Wisconsin Department of Natural Resources ("DNR") had initiated a
remedial investigation/ feasibility study ("RI/FS") of the lower
Fox River site.
On February 26, 1999, the DNR released for public comment a
draft RI/FS for the lower Fox River site. In the draft RI/FS,
the DNR reviewed and summarized several categories of possible
remedial alternatives for the site, estimated to cost in the
range of $143 million to $721 million, but did not identify a
preferred remedy. (As required by applicable regulations, the
draft RI/FS also includes a "no action" alternative that does not
entail remediation costs, but the Company does not believe that
the "no action" alternative will be selected). There can be no
assurance that many of the cost estimates in the draft RI/FS will
not differ significantly from actual costs. Public comments on
the draft RI/FS must be submitted by April 12, 1999. WT intends
to submit its comments prior to that deadline. After
consideration of public comment, the draft RI/FS may be revised
to add to, delete or amend the alternatives for managing
contaminated sediments. Later this year, after finalizing the
RI/FS, the DNR and the EPA are expected to announce a preferred
remedial alternative in a Proposed Remedial Action Plan. The
Proposed Remedial Action Plan will be subject to a public comment
period, and enforcement of any definitive Remedial Action Plan
may be subject to judicial review.
The largest components of the costs of the more expensive
clean-up alternatives presented in the draft RI/FS are
attributable to large-scale sediment removal, treatment and
disposal. Based on current information and advice from its
environmental consultants, WT believes that an aggressive effort
to remove substantial amounts of PCB-contaminated sediments (most
of which are buried under cleaner material or are otherwise
unlikely to move), as contemplated by certain alternatives
presented in the draft RI/FS, would be environmentally
detrimental and therefore inappropriate. Instead, WT believes
that less intrusive alternatives are more environmentally
appropriate, cost effective and responsible methods of managing
risks attributable to sediment contamination.
The ultimate cost to WT associated with these matters cannot
be predicted with certainty at this time, due to uncertainties
with respect to: which, if any, of the remedial alternatives
presented in the draft RI/FS will be implemented, and
uncertainties associated with the actual costs of each of the
potential alternatives; the outcome of the federal and state
natural resource damage assessments; WT's share of any multi-
party clean-up/restoration expenses; the timing of any clean-
up/restoration; the evolving nature of clean-up/restoration
technologies and governmental regulations; controlling legal
precedent; the extent to which contribution will be available
from other parties; and the scope of potential recoveries from
insurance carriers and prior owners of WT. While such costs
cannot be predicted with certainty at this time, the Company
believes that the ultimate clean-up/restoration costs associated
with the lower Fox River site may exceed $100 million for all
PRPs in the aggregate. Under CERCLA, each PRP generally will be
jointly and severally liable for the full amount of the clean-up
costs, subject to a right of contribution from the other PRPs.
In practice, PRPs generally negotiate among themselves to
determine their respective contributions to any multi-party
cleanup/restoration, based upon factors including their
respective contributions to the alleged contamination and their
ability to pay. Based on presently available information, the
Company believes that several of the named PRPs will be able to
pay substantial shares toward remediation and restoration, and
that there are additional parties, some of which have substantial
resources, that may also be jointly and severally liable.
The Company also believes that it is entitled to substantial
indemnification from a prior owner of WT, pursuant to a stock
purchase agreement between the parties, with respect to
liabilities related to this matter. The Company believes that
the prior owner intends to, and has the financial ability to,
honor its indemnification obligation under the stock purchase
agreement.
Based on presently available information, the Company
believes that if any remediation/restoration is done in an
environmentally appropriate, cost effective and responsible
manner, the matter is unlikely to have a material adverse effect
on the Company's financial position, liquidity or results of
operations. However, because of the uncertainties described
above, there can be no assurance that WT's ultimate liability
with respect to the lower Fox River site will not have a material
adverse effect on the Company's financial position, liquidity or
results of operations.
The EPA has stated its intent to develop additional draft
rules under the Clean Water Act and the Clean Air Act, which
would impose new air and water quality standards for pulp and
paper mills (the "Cluster Rules"). The eventual capital cost
impact on the Company of compliance with the additional Cluster
Rules is not presently determinable and will depend on a number
of factors, including the scope of the standards imposed and time
permitted for compliance; the Company's strategic decisions
related to compliance, including potential changes in product mix
and market; and development in compliance technology.
In March 1998, WT's Chicago, IL, tissue mill received a
Notice of Violation from EPA alleging violation of the Illinois
State Implementation Plan as adopted pursuant to the Clean Air
Act. The alleged violation involves the emission of volatile
organic material. WT is in the process of negotiating a possible
resolution of the alleged violation with EPA. The ultimate cost
to WT, if any, associated with the alleged violation cannot be
determined with certainty at this time due to the absence of a
determination that there has been a violation, and, if a
violation is found to have occurred, a determination of the
appropriate capture and control techniques or other corrective
action and the cost thereof, and the amount of any penalties
imposed by EPA. WT believes that it is entitled to significant
indemnification for any costs or expenses incurred with regard to
this matter from the prior owner of the Chicago mill and that the
prior owner has the financial ability to honor its
indemnification obligation.
On July 17, 1998, WT's Menasha, WI, tissue mill received a Notice
of Violation from the Wisconsin Department of Natural Resources
("WDNR") alleging violations involving emission of volatile
organic compounds and reporting requirements. WT has resolved the
alleged violations by agreement with WDNR without a finding that
violations occurred and without significant financial or
operational effects on WT.
EMPLOYEES
As of December 31, 1998, the Company had 5,557 employees.
The Company believes that its relations with its employees are
good. In 1997, Wisconsin Tissue entered into a five-year
collective bargaining agreement with the union representing
employees in Menasha, WI. During 1998, Wisconsin Tissue
implemented an enhanced retirement program for certain salaried
employees. See "Notes to Consolidated Financial Statements, Note
6 - Employee Retirement and Postretirement Benefits" of the 1998
Annual Report, incorporated herein by reference.
COMPETITION AND SEASONALITY
Chesapeake has many customers who buy its products. With
the exception of CFPC's pulpwood sales to St. Laurent, the
Company is not dependent on any single customer, or group of
customers, in any of its business segments. Longstanding
relationships exist with many customers who place orders on a
continuing basis. Because of the nature of Chesapeake's
businesses, order backlogs are not large. The third quarter of
each year usually generates the highest sales and earnings.
Chesapeake's largest businesses generally experience peak
operational activity during the months of August through October.
Competition is intense in the Tissue and Specialty Packaging
segments from much larger companies and from local and regional
producers and converters. The Company competes by
differentiating itself through product design and exceptional
customer service. The Company believes that competitive factors
in the industries in which it competes preclude a meaningful
estimate of the number of competitors and the Company's relative
competitive position.
RESEARCH AND DEVELOPMENT
In addition to forestry research programs, the Company
conducts limited continuing technical research and development
projects relating to new products and improvements of existing
products and processes. Expenditures for research and
development activities are not material.
TRADEMARKS
The Company utilizes various trademarks in the course of its
business, none of which are individually material.
Item 2. Properties
At year-end 1998, Chesapeake manufactured its products at
multiple facilities in 17 states, Canada, Mexico, and France. The
information presented under "Operating Locations" in the 1998
Annual Report is incorporated herein by reference. The Company
believes that its production facilities are well maintained and
in good operating condition, and are utilized at practical
capacities that vary in accordance with product mixes, market
conditions, and machine configurations.
Item 3. Legal Proceedings
The information presented in "Notes to Consolidated
Financial Statements, Note 10 - Litigation" of the 1998 Annual
Report is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
None
Executive Officers of the Registrant
The name and age of each executive officer of the Company
as of February 28, 1999, together with a brief description of the
principal occupation or employment of each such person during the
past five years, is set forth below. Executive officers serve at
the pleasure of the board of directors and are generally elected
at each annual organizational meeting of the board of directors.
Thomas H. Johnson (49)
President and Chief Executive Officer since 1997
Vice Chairman, Riverwood International Corporation(1996-1997)
President and Chief Executive Officer, Riverwood
International Corporation (1989-1996)
Octavio Orta (54)
Executive Vice President-Display & Packaging since 1998
President of Chesapeake Display & Packaging Company since 1998
Senior Vice President-Coated Board Sales & Packaging
Operations Groups, Riverwood International
Corporation(1995-1998)
Senior Vice President, Europe and Asia/Pacific, Riverwood
International Corporation (1993-1995)
William A. Raaths (52)
Executive Vice President-Tissue Products since 1998
President-Wisconsin Tissue Mills Inc. since 1995
Group Vice President-Tissue Products (1995-1998)
Executive Vice President-Wisconsin Tissue Mills Inc. (1994-
1995)
President, Chesapeake Consumer Products Company (1989-1994)
J. P. Causey Jr. (55)
Senior Vice President, Secretary & General Counsel since 1995
Vice President, Secretary & General Counsel (1986-1995)
Andrew J. Kohut (40)
Senior Vice President-Strategic Business Development since
1998
Group Vice President-Specialty Packaging & Merchandising
Services (1996-1998)
Group Vice President-Finance & Strategic Development (1995-
1996)
Chief Financial Officer (1991-1996)
Vice President-Finance (1991-1995)
Robert F. Schick (56)
Senior Vice President-Containers since 1998
President of Chesapeake Packaging Co. since 1996
Vice President-Containers (1997-1998)
Vice President-Operations Chesapeake Packaging Co. (1988-1996)
William T. Tolley (41)
Senior Vice President-Finance & Chief Financial Officer since
1998
Group Vice President-Finance & Chief Financial Officer (1996-
1998)
Vice President, Finance & Chief Financial Officer, Carrier
Corporation, North American Operations, a division of United
Technologies (1995-1996)
Vice President & Chief Financial Officer, Carrier Transicold,
a division of United Technologies (1991-1995)
Jack C. King (56)
Vice President - Forest Resources since 1998
President of Chesapeake Forest Products Company since 1996
President of Chesapeake Building Products Company since 1990
Vice President of Cheapeake Forest Products Company (1989-
1996)
Thomas A. Smith (52)
Vice President-Human Resources & Assistant Secretary since
1987
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The dividend and stock price information presented under the
caption "Recent Quarterly Results" of the 1998 Annual Report is
incorporated herein by reference. The Company's common stock is
listed on the New York Stock Exchange under the symbol "CSK". As
of February 28, 1999, there were 6,681 stockholders of record of
the Company's common stock.
The Company has certain loan agreements related to a portion
of its debt, none of which materially limit the Company's ability
to pay dividends. See "Notes to Consolidated Financial
Statements, Note 4 - Long-Term Debt" of the 1998 Annual Report,
incorporated herein by reference.
Item 6. Selected Financial Data
The information for the years 1994-1998 presented under the
caption "Eleven-Year Comparative Record" of the 1998 Annual
Report is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information presented under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" of the 1998 Annual Report, except the information set
forth under the caption "Environmental" therein, is incorporated
herein by reference. The information set forth under the caption
"Environmental" in Item 1 - "Business" of this Form 10-K is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of the Company and its
subsidiaries, including the notes thereto, and the information
presented under the caption "Recent Quarterly Results" of the
1998 Annual Report, are incorporated herein by reference. The
"Report of Independent Accountants" as presented in the Company's
1998 Annual Report is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information presented under the captions "Information
Concerning Nominees", "Directors Continuing in Office", and
"Section 16(a) Beneficial Ownership Reporting Compliance" of the
Company's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held April 28, 1999 (the "1999 Proxy
Statement"), and the information presented under the caption
"Executive Officers of the Registrant" in Part I of this Form 10-
K, is incorporated herein by reference.
Item 11. Executive Compensation
The information presented under the captions "Compensation
of Directors" and "Executive Compensation" of the 1999 Proxy
Statement (excluding, however, the information presented under
the subheadings "Compensation Committee Report on Executive
Compensation" and "Performance Graph") is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information presented under the caption "Security
Ownership of Certain Beneficial Owners and Management" of the
1999 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information presented under the caption "Certain
Relationships and Related Transactions" of the 1999 Proxy
Statement is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
a. Documents
(i) Financial Statements
The consolidated balance sheet of
Chesapeake Corporation and subsidiaries as of
December 31, 1998 and 1997, and the related
consolidated statements of income, retained
earnings, and comprehensive income, and cash
flows for each of the three years in the
period ended December 31, 1998, including the
notes thereto, are presented in the 1998
Annual Report and are incorporated herein by
reference. The "Report of Independent
Accountants" as presented in the 1998 Annual
Report is incorporated herein by reference.
With the exception of the aforementioned
information, and the information incorporated
by reference in numbered Items 1, 2, 3, 5, 6,
7 and 8 of this Form 10-K, no other data
appearing in the 1998 Annual Report is deemed
to be "filed" as part of this Form 10-K.
(ii) Financial Statement Schedules
Schedule II "Valuation and Qualifying
Accounts" for the three years ended December
31, 1998, is found on page 20 hereof. No
other schedules are filed as part of this
report because they are not applicable or are
not required.
The "Report of Independent Accountants on
Financial Statements Schedules" with respect
to the foregoing schedule is found on page 19
hereof.
(iii) Exhibits filed or incorporated by reference
The exhibits that are required to be
filed or incorporated by reference herein are
listed in the Exhibit Index found on pages 21-
23 hereof. Exhibits 10.1-10.16 hereto
constitute management contracts or
compensatory plans or arrangements required
to be filed as exhibits hereto.
b. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CHESAPEAKE CORPORATION
(Registrant)
February 17, 1999
By /s/ WILLIAM T. TOLLEY
William T. Tolley
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated.
By /s/ ROBERT L. HINTZ By /s/ WALLACE STETTINIUS
Robert L. Hintz Wallace Stettinius
Director Director
By /s/ THOMAS H. JOHNSON By /s/ RICHARD G. TILGHMAN
Thomas H. Johnson Richard G. Tilghman
Director; Chief Executive Director
Officer and President
By /s/ WILLIAM D. McCOY By /s/ JOSEPH P. VIVIANO
William D. McCoy Joseph P. Viviano
Director Director
By /s/ JOHN W. ROSENBLUM By /s/ HARRY H. WARNER
John W. Rosenblum Harry H. Warner
Director Chairman of the Board
By /s/ FRANK S. ROYAL By /s/ WILLIAM T. TOLLEY
Frank S. Royal William T. Tolley
Director Chief
Financial and
Accounting Officer
Each of the above signatures is affixed as of February 17, 1999.
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Chesapeake Corporation:
Our audits of the consolidated financial statements referred to
in our report dated February 12, 1999 appearing in the 1998
Annual Report to Shareholders of Chesapeake Corporation (which
report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item
14(a)(ii) of this Form 10-K. In our opinion, the financial
statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Richmond, Virginia
February 12, 1999
CHESAPEAKE CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(A) (B) (C) (D) (E)
Additions
Balance at charged to
beginning costs and Balance
Description of year expenses Deductions end of year
(In millions)
Valuation accounts deducted
from assets to which they
apply - for doubtful accounts
receivable
Year Ended:
December 31, 1996 $3.2 $1.7 $ .2 $4.7
December 31, 1997 $4.7 $2.6 $1.4 $5.9
December 31, 1998 $5.9 $1.4 $3.2 $4.1
EXHIBIT INDEX
2.1 Purchase Agreement, dated as of April 30, 1997, by and
between Chesapeake Corporation, St. Laurent Paperboard
Inc. and St. Laurent Paperboard (U.S) Inc. (filed as
Exhibit 2.1 to the Registrant's Current Report on Form 8-K
filed May 23, 1997, and incorporated herein by reference)
3.1 Articles of Incorporation (filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference)
3.2 Bylaws
4.1 Indenture, dated as of July 15, 1985, between the
Registrant and Sovran Bank, N.A., as Trustee (filed as
Exhibit 4.1 to Form S-3 Registration Statement No. 33-
30900, and incorporated herein by reference)
4.2 First Supplemental Indenture, dated as of September 1,
1989, to the Indenture dated as of July 15, 1985, between
the Registrant and Sovran Bank, N.A., as Trustee (filed as
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
filed October 9, 1990, and incorporated herein by
reference)
4.3 Amended and Restated Credit Agreement, dated as of March 15,
1999, among Chesapeake Corporation, Chesapeake UK Holdings
Limited, Various Lenders, and First Union National Bank as
Administrative Agent
4.4 Rights Agreement, dated as of March 15, 1998, between the
Registrant and Harris Trust and Savings Bank, as rights
agent (filed as Exhibit 1 to Registration Statement on
Form 8-A, dated March 13, 1998)
The registrant agrees to furnish to the Securities and Exchange
Commission, upon request, copies of those agreements defining the
rights of holders of long-term debt of the Registrant and its
subsidiaries that are not filed herewith pursuant to Item
601(b)(4)(iii) of Regulation S-K.
10.1 1987 Stock Option Plan (filed as Exhibit A to the
Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders held April 22, 1987, and incorporated herein by
reference)
10.2 Directors' Deferred Compensation Plan (filed as Exhibit
VII to the Registrant's Annual Report on Form 10-K for the
year ended December 28, 1980, and incorporated herein by
reference)
10.3 Non-Employee Director Stock Option Plan (filed as Exhibit
4.1 to Form S-8 Registration Statement No. 33-53478, and
incorporated herein by reference)
10.4 Executive Supplemental Retirement Plan (filed as Exhibit
VI to the Registrant's Annual Report on Form 10-K for the
year ended December 28, 1980, and incorporated herein by
reference)
10.5 Retirement Plan for Outside Directors (filed as Exhibit
10.9 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987, and incorporated herein
by reference)
10.6 Chesapeake Corporation Salaried Employees' Benefits
Continuation Plan (filed as Exhibit 10.8 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by reference)
10.7 Chesapeake Corporation Long-Term Incentive Plan (filed as
Exhibit 10.9 to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1989, and incorporated
herein by reference)
10.8 Chesapeake Corporation 1993 Incentive Plan (filed as
Exhibit 4.1 to Form S-8 Registration Statement No. 33-
67384 and incorporated herein by reference)
10.9 Chesapeake Corporation Directors' Stock Option and Deferred
Compensation Plan (filed as Exhibit 10.10 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by reference)
10.10 Chesapeake Corporation 401(k) Restoration Plan (filed as
Exhibit 10.11 to the Registrant's Annual Report on Form
10-K for the year December 31, 1996, and incorporated
herein by reference)
10.11 Chesapeake Corporation 1997 Incentive Plan (filed as
Exhibit 4.5 to Form S-8 Registration Statement No. 333-
30763 and incorporated herein by reference)
10.12 Agreement with Thomas H. Johnson (filed as Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, and incorporated herein
by reference)
10.13 Agreement with J. Carter Fox (filed as Exhibit 10.14 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997, and incorporated herein by
reference)
10.14 Agreement with Robert F. Schick (filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by
reference)
10.15 Agreement with Jack C. King (filed as Exhibit 10.2 to
the Quarterly Report on Form 10-Q for the quarter ended June
30, 1998, and incorporated herein by reference)
10.16 Amendment to Agreement with Jack C. King (filed as Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1998, and incorporated
herein by reference)
11.1 Computation of Net Income Per Share of Common Stock
13.1 Portions of the Chesapeake Corporation Annual Report to
Stockholders for the year ended December 31, 1998
18.1 Letter re change in accounting principle from
PricewaterhouseCoopers LLP
21.1 Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP
27.1 Financial Data Schedule
99.1 Form 11-K Annual Report, Hourly Employees' Stock Purchase
Plan for the plan fiscal year ended November 30, 1998
EX 3.2
AMENDED AND RESTATED BYLAWS
of
CHESAPEAKE CORPORATION
(as adopted 2/13/90, with amendments through 2/17/99)
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the
Corporation in the Commonwealth of Virginia shall be in the City
of Richmond or such other location as may be designated by the
Board of Directors from time to time.
Section 2. Other Offices. The Corporation may have offices
at such other place or places as the Board of Directors may from
time to time designate or appoint.
ARTICLE II
Capital Shares
Section 1. Certificates. Shares of the Corporation shall
be evidenced by certificates in forms prescribed by the Board of
Directors and executed in any manner permitted by law and stating
thereon the information required by law.
Transfer books in which shares shall be transferred shall be
kept by the Corporation or by one or more transfer agents
appointed by it. A record shall be kept of each share
certificate that is issued. The Corporation shall have the right
to appoint at any time or from time to time one or more
registrars of its capital shares.
Section 2. Transfer of Shares. Shares of the Corporation
shall be transferable or assignable only on the books of the
Corporation by the holder in person or by an attorney on
surrender of the certificate representing such shares duly
endorsed and, if sought to be transferred by an attorney,
accompanied by a written power of attorney. The Corporation will
recognize, however, the exclusive right of the person registered
on its books as the owner of shares to receive dividends and to
vote as such owner.
Section 3. Lost, Destroyed and Mutilated Certificates.
After receiving notice from a shareholder of any loss,
destruction or mutilation of a share certificate, the Secretary
or his nominee may in his discretion cause one or more new
certificates for the same number of shares in the aggregate to be
issued to such shareholder upon the surrender of the mutilated
certificate or upon satisfactory proof of such loss or
destruction and the deposit of a bond in such form and amount and
with such surety as the Secretary or his nominee may require.
Section 4. Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors
may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not
more than seventy (70) days prior to the date on which the
particular action requiring such determination of shareholders is
to be taken. If no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notices of the meeting are first
mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders.
Section 5. Control Share Acquisitions Statute. The
provisions of Article 14.1 of Chapter 9 of Title 13.1 of the Code
of Virginia (1950), as amended, entitled Control Share
Acquisitions, shall not apply to the Corporation.
ARTICLE III
Shareholders
Section 1. Annual Meeting. Subject to the Board of
Directors' ability to postpone a meeting under Virginia law, the
annual meeting and all other meetings of shareholders shall be
held on such date and at such time and place as may be fixed by
the Board of Directors and stated in the notice of the meeting.
The annual meeting shall be held for the purpose of electing
Directors and for the transaction of only such other business as
is properly brought before the meeting in accordance with these
bylaws. To be properly brought before an annual meeting,
business must be (i) specified in the notice of annual meeting
(or any supplement thereto) given by or at the direction of the
Board of Directors, (ii) otherwise properly brought before the
annual meeting by or at the direction of the Board of Directors,
or (iii) otherwise properly brought before the annual meeting by
a shareholder. In addition to any other applicable requirements
for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary. To be timely, a
shareholder's notice must be in writing and delivered or mailed
to and received by the Secretary not less than sixty (60) days
before the first anniversary of the date of the Corporation's
proxy statement in connection with the last annual meeting. A
shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name and record
address of the shareholder proposing such business, (iii) the
class, series and number of the Corporation's shares that are
beneficially owned by the shareholder, and (iv) any material
interest of the shareholder in such business. Notwithstanding
anything in these bylaws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the
procedures set forth in this Article III(1); provided, however,
that nothing in this Article III(1) shall be deemed to preclude
discussion by any shareholder of any business properly brought
before the annual meeting. In the event that a shareholder
attempts to bring business before an annual meeting without
complying with the provisions of this Article III(1), the
chairman of the meeting shall declare to the shareholders present
at the meeting that the business was not properly brought before
the meeting in accordance with the foregoing procedures, and such
business shall not be transacted.
Section 2. Special Meetings. Special meetings of the
shareholders may be held at any time and at any place designated
in the notice thereof, upon call of the Chairman of the Board of
Directors, the President or a majority of the Board of Directors.
Section 3. Notice. Notice in writing of every annual or
special meeting of the shareholders, stating the date, time and
place, and, in case of a special meeting, the purpose or purposes
thereof, shall be mailed not less than ten (10) nor more than
sixty (60) days before any such meeting to each shareholder of
record entitled to vote at such meeting, at his address as it
appears in the share transfer books of the Corporation. Such
further notice shall be given as may be required by law, but
meetings may be held without notice if all of the shareholders
entitled to vote at the meeting waive such notice, by attendance
at the meeting or otherwise, in accordance with law.
Section 4. Quorum. A majority of the votes entitled to be
cast by any voting group on any matter, represented in person or
by proxy, shall constitute a quorum of such voting group with
respect to action on such matter. If at the time and place of
the meeting there be present less than a quorum, the meeting may
be adjourned from time to time by the vote of a majority of the
shares present in person or by proxy without notice other than
announcement at the meeting.
Section 5. Voting. Except as otherwise specified in the
Articles of Incorporation or the Virginia Stock Corporation Act,
at all meetings of the shareholders, each holder of an
outstanding share may vote in person or by proxy, and shall be
entitled to one vote on each matter voted on at such meeting for
each share registered in the name of such shareholder on the
books of the Corporation on the record date for such meeting.
Every proxy shall be in writing, dated and signed by the
shareholder entitled to vote or his duly authorized attorney-in-
fact. Notwithstanding the foregoing, the President, the
Secretary or any Vice President may approve procedures to enable
a stockholder or a stockholder's duly authorized attorney-in-fact
to authorize another person or persons to act for him or her as
proxy by transmitting or authorizing the transmission of a
telegram, cablegram, internet transmission, telephone
transmission or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the
proxy to receive such transmission, provided that any such
transmission must either set forth or be submitted with
information from which the inspectors of election can determine
that the transmission was authorized by the stockholder or the
stockholder's duly authorized attorney-in-fact. If it is
determined that such transmissions are valid, the inspectors
shall specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the
writing or transmission created pursuant to this Section 5 may be
substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a
complete reproduction of the entire original writing or
transmission.
Unless a greater vote is required pursuant to the Articles
of Incorporation or the Virginia Stock Corporation Act, if a
quorum exists, action on a matter (other than the election of
Directors) by a voting group is approved if the votes cast
favoring the action exceed the votes cast opposing the action.
Unless otherwise provided in the Article of Incorporation,
Directors shall be elected by a plurality of votes cast by shares
entitled to vote in the election at a meeting at which a quorum
is present.
Section 6. Presiding Officer. All meetings of the
shareholders shall be presided over by the Chairman of the Board
of Directors or, in his absence or at his request, by the
President. In case there be present neither the Chairman of the
Board of Directors nor the President, the meeting shall elect a
chairman. The Secretary or, in his absence or at his request, an
Assistant Secretary, shall act as secretary of such meetings. In
case there be present neither the Secretary nor an Assistant
Secretary, a secretary may be appointed by the chairman of the
meeting.
Section 7. Inspectors and Tellers. An appropriate number
of inspectors and tellers for any meeting of the shareholders may
be appointed by or pursuant to the direction of the Board of
Directors. Inspectors and tellers so appointed will open and
close the polls, will receive and take charge of proxies and
ballots and will decide all questions as to the qualifications of
voters, validity of proxies and ballots and the number of votes
properly cast.
ARTICLE IV
Directors
Section 1. General Powers. The business and the affairs of
the Corporation shall be managed under the direction of the Board
of Directors, and, except as expressly provided by law, the
Articles of Incorporation or these bylaws, all of the powers of
the Corporation shall be vested in such Board of Directors.
Section 2. Number and Election of Directors. The number of
Directors constituting the Board of Directors shall be nine (9),
who shall be divided into three classes, Class I, Class II and
Class III, as nearly equal in number as possible. Directors of
each class shall be elected by the shareholders to serve for the
terms specified in the Articles of Incorporation and, unless
sooner removed in accordance with the Articles of Incorporation
and applicable law, shall serve until their respective successors
are duly elected and qualified. The Board of Directors may
increase the number of Directors by two (2) during any twelve-
month period and may decrease the number of Directors by thirty
(30) percent or less of the number of Directors last elected by
the shareholders. Any vacancy, including a vacancy resulting
from an increase in the number of Directors as specified above,
may be filled by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board of
Directors, and Directors so chosen shall hold office until the
next meeting of the shareholders at which Directors are elected.
At such meeting of the shareholders, the shareholders shall elect
a Director to fill the vacancy, and the newly elected Director
shall hold office for a term expiring at the annual meeting of
the shareholders at which the term of the class to which he has
been elected expires.
Subject to any rights of holders of preferred shares, only
persons who are nominated in accordance with the procedures set
forth in this Article IV(2) shall be eligible for election as
Directors. Notice of nominations made by shareholders entitled
to vote for the election of Directors shall be received in
writing by the Secretary not less than fifty (50) nor more than
seventy-five (75) days before the first anniversary of the date
of the Corporation's proxy statement in connection with the last
meeting of shareholders called for the election of Directors.
Each notice shall set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in such
notice, (ii) the principal occupation or employment of each such
nominee, and (iii) the number of capital shares of the
Corporation beneficially owned by each such nominee. The
Secretary shall deliver all such notices to the Corporation's
Nominating Committee, or such other committee as may be appointed
by the Board of Directors from time to time for such purpose, for
review. The Nominating Committee shall thereafter make its
recommendation with respect to nominees to the Board of
Directors. The chairman of any meeting of shareholders called
for the election of Directors may, if the facts warrant,
determine that a nomination was not made in accordance with the
foregoing procedures, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be
disregarded.
Section 3. Annual Meeting. A regular annual meeting of the
Board of Directors shall be held following the adjournment of the
annual meeting of the shareholders at such place as the Board of
Directors may designate. The regular annual meeting of the Board
of Directors then just elected by the shareholders shall be held
for the election of officers of the Corporation and the
transaction of all other business as shall come before the said
meeting.
Section 4. Special Meetings. Special meetings of the Board
of Directors may be called at any time by the Chairman of the
Board of Directors, the President or by any two members of the
Board of Directors on such date and at such time and place as may
be designated in such call, or may be held on any date and at any
time and place without notice by the unanimous written consent of
all the members or by the presence of all of the members at such
meeting.
Section 5. Notice of Meetings. Notice of the time and
place of every meeting of the Board of Directors shall be mailed,
telephoned or transmitted by any other means of telecommunication
by or at the direction of the Secretary or other officer of the
Corporation to each Director at his last known address not less
than twenty-four (24) hours before such meeting, provided that
notice need not be given of the annual meeting or of regular
meetings held at times and places fixed by resolution of the
Board of Directors. Such notice need not describe the purpose of
a special meeting. Meetings may be held at any time without
notice if all the Directors waive such notice, by attendance at
the meeting or otherwise, in accordance with law.
Section 6. Quorum; Presence at Meeting. A quorum at any
meeting of the Board of Directors shall consist of a majority of
the number of Directors fixed from time to time in these bylaws.
Members of the Board of Directors may participate in any meeting
of the Board of Directors by means of a conference telephone or
similar communications equipment whereby all persons
participating in the meeting may simultaneously hear each other,
and participation by such means shall be deemed to constitute
presence in person at such meeting.
Section 7. Voting. If a quorum is present when a vote is
taken, the affirmative vote of a majority of Directors present is
the act of the Board of Directors, unless the Articles of
Incorporation or these bylaws require the vote of a greater
number of Directors. A Director who is present at a meeting of
the Board of Directors or any committee thereof when corporate
action is taken is deemed to have assented to the action unless
(i) he objects at the beginning of the meeting, or promptly upon
his arrival, to holding it or transacting specified business at
the meeting, or (ii) he votes against, or abstains from, the
action taken.
Section 8. Compensation of Directors. Directors, as such,
shall not receive any stated salary for their services, except
that, by resolution of the Board of Directors, Directors may be
paid (i) a retainer in an amount determined by the Board of
Directors for their services as such, (ii) an additional retainer
in an amount determined by the Board of Directors for their
services as Chairman of the Board of Directors or chairman of any
special or standing committee of the Board of Directors, and
(iii) a fixed sum and expenses for attendance at each regular,
adjourned, or special meeting of the Board of Directors or any
special or standing committee thereof. Nothing herein contained
shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation
therefor.
Section 9. Eligibility. Except as hereinafter provided, no
person shall be elected or re-elected to the Board of Directors
if at the time of any proposed election or re-election he shall
have attained the age of 70 years; provided, however, that the
foregoing provision shall not apply to persons who were members
of the Board of Directors on January 1, 1966. Any Director who
(i) separates from employment with the business or professional
organization by which he was principally employed as of the date
of his most recent election or re-election to the Board of
Directors, or (ii) ceases to serve as an officer in any of the
capacities in which he served with such business or professional
organization as of the date of his most recent election or re-
election to the Board of Directors, shall be deemed to have
submitted his resignation as a Director effective upon such
separation from employment or cessation of service as an officer.
Such resignation shall be considered by the Board of Directors at
its next regularly scheduled meeting.
ARTICLE V
Executive and Other Committees
Section 1. Creation of Executive Committee. The Board of
Directors may, whenever it sees fit, by a majority vote of the
number of Directors fixed from time to time in these bylaws,
designate an Executive Committee which shall consist of three (3)
or more Directors, including the Chairman of the Board of
Directors and the President, provided that the President shall be
a member of the Executive Committee only if designated the Chief
Executive Officer. The Chairman of the Board shall be the
Chairman of the Executive Committee. The members of the
Executive Committee shall serve until their successors are
designated by the Board of Directors or until removed or until
the Executive Committee is dissolved by a majority vote of the
number of Directors fixed from time to time in these bylaws.
Section 2. Powers of Executive Committee. Except as
otherwise provided by the Articles of Incorporation or these
bylaws, the Executive Committee, when the Board of Directors is
not in session, shall have all powers vested in the Board of
Directors by law, by the Articles of Incorporation or by these
bylaws; provided, that the Executive Committee shall not have the
authority to take any action that may not be delegated to a
committee under the Virginia Stock Corporation Act. The
Executive Committee shall report at the next regular or special
meeting of the Board of Directors on all action it has taken
since the last regular or special meeting of the Board of
Directors.
Section 3. Committee of Outside Directors. The Directors
who are not employees or former employees of the Corporation
("Outside Directors"), shall constitute the Committee of Outside
Directors. The Committee of Outside Directors shall (a) evaluate
the performance of the Chairman of the Board and the Chief
Executive Officer, (b) recommend, when appropriate, a successor
for the Chairman of the Board and the Chief Executive Officer,
(c) in consultation with the Chairman of the Board, consider and
make recommendations to the Board of Directors for the election
of the other officers of the Corporation and (d) perform such
other duties as may be delegated to the Committee of Outside
Directors by the Board of Directors. The Committee of Outside
Directors shall at the annual meeting of the Board of Directors
elect from their number by a majority vote of the number of
Outside Directors a Chairman of the Committee of Outside
Directors who shall preside at meetings of the Committee of
Outside Directors and perform such other duties as may be
assigned by the Committee of Outside Directors. No Director
shall be elected Chairman of the Committee of Outside Directors
for more than three (3) consecutive full terms, provided that a
director shall be eligible for election as Chairman if he has not
served as Chairman during the immediately preceding eleven (11)
months.
Section 4. Audit Committee. The Board of Directors, by
resolution adopted by a majority of the number of Directors fixed
in accordance with these bylaws, shall elect an Audit Committee
which shall consist of a Chairman and not less than two (2)
Directors, all of whom shall be Outside Directors. The Audit
Committee shall review and discuss with the corporation's
independent accountants the financial records of the Corporation
and report to the Board of Directors with respect thereto, and
shall perform such other duties as may be assigned by the Board
of Directors. The Audit Committee shall report regularly to the
Board of Directors all action which it has taken.
Section 5. Executive Compensation Committee. The Board of
Directors, by resolution adopted by a majority of the number of
Directors fixed in accordance with these bylaws, shall elect an
Executive Compensation Committee which shall consist of a
Chairman and not less than two (2) other members, all of whom
shall be Outside Directors. The Executive Compensation Committee
shall approve officers' incentive awards and stock option grants,
recommend to the Board of Directors remuneration levels for
executive officers, and perform such other duties as may be
assigned to it by the Board of Directors. The Executive
Compensation Committee shall report regularly to the Board of
Directors all action which it has taken.
Section 6. Nominating Committee. The Board of Directors,
by resolution adopted by a majority of the number of Directors
fixed in accordance with these bylaws, shall elect a Nominating
Committee which shall consist of a Chairman and not less than two
(2) other members, all of whom shall be Outside Directors. The
Nominating committee shall review annually the attendance and
performance of the Directors, review the compensation of
Directors and make recommendations to the Board of Directors as
to such compensation, recommend nominees for election to the
Board of Directors and perform such other duties as may be
assigned to it by the Board of Directors. The Nominating
Committee shall report regularly to the Board of Directors all
action which it has taken.
Section 7. Other Committees. The Board of Directors, by
resolution adopted by a majority of the number of Directors fixed
in accordance with these bylaws, may establish such other
standing or special committees of the Board of Directors as it
may deem advisable, consisting of two (2) or more Directors. The
members, terms and authority of such committees shall be set
forth in the resolutions establishing the same.
Section 8. Meetings. Regular and special meetings of any
committee established pursuant to this Article may be called by
the Chairman of the Board, the President, the Chairman of the
committee involved or any two (2) members of the committee
involved and held subject to the same requirements with respect
to date, time, place and notice as are specified in these bylaws
for regular and special meetings of the Board of Directors.
Section 9. Quorum and Manner of Acting. A quorum of the
members of any committee serving at the time of any meeting
thereof for the transaction of business at such meeting shall
consist of (i) one-third (but not fewer than two (2)) of such
members in the case of any committee other than the Executive
Committee, and (ii) a majority of such members in the case of the
Executive Committee. The action of a majority of those members
present at a committee meeting at which a quorum is present shall
constitute the act of the committee.
Section 10. Term of Office. Members and the chairman of
any committee, excluding the Committee of Outside Directors,
shall be elected at the annual meeting of the Board of Directors
and shall hold office until the next annual meeting of the Board
of Directors and until their successors are elected by the Board
of Directors, or until such committee is dissolved by the Board
of Directors.
Section 11. Resignation and Removal. Any member of a
committee may resign at any time by giving written notice of his
intention to do so to the Chairman of the Board or the Secretary,
or may be removed, with or without cause, at any time by such
vote of the Board of Directors or, in the case of the Committee
of Outside Directors, by such vote of the Committee as would
suffice for his election.
Section 12. Vacancies. Any vacancy occurring in a
committee resulting from any cause whatever may be filled by a
vote of a majority of the number of Directors fixed by these
bylaws.
ARTICLE VI
Officers
Section 1. Required Officers. The officers of the
Corporation shall be a Chairman of the Board, a President and a
Secretary, together with such other officers, including one or
more Vice Presidents (whose seniority and titles may be specified
by the Board of Directors) and a Treasurer, as may be elected
from time to time by the Board of Directors. Any two or more
offices may be held by the same person.
Section 2. Election of Officers; Compensation. The
officers of the Corporation shall be elected by the Board of
Directors and shall hold office until the next annual meeting of
the Board of Directors and until their successors are duly
elected and qualified; provided, however, that any officer may be
removed and the resulting vacancy filled at any time, with or
without cause, by the Board of Directors. The salaries or
compensation of all officers of the Corporation shall be fixed by
or pursuant to the direction of the Board of Directors.
Section 3. Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the shareholders,
Directors and the Executive Committee and shall have such other
powers as may be conferred upon him by the Board of Directors.
If the Chairman of the Board is not the Chief Executive Officer,
he shall, in the absence of or inability of the Chief Executive
Officer to act, be the Acting Chief Executive Officer until such
time as another person is designated by the Board of Directors as
Chief Executive Officer or Acting Chief Executive Officer. He
may sign and execute in the name of the Corporation share
certificates, deeds, mortgages, bonds, contracts or other
instruments except in cases where the signing and the execution
thereof shall be expressly and exclusively delegated by the Board
of Directors or by these bylaws to some other officer or agent of
the Corporation or shall be required by law otherwise to be
signed or executed.
Section 4. President. The President shall perform such
duties as shall be required of him by the Chairman of the Board
or the Board of Directors. If the President is not the Chief
Executive Officer, he shall, in the absence of or inability of
the Chief Executive Officer to act, be the Acting Chief Executive
Officer until such time as another person is designated by the
Board of Directors as Chief Executive Officer or Acting Chief
Executive Officer. He may sign and execute in the name of the
Corporation share certificates, deeds, mortgages, bonds,
contracts or other instruments except in cases where the signing
and the execution thereof shall be expressly and exclusively
delegated by the Board of Directors or by these bylaws to some
other officer or agent of the Corporation or shall be required by
law otherwise to be signed or executed.
Section 5. Chief Executive Officer. The Board of Directors
shall designate one of the officers of the Corporation as the Chief
Executive Officer of the Corporation. The Chief Executive Officer
shall be primarily responsible for the implementation of policies of
the Board of Directors. He shall have authority over the general
management and direction of the business and operations of the
Corporation and its divisions, if any, subject only to the
ultimate authority of the Board of Directors.
Section 6. Vice Presidents. The Vice Presidents shall
perform such duties as shall be required of them by the Chairman
of the Board, the President or the Board of Directors. Any Vice
President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts or other instruments
authorized by the Board of Directors, except where the signing
and execution of such documents shall be expressly and
exclusively delegated by the Board of Directors, the Chairman of
the Board or the President to some other officer or agent of the
Corporation or shall be required by law or otherwise to be signed
or executed.
Section 7. Secretary. The Secretary shall prepare and
maintain custody of the minutes of all meetings of the Board of
Directors and stockholders of the Corporation. When requested,
he shall also act as secretary of the meetings of the committees
of the Board of Directors. He shall see that all notices
required to be given by the Corporation are duly given and
served; he shall have custody of all deeds, leases, contracts and
other important corporate documents; he shall have charge of the
books, records and papers of the Corporation relating to its
organization and management as a Corporation; and he shall in
general perform all the duties incident to the office of
Secretary and such other duties as from time to time may be
assigned to him by the Chairman of the Board, the President or
the Board of Directors. An Assistant Secretary may exercise any
of the functions or perform any of the duties of the Secretary.
Section 8. Treasurer. The Treasurer shall have custody of the
moneys and securities of the Corporation, shall sign or
countersign such instruments as require his signature and shall
perform such other duties as may be incident to his office or are
properly required of him by the Chairman of the Board, the
President, or the Board of Directors. An Assistant Treasurer may
exercise any of the functions or perform any of the duties of the
Treasurer.
ARTICLE VII
Limit on Liability; Indemnification
Section 1. Definitions. In this Article:
"applicant" means the person seeking indemnification
pursuant to this Article;
"expenses" includes counsel fees;
"liability" means the obligation to pay a judgment,
settlement, penalty, fine, including any excise tax assessed with
respect to an employee benefit plan, or reasonable expenses
incurred with respect to a proceeding;
"party" includes an individual who was, is or is
threatened to be made a named defendant or respondent in a
proceeding; and
"proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal.
Section 2. Limitation on Liability. To the full extent
that the Virginia Stock Corporation Act, as it exists on the date
hereof or may hereafter be amended, permits the limitation or
elimination of the liability of Directors and officers, no
Director or officer of the Corporation shall be liable to the
Corporation or its shareholders for monetary damages with respect
to any transaction, occurrence or course of conduct, whether
prior or subsequent to the effective date of this Article.
Section 3. Indemnification. The Corporation shall
indemnify (a) any person who was or is a party to any proceeding,
including a proceeding brought by or in the right of the
Corporation, by reason of the fact that he is or was a Director
or officer of the Corporation, and (b) any Director or officer of
the Corporation who is or was serving at the request of the
Corporation as a director, trustee, partner or officer of another
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against any liability incurred by him
in connection with such proceeding unless he engaged in willful
misconduct or a knowing violation of the criminal law. A person
is considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also
impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan. The
Board of Directors is hereby empowered, by a majority vote of a
quorum of disinterested Directors, to enter into a contract to
indemnify any Director or officer in respect of any proceeding
arising from any act or omission, whether occurring before or
after the execution of such contract.
Section 4. Application; Amendment. The provisions of this
Article shall be applicable to all proceedings commenced after
the adoption hereof by the shareholders of the Corporation,
arising from any act or omission, whether occurring before or
after such adoption. No amendment or repeal of this Article
shall have any effect on the rights provided under this Article
with respect to any act or omission occurring prior to such
amendment or repeal. The Corporation shall promptly take all
such actions, and make all such determinations, as shall be
necessary or appropriate to comply with its obligation to make
any indemnity under this Article and shall promptly pay or
reimburse all reasonable expenses, including attorneys' fees,
incurred by any Director or officer in connection with such
actions and determinations or proceedings of any kind arising
therefrom.
Section 5. Termination of Proceeding. The termination of
any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent, shall not of itself
create a presumption that the applicant engaged in willful
misconduct or a knowing violation of the criminal law.
Section 6. Determination of Availability. Any
indemnification under Section (3) of this Article (unless ordered
by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of
the applicant is proper in the circumstances because he did not
engage in willful misconduct or a knowing violation of the
criminal law. The determination shall be made:
(a) by the Board of Directors by a majority vote of a
quorum consisting of Directors not at the time parties to the
proceeding;
(b) if a quorum cannot be obtained under subsection
(a) of this section, by majority vote of a committee duly
designated by the Board of Directors (in which designation
Directors who are parties may participate), consisting solely of
two or more Directors not at the time parties to the proceeding;
(c) by special legal counsel:
(i) selected by the Board of Directors or its
committee in the manner prescribed in subsection (a) or (b) of
this section; or
(ii) if a quorum of the Board of Directors cannot
be obtained under subsection (a) of this section and a
committee cannot be designated under subsection (b) of this
subsection, selected by majority vote of the full Board of
Directors, in which selection Directors who are parties may
participate; or
(d) by the shareholders, but shares owned by or voted
under the control of Directors who are at the time parties to the
proceeding may not be voted on the determination.
Any evaluation as to the reasonableness of expenses shall
be made in the same manner as the determination that
indemnification is permissible, except that if the determination
is made by special legal counsel, such evaluation as to
reasonableness of expenses shall be made by those entitled under
subsection (c) of this section to select counsel.
Notwithstanding the foregoing, in the event there has been a
change in the composition of a majority of the Board of Directors
after the date of the alleged act or omission with respect to
which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any
claim for indemnification made pursuant to this Article shall be
made by special legal counsel agreed upon by the Board of
Directors and the applicant. If the Board of Directors and the
applicant are unable to agree upon such special legal counsel,
the Board of Directors and the applicant each shall select a
nominee, and the nominees shall select such special legal
counsel.
Section 7. Advances. (a) The Corporation may pay for or
reimburse the reasonable expenses incurred by any applicant who
is a party to a proceeding in advance of final disposition of the
proceeding or the making of any determination under Section (6)
if:
(i) the applicant furnishes the Corporation a written
statement of his good faith belief that he has met the standard
of conduct described in Section (3); and
(ii) the applicant furnishes the Corporation a written
undertaking, executed personally or on his behalf, to repay the
advance if it is ultimately determined that he did not meet such
standard of conduct.
Section 8. Indemnification of Others. The Board of
Directors is hereby empowered, by majority vote of a quorum
of disinterested Directors, to cause the Corporation to indemnify
or contract to indemnify any person not specified in Section (3)
of this Article who was, is or may become a party to any
proceeding, by reason of the fact that he is or was an employee
or agent of the Corporation, or is or was serving at the request
of the Corporation as director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, to the same extent as if such
person were specified as one to whom indemnification is granted
in Section (3). The provisions of Sections (4) through (7) of
this Article shall be applicable to any indemnification provided
hereafter pursuant to this Section (8).
Section 9. Insurance. The Corporation may purchase and
maintain insurance to indemnify it against the whole or any
portion of the liability assumed by it in accordance with this
Article and may also procure insurance, in such amounts as the
Board of Directors may determine, on behalf of any person who is
or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against or incurred by
him in any such capacity or arising from his status as such,
whether or not the Corporation would have power to indemnify him
against such liability under the provisions of this Article.
Section 10. Further Indemnity. Every reference herein to
Directors, officers, employees and agents shall include former
Directors, officers, employees and agents and their respective
heirs, executors and administrators. The indemnification hereby
provided and provided hereafter pursuant to the power hereby
conferred on the Board of Directors shall not be exclusive of any
other rights to which any person may be entitled, including any
right under policies of insurance that may be purchased and
maintained by the Corporation or others, with respect to claims,
issues or matters in relation to which the Corporation would not
have the power to indemnify such person under the provisions of
this Article. Such rights shall not prevent or restrict the
power of the Corporation to make or provide for any further
indemnity, or provisions for determining entitlement to
indemnity, pursuant to one or more indemnification agreements,
bylaws, or other arrangements (including, without limitation,
creation of trust funds or security interests funded by letters
of credit or other means) approved by the Board of Directors
(whether or not any of the Directors of the Corporation shall be
a party to or beneficiary of any such agreements, bylaws or
arrangements); provided, however, that any provision of such
agreements, bylaws or other arrangements shall not be effective
if and to the extent that it is determined to be contrary to this
Article or applicable laws of the Commonwealth of Virginia.
Section 11. Further Board Action. Any other provision of
this Article notwithstanding, the Board of Directors shall be
empowered to amend this Article from time to time, to the extent
permitted by then applicable law, to limit, eliminate or extend
the rights provided hereunder, provided that no such amendment
shall limit or reduce the rights provided under this article with
respect to any act or omission occurring prior to such amendment.
Section 12. Severability. Each provision of this Article
shall be severable, and an adverse determination as to any such
provision shall in no way affect the validity of any other
provision.
ARTICLE VIII
Emergency Bylaws
The emergency bylaws provided in this Article shall be
operative during any emergency, notwithstanding any different
provision in the preceding Articles of these bylaws, in the
Articles of Incorporation or in the Virginia Stock Corporation
Act (other than those provisions relating to emergency bylaws).
An emergency exists if a quorum of the Board of Directors cannot
readily be assembled because of some catastrophic event. To the
extent not inconsistent with these emergency bylaws, the bylaws
provided in the preceding Articles shall remain in effect during
such emergency. Upon the termination of such emergency, the
emergency bylaws shall cease to be operative unless and until
another such emergency shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be
called by any officer of the Corporation or by any Director. The
notice thereof shall specify the date, time and place of the
meeting. To the extent feasible, notice shall be given in accord
with Article IV, Section (5) above, but notice may be given only
to such of the Directors as it may be feasible to reach at the
time, by such means as may be feasible at the time, including
publication or radio, and at a time less then twenty-four (24)
hours before the meeting if deemed necessary by the person giving
notice. Notice shall be similarly given, to the extent feasible,
to the other persons referred to in Subsection (b) below.
(b) At any meeting of the Board of Directors, a quorum
shall consist of a majority of the number of Directors fixed at
the time in accordance with Article IV, Section (6) of these
bylaws. If the Directors present at any particular meeting shall
be fewer than the number required for such quorum, other persons
present as referred to below to the number necessary to make up
such quorum shall be deemed Directors for such particular meeting
as determined by the following provisions and in the following
order of priority:
(i) the President, if not already serving as a
Director;
(ii) Vice Presidents not already serving as
Directors, first in the order of the seniority of their title as
designated by the Board of Directors before the emergency, and
then in the order of their seniority of first election to such
offices; provided, that if two or more shall have the same
seniority of title or shall have been first elected to such
offices on the same day, then in the order of their seniority
in age;
(iii) [reserved for future use]
(iv) all other officers of the Corporation in the order of their
seniority of first election to such offices, or if two or more
shall have been first elected to such offices on the same day,
then in the order of their seniority in age; and
(v) any other persons who are designated on a
list that shall have been approved by the Board of Directors
before the emergency, such persons to be taken in such order of
priority and subject to such conditions as may be provided
in the resolution approving the list.
(c) The Board of Directors, during as well as before
any such emergency, may provide, and from time to time modify,
lines of succession in the event that during such an emergency
any or all officers or agents of the Corporation shall for any
reason be rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as before
any such emergency, may, effective in the emergency, change the
principal office, or designate several alternative offices, or
authorize the officers so to do.
No officer, Director or employee shall be liable for action
taken in good faith in accordance with these emergency bylaws.
These emergency bylaws shall be subject to repeal or change
by further action of the Board of Directors or by action of the
shareholders, except that no such repeal or change shall modify
the provisions of the next preceding paragraph with regard to
action or inaction prior to the time of such repeal or change.
Any such amendment of these emergency bylaws may make any further
or different provisions that may be practical and necessary for
the circumstances of the emergency.
ARTICLE IX
Miscellaneous
Section 1. Voting of Shares. Shares of any corporation
which this Corporation shall be entitled to vote may be voted,
either in person or by proxy, by this Corporation's Chairman of
the Board or President or by any other officer expressly
authorized by this Corporation's Board of Directors or Executive
Committee, and each such officer is authorized to give this
Corporation's consent in writing to any action of such
corporation, and to execute waivers and take all other necessary
action on behalf of the Corporation with respect to such shares.
Section 2. Seal. The corporate seal of the Corporation
shall consist of a flat-faced circular die, of which there may be
any number of counterparts, on which there shall be engraved two
concentric circles between which is inscribed the name of the
corporation, and in the center the year of its organization and
the words "corporate seal".
Section 3. Amendments to Bylaws. Unless proscribed by the
Articles of Incorporation, the Board of Directors of the
Corporation shall have the power to adopt and from time to time
amend, alter, change or repeal these bylaws with or without the
approval of the shareholders of the Corporation, but bylaws so
made, amended, altered or changed, may be further amended,
altered, changed or repealed by the shareholders. The
shareholders in adopting or amending a particular bylaw may
provide expressly that the Board of Directors may not amend or
repeal that bylaw.
EX 4.3
AMENDED AND RESTATED
CREDIT AGREEMENT
among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED,
VARIOUS LENDERS,
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
__________________________________
Dated as of March 15, 1999
__________________________________
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
March 15, 1999 among CHESAPEAKE CORPORATION, a Virginia
corporation (the "Company"), CHEASAPEAKE UK HOLDINGS LIMITED, a
company incorporated in England ("UK Sub," and together with the
Company, the "Borrowers," and each, a "Borrower"), the Lenders
from time to time party hereto and FIRST UNION NATIONAL BANK, as
Administrative Agent (all capitalized terms used herein and
defined in Section 1 are used herein as therein defined).
STATEMENT OF PURPOSE
WHEREAS, the Borrowers and the Lenders are party to a Credit
Agreement, dated as of January 18, 1999, as amended by the First
Amendment to Credit Agreement dated as of February 12, 1999; and
WHEREAS, the Borrowers and the Lenders desire to amend and
restate the Credit Agreement, as amended, in its entirety, upon
the terms and conditions set forth herein
NOW, THEREFORE, the parties hereto agree that the Credit
Agreement, as amended, shall be and is hereby amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when
used in this Agreement shall have the meanings assigned to them
below:
"364 Day Facility" means the short term revolving credit
facility established pursuant to Section 2.1 hereof.
"364 Day Facility Commitment" means (a) as to any Lender,
the obligation of such Lender to make Revolving Credit Loans
under the 364 Day Facility for the accounts of the Borrowers in
an aggregate principal Dollar Equivalent amount at any time
outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1(a) hereto, as such amount may be
reduced or modified at any time or from time to time pursuant to
the terms hereof and (b) as to all Lenders, the aggregate 364 Day
Facility Commitment of all Lenders to make Revolving Credit Loans
under the 364 Day Facility, as such amount may be reduced at any
time or from time to time pursuant to the terms hereof. The 364
Day Facility Commitment of all Lenders on the Closing Date shall
be Two Hundred Million Dollars ($200,000,000).
"364 Day Facility Commitment Percentage" means, as to any
Lender at any time, the ratio of (a) the amount of the 364 Day
Facility Commitment of such Lender to (b) the aggregate 364 Day
Facility Commitment of all of the Lenders.
"364 Day Facility Swingline Commitment" means the obligation
of the Swingline Lender to make Swingline Loans under the 364 Day
Facility for the accounts of the Borrowers in an aggregate
principal amount at any time outstanding not to exceed an amount
equal to Ten Million Dollars ($10,000,000) less the then
outstanding aggregate principal amount of Swingline Loans made
under the Five Year Facility.
"364 Day Facility Termination Date" means the earliest of
the dates referred to in Section 2.8(a).
"Absolute Rate Bid" means an offer by a Lender to make a
Competitive Bid Loan in accordance with Section 2.5, denominated
in Dollars and at a rate of interest per annum expressed in
multiples of 1/100th of one percent.
"Acquisition Sub" means Chesapeake UK Acquisitions plc, a
Wholly-Owned Subsidiary of the UK Sub.
"Additional Debt Securities" means public or privately
placed notes, debentures, bonds, or debt securities issued by a
Credit Party after the Closing Date representing incurrence of
long-term debt for borrowed money; provided that "Additional Debt
Securities" shall not include public or privately placed notes,
debentures, bonds, or debt securities issued by a Credit Party
after the Closing Date for the purpose of (i) financing an
acquisition permitted pursuant to Section 10.4(b) or (ii)
financing repurchases or redemptions of Debt permitted pursuant
to Section 10.4(c).
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto
appointed pursuant to Section 12.9.
"Administrative Agent's Office" means the office of the
Administrative Agent specified in or determined in accordance
with the provisions of Section 13.1(c).
"Affiliate" means, with respect to any Person, any other
Person (other than a Subsidiary) which directly or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, such first Person or any of
its Subsidiaries. The term "control" means the possession,
directly or indirectly, of any 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.
"Aggregate Revolving Credit Commitment" means (a) as to any
Lender, the aggregate of such Lender's 364 Day Facility
Commitment and Five Year Facility Commitment, as such amount may
be reduced or modified at any time or from time to time pursuant
to the terms hereof and (b) as to all Lenders, the aggregate 364
Day Facility Commitment and Five Year Facility Commitment of all
Lenders, as such amount may be reduced or modified at any time or
from time to time pursuant to the terms hereof. The Aggregate
Revolving Credit Commitment of all Lenders on the Closing Date
shall be Four Hundred and Fifty Million Dollars ($450,000,000).
"Aggregate Revolving Credit Commitment Percentage" means as
to any Lender at any time, the ratio of (a) such Lender's
Aggregate Revolving Credit Commitment to (b) the Aggregate
Revolving Credit Commitment of all of the Lenders.
"Agreement" means this Amended and Restated Credit
Agreement, as further amended, restated, supplemented or
otherwise modified.
"Announcement Date" means January 20, 1999, the date on
which the Press Release was issued.
"Applicable Currency" means, as to any particular payment or
Revolving Credit Loan, Dollars or the Offshore Currency in which
it is denominated or is payable.
"Applicable Law" means all applicable provisions of
constitutions, laws, statutes, ordinances, rules, treaties,
regulations, permits, licenses, approvals, interpretations and
orders of Governmental Authorities and all orders and decrees of
all courts and arbitrators.
"Applicable Margin" means, for purposes of calculating (a)
the Offshore Rate for purposes of Section 4.1(a), (b) the L/C Fee
for purposes of Section 3.3(a) or (c) the Facility Fee for
purposes of Section 4.3(a), the rate set forth below for the
applicable rating of the senior, unsecured, long-term debt of the
Company (the "Debt Rating") publicly announced by Standard &
Poor's Ratings Group ("S&P") and Moody's Investors Service, Inc.
("Moody's") as follows:
364 Day 364 Day Five Year Five Year All-In
Facility Facility Facility Facility Cost
S&P Moody's LIBOR Facility LIBOR Facility L/C Both
Level Rating Rating Spread Fee Spread Fee Fee Facilities
1 >BBB+ >Baa1 0.500% 0.125% 0.475% 0.150% 0.500% 0.625%
2 BBB Baa2 0.825% 0.175% 0.800% 0.200% 0.825% 1.000%
3 BBB- Baa3 0.900% 0.225% 0.875% 0.250% 0.900% 1.125%
4 BB+ Ba1 1.125% 0.250% 1.100% 0.275% 1.125% 1.375%
5 <BB+ <Ba1 1.40% 0.350% 1.375% 0.375% 1.40% 1.750%
provided, that if both Moody's and S&P shall not have in effect a
Debt Rating (other than by reason of the circumstances referred
to in the last sentence of this definition), then such Debt
Rating shall be deemed to be Level 5, provided further, that if
the Conversion Option is exercised, the Applicable Margin for the
364 Day Facility LIBOR Spread and the Five Year Facility LIBOR
Spread shall be increased by 37.5 basis points for all Levels.
In the event that the corresponding Debt Ratings publicly
announced by S&P and Moody's listed above differ by (a) one
level, the Applicable Margin shall be based on the higher of the
two ratings, and (b) two or more levels, the Applicable Margin
shall be based on the rating one rating below the higher of the
two ratings. Any change in the Applicable Margin shall be
effective as of the Business Day on which the applicable rating
is announced or is publicly available. If the rating system of
Moody's and S&P shall change, or if both of such rating agencies
shall cease to be in the business of rating corporate debt
obligations, the Company and the Lenders shall negotiate in good
faith to amend this definition to reflect such changed rating
system or the unavailability of ratings from such rating agencies
and, pending the effectiveness of any such amendment, the
Applicable Margin shall be determined by reference to the rating
most recently in effect prior to such change or cessation.
"Application" means an application, in the form specified by
any Issuing Lender from time to time, requesting such Issuing
Lender to issue a Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned
thereto in Section 13.10(b)(iii).
"Bankruptcy Event" means any of the events set forth in
Section 11.1(b), (i), (j), (k) or (l), or any of those events
which with the passage of time, the giving of notice or any other
condition, would constitute such an event, in respect of any of
the Credit Parties, the Target or any of their respective
Material Subsidiaries, provided, that for purposes of Section
5.3(b), "Bankruptcy Event" shall not include the events set forth
in Section 11.1(k) or any of those events which with the passage
of time, the giving of notice or any other condition, would
constitute such an event, with respect to the Target or any of
its Material Subsidiaries.
"Base Rate" means, at any time, the higher of (a) the Prime
Rate and (b) the sum of (i) the Federal Funds Rate plus (ii) 1/2
of 1%; each change in the Base Rate shall take effect
simultaneously with the corresponding change or changes in the
Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan denominated in Dollars and
bearing interest at a rate based upon the Base Rate as provided
in Section 4.1(a).
"Belgian Francs" means the unit of currency (other than the
Euro Unit) of Belgium.
"Borrower" means either of Chesapeake Corporation, a
Virginia corporation or Chesapeake UK Holdings Limited, a company
incorporated in England.
"Business Day" means (a) any day other than a Saturday,
Sunday or legal holiday on which banks in Charlotte, North
Carolina and New York, New York, are not authorized or required
by law to remain closed for the conduct of their commercial
banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and
interest on, any Offshore Rate Loan, the term "Business Day"
shall also exclude any day on which banks are not open for
trading in Dollar and Offshore Currency deposits in the
eurocurrency interbank market.
"Capital Lease" means, with respect to the Credit Parties
and their Subsidiaries, any lease of any property that should, in
accordance with GAAP, be classified and accounted for as a
capital lease on a Consolidated balance sheet of the Credit
Parties and their Subsidiaries.
"Certain Funds Period" means the period commencing on the
Announcement Date and ending on the date which is the earlier of:
(i) the date falling 42 days after the date on which the
Acquisition Sub is obligated to deliver the notices to
shareholders who have not accepted the Offer pursuant to Section
9.1(f) of this Agreement;
(ii) the date falling six (6) months after February 12,
1999;
(iii) the date the Offer lapses or is withdrawn in
accordance with Applicable Law; and
(iv) the date on which the Target becomes a Wholly-Owned
Subsidiary of the Acquisition Sub and the Acquisition Sub has
paid for all Shares beneficially owned by it.
"Change in Control" shall have the meaning assigned thereto
in Section 11.1(h).
"City Code" means The City Code on Takeovers and Mergers as
issued by the United Kingdom Panel on Takeovers and Mergers.
"Clean-Up Event" shall have the meaning assigned thereto in
Section 11.4.
"Clean-Up Period" shall have the meaning assigned thereto in
Section 11.4.
"Closing Date" means January 18, 1999, the date upon which
each condition described in Section 5.1 and Section 5.2 was
satisfied or waived in all respects.
"Code" means the Internal Revenue Code of 1986, and the
rules and regulations thereunder, each as amended, supplemented
or otherwise modified from time to time.
"Commitment Percentage" means, as to any Lender at any time,
such Lender's 364 Day Facility Commitment Percentage or Five Year
Facility Commitment Percentage, as the context requires.
"Competitive Bid" means an Absolute Rate Bid or a Margin
Rate Bid.
"Competitive Bid Loans" means any Loan made pursuant to
Section 2.5 and all such loans collectively as the context
requires.
"Competitive Bid Notes" means the notes made by the
Borrowers payable to the order of each Lender who makes a
Competitive Bid Loan and any amendments and modifications
thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part;
"Competitive Bid Note" means any of such Competitive Bid Notes.
"Competitive Bid Rate" means the rate of interest per annum
expressed in multiples of 1/100th of one percent offered with
respect to any Competitive Bid Loan or the Margin, as applicable,
offered by the Lender making such Competitive Bid.
"Competitive Bid Request" means a request by a Borrower for
Competitive Bids in accordance with Section 2.5.
"Consolidated" means, when used with reference to financial
statements or financial statement items of the Credit Parties and
their Subsidiaries, such statements or items on a consolidated
basis in accordance with applicable principles of consolidation
under GAAP.
"Consolidated Capitalization" for any period means the sum
of (i) Funded Debt for such period, (ii) deferred tax liabilities
of the Company and its Consolidated Subsidiaries for such period
and (iii) shareholders' equity of the Company and its
Consolidated Subsidiaries for such period.
"Consolidated Fixed Charges" for any period means the sum of
(i) Consolidated Interest Expense for such period and (ii) all
Rental Expense of the Company and its Consolidated Subsidiaries
for such period.
"Consolidated Interest Expense" for any period means
interest (excluding, however, any prepayment penalties or
premiums), whether expensed or (to the extent presented
separately on the consolidated balance sheet of the Company and
its Consolidated Subsidiaries or in the footnotes thereto)
capitalized, in respect of Debt of the Company or any of its
Consolidated Subsidiaries outstanding during such period.
"Consolidated Net Income" means, for any period, the net
income, after taxes, of the Company and its Consolidated
Subsidiaries determined on a consolidated basis, in accordance
with GAAP, but excluding any equity interests of the Company or
any Subsidiary in the unremitted earnings of any Person that is
not a Subsidiary.
"Consolidated Net Tangible Assets" means, at any date and
without duplication, the aggregate amount of assets of the
Company and its Subsidiaries (less applicable reserves and other
properly deductible items) after deducting therefrom (i) all
current liabilities, and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and
other like intangibles, all as set forth on the most recent
fiscal quarter- or Fiscal Year-end balance sheet of the Company
and its Subsidiaries and computed in accordance with GAAP.
"Consolidated Net Worth" means, as of any date, the total
shareholders' equity that appears on a Consolidated balance sheet
of the Company and its Consolidated Subsidiaries prepared as of
such date in accordance with GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary
or other entity the accounts of which, in accordance with GAAP,
are consolidated with those of the Company in its consolidated
financial statements as of such date.
"Conversion Option" shall have the meaning assigned thereto
in Section 2.8(a).
"Conversion Period" shall have the meaning assigned thereto
in Section 2.8(a).
"Credit Facility" means the collective reference to the 364
Day Facility, the Five Year Facility and the L/C Facility.
"Credit Parties" means the Borrowers and any Guarantors.
"Current SEC Reports" means the most recent report on Form
10-K, or any successor form, and any amendments thereto filed by
the Company with the Securities and Exchange Commission (the
"Commission") and any reports on Forms 10-Q and/or 8-K, or any
successor forms, and any amendments thereto, filed by the Company
with the Commission after the date of such report on Form 10-K.
"Debt" of any Person means at any date, without duplication,
the sum of the following calculated in accordance with GAAP: (a)
all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (c) all obligations of such Person
to pay the deferred purchase price of property or services,
except trade accounts payable arising in the ordinary course of
business, (d) all obligations of such Person as lessee under
Capital Leases (to the extent presented separately on the
Consolidated balance sheet of the Company and its Consolidated
Subsidiaries), (e) all obligations of such Person to reimburse
any bank or other Person in respect of amounts payable under a
banker's acceptance, (f) all non-contingent obligations of such
Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (g)
all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Persons, (h) all Debt
of others guaranteed by such Person and (i) all obligations
incurred by any such Person pursuant to Hedging Agreements.
"Default" means any of the events specified in Section 11.1
which with the passage of time, the giving of notice or any other
condition, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to
which a Lender Default is in effect.
"Depreciation and Depletion" means for any period the sum of
all depreciation expenses, amortization expenses and cost of
timber harvested of the Company and its Consolidated Subsidiaries
for such period, as determined in accordance with GAAP.
"Determination Date" shall have the meaning assigned thereto
in Section 2.9(a).
"Deutsche Mark" means the unit of currency (other than the
Euro Unit) of the Federal Republic of Germany.
"Dollars" or "$" means, unless otherwise qualified, dollars
in lawful currency of the United States.
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b)
as to any amount denominated in an Offshore Currency, the
equivalent amount in Dollars as determined by the Administrative
Agent at such time on the basis of the Spot Rate for the purchase
of Dollars with such Offshore Currency on the most recent
Determination Date provided for in Section 2.9(a).
"EBITDA" means, for any period, as applied to the Company
and its Consolidated Subsidiaries without duplication, the sum of
the amounts for such period of: (i) Consolidated Net Income, (ii)
Depreciation and Depletion, (iii) Consolidated Interest Expense,
(iv) all Rental Expense of the Company and its Consolidated
Subsidiaries, (v) all federal and state income and franchise
taxes reported for such period, all as determined and computed in
accordance with GAAP and (vi) other non-recurring, non-cash
charges.
"Eligible Assignee" means, with respect to any assignment of
the rights, interest and obligations of a Lender hereunder, a
Person that is at the time of such assignment (a) a commercial
bank organized under the laws of the United States or any state
thereof, having combined capital and surplus in excess of
$500,000,000, (b) a commercial bank organized under the laws of
any other country that is a member of the Organization of
Economic Cooperation and Development, or a political subdivision
of any such country, having combined capital and surplus in
excess of $500,000,000, (c) a finance company, insurance company
or other financial institution which in the ordinary course of
business extends credit of the type extended hereunder and that
has total assets in excess of $1,000,000,000, (d) already a
Lender hereunder (whether as an original party to this Agreement
or as the assignee of another Lender) or an Affiliate of a Lender
hereunder, (e) the successor (whether by transfer of assets,
merger or otherwise) to all or substantially all of the
commercial lending business of the assigning Lender, or (f) any
other Person that has been approved in writing as an Eligible
Assignee by the Borrowers and the Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan
within the meaning of Section 3(3) of ERISA which (a) is
maintained for employees of a Borrower or any ERISA Affiliate or
(b) has at any time within the preceding six years been
maintained for the employees of a Borrower or any current or
former ERISA Affiliate.
"Environmental Laws" means any and all federal, state, local
and foreign laws, statutes, ordinances, rules, regulations,
permits, licenses, approvals, binding interpretations and orders
of courts or Governmental Authorities, relating to the protection
of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Materials.
"Environmental Permits" shall have the meaning assigned
thereto in Section 6.1(h).
"ERISA" means the Employee Retirement Income Security Act of
1974, and the rules and regulations thereunder, each as amended,
supplemented or otherwise modified from time to time.
"ERISA Affiliate" means any Person who together with a
Borrower is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA.
"Euro" means the single currency of participating member
states of the European Union.
"Euro Unit" means the currency unit of the Euro.
"Eurodollar Reserve Percentage" means, for any day, the
percentage (expressed as a decimal and rounded upwards, if
necessary, to the next higher 1/100th of 1%) which is in effect
for such day as prescribed by the Federal Reserve Board (or any
successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or
emergency reserves) in respect of eurocurrency liabilities or any
similar category of liabilities for a member bank of the Federal
Reserve System in New York City and to which the Administrative
Agent or any Lender is then subject.
"Event of Default" means any of the events specified in
Section 11.1, provided that any requirement for passage of time,
giving of notice, or any other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time,
an amount equal to the sum of (a) the aggregate principal amount
of all Revolving Credit Loans made by such Lender then
outstanding, (b) such Lender's Five Year Facility Commitment
Percentage of the L/C Obligations then outstanding, (c) the
aggregate principal amount of all Competitive Bid Loans made by
such Lender then outstanding and (d) the aggregate principal
amount of all Swingline Loans made by such Lender then
outstanding.
"Facility Fee" shall have the meaning assigned thereto in
Section 4.3(a).
"FDIC" means the Federal Deposit Insurance Corporation, or
any successor thereto.
"Federal Funds Rate" means, the rate per annum (rounded
upwards, if necessary, to the next higher 1/100th of 1%)
representing the daily effective federal funds rate as quoted by
the Administrative Agent and confirmed in Federal Reserve Board
Statistical Release H.15 (519) or any successor or substitute
publication selected by the Administrative Agent. If, for any
reason, such rate is not available, then "Federal Funds Rate"
shall mean a daily rate which is determined, in the opinion of
the Administrative Agent, to be the rate at which federal funds
are being offered for sale in the national federal funds market
at 9:00 a.m. (Charlotte time). Rates for weekends or holidays
shall be the same as the rate for the most immediate preceding
Business Day.
"First Union" means First Union National Bank, a national
banking association, and its successors.
"Fiscal Year" means the fiscal year of the Credit Parties
and their Subsidiaries ending on December 31.
"Five Year Facility" means the multi-year revolving credit
facility established pursuant to Section 2.1 hereof.
"Five Year Facility Commitment" means (a) as to any Lender,
the obligation of such Lender to make Revolving Credit Loans
under the Five Year Facility for the accounts of the Borrowers in
an aggregate principal Dollar Equivalent amount at any time
outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1(a) hereto as such amount may be
reduced or modified at any time or from time to time pursuant to
the terms hereof and (b) as to all Lenders, the aggregate Five
Year Facility Commitment of all Lenders to make Revolving Credit
Loans under the Five Year Facility, as such amount may be reduced
at any time or from time to time pursuant to the terms hereof.
The Five Year Facility Commitment of all Lenders on the Closing
Date shall be Two Hundred and Fifty Million Dollars
($250,000,000).
"Five Year Facility Commitment Percentage" means, as to any
Lender at any time, the ratio of (a) the amount of the Five Year
Facility Commitment of such Lender to (b) the aggregate Five Year
Facility Commitment of all of the Lenders.
"Five Year Facility Swingline Commitment" means the
obligation of the Swingline Lender to make Swingline Loans under
the Five Year Facility for the accounts of the Borrowers in an
aggregate principal amount at any time outstanding not to exceed
an amount equal to Ten Million Dollars ($10,000,000) less the
then outstanding aggregate principal amount of Swingline Loans
made under the 364 Day Facility.
"Five Year Facility Termination Date" means the earliest of
the dates referred to in Section 2.8(b).
"Foreign Lender" means any Lender that is organized under
the laws of a jurisdiction other than that in which the Company
is located. For purposes of this definition, the United States
of America, each state thereof and the District of Columbia shall
be deemed to constitute a single jurisdiction.
"Foreign Pension Plan" shall mean any plan, fund (including,
without limitation, any superannuation fund) or other similar
program established or maintained outside the United States of
America by a Borrower or any one or more of its Subsidiaries
primarily for the benefit of employees of such Borrower or such
Subsidiaries residing outside the United States of America, which
plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of
retirement or payments to be made upon termination of employment,
and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" means each Subsidiary of a Borrower
that is not incorporated under the laws of the United States or
any State or territory thereof.
"French Francs" means the unit of currency (other than the
Euro Unit) of the Republic of France.
"Funded Debt" means, without duplication, at any date, the
Debt of the Company and its Consolidated Subsidiaries of the type
described in clauses (a), (b), (c), (d), (f) (solely to the
extent (f) represents obligations to reimburse a bank or other
Person in respect of amounts actually paid by such bank or other
Person under letters of credit or similar instruments), (g) and
(h) of the definition of "Debt," determined on a consolidated
basis as of such date.
"GAAP" means generally accepted accounting principles, as
recognized by the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board,
consistently applied and maintained on a consistent basis for the
Credit Parties and their Subsidiaries throughout the period
indicated.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings
with, and reports to, all Governmental Authorities.
"Governmental Authority" means any nation, province, state
or political subdivision thereof, and any government or any
Person exercising executive, legislative, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantors" shall have the meaning assigned thereto in
Section 2.10(b).
"Guaranty Agreements" means the collective reference to the
unconditional and unlimited guaranty agreements, each in form and
substance reasonably satisfactory to the Administrative Agent,
executed by each of the Guarantors in favor of the Administrative
Agent, for the ratable benefit of itself and the Lenders, to
guarantee the Obligations of the Borrowers hereunder.
"Guaranty Obligation" means, with respect to the Credit
Parties and their Subsidiaries, without duplication, any
obligation, contingent or otherwise, of any such Person pursuant
to which such Person has directly or indirectly guaranteed any
Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of any such Person (a) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement condition or otherwise) or
(b) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, that the term Guaranty
Obligation shall not include (i) endorsements for collection or
deposit in the ordinary course of business or (ii) a contractual
commitment by one Person to invest in another Person for so long
as such investment is expected to constitute a permitted
investment under Section 10.4.
"Hazardous Materials" means any substances or materials (a)
which are or become regulated or defined as hazardous wastes,
hazardous substances, pollutants, contaminants, chemical
substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise harmful to human health or the environment and are or
become regulated by any Governmental Authority, (c) the presence
of which require investigation or remediation under any
Environmental Law, (d) the discharge or emission or release of
which requires a permit or license under any Applicable Law or
other Governmental Approval, or (e) which contain, without
limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or waste, crude oil, nuclear fuel, natural gas
or synthetic gas.
"Hedging Agreement" means any agreement with respect to an
interest rate swap, collar, cap, floor or forward rate agreement,
foreign currency agreement or other agreement regarding the
hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of any Credit Party, and
any confirming letter executed pursuant to such hedging
agreement, all as amended, restated or otherwise modified from
time to time.
"Interest Period" shall have the meaning assigned thereto in
Section 4.1(b).
"Investment Grade" means a Debt Rating of BBB- or higher
issued by S&P and a Debt Rating of Baa3 or higher issued by
Moody's.
"Issuing Lender" means First Union in its capacity as issuer
of any Letter of Credit, and any other Lender mutually acceptable
and on terms satisfactory to the Borrowers and the Administrative
Agent.
"L/C Commitment" means Fifty Million Dollars ($50,000,000).
"L/C Facility" means the letter of credit facility
established pursuant to Article III hereof.
"L/C Fee" shall have the meaning assigned thereto in Section
3.3(a).
"L/C Obligations" means at any time, an amount equal to the
sum of (a) the aggregate undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of
drawings under Letters of Credit which have not then been
reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the
Lenders having a Five Year Facility Commitment other than the
applicable Issuing Lender.
"Lender" means each Person executing this Agreement as a
Lender set forth on the signature pages hereto and each Person
that hereafter becomes a party to this Agreement as a Lender
pursuant to Section 13.10(b) other than any party hereto that
ceases to be a party hereto pursuant to any Assignment and
Acceptance.
"Lender Default" means (i) the refusal (which has not been
retracted) or the failure of a Lender to make available its
portion of any Mandatory Borrowing or (ii) a Lender having
notified in writing the Borrowers and/or the Administrative Agent
that such Lender does not intend to comply with its obligations
under Section 2.6(b), in the case of either clause (i) or (ii) as
a result of any takeover or control of such Lender by any
Governmental Authority.
"Lending Office" means, with respect to any Lender, the
office of such Lender maintaining such Lender's Aggregate
Revolving Credit Commitment Percentage of the Revolving Credit
Loans.
"Letters of Credit" shall have the meaning assigned thereto
in Section 3.1.
"LIBOR" means the rate of interest per annum determined on
the basis of the rate for deposits in the Applicable Currency in
minimum amounts of at least $5,000,000 or the Dollar Equivalent
thereof for a period equal to the applicable Interest Period
which appears on the Dow Jones Market Screen 3740 or 3750 (or on
any successor or substitute page of such service, or any
successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of
such service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates
applicable to the Applicable Currency deposits in the London
interbank market) at approximately 11:00 a.m. (London time) two
(2) Business Days prior to the first day of the applicable
Interest Period (rounded upward, if necessary, to the nearest one
hundredth of one percent (1/100%)). If, for any reason, such
rate does not appear on Dow Jones Market Screen 3740 or 3750,
then "LIBOR" shall be determined by the Administrative Agent to
be the arithmetic average (rounded upward, if necessary, to the
nearest one-hundredth of one percent (1/100%)) of the rate per
annum at which deposits in the Applicable Currency would be
offered by the Reference Group in the London interbank market to
the Administrative Agent as of approximately 11:00 a.m. (London
time) two (2) Business Days prior to the first day of the
applicable Interest Period for a period equal to such Interest
Period and in an amount substantially equal to the amount of the
applicable Revolving Credit Loan.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any asset which
it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, Capital Lease or
other title retention agreement relating to such asset.
"Loan Documents" means, collectively, this Agreement, the
Notes, the Applications and each other document, instrument and
agreement executed and delivered by any Credit Party, its
Subsidiaries or their counsel in connection with this Agreement
or otherwise referred to herein or contemplated hereby, all as
may be amended, restated or otherwise modified.
"Loans" means the collective reference to the Revolving
Credit Loans, the Competitive Bid Loans and the Swingline Loans;
"Loan" means any one of such Loans.
"Mandatory Borrowing" shall have the meaning assigned
thereto in Section 2.6(b).
"Margin" means, with respect to any Competitive Bid Loan,
the marginal rate of interest, if any, to be added to or
subtracted from the Offshore Rate to determine the rate of
interest applicable to such Loan, as specified by the Lender
making such Loan in its related Margin Rate Bid.
"Margin Rate Bid" means an offer by a Lender to make a
Competitive Bid Loan in accordance with Section 2.5, denominated
in Dollars or in a single Offshore Currency and at a rate of
interest per annum equal to the Offshore Rate plus or minus the
Margin.
"Material Adverse Effect" means, with respect to the Credit
Parties or any of their Subsidiaries, a material adverse effect
on the business, assets, liabilities (actual or contingent),
operations, condition (financial or otherwise) or financial
prospects of the Credit Parties and their Subsidiaries taken as a
whole or the ability of any such Credit Party to perform its
obligations under the Loan Documents, in each case to which it is
a party.
"Material Subsidiary" means a Subsidiary which is material
to the business, assets, liabilities (actual or contingent),
operations or financial condition of the Company and its
Subsidiaries taken as a whole, including, without limitation, a
Subsidiary whose principal assets are one or more Material
Subsidiaries.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which a Borrower or any ERISA
Affiliate is making, has made, is accruing or has accrued an
obligation to make, contributions within the preceding six years.
"Net Cash Proceeds" means, as applicable, with respect to
any issuance of Additional Debt Securities, the gross cash
proceeds received by a Credit Party or any of its Subsidiaries
therefrom less all legal, underwriting and other fees and
expenses incurred in connection therewith.
"Net Sale Proceeds" shall mean, for any sale of assets, the
gross cash proceeds (including any cash received by way of
deferred payment pursuant to a promissory note, receivable or
otherwise, but only as and when received) received from such
sale, net of the reasonable costs of such sale (including fees
and commissions, payments of unassumed liabilities relating to
the assets sold and required payments of any Debt which is
secured by the respective assets which were sold), and the
incremental taxes paid or payable as a result of such sale.
"Notes" means the collective reference to the Revolving
Credit Notes, the Swingline Notes and the Competitive Bid Notes;
and "Note" means any one of such Notes.
"Notice of Account Designation" shall have the meaning
assigned thereto in Section 2.2(b).
"Notice of Conversion/Continuation" shall have the meaning
assigned thereto in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned
thereto in Section 2.3(c).
"Notice of Revolving Credit Borrowing" shall have the
meaning assigned thereto in Section 2.2(a).
"Notice of Swingline Borrowing" shall have the meaning
assigned thereto in Section 2.6(d).
"Obligations" means, in each case, whether now in existence
or hereafter arising: (a) the principal of and interest on
(including interest accruing after the filing of any bankruptcy
or similar petition) the Loans, (b) all payment and other
obligations owing by the Credit Parties to any Lender or
Affiliate of a Lender or the Administrative Agent under any
Hedging Agreement with any Lender or Affiliate of a Lender (which
such Hedging Agreement is permitted hereunder), and (c) all other
fees and commissions (including attorney's fees), charges,
indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by the Credit Parties to
the Lenders or the Administrative Agent, of every kind, nature
and description, direct or indirect, absolute or contingent, due
or to become due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note, in each
case under or in respect of this Agreement, any Note, or any of
the other Loan Documents.
"Offer" means the offer made by the Acquisition Sub,
substantially on the terms set out in the Press Release, to
acquire all of the outstanding capital stock of the Target not
already beneficially owned by the Borrowers, as such offer has
been and may from time to time be amended, added to, revised,
renewed or waived in accordance with Section 9.1.
"Offer Costs" means all costs, fees and expenses (and taxes
thereon) and all stamp, documentary, registration or similar tax
incurred by or on behalf of a Borrower in connection with the
Offer including the preparation, negotiation and entry into of
this Agreement and fees payable in connection therewith.
"Officer's Compliance Certificate" shall have the meaning
assigned thereto in Section 7.2.
"Offshore Currency" means Sterling, Deutsche Marks, French
Francs, Belgian Francs and Euros.
"Offshore Currency Loan" means any Offshore Rate Loan or
Competitive Bid Loan denominated in an Offshore Currency.
"Offshore Rate" means, for any Interest Period, with respect
to an Offshore Rate Loan, the rate of interest per annum (rounded
upward to the next 1/100th of 1%) determined by the
Administrative Agent as follows:
Offshore Rate = LIBOR
---------------------------------------------
1.00 - Eurodollar Reserve Percentage
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Revolving Credit Loan or a
Swingline Loan bearing interest at a rate based upon the Offshore
Rate as provided in Section 4.1(a) and, if a Revolving Credit
Loan, may be an Offshore Currency Loan or a Revolving Credit Loan
denominated in Dollars.
"Operating Lease" shall mean, as to any Person, as
determined in accordance with GAAP, any lease of property
(whether real, personal or mixed) by such Person as lessee which
is not a Capital Lease.
"Other Taxes" shall have the meaning assigned thereto in
Section 4.11(b).
"Panel" means the United Kingdom Panel on Takeovers and
Mergers.
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA or any successor agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title
IV of ERISA or Section 412 of the Code and is maintained for the
employees of a Borrower or any of its ERISA Affiliates.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust, business trust, joint
venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental
Authority or any other form of entity or group thereof.
"Press Release" means the press announcement in the form
agreed to by the Administrative Agent and released by the UK Sub
in connection with the Offer.
"Prime Rate" means, at any time, the rate of interest per
annum publicly announced from time to time by First Union as its
prime rate in effect at its principal office in Charlotte, North
Carolina. Each change in the Prime Rate shall be effective as of
the opening of business on the day such change in the Prime Rate
occurs. The parties hereto acknowledge that the rate announced
publicly by First Union as its Prime Rate is an index or base
rate and shall not necessarily be its lowest or best rate charged
to its customers or other banks.
"Prior Bank Commitments" means the Company's committed
credit facilities with domestic lenders as of the Closing Date.
"Projections" shall have the meaning assigned thereto in
Section 5.2(e)(ii).
"Real Property" of any Person shall mean all the right,
title and interest of such Person in and to land, improvements
and fixtures, including leaseholds.
"Redeemable Preferred Stock" of any Person means any
preferred stock issued by such Person which is at any time prior
to the termination or expiration of the Aggregate Revolving
Credit Commitment, either (i) mandatorily redeemable (by sinking
fund or similar payments or otherwise) or (ii) redeemable at the
option of the holder thereof.
"Reimbursement Obligation" means the obligation of the
Borrowers to reimburse each Issuing Lender pursuant to Section
3.5 for amounts drawn under Letters of Credit.
"Reference Group" shall mean the Lenders party to this
Agreement on the Closing Date.
"Register" shall have the meaning assigned thereto in
Section 13.10(d).
"Rental Expense" means, all obligations of the Credit
Parties or any of their Subsidiaries for payments under Operating
Leases.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title
IV of ERISA other than those events as to which the 30-day notice
period is waived under subsection .22, .23, .27 or .28 of PBGC
Regulation Section 4043.
"Required Lenders" means, at any date, any combination of
Lenders whose Aggregate Revolving Credit Commitment Percentage
equals at least fifty-one percent (51%) of the Aggregate
Revolving Credit Commitment or if the Aggregate Revolving Credit
Commitment has been terminated, any combination of Lenders who
collectively hold at least fifty-one percent (51%) of the
aggregate unpaid principal amount of the Extensions of Credit
(excluding the aggregate unpaid principal amount of Competitive
Bid Loans) provided that, for purposes of declaring the Loans to
be due and payable pursuant to Article XI, and for all purposes
after the Loans become due and payable pursuant to Article XI,
the outstanding Competitive Bid Loans of the Lenders shall be
included in their respective Aggregate Revolving Credit
Commitment Percentages in determining the Required Lenders.
"Responsible Officer" means any of the following: the
chairman, president, chief executive officer, chief financial
officer, treasurer or vice president and corporate controller of
a Borrower or any other officer of a Borrower reasonably
acceptable to the Administrative Agent.
"Revolving Credit Commitment Percentage" means, as to any
Lender at any time, the ratio of (a) the amount of the Aggregate
Revolving Credit Commitment of such Lender to (b) the Aggregate
Revolving Credit Commitment of all of the Lenders.
"Revolving Credit Loans" means any revolving loan made to a
Borrower pursuant to Section 2.2 under the 364 Day Facility (or
the conversion thereof upon the exercise of the Conversion
Option) or the Five Year Facility, and all such revolving loans
collectively as the context requires.
"Revolving Credit Notes" means the collective reference to
the Revolving Credit Notes made by the Borrowers payable to the
order of each Lender with a Five Year Facility Commitment or a
364 Day Facility Commitment, substantially in the form of Exhibit
A-1 hereto, and any amendments and modifications thereto, any
substitutes therefor, and any replacements, restatements,
renewals or extensions thereof, in whole or in part (including,
without limitation, such substitutes, replacements, restatements,
renewals or extensions resulting from the exercise of the
Conversion Option); "Revolving Credit Note" means any of such
Revolving Credit Notes.
"SEC Reports" shall have the meaning assigned thereto in
Section 6.1(w).
"Shares" means any shares of capital stock of the Target
which are the subject of the Offer.
"Spot Rate" for a currency means the rate quoted by the
Administrative Agent as the spot rate for the purchase by the
Administrative Agent of such currency with another currency
through its foreign exchange trading office at approximately 8:00
a.m. (Charlotte time) on the date two Business Days prior to the
date as of which the foreign exchange computation is made.
"Sterling" means the currency of the United Kingdom.
"Subordinated Debt" means the collective reference to Debt
on Schedule 6.1(p) hereof designated as Subordinated Debt and any
other Debt of the Credit Parties or any Subsidiary thereof
subordinated in right and time of payment to the Obligations and
otherwise permitted hereunder.
"Subsidiary" means, with respect to any Person (the
"parent") at any date, any corporation, limited liability
company, partnership, association or other entity the accounts of
which would be Consolidated with those of the parent in the
parent's Consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date,
as well as any other corporation, limited liability company,
partnership, association or other entity (a) of which securities
or other ownership interests representing more than fifty percent
(50%) of the equity or more than fifty percent (50%) of the
ordinary voting power or, in the case of a partnership, more than
fifty percent (50%) of the general partnership interests are, as
of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent. Unless otherwise qualified
references to "Subsidiary" or "Subsidiaries" herein shall refer
to those of the Company.
"Swingline Lender" means First Union in its capacity as
issuer of any Swingline Loan.
"Swingline Loans" means any revolving loan made pursuant to
Section 2.6 and all such loans collectively as the context
requires.
"Swingline Notes" means the notes made by the Borrowers
payable to the order of the Swingline Lender pursuant to Section
2.6(f) substantially in the form of Exhibit A-2, and any
amendments and modifications thereto, and any substitutes
therefor, and any replacements, restatements, renewals or
extension thereof, in whole or in part; "Swingline Note" means
any of such Swingline Notes.
"Swingline Termination Date" means the earlier to occur of
(a) the resignation of First Union as Administrative Agent in
accordance with Section 12.9 and (b) the termination of the
Aggregate Revolving Credit Commitment.
"Target" means Field Group plc.
"Target Group" means, at any particular time, the Target and
all of its subsidiaries.
"Taxes" shall have the meaning assigned thereto in Section
4.11(a).
"Term Loan" shall have the meaning assigned thereto in
Section 2.8(a).
"Term Loan Termination Date" means the earliest of the dates
referred to in Section 2.8(c).
"Termination Date" means the 364 Day Facility Termination
Date, the Five Year Facility Termination Date or the Term Loan
Termination Date, as the context requires.
"Termination Event" means any of the following that result
in a Material Adverse Effect: (a) a "Reportable Event" described
in Section 4043 of ERISA, or (b) the withdrawal of a Borrower or
any ERISA Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the termination of a Pension Plan,
the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to
terminate, or to seek the appointment of a trustee with respect
to, any Pension Plan by the PBGC, or (e) any other event or
condition which would constitute grounds under Section 4042(a) of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan, or (f) the partial or complete
withdrawal of a Borrower or any ERISA Affiliate from a
Multiemployer Plan, or (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA, or (h) any event
or condition which results in the reorganization or insolvency of
a Multiemployer Plan under Sections 4241 or 4245 of ERISA, (i)
any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer
Plan under Section 4042 of ERISA or (j) the withdrawal or partial
withdrawal of any Credit Party or ERISA Affiliate from a
Multiemployer Plan.
"Timberlands" means all or substantially all of the
timberlands held by Chesapeake Forest Products Company.
"Tissue Mill" means the tissue facility the Company intends
to construct in Halifax County, North Carolina.
"UCC" means the Uniform Commercial Code as in effect in the
Commonwealth of Virginia, as amended, restated or otherwise
modified from time to time.
"UK Loan Notes" means the notes to be issued by the
Acquisition Sub to holders of Shares as contemplated by the
Offer.
"Unconditional Date" means March 5, 1999, the date on which
the Offer was declared unconditional in all respects.
"Unfunded Current Liability" of any Pension Plan means the
amount, if any, by which the actuarial present value of the
accumulated plan benefits under the Pension Plan as of the close
of its most recent year, determined in accordance with actuarial
assumptions at such time consistent with Statement of Financial
Accounting Standards No. 87, exceeds the sum of (i) the market
value of the assets allocable thereto and (ii) $100,000.
"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1994 Revision), International Chamber of
Commerce Publication No. 500.
"United States" means the United States of America.
"Wholly-Owned" means, with respect to a Subsidiary, that all
of the shares of capital stock or other ownership interests of
such Subsidiary are, directly or indirectly, owned or controlled
by any Credit Party and/or one or more of its Wholly-Owned
Subsidiaries.
"Year 2000 Problem" shall have the meaning assigned thereto
in Section 5.1(h)(iii).
SECTION 1.2 General.
Unless otherwise specified, a reference in this Agreement to
a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of
this Agreement. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include
the singular and plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, feminine
and neuter. Any reference herein to "Charlotte time" shall refer
to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined
therein, all capitalized terms defined in this Agreement shall
have the defined meanings when used in this Agreement, the Notes
and the other Loan Documents or any certificate, report or other
document made or delivered pursuant to this Agreement.
(b) Miscellaneous. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
SECTION 1.4 Currency Equivalents Generally.
For all purposes of this Agreement (but not for purposes of
the preparation of any financial statements delivered pursuant
hereto), the equivalent in any Offshore Currency or other
currency of an amount in Dollars, and the equivalent in Dollars
of an amount in any Offshore Currency or other currency, shall be
determined at the Spot Rate.
SECTION 1.5 Introduction of Euro.
For the avoidance of doubt, the parties hereto affirm and
agree that neither the fixation of the conversion rate of any
Offshore Currency of a country that is a member of the European
Union against the Euro as a single currency, in accordance with
the Treaty Establishing the European Economic Community, as
amended by the Treaty on the European Union (the Maastricht
Treaty), nor the conversion of any Obligations under the Loan
Documents from an Offshore Currency of a country that is a member
of the European Union into Euros, shall require the early
termination of this Agreement or the prepayment of any amount due
under the Loan Documents or create any liability of one party to
another party for any direct or consequential loss arising from
any of such events. As of the date that any such Offshore
Currency is no longer the lawful currency of its respective
country, all Obligations under the Loan Documents that would
otherwise be in such Offshore Currency shall thereafter be
denominated and satisfied in Euros.
If more than one currency or currency unit are at the same
time recognized by the laws of any country as the lawful currency
of that country, then:
(a) any reference in this Agreement to, and any Obligation
arising under this Agreement or the other Loan Documents in, the
currency of that country shall be translated into, or paid into,
the lawful currency or currency unit of that country designated
by the Administrative Agent; and
(b) any translation from one currency or currency unit to
another shall be at the official rate of exchange legally
recognized by the central bank of the country issuing such
currency for the conversion of that currency or currency unit
into the other, rounded up or down by the Administrative Agent
acting in accordance with any Applicable Law on rounding or, if
there is no such law, acting reasonably in accordance with its
market practice.
If a change in any currency of a country occurs, this
Agreement will be amended to the extent the Administrative Agent
(acting reasonably) specifies to be necessary to reflect the
change in currency and to put the parties hereto in the same
position, as far as possible, that they would have been in if no
change in currency had occurred; provided that any such
amendments will not adversely affect the Lenders.
ARTICLE II
CREDIT FACILITIES
SECTION 2.1 Amount and Terms of Credit.
(a) Description of Facilities. Upon the terms and subject
to the conditions set forth in this Agreement: (i) the Lenders
hereby grant to the Borrowers a short term revolving credit
facility (the "364 Day Facility") and a multi-year revolving
credit facility (the "Five Year Facility") pursuant to which each
Lender severally agrees to make Revolving Credit Loans to the
respective Borrowers in Dollars and Offshore Currencies in
accordance with Section 2.2 and the Swingline Lender agrees to
make Swingline Loans to the respective Borrowers in Dollars in
accordance with Section 2.6 and (ii) the parties hereto agree
that each Lender may, in its sole discretion, make bids to make
Competitive Bid Loans to the respective Borrowers in Dollars or
in an Offshore Currency in accordance with Section 2.5; provided
that (A) the aggregate principal Dollar Equivalent amount of all
outstanding Revolving Credit Loans (after giving effect to any
amount requested) made under the 364 Day Facility plus the aggre
gate principal amount of all outstanding Swingline Loans (after
giving effect to the amount of any Swingline Loans requested
under the 364 Day Facility and exclusive of Swingline Loans made
under the 364 Day Facility which are repaid with the proceeds of,
and simultaneously with the incurrence of, Revolving Credit Loans
under the 364 Day Facility) shall not exceed the 364 Day Facility
Commitment less the aggregate principal amount of all outstanding
Competitive Bid Loans made under the 364 Day Facility; and the
principal Dollar Equivalent amount of outstanding Revolving
Credit Loans made under the 364 Day Facility by any Lender shall
not at any time exceed such Lender's 364 Day Facility Commitment;
(B) the aggregate principal Dollar Equivalent amount of all
outstanding Revolving Credit Loans (after giving effect to any
amount requested) made under the Five Year Facility plus the
aggregate principal amount of all outstanding Swingline Loans
made under the Five Year Facility (after giving effect to the
amount of any Swingline Loans requested under the Five Year
Facility and exclusive of Swingline Loans made under the Five
Year Facility which are repaid with the proceeds of, and
simultaneously with the incurrence of, Revolving Credit Loans
under the Five Year Facility) shall not exceed the Five Year
Facility Commitment less the sum of (x) all outstanding L/C
Obligations plus (y) the aggregate principal amount of all
outstanding Competitive Bid Loans made under the Five Year
Facility; and the principal Dollar Equivalent amount of
outstanding Revolving Credit Loans made under the Five Year
Facility by any Lender shall not at any time exceed such Lender's
Five Year Facility Commitment; and (C) during the Conversion
Period, the aggregate principal Dollar Equivalent amount of all
outstanding Offshore Currency Loans (after giving effect to any
amount requested) made under the Five Year Facility shall not
exceed $200,000,000. Each Revolving Credit Loan by a Lender under
the 364 Day Facility or the Five Year Facility shall be in a
principal Dollar Equivalent amount equal to such Lender's
Commitment Percentage of the aggregate principal Dollar
Equivalent amount of Revolving Credit Loans requested under such
facility on such occasion.
(b) Application of Facilities. The Credit Facility
established hereby shall be used by the Borrowers and their
respective Subsidiaries to:
(i) finance or refinance the consideration payable in
respect of the acquisition of Shares to be acquired by the
Acquisition Sub pursuant to the Offer;
(ii) finance or refinance the Offer Costs;
(iii) finance or refinance the consideration
payable pursuant to the operation by the Acquisition Sub of
the procedures contained in sections 428-430 of the
Companies Act 1985 in respect of Shares;
(iv) finance or refinance the consideration payable to
the Target's share option holders pursuant to any relevant
offer;
(v) finance the working capital and general corporate
purposes of the Borrowers and their respective Subsidiaries;
and, accordingly, the Borrowers shall apply all amounts raised by
them hereunder in or towards satisfaction of such purpose and
neither the Administrative Agent and the Lenders nor any of them
shall be obliged to concern themselves with such application.
SECTION 2.2 Procedure for Advances of Revolving
Credit Loans.
(a) Requests for Revolving Credit Loans. A Borrower shall
give the Administrative Agent irrevocable prior written notice in
the form attached hereto as Exhibit B-1 (a "Notice of Revolving
Credit Borrowing") not later than 11:00 a.m. (Charlotte time) (i)
on the same Business Day as each Base Rate Loan, (ii) at least
three (3) Business Days before each Offshore Rate Loan
denominated in Dollars, and (iii) at least four (4) Business Days
before each Offshore Currency Loan, of its intention to borrow,
specifying (A) the date of such borrowing, which shall be a
Business Day, (B) whether such Revolving Credit Loan is to be
made under the 364 Day Facility or the Five Year Facility, (C)
the amount of such borrowing, which shall be in an amount equal
to the unused amount of the 364 Day Facility Commitment or the
Five Year Facility Commitment, as applicable, or if less, (x)
with respect to Base Rate Loans in an aggregate principal amount
of $1,000,000 or a whole multiple of $250,000 in excess thereof
and (y) with respect to Offshore Rate Loans in an aggregate
principal amount of $5,000,000 or a whole multiple of $1,000,000
in excess thereof, (D) whether such Revolving Credit Loan is to
be an Offshore Rate Loan or Base Rate Loan and (E) in the case of
an Offshore Rate Loan, the duration of the Interest Period
applicable thereto and the Applicable Currency. Notices received
after 11:00 a.m. (Charlotte time) shall be deemed received on the
next Business Day. The Administrative Agent shall promptly
notify the Lenders of each Notice of Revolving Credit Borrowing.
The Dollar Equivalent amount of an Offshore Currency Loan will be
determined by the Administrative Agent for such Offshore Currency
Loan on the Determination Date therefor in accordance with
Section 2.9(a).
(b) Disbursement of Revolving Credit Loans. Each Lender
will make available to the Administrative Agent, for the accounts
of the respective Borrowers, at the office of the Administrative
Agent in funds immediately available to the Administrative Agent,
such Lender's Commitment Percentage of the Revolving Credit Loans
to be made on such borrowing date (i) in the case of a Revolving
Credit Loan denominated in Dollars, no later than 2:00 p.m.
(Charlotte time) on the proposed borrowing date and (ii) in the
case of a Revolving Credit Loan that is an Offshore Currency
Loan, by such time as the Administrative Agent may determine to
be necessary for such funds to be credited on such date in
accordance with normal banking practices in the place of payment.
Each Borrower hereby irrevocably authorizes the Administrative
Agent to disburse the proceeds of each borrowing requested by
such Borrower pursuant to this Section 2.2 in immediately
available funds by crediting or wiring such proceeds to the
deposit account of such Borrower identified in the most recent
notice of account designation, substantially in the form of
Exhibit C hereto (a "Notice of Account Designation"), delivered
by such Borrower to the Administrative Agent or as may be
otherwise agreed upon by such Borrower and the Administrative
Agent from time to time. Subject to Section 4.7 hereof, the
Administrative Agent shall not be obligated to disburse the
portion of the proceeds of any Revolving Credit Loan requested
pursuant to this Section 2.2 for which any Lender is responsible
to the extent that such Lender has not made available to the
Administrative Agent its Commitment Percentage of such Revolving
Credit Loan.
SECTION 2.3 Repayment of Loans.
(a) Repayment on Termination Date. The Borrowers jointly
and severally agree to repay the outstanding principal amount of
all Loans under the 364 Day Facility in full on the 364 Day
Facility Termination Date, with all accrued but unpaid interest
thereon. The Borrowers jointly and severally agree to repay the
outstanding principal amount of all Loans and the Reimbursement
Obligation under the Five Year Facility in full on the Five Year
Facility Termination Date with all accrued but unpaid interest
thereon. If the Company has exercised the Conversion Option, the
Borrowers jointly and severally agree to repay the outstanding
principal amount of the Term Loan in full on the Term Loan
Termination Date, with all accrued but unpaid interest thereon.
(b) Mandatory Repayment of Loans.
(i) If at any time (A) the sum of the outstanding
principal Dollar Equivalent amount of all Loans made under the
364 Day Facility exceeds the 364 Day Facility Commitment of all
Lenders or (B) the sum of the outstanding principal Dollar
Equivalent amount of all Loans made under the Five Year Facility
and all outstanding L/C Obligations exceeds the Five Year
Facility Commitment of all Lenders, the Borrowers jointly and
severally agree to repay immediately upon notice from the
Administrative Agent, by payment to the Administrative Agent for
the account of the Lenders, Revolving Credit Loans, Swingline
Loans, L/C Obligations or Competitive Bid Loans and/or furnish
cash collateral reasonably satisfactory to the Administrative
Agent, in an amount equal to such excess. Such cash collateral
shall be applied in accordance with Section 11.2(b).
(ii) In addition to any other mandatory repayment of
Loans made under the 364 Day Facility pursuant to this Section
2.3, on each date on or after the Closing Date on which any
Credit Party receives any cash proceeds from the issuance of
Additional Debt Securities, the Borrowers jointly and severally
agree to repay, by payment to the Administrative Agent for the
account of the Lenders, Revolving Credit Loans (including, if
applicable, Revolving Credit Loans that have been converted into
the Term Loan), Swingline Loans or Competitive Bid Loans made
under the 364 Day Facility in an amount equal to 100% of the Net
Cash Proceeds of such issuance of Additional Debt Securities; or,
if less, an amount equal to the aggregate principal Dollar
Equivalent amount of Revolving Credit Loans (including, if
applicable, Revolving Credit Loans that have been converted into
the Term Loan), Swingline Loans and Competitive Bid Loans made
under the 364 Day Facility and any accrued but unpaid interest
thereon and any other Obligations with respect to the 364 Day
Facility.
(iii) In addition to any other mandatory repayment
of Loans made under the 364 Day Facility pursuant to this Section
2.3, if (A) the Company has exercised the Conversion Option and
(B) (1) any Credit Party has received proceeds from the sale of
Timberlands, where such sale was consummated before the Company
exercised the Conversion Option or (2) any Credit Party receives
proceeds from the sale of Timberlands, where such sale is
consummated during the Conversion Period, the Borrowers jointly
and severally agree to repay, by payment to the Administrative
Agent for the account of the Lenders, Revolving Credit Loans
converted into the Term Loan in an amount equal to 50% of the Net
Sale Proceeds from such sale, as adjusted for any installment
sales discounts. Such repayment shall be made, in the case of
clause (B)(1) of the preceding sentence, on the day the Company
exercises the Conversion Option and, in the case of clause (B)(2)
of the preceding sentence, on the day such proceeds are received
by the Company.
(iv) If on any Determination Date, the Administrative
Agent shall have determined that the aggregate principal Dollar
Equivalent amount of all Loans and L/C Obligations then
outstanding exceeds the Aggregate Revolving Credit Commitment by
more than $500,000 due to a change in applicable rates of
exchange between Dollars and Offshore Currencies, then the
Administrative Agent shall give notice to the Borrowers that a
prepayment is required under this Section 2.3(b)(iv) and the
Borrowers jointly and severally agree thereupon to make
prepayments of Loans such that, after giving effect to such
prepayment, the aggregate Dollar Equivalent amount of all Loans
and L/C Obligations then outstanding does not exceed the
Aggregate Revolving Credit Commitment.
(v) If on any Determination Date during the Conversion
Period, the Administrative Agent shall have determined that the
aggregate principal Dollar Equivalent amount of all outstanding
Offshore Currency Loans made under the Five Year Facility exceeds
$200,000,000, the Borrowers jointly and severally agree thereupon
to make prepayments of Offshore Currency Loans made under the
Five Year Facility such that, after giving effect to such
prepayment, the aggregate Dollar Equivalent amount of all
outstanding Offshore Currency Loans made under the Five Year
Facility does not exceed $200,000,000.
(vi) Notwithstanding anything to the contrary in
Sections 2.3(b)(ii) and (iii), the mandatory repayment described
in such Sections of any Offshore Rate Loans may be delayed until
the last day of the Interest Period applicable to such Offshore
Rate Loans. Any repayment of such Offshore Rate Loans other than
on the last day of the Interest Period applicable thereto shall
be accompanied by any amount required to be paid pursuant to
Section 4.9 hereof.
(vii) Notwithstanding anything to the contrary in
Sections 2.3(b)(iv) and (v), the mandatory repayment described in
such Sections of any Offshore Rate Loans may be delayed until the
last day of the Interest Period applicable to such Offshore Rate
Loans; provided, that if the Borrowers so delay repayment of
Offshore Rate Loans, the Borrowers shall deposit or cause to be
deposited, on the day repayment would have otherwise been
required, in a cash collateral account opened by the
Administrative Agent, an amount equal to the aggregate principal
amount of such delayed mandatory repayment of Offshore Rate Loans
and any accrued but unpaid interest thereon. Any repayment of
such Offshore Rate Loans other than on the last day of the
Interest Period applicable thereto shall be accompanied by any
amount required to be paid pursuant to Section 4.9 hereof.
(c) Optional Repayments. Each Borrower may at any time and
from time to time repay the Revolving Credit Loans or Swingline
Loans made to it, in whole or in part, upon at least three (3)
Business Days' irrevocable notice to the Administrative Agent
with respect to Offshore Rate Loans and one (1) Business Day
irrevocable notice with respect to Base Rate Loans, in the form
attached hereto as Exhibit D (a "Notice of Prepayment")
specifying the date and amount of repayment; whether the
repayment is of Revolving Credit Loans or Swingline Loans and
whether such loans were made under the 364 Day Facility or the
Five Year Facility, or a combination thereof, and, if a
combination, the amount allocable to each; whether the repayment
is of Offshore Rate Loans, Base Rate Loans, or a combination
thereof, and, if of a combination thereof, the amount allocable
to each. Upon receipt of such notice, the Administrative Agent
shall promptly notify each Lender. If any such notice is given,
the amount specified in such notice shall be due and payable on
the date set forth in such notice. Partial repayments shall be
in an aggregate amount of $1,000,000 or a whole multiple of
$250,000 in excess thereof with respect to Base Rate Loans,
$250,000 or a whole multiple of $100,000 in excess thereof with
respect to Swingline Loans and $5,000,000 or a whole multiple of
$1,000,000 in excess thereof with respect to Offshore Rate Loans.
(d) Limitation on Repayment of Offshore Rate Loans. The
Borrowers may not repay any Offshore Rate Loan on any day other
than on the last day of the Interest Period applicable thereto
unless such repayment is accompanied by any amount required to be
paid pursuant to Section 4.9 hereof.
(e) Limitation on Repayment of Competitive Bid Loans. The
Borrowers may not repay any Competitive Bid Loan on any day other
than on the last day of the Interest Period applicable thereto
except, and on such terms, as agreed to by the Borrower to which
the Competitive Bid Loan was made and the Lender which made such
Competitive Bid Loan.
SECTION 2.4 Revolving Credit Notes.
Each Lender's Revolving Credit Loans and the joint and
several obligation of each Borrower to repay such Revolving
Credit Loans shall be evidenced by separate Revolving Credit
Notes executed by each Borrower payable to the order of such
Lender representing the Borrower's obligation to pay such
Lender's 364 Day Facility Commitment and such Lender's Five Year
Facility Commitment or, if less, the aggregate unpaid principal
Dollar Equivalent amount of all Revolving Credit Loans made and
to be made by such Lender under the 364 Day Facility or the Five
Year Facility, as applicable, plus interest and all other fees,
charges and other amounts due thereon. Each Revolving Credit
Note shall be dated the date hereof and shall bear interest on
the unpaid principal amount thereof at the applicable interest
rate per annum specified in Section 4.1.
SECTION 2.5. Competitive Bid Loans and Procedure.
(a) Subject to the terms and conditions set forth herein,
from time to time until the expiration or termination of the
Aggregate Revolving Credit Commitment, each Borrower may request
Competitive Bids under the 364 Day Facility or the Five Year
Facility, and may (but shall not have any obligation to) accept
Competitive Bids and borrow Competitive Bid Loans, which shall be
denominated in Dollars or an Offshore Currency; provided that (i)
the sum of the aggregate principal Dollar Equivalent amount of
outstanding Revolving Credit Loans and Swingline Loans made under
the 364 Day Facility plus the aggregate principal Dollar
Equivalent amount of outstanding Competitive Bid Loans made
thereunder at any time shall not exceed the 364 Day Facility
Commitment and (ii) the sum of the aggregate principal Dollar
Equivalent amount of outstanding Revolving Credit Loans and
Swingline Loans made under the Five Year Facility plus the
aggregate principal Dollar Equivalent amount of outstanding
Competitive Bid Loans made thereunder at any time shall not
exceed the Five Year Facility Commitment less the sum of all
outstanding L/C Obligations. To request Competitive Bids, a
Borrower shall notify the Administrative Agent of such request by
telephone, not later than 11:00 a.m., Charlotte time, (i) at
least two (2) Business Days before the date of the proposed
borrowing if the Borrower requests Absolute Rate Bids and (ii) at
least five (5) Business Days before the date of the proposed
borrowing if the Borrower requests Margin Rate Bids; provided
that a Competitive Bid Request shall not be made within five (5)
Business Days after the date of any previous Competitive Bid
Request and no more than two (2) Competitive Bid Requests for
Margin Rate Bids may be made each month. Each such telephonic
Competitive Bid Request shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written
Competitive Bid Request in a form approved by the Administrative
Agent and signed by the Company. Each such telephonic and
written Competitive Bid Request shall specify the following
information:
(i) the aggregate amount of the requested borrowing
and, if a Margin Rate Bid is requested, whether the proposed
borrowing is to be denominated in Dollars or in a single
Offshore Currency;
(ii) the date of such borrowing, which shall be a
Business Day;
(iii) up to three (3) alternative Interest
Period(s) which could be applicable to such borrowing, each
of which shall be a period contemplated by the definition of
the term "Interest Period" in Section 4.1(b)(i) if the
Borrower has requested Margin Rate Bids and each of which
shall be a period contemplated by the definition of the term
"Interest Period" in Section 4.1(b)(ii) if the Borrower has
requested Absolute Rate Bids;
(iv) whether the borrowing is to be made under the 364
Day Facility or the Five Year Facility;
(v) the location and number of the Borrower's account
to which funds are to be disbursed; and
(vi)if the Borrower has requested that the Competitive
Bid Loan be made during the Certain Funds Period and the proceeds
of the Competitive Bid Loan are to be used as specified in
Section 2.1(b)(i), (ii) or (iii) hereof, a representation and
warranty that the conditions specified in Section 5.3 hereof have
been satisfied or waived in writing by the Administrative Agent
as of the date of the Competitive Bid Request, and, in all other
situations, a representation and warranty that the conditions
specified in Section 5.4 hereof have been satisfied or waived in
writing by the Administrative Agent as of the date the
Competitive Bid Request.
Promptly following receipt of a Competitive Bid Request
in accordance with this Section, the Administrative Agent shall
notify the Lenders of the details thereof by telecopy, inviting
the Lenders to submit Competitive Bids.
(b) Each Lender may (but shall not have any obligation to)
make one or more Competitive Bids to a Borrower in response to a
Competitive Bid Request. Each Competitive Bid by a Lender must
be in a form approved by the Administrative Agent and must be
received by the Administrative Agent by telecopy, not later than
9:30 a.m., Charlotte time, one (1) Business Day before the
proposed date of such borrowing if the Borrower has requested
Absolute Rate Bids and four (4) Business Days before the proposed
date of such borrowing if the Borrower has requested Margin Rate
Bids. Competitive Bids that do not conform substantially to the
form approved by the Administrative Agent may be rejected by the
Administrative Agent, and the Administrative Agent shall notify
the applicable Lender as promptly as practicable. Each
Competitive Bid shall specify (i) the principal amount (which
shall be a minimum of $5,000,000 or the Dollar Equivalent thereof
and an integral multiple of $1,000,000 or the Dollar Equivalent
thereof and which may equal the entire principal amount of the
borrowing requested by the Borrower) of the Competitive Bid Loan
or Loans that the applicable Lender is willing to make, (ii) the
Competitive Bid Rate or Rates at which such Lender is prepared to
make such Loan or Loans (expressed as a percentage rate per annum
in the form of a decimal to no more than four decimal places) and
(iii) the Interest Period applicable to each such Loan and the
last day thereof. The Dollar Equivalent amount of an Offshore
Currency Loan will be determined by the Administrative Agent for
such Offshore Currency Loan on the Determination Date therefor in
accordance with Section 2.9(a). The Offshore Rate to be applied
to a Competitive Bid Loan made pursuant to a Margin Rate Bid will
be determined by the Administrative Agent two (2) Business Days
before the date of the proposed borrowing.
(c) The Administrative Agent shall promptly notify the
Borrower requesting Competitive Bids by telecopy of the
Competitive Bid Rate and the principal amount specified in each
Competitive Bid and the identity of the Lender that shall have
made such Competitive Bid.
(d) Subject only to the provisions of this paragraph, the
Borrower requesting Competitive Bids may accept or reject any
Competitive Bid. Such Borrower shall notify the Administrative
Agent by telephone, confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has
decided to accept or reject each Competitive Bid, not later than
11:00 a.m., Charlotte time, one (1) Business Day before the date
of the proposed borrowing if the Borrower has requested Absolute
Rate Bids and four (4) Business Days before the date of the
proposed borrowing if the Borrower has requested Margin Rate
Bids; provided that (i) the failure of such Borrower to give such
notice shall be deemed to be a rejection of each Competitive Bid,
(ii) such Borrower shall not accept a Competitive Bid made at a
particular Competitive Bid Rate if such Borrower rejects a
Competitive Bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by such
Borrower shall not exceed the aggregate amount of the requested
borrowing specified in the related Competitive Bid Request,
(iv) to the extent necessary to comply with clause (iii) above,
such Borrower may accept Competitive Bids at the same Competitive
Bid Rate in part, which acceptance, in the case of multiple
Competitive Bids at such Competitive Bid Rate, shall be made pro
rata in accordance with the amount of each such Competitive Bid,
and (v) except pursuant to clause (iv) above, no Competitive Bid
shall be accepted for a Competitive Bid Loan unless such
Competitive Bid Loan is in a minimum principal amount of
$5,000,000 or the Dollar Equivalent thereof and an integral
multiple of $1,000,000 or the Dollar Equivalent thereof; provided
further that if a Competitive Bid Loan must be in an amount less
than $5,000,000 or the Dollar Equivalent thereof because of the
provisions of clause (iv) above, such Competitive Bid Loan may be
for a minimum of $1,000,000 or the Dollar Equivalent thereof or
any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple Competitive
Bids at a particular Competitive Bid Rate pursuant to clause
(iv) above the amounts shall be rounded to integral multiples of
$1,000,000 or the Dollar Equivalent thereof in a manner
determined by the Borrower. A notice given by a Borrower
pursuant to this paragraph shall be irrevocable.
(e) The Administrative Agent shall promptly notify each
bidding Lender by telecopy whether or not its Competitive Bid has
been accepted (and, if so, the amount and Competitive Bid Rate so
accepted), and each successful bidder will thereupon become
bound, subject to the terms and conditions hereof, to make the
Competitive Bid Loan in respect of which its Competitive Bid has
been accepted.
(f) Not later than 2:00 p.m. (Charlotte time) on the
proposed borrowing date, each Lender whose Competitive Bid has
been accepted will make available to the Administrative Agent,
for the account of the Borrower to whom the Competitive Bid Loan
is to be made, at the office of the Administrative Agent in funds
immediately available to the Administrative Agent, the amount of
the Competitive Bid Loan to be made on such borrowing date by
such Lender. Each Borrower hereby irrevocably authorizes the
Administrative Agent to disburse the proceeds of each borrowing
requested pursuant to this Section 2.5 in immediately available
funds by crediting or wiring such proceeds to the deposit account
of such Borrower identified in its most recent Notice of Account
Designation or as may be otherwise agreed upon by such Borrower
and the Administrative Agent from time to time. Subject to
Section 4.7 hereof, the Administrative Agent shall not be
obligated to disburse the proceeds of any Competitive Bid Loan
requested pursuant to this Section 2.5 for which any Lender is
responsible to the extent that such Lender has not made available
to the Administrative Agent the amount of such Competitive Bid
Loan.
(g) If the entity which is the Administrative Agent shall
elect to submit a Competitive Bid in its capacity as a Lender, it
shall submit such Competitive Bid directly to the Borrower
requesting Competitive Bids at least one quarter of an hour
earlier than the time by which the other Lenders are required to
submit their Competitive Bids to the Administrative Agent
pursuant to paragraph (b) of this Section.
(h) While any Competitive Bid Loan made under the 364 Day
Facility is outstanding, the 364 Day Facility Commitment of each
Lender shall be deemed used for all purposes by an amount equal
to its pro rata share (based on its respective 364 Day Facility
Commitment Percentage) of the principal amount of such
Competitive Bid Loan
(i) While any Competitive Bid Loan made under the Five Year
Facility is outstanding, the Five Year Facility Commitment of
each Lender shall be deemed used for all purposes by an amount
equal to its pro rata share (based on its respective Five Year
Facility Commitment Percentage) of the principal amount of such
Competitive Bid Loan.
(j) (i) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing the indebtedness
of each Borrower to such Lender resulting from each Competitive
Bid Loan made by such Lender to such Borrower from time to time,
including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.
(ii) The entries maintained in the accounts maintained
pursuant to paragraph (i) shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded;
provided, however, that the failure of the Administrative Agent
or any Lender to maintain such accounts or any error therein
shall not in any manner affect the joint and several obligation
of each Borrower to repay the Obligations in accordance with
their terms.
(iii) Any Lender may request that its Competitive
Bid Loans be evidenced by a Competitive Bid Note. In such event,
each Borrower shall prepare, execute and deliver to such Lender a
Competitive Bid Note payable to the order of such Lender
representing such Borrower's joint and several obligation to
repay the Competitive Bid Loans made by such Lender. Thereafter,
the Competitive Bid Loans evidenced by such Competitive Bid Note
and interest thereon shall at all times (including after any
assignment pursuant to Section 13.10) be represented by one or
more Competitive Bid Notes payable to the order of the payee
named therein or any assignee pursuant to Section 13.10, except
to the extent that any such Lender or assignee subsequently
returns any such Competitive Bid Note for cancellation and
requests that such Competitive Bid Loans once again be evidenced
as described in paragraph (i) above.
(k) Each Borrower shall repay the outstanding principal
amount of each Competitive Bid Loan made to it in full on the
last day of the Interest Period applicable thereto, with all
accrued but unpaid interest thereon. Competitive Bid Loans may
not be repaid prior to the last day of the applicable Interest
Period except in accordance with Section 2.3(b) and (e).
Notwithstanding anything herein to the contrary, all Competitive
Bid Loans made under the 364 Day Facility must be repaid prior to
January 18, 2000 and the Borrowers jointly and severally agree to
pay any amount required to be paid pursuant to Section 4.9 hereof
as a result of repayment of any Competitive Bid Loan prior to
such date.
SECTION 2.6 Swingline Loans and Procedure
(a) Swingline Commitment. Subject to the terms and
conditions set forth herein, from time to time until the
Swingline Termination Date, the Swingline Lender agrees to make,
under the 364 Day Facility or the Five Year Facility, a revolving
loan or revolving loans (each a "Swingline Loan" and,
collectively, the "Swingline Loans") to the respective Borrowers,
which Swingline Loans (i) shall be denominated in Dollars, (ii)
may be repaid and reborrowed in accordance with the provisions
hereof, (iii) made under the 364 Day Facility shall not exceed in
aggregate principal amount at any time outstanding, when combined
with the sum of the aggregate principal Dollar Equivalent amount
of outstanding Revolving Credit Loans made under the 364 Day
Facility plus the aggregate principal Dollar Equivalent amount of
Competitive Bid Loans made thereunder at any time, the 364 Day
Facility Commitment, (iv) made under the Five Year Facility shall
not exceed in aggregate principal amount at any time outstanding,
when combined with the sum of the aggregate principal Dollar
Equivalent amount of outstanding Revolving Credit Loans made
under the Five Year Facility plus the aggregate principal amount
of Competitive Bid Loans made thereunder at any time, the Five
Year Facility Commitment less the sum of all outstanding L/C
Obligations, (v) made under the 364 Day Facility shall not exceed
in aggregate principal amount at any time outstanding the 364 Day
Facility Swingline Commitment and (vi) made under the Five Year
Facility shall not exceed in aggregate principal amount at any
time outstanding the Five Year Facility Swingline Commitment.
Notwithstanding anything to the contrary contained in this
Section 2.6(a), (x) the Swingline Lender shall not be obligated
to make any Swingline Loans at a time when a Lender Default
exists unless the Swingline Lender has entered into arrangements
satisfactory to it and the Borrowers to eliminate the Swingline
Lender's risk with respect to the Defaulting Lender's or Lenders'
participation in such Swingline Loans, including by cash
collateralizing such Defaulting Lender's or Lenders' Commitment
Percentage of the outstanding Swingline Loans and (y) the
Swingline Lender shall not make any Swingline Loan after it has
received written notice from any Borrower or the Required Lenders
stating that a Default or an Event of Default exists and is con
tinuing until such time as the Swingline Lender shall have
received written notice (A) of rescission of all such notices
from the party or parties originally delivering such notice or
(B) of the waiver of such Default or Event of Default by the
Required Lenders.
(b) Mandatory Borrowings.
(i)On any Business Day, the Swingline Lender may, in
its sole discretion, give notice to the Lenders that the
Swingline Lender's outstanding Swingline Loans under the 364 Day
Facility and/or the Five Year Facility shall be funded with one
or more borrowings of Revolving Credit Loans denominated in
Dollars (provided that such notice shall be deemed to have been
automatically given (A) with respect to outstanding Swingline
Loans made under the 364 Day Facility and the Five Year Facility
upon the occurrence of a Default or an Event of Default under Sec
tion 11.1(i), (j), (k) or (l) and (B) with respect to outstanding
Swingline Loans made under the 364 Day Facility, on January 14,
2000, if the Company exercises the Conversion Option ), in which
case one or more borrowings of Revolving Credit Loans under the
364 Day Facility and/or the Five Year Facility, as applicable,
constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business
Day by all Lenders in accordance with each Lender's Commitment
Percentage and the proceeds thereof shall be applied directly by
the Swingline Lender to repay the Swingline Lender for such
outstanding Swingline Loans. Each Lender hereby irrevocably
agrees to make Revolving Credit Loans upon one Business Day's
notice pursuant to each Mandatory Borrowing in the amount and in
the manner specified in the preceding sentence and on the date
specified in writing by the Swingline Lender notwithstanding
(A) the amount of the Mandatory Borrowing may not comply with the
minimum borrowing amount otherwise required hereunder, (B)
whether any conditions specified in Section 5.3 or Section 5.4,
as applicable are then satisfied, (C) whether a Default or an
Event of Default then exists, (D) the date of such Mandatory
Borrowing and (E) the amount of the 364 Day Facility Commitment,
the Five Year Facility Commitment or the Aggregate Revolving
Credit Commitment at such time. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the
occurrence of a Bankruptcy Event with respect to any Credit
Party), then each Lender hereby agrees that it shall forthwith
purchase (as of the date the Mandatory Borrowing would otherwise
have occurred, but adjusted for any payments received from the
respective Borrower on or after such date and prior to such
purchase) from the Swingline Lender such participations in the
outstanding Swingline Loans made under the 364 Day Facility
and/or the Five Year Facility, as applicable, as shall be
necessary to cause the Lenders to share in such Swingline Loans
ratably based upon their respective Commitment Percentages,
provided that (x) all interest payable on the Swingline Loans
shall be for the account of the Swingline Lender until the date
as of which the respective participation is required to be
purchased and, to the extent attributable to the purchased
participation, shall be payable to the participant from and after
such date and (y) at the time any purchase of participations
pursuant to this sentence is actually made, the purchasing Lender
shall be required to pay the Swingline Lender interest on the
principal amount of participation purchased for each day from and
including the day upon which the Mandatory Borrowing would
otherwise have occurred to but excluding the date of payment for
such participation, at the overnight Federal Funds Rate for the
first three days and at the rate otherwise applicable to Base
Rate Loans hereunder for each day thereafter.
(ii)To the extent amounts received from the Lenders
pursuant to Section 2.6(b)(i) above are not sufficient to repay
in full the outstanding Swingline Loans requested or required to
be repaid, the Borrowers jointly and severally agree to pay to
the Swingline Lender on demand the amount required to repay such
Swingline Loans in full. In addition, each Borrower hereby
authorizes the Administrative Agent to charge any account
maintained by such Borrower with the Swingline Lender (up to the
amount available therein) in order to immediately pay the
Swingline Lender the amount of such Swingline Loans to the extent
amounts received from the Lenders are not sufficient to repay in
full the outstanding Swingline Loans requested or required to be
repaid. If any portion of any such amount paid to the Swingline
Lender shall be recovered by or on behalf of a Borrower from the
Swingline Lender in bankruptcy or otherwise, the loss of the
amount so recovered shall be ratably shared among all the Lenders
in accordance with their respective Commitment Percentages.
(c) Amount of Each Swingline Borrowing. Each Swingline
Loan shall be made in an aggregate principal amount of $500,000
or a whole multiple of $100,000 in excess thereof.
(d) Notice of Borrowing.
(i)A Borrower shall give the Swingline Lender
irrevocable prior written notice (a "Notice of Swingline
Borrowing") substantially in the form attached as Exhibit B-2 no
later than 11:00 a.m. (Charlotte time) (i) on the same Business
Day as each Base Rate Loan and (ii) at least three (3) Business
Days before each Offshore Rate Loan denominated in Dollars, of
its intention to borrow, specifying (A) the date of such
borrowing, which shall be a Business Day, (B) whether such
Swingline Loan is to be made under the 364 Day Facility or the
Five Year Facility, (C) the amount of such borrowing, which shall
be in an amount equal to the unused amount of the 364 Day
Facility Swingline Commitment or the Five Year Facility Swingline
Commitment, as applicable, or less, (D) whether such Swingline
Loan is to be an Offshore Rate Loan denominated in Dollars or a
Base Rate Loan and (E) in the case of an Offshore Rate Loan, the
duration of the Interest Period applicable thereto. Notices
received after 11:00 a.m. (Charlotte time) shall be deemed
received on the next Business Day.
(i)Mandatory Borrowings shall be made upon the notice
specified in Section 2.6(b), with each Borrower irrevocably
agreeing, by its incurrence of any Swingline Loan, to the making
of the Mandatory Borrowings as set forth in Section 2.6(b).
(e) Disbursement of Funds. Not later than 2:00 p.m.
(Charlotte time) on the proposed borrowing date, the Swingline
Lender will make available to the Administrative Agent, for the
account of the Borrower to whom the Swingline Loan is to be made,
at the office of the Administrative Agent in funds immediately
available to the Administrative Agent, the amount of the
Swingline Loan to be made on such borrowing date. In the case of
Mandatory Borrowings, no later than 2:00 p.m. (Charlotte time) on
the date specified in Section 2.6(b), each Lender will make
available to the Administrative Agent, for the account of the
respective Borrower, at the office of the Administrative Agent in
funds immediately available to the Administrative Agent, such
Lender's Commitment Percentage of Mandatory Borrowing to be made
on such borrowing date. Each Borrower hereby irrevocably
authorizes the Administrative Agent to disburse the proceeds of
each borrowing requested pursuant to this Section 2.6 in
immediately available funds by crediting or wiring such proceeds
to the deposit account of such Borrower identified in the most
recent Notice of Account Designation or as may be otherwise
agreed upon by such Borrower and the Administrative Agent from
time to time. Subject to Section 4.7 hereof, the Administrative
Agent shall not be obligated to disburse the proceeds of any
Swingline Loan requested pursuant to this Section 2.6 to the
extent that the Swingline Lender has not made available to the
Administrative Agent the amount of such Swingline Loan.
(f) Swingline Notes. The Swingline Lender's Swingline
Loans and the joint and several obligation of each Borrower to
repay Swingline Loans shall be evidenced by a note executed by
each Borrower payable to the order of the Swingline Lender
representing such Borrower's obligation to pay the Swingline
Lender's 364 Day Facility Swingline Commitment and Five Year
Facility Swingline Commitment or, if less, the aggregate unpaid
principal amount of all Swingline Loans made and to be made by
the Swingline Lender under the 364 Day Facility or the Five Year
Facility, as applicable, plus interest and all other fees,
charges and other amounts due thereon. Each Swingline Note shall
be dated the date hereof and shall bear interest on the unpaid
principal amount thereof at the applicable interest rate per
annum specified in Section 4.1.
(g) While any Swingline Loan made under the 364 Day
Facility is outstanding, the 364 Day Facility Commitment of each
Lender shall be deemed used for all purposes by an amount equal
to its pro rata share (based on its respective 364 Day Facility
Commitment Percentage) of the principal amount of such Swingline
Loan.
(h) While any Swingline Loan made under the Five Year
Facility is outstanding, the Five Year Facility Commitment of
each Lender shall be reduced and deemed used for all purposes by
an amount equal to its pro rata share (based on its respective
Five Year Facility Commitment Percentage) of the principal amount
of such Swingline Loan.
SECTION 2.7 Permanent Reduction of the Commitments.
(a) Voluntary Reduction. The Borrowers shall have the
right at any time and from time to time, upon at least five (5)
Business Days' prior written notice to the Administrative Agent,
to permanently reduce (except as provided below), without premium
or penalty, (i) (A) the entire 364 Day Facility Commitment or the
Term Loan, as applicable, at any time or (B) portions of the 364
Day Facility Commitment or the Term Loan, as applicable, from
time to time, in an aggregate principal Dollar Equivalent amount
not less than $5,000,000 or any whole multiple of $1,000,000 in
excess thereof or (ii) (A) the entire Five Year Facility
Commitment at any time or (B) portions of the Five Year Facility
Commitment, from time to time, in an aggregate principal Dollar
Equivalent amount not less than $5,000,000 or any whole multiple
of $1,000,000 in excess thereof.
(b) (i) Each permanent reduction of the 364 Day Facility
Commitment made pursuant to this Section 2.7 shall be
accompanied, if necessary, by a payment of principal sufficient
to reduce the aggregate outstanding Revolving Credit Loans and
Swingline Loans made under the 364 Day Facility after such
reduction to the 364 Day Facility Commitment. Any reduction of
the 364 Day Facility Commitment to zero (including upon
termination of the 364 Day Facility on the 364 Day Facility
Termination Date) shall be accompanied by payment of all
outstanding Revolving Credit Loans and Swingline Loans made under
the 364 Day Facility and shall result in the termination of the
364 Day Facility Commitment, the 364 Day Facility Swingline
Commitment and the 364 Day Facility. If the reduction of the 364
Day Facility Commitment requires the repayment of any Offshore
Rate Loan, such repayment shall be accompanied by any amount
required to be paid pursuant to Section 4.9 hereof.
Notwithstanding anything herein to the contrary, the 364 Day
Facility Commitment may not be permanently reduced by such an
amount so that after such reduction, the 364 Day Facility
Commitment is less than the aggregate amount of all unpaid
principal of and interest on outstanding Competitive Bid Loans
made under the 364 Day Facility.
(ii) Each permanent reduction of the Five Year Facility
Commitment made pursuant to this Section 2.7 shall be
accompanied, if necessary, by a payment of principal sufficient
to reduce the aggregate outstanding Revolving Credit Loans and
Swingline Loans made under the Five Year Facility and L/C
Obligations, as applicable, after such reduction to the Five Year
Facility Commitment and if the Five Year Facility Commitment as
so reduced is less than the aggregate amount of all outstanding
Letters of Credit, the Borrower shall be required to deposit in a
cash collateral account opened by the Administrative Agent an
amount equal to the amount by which the aggregate then undrawn
and unexpired amount of such Letters of Credit exceeds the Five
Year Facility Commitment as so reduced. Such cash collateral
shall be applied in accordance with Section 11.2(b). Any
reduction of the Five Year Facility Commitment to zero (including
upon termination of the Five Year Facility on the Five Year
Facility Termination Date) shall be accompanied by payment of all
outstanding Revolving Credit Loans and Swingline Loans made under
the Five Year Facility (and furnishing of cash collateral
satisfactory to the Administrative Agent for all L/C Obligations)
and shall result in the termination of the Five Year Facility
Commitment, the Five Year Facility Swingline Commitment and the
Five Year Facility. If the reduction of the Five Year Facility
Commitment requires the repayment of any Offshore Rate Loan, such
repayment shall be accompanied by any amount required to be paid
pursuant to Section 4.9 hereof. Notwithstanding anything herein
to the contrary, the Five Year Facility Commitment may not be
permanently reduced by such an amount so that after such
reduction, the Five Year Facility Commitment is less than the
aggregate amount of all unpaid principal of and interest on
outstanding Competitive Bid Loans made under the Five Year
Facility.
(iii) Each permanent reduction of the Term
Loan made pursuant to this Section 2.7 shall be accompanied, if
necessary, by a payment of principal sufficient to reduce the
aggregate outstanding Revolving Credit Loans converted into the
Term Loan after such reduction to the Term Loan. Any reduction
of the Term Loan to zero (including upon termination of the Term
Loan on the Term Loan Termination Date) shall be accompanied by
payment of all outstanding Revolving Credit Loans converted into
the Term Loan and shall result in the termination of the Term
Loan. If the reduction of the Term Loan requires the repayment
of any Offshore Rate Loan, such repayment shall be accompanied by
any amount required to be paid pursuant to Section 4.9 hereof.
SECTION 2.8 Termination.
(a) The 364 Day Facility shall terminate on the earliest of
(a) February 12, 2000, (b) the date of termination of the 364 Day
Facility Commitment by the Company pursuant to Section 2.7(a),
and (c) the date of termination by the Administrative Agent on
behalf of the Lenders pursuant to Section 11.2(a), subject to
Section 11.3. Notwithstanding the foregoing, if the 364 Day
Facility has not terminated prior to February 12, 2000, and if no
Default or Event of Default shall have occurred and be continuing
hereunder, the Company, in its sole discretion, may exercise an
option (the "Conversion Option") to convert, as of February 12,
2000, the aggregate principal amount of outstanding Revolving
Credit Loans made under the 364 Day Facility plus accrued but
unpaid interest and all other fees, charges and other amounts due
thereon, to a Term Loan (the "Term Loan") and the 364 Day
Facility shall terminate on the Term Loan Termination Date. The
Company may exercise the Conversion Option by providing the
Administrative Agent with a written notice of such election prior
to February 12, 2000. If the Conversion Option is exercised,
during the period from February 12, 2000 until the Term Loan
Termination Date (such period, the "Conversion Period"), the
Revolving Credit Loans made under the 364 Day Facility and
converted into the Term Loan shall continue to be subject to all
of the terms and conditions of this Agreement, including, without
limitation, Section 2.3, Article 5, and the Applicable Revolving
Credit Notes, provided, that the aggregate principal amount of
such loans, if repaid in whole or in part before the Term Loan
Termination Date, may no longer be reborrowed. The Borrowers may
not request Competitive Bids and borrow Competitive Bid Loans
under the 364 Day Facility during the Conversion Period. In
addition, the Borrowers may not request and borrow Swingline
Loans under the 364 Day Facility during the Conversion Period.
The Revolving Credit Loans which have been converted into the
Term Loan shall continue to bear interest at the rates applicable
thereto on February 12, 2000, provided, that the Borrowers may
continue to elect to convert or continue such interest rates as
provided in Section 4.2, and provided, further, that such
interest rates shall be increased as set forth in the definition
of Applicable Margin.
(b) The Five Year Facility shall terminate on the earliest
of (a) February 12, 2004, (b) the date of termination of the Five
Year Facility Commitment by the Company pursuant to Section
2.7(a), and (c) the date of termination by the Administrative
Agent on behalf of the Lenders pursuant to Section 11.2(a),
subject to Section 11.3.
(c) The Term Loan shall terminate on the earliest of (a)
February 12, 2002, (b) the date of termination of the Term Loan
by the Company pursuant to Section 2.7(a) and (c) the date of
termination by the Administrative Agent on behalf of the Lenders
pursuant to Section 11.2(a), subject to Section 11.3.
SECTION 2.9 Utilization of Revolving Commitments in
Offshore Currencies.
(a) The Administrative Agent will determine the Dollar
Equivalent amount with respect to any (i) Revolving Credit Loan
or Competitive Bid Loan that is an Offshore Currency Loan as of
the requested borrowing date and as of the earlier of (x) any
requested continuation date or (y) ninety days after the
borrowing date, (ii) outstanding Offshore Currency Loans as of
such dates as may be requested by the Required Lenders (but in no
event more frequently than once a week) (each such date under
clause (i) and (ii), a "Determination Date").
(b) The Lenders shall be under no obligation to make
Offshore Currency Loans in the requested Offshore Currency if the
Administrative Agent has received notice from the Required
Lenders by 12:30 p.m. (Charlotte time) three (3) Business Days
prior to the date of a requested borrowing of an Offshore
Currency Loan that deposits in the relevant Offshore Currency (in
the applicable amounts) are not being offered to such Lenders in
the interbank eurocurrency market for such Interest Period in
which event the Administrative Agent will give notice to the
Borrower requesting such Offshore Currency Loan no later than
1:30 p.m. (Charlotte time) on the third Business Day prior to the
requested date of such borrowing that the borrowing in the
requested Offshore Currency is not then available, and notice
thereof will also be given promptly by the Administrative Agent
to the Lenders. If the Administrative Agent shall have notified
the Borrower that any requested Offshore Currency Loan is not
then available, the Notice of Revolving Credit Borrowing relating
to such requested Offshore Currency Loan shall be deemed to be
withdrawn, the borrowing requested therein shall not occur and
the Administrative Agent will promptly so notify each Lender.
(c) In the case of a proposed continuation of an Offshore
Currency Loan for an additional Interest Period pursuant to
Section 4.2, the Lenders shall be under no obligation to continue
such Offshore Currency Loan if the Administrative Agent has
received notice from the Required Lenders by 12:30 p.m.
(Charlotte time) two Business Days prior to the day of such
continuation that deposits in the relevant Offshore Currency (in
the applicable amounts) are not being offered to such Lenders in
the interbank eurocurrency market for such Interest Period in
which event the Administrative Agent will give notice to the
Borrower requesting such continuation no later than 1:30 p.m.
(Charlotte time) on the second Business Day prior to the
requested date of such continuation that the continuation of such
Offshore Currency Loan is not then available, and notice thereof
will also be given promptly by the Administrative Agent to the
Lenders. If the Administrative Agent shall have notified the
Borrower requesting continuation of an Offshore Currency Loan
that the requested continuation is not then available, the Notice
of Continuation with respect thereto shall be deemed to be
withdrawn and such Offshore Currency Loan shall be repaid on the
last day of the Interest Period with respect thereto.
(d) Notwithstanding anything herein to the contrary, during
the existence of a Default or an Event of Default, unless the
Required Banks otherwise agree, all outstanding Offshore Currency
Loans shall be redenominated and converted into their Dollar
Equivalent of Base Rate Loans in Dollars on the last day of the
Interest Period applicable to any such Offshore Currency Loans.
SECTION 2.10 Guaranty Agreements.
(a) In the event that the Company's Debt Rating is
downgraded below Investment Grade by both Moody's and S&P at any
date (the "Downgrade Date") before all of the Obligations (other
than Obligations under any Hedging Agreement) have been paid and
satisfied in full and the 364 Day Facility Commitment and the
Five Year Facility Commitment have expired or been terminated,
the Company will, if requested by the Required Lenders, (i) cause
each of its Material Subsidiaries then owned or thereafter formed
or acquired to execute and deliver to the Administrative Agent, a
Guaranty Agreement substantially in the form attached as
Exhibit E.
(b) In the event that there exists any restriction,
limitation or other encumbrance (by covenant or otherwise but
excluding those restrictions and limitations set out in Part VIII
of the Companies Act 1985) on the ability of the Target or any of
its Material Subsidiaries to make any payment to a Borrower or
its Subsidiaries (in the form of dividends, intercompany
advances, other than by virtue of complying in all respects with
section 151 of the Companies Act 1985, or otherwise) at any date
after the Clean-Up Period has ended, the Borrowers will, if
requested by the Required Lenders, cause the Target and each of
its Material Subsidiaries to (i) execute and deliver to the
Administrative Agent, a Guaranty Agreement substantially in the
form attached as Exhibit E and (ii) comply in all respects with
sections 151 to 158 inclusive of the Companies Act 1985,
including provisions with respect to the giving of the guarantees
and the payments of amounts due under this Agreement and the
other Loan Documents.
(c) Any Subsidiary of a Borrower which executes and
delivers a Guaranty Agreement to the Administrative Agent shall
be a "Guarantor" for purposes of this Agreement and the other
Loan Documents, if applicable.
(d) If any Guaranty Agreements are executed and delivered
pursuant to this Section 2.10, the Borrowers will also provide
and cause their respective Subsidiaries to provide, to the
Administrative Agent and the Lenders such corporate resolutions,
authorizations and approvals, legal opinions and other closing
certificates and documents in connection therewith as the
Administrative Agent reasonably determines to be necessary or
appropriate.
(e) The rights of the Administrative Agent and the Lenders
under this Section 2.10 are in addition to, and not in lieu of,
the other rights and remedies available to the Administrative
Agent and the Lenders under this Agreement and the other Loan
Documents, and the acceptance of any Guaranty Agreements under
this Section 2.10 will not constitute or be deemed to be a waiver
of any Default or Event of Default.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment.
Subject to the terms and conditions hereof, each Issuing
Lender, in reliance on the agreements of the other Lenders set
forth in Section 3.4(a), agrees to issue trade letters of credit
("Letters of Credit") for the respective accounts of the
Borrowers on any Business Day from the Closing Date through but
not including the Five Year Facility Termination Date in such
form as may be approved from time to time by such Issuing Lender;
provided, that no Issuing Lender shall have any obligation to
issue any Letter of Credit if, after giving effect to such
issuance, (a) the L/C Obligations would exceed the L/C Commitment
or (b) the sum of (i) the aggregate principal Dollar Equivalent
amount of outstanding Revolving Credit Loans made under the Five
Year Facility, (ii) the aggregate principal amount of outstanding
Swingline Loans made under the Five Year Facility, (iii) the
aggregate principal amount of L/C Obligations and (iv) the
aggregate principal amount of Competitive Bid Loans made under
the Five Year Facility, would exceed the Five Year Facility
Commitment. Each Letter of Credit shall (i) be denominated in
Dollars, (ii) be a letter of credit issued to support obligations
of a Borrower or any of its Subsidiaries, contingent or
otherwise, incurred in the ordinary course of business, (iii)
expire on a date no later than two hundred twenty-five (225) days
from the date of issuance thereof and (iv) be subject to the
Uniform Customs and, to the extent not inconsistent therewith,
the laws of the Commonwealth of Virginia. No Issuing Lender
shall at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause such
Issuing Lender or any L/C Participant to exceed any limits
imposed by, any Applicable Law. References herein to "issue" and
derivations thereof with respect to Letters of Credit shall also
include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of
Credit.
Any Borrower may from time to time request that any Issuing
Lender issue a Letter of Credit (or amend, extend or renew an
outstanding Letter of Credit) by delivering to such Issuing
Lender at any Issuing Lender's office at any address mutually
acceptable to such Borrower and such Issuing Lender an
Application therefor, completed to the satisfaction of such
Issuing Lender, and such other certificates, documents and other
papers and information as such Issuing Lender may reasonably
request. If the Borrower delivers an Application during the
Certain Funds Period and the Letter of Credit is to be used as
specified in Section 2.1(b)(i), (ii) or (iii) hereof, the
Application will contain a representation and warranty that the
conditions specified in Section 5.3 hereof have been satisfied or
waived in writing by the Administrative Agent as of the date of
the Application, and, in all other situations, a representation
and warranty that the conditions specified in Section 5.4 hereof
have been satisfied or waived in writing by the Administrative
Agent as of the date of the Application. Upon receipt of any
Application, such Issuing Lender shall process such Application
and the certificates, documents and other papers and information
delivered to it in connection therewith in accordance with its
customary procedures and shall, subject to Section 3.1 and
Article VI hereof, promptly issue the Letter of Credit (or amend,
extend or renew the outstanding Letter of Credit) requested
thereby (but in no event shall any Issuing Lender be required to
issue any Letter of Credit (or amend, extend or renew an
outstanding Letter of Credit) earlier than three (3) Business
Days after its receipt of the Application therefor and all such
other certificates, documents and other papers and information
relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed
by such Issuing Lender and the Borrower submitting the
Application. Within fifteen (15) Business Days after the end of
each month, the Administrative Agent shall report to each Lender
the average daily undrawn and unexpired amounts for all Letters
of Credit during the previous month for each day in such month.
SECTION 3.3 Fees and Other Charges.
(a) The Borrowers jointly and severally agree to pay to the
Administrative Agent, for the account of each Issuing Lender and
the L/C Participants, a letter of credit fee (the "L/C Fee") with
respect to each Letter of Credit in an amount equal to the
Applicable Margin times the average daily undrawn amount of such
issued Letter of Credit as reported by the Administrative Agent
pursuant to Section 3.2. Such fee shall be payable quarterly in
arrears within fifteen (15) Business Days after the end of each
calendar quarter and on the Five Year Facility Termination Date.
(b) The Administrative Agent shall, promptly following its
receipt thereof, distribute to each Issuing Lender and the L/C
Participants all fees received by the Administrative Agent in
accordance with their respective Five Year Facility Commitment
Percentages.
SECTION 3.4 L/C Participations.
(a) Each Issuing Lender irrevocably agrees to grant and
hereby grants to each L/C Participant, and, to induce such
Issuing Lender to issue Letters of Credit hereunder, each L/C
Participant irrevocably agrees to accept and purchase and hereby
accepts and purchases from such Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own
account and risk, an undivided interest equal to such L/C
Participant's Five Year Facility Commitment Percentage in such
Issuing Lender's obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by such
Issuing Lender thereunder. Each L/C Participant unconditionally
and irrevocably agrees with each Issuing Lender that, if a draft
is paid under any Letter of Credit for which such Issuing Lender
is not reimbursed in full by the Borrowers in accordance with the
terms of this Agreement, such L/C Participant shall pay to such
Issuing Lender upon demand at such Issuing Lender's address for
notices specified herein an amount equal to such L/C
Participant's Five Year Facility Commitment Percentage of the
amount of such draft, or any part thereof, which is not so
reimbursed.
(b) Upon becoming aware of any amount required to be paid
by any L/C Participant to any Issuing Lender pursuant to
Section 3.4(a) in respect of any unreimbursed portion of any
payment made by such Issuing Lender under any Letter of Credit,
the Administrative Agent shall notify each L/C Participant of the
amount and due date of such required payment and such L/C
Participant shall pay to such Issuing Lender the amount specified
on the applicable due date. If any such amount is paid to such
Issuing Lender after the date such payment is due, such L/C
Participant shall pay to such Issuing Lender on demand, in
addition to such amount, the product of (i) such amount, times
(ii) the daily average Federal Funds Rate as determined by the
Administrative Agent during the period from and including the
date such payment is due to the date on which such payment is
immediately available to such Issuing Lender, times (iii) a
fraction the numerator of which is the number of days that elapse
during such period and the denominator of which is 360. A
certificate of any Issuing Lender with respect to any amounts
owing under this Section 3.4(b) shall be conclusive in the
absence of manifest error. With respect to payment to any
Issuing Lender of the unreimbursed amounts described in this
Section 3.4(b), if the L/C Participants receive notice that any
such payment is due (A) prior to 1:00 p.m. (Charlotte time) on
any Business Day, such payment shall be due that Business Day,
and (B) after 1:00 p.m. (Charlotte time) on any Business Day,
such payment shall be due on the following Business Day.
(c) Whenever, at any time after any Issuing Lender has made
payment under any Letter of Credit and has received from any L/C
Participant its Five Year Facility Commitment Percentage of such
payment in accordance with this Section 3.4, such Issuing Lender
receives any payment related to such Letter of Credit (whether
directly from a Borrower or otherwise, or any payment of interest
on account thereof), such Issuing Lender will distribute to such
L/C Participant its pro rata share thereof in accordance with
such L/C Participant's Five Year Facility Commitment Percentage;
provided, that in the event that any such payment received by
such Issuing Lender shall be required to be returned by such
Issuing Lender, such L/C Participant shall return to such Issuing
Lender the portion thereof previously distributed by such Issuing
Lender to it.
SECTION 3.5 Reimbursement Obligation of the
Borrowers.
Each Borrower agrees to reimburse each Issuing Lender on
each date the Administrative Agent notifies such Borrower of the
date and amount of a draft paid under any Letter of Credit for
the amount of (i) such draft so paid and (ii) any taxes, fees,
charges or other costs or expenses incurred by any Issuing Lender
in connection with such payment. Each such payment shall be made
to any Issuing Lender at its address for notices specified herein
in lawful money of the United States and in immediately available
funds. Interest shall be payable on any and all amounts
remaining unpaid by any Borrower under this Article III from the
date such amounts become payable (whether at stated maturity, by
acceleration or otherwise) until payment in full at the rate
which would be payable on any outstanding Base Rate Loans which
were then overdue. If any Borrower fails to timely reimburse
such Issuing Lender on the date such Borrower receives the notice
referred to in this Section 3.5, such Borrower shall be deemed to
have timely given a Notice of Revolving Credit Borrowing pursuant
to Section 2.2 hereunder to the Administrative Agent requesting
the Lenders to make a Base Rate Loan under the Five Year Facility
on such date in an amount equal to the amount of such draft paid,
together with any taxes, fees, charges or other costs or expenses
incurred by any Issuing Lender and to be reimbursed pursuant to
this Section 3.5 and, regardless of whether or not the conditions
precedent specified in Article VI have been satisfied, the
Lenders shall make Base Rate Loans in such amount, the proceeds
of which shall be applied to reimburse such Issuing Lender for
the amount of the related drawing and costs and expenses.
Notwithstanding the foregoing, nothing in this Section 3.5 shall
obligate the Lenders to make such Base Rate Loans if the making
of such Base Rate Loans would violate the automatic stay under
federal bankruptcy laws.
SECTION 3.6 Obligations Absolute.
Each Borrower's obligations under this Article III
(including without limitation the Reimbursement Obligation) shall
be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment
which such Borrower may have or have had against any Issuing
Lender or any beneficiary of a Letter of Credit. Each Borrower
also agrees with each Issuing Lender that no Issuing Lender shall
be responsible for, and such Borrower's Reimbursement Obligation
under Section 3.5 shall not be affected by, among other things,
the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among
such Borrower and any beneficiary of any Letter of Credit or any
other party to which such Letter of Credit may be transferred or
any claims whatsoever of such Borrower against any beneficiary of
such Letter of Credit or any such transferee. No Issuing Lender
shall be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice,
however transmitted, in connection with any Letter of Credit,
except for errors or omissions caused by such Issuing Lender's
gross negligence or willful misconduct. Each Borrower agrees
that any action taken or omitted by any Issuing Lender under or
in connection with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified
in the Uniform Customs and, to the extent not inconsistent
therewith, the UCC shall be binding on such Borrower and shall
not result in any liability of any Issuing Lender to such
Borrower. The responsibility of each Issuing Lender to any
Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to
determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment
are in conformity with such Letter of Credit.
SECTION 3.7 Effect of Application.
To the extent that any provision of any Application related
to any Letter of Credit is inconsistent with the provisions of
this Article III, the provisions of this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.
(a) Interest Rate Options. Subject to the provisions of
this Section 4.1, at the election of a Borrower, the aggregate
principal balance of any Revolving Credit Loans and Swingline
Loans shall bear interest at (i) the Base Rate or (ii) the
Offshore Rate plus the Applicable Margin; provided that Offshore
Rate Loans shall not be available until three (3) Business Days
after the Closing Date. Such Borrower shall select the rate of
interest, Interest Period, if any, and Applicable Currency, in
the case of an Offshore Currency Loan, applicable to any
Revolving Credit Loan or Swingline Loan at the time a Notice of
Revolving Credit Borrowing is given pursuant to Section 2.2, or
at the time a Notice of Swingline Borrowing is given pursuant to
Section 2.6(d) or at the time a Notice of Conversion/Continuation
is given pursuant to Section 4.2. Each Revolving Credit Loan,
Swingline Loan, or portion thereof bearing interest based on the
Base Rate shall be a "Base Rate Loan," and each Revolving Credit
Loan, Swingline Loan, or portion thereof bearing interest based
on the Offshore Rate shall be an "Offshore Rate Loan." Any
Revolving Credit Loan or Swingline Loan or any portion thereof as
to which the Borrower requesting such Revolving Credit Loan or
Swingline Loan has not duly specified an interest rate as
provided herein shall be deemed a Base Rate Loan. A Competitive
Bid Loan will bear interest at the Competitive Bid Rate specified
in the Competitive Bid accepted by the Borrower with respect to
such Competitive Bid Loan.
(b) Interest Periods.
(i) In connection with each Offshore Rate Loan and
each Competitive Bid Loan made pursuant to a Margin Rate Bid, a
Borrower, by giving notice at the times described in Section
4.1(a), shall elect an interest period (each, an "Interest
Period") to be applicable to such Revolving Credit Loan, which
Interest Period shall, unless otherwise agreed by the
Administrative Agent and the Lenders, be a period of one (1), two
(2), three (3), or six (6) months with respect to each Offshore
Rate; provided that:
(A) the Interest Period shall commence on the
date of advance of or conversion to any Offshore Rate Loan or
Competitive Bid Loan made pursuant to a Margin Rate Bid and, in
the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the date on which
the next preceding Interest Period expires;
(B) if any Interest Period would otherwise
expire on a day that is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day; provided, that
if any Interest Period with respect to an Offshore Rate Loan or
Competitive Bid Loan made pursuant to a Margin Rate Bid would
otherwise expire on a day that is not a Business Day but is a day
of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;
(C) any Interest Period with respect to an
Offshore Rate Loan or Competitive Bid Loan made pursuant to a
Margin Rate Bid that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
relevant calendar month at the end of such Interest Period;
(D) no Interest Period shall extend beyond the
Termination Date of the facility under which the Offshore Rate
Loan or Competitive Bid Loan made pursuant to a Margin Rate Bid
with respect to which such Interest Period relates was made; and
(E) there shall be no more than six (6) Interest
Periods for Offshore Rate Loans in effect at any time.
(ii) In connection with each Competitive Bid Loan made
pursuant to an Absolute Rate Bid, a Borrower, by giving notice at
the times described in Section 4.1(a), shall elect an Interest
Period to be applicable to such Competitive Bid Loan, which
Interest Period shall, unless otherwise agreed by the
Administrative Agent and the Lenders, be a period from seven (7)
to one hundred and eighty (180) days with respect to each
Competitive Bid Rate; provided that:.
(A) the Interest Period shall commence on the date
of advance of any Competitive Bid Loan made pursuant to an
Absolute Rate Bid and, in the case of immediately successive
Interest Periods, each successive Interest Period shall commence
on the date on which the next preceding Interest Period expires;
(B) if any Interest Period would otherwise
expire on a day that is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day; provided, that
if any Interest Period with respect to a Competitive Bid Loan
made pursuant to an Absolute Rate Bid would otherwise expire on a
day that is not a Business Day but is a day of the month after
which no further Business Day occurs in such month, such Interest
Period shall expire on the next preceding Business Day;
(C) any Interest Period with respect to a
Competitive Bid Loan made pursuant to an Absolute Rate Bid that
begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on
the last Business Day of the relevant calendar month at the end
of such Interest Period;
(D) no Interest Period shall extend beyond the
Termination Date of the facility under which the Competitive Bid
Loan made pursuant to an Absolute Rate Bid with respect to which
such Interest Period relates was made; and
(E) there shall be no more than an aggregate of
twelve (12) Interest Periods for Competitive Bid Loans and
Offshore Rate Loans in effect at any time.
(c) Default Rate. Subject to Section 11.5, at the
discretion of the Administrative Agent and Required Lenders, upon
the occurrence and during the continuance of an Event of Default,
(i) the Borrowers shall no longer have the option to request
Offshore Rate Loans, (ii) all outstanding Offshore Rate Loans
shall bear interest at a rate per annum equal to two percent (2%)
in excess of the rate then applicable to Offshore Rate Loans, as
applicable, until the end of the applicable Interest Period, and
thereafter at a rate equal to two percent (2%) in excess of the
rate then applicable to Base Rate Loans, (iii) all outstanding
Base Rate Loans shall bear interest at a rate per annum equal to
two percent (2%) in excess of the rate then applicable to Base
Rate Loans and (iv) each outstanding Competitive Bid Loan shall
bear interest at a rate per annum equal to two percent (2%) in
excess of the rate then applicable to such Competitive Bid Loan.
Interest shall continue to accrue on the amount of Loans
outstanding after the filing by or against a Borrower of any
petition seeking any relief in bankruptcy or under any act or law
pertaining to insolvency or debtor relief, whether state, federal
or foreign.
(d) Interest Payment and Computation. Interest on each
Base Rate Loan shall be payable in arrears on the last Business
Day of each calendar quarter commencing March 31, 1999; and
interest on each Offshore Rate Loan and each Competitive Bid Loan
shall be payable on the last day of each Interest Period
applicable thereto, and if such Interest Period exceeds three (3)
months, at the end of each three (3) month interval during such
Interest Period. Interest on Offshore Rate Loans and Competitive
Bid Loans and all fees payable hereunder shall be computed on the
basis of a 360-day year and assessed for the actual number of
days elapsed and interest on Base Rate Loans shall be computed on
the basis of a 365/66-day year and assessed for the actual number
of days elapsed.
(e) Maximum Rate. In no contingency or event whatsoever
shall the aggregate of all amounts deemed interest hereunder or
under any of the Notes charged or collected pursuant to the terms
of this Agreement or pursuant to any of the Notes exceed the
highest rate permissible under any Applicable Law which a court
of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines
that the Lenders have charged or received interest hereunder in
excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate
permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option (i) promptly refund to the
Borrowers any interest received by Lenders in excess of the
maximum lawful rate or (ii) shall apply such excess to the
principal balance of the Obligations. It is the intent hereof
that the Borrowers not pay or contract to pay, and that neither
the Administrative Agent nor any Lender receive or contract to
receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may be paid by the Borrower
under Applicable Law.
SECTION 4.2 Notice and Manner of Conversion or
Continuation of Revolving Credit Loans.
Provided that no Event of Default has occurred and is then
continuing, any Borrower shall have the option (a) to convert all
or any portion of its outstanding Base Rate Loans in a principal
amount equal to $5,000,000 or any whole multiple of $1,000,000 in
excess thereof into one or more Offshore Rate Loans denominated
in Dollars or an Offshore Currency and (b) (i) to convert all or
any part of its outstanding Offshore Rate Loans in a principal
amount equal to $1,000,000 or a whole multiple of $250,000 in
excess thereof into Base Rate Loans denominated in Dollars or
(ii) to continue Offshore Rate Loans, whether denominated in
Dollars or an Offshore Currency, as Offshore Rate Loans for an
additional Interest Period; provided that if any conversion or
continuation is made prior to the expiration of any Interest
Period, such Borrower shall pay any amount required to be paid
pursuant to Section 4.9 hereof. Whenever a Borrower desires to
convert or continue Revolving Credit Loans or Swingline Loans as
provided above, such Borrower shall give the Administrative Agent
irrevocable prior written notice in the form attached as Exhibit
F (a "Notice of Conversion/Continuation") not later than 11:00
a.m. (Charlotte time) three (3) Business Days before the day on
which a proposed conversion or continuation of such Revolving
Credit Loan or Swingline Loan is to be effective (except in the
case of a conversion of an Offshore Rate Loan denominated in
Dollars to a Base Rate Loan in which case same day notice by the
Borrower shall be sufficient) specifying (A) the Revolving Credit
Loans or Swingline Loans to be converted or continued, the
facility under which such Loans were made and, in the case of any
Offshore Rate Loan to be converted or continued, the last day of
the Interest Period therefor, (B) the effective date of such
conversion or continuation (which shall be a Business Day), (C)
the principal Dollar Equivalent amount of such Revolving Credit
Loans to be converted or continued, (D) the Interest Period to be
applicable to such converted or continued Offshore Rate Loan and
(E) in the case of any continued Offshore Rate Loan which is an
Offshore Currency Loan, the Applicable Currency. The
Administrative Agent shall promptly notify the Lenders of such
Notice of Conversion/Continuation.
SECTION 4.3 Facility Fee.
The Borrowers jointly and severally agree to pay to the
Administrative Agent, for the account of the Lenders, a non-
refundable facility fee (the "Facility Fee") at a rate per annum
equal to the Applicable Margin on the full amount of the
Aggregate Revolving Credit Commitment, regardless of usage. The
Facility Fee shall be payable in arrears on the last Business Day
of each calendar quarter for the period commencing on the Closing
Date and ending on the termination of the Aggregate Revolving
Credit Commitment. Such Facility Fee shall be distributed by the
Administrative Agent to the Lenders pro rata in accordance with
the Lenders' respective Aggregate Revolving Credit Commitment
Percentages.
SECTION 4.4 Manner of Payment.
Each payment by a Borrower on account of the principal of or
interest on the Loans or of any fee, commission or other amounts
(including the Reimbursement Obligation) payable to the Lenders
under this Agreement or any Note shall be made not later than
1:00 p.m. (Charlotte time) on the date specified for payment
under this Agreement to the Administrative Agent at the
Administrative Agent's Office for the account of the Lenders
(other than as set forth below), in Dollars, in immediately
available funds and shall be made without any set-off,
counterclaim or deduction whatsoever. Payment of principal of,
interest on or any other amount relating to any Offshore Currency
Loan shall be made in the Offshore Currency in which such Loan is
denominated or payable and with respect to all other amounts due
hereunder, shall be made in Dollars. Any payment received after
such time but before 2:00 p.m. (Charlotte time) on such day shall
be deemed a payment on such date for the purposes of Section
11.1, but for all other purposes shall be deemed to have been
made on the next succeeding Business Day. Any payment received
after 2:00 p.m. (Charlotte time) shall be deemed to have been
made on the next succeeding Business Day for all purposes. Each
payment to the Administrative Agent of the L/C Participants'
commissions shall be made in like manner, but for the account of
the L/C Participants. Each payment to the Administrative Agent
of Administrative Agent's fees or expenses shall be made for the
account of the Administrative Agent and any amount payable to any
Lender under Section 2.5, 2.6, 4.8, 4.9, 4.10, 4.11 or 13.2 shall
be paid to the Administrative Agent for the account of the
applicable Lender. The Administrative Agent shall distribute any
such payments received by it for the account of any other Lender
to such Lender promptly following receipt thereof and shall wire
advice of the amount of such credit to such Lender. Subject to
Section 4.1(b)(ii), if any payment under this Agreement or any
Note shall be specified to be made upon a day which is not a
Business Day, it shall be made on the next succeeding day which
is a Business Day and such extension of time shall in such case
be included in computing any interest if payable along with such
payment.
SECTION 4.5 Crediting of Payments and Proceeds.
In the event that any Borrower shall fail to pay any of the
Obligations when due and the Obligations have been accelerated
pursuant to Section 11.2, all payments received by the Lenders
upon the Notes and the other Obligations and all net proceeds
from the enforcement of the Obligations shall be applied first to
all expenses then due and payable by the Borrowers hereunder,
then to all indemnity obligations then due and payable by the
Borrowers hereunder, then to all Administrative Agent's fees then
due and payable, then to all commitment and other fees and
commissions then due and payable, then to accrued and unpaid
interest on the Notes, the Reimbursement Obligation and any
termination payments due in respect of a Hedging Agreement with
any Lender or Affiliate of a Lender (which Hedging Agreement is
permitted hereunder) (pro rata in accordance with all such
amounts due), then to the principal amount of the Notes and
Reimbursement Obligation (pro rata in accordance with all such
amounts due) and then to the cash collateral account described in
Section 11.2(b) hereof to the extent of any L/C Obligations then
outstanding, in that order.
SECTION 4.6 Adjustments.
If any Lender (a "Benefited Lender") shall at any time
receive any payment of all or part of the Obligations owing to
it, or interest thereon, or if any Lender shall at any time
receive any collateral in respect to the Obligations owing to it
(whether voluntarily or involuntarily, by set-off or otherwise)
in a greater proportion than any such payment to and collateral
received by any other Lender, if any, in respect of the
Obligations owing to such other Lender, or interest thereon, such
Benefited Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Extensions of Credit, or
shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to
cause such Benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the
Lenders; provided, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefited
Lender, such purchase shall be rescinded, and the purchase price
and benefits returned to the extent of such recovery, but without
interest. Each Borrower agrees that each Lender so purchasing a
portion of another Lender's Extensions of Credit may exercise all
rights of payment (including, without limitation, rights of set-
off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
SECTION 4.7 Nature of Obligations of Lenders
Regarding Extensions of Credit; Assumption by the Administrative
Agent.
The obligations of the Lenders under this Agreement to make
the Loans and issue or participate in Letters of Credit are
several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender
prior to a proposed borrowing date that such Lender will not make
available to the Administrative Agent such Lender's ratable
portion of the Revolving Credit Loans to be borrowed, the amount
of Competitive Bid Loans to be made by such Lender or, if such
Lender is the Swingline Lender, subject to Section 2.6(a), the
amount of Swingline Loans to be made, on such date (which notice
shall not release such Lender of its obligations hereunder), the
Administrative Agent may assume that such Lender has made such
portion or amount available to the Administrative Agent on the
proposed borrowing date in accordance with Sections 2.2(b),
2.5(f) and 2.6(e), and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower requesting
such borrowing on such date a corresponding amount. If such
amount is made available to the Administrative Agent on a date
after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to
the product of (a) the amount not made available by such Lender
in accordance with the terms hereof, times (b) the daily average
Federal Funds Rate during such period as determined by the
Administrative Agent, times (c) a fraction the numerator of which
is the number of days that elapse from and including such
borrowing date to the date on which such amount not made
available by such Lender in accordance with the terms hereof
shall have become immediately available to the Administrative
Agent and the denominator of which is 360. A certificate of the
Administrative Agent with respect to any amounts owing under this
Section 4.7 shall be conclusive, absent manifest error. If such
Lender's Commitment Percentage of such Revolving Credit Loans,
the amount of Competitive Bid Loans made by such Lender, or, if
such Lender is the Swingline Lender, the amount of such Swingline
Loans, is not made available to the Administrative Agent by such
Lender within three (3) Business Days of such borrowing date, the
Administrative Agent shall be entitled to recover such amount
made available by the Administrative Agent with interest thereon
at the rate per annum applicable to such borrowing, on demand,
from the Borrower which received such borrowing. The failure of
any Lender to make available its Commitment Percentage of any
Revolving Credit Loan, the amount of a Competitive Bid Loan or
the amount of a Swingline Loan requested by any Borrower shall
not relieve it or any other Lender of its obligation hereunder to
make its Commitment Percentage of such Revolving Credit Loan, the
amount of the Competitive Bid Loan or the amount of the Swingline
Loan, respectively, available on the borrowing date, but no
Lender shall be responsible for the failure of any other Lender
to make its Commitment Percentage of such Revolving Credit Loan,
the amount of such Competitive Bid Loan or the amount of such
Swingline Loan, available on the borrowing date.
SECTION 4.8 Changed Circumstances.
(a) Circumstances Affecting Offshore Rate Availability. If
with respect to any Interest Period: (i) the Administrative Agent
or any Lender (after consultation with the Administrative Agent)
shall determine that, by reason of circumstances affecting the
foreign exchange and interbank markets generally, deposits in
eurodollars or the applicable Offshore Currency in the applicable
amounts are not being quoted via Dow Jones Market Screen 3740 or
3750 (or on any successor or substitute page of such service, or
any successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of
such service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates
applicable to Dollar or Offshore Currency deposits in the London
interbank market) or offered to the Administrative Agent or such
Lender for such Interest Period; or (ii) the Required Lenders
reasonably determine (which determination shall be conclusive)
and notify the Administrative Agent that the Offshore Rate will
not adequately and fairly reflect the cost to the Required
Lenders of funding Offshore Rate Loans for such Interest Period;
then the Administrative Agent shall forthwith give notice thereof
to the Borrowers. Thereafter, until the Administrative Agent
notifies the Borrowers that such circumstances no longer exist,
the obligation of the Lenders to make Offshore Rate Loans or
Competitive Bid Loans which bear interest at a rate based on the
Offshore Rate and the right of the Borrowers to convert any
Revolving Credit Loan to or continue any Revolving Credit Loan as
an Offshore Rate Loan shall be suspended, and the Borrowers (i)
shall repay in full (or cause to be repaid in full) the then
outstanding principal amount of each such Competitive Bid Loan
that bears interest at a rate based on the Offshore Rate together
with accrued interest thereon on the last day of the then current
Interest Period applicable to such Competitive Bid Loan and (ii)
shall repay in full (or cause to be repaid in full) the then
outstanding principal amount of each such Offshore Rate Loan
together with accrued interest thereon, on the last day of the
then current Interest Period applicable to such Offshore Rate
Loan or convert the then outstanding principal amount of each
such Offshore Rate Loan to a Base Rate Loan as of the last day of
such Interest Period (Offshore Rate Loans denominated in an
Offshore Currency which are not repaid shall be redenominated and
converted into their Dollar Equivalent of Base Rate Loans in
Dollars).
(b) Laws Affecting Offshore Rate Availability. If, after
the date hereof, the introduction of, or any change in, any
Applicable Law or any change in the interpretation or
administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any of
their respective Lending Offices) with any request or directive
(whether or not having the force of law) issued after the date
hereof of any such Authority, central bank or comparable agency,
shall make it unlawful or impossible for any of the Lenders (or
any of their respective Lending Offices) to honor its obligations
hereunder to make or maintain any Offshore Rate Loan, such Lender
shall promptly give notice thereof to the Administrative Agent
and the Administrative Agent shall promptly give notice to the
Borrowers and the other Lenders. Thereafter, until the
Administrative Agent notifies the Borrowers that such
circumstances no longer exist, (i) the obligations of the
affected Lenders to make Offshore Rate Loans and the right of the
Borrowers to convert any Revolving Credit Loan of the affected
Lenders or continue any Revolving Credit Loan of the affected
Lenders as an Offshore Rate Loan shall be suspended and
thereafter the Borrowers may select only Base Rate Loans
hereunder, (ii) if any of the Lenders may not lawfully continue
to maintain an Offshore Rate Loan to the end of the then current
Interest Period applicable thereto as an Offshore Rate Loan, the
applicable Offshore Rate Loan of the affected Lenders shall
immediately be converted to a Base Rate Loan for the remainder of
such Interest Period (Offshore Currency Loans shall be
redenominated and converted into their Dollar Equivalent of Base
Rate Loans in Dollars) and the Borrowers shall pay any amount
required to be paid pursuant to Section 4.9 in connection
therewith and (iii) if any of the Lenders may not lawfully
continue to maintain a Competitive Bid Loan which bears interest
at a rate based on the Offshore Rate to the end of the then
current Interest Period applicable thereto at such rate of
interest, such Competitive Bid Loan of the affected Lenders shall
immediately be converted to a Base Rate Loan for the remainder of
such Interest Period. The Borrowers shall repay the outstanding
principal amount of any Competitive Bid Loans converted into Base
Rate Loans in accordance with clause (iii) of this Section
4.8(b), together with all accrued but unpaid interest thereon and
any amount required to be paid pursuant to Section 4.9 hereof, on
the last day of the Interest Period applicable to such
Competitive Bid Loans.
(c) Increased Costs. If, after the date hereof, the
introduction of, or any change in, any Applicable Law, or in the
interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any of
the Lenders (or any of their respective Lending Offices) with any
request or directive (whether or not having the force of law)
issued after the date hereof of such Authority, central bank or
comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with
respect to any Note, Letter of Credit or Application or shall
change the basis of taxation of payments to any of the Lenders
(or any of their respective Lending Offices) of the principal of
or interest on any Note, Letter of Credit or Application or any
other amounts due under this Agreement in respect thereof (except
for changes in the rate of tax on the overall net income of any
of the Lenders or any of their respective Lending Offices imposed
by the jurisdiction in which such Lender is organized or is or
should be qualified to do business or such Lending Office is
located); or
(ii) shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board
of Governors of the Federal Reserve System, other than those used
to calculate the Offshore Rate), special deposit, insurance or
capital or similar requirement against assets of, deposits with
or for the account of, or credit extended by any of the Lenders
(or any of their respective Lending Offices) or shall impose on
any of the Lenders (or any of their respective Lending Offices)
or the foreign exchange and interbank markets any other condition
affecting any Note; and the result of any event of the kind
described in the foregoing clause (i) or this clause (ii), is to
increase the costs to any of the Lenders of maintaining any
Offshore Rate Loan, Competitive Bid Loan or issuing or
participating in Letters of Credit or to reduce the yield or
amount of any sum received or receivable by any of the Lenders
under this Agreement or under the Revolving Credit Notes in
respect of an Offshore Rate Loan, the Competitive Bid Notes, or
Letter of Credit or Application, then such Lender may promptly
notify the Administrative Agent, and the Administrative Agent
shall promptly notify the respective Borrower of such fact and
demand compensation therefor and, within fifteen (15) days after
such notice by the Administrative Agent, such Borrower shall pay
to such Lender such additional amount or amounts as will
compensate such Lender or Lenders for such increased cost or
reduction. The Administrative Agent and the applicable Lender
will promptly notify the respective Borrower of any event of
which it has knowledge which will entitle such Lender to
compensation pursuant to this Section 4.8(c); provided, that the
Administrative Agent shall incur no liability whatsoever to the
Lenders or the Borrowers in the event it fails to do so. The
amount of such compensation shall be determined, in the
applicable Lender's reasonable discretion, based upon the
assumption that such Lender funded its Revolving Credit
Commitment Percentage of the Offshore Rate Loans, or the amount
of any Competitive Bid Loans made by such Lender, in the London
interbank market and using any reasonable attribution or
averaging methods which such Lender deems appropriate and
practical; provided that no compensation shall be payable
pursuant to the above if the applicable Lender fails to demand
compensation for such increased costs within one-hundred eighty
(180) days following the date on which such Lender has actual
knowledge of the event resulting in such increase. A certificate
of such Lender setting forth in reasonable detail the basis for
determining such amount or amounts necessary to compensate such
Lender shall be forwarded to the respective Borrower through the
Administrative Agent and shall be conclusively presumed to be
correct save for manifest error.
(d) Mitigation Obligations; Replacement of Lenders.
(i) If any Lender requests compensation under this
Section 4.8, or if the Borrowers are required to pay any
additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Sections 4.10 or 4.11, then
such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (A) would eliminate or
reduce amounts payable pursuant to this Section 4.8 or Sections
4.10 or 4.11, as the case may be, in the future and (B) would not
subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. The Borrowers
jointly and severally agree to pay all reasonable costs and
expenses incurred by any Lender in connection with any such
designation or assignment.
(ii) If any Lender requests compensation under this
Section 4.8, or if the Borrowers are required to pay any
additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Sections 4.10 or 4.11, or
if any Lender defaults in its obligation to fund Loans hereunder,
then the Borrowers may, at their sole expense and effort, upon
notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance
with and subject to the restrictions contained in Section 13.10),
all its interests, rights and obligations under this Agreement to
an Eligible Assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such
assignment); provided that (A) the Borrowers shall have received
the prior written consent of the Administrative Agent (and, if an
L/C Commitment is being assigned, the Issuing Lender), which
consent shall not unreasonably be withheld, (B) such Lender shall
have received payment of an amount equal to the outstanding
principal of its Loans and participations in Letters of Credit,
accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the
Borrowers (in the case of all other amounts) and (C) in the case
of any such assignment resulting from a claim for compensation
under this Section 4.8, such assignment will result in a
reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment
and delegation cease to apply. If a Lender defaults, the
Borrowers do not waive any of their rights against such Lender if
a Borrower causes the defaulting Lender to assign its position.
SECTION 4.9 Indemnity.
Each Borrower hereby indemnifies each of the Lenders against
any loss or expense which may arise or be attributable to each
Lender's obtaining, liquidating or employing deposits or other
funds acquired to effect, fund or maintain any Loan (a) as a
consequence of any failure by such Borrower to make any payment
when due of any amount due hereunder in connection with an
Offshore Rate Loan, (b) due to any failure of such Borrower to
borrow on a date specified therefor in a Notice of Revolving
Credit Borrowing, Notice of Swingline Borrowing, Competitive Bid
Request or Notice of Continuation/Conversion or (c) due to any
payment, prepayment or conversion of any Offshore Rate Loan on a
date other than the last day of the Interest Period therefor.
The amount of such loss or expense shall be determined, in the
applicable Lender's reasonable discretion, based upon the
assumption that such Lender funded its Commitment Percentage of
the Offshore Rate Loans in the London interbank market and using
any reasonable attribution or averaging methods which such Lender
deems appropriate and practical; provided that no compensation
shall be payable pursuant to the above if the applicable Lender
fails to demand compensation for such increased costs within one-
hundred eighty (180) days following the date on which such Lender
has actual knowledge of the event resulting in such increase. A
certificate of such Lender setting forth in reasonable detail the
basis for determining such amount or amounts necessary to
compensate such Lender shall be forwarded to the respective
Borrower through the Administrative Agent and shall be
conclusively presumed to be correct save for manifest error.
SECTION 4.10 Capital Requirements.
If either (a) the introduction of, or any change in, or in
the interpretation of, any Applicable Law or (b) compliance with
any guideline or request issued after the date hereof from any
central bank or comparable agency or other Governmental Authority
(whether or not having the force of law), has or would have the
effect of reducing the rate of return on the capital of, or has
affected or would affect the amount of capital required to be
maintained by, any Lender or any corporation controlling such
Lender as a consequence of, or with reference to any Lender's 364
Day Facility Commitment or Five Year Facility Commitment or with
reference to the Swingline Lender's 364 Day Facility Swingline
Commitment or Five Year Facility Swingline Commitment and other
commitments of this type, below the rate which the Lender or such
other corporation could have achieved but for such introduction,
change or compliance, then within five (5) Business Days after
written demand by any such Lender, the Borrowers shall pay to
such Lender from time to time as specified by such Lender
additional amounts sufficient to compensate such Lender or other
corporation for such reduction; provided that no compensation
shall be payable pursuant to the above if the applicable Lender
fails to demand compensation for such increased costs within one-
hundred eighty (180) days following the date on which such Lender
has actual knowledge of the event resulting in such increase. A
certificate of such Lender setting forth in reasonable detail the
basis for determining such amounts necessary to compensate such
Lender shall be forwarded to the Borrowers through the
Administrative Agent and shall be conclusively presumed to be
correct save for manifest error.
SECTION 4.11 Taxes.
(a) Payments Free and Clear. Any and all payments by any
Borrower hereunder or under the Notes or the Letters of Credit
shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges
or withholding, and all liabilities with respect thereto
excluding, (i) in the case of each Lender and the Administrative
Agent, income and franchise taxes imposed on (or measured by) its
net income by the United States of America or by the jurisdiction
under the laws of which such Lender or the Administrative Agent
(as the case may be) is organized or its principal office is
located or is or should be qualified to do business or any
political subdivision thereof, or in the case of any Lender, in
which its applicable Lending Office is located (provided,
however, that no Lender shall be deemed to be located in any
jurisdiction solely as a result of taking any action related to
this Agreement, the Notes or Letters of Credit) and (ii) any
branch profits tax imposed by the United States of America or any
similar tax imposed by any other jurisdiction described in clause
(i) above (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under any Note or Letter of Credit to any
Lender or the Administrative Agent, (A) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 4.11) such Lender or the
Administrative Agent (as the case may be) receives an amount
equal to the amount such party would have received had no such
deductions been made, (B) such Borrower shall make such
deductions, (C) such Borrower shall pay the full amount deducted
to the relevant taxing authority or other authority in accordance
with applicable law, and (D) such Borrower shall deliver to the
Administrative Agent evidence of such payment to the relevant
taxing authority or other authority in the manner provided in
Section 4.11(d). No Borrower shall, however, be required to pay
any amounts pursuant to clause (A) of the preceding sentence to
any Foreign Lender or the Administrative Agent not organized
under the laws of the United States of America or a state thereof
(or the District of Columbia) if such Foreign Lender or the
Administrative Agent fails to comply with the requirements of
paragraph (e) or Section 4.8(d), as the case may be.
(b) Stamp and Other Taxes. In addition, the Borrowers
shall pay any present or future stamp, registration, recordation
or documentary taxes or any other similar fees or charges or
excise or property taxes, levies of the United States or any
state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with
respect to, this Agreement, the Loans, the Letters of Credit, the
other Loan Documents, or the perfection of any rights or security
interest in respect thereto (hereinafter referred to as "Other
Taxes").
(c) Indemnity. Each Borrower shall indemnify each Lender
and the Administrative Agent for the full amount of Taxes and
Other Taxes (including, without limitation, any Taxes and Other
Taxes imposed by any jurisdiction on amounts payable under this
Section 4.11) paid by such Lender or the Administrative Agent (as
the case may be) and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, whether
or not such Taxes or Other Taxes were correctly or legally
asserted. A certificate as to the amount of such payment or
liability prepared by a Lender or the Administrative Agent,
absent manifest error, shall be conclusive, provided that if the
Borrowers reasonably believe that such Taxes or Other Taxes were
not correctly or legally asserted, such Lender or the
Administrative Agent (as the case may be) shall use reasonable
efforts to cooperate with the Borrowers, at the Borrowers'
expense, to obtain a refund of such Taxes or Other Taxes. Such
indemnification shall be made within thirty (30) days from the
date such Lender or the Administrative Agent (as the case may be)
makes written demand therefor. If a Lender or the Administrative
Agent shall become aware that it is entitled to receive a refund
in respect of Taxes or Other Taxes, it promptly shall notify the
respective Borrower of the availability of such refund and shall,
within sixty (60) days after receipt of a request by such
Borrower pursue or timely claim such refund at such Borrower's
expense. If any Lender or the Administrative Agent receives a
refund in respect of any Taxes or Other Taxes for which such
Lender or the Administrative Agent has received payment from any
Borrower hereunder, it promptly shall repay such refund (plus
interest received, if any) to such Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by
such Borrower under this Section 4.11 with respect to Taxes or
Other Taxes giving rise to such refund), provided that such
Borrower, upon the request of such Lender or the Administrative
Agent, agrees to return such refund (plus any penalties, interest
or other charges required to be paid) to such Lender or the
Administrative Agent in the event such Lender or the
Administrative Agent is required to repay such refund to the
relevant taxing authority.
(d) Evidence of Payment. Within thirty (30) days after the
date of any payment of Taxes or Other Taxes, the respective
Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 13.1, the original or a certified
copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Foreign Lender shall
deliver to the Borrowers, with a copy to the Administrative
Agent, on the Closing Date or concurrently with the delivery of
the relevant Assignment and Acceptance, as applicable, (i) two
United States Internal Revenue Service Forms 4224 or Forms 1001,
as applicable (or successor forms) properly completed and
certifying in each case that such Foreign Lender is entitled to a
complete exemption from withholding or deduction for or on
account of any United States federal income taxes, and (ii) an
Internal Revenue Service Form W-8 or W-9 or successor applicable
form, as the case may be, to establish an exemption from United
States backup withholding taxes. Each Foreign Lender further
agrees to deliver to the Borrowers, with a copy to the
Administrative Agent, a Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms or manner of certification, as the
case may be, on or before the date that any such form expires or
becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the
Borrowers, certifying in the case of a Form 1001 or 4224 that
such Foreign Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States
federal income taxes (unless in any such case an event (including
without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would
otherwise be required which renders such forms inapplicable or
the exemption to which such forms relate unavailable and such
Foreign Lender notifies the Borrowers and the Administrative
Agent that it is not entitled to receive payments without
deduction or withholding of United States federal income taxes)
and, in the case of a Form W-8 or W-9, establishing an exemption
from United States backup withholding tax.
(f) Survival. Without prejudice to the survival of any
other agreement of the Borrower hereunder, the agreements and
obligations of the Borrowers contained in this Section 4.11 shall
survive the payment in full of the Obligations and the
termination of the 364 Day Facility Commitment and the Five Year
Facility Commitment, but shall be limited in duration to the
applicable statute of limitations for Taxes or Other Taxes for
which indemnification is sought.
SECTION 4.12 Right of Lenders to Fund Through Branches and
Affiliates. Each Lender may, if it so elects, fulfill its
commitment as to any Loan or L/C Participation hereunder by
designating a branch or Affiliate of such Lender to make such
Loan or L/C Participation, provided, that (i) such Lender shall
remain solely responsible for the performance of its obligations
hereunder, (ii) no such designation shall result in any increased
costs to any Borrower and (iii) such branch or Affiliate complies
with all form of delivery and other requirements hereunder as if
it were a Lender.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing. The parties hereto executed
and delivered this Agreement (the "Closing") on January 18, 1999
(the "Closing Date").
SECTION 5.2 Conditions to Closing. The obligations
of the Lenders to close this Agreement were subject to the
satisfaction or waiver of each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Revolving
Credit Notes and the Swingline Notes, and all other applicable
Loan Documents, shall have been duly authorized, executed and
delivered to the Administrative Agent by the parties thereto,
shall be in full force and effect and no default shall exist
thereunder, and the Borrowers shall have delivered original
counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officers' Certificates. The Administrative Agent
shall have received a certificate from a Responsible Officer on
behalf of each Borrower, in form and substance reasonably
satisfactory to the Administrative Agent, to the effect that all
representations and warranties of the Borrower contained in this
Agreement and the other Loan Documents are true, correct and
complete in all material respects; that such Borrower is not in
violation of any of the covenants contained in this Agreement and
the other Loan Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event
of Default has occurred and is continuing; and that each of the
closing conditions has been satisfied or waived (assuming
satisfaction of the Administrative Agent where not advised
otherwise).
(ii) General Certificates. The Administrative Agent
shall have received a certificate of the secretary, assistant
secretary or general counsel of each Borrower certifying as to
the incumbency and genuineness of the signature of each officer
of such Borrower executing Loan Documents to which it is a party
and certifying that attached thereto is a true, correct and
complete copy of (A) the articles of incorporation of such
Borrower and all amendments thereto, certified as of a recent
date by the appropriate Governmental Authority in its
jurisdiction of incorporation, (B) the bylaws of such Borrower as
in effect on the date of such certifications, (C) resolutions
duly adopted by the Board of Directors of such Borrower
authorizing, as applicable, the borrowings contemplated hereunder
and the execution, delivery and performance of this Agreement and
the other Loan Documents to which it is a party, and (D) each
certificate required to be delivered pursuant to Section
5.2(b)(iii).
(iii) Certificates of Good Standing. The
Administrative Agent shall have received long-form certificates
as of a recent date of the good standing of the Borrowers and
their Material Subsidiaries under the laws of their respective
jurisdictions of organization and short-form certificates as of a
recent date of the good standing of each Borrower under the laws
of each other jurisdiction where such Borrower is qualified to do
business.
(iv) Opinions of Counsel. The Administrative Agent
shall have received opinions in form and substance reasonably
satisfactory to the Administrative Agent of Hunton & Williams,
counsel to the Company, and Travers Smith Braithwaite, United
Kingdom counsel to the UK Sub and the Acquisition Sub, addressed
to the Administrative Agent and the Lenders with respect to the
Borrowers, the Loan Documents and such other matters as the
Lenders shall reasonably request.
(c) Consents; Defaults.
(i) Governmental and Third Party Approvals. The
Borrowers shall have obtained all approvals, authorizations and
consents of any Person and of all Governmental Authorities and
courts having jurisdiction necessary in order to enter into this
Agreement and the other Loan Documents as of the Closing Date.
Additionally, there shall not exist any judgment, order,
injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the
transactions contemplated by this Agreement and the other Loan
Documents or otherwise referred to herein or therein.
(ii) No Event of Default. No Default or Event of
Default shall have occurred and be continuing.
(d) No Material Adverse Effect. Since September 30, 1998
nothing shall have occurred (and neither the Administrative Agent
nor the Lenders shall have become aware of any facts or condi
tions not previously known) which (i) has had, or could
reasonably be expected to have, a material adverse effect on the
rights or remedies of the Lenders or the Administrative Agent, or
on the ability of any Credit Party to perform its obligations to
the Lenders or the Administrative Agent hereunder or under any
other Loan Document or (b) has had, or could reasonably be
expected to have, a material adverse effect on the business,
assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or financial prospects of the Borrowers
and their Subsidiaries taken as a whole.
(e) Financial Matters.
(i) Financial Statements. The Administrative Agent
shall have received the unaudited Consolidated financial
statements of the Company and its Subsidiaries for the nine (9)
months ended as of September 30, 1998. Such financial statements
shall be in form and substance reasonably satisfactory to the
Administrative Agent.
(ii) Projections. The Administrative Agent shall have
received projected balance sheets and related projections of
income, cash flows and shareholders' equity for each of Fiscal
Years 1999, 2000 and 2001 (the "Projections"). The Projections
shall be in a form reasonably satisfactory to the Administrative
Agent, prepared in good faith based upon reasonable assumptions
and shall set forth, with appropriate discussion, the principal
assumptions upon which the Projections are based.
(iii) Payment at Closing. The Borrowers shall have
paid any accrued and unpaid fees or commissions due hereunder
(including, without limitation, reasonable legal fees and
expenses) to the Administrative Agent and Lenders, and to any
other Person such amount as may be due thereto in connection with
the transactions contemplated hereby, including all taxes, fees
and other charges in connection with the execution, delivery,
recording, filing and registration of any of the Loan Documents.
(f) Litigation. Except as set forth in the Current SEC
Reports, as of the Closing Date, there shall be no actions, suits
or proceedings pending or, to the best knowledge of any Borrower,
threatened (i) with respect to this Agreement or any other Loan
Document or (ii) which the Administrative Agent or the Required
Lenders shall reasonably determine could reasonably be expected
to have a material adverse effect on (a) business, assets,
liabilities (actual or contingent), operations, condition
(financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole, (b) the rights or remedies of the
Lenders or the Administrative Agent hereunder or under any other
Loan Document or (c) the ability of any Credit Party to perform
its respective obligations to the Lenders or the Administrative
Agent hereunder or under any other Loan Document.
(g) Miscellaneous.
(i) Proceedings and Documents. All Loan
Documents, opinions, certificates and other instruments and all
proceedings in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory in form and
substance to the Administrative Agent, the Arranger and the
Lenders.
(ii) Year 2000. The Administrative Agent shall have
received and reviewed information in form and substance
reasonably satisfactory to it confirming that (A) the Borrowers
and their Subsidiaries are taking all necessary and appropriate
steps to ascertain the extent of, and to quantify and
successfully address, business and financial risks facing the
Borrower and its Subsidiaries as a result of what is commonly
referred to as the "Year 2000 Problem" (i.e., the inability of
certain computer applications to recognize and perform date
sensitive functions involving certain dates prior to and after
September 1, 1999), including risks resulting from the failure
of key vendors and customers of the Borrower and its Subsidiaries
to successfully address the Year 2000 Problem, and (B) the
Borrowers' and their Subsidiaries' material computer applications
and those of their key vendors and customers will, on a timely
basis, adequately address the Year 2000 Problem in each case
sufficient to avoid a Material Adverse Effect.
(iii) Accuracy and Completeness of Information. All
information taken as an entirety made available to the
Administrative Agent or the Lenders by the Borrowers or any of
their representatives in connection with the transactions
contemplated hereby ("Information") is and will be complete and
correct in all material respects as of the date made available to
the Administrative Agent and does not and will not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained therein not
misleading.
SECTION 5.3 Conditions to Extensions of Credit Used
to Acquire Shares During the Certain Funds Period.
To ensure that the Borrowers have resources available to
fulfill their obligations under the Offer, the obligations of the
Lenders to make any Extensions of Credit which are to be used for
the purposes specified in Section 2.1(b)(i), (ii) or (iii) during
the Certain Funds Period are, notwithstanding anything to the
contrary herein, including Section 5.2, or in any other Loan
Document, only subject to the satisfaction of the following
conditions precedent on the relevant borrowing or issue date, as
applicable:
(a) The Administrative Agent shall have received a copy of
a press release confirming that the Offer has become or has been
declared unconditional in all respects.
(b) No Bankruptcy Event shall have occurred.
(c) (i) Neither this Agreement nor any other Loan Document,
including, without limitation, the Revolving Credit Notes,
Swingline Notes and the Competitive Bid Notes, shall fail to be
in full force and effect and (ii) neither Borrower nor any of
their Subsidiaries shall have asserted that this Agreement or any
other Loan Document is not in full force and effect.
(d) The Borrowers and each of their respective Material
Subsidiaries is a duly organized and validly existing
corporation, partnership or limited liability company, as the
case may be, in good standing under the laws of the jurisdiction
of its organization. As of the Closing Date, the Target and each
of its respective Material Subsidiaries is a duly organized and
validly existing corporation, partnership or limited liability
company, as the case may be, in good standing under the laws of
the jurisdiction of its organization.
(e) The Acquisition Sub has acquired, or entered into
contracts to acquire and/or has received acceptances of the Offer
which will result in the acquisition by the Acquisition Sub of
not less than ninety percent (90%) of the Shares or such lower
percentage as the Administrative Agent agrees to in writing
following consultation with the Borrowers, it being acknowledged
that in circumstances where the Borrowers demonstrate to the
reasonable satisfaction of the Administrative Agent that there is
no shareholder or group of shareholders acting together who hold
enough shares as to have the ability under the Companies Act 1985
to prejudice the ability of the Borrowers to re-register the
Target as a private company or the ability of any member of the
Target Group to follow the "whitewash procedure" of Sections 155-
8 of the Companies Act 1985 and, if required, to execute and
deliver the Guaranty Agreements referred to in Section 2.10 and
who, in the Administrative Agent's reasonable opinion, are likely
to do so, the Administrative Agent shall give its consent.
(f) The representations and warranties contained in Section
6.1 (a), (b), (c), (d) and (s) (with respect to a Bankruptcy
Event as defined for the purposes of this Section 5.3) shall be
true and correct on and as of such borrowing or issuance date
with the same effect as if made on and as of such date; except
for any representation and warranty made as of an earlier date,
which representation and warranty shall remain true and correct
as of such earlier date.
(g) The Administrative Agent shall have received a Notice
of Revolving Credit Borrowing from either Borrower in accordance
with Section 2.2(a), a Notice of Swingline Borrowing in
accordance with Section 2.6(d), a Competitive Bid Request in
accordance with Section 2.5(a) or an Application in accordance
with Section 3.2 and a Notice of Account Designation specifying
the account or accounts to which the proceeds of any Loans made
after the Closing Date are to be disbursed.
(h) All Prior Bank Commitments shall have been (or will be
upon the initial borrowing hereunder and the application of the
proceeds thereof) (i) paid in full, (ii) the commitments, other
obligations and rights of the Company and the lenders thereunder
terminated and (iii) all outstanding promissory notes issued by
the Company with respect thereto canceled and the originally
executed copies thereof returned to the Administrative Agent (who
shall promptly forward such notes to the Company); provided, that
arrangements may be made so that any outstanding letter of credit
issued under such committed facilities may remain outstanding as
necessary.
The acceptance by any Borrower of the benefits of each
Extension of Credit used to acquire Shares in accordance with the
terms of the Offer during the Certain Funds Period shall
constitute a representation and warranty by such Borrower to the
Administrative Agent and each of the Lenders that all the
conditions specified in this Section 5.3 and applicable to such
borrowing have been satisfied as of that time.
SECTION 5.4 Conditions to All Other Extensions of
Credit.
The obligations of the Lenders to make any Extensions of
Credit after the Certain Funds Period has ended are subject to
the satisfaction of the following conditions precedent on the
relevant borrowing or issue date, as applicable:
(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI, (i)
excluding Section 6.1(n) and (ii) limiting Section 6.1(a) to the
Target and its Material Subsidiaries, shall be true and correct
in all material respects on and as of such borrowing or issuance
date with the same effect as if made on and as of such date;
except for any representation and warranty made as of an earlier
date, which representation and warranty shall remain true and
correct in all material respects as of such earlier date and
subject to the qualification that with respect to the Target and
its Subsidiaries, Sections 6.1(f), (m), (o), (r), (v) and (w)
shall be qualified during the Clean-Up Period by reference to the
conditions set forth in Section 11.4.
(b) No Existing Default. No Default or Event of Default
shall have occurred and be continuing hereunder (i) on the
borrowing date with respect to such Loan or after giving effect
to the Loans to be made on such date or (ii) on the issue date
with respect to such Letter of Credit or after giving effect to
such Letters of Credit on such date.
(c) Notice of Revolving Credit Borrowing. The
Administrative Agent shall have received a Notice of Revolving
Credit Borrowing from either Borrower in accordance with Section
2.2(a) or a Competitive Bid Request in accordance with Section
2.5(a) and a Notice of Account Designation specifying the account
or accounts to which the proceeds of any Loans made after the
Closing Date are to be disbursed.
(d) Termination of Prior Bank Commitments. All Prior Bank
Commitments shall have been (or will be upon the initial
borrowing hereunder and the application of the proceeds thereof)
(i) paid in full, (ii) the commitments, other obligations and
rights of the Company and the lenders thereunder terminated and
(iii) all outstanding promissory notes issued by the Company with
respect thereto canceled and the originally executed copies
thereof returned to the Administrative Agent (who shall promptly
forward such notes to the Company); provided, that arrangements
may be made so that any outstanding letter of credit issued under
such committed facilities may remain outstanding as necessary.
(e) Termination of Certain Funds Period. The Certain Funds
Period shall have ended.
The occurrence of the Closing Date and the acceptance by any
Borrower of the benefits of each Extension of Credit hereunder
(other than Extensions of Credit used to acquire Shares in
accordance with the terms of the Offer during the Certain Funds
Period) shall constitute a representation and warranty by such
Borrower to the Administrative Agent and each of the Lenders that
all the conditions specified in Sections 5.2 and 5.4 and
applicable to such borrowing have been satisfied as of that time.
All of the Notes, certificates, legal opinions and other
documents and papers referred to in Sections 5.2, 5.3 and 5.4,
unless otherwise specified, shall be delivered to the
Administrative Agent for the account of each of the Lenders and,
except for the Notes, in sufficient counterparts or copies for
each of the Lenders and shall be in form and substance reasonably
satisfactory to the Administrative Agent, the Arranger and the
Required Lenders.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES
SECTION 6.1 Representations and Warranties.
To induce the Administrative Agent and Lenders to enter into
this Agreement and to induce the Lenders to make Extensions of
Credit, each Borrower hereby represents and warrants to the
Administrative Agent and Lenders that:
(a) Organization; Power; Qualification. Each of the Credit
Parties and their Material Subsidiaries is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as
now being and hereafter proposed to be conducted and is duly
qualified and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its
business requires such qualification and authorization, except
where the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
(b) Ownership. Each Subsidiary of each of the Credit
Parties as of the Closing Date is listed on Schedule 6.1(b). As
of the Closing Date, all outstanding shares of each such
Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable. As of the Closing Date, there are
no outstanding stock purchase warrants, subscriptions, options,
securities, instruments or other rights of any type or nature
whatsoever, which are convertible into, exchangeable for or
otherwise provide for or permit the issuance of capital stock of
the Credit Parties or their Subsidiaries, except as described on
Schedule 6.1(b).
(c) Authorization of Agreement, Loan Documents and
Borrowing. Each of the Credit Parties and, if applicable, their
Subsidiaries has the right, power and authority and has taken all
necessary corporate and other action to authorize the execution,
delivery and performance of each of the Loan Documents to which
it is a party in accordance with its respective terms. Each of
the Loan Documents has been duly executed and delivered by the
duly authorized officers of the Credit Parties and each of their
Subsidiaries party thereto, as applicable, and each such document
constitutes the legal, valid and binding obligation of the Credit
Parties and, if applicable, each of their Subsidiaries party
thereto, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state or federal debtor
relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability
of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing
with Laws, Etc. The execution, delivery and performance by the
Credit Parties and their Subsidiaries of the Loan Documents to
which each such Person is a party, in accordance with their
respective terms, the borrowings hereunder and the transactions
contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any of the Credit
Parties or any of their Subsidiaries to obtain any Governmental
Approval not otherwise already obtained or violate any Applicable
Law relating to the Credit Parties or any of their Subsidiaries,
other than as required by federal and state securities laws with
respect to the Additional Debt Securities, (ii) conflict with,
result in a breach of or constitute a default under the articles
of incorporation, bylaws or other organizational documents of the
Credit Parties or any of their Subsidiaries or any indenture or
other material agreement or instrument to which such Person is a
party or by which any of its properties may be bound or any
Governmental Approval relating to such Person except as could not
reasonably be expected to have a Material Adverse Effect, or
(iii) result in or require the creation or imposition of any
material Lien upon or with respect to any property now owned or
hereafter acquired by such Person.
(e) Compliance with Law; Governmental Approvals. Other
than with respect to environmental matters, which are treated
exclusively in Section 6.1(h) hereof, each of the Credit Parties
and their respective Subsidiaries (i) has all Governmental
Approvals required by any Applicable Law for it to conduct its
business, each of which is in full force and effect, is final and
not subject to review on appeal and is not the subject of any
pending or, to the best of the Borrowers' knowledge, threatened
attack by direct or collateral proceeding, and (ii) is in
compliance with each Governmental Approval applicable to it and
in compliance with all other Applicable Laws relating to it or
any of its respective properties; in each case, except where the
failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(f) Tax Returns and Payments. Each of the Credit Parties
and their respective Subsidiaries has timely filed or caused to
be filed all federal and state, local and other tax returns
required by Applicable Law to be filed, and has paid, or made
adequate provision for the payment of, all federal and state,
local and other taxes, assessments and governmental charges or
levies upon it and its property, income, profits and assets which
are due and payable, except taxes (a) that are being contested in
good faith by appropriate proceedings and for which such Credit
Party or Subsidiary, as applicable, has set aside on its books
adequate reserves or (b) to the extent the failure to do so could
not reasonably be expected to have a Material Adverse Effect. No
Governmental Authority has asserted any material Lien or other
claim against the Credit Parties or any Subsidiary thereof with
respect to unpaid taxes which has not been discharged or
resolved. The charges, accruals and reserves on the books of each
of the Credit Parties and any of their respective Subsidiaries in
respect of federal and all material state, local and other taxes
for all Fiscal Years and portions thereof since the organization
of each of the Credit Parties and any of their Subsidiaries are,
in the judgment of the Credit Parties, adequate, and the Credit
Parties do not anticipate any material additional taxes or
assessments for any of such years.
(g) Intellectual Property Matters. Each of the Credit
Parties and its Subsidiaries owns or possesses rights to use all
franchises, licenses, copyrights, copyright applications,
patents, patent rights or licenses, patent applications,
trademarks, trademark rights, trade names, trade name rights,
copyrights and rights with respect to the foregoing which are
required to conduct its business except where the failure to do
so could not reasonably be expected to have a Material Adverse
Effect. No event has occurred which, to the knowledge of the
Borrowers, permits, or after notice or lapse of time or both
would permit, the revocation or termination of any such rights,
and, to the knowledge of the Borrowers, neither the Credit
Parties nor any Subsidiary thereof is liable to any Person for
infringement under Applicable Law with respect to any such rights
as a result of its business operations, except as could not
reasonably be expected to have a Material Adverse Effect.
(h) Environmental Matters. Except as set forth in the
Current SEC Reports or as otherwise could not reasonably be
expected to have a Material Adverse Effect:
(i) The properties of the Credit Parties and
their Subsidiaries (including soils, surface waters, groundwaters
on, at or under such properties) do not contain and are not
otherwise affected by, and to the Borrowers' knowledge have not
previously contained or been affected by, any Hazardous Materials
in amounts or concentrations which (A) constitute or constituted
a violation of applicable Environmental Laws or (B) could give
rise to liability or obligation under applicable Environmental
Laws;
(ii) The properties of the Credit Parties and
their Subsidiaries and all operations conducted in connection
therewith are in compliance, and have been in compliance, with
all applicable Environmental Laws, and there are no Hazardous
Materials at, under or about such properties or such operations
which could reasonably be expected to interfere with the
continued operation of such properties;
(iii) The Credit Parties and their Subsidiaries
have obtained, are in compliance with, and have made all
appropriate filings for issuance or renewal of, all permits,
licenses, and other governmental consents required by applicable
Environmental Laws ("Environmental Permits"), and all such
Environmental Permits are in full force and effect;
(iv) Neither any of the Credit Parties nor any
Subsidiary thereof has received any notice of violation, alleged
violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental
Laws, nor do the Borrowers have knowledge or reason to believe
that any such notice will be received or is being threatened;
(v) To the knowledge of the Borrowers, Hazardous
Materials have not been transported or disposed of from the
properties of the Credit Parties or any of their Subsidiaries in
violation of, or in a manner or to a location which could
reasonably be expected to give rise to liability under,
Environmental Laws, nor, to the knowledge of the Borrowers, have
any Hazardous Materials been generated, treated, stored or
disposed of at, on or under any of such properties in violation
of, or in a manner which could reasonably be expected to give
rise to liability under, any Environmental Laws;
(vi) No judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of the
Borrowers, threatened, under any Environmental Law to which any
of the Credit Parties or any Subsidiary thereof has been or will
be named as a party, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders,
or other administrative or judicial requirements outstanding
under any Environmental Law with respect to the properties or
operations of the Credit Parties and their Subsidiaries; and
(vii) To the knowledge of the Borrowers, there
has been no release, or threat of release, of Hazardous Materials
at or from the properties of the Credit Parties or any of their
Subsidiaries, in violation of or in amounts or in a manner that
could reasonably be expected to give rise to liability under
Environmental Laws.
(i) ERISA.
(i) Each of the Credit Parties and each
ERISA Affiliate is in compliance with all applicable provisions
of ERISA and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans except
where any such non-compliance could not reasonably be expected to
have a Material Adverse Effect. Except for any failure that
would not reasonably be expected to have a Material Adverse
Effect, each Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service to be so qualified, and each trust
related to such plan has been determined to be exempt under
Section 501(a) of the Code. No liability that could reasonably
be expected to have a Material Adverse Effect has been incurred
by the Credit Parties or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any
Employee Benefit Plan or any Multiemployer Plan;
(ii) No accumulated funding deficiency (as defined
in Section 412 of the Code) has been incurred (without regard to
any waiver granted under Section 412 of the Code), nor has any
funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan except for any
accumulated funding deficiency that could not reasonably be
expected to have a Material Adverse Effect;
(iii) Neither the Credit Parties nor any ERISA
Affiliate has: (A) engaged in a nonexempt prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code,
(B) incurred any liability to the PBGC which remains outstanding
other than the payment of premiums and there are no premium
payments which are due and unpaid, (C) failed to make a required
contribution or payment to a Multiemployer Plan, or (D) failed to
make a required installment or other required payment under
Section 412 of the Code except where any of the foregoing
individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect;
(iv) No Termination Event that could reasonably be
expected to result in a Material Adverse Effect has occurred or
is reasonably expected to occur; and
(v) No proceeding, claim, lawsuit and/or
investigation is existing or, to the knowledge of the Borrowers,
threatened concerning or involving any Employee Benefit Plan that
could reasonably be expected to result in a Material Adverse
Effect.
(j) Margin Stock. Neither the Credit Parties nor any
Subsidiary thereof is engaged principally or as one of its
activities in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each such term
is defined or used in Regulation U of the Board of Governors of
the Federal Reserve System). No part of the proceeds of any of
the Loans or Letters of Credit will be used for purchasing or
carrying margin stock, unless the Credit Parties shall have given
the Administrative Agent and Lenders prior notice of such event
and such other information as is reasonably necessary to permit
the Administrative Agent and Lenders to comply, in a timely
fashion, with all reporting obligations required by Applicable
Law, or for any purpose which violates, or which would be
inconsistent with, the provisions of Regulation T, U or X of such
Board of Governors.
(k) Government Regulation. Neither the Credit Parties nor
any Subsidiary thereof is an "investment company" or a company
"controlled" by an "investment company" (as each such term is
defined or used in the Investment Company Act of 1940, as
amended) and neither the Credit Parties nor any Subsidiary
thereof is, or after giving effect to any Extension of Credit
will be, subject to regulation under the Public Utility Holding
Company Act of 1935 or the Interstate Commerce Act, each as
amended.
(l) Burdensome Provisions. Neither the Credit Parties nor
any Subsidiary thereof is a party to any indenture, agreement,
lease or other instrument, or subject to any corporate or
partnership restriction, Governmental Approval or Applicable Law
which is so unusual or burdensome as in the foreseeable future
could be reasonably expected to have a Material Adverse Effect.
The Credit Parties and their Subsidiaries do not presently
anticipate that future expenditures needed to meet the provisions
of any statutes, orders, rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse
Effect.
(m) Financial Statements; Financial Condition; Etc.
(i) The (A) audited Consolidated balance sheets of the
Credit Parties and their Subsidiaries as of December 31, 1997,
and the related statements of income, stockholders' equity and
cash flows for the Fiscal Year then ended and (B) unaudited
Consolidated balance sheet of the Credit Parties and their
Subsidiaries as of September 30, 1998, and related unaudited
interim statements of income, stockholders' equity and cash
flows, copies of which have been furnished to the Administrative
Agent and each Lender, are complete in all material respects and
fairly present in all material respects the assets, liabilities
and financial position of the Credit Parties and their
Subsidiaries as at such dates, and the results of the operations
and changes of financial position for the periods then ended,
subject to normal year end adjustments. All such financial
statements, including the related notes thereto, have been
prepared in accordance with GAAP.
(ii) As of the Closing Date, the sum of the assets, at
a fair valuation, of each Credit Party on a stand-alone basis and
of the Credit Parties and their Subsidiaries taken as a whole
will exceed its or their debts, respectively; (b) each Credit
Party on a stand-alone basis and the Credit Parties and their
Subsidiaries taken as a whole has not incurred and does not
intend to incur, and does not believe that it will incur, debts
beyond its or their ability to pay such debts as such debts
mature, respectively; and (c) each Credit Party on a stand-alone
basis and the Credit Parties and their Subsidiaries taken as a
whole will have sufficient capital with which to conduct its or
their business, respectively. For purposes of this Section,
"debt" means any liability on a claim, and "claim" means (i)
right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or
unsecured or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or
not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured. The amount of contingent liabilities at
any time shall be computed as the amount that, in the light of
all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or
matured liability.
(n) No Material Adverse Change. Since September 30, 1998,
there has been no Material Adverse Effect.
(o) Liens. None of the properties and assets of the Credit
Parties or any Subsidiary thereof is subject to any Lien, except
Liens permitted pursuant to Section 10.3.
(p) Debt and Guaranty Obligations. Schedule 6.1(p) is a
complete and correct listing of all Debt and Guaranty Obligations
of the Credit Parties and their Subsidiaries as of the Closing
Date in excess of $10,000,000.
(q) Litigation. Except for matters existing on the Closing
Date and set forth in the Current SEC Reports, there are no
actions, suits or proceedings pending nor, to the knowledge of
the Borrowers, threatened against or affecting the Credit Parties
or any Subsidiary thereof or any of their respective properties
in any court or before any arbitrator of any kind or before or by
any Governmental Authority, which could reasonably be expected to
have a Material Adverse Effect.
(r) Absence of Defaults. Since September 30, 1998, to the
knowledge of the Borrowers, no event has occurred and is
continuing which constitutes a Default or an Event of Default.
(s) Absence of Bankruptcy Events. Since September 30,
1998, no event has occurred or is continuing which constitutes a
Bankruptcy Event.
(t) Accuracy and Completeness of Information. As of the
Closing Date, the Credit Parties have disclosed to the Lenders
all agreements, instruments and corporate or other restrictions
to which they or any of their Subsidiaries are subject, and all
other matters known to them, other than general market, economic
and industry conditions, that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
The written information, taken as a whole, furnished by or on
behalf of the Credit Parties to the Administrative Agent or any
Lender in connection with the negotiation of this Agreement or
delivered hereunder (as modified or supplemented by other
information so furnished) does not contain any material
misstatement of fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with
respect to the Projections and any other projected financial
information, the Credit Parties represent only that such
information was prepared in good faith based upon assumptions
believed to be reasonable at the time. As of the Closing Date,
the Borrowers believe that the Projections are reasonable and
attainable, it being recognized by the Lenders, however, that
projections as to future events are not to be viewed as facts and
that the actual results during the period or periods covered by
the Projections may differ from the projected results and that
the differences may be material.
(u) Year 2000 Compliance. The Credit Parties have (i)
initiated a review and assessment of all areas within their and
each of their Subsidiaries' material business and operations that
could reasonably be expected to be adversely affected by the Year
2000 Problem, (ii) developed a plan, strategy or other approach
for addressing the Year 2000 Problem on a timely basis, and (iii)
implemented that plan, strategy or other approach. Based on the
foregoing and upon the Credit Parties' reliance on (i) any Year
2000 consulting services, study, report or any other information
performed or provided by any Person other than the Credit Parties
or any of their Subsidiaries and (ii) any certification or
assurance of Year 2000 compliance provided by any vendor,
supplier, servicer, manufacturer, customer or other provider of
any hardware or software product or other computer applications
installed at the Credit Parties or any of their Subsidiaries, the
Credit Parties believe, as of the Closing Date, that all computer
applications (including, limited to the Credit Parties'
inquiries, those disclosed by their suppliers, vendors and
customers) that are material to their or any of their
Subsidiaries' business and operations are reasonably expected on
a timely basis to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that
is, be "Year 2000 compliant"), except to the extent that a
failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(v) Real Property. The Credit Parties and their
Subsidiaries have good and marketable title to all material
properties owned by them and valid leasehold interests in all
material properties leased by them, including all property
reflected in the Current SEC Reports and in the balance sheets
referred to in Section 6.1(m)(i) (except as sold or otherwise
disposed of since the date of such balance sheet in the ordinary
course of business or as permitted by the terms of this
Agreement), free and clear of all Liens, except Liens permitted
pursuant to Section 10.3.
(w) Labor Practices. Neither the Credit Parties nor any of
their Subsidiaries is engaged in any unfair labor practices that
could reasonably be expected to have a Material Adverse Effect.
There is (i) no unfair labor practice complaint pending against
any Credit Party or any of their Subsidiaries or, to the
knowledge of the Borrowers, threatened against the Credit Parties
or any of their Subsidiaries, before the National Labor Relations
Board, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is so pending
against the Credit Parties or any of their Subsidiaries or, to
the knowledge of the Borrowers, threatened against the Credit
Parties or any of their Subsidiaries, (ii) no strike, labor
dispute, slowdown or stoppage pending against the Credit Parties
or any of their Subsidiaries or, to the knowledge of the
Borrowers, threatened against the Credit Parties or any of their
Subsidiaries and (iii) no union representation question exists
with respect to the employees of the Credit Parties or any of
their Subsidiaries except (with respect to any matter specified
in clause (i), (ii) or (iii) above, either individually or in the
aggregate) such as could not reasonably be expected to have a
Material Adverse Effect.
(x) SEC Reports. During the preceding three (3) Fiscal
Years, the Company and its Subsidiaries have filed all forms,
reports, statements (including proxy statements) and other
documents (such filings by the Credit Parties and their
Subsidiaries are collectively referred to as the "SEC Reports"),
required to be filed by it with the Securities and Exchange
Commission. The SEC Reports (i) were prepared in all material
respects in accordance with the requirements of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended, as the case may be, and the rules and regulations of
the Securities Exchange Commission thereunder applicable to such
SEC Reports at the time of filing thereof and (ii) did not at the
time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, which untrue statement or omission was not corrected
in a subsequent SEC Report.
(y) UK Sub and Acquisition Sub. Neither the UK Sub nor the
Acquisition Sub has carried on any business, owns any assets
(other than contributions to capital) or incurred any liability
(actual or contingent) as of the Closing Date.
SECTION 6.2 Survival of Representations and
Warranties, Etc.
All representations and warranties set forth in this Article
VI and all representations and warranties contained in any
certificate, or any of the Loan Documents (including but not
limited to any such representation or warranty made in or in
connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All
representations and warranties made under this Agreement shall be
made or deemed to be made at and as of the Closing Date, shall
survive the Closing Date and shall not be waived by the execution
and delivery of this Agreement, any investigation made by or on
behalf of the Lenders or any borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations (other than Obligations under
Hedging Agreements) have been paid and satisfied in full and the
later of the 364 Day Facility Termination Date, the Five Year
Facility Termination Date or the Term Loan Termination Date,
unless consent has been obtained in the manner set forth in
Section 13.11 hereof, the Credit Parties will furnish or cause to
be furnished to the Administrative Agent and to the Lenders at
their respective addresses as set forth on Schedule 1, or such
other office as may be designated by the Administrative Agent and
Lenders from time to time:
SECTION 7.1 Financial Statements.
(a) Quarterly Financial Statements. As soon as practicable
and in any event within forty-five (45) days after the end of
each of the first three fiscal quarters of each Fiscal Year,
either (i) a copy of a report on Form 10-Q, or any successor
form, and any amendments thereto, filed by the Company with the
Securities and Exchange Commission with respect to the
immediately preceding fiscal quarter or (ii) an unaudited
Consolidated balance sheet of the Company and its Subsidiaries as
of the close of such fiscal quarter and unaudited Consolidated
statements of income, stockholders' equity and cash flows for the
fiscal quarter then ended and that portion of the Fiscal Year
then ended, including the notes thereto, all in reasonable detail
setting forth in comparative form the corresponding figures for
the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the preceding Fiscal Year and
prepared by the Company in accordance with GAAP and, if
applicable, containing disclosure of the effect on the financial
position or results of operations of any change in the
application of accounting principles and practices during the
period, and certified by a Responsible Officer to present fairly
in all material respects the financial condition of the Company
and its Subsidiaries as of their respective dates and the results
of operations of the Company and its Subsidiaries for the
respective periods then ended, subject to normal year end
adjustments.
(b) Annual Financial Statements. As soon as practicable
and in any event within ninety (90) days after the end of each
Fiscal Year, either (i) a copy of a report on Form 10-K, or any
successor form, and any amendments thereto, filed by the Company
with the Securities and Exchange Commission with respect to the
immediately preceding Fiscal Year or (ii) an audited Consolidated
balance sheet of the Company and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of
income, stockholders' equity and cash flows for the Fiscal Year
then ended, including the notes thereto, all in reasonable detail
setting forth in comparative form the corresponding figures for
the preceding Fiscal Year and prepared by a nationally recognized
independent certified public accounting firm in accordance with
GAAP and, if applicable, containing disclosure of the effect on
the financial position or results of operation of any change in
the application of accounting principles and practices during the
year, and accompanied by a report thereon by such certified
public accountants that is not qualified with respect to scope
limitations imposed by the Company or any of its Subsidiaries or
with respect to accounting principles followed by the Company or
any of its Subsidiaries not in accordance with GAAP.
SECTION 7.2 Officer's Compliance Certificate. At
each time financial statements are delivered pursuant to Section
7.1(a) or (b) a certificate of a Responsible Officer in the form
of Exhibit G attached hereto (an "Officer's Compliance
Certificate") including the calculations prepared by such Officer
required to establish whether or not the Credit Parties and their
Subsidiaries are in compliance with the financial covenants set
forth in Section 10.2 hereof as at the end of each respective
period.
SECTION 7.3 Accountants' Certificate. At each time
financial statements are delivered pursuant to Section 7.1(b), a
certificate of the independent public accountants certifying such
financial statements addressed to the Administrative Agent for
the benefit of the Lenders stating that in making the examination
necessary for the certification of such financial statements,
they obtained no knowledge of any Default or Event of Default or,
if such is not the case, specifying such Default or Event of
Default and its nature and period of existence.
SECTION 7.4 Other Reports.
(a) Promptly after the filing thereof, a copy of (i) each
report or other filing made by the Credit Parties or any or their
Subsidiaries with the Securities and Exchange Commission and
required by the Securities and Exchange Commission to be
delivered to the shareholders of the Credit Parties or any or
their Subsidiaries, (ii) each report made by the Credit Parties
or any of their Subsidiaries to the Securities and Exchange
Commission on Form 8-K and (iii) each final registration
statement of the Credit Parties or any of their Subsidiaries
filed with the Securities and Exchange Commission, except in
connection with pension plans and other employee benefit plans;
and
(b) Such other information regarding the operations,
business affairs and financial condition of the Credit Parties or
any of their Subsidiaries as the Administrative Agent or any
Lender may reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters.
Prompt (but in no event later than ten (10) Business Days
after an executive officer of the Credit Parties obtains
knowledge thereof) telephonic (confirmed in writing) or written
notice of:
(a) the commencement of all proceedings and investigations
by or before any Governmental Authority and all actions and
proceedings in any court or before any arbitrator against or
involving the Credit Parties or any Subsidiary thereof or any of
their respective properties, assets or businesses (i) which in
the reasonable judgment of the Borrowers could reasonably be
expected to have a Material Adverse Effect, (ii) with respect to
any material Debt of the Credit Parties or any of their
Subsidiaries or (iii) with respect to any Loan Document;
(b) any notice of any violation received by the Credit
Parties or any Subsidiary thereof from any Governmental Authority
including, without limitation, any notice of violation of
Environmental Laws, which in the reasonable judgment of the
Borrowers in any such case could reasonably be expected to have a
Material Adverse Effect;
(c) (i) any unfavorable determination letter from the
Internal Revenue Service regarding the qualification of an
Employee Benefit Plan under Section 401(a) of the Code (along
with a copy thereof) which could reasonably be expected to have a
Material Adverse Effect, (ii) all notices received by the Credit
Parties or any ERISA Affiliate of the PBGC's intent to terminate
any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (iii) all notices received by the Credit Parties or
any ERISA Affiliate from a Multiemployer Plan sponsor concerning
the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA which could reasonably be expected to have
a Material Adverse Effect, (iv) the Credit Parties obtaining
knowledge or reason to know that the Credit Parties or any ERISA
Affiliate has filed or intends to file a notice of intent to
terminate any Pension Plan under a distress termination within
the meaning of Section 4041(c) of ERISA and (v) the occurrence of
a Reportable Event;
(d) the occurrence of any event which constitutes, or which
could reasonably be expected to result in, a Default or an Event
of Default;
(e) the occurrence of any event which constitutes, or which
could reasonably be expected to result in, a Material Adverse
Effect; and
(f) any change in the Moody's or S&P Debt Rating of the
Company.
SECTION 7.6 Accuracy of Information.
All written information, reports, statements and other
papers and data furnished by or on behalf of the Credit Parties
to the Administrative Agent or any Lender (other than financial
forecasts) whether pursuant to this Article VII or any other
provision of this Agreement, shall be, at the time the same is so
furnished, true and complete in all material respects.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations (other than any Obligations
under any Hedging Agreement) have been paid and satisfied in full
and the 364 Day Facility Commitment and the Five Year Facility
Commitment have expired or been terminated, unless consent has
been obtained in the manner provided for in Section 13.11, the
Borrowers will, and will cause each of the Credit Parties and
their respective Subsidiaries to:
SECTION 8.1 Preservation of Corporate Existence and
Related Matters.
Except as permitted by Section 10.5, preserve and maintain
its separate corporate existence and all rights, franchises,
licenses and privileges necessary to the conduct of its business,
and qualify and remain qualified as a foreign corporation and
authorized to do business in each jurisdiction where the nature
and scope of its activities require it to so qualify under
Applicable Law, except where the failure to so preserve and
maintain its existence and rights or to so qualify would not have
a Material Adverse Effect.
SECTION 8.2 Maintenance of Property.
Protect and preserve all properties useful in and material
to its business, including copyrights, patents, trade names and
trademarks; maintain in good working order and condition all
buildings, equipment and other tangible real and personal
property material to the conduct of its business, ordinary wear
and tear excepted; and from time to time make or cause to be made
all renewals, replacements and additions to such property
necessary for the conduct of its business, so that the business
carried on in connection therewith may be properly and
advantageously conducted at all times, except, in each case,
where the failure to do so would not have a Material Adverse
Effect.
SECTION 8.3 Insurance.
Maintain in full force and effect insurance with financially
sound and reputable insurance companies against such risks and in
such amounts as are in accordance with normal industry practice
and as may be required by Applicable Law.
SECTION 8.4 Accounting Methods and Financial
Records.
Maintain a system of accounting, and keep such books,
records and accounts (which shall be true and complete in all
material respects) as may be required or as may be necessary to
permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental
Authority having jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations.
(a) Pay and perform all Obligations under this Agreement
and the other Loan Documents.
(b) Pay and discharge (i) all material taxes, assessments
and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior
to the date on which penalties attach thereto, and (ii) all other
material indebtedness, obligations and liabilities in accordance
with customary trade practices; provided, that the Credit Parties
or such Subsidiary may contest any item described in clause (i)
or (ii) of this Section 8.5(b) in good faith and by proper
proceedings so long as adequate reserves are maintained with
respect thereto to the extent required by GAAP.
(c) Perform all of its obligations under the terms of each
mortgage, indenture, security agreement, loan agreement or credit
agreement and each other agreement, contract or instrument by
which it is bound, except such non-performances as could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
SECTION 8.6 Compliance With Laws and Approvals.
Observe and remain in compliance with all Applicable Laws
and maintain in full force and effect all Governmental Approvals,
in each case applicable to the conduct of its business except
where the failure to observe or comply could not reasonably be
expected to have a Material Adverse Effect.
SECTION 8.7 Environmental Laws.
In addition to and without limiting the generality of
Section 8.6, (a) comply with, and use best efforts to ensure such
compliance by all tenants and subtenants with all applicable
Environmental Laws and obtain and comply with and maintain, and
ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental
Laws except where the failure to comply could not reasonably be
expected to have a Material Adverse Effect, (b) conduct and
complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders
and directives of any Governmental Authority regarding
Environmental Laws except (i) where the failure to do so could
not reasonably be expected to have a Material Adverse Effect or
(ii) to the extent the Credit Parties or any of their
Subsidiaries are contesting, in good faith, any such requirement,
order or directive before the appropriate Governmental Authority
so long as adequate reserves are maintained with respect thereto
to the extent required by GAAP, and (c) defend, indemnify and
hold harmless the Administrative Agent and the Lenders, and their
respective parents, Subsidiaries, Affiliates, employees, agents,
officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent
or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any
Environmental Laws applicable to the operations or properties of
the Credit Parties or such Subsidiaries, or any orders,
requirements or demands of Governmental Authorities related
thereto, including, without limitation, reasonable attorney's and
consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent
that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking
indemnification therefor.
SECTION 8.8 Compliance with ERISA.
In addition to and without limiting the generality of
Section 8.6, (a) comply with all applicable provisions of ERISA
and the Code and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans, except
where the failure to comply could not reasonably be expected to
have a Material Adverse Effect, (b) not take any action or fail
to take action the result of which would result in a liability to
the PBGC or to a Multiemployer Plan in an amount that could
reasonably be expected to have a Material Adverse Effect, and (c)
furnish to the Administrative Agent upon the Administrative
Agent's request such additional information about any Employee
Benefit Plan concerning compliance with this covenant as may be
reasonably requested by the Administrative Agent.
SECTION 8.9 Conduct of Business.
Maintain substantially all of its businesses in
substantially the same fields as the businesses conducted on the
Closing Date and in lines of business reasonably related thereto
or as otherwise permitted pursuant to the terms of this
Agreement.
SECTION 8.10 Visits and Inspections.
Permit representatives of the Administrative Agent or any
Lender, from time to time upon reasonable prior notice and during
ordinary business hours to visit and inspect its properties;
inspect and make extracts from its books, records and files,
including, but not limited to, management letters prepared by
independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets,
liabilities, financial condition, results of operations and
business prospects.
SECTION 8.11 Use of Proceeds.
Use the proceeds of the Extensions of Credit for the
purposes set forth in Section 2.1(b).
SECTION 8.12 Year 2000 Compatibility.
Take all actions reasonably necessary to assure that the
Credit Parties' computer based systems (which if not functional
would have a Material Adverse Effect) are able to operate and
effectively process data in a manner that is Year 2000 compliant.
At the request of the Administrative Agent or any Lender, the
Credit Parties shall provide information to the Administrative
Agent concerning the Credit Parties' Year 2000 compliance.
ARTICLE IX
COVENANTS RELATING TO THE OFFER
SECTION 9.1 Covenants Relating to the Offer.
Until all of the Obligations (other than any Obligations
under any Hedging Agreement) have been paid and satisfied in full
and the Aggregate Revolving Credit Commitment has expired or been
terminated, unless consent has been obtained in the manner
provided for in Section 13.11, the Borrowers will ensure the
Acquisition Sub will:
(a) have issued the Press Release within seven (7) days of
January 18, 1999;
(b) comply in all material respects with the United Kingdom
Financial Services Act of 1986 and the United Kingdom Companies
Act 1985 and all other applicable United Kingdom laws and
regulations relevant in the context of the Offer, including
(subject to any waivers by the Panel) the City Code (and shall
not take any action which, under the City Code would or might
lead to any variation or extension of the Offer being required by
the Panel without the consent of the Administrative Agent);
(c) provide the Administrative Agent with:
(i) copies of all material documents, notices or
announcements, received or sent by it in relation to the
Offer; and
(ii) such information regarding the progress of the
Offer as the Administrative Agent reasonably requests
(including, without limitation, details of the number of
acceptances and the number of Shares acquired by the
Borrowers);
(d) unless required to do so by Applicable Law or under the
City Code (and if so required, having notified the Administrative
Agent as soon as possible after becoming aware of the
requirement), not issue any press release or make any statement
during the course of the Offer which contains any information or
statement concerning this Agreement or any other Loan Document or
the Lenders without first obtaining the prior approval of the
information or statement from the Administrative Agent, such
consent not to be unreasonably withheld or delayed and in any
event taking into account the timing constraints of the City
Code;
(e) refrain from purchasing any Shares if to do so would
obligate the Borrowers to make a mandatory offer under Rule 9 of
the City Code;
(f) promptly after becoming the beneficial owner of 90% of
the Shares give notices required under Section 429 of the
Companies Act 1985 with respect to the Shares;
(g) subject to the Acquisition Sub's obligations set out in
Note 2 to Rule 13 of the City Code, not, without the prior
written consent of the Administrative Agent (which shall take
into account the timing constraints of the City Code on the
Borrowers), waive, revise, vary or amend any of the material
terms of, or conditions to, the Offer, including any condition
relating to the level of acceptances;
(h) beneficially own all Shares free from all Liens and
other encumbrances, claims or competing interests whatsoever; and
(i) as soon as practicable after the Unconditional Date
but, in any event, prior to the date which is 90 days after the
Unconditional Date cause the Target to be re-registered as a
private limited company.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations (other than any Obligations
under any Hedging Agreement) have been paid and satisfied in full
and the 364 Day Facility Commitment and the Five Year Facility
Commitment have expired or been terminated (or, with respect to
Section 10.4, until the date referred to in the first paragraph
thereof, if earlier) unless consent has been obtained in the
manner set forth in Section 13.11:
SECTION 10.1 Limitations on Debt and Guaranty Obligations.
Subject to Section 10.11, the Credit Parties will not
create, incur, assume or suffer to exist any Debt, including
Guaranty Obligations, which is senior in right of payment to the
Obligations, or any other Debt if at the time of, or immediately
upon giving effect to, the creation, incurrence, assumption or
existence of such Debt, a Default or an Event of Default exists
or would exist (it being understood and agreed that the fact that
Debt is secured by a Lien permitted by Section 10.3 shall not
cause such Debt to be considered senior to the Obligations for
purposes of this Section 10.1), and the Credit Parties will not
permit any of their Subsidiaries to create incur, assume or
suffer to exist any Debt, except:
(a) Debt of the Company and its Subsidiaries existing as of
the Closing Date and described in Schedule 6.1(p);
(b) Debt of any Subsidiary owing to a Credit Party or any
other Subsidiary;
(c) Debt of any Subsidiary outstanding at the time such
Subsidiary becomes a Subsidiary of a Credit Party and not
incurred in contemplation thereof, as long as the Debt remains
the sole obligation of such Subsidiary and as long as the
outstanding principal amount of such Debt is not voluntarily
increased by such Subsidiary after the date such Subsidiary
becomes a Subsidiary of a Credit Party;
(d) Debt of any Subsidiary secured by a Lien permitted by
Section 10.3, provided that such Debt does not exceed the value
of the assets or property subject to such permitted Lien;
(e) Debt constituting the renewal or refinancing of any
Debt permitted by subsections (a), (b) or (c) above as long as
the aggregate principal amount thereof is not increased;
(f) Debt of any Subsidiary not otherwise permitted by this
Section 10.1 as long as the aggregate of all such Debt for all
Subsidiaries at any time outstanding does not exceed ten percent
(10%) of Consolidated Net Tangible Assets;
(g) Debt of any Subsidiary of the Company, incurred in
connection with the construction of the Tissue Mill; provided
that (i) such Debt when incurred shall not exceed the cost of
construction of such asset (including the cost of acquisition of
related real property); (ii) no such Debt shall be refinanced for
a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing; and (iii) the total
amount of all such Debt shall not exceed $100,000,000 at any time
outstanding; and
(h) The UK Loan Notes and the Company's Guaranty Obligation
related thereto, provided that the aggregate principal Dollar
Equivalent amount thereof at the time of issuance shall not
exceed 10% of the aggregate purchase price paid by the
Acquisition Sub for the Shares.
(i) Notwithstanding anything in this Section 10.1 to the
contrary, the aggregate principal amount of the Prior Bank
Commitments shall not be increased.
SECTION 10.2 Financial Covenants.
(a) Ratio of EBITDA to Consolidated Fixed Charges. As of
the end of each fiscal quarter, commencing with the end of the
first fiscal quarter ending after the Closing Date, the Company
will not permit the ratio of EBITDA for the fiscal quarter just
ended and the immediately preceding three fiscal quarters to
Consolidated Fixed Charges for the fiscal quarter just ended and
the immediately preceding three fiscal quarters to be less than
2.25 to 1.00.
(b) Ratio of Funded Debt to Consolidated Total Capital. As
of the end of each fiscal quarter, commencing with the end of the
first fiscal quarter ending after the Closing Date, the Company
will not permit the ratio of Funded Debt to Consolidated Total
Capital to be greater than .60 to 1.00.
SECTION 10.3 Limitations on Liens.
Subject to Section 10.11, the Credit Parties will not
create, incur, assume or suffer to exist, or permit any of their
Subsidiaries to create, incur, assume or suffer to exist, any
Lien on, or with respect to, any of their assets or properties
(including without limitation shares of capital stock or other
ownership interests), real or personal, whether now owned or
hereafter acquired, except:
(a) Liens existing on the Closing Date and securing amounts
not in excess of $10,000,000 in aggregate principal amount;
(b) Liens for taxes, assessments and other governmental
charges or levies not yet due or as to which the period of grace,
if any, related thereto has not expired or which are being
contested in good faith and by appropriate proceedings if
adequate reserves are maintained to the extent required by GAAP;
(c) The claims of materialmen, mechanics, carriers,
warehousemen, processors or landlords for labor, materials,
supplies or rentals incurred in the ordinary course of business,
(i) which are not overdue for a period of more than thirty (30)
days or (ii) which are being contested in good faith and by
appropriate proceedings if adequate reserves are maintained to
the extent required by GAAP;
(d) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure
payment of, obligations under workers' compensation, unemployment
insurance or similar legislation or obligations under customer
service contracts;
(e) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on
the use of real property, which in the aggregate are not
substantial in amount and which do not, in any case, detract from
the value of any material parcel of real property or impair the
use thereof in the ordinary conduct of business;
(f) Liens in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lenders;
(g) Liens on the property or assets of any Subsidiary
existing at the time such Subsidiary becomes a Subsidiary of a
Credit Party and not incurred in contemplation thereof, as long
as the outstanding principal amount of the Debt secured thereby
is not voluntarily increased by such Subsidiary after the date
such Subsidiary becomes a Subsidiary of such Credit Party;
(h) Liens on the property or assets of the Credit Parties
or any Subsidiary securing Debt which is permitted under Section
10.1 and which is incurred to finance the acquisition of such
property or assets, provided that (i) each such Lien shall be
created substantially simultaneously with the acquisition of the
related property or assets; (ii) each such Lien does not at any
time encumber any property other than the related property or
assets financed by such Debt; (iii) the principal amount of Debt
secured by each such Lien is not increased; and (iv) the
principal amount of Debt secured by each such Lien shall at no
time exceed 100% of the original purchase price of such related
property or assets at the time acquired;
(i) Liens not otherwise permitted by this Section 10.3 as
long as all such Liens do not encumber property and assets which
constitute more than five percent (5%) of Consolidated Net
Tangible Assets; and
(j) Any Lien not otherwise permitted by this Section 10.3
as long as, prior to or contemporaneously with the creation,
incurrence, assumption or existence of such Lien, each Credit
Party shall have taken all steps necessary to cause the
Obligations to be secured by such Lien, equally and ratably based
on amount of indebtedness with the other Debt and obligations
secured thereby, to the satisfaction of the Administrative Agent
and each of the Lenders.
SECTION 10.4 Limitations on Loans, Advances, Investments
and Acquisitions.
Until all of the Obligations (other than any Obligations
under any Hedging Agreement) relating to the 364 Day Facility or,
if the Company has exercised the Conversion Option, the Term
Loan, have been paid and satisfied in full and the 364 Day
Facility Commitment has expired or been terminated, unless
consent has been obtained in the manner set forth in Section
13.11 hereof, the Credit Parties will not purchase, own, invest
in or otherwise acquire, directly or indirectly, or permit their
Subsidiaries to purchase, own, invest in or otherwise acquire,
directly or indirectly, any capital stock (other than capital
stock of the Credit Parties), interests in any partnership,
limited liability company or joint venture (including without
limitation the creation or capitalization of any Subsidiary),
evidence of Debt or other obligation or security, substantially
all or a portion of the business or assets of any other Person or
any other investment or interest whatsoever in any other Person,
or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or
by delivery of property in, any Person, or enter into, directly
or indirectly, any commitment or option in respect of the
foregoing (collectively, "Investments") except:
(a) Investments in (i) direct obligations of or obligations
guaranteed by the United States government or United States
Government sponsored agencies maturing within one year after the
date of acquisition, (ii) repurchase agreements with a term of
not more than 91 days collateralized by the investments in (i)
above, (iii) certificates of deposit, banker's acceptances, and
other deposit accounts issued or guaranteed by a bank whose
credit is satisfactory to the Administrative Agent and maturing
within one year after the date of acquisition, (iv) commercial
paper rated A-1 or the equivalent thereof by S& P or P-1 or the
equivalent thereof by Moody's and in either case maturing within
six months after the date of acquisition, (v) corporate debt
obligations rated at least A or the equivalent thereof by S&P or
Moody's and in each case maturing within six months after the
date of acquisition, and/or (vi) money market funds complying
with the risk limiting conditions of Rule 2a-7 (or any successor
rule) of the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended;
(b) Investments by the Credit Parties or any Subsidiary in
the form of acquisitions of all or substantially all of the
business or a line of business (whether by the acquisition of
capital stock, assets or any combination thereof) of any other
Person so long as (i) a Responsible Officer certifies to the
Administrative Agent and the Required Lenders that no Default or
Event of Default has occurred and is continuing or would result
from the closing of such acquisition, such certification to
include, for any acquisition involving a purchase price in excess
of $25,000,000, either individually or in an series of related
transactions, a financial condition certificate in the form
required under Section 5.2(e)(ii)(A) and (ii) the business or
line of business acquired is in substantially the same fields as
the businesses conducted by the Credit Parties on the Closing
Date and in lines of business reasonably related thereto or as
otherwise permitted pursuant to the terms of this Agreement;
(c) Repurchases or redemptions of (i) the capital stock or
other ownership interests of any of the Credit Parties or any of
their Subsidiaries not to exceed $70,000,000 in the aggregate or
(ii) Debt which ranks pari passu with the Obligations, pursuant
to a plan approved by the Board of Directors of the Credit Party
or such Subsidiary, as applicable;
(d) The acquisition of the Target in accordance with the
terms of the Offer; and
(e) Investments not otherwise permitted under this Section
10.4; provided that such Investments may not exceed $75,000,000
in the aggregate.
SECTION 10.5 Limitations on Mergers and Liquidation.
None of the Credit Parties will merge, consolidate or enter
into any similar combination with any other Person or liquidate,
wind-up or dissolve itself (or suffer any liquidation or
dissolution), or permit any of its Subsidiaries to merge,
consolidate or enter into any similar combination with any other
Person or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), except:
(a) Any Credit Party or a Subsidiary may merge with another
Person, provided that (i) such Person is organized under the law
of the United States or one of its states, (ii) such Credit Party
or the Subsidiary, as the case may be, is the corporation
surviving such merger, and (iii) immediately prior to and after
giving effect to such merger, no Default or Event of Default
exists or would exist;
(b) Any Wholly-Owned Subsidiary of a Credit Party may merge
into a Credit Party or any other Wholly-Owned Subsidiary of a
Credit Party; and
(c) Any Wholly-Owned Subsidiary of a Credit Party may
liquidate, wind-up or dissolve itself into a Credit Party or any
other Wholly-Owned Subsidiary of a Credit Party.
SECTION 10.6 Limitations on Sale or Transfer of Assets.
The Credit Parties will not convey, sell, lease, assign,
transfer or otherwise dispose of, or permit any of their
Subsidiaries to convey, sell, lease, assign, transfer or
otherwise dispose of:
(a) All or substantially all of the property, business or
assets of the Company and its Subsidiaries on a Consolidated
basis;
(b) Any of their property, business or assets if such
transaction would reasonably be expected to have a Material
Adverse Effect; or
(c) Any of their property, business or assets if
immediately prior to or after giving effect to such transaction a
Default or an Event of Default exists or would exist;
provided that the Company may convey, sell, lease, assign,
transfer or otherwise dispose of the Timberlands without regard
to the foregoing restrictions in this Section 10.6.
SECTION 10.7 Prohibitions on Limitations on Dividends and
Distributions.
The Credit Parties will not permit any Subsidiary to agree
to, incur, assume or suffer to exist any restriction, limitation
or other encumbrance (by covenant or otherwise) on the ability of
such Subsidiary to make any payment to a Credit Party or any of
its Subsidiaries (in the form of dividends, intercompany advances
or otherwise), except:
(a) Restrictions and limitations existing on the Closing
Date and described on Schedule 10.7;
(b) Restrictions and limitations applicable to a Subsidiary
existing at the time such Subsidiary becomes a Subsidiary of a
Credit Party and not incurred in contemplation thereof, as long
as no such restriction or limitation is made more restrictive
after the date such Subsidiary becomes a Subsidiary of such
Credit Party; and
(c) Other restrictions and limitations that are not
material either individually or in the aggregate.
SECTION 10.8 Transactions with Affiliates.
The Credit Parties will not, and will not permit any of
their Subsidiaries to, directly or indirectly (i) make any loan
or advance to, or purchase or assume any note or other obligation
to or form, any of its officers, directors, shareholders or
Affiliates, or to or from any member of the immediate family of
any of its officers, directors, shareholders or Affiliates, other
than (1) loans or advances to customers of the Credit Parties and
their Subsidiaries in the ordinary course of business which are
arm's length, and (2) any other loan or advance or assumption
that would not cause the aggregate amount of all such loans and
advances and assumed notes and advances to exceed $5,000,000,
(ii) enter into, or be a party to, any subcontract of any
operations or other transaction with any of its Affiliates,
except pursuant to the reasonable requirements of its business
and upon fair and reasonable terms that are no less favorable to
it than it would obtain in a comparable arm's length transaction
with a Person not its Affiliate and except for transactions which
are not material either individually or in the aggregate.
Nothing contained in this Section 10.8 shall prohibit the Credit
Parties or any of their Subsidiaries that have obtained an
ownership interest in a customer in connection with a loan or
credit workout to provide non-standard payment or other terms to
such customer or otherwise to do business with such customer in
the ordinary course of business.
SECTION 10.9 Certain Accounting Changes.
The Credit Parties will not change their Fiscal Year ends in
order to avoid a Default or an Event of Default or if a Material
Adverse Effect would result therefrom, and make any change in
their accounting treatment and reporting practices except as
required by GAAP.
SECTION 10.10 Amendments; Payments and Prepayments of
Material Debt and Subordinated Debt.
At any time after the occurrence of a Default or an Event of
Default and during the continuance thereof, the Credit Parties
will not, and will not permit any of their Subsidiaries to, amend
or modify (or permit the modification or amendment of) any of the
terms or provisions of any Subordinated Debt, or cancel or
forgive, make any voluntary or optional payment or prepayment on,
or redeem or acquire for value (including without limitation by
way of depositing with any trustee with respect thereto money or
securities before due for the purpose of payment when due) any
Subordinated Debt.
SECTION 10.11 Restrictions with Respect to the UK Sub
Notwithstanding anything herein to the contrary, until the
Clean-Up Period has ended, the UK Sub and the Acquisition Sub
shall not (a) carry on any business other than as the holding
company of the Target, (b) own any assets other than the Shares
and credit balances in bank accounts, (c) incur any Debt except
(i) in connection with any Guaranty Agreement executed and
delivered by the UK Sub to the Administrative Agent pursuant to
Section 2.10 and (ii) the UK Loan Notes, (d) create, incur,
assume or suffer to exist, any Lien on or with respect to any of
its assets or properties, except Liens in favor of the
Administrative Agent for the benefit of the Administrative Agent
and the Lenders, (e) make any Investments except the acquisition
of the Target in accordance with the terms of the Offer, (f)
merge, consolidate or enter into any similar combination with any
other Person or liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution), (g) convey, lease, sell, assign,
transfer or otherwise dispose of any of its property, business or
assets, unless such transfer or disposition is to the Company,
(h) incur, assume or suffer to exist any restriction, limitation
or other encumbrance (by covenant or otherwise) on its ability to
make any payment to the Company (in the form of dividends,
intercompany advances or otherwise), (i) make any loan or advance
to or purchase or assume any note or other obligation from any of
its officers, directors, shareholders or Affiliates or to or from
any member of the immediate family of any of the foregoing.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default.
Each of the following shall constitute an Event of Default,
whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule
or regulation of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and
Reimbursement Obligation. Any Borrower shall default in any
payment of principal of any Loan, Note or Reimbursement
Obligation when and as due (whether at maturity, by reason of
acceleration or otherwise).
(b) Other Payment Default. Any Borrower shall default in
the payment when and as due (whether at maturity, by reason of
acceleration or otherwise) of any interest, fees or other amounts
owing on any Loan, Note or Reimbursement Obligation or the
payment of any other Obligation (other than any Obligation under
any Hedging Agreement), and such default shall continue
unremedied for three (3) Business Days.
(c) Misrepresentation. Any representation, warranty or
statement made or deemed to be made by any Credit Party or any of
their Subsidiaries, if applicable, under this Agreement, any Loan
Document or any amendment hereto or thereto or in any certificate
delivered to the Administrative Agent or to any Lender pursuant
hereto and thereto, shall at any time prove to have been
incorrect or misleading in any material respect when made or
deemed made.
(d) Default in Performance of Certain Covenants. Any of
the Credit Parties shall default in the performance or observance
of any covenant or agreement contained in Article IX or Sections
10.2, 10.3, 10.4, 10.5, 10.6 or 10.11 of this Agreement. Any of
the Credit Parties shall default in the performance or observance
of any covenant or agreement contained in Article X, other than
those contained in Sections 10.2, 10.3, 10.4, 10.5, 10.6 or
10.11, and such default shall continue for a period of fifteen
(15) days after written notice thereof has been given to the
Borrowers by the Administrative Agent.
(e) Default in Performance of Other Covenants and
Conditions. Any of the Credit Parties or any Subsidiary thereof,
if applicable, shall default in the performance or observance of
any term, covenant, condition or agreement contained in this
Agreement (other than as specifically provided for otherwise in
this Section 11.1) or any other Loan Document and such default
shall continue for a period of thirty (30) days after written
notice thereof has been given to the Borrowers by the
Administrative Agent.
(f) Hedging Agreement. Any termination payments in an
amount greater than $5,000,000 shall be due by any Credit Party
under any Hedging Agreement and such amount is not paid within
thirty (30) Business Days of the due date thereof.
(g) Debt Cross-Default. Any of the Credit Parties or any
of their Subsidiaries shall (i) default in the payment of (A) the
UK Loan Notes or (B) any Debt (other than the Notes or any
Reimbursement Obligation) the aggregate outstanding amount of
which Debt is in excess of $10,000,000, beyond the period of
grace if any, provided in the instrument or agreement under which
such Debt was created, or (ii) default in the observance or
performance of any other agreement or condition relating to (A)
the UK Loan Notes or (B) any Debt (other than the Notes or any
Reimbursement Obligation), the aggregate outstanding amount of
which Debt is in excess of $10,000,000 or contained in any
instrument or agreement evidencing, securing or relating thereto
or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to
permit the holder or holders of such Debt (or a trustee or agent
on behalf of such holder or holders) to cause, with the giving of
notice if required, any such Debt to become due prior to its
stated maturity (any such notice having been given and any
applicable grace period having expired).
(h) Change in Control. Any person or group of persons
(within the meaning of Section 13(d) of the Securities Exchange
Act of 1934, as amended) shall obtain ownership or control in one
or more series of transactions of more than thirty-three (33%) of
the common stock or thirty-three (33%) of the voting power of the
Company entitled to vote in the election of members of the board
of directors of the Company or there shall have occurred under
any indenture or other instrument evidencing any Debt in excess
of $10,000,000 any "change in control" (as defined in such
indenture or other evidence of debt) obligating the Company to
repurchase, redeem or repay all or any part of the debt or
capital stock provided for therein (any such event, a "Change in
Control") other than in connection with an acquisition permitted
pursuant to Section 10.4(b).
(i) Voluntary Bankruptcy Proceeding. Any Credit Party or
any Material Subsidiary thereof shall (i) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in
effect), (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for
adjustment of debts, (iii) consent to or fail to contest in a
timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of
itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as
they become due, (vi) make a general assignment for the benefit
of creditors, or (vii) take any corporate action for the purpose
of authorizing any of the foregoing.
(j) Involuntary Bankruptcy Proceeding. A case or other
proceeding shall be commenced against any Credit Party or any
Material Subsidiary thereof in any court of competent
jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic
or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition for adjustment of debts, or (ii) the
appointment of a trustee, receiver, custodian, liquidator or the
like for any Credit Party or any Material Subsidiary thereof or
for all or any substantial part of their respective assets,
domestic or foreign, and such case or proceeding shall continue
without dismissal or stay for a period of sixty (60) consecutive
days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief
under such federal bankruptcy laws) shall be entered.
(k) Enforcement. A creditor or an encumbrancer attaches or
takes possession of, or a distress, execution, sequestration or
other process is levied or enforced upon or sued out against, any
of the undertakings and assets of any Credit Party or any
Material Subsidiary thereof and (if capable of discharge) such
possession is not terminated or such attachment or process is not
satisfied, removed or discharge within seven (7) days
(l) Similar Events. Any event occurs or any proceeding is
taken with respect to any Credit Party or any Material Subsidiary
in any jurisdiction to which it is subject which has an effect
equivalent or similar to any of the events set forth in Sections
11.1(i), (j) or (k).
(m) Judgment. A judgment or order for the payment of money
which causes the aggregate amount of all such judgments to exceed
$5,000,000 in any Fiscal Year shall be entered against any Credit
Party or any Subsidiary thereof by any court and such judgment or
order shall continue without discharge or stay for a period of
thirty (30) days.
(n) Guaranty Obligation. At any time after the execution
and delivery thereof, the Guaranty Obligation or any provision
thereof shall cease to be in full force or effect as to any
Guarantor, or any Guarantor or any Person acting by or on behalf
of such Guarantor shall deny or disaffirm such Guarantor's
obligations under the Guaranty Obligation or any Guarantor shall
default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed
pursuant to the Guaranty Obligation.
(o) ERISA. An event described in each clause (a), (b) and
(c) below shall have occurred: (a) any Pension Plan shall fail
to satisfy the minimum funding standard required for any plan
year or part thereof under Section 412 of the Code or Section 302
of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the
Code or Section 303 or 304 of ERISA, a Reportable Event shall
have occurred, a contributing sponsor (as defined in Section
4001(a)(13) of ERISA) of a Pension Plan subject to Title IV of
ERISA shall be subject to the advance reporting requirement of
PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall
be reasonably expected to occur with respect to such Pension Plan
within the following thirty (30) days, any Pension Plan which is
subject to Title IV of ERISA shall have had or is likely to have
a trustee appointed to administer such Pension Plan, any Pension
Plan which is subject to Title IV of ERISA is, shall have been or
is likely to be terminated or to be the subject of termination
proceedings under ERISA, any Pension Plan shall have an Unfunded
Current Liability, a contribution required to be made with
respect to a Pension Plan or a Foreign Pension Plan has not been
timely made, the Credit Parties or any of their Subsidiaries or
any ERISA Affiliate has incurred or is likely to incur any
liability to or on account of a Pension Plan under Section 409,
502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on
account of a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of
the Code, or the Credit Parties or any of their Subsidiaries has
incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1)
of ERISA) that provide benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA)
or Pension Plans or Foreign Pension Plans; (b) there shall result
from any such event or events the imposition of a lien, the
granting of a security interest or a liability or a material risk
of such a lien being imposed, such security interest being
granted or such liability being incurred, and (c) such lien,
security interest or liability, individually, and/or in the
aggregate, has had, or could reasonably be expected to have, a
Material Adverse Effect.
SECTION 11.2 Remedies.
Upon the occurrence of an Event of Default, with the consent
of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent
shall, by notice to the Credit Parties:
(a) Acceleration; Termination of Facilities. Declare the
principal of and interest on the Loans, the Notes and the
Reimbursement Obligations at the time outstanding, and all other
amounts owed to the Lenders and to the Administrative Agent under
this Agreement or any of the other Loan Documents (other than any
Hedging Agreement) (including, without limitation, all L/C
Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents
required thereunder) and all other Obligations (other than
Obligations owing under any Hedging Agreement), to be forthwith
due and payable, whereupon the same shall immediately become due
and payable without presentment, demand, protest or other notice
of any kind, all of which are expressly waived, anything in this
Agreement or the other Loan Documents to the contrary
notwithstanding, and terminate the Credit Facility and any right
of the Borrowers to request borrowings or Letters of Credit
thereunder; provided, that upon the occurrence of an Event of
Default specified in Section 11.1(i), (j), (k) or (l) with
respect to the Credit Parties, the Credit Facility shall be
automatically terminated and all Obligations (other than
obligations owing under any Hedging Agreement) shall
automatically become due and payable.
(b) Letters of Credit. With respect to all Letters of
Credit with respect to which presentment for honor shall not have
occurred at the time of an acceleration pursuant to the preceding
paragraph, require the Borrowers at such time to deposit or cause
to be deposited in a cash collateral account opened by the
Administrative Agent an amount equal to the aggregate then
undrawn and unexpired amount of such Letters of Credit. Amounts
held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such
Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay the other Obligations. After all
such Letters of Credit shall have expired or been fully drawn
upon, the Reimbursement Obligation shall have been satisfied and
all other Obligations shall have been paid in full, the balance,
if any, in such cash collateral account shall be promptly
returned to the Borrowers.
(c) Rights of Collection. Exercise on behalf of the
Lenders all of its other rights and remedies under this
Agreement, the other Loan Documents and Applicable Law, in order
to satisfy all of the Obligations.
SECTION 11.3 Remedies During the Certain Funds Period.
Notwithstanding anything to the contrary in the foregoing
Sections 11.1 and 11.2 and subject to the following Section 11.4,
during the Certain Funds Period, unless an Event of Default has
occurred and is continuing under Section 11.1(b); Section
11.1(c), with respect to breaches of representations and
warranties contained in Section 6.1(a), (b), (c), (d) or (s)
(with respect to a Bankruptcy Event as defined for the purposes
of Section 5.3) only; Section 11.1(i), Section 11.1(j), or
Section 11.1(l) with respect to any Credit Party, the Target or
any of their respective Material Subsidiaries; or Section 11.1(k)
with respect to any Credit Party and their Material Subsidiaries
(other than the Target and its Material Subsidiaries), neither
the Administrative Agent nor any Lender shall be entitled to (i)
exercise any rights specified in Section 11.2(a) or (ii) exercise
any rights of rescission or other remedy.
SECTION 11.4 Clean-Up Period.
Notwithstanding anything to the contrary in the foregoing
Sections 11.1 and 11.2, for a period of two months following the
Unconditional Date (the "Clean-Up Period"), the occurrence of any
of the events with respect to the Target and its Subsidiaries set
forth in (i) Section 11.1(c) with respect to Sections 6.1(f),
(m), (o), (r), (v) and (w); (ii) Section 11.1(d) with respect to
Article X and (iii) Section 11.1(g) with respect to debt cross-
defaults caused as a direct result of the change in control of
the Target due to the consummation of the Offer (each such event
a "Clean-Up Event") shall not constitute a Default or an Event of
Default under this Agreement or any other Loan Document; provided
that:
(a) the Borrowers agree to notify the Administrative Agent
promptly upon learning of any such Clean-Up Event;
(b) such Clean-Up Event is in respect of events or
circumstances existing on the Unconditional Date;
(c) such Clean-Up Event would not have a Material Adverse
Effect;
(d) such Clean-Up Event is not capable of immediate remedy;
and
(e) such Clean-Up Event is capable of being remedied during
the Clean-Up Period.
If a Clean-Up Event has not been remedied by the end of the
Clean-Up Period, such event shall constitute an Event of Default.
SECTION 11.5 Rights and Remedies Cumulative; Non-Waiver;
etc.
The enumeration of the rights and remedies of the
Administrative Agent and the Lenders set forth in this Agreement
is not intended to be exhaustive and the exercise by the
Administrative Agent and the Lenders of any right or remedy shall
not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other
right or remedy given hereunder or under the Loan Documents or
that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of the
Administrative Agent or any Lender in exercising any right, power
or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any
other right, power or privilege or shall be construed to be a
waiver of any Event of Default. No course of dealing between the
Credit Parties, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any of the
other Loan Documents or to constitute a waiver of any Event of
Default.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment.
Each of the Lenders hereby irrevocably designates and
appoints First Union as Administrative Agent of such Lender under
this Agreement and the other Loan Documents for the term hereof
and each such Lender irrevocably authorizes First Union as
Administrative Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as
are expressly delegated to the Administrative Agent by the terms
of this Agreement and such other Loan Documents, together with
such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this
Agreement or such other Loan Documents, the Administrative Agent
shall not have any duties or responsibilities, except those
expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or the other Loan Documents or
otherwise exist against the Administrative Agent. Any reference
to the Administrative Agent in this Article XIII shall be deemed
to refer to the Administrative Agent solely in its capacity as
Administrative Agent and not in its capacity as a Lender.
SECTION 12.2 Delegation of Duties.
The Administrative Agent may execute any of its respective
duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact
selected by the Administrative Agent with reasonable care.
SECTION 12.3 Exculpatory Provisions.
Neither the Administrative Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection
with this Agreement or the other Loan Documents (except for
actions occasioned solely by its or such Person's own gross
negligence or willful misconduct), or (b) responsible in any
manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Borrower or any of its
Subsidiaries or any officer thereof contained in this Agreement
or the other Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or
received by the Administrative Agent under or in connection with,
this Agreement or the other Loan Documents or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the other Loan Documents or for
any failure of any Borrower or any of its Subsidiaries to perform
its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of any
Borrower or any of its Subsidiaries.
SECTION 12.4 Reliance by the Administrative Agent.
The Administrative Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected by
the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes
unless such Note shall have been transferred in accordance with
Section 13.10 hereof. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this
Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders (or,
when expressly required hereby or by the relevant other Loan
Document, all the Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action except for
its own gross negligence or willful misconduct. The
Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and
the Notes in accordance with a request of the Required Lenders
(or, when expressly required hereby, all the Lenders), and such
request and any action taken or failure to act pursuant thereto
shall be binding upon all the Lenders and all future holders of
the Notes.
SECTION 12.5 Notice of Default.
The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless it has received notice from a Lender or
the Borrowers referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Administrative Agent
receives such a notice, it shall promptly give notice thereof to
the Lenders. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless
and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders, except
to the extent that other provisions of this Agreement expressly
require that any such action be taken or not be taken only with
the consent and authorization or the request of the Lenders or
Required Lenders, as applicable.
SECTION 12.6 Non-Reliance on the Administrative Agent and
Other Lenders.
Each Lender expressly acknowledges that neither the
Administrative Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact, Subsidiaries or
Affiliates has made any representations or warranties to it and
that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrowers or any of
their respective Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that
it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of
the Borrowers and their respective Subsidiaries and made its own
decision to make its Loans and issue or participate in Letters of
Credit hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it
deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of
the Borrowers and their respective Subsidiaries. Except for
notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent hereunder or
by the other Loan Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of
any Borrower or any of its Subsidiaries which may come into the
possession of the Administrative Agent or any of its respective
officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates. The Administrative Agent shall
forward to the Lenders all documents, notices or announcements it
receives from the Borrowers pursuant to this Agreement.
SECTION 12.7 Indemnification.
The Lenders agree to indemnify the Administrative Agent in
its capacity as such and (to the extent not reimbursed by the
Borrowers and without limiting the obligation of the Borrowers to
do so), ratably according to the respective amounts of their
Revolving Credit Commitment Percentages from and against any and
all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes or any
Reimbursement Obligation) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection
with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent they result
from the Administrative Agent's bad faith, gross negligence or
willful misconduct. The agreements in this Section 12.7 shall
survive the payment of the Notes, any Reimbursement Obligation
and all other amounts payable hereunder and the termination of
this Agreement.
SECTION 12.8 The Administrative Agent in Its Individual
Capacity.
The Administrative Agent and its respective Subsidiaries and
Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrowers as though the
Administrative Agent were not an Administrative Agent hereunder.
With respect to any Loans made or renewed by it and any Note
issued to it and with respect to any Letter of Credit issued by
it or participated in by it, the Administrative Agent shall have
the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though
it were not an Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its
individual capacity.
SECTION 12.9 Resignation of the Administrative Agent;
Successor Administrative Agent.
Subject to the appointment and acceptance of a successor as
provided below, the Administrative Agent may resign at any time
by giving notice thereof to the Lenders and the Credit Parties.
Upon any such resignation, the Required Lenders shall have the
right, subject to the approval of the Credit Parties (so long as
no Default or Event of Default has occurred and is continuing),
to appoint a successor Administrative Agent, which successor
shall have minimum capital and surplus of at least $500,000,000.
If no successor Administrative Agent shall have been so appointed
by the Required Lenders, been approved (so long as no Default or
Event of Default has occurred and is continuing) by the Credit
Parties or have accepted such appointment within thirty (30) days
after the Administrative Agent's giving of notice of resignation,
then the Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent reasonably acceptable to
the Credit Parties (so long as no Default or Event of Default has
occurred and is continuing), which successor shall have minimum
capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder
by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested
with all rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations hereunder. After
any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 12.9 shall
continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as
Administrative Agent.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided
in this Agreement, all notices and communications hereunder shall
be in writing, or by telephone subsequently confirmed in writing.
Any notice shall be effective if delivered by hand delivery or
sent via telecopy, recognized overnight courier service or
certified mail, return receipt requested, and shall be presumed
to be received by a party hereto (i) on the date of delivery if
delivered by hand or sent by telecopy, (ii) on the next Business
Day if sent by recognized overnight courier service and (iii) on
the third Business Day following the date sent by certified mail,
return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent
will be deemed to be the controlling and proper notice in the
event of a discrepancy with or failure to receive a confirming
written notice.
(b) Addresses for Notices. Notices to any party shall be
sent to it at the following addresses, or any other address as to
which all the other parties are notified in writing.
If to the Company:
Chesapeake Corporation
1021 East Cary Street
Richmond, VA 23219
Attention: William T. Tolley
Telephone No.: 804 697-1157
Telecopy No.: 804 697-1134
with a copy to:
Chesapeake Corporation
1021 East Cary Street
Richmond, VA 23219
Attention: J.P. Causey Jr.
Telephone No.: 804 697-1166
Telecopy No.: 804 697-1134
If to the UK Sub:
Chesapeake UK Holdings Limited
1021 East Cary Street
Richmond, VA 23219
Attention: William T. Tolley
Telephone No.: 804 697-1157
Telecopy No.: 804 697-1134
with a copy to:
Chesapeake Corporation
1021 East Cary Street
Richmond, VA 23219
Attention: J.P. Causey Jr.
Telephone No.: 804 697-1166
Telecopy No.: 804 697-1134
If to First Union as First Union National
Bank
Administrative Agent:
One First Union Center, DC 4
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
With copies to:First Union National Bank
1345 Chestnut Street, PA4830
Philadelphia, Pennsylvania 19107-7618
Attention: Syndication Agency
Services
Telephone No.: (215) 973-6621
Telecopy No.: (215) 973-1887
If to any Lender:To the Address set
forth on Schedule 1 hereto
(c) Administrative Agent's Office. The Administrative
Agent hereby designates its office located at the address set
forth above, or any subsequent office which shall have been
specified for such purpose by written notice to the Borrowers and
the Lenders, as the Administrative Agent's Office referred to
herein, to which payments due are to be made and at which Loans
will be disbursed.
SECTION 13.2 Expenses; Indemnity.
The Borrowers jointly and severally agree to (a) pay all
reasonable out-of-pocket expenses of the Administrative Agent in
connection with (i) the preparation, execution and delivery of
this Agreement and each other Loan Document, whenever the same
shall be executed and delivered, including without limitation the
reasonable out-of-pocket syndication and due diligence expenses
and reasonable fees and disbursements of counsel for the
Administrative Agent and (ii) the preparation, execution and
delivery of any waiver, amendment or consent by the
Administrative Agent, the Arranger or the Lenders relating to
this Agreement or any other Loan Document, including without
limitation reasonable fees and disbursements of counsel for the
Administrative Agent, (b) pay all reasonable out-of-pocket
expenses of the Administrative Agent actually incurred in
connection with the administration of the Credit Facility, (c)
pay all reasonable out-of-pocket expenses of the Administrative
Agent, the Arranger and each Lender actually incurred in
connection with the enforcement of any rights and remedies of the
Administrative Agent, the Arranger and the Lenders under the
Credit Facility, including, to the extent reasonable under the
circumstances, consulting with accountants, attorneys and other
Persons concerning the nature, scope or value of any right or
remedy of the Administrative Agent, the Arranger or any Lender
hereunder or under any other Loan Document or any factual matters
in connection therewith, which expenses shall include without
limitation the reasonable fees and disbursements of such Persons,
and (d) defend, indemnify and hold harmless the Administrative
Agent, the Arranger and the Lenders, and their respective
parents, Subsidiaries, Affiliates, employees, agents, officers
and directors, from and against any losses, penalties, fines,
liabilities, settlements, damages, costs and expenses, suffered
by any such Person in connection with any claim, investigation,
litigation or other proceeding (whether or not the Administrative
Agent, the Arranger or any Lender is a party thereto) and the
prosecution and defense thereof, arising out of or in any way
connected with this Agreement, the Credit Facility, any other
Loan Document, the Loans, the Notes or the Offer or any
acquisition by the Borrowers or any Person acting in concert with
the Borrowers of any Shares or as a result of the breach of any
of the Borrowers' obligations hereunder or in connection with the
Offer, including without limitation reasonable attorney's fees
(including the allocated cost of internal counsel), consultant's
fees and settlement costs (but excluding any losses, penalties,
fines liabilities, settlements, damages, costs and expenses to
the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified (as finally determined
by a court of competent jurisdiction)).
SECTION 13.3 Set-off.
In addition to any rights now or hereafter granted under
Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during
the continuance thereof, the Lenders and any assignee or
participant of a Lender in accordance with Section 13.10 are
hereby authorized by the Credit Parties at any time or from time
to time, without notice to the Credit Parties or to any other
Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all deposits (general or
special, time or demand, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness at any time held
or owing by the Lenders or any Affiliates thereof, or any such
assignee or participant to or for the credit or the accounts of
the respective Borrowers against and on account of the
Obligations irrespective of whether or not (a) the Lenders shall
have made any demand under this Agreement or any of the other
Loan Documents or (b) the Administrative Agent shall have
declared any or all of the Obligations to be due and payable as
permitted by Section 11.2 and although such Obligations shall be
contingent or unmatured.
SECTION 13.4 Governing Law.
This Agreement, the Notes and the other Loan Documents,
unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accordance with the laws of the
Commonwealth of Virginia, without giving effect to the conflict
of law principles thereof.
SECTION 13.5 Consent to Jurisdiction.
Each of the parties hereto hereby irrevocably consents to
the personal jurisdiction of the state and federal courts located
in Virginia, in any action, claim or other proceeding arising out
of any dispute in connection with this Agreement, the Notes and
the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations.
Each of the parties hereto hereby irrevocably consents to the
service of a summons and complaint and other process in any
action, claim or proceeding brought by any other party hereto in
connection with this Agreement, the Notes or the other Loan
Documents, any rights or obligations hereunder or thereunder, or
the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 13.1.
Nothing in this Section 13.5 shall affect the right of any of the
parties hereto to serve legal process in any other manner
permitted by Applicable Law or affect the right of any of the
parties hereto to bring any action or proceeding against any
other party hereto or its properties in the courts of any other
jurisdictions.
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether
made before or after institution of any judicial proceeding, any
dispute, claim or controversy arising out of, connected with or
relating to the Notes or any other Loan Documents ("Disputes"),
between or among parties to the Notes or any other Loan Document
shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive
the right of that party to demand arbitration hereunder.
Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising
from Loan Documents executed in the future, or claims concerning
any aspect of the past, present or future relationships arising
out of or connected with the Loan Documents. Arbitration shall
be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association and Title 9 of the U.S. Code.
All arbitration hearings shall be conducted in Washington, D.C.
The expedited procedures set forth in Rule 51, et seq. of the
Arbitration Rules shall be applicable to claims of less than
$1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any
court having jurisdiction. Notwithstanding anything foregoing to
the contrary, any arbitration proceeding demanded hereunder shall
begin within ninety (90) days after such demand thereof and shall
be concluded within one hundred and twenty (120) days after such
demand. These time limitations may not be extended unless a
party hereto shows cause for extension and then such extension
shall not exceed a total of sixty (60) days. The panel from
which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of
general jurisdiction, state or federal, of the state where the
hearing will be conducted. The parties hereto do not waive any
applicable Federal or state substantive law except as provided
herein.
(b) Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE
ARRANGER, EACH LENDER AND EACH CREDIT PARTY HEREBY ACKNOWLEDGE
THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY
WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO
ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto and
the other Loan Documents preserve, without diminution, the
remedies that such Persons may employ or exercise freely, either
alone, in conjunction with or during a Dispute. Each such Person
shall have and hereby reserves the right to proceed in any court
of proper jurisdiction or by self help to exercise or prosecute
the following remedies where available, and solely to collect
amounts due, pursuant to the terms of this Agreement: (i)
obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of
receiver and in filing an involuntary bankruptcy proceeding, and
(ii) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an
arbitrator to grant similar remedies that may be requested by a
party in a Dispute.
SECTION 13.7 Reversal of Payments.
To the extent any Credit Party makes a payment or payments
to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or
proceeds of the collateral which payments or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the
extent of such payment or proceeds repaid, the Obligations or
part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment or proceeds
had not been received by the Administrative Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages.
(a) Each of the parties to this Agreement recognizes that,
in the event such party fails to perform, observe or discharge
any of its obligations or liabilities under this Agreement, any
remedy of law may prove to be inadequate relief to the other
parties hereto. Therefore, each of the parties hereto agrees that
the other parties hereto, at such other party's option, shall be
entitled to temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages.
(b) The Administrative Agent, the Arranger, the Lenders and
the Credit Parties (on behalf of themselves and their
Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party
to a Loan Document or any other party in a Dispute and each such
Person hereby waives any right or claim to punitive or exemplary
damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved
through arbitration or judicially.
SECTION 13.9 Accounting Matters.
Except as otherwise expressly provided herein, all terms of
an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time, provided
that, if the Borrowers notify the Administrative Agent that the
Borrowers request an amendment to any provision hereof to
eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of
such provision (or if the Administrative Agent notifies the
Borrowers that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be interpreted
on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall
have been withdrawn or such provision amended in accordance
therewith.
SECTION 13.10 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of the Credit Parties, the
Administrative Agent, the Arranger and the Lenders, all future
holders of the Notes, and their respective successors and
permitted assigns, except that the Borrowers shall not assign or
transfer any of their rights or obligations under this Agreement
without the prior written consent of each Lender other than
pursuant to Section 10.5.
(b) Assignment by Lenders. Each Lender may, with the
consent of the Borrowers (so long as no Default or Event of
Default has occurred and is continuing or, if a Default or Event
of Default has occurred and is continuing, without the consent of
the Borrowers), and the consent of the Administrative Agent,
which consents shall not be unreasonably withheld, assign to one
or more Eligible Assignees all or a portion of its interests,
rights and obligations under this Agreement (including, without
limitation, all or a portion of the Extensions of Credit at the
time owing to it and the Notes held by it); provided that:
(i) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning
Lender's Aggregate Revolving Credit Commitment and all other
rights and obligations under this Agreement;
(ii) if less than all of the assigning Lender's
Aggregate Revolving Credit Commitment or Loans is to be assigned,
the Aggregate Revolving Credit Commitment or Loans so assigned
shall not be less than $10,000,000;
(iii) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and
Acceptance in the form of Exhibit H attached hereto (an
"Assignment and Acceptance"), together with any Note or Notes
subject to such assignment;
(iv) such assignment shall not, without the
consent of the Borrowers, on behalf of itself and the other
Credit Parties, require any Borrower, or any Credit Party, to
file a registration statement with the Securities and Exchange
Commission or apply to or qualify the Loans or the Notes under
the blue sky laws of any state;
(v) the assigning Lender shall pay to the
Administrative Agent an assignment fee of $3,500 upon the
execution by such Lender of the Assignment and Acceptance
(including, but not limited to, an assignment by a Lender to
another Lender); provided that no such fee shall be payable upon
any assignment by a Lender to an Affiliate thereof; and
(vi) no consents will be required for assignments
where the Eligible Assignee is an Affiliate of the assigning
Lender.
Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least ten (10)
Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto and, to the extent of the
interest assigned in such Assignment and Acceptance, have the
rights and obligations of a Lender hereby and (B) the Lender
thereunder shall, to the extent of the interest assigned in such
assignment, be released from its obligations under this
Agreement.
(c) Rights and Duties Upon Assignment. By executing and
delivering an Assignment and Acceptance, the assigning Lender
thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as set forth in such
Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a
copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the
Lenders and the amount of the Extensions of Credit with respect
to each Lender from time to time (the "Register"). No assignment
shall be effective for purposes of this Agreement unless it has
been recorded in the Register as provided in this paragraph. The
entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Administrative Agent, the
Arranger and the Lenders may treat each person whose name is
recorded in the Register as a Lender hereunder for all purposes
of this Agreement. The Register shall be available for
inspection by the Borrowers or Lenders at any reasonable time and
from time to time upon reasonable prior notice.
(e) Issuance of New Notes. Upon its receipt of an
Assignment and Acceptance executed by an assigning Lender and an
Eligible Assignee together with any Note or Notes subject to such
assignment and the written consent to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has
been completed and is substantially in the form of Exhibit H:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in
the Register;
(iii) give prompt notice thereof to the
Lenders and the Borrowers, on behalf of itself and the other
Credit Parties; and
(iv) promptly deliver a copy of such Assignment
and Acceptance to the Borrower.
Within ten (10) Business Days after receipt of notice, each
Borrower shall execute and deliver to the Administrative Agent,
in exchange for the surrendered Note or Notes, a new Note or
Notes to the order of such Eligible Assignee in amounts equal to
the amounts assumed by it pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning
Lender in an amount equal to the amounts retained by it
hereunder. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in
substantially the form of the assigned Notes delivered to the
assigning Lender. Each surrendered Note or Notes shall be
canceled and returned to the Borrower which made such Note.
(f) Participations. Each Lender may sell participations to
one or more banks or other entities in all or a portion of its
rights and/or obligations under this Agreement (including,
without limitation, all or a portion of its Extensions of Credit
and the Notes held by it); provided that:
(i) each such participation shall be in an
amount not less than $10,000,000;
(ii) such Lender's obligations under this
Agreement (including, without limitation, its Aggregate Revolving
Credit Commitment) shall remain unchanged;
(iii) such Lender shall remain solely
responsible to the other parties hereto for the performance of
such obligations;
(iv) the Credit Parties, the Administrative Agent,
the Arranger and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement;
(v) such Lender shall not permit such participant
the right to approve any waivers, amendments or other
modifications to this Agreement or any other Loan Document other
than waivers, amendments or modifications which would reduce the
principal of or the interest rate on any Loan or Reimbursement
Obligation, extend the term or increase the amount of the
Aggregate Revolving Credit Commitment, reduce the amount of any
fees to which such participant is entitled, extend any scheduled
payment date for principal, interest or fees of any Loan, or
release of all or substantially all of the Guarantors, except as
expressly contemplated hereby or thereby; and
(vi) any such disposition shall not, without the
consent of the Borrowers, on behalf of itself and the other
Credit Parties, require the Borrowers or any other Credit Party,
to file a registration statement with the Securities and Exchange
Commission or apply to or qualify the Revolving Credit Loans or
the Revolving Credit Notes under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. Each of
the Administrative Agent, the Issuing Lender and the Lenders
agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to
its Affiliates, directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will
be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent
required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or
any suit, action or proceeding relating to this Agreement or the
enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this
Section, to any assignee of or participant in, or any prospective
assignee of or participant in, any of its rights or obligations
under this Agreement, (g) with the prior written consent of the
Credit Parties, (h) to the extent such Information (A) becomes
publicly available other than as a result of a breach of this
Section or (B) becomes available to the Administrative Agent, the
Issuing Lender or any Lender on a nonconfidential basis from a
source other than the Credit Parties or (i) to Gold Sheets and
other similar bank trade publications, such information to
consist of deal terms and other information (customarily found in
such publications) upon the Credit Parties' prior review and
approval, which shall not be unreasonably withheld or delayed.
For the purposes of this Section, "Information" means all
information received from the Credit Parties or any of their
Subsidiaries relating to the Credit Parties or their business,
other than any such information that is available to the
Administrative Agent, the Issuing Lender or any Lender on a
nonconfidential basis prior to disclosure by the Credit Parties;
provided that, in the case of information received from the
Credit Parties after the Closing Date (other than certificates or
other information specifically required by the terms of this
Agreement), such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord
to its own confidential information.
(h) Certain Pledges or Assignments. Nothing herein shall
prohibit any Lender from pledging or assigning any Note to any
Federal Reserve Bank in accordance with Applicable Law.
SECTION 13.11 Amendments, Waivers and Consents.
Except as set forth below, any term, covenant, agreement or
condition of this Agreement or any of the other Loan Documents
may be amended or waived by the Lenders and any consent given by
the Lenders, if, but only if, such amendment, waiver or consent
is in writing signed by the Required Lenders (or by the
Administrative Agent with the consent of the Required Lenders)
and delivered to the Administrative Agent and, in the case of an
amendment, signed by the Credit Parties; provided, that no
amendment, waiver or consent shall (a) increase the amount or
extend the time of the obligation of the Lenders to make Loans or
issue or participate in Letters of Credit (except as expressly
contemplated by Section 2.8), (b) extend the originally scheduled
time or times of payment of the principal of any Loan or
Reimbursement Obligation or the time or times of payment of
interest or fees on any Loan or Reimbursement Obligation, (c)
reduce the rate of interest or fees payable on any Loan or
Reimbursement Obligation, (d) reduce the principal amount of any
Loan or Reimbursement Obligation, (e) permit any subordination of
the principal or interest on any Loan or Reimbursement
Obligation, (f) permit any assignment (other than as specifically
permitted or contemplated in this Agreement) of any of the Credit
Parties' rights and obligations hereunder, (g) release all or
substantially all of the Guarantors or (h) amend the provisions
of this Section 13.11 or the definition of Required Lenders,
without the prior written consent of each Lender. In addition,
no amendment, waiver or consent to the provisions of (a) Article
XIII shall be made without the written consent of the
Administrative Agent and (b) Article III without the written
consent of each Issuing Lender.
SECTION 13.12 Performance of Duties.
The Credit Parties' obligations under this Agreement and
each of the Loan Documents shall be performed by the Credit
Parties at their sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest.
All powers of attorney and other authorizations granted to
the Lenders, the Administrative Agent and any Persons designated
by the Administrative Agent or any Lender pursuant to any
provisions of this Agreement or any of the other Loan Documents
shall be deemed coupled with an interest and shall be irrevocable
so long as any of the Obligations remain unpaid or unsatisfied or
the Credit Facility has not been terminated.
SECTION 13.14 Joint and Several Obligations.
All obligations, liabilities, covenants and representations
and warranties of any Borrower under this Agreement shall be
joint and several obligations, liabilities, covenants and
representations and warranties of all of the Borrowers. Neither
the Administrative Agent nor any Lender shall be obligated before
exercising any of the rights, powers and remedies conferred upon
them in respect of the Company or, as the case may be, the UK
Sub, by this Agreement, any other Loan Document or by Applicable
Law:
(a) to make any demand of the UK Sub or, as the case may
be, the Company;
(b) to take any action or obtain judgment in any court
against the UK Sub or, as the case may be, the Company;
(c) to make any claim or proof in winding up or dissolution
of the UK Sub or, as the case may be, the Company; or
(d) to enforce or seek to enforce any security or guaranty
taken in respect of any of the Obligations of the UK Sub or, as
the case may be, the Company.
SECTION 13.15 Subordination of Company's Claims Against the
UK Sub
The Borrowers hereby agree that any claims of the Company
against the UK Sub or any rights the Company has to be
indemnified by the UK Sub shall be subordinate in right of
payment to the payment and satisfaction in full of the Borrowers'
Obligations to the Administrative Agent under this Agreement and
the other Loan Documents.
SECTION 13.16 Survival of Indemnities.
Notwithstanding any termination of this Agreement, the
indemnities to which the Administrative Agent, the Arranger and
the Lenders are entitled under the provisions of this Article XIV
and any other provision of this Agreement and the Loan Documents
shall continue in full force and effect and shall protect the
Administrative Agent, the Arranger and the Lenders against events
arising after such termination as well as before, including after
the Borrowers' acceptance of the Lenders' commitments for the
Credit Facility, notwithstanding any failure of such facility to
close.
SECTION 13.17 Titles and Captions.
Titles and captions of Articles, Sections and subsections in
this Agreement are for convenience only, and neither limit nor
amplify the provisions of this Agreement.
SECTION 13.18 Severability of Provisions.
Any provision of this Agreement or any other Loan Document
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective only to the extent of
such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions hereof or
thereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 13.19 Counterparts.
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and
shall be binding upon all parties, their successors and assigns,
and all of which taken together shall constitute one and the same
agreement. Delivery of any executed counterpart of a signature
page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 13.20 Term of Agreement.
This Agreement shall remain in effect from the Closing Date
through and including the date upon which all Obligations (other
than obligations owing by any Credit Party to any Lender or
Affiliate of a Lender or the Administrative Agent under any
Hedging Agreement) shall have been indefeasibly and irrevocably
paid and satisfied in full. No termination of this Agreement
shall affect the rights and obligations of the parties hereto
arising prior to such termination.
SECTION 13.21 Inconsistencies with Other Documents;
Independent Effect of Covenants.
(a) In the event there is a conflict or inconsistency
between this Agreement and any other Loan Document or the letter
agreements between the Administrative Agent and the Borrowers
dated as of January 18, 1999, as amended, the terms of this
Agreement shall control.
(b) The Borrowers expressly acknowledge and agree that each
covenant contained in Article IX, X, or XI hereof shall be given
independent effect.
[Signature pages to follow]
IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized officers to execute and deliver this Agreement as
of the date first above written.
CHESAPEAKE CORPORATION
By:
Name:
Title:____________________________________
CHESAPEAKE UK HOLDINGS LIMITED
By:
Name:
Title:____________________________________
FIRST UNION NATIONAL BANK,
Individually and as
Administrative Agent
By:
Name:
Title:____________________________________
COMPAGNIE FINANCIERE DE CIC ET DE
I'UNION EUROPEENNE
By:
Name:
Title:____________________________________
By:
Name:
Title:____________________________________
NATIONSBANK, N.A.
By:
Name:
Title:____________________________________
BANK OF MONTREAL
By:
Name:
Title:____________________________________
THE BANK OF NEW YORK
By:
Name:
Title:____________________________________
CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:____________________________________
BANK OF NOVA SCOTIA
By:
Name:
Title:____________________________________
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK AG,
Cayman Islands Branch
By:
Name:
Title:____________________________________
By:
Name:
Title:____________________________________
CRESTAR BANK
By:
Name:
Title:____________________________________
TORONTO DOMINION
By:
Name:
Title:____________________________________
WACHOVIA BANK, N.A.
By:
Name:
Title:____________________________________
Schedule 1
Lender(s) and Address(es)
First Union National Bank DG Bank Deutsche
One First Union Center, DC-4 Genossenschaftsbank AG
301 South College Street Cayman Islands Branch
Charlotte, N.C. 28288-0608 DG Bank, AG, Atlanta
Scott Santa Cruz Agency
Phone: 704-383-1988 303 Peachtree Street, NE,
Fax: 704-374-3300 Suite 2900
Atlanta, GA 30308
Compagnie Financiere de CIC Kurt Morris
et de I'Union Europeenne Phone: 404-524-3966
520 Madison Avenue Fax: 404-524-4006
New York, NY 10022
Martha Skidmore The Bank of Nova Scotia
Phone: 212-715-4430 One Liberty Plaza
Fax: 212-715-4535 New York, NY 10006
Richard Garritt
NationsBank, N.A. Phone: 212-225-5028
100 N. Tryon Street Fax: 212-225-5090
Charlotte, NC 28255
Joe Corah Crestar Bank
Phone: 704-386-5976 919 W. Main Street
Fax: 704-386-9835 Richmond, VA 23219
Christopher Werner
Bank of Montreal Phone: 804-782-5998
430 Park Avenue Fax: 804-782-5413
New York, NY 10022
Brian Burke Toronto Dominion
Phone: 212-605-1643 31 W. 52nd Street, 18th
Fax: 212-605-1455 Floor
New York, NY 10016
The Bank of New York Raja Mukherji
One Wall Street, 22nd Floor Phone: 212-827-7702
New York, NY 10286 Fax: 212-827-7250
Anne Marie Hughes
Phone: 212-635-1339 Wachovia Bank, NA
Fax: 212-635-6434 1021 E. Cary Street
Richmond, VA 23219
Credit Lyonnais New York Christopher Borin
303 Peachtree Street, NE Phone: 804-697-6820
Suite 4400 Fax: 804-697-7581
Atlanta, GA 30308
Walter Robinson
Phone: 404-524-3700
Fax: 404-584-5249
Schedule 1.1(a)
Commitments as of Closing
First Union National Bank 364 Day Facility Commitment($150,000,000)
Five Year Facility Commitment($250,000,000)
Schedule 6.1(b)
Subsidiary Corporations of Chesapeake Corporation
WHOLLY-OWNED SUBSIDIARIES OF CHESAPEAKE CORPORATION
Wisconsin Tissue Mills Inc. (Delaware)
Wholly-Owned Subsidiary of Wisconsin Tissue Mills Inc.
Wisconsin Tissue (Canada), Limited (Ontario, Canada)
Chesapeake Forest Products Company (Virginia)
Wholly-Owned Subsidiary of Chesapeake Forest Products
Company
Chesapeake Building Products Company (Virginia)
Chesapeake Display and Packaging Company (Iowa)
Wholly-Owned Subsidiary of Chesapeake Display and Packaging
Company
Chesapeake Display and Packaging (Canada) Limited
(Ontario, Canada)
Chesapeake Packaging Company (Virginia)
Delmarva Properties, Inc. (Virginia)
Stonehouse Inc. (Virginia)
Chesapeake Resources Company (Virginia)
Cary St. Company (Delaware)
Chesapeake Trading Corp. (Virginia)
Chesapeake Trading Company, Inc. (U.S. Virgin Islands)
Chesapeake Recycling Co. (Virginia)
The Chesapeake Corporation of Virginia (Virginia)
Chesapeake International Holding Company (Virginia)
Subsidiary of Chesapeake International Holding Company
Chesapeake Europe S.A. (France)
Chesapeake Display and Packaging Europe (France)
Subsidiary of Chesapeake Corporation and Wisconsin Tissue
Mills Inc.
Wisconsin Tissue de Mexico, S.A. de C.V. (Mexico)
Capitol Packaging Company (Colorado)
Chesapeake US Holdings Limited (England)
Options, Warrants and Other Convertible Securities
There are no outstanding stock purchase warrants,
subscriptions, options, securities, instruments or other rights
of any type or nature whatsoever, which are convertible into,
exchangeable for or otherwise provide for or permit the issuance
of capital stock of the Credit Parties or their Subsidiaries,
except Chesapeake Corporation's stock-based director and employee
compensation programs, as described in Note 9 to Chesapeake
Corporation's audited consolidated financial statements for its
fiscal year ended December 31, 1997.
Schedule 6.1(p)
Debt and Guaranty Obligations of the Credit Parties
and any Subsidiary in Excess of $10 Million as of Closing Date
Borrower Obligation
Chesapeake Corporation $55 million 10.375% notes due 2000
Chesapeake Corporation $33.6 million 9.875% notes due 2003
Chesapeake Corporation $85 million 7.2% notes due 2005
Chesapeake Corporation $50 million 6.375-6.875% notes due 2019
Chesapeake Europe SA* FRF 75 million committed credit line with
Societe Generale expiring
September 16, 2001
Chesapeake Corporation $20 million credit line with
Crestar Bank expiring
May 2002 (no borrowing outstanding)
Chesapeake Corporation $20 million credit line with
Wachovia Bank of
North Carolina, N.A. expiring
May 2002
(no borrowing outstanding)
Schedule 10.7
Restrictions and Limitations on Subsidiary
Dividends and Distributions as of Closing Date
Subsidiary Facility
Chesapeake Europe SA FRF 75 million Societe Generale
Committed line expiring
September 16, 2001
FRF 50 million Bank of America
Committed line expiring June 30,
2000
FRF 50 million Chase Manhattan Bank
Term loan due June 3, 2002
Restrictions: The ratio of CSK Europe's debts (excluding
supplier's credits and other indebtedness arising from
commercial business activities) to its net worth shall
remain equal to or less than 6, and
The sum of CSK Europe's net worth and intercompany
loans from Chesapeake Corporation shall always equal at
least FRF 10 million.
EXHIBIT A-1
FORM OF REVOLVING CREDIT NOTE
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
REVOLVING CREDIT NOTE
$____________ _______________
FOR VALUE RECEIVED, the undersigned, [Borrower], a corporation
organized under the laws of [Virginia/the United Kingdom] (the
"Borrower"), hereby promises to pay to the order of
_________________________________, (the "Lender"), at the place
and times provided in the Credit Agreement referred to below, the
principal sum of _________________ ($__________) or, if less, the
aggregate unpaid principal amount of all loans made to the
Borrower by the Lender under the [364 Day Facility] [Five Year
Facility] (such loans, the "Revolving Credit Loans") granted by
the Lenders (as defined) to the Borrower pursuant to that certain
Credit Agreement, dated as of even date herewith (as amended,
restated or otherwise modified, the "Credit Agreement") among
Chesapeake Corporation, Chesapeake UK Holdings Limited, the
Lenders who are or may become a party thereto (collectively, the
"Lenders"), First Union National Bank, as Administrative Agent
and First Union Capital Markets, as Arranger. Capitalized terms
used herein and not defined herein shall have the meanings
assigned thereto in the Credit Agreement.
The unpaid principal amount of Revolving Credit Loans from
time to time outstanding is subject to mandatory repayment from
time to time as provided in the Credit Agreement and shall bear
interest as provided in Section 4.1 of the Credit Agreement. All
payments of principal of and interest on Revolving Credit Loans
shall be payable in lawful currency of the United States of
America or, in the case of Offshore Currency Loans, in the
Applicable Currency, in immediately available funds to the
account designated in the Credit Agreement.
This Revolving Credit Note is entitled to the benefits of,
and evidences Obligations incurred under, the Credit Agreement,
to which reference is made for a statement of the terms and
conditions on which the Borrower is permitted and required to
make prepayments and repayments of principal of the Obligations
evidenced by this Revolving Credit Note and on which such
Obligations may be declared to be immediately due and payable.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
The Debt evidenced by this Revolving Credit Note is senior
in right of payment to all Subordinated Debt referred to in the
Credit Agreement.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and (except as required
by the Credit Agreement) notice of any kind with respect to this
Revolving Credit Note.
IN WITNESS WHEREOF, the undersigned has executed this
Revolving Credit Note under seal as of the day and year first
above written.
[BORROWER]
By:
Name:
Title:
EXHIBIT A-2
FORM OF SWINGLINE NOTE
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
SWINGLINE NOTE
$____________ _______________
FOR VALUE RECEIVED, the undersigned, [Borrower], a corporation
organized under the laws of [Virginia/the United Kingdom] (the
"Borrower"), hereby promises to pay to the order of
_________________________________, (the "Lender"), at the place
and times provided in the Credit Agreement referred to below, the
principal sum of TEN MILLION DOLLARS ($10,000,000) or, if less,
the aggregate unpaid principal amount of all Swingline Loans made
to the Borrower by the Lender under the [364 Day Facility] [Five
Year Facility] (such loans, the "Swingline Loans") granted by the
Lenders (as defined) to the Borrower pursuant to that certain
Credit Agreement, dated as of even date herewith (as amended,
restated or otherwise modified, the "Credit Agreement") among
Chesapeake Corporation, Chesapeake UK Holdings Limited, the
Lenders who are or may become a party thereto (collectively, the
"Lenders"), First Union National Bank, as Administrative Agent
and First Union Capital Markets, as Arranger. Capitalized terms
used herein and not defined herein shall have the meanings
assigned thereto in the Credit Agreement.
The unpaid principal amount of Swingline Loans from time to
time outstanding is subject to mandatory repayment from time to
time as provided in the Credit Agreement and shall bear interest
as provided in Section 4.1 of the Credit Agreement. All payments
of principal of and interest on Swingline Loans shall be payable
in lawful currency of the United States of America or in
immediately available funds to the account designated in the
Credit Agreement.
This Swingline Note is entitled to the benefits of, and
evidences Obligations incurred under, the Credit Agreement, to
which reference is made for a statement of the terms and
conditions on which the Borrower is permitted and required to
make prepayments and repayments of principal of the Obligations
evidenced by this Swingline Note and on which such Obligations
may be declared to be immediately due and payable.
THIS SWINGLINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
VIRGINIA.
The Debt evidenced by this Swingline Note is senior in right
of payment to all Subordinated Debt referred to in the Credit
Agreement.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and (except as required
by the Credit Agreement) notice of any kind with respect to this
Swingline Note.
IN WITNESS WHEREOF, the undersigned has executed this
Swingline Note under seal as of the day and year first above
written.
[BORROWER]
By:
Name:
Title:____________________________________
EXHIBIT A-3
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF COMPETITIVE BID NOTE
COMPETITIVE BID NOTE
$____________ _______________
FOR VALUE RECEIVED, the undersigned, [Borrower], a corporation
organized under the laws of [Virginia/the United Kingdom] (the
"Borrower"), hereby promises to pay to the order of
_________________________________, (the "Lender"), at the place
and times provided in the Credit Agreement referred to below, the
principal sum of _________________ ($__________) or, if less, the
aggregate unpaid principal amount of all Competitive Bid Loans
made to the Borrower by the Lender under the Credit Agreement
referred to below, together with interest at the rates as in
effect from time to time with respect to each portion of the
principal amount hereof, determined and payable as provided in
the Credit Agreement.
This Competitive Bid Note is a Note referred to in, and is
entitled to the benefits of, the Credit Agreement, dated as of
even date herewith (as amended, restated or otherwise modified,
the "Credit Agreement") among Chesapeake Corporation, Chesapeake
UK Holdings Limited, the Lenders who are or may become a party
thereto (collectively, the "Lenders"), First Union National Bank,
as Administrative Agent and First Union Capital Markets, as
Arranger. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
The unpaid principal amount of Competitive Bid Loans from
time to time outstanding is subject to mandatory repayment from
time to time as provided in the Credit Agreement and shall bear
interest as provided in Section 4.1 of the Credit Agreement. All
payments of principal of and interest on Competitive Bid Loans
shall be payable in lawful currency of the United States of
America or, in the case of Offshore Currency Loans, in the
Applicable Currency, in immediately available funds to the
account designated in the Credit Agreement.
This Competitive Bid Note is entitled to the benefits of,
and evidences Obligations incurred under, the Credit Agreement,
to which reference is made for a statement of the terms and
conditions on which the Borrower is permitted and required to
make prepayments and repayments of principal of the Obligations
evidenced by this Competitive Bid Note and on which such
Obligations may be declared to be immediately due and payable.
THIS COMPETITIVE BID NOTE SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
The Debt evidenced by this Competitive Bid Note is senior in
right of payment to all Subordinated Debt referred to in the
Credit Agreement.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and (except as required
by the Credit Agreement) notice of any kind with respect to this
Competitive Bid Note.
IN WITNESS WHEREOF, the undersigned has executed this
Competitive Bid Note under seal as of the day and year first
above written.
[BORROWER]
By:
Name:
Title:
EXHIBIT B-1
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF REVOLVING CREDIT BORROWING
NOTICE OF REVOLVING CREDIT BORROWING
Dated as of: ______________
First Union National Bank,
as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Revolving Credit Borrowing is
delivered to you under Section 2.2(a) of the Amended and Restated
Credit Agreement dated as of March 15, 1999 (as amended, restated
or otherwise modified, the "Credit Agreement"), by and among
CHESAPEAKE CORPORATION, CHESAPEAKE UK HOLDINGS LIMITED, the
lenders party thereto (the "Lenders") and First Union National
Bank, as Administrative Agent.
1. [Borrower] (the "Borrower") hereby requests that the
Lenders make a Revolving Credit Loan to the Borrower in the
aggregate principal amount of $___________. (Complete with an
amount in accordance with Section 2.2(a) of the Credit
Agreement.) The Borrower hereby requests that the Lenders make
such Revolving Credit Loan under the [364 Day Facility] [Five
Year Facility]. (Select a facility in accordance with Section
2.2(a) of the Credit Agreement.)
2. The Borrower hereby requests that such Revolving Credit
Loan be made on the following Business Day:
_____________________. (Complete with a Business Day in
accordance with Section 2.2(a) of the Credit Agreement.)
3. The Borrower hereby requests that the Revolving Credit
Loan bear interest at the following interest rate, plus the
Applicable Margin, as set forth below:
Interest Termination Applicable
Component Period Date for Currency
of Loan Interest (Offshore Interest (Offshore
Rate Rate only) Period Rate only)
(if
applicable)
Base Rate or
Offshore
Rate
4. The principal amount of all Loans outstanding under the
364 Day Facility as of the date hereof (including the requested
Revolving Credit Loan, if applicable) and the principal amount of
all Loans and L/C Obligations outstanding under the Five Year
Facility as of the date hereof (including the requested Revolving
Credit Loan, if applicable) do not exceed the maximum amount
permitted to be outstanding under the 364 Day Facility and the
Five Year Facility, respectively, pursuant to the terms of the
Credit Agreement.
5. If the Borrower has requested that the Revolving Credit
Loan be made during the Certain Funds Period and the proceeds of
the Revolving Credit Loan are to be used as specified in Section
2.1(c)(i), (ii) or (iii) of the Credit Agreement, the Borrower
hereby represents and warrants that the conditions specified in
Section 5.3 of the Credit Agreement have been satisfied or waived
in writing by the Administrative Agent as of the date hereof. In
all other situations, the Borrower hereby represents and warrants
that the conditions specified in Section 5.4 of the Credit
Agreement have been satisfied or waived in writing by the
Administrative Agent as of the date hereof.
6. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice
of Revolving Credit Borrowing on behalf of the Borrower this ____
day of _______, ____.
[BORROWER]
By:
Name:
Title:
EXHIBIT B-2
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF SWINGLINE BORROWING
NOTICE OF SWINGLINE BORROWING
Dated as of: ______________
First Union National Bank,
as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Swingline Borrowing is delivered
to you under Section 2.6(d) of the Amended and Restated Credit
Agreement dated as of March 15, 1999 (as amended, restated or
otherwise modified, the "Credit Agreement"), by and among
CHESAPEAKE CORPORATION, CHESAPEAKE UK HOLDINGS LIMITED, the
lenders party thereto (the "Lenders") and First Union National
Bank, as Administrative Agent.
1. [Borrower] (the "Borrower") hereby requests that the
Lenders make a Swingline Loan to the Borrower in the aggregate
principal amount of $___________. (Complete with an amount in
accordance with Section 2.6(d) of the Credit Agreement.) The
Borrower hereby requests that the Lenders make such Swingline
Loan under the [364 Day Facility] [Five Year Facility]. (Select a
facility in accordance with Section 2.6(d) of the Credit
Agreement.)
2. The Borrower hereby requests that such Swingline Loan
be made on the following Business Day: _____________________.
(Complete with a Business Day in accordance with Section 2.6 of
the Credit Agreement.)
3. The Borrower hereby requests that the Revolving Credit
Loan bear interest at the following interest rate, plus the
Applicable Margin, as set forth below:
Interest Termination
Component Period Date for
of Loan Interest Rate (Offshore Interest
Rate only) Period
(if
applicable)
Base Rate or
Offshore Rate
4. The principal amount of all Loans outstanding under the
364 Day Facility as of the date hereof (including the requested
Swingline Loan, if applicable) and the principal amount of all
Loans and L/C Obligations outstanding under the Five Year
Facility as of the date hereof (including the requested Swingline
Loan, if applicable) do not exceed the maximum amount permitted
to be outstanding under the 364 Day Facility and the Five Year
Facility, respectively, pursuant to the terms of the Credit
Agreement. The principal amount of all Swingline Loans
outstanding under the 364 Day Facility as of the date hereof
(including the requested Swingline Loan, if applicable) and the
principal amount of all Swingline Loans outstanding under the 364
Day Facility as of the date hereof (including the requested
Swingline Loan, if applicable) do not exceed the 364 Day Facility
Swingline Commitment and the Five Year Facility Swingline
Commitment, respectively.
5. If the Borrower has requested that the Swingline Loan
be made during the Certain Funds Period and the proceeds of the
Swingline Loan are to be used as specified in Section 2.1(c)(i),
(ii) or (iii) of the Credit Agreement, the Borrower hereby
represents and warrants that the conditions specified in Section
5.3 of the Credit Agreement have been satisfied or waived in
writing by the Administrative Agent as of the date hereof. In
all other situations, the Borrower hereby represents and warrants
that the conditions specified in Section 5.4 of the Credit
Agreement have been satisfied or waived in writing by the
Administrative Agent as of the date hereof.
6. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice
of Swingline Borrowing on behalf of the Borrower this ____ day of
_______, ____.
[BORROWER]
By:
Name:
Title:____________________________________
EXHIBIT B-3
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF COMPETITIVE BID REQUEST
COMPETITIVE BID REQUEST
Dated as of: ______________
First Union National Bank,
as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, [Borrower], refers to the Amended and
Restated Credit Agreement dated as of March 15, 1999 (as amended,
restated or otherwise modified, the "Credit Agreement"), by and
among CHESAPEAKE CORPORATION, CHESAPEAKE UK HOLDINGS LIMITED, the
lenders party thereto (the "Lenders") and First Union National
Bank, as Administrative Agent.
1. The undersigned hereby gives you notice pursuant to
Section 2.5(a) of the Credit Agreement that it requests a
Competitive Bid Loan under the Credit Agreement and in connection
therewith sets forth below the terms on which such Competitive
Bid Loan is requested to be made.1
(a) Date of Competitive Bid Loan ____________________
(b) Principal Amount and Currency
of Competitive Bid Loan ____________________
(c) Interest Period(s) and
last day thereof ____________________
(d) Facility ____________________
(e) Disbursement account ____________________
2. Upon acceptance of any or all of the Competitive Bid
Loans offered by the Lenders in response to this request, the
undersigned shall be deemed to have represented and warranted
that all conditions to lending specified in Section 5.4 of the
Credit Agreement have been satisfied.
3. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
[BORROWER]
By:
Name:
Title:_____________________________
EXHIBIT B-4
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF COMPETITIVE BID
COMPETITIVE BID
Dated as of: ______________
First Union National Bank,
as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, [Name of Lender], refers to the Amended and
Restated Credit Agreement dated as of March 15, 1999 (as amended,
restated or otherwise modified, the "Credit Agreement"), by and
among CHESAPEAKE CORPORATION, CHESAPEAKE UK HOLDINGS LIMITED, the
lenders party thereto (the "Lenders") and First Union National
Bank, as Administrative Agent.
1. The undersigned hereby makes a Competitive Bid pursuant
to Section 2.5(b) of the Credit Agreement, in response to the
Competitive Bid Request made by the [Borrower] on __________,
____, and in connection therewith sets forth below the terms on
which such Competitive Bid is made.2
(a) Date of Competitive Bid ____________________
(b) Principal Amount and Currency ____________________
(c) Interest Period and last
day thereof ____________________
2. The undersigned hereby confirms that it is prepared,
subject to the conditions set forth in the Credit Agreement, to
extend credit to the Borrower upon acceptance by the Borrower of
this bid in accordance with Section 2.5 of the Credit Agreement.
3. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
[NAME OF LENDER]
By:
Name:
Title:_____________________________
EXHIBIT C
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF ACCOUNT DESIGNATION
NOTICE OF ACCOUNT DESIGNATION
Dated as of: _________
First Union National Bank,
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This Notice of Account Designation is delivered to you under
Section 2.2 of the Amended and Restated Credit Agreement dated as
of March 15, 1999 (as amended, restated or otherwise modified,
the "Credit Agreement"), by and among CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED, the lenders party thereto (the
"Lenders"), First Union National Bank, as Administrative Agent
(the "Administrative Agent") and First Union Capital Markets, as
Arranger.
1. The Administrative Agent is hereby authorized to
disburse all proceeds of Loans made to [Borrower] (the
"Borrower") into the following account(s):
____________________________
ABA Routing Number: _________
Account Number: _____________
2. This authorization shall remain in effect until revoked
or until a subsequent Notice of Account Designation is provided
by the Borrower to the Administrative Agent.
3. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice
of Account Designation this _____ day of _______, ____.
[BORROWER]
By:
Name:
Title:
EXHIBIT D
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF PREPAYMENT
NOTICE OF PREPAYMENT
Dated as of: _____________
First Union National Bank,
as Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Prepayment is delivered to you
under Section 2.3(c) of the Amended and Restated Credit Agreement
dated as of March 15, 1999 (as amended, restated or otherwise
modified, the "Credit Agreement") by and among CHESAPEAKE
CORPORATION, CHESAPEAKE UK HOLDINGS LIMITED, the lenders party
thereto (the "Lenders") and First Union National Bank, as
Administrative Agent.
1. [Borrower] (the "Borrower") hereby provides notice to
the Administrative Agent that it shall repay the following [Base
Rate Loans] and/or [Offshore Rate Loans]: ____________________.
(Complete with an amount in accordance with Section 2.3 of the
Credit Agreement.)
2. The Loan to be prepaid is a [Revolving Credit Loan]
[Swingline Loan] made under the [check each applicable box]
/ / 364 Day Facility
/ / Five Year Facility
3. The Borrower shall repay the above-referenced Loans on
the following Business Day: _______________. (Complete in
accordance with Section 2.3 of the Credit Agreement.)
4. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice
of Prepayment on this ____ day of _______, ____.
[BORROWER]
By:______________________________
Name:_________________________
Title:________________________
EXHIBIT E
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF GUARANTY AGREEMENT
THIS UNCONDITIONAL GUARANTY AGREEMENT (as amended, restated
or otherwise modified, this "Guaranty"), dated as of ________ __,
____ is made by certain subsidiaries of CHESAPEAKE CORPORATION,
a corporation organized under the laws of Virginia (the
"Company") (such subsidiaries, collectively, the "Guarantors",
each a "Guarantor"), in favor of FIRST UNION NATIONAL BANK, a
national banking association, as Administrative Agent (the
"Administrative Agent") for the ratable benefit of itself and the
financial institutions who are, or may become party to the Credit
Agreement (as defined below).
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement of even date
herewith (as amended, restated or otherwise modified, the "Credit
Agreement"), by and among the Company, Chesapeake UK Holdings,
Limited (together with the Company, the "Borrowers") the Lenders
and the Administrative Agent, the Lenders will provide certain
credit facilities to the Borrowers as more specifically described
in the Credit Agreement.
The Borrowers and the Guarantors comprise one integrated
financial enterprise, and all Loans to the Borrowers will inure,
directly or indirectly, to the benefit of each of the Guarantors.
The Lenders have requested that each Guarantor execute and
deliver this Guaranty, and each of the Guarantors has agreed to
do so pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein, each Guarantor hereby agrees
with the Administrative Agent for the ratable benefit of the
Administrative Agent and Lenders as follows:
SECTION 1. Definitions. Capitalized terms used and not
otherwise defined in this Guaranty including the preambles and
recitals hereof shall have the meanings assigned to them in the
Credit Agreement. In the event of a conflict between capitalized
terms defined herein and in the Credit Agreement, the Credit
Agreement shall control.
SECTION 2. Guaranty of Obligations of Borrowers. Each
Guarantor hereby, jointly and severally with the other
Guarantors, unconditionally guarantees to the Administrative
Agent for the ratable benefit of itself and the Lenders, and
their respective permitted successors, endorsees, transferees and
assigns, the prompt payment and performance of all Obligations of
the Borrowers, whether primary or secondary (whether by way of
endorsement or otherwise), whether now existing or hereafter
arising, whether or not from time to time reduced or extinguished
(except by payment thereof) or hereafter increased or incurred,
whether enforceable or unenforceable as against the Borrowers,
whether or not discharged, stayed or otherwise affected by any
bankruptcy, insolvency or other similar law or proceeding,
whether created directly with the Administrative Agent or any
Lender or acquired by the Administrative Agent or any Lender
through assignment or endorsement, whether matured or unmatured,
whether joint or several, as and when the same become due and
payable (whether at maturity or earlier, by reason of
acceleration, mandatory repayment or otherwise), in accordance
with the terms of any such instruments evidencing any such
obligations, including all renewals, extensions or modifications
thereof (all Obligations of the Borrowers to the Administrative
Agent or any Lender, including all of the foregoing, being
hereinafter collectively referred to as the "Guaranteed
Obligations"); provided, that notwithstanding anything to the
contrary contained herein, it is the intention of each Guarantor
and the Lenders that, in any proceeding involving the bankruptcy,
reorganization, arrangement, adjustment of debts, relief of
debtors, dissolution or insolvency or any similar proceeding with
respect to any Guarantor or its assets, the amount of such
Guarantor's obligations with respect to the Guaranteed
Obligations shall be in, but not in excess of, the maximum amount
thereof not subject to avoidance or recovery by operation of
applicable law governing bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution, insolvency,
fraudulent transfers or conveyances or other similar laws
(including, without limitation, 11 U.S.C. 547, 548, 550 and
other "avoidance" provisions of Title 11 of the United States
Code) applicable in any such proceeding to such Guarantor and
this Guaranty (collectively, "Applicable Insolvency Laws"). To
that end, but only in the event and to the extent that such
Guarantor's obligations with respect to the Guaranteed
Obligations or any payment made pursuant to the Guaranteed
Obligations would, but for the operation of the foregoing
proviso, be subject to avoidance or recovery in any such
proceeding under Applicable Insolvency Laws, the amount of such
Guarantor's obligations with respect to the Guaranteed
Obligations shall be limited to the largest amount which, after
giving effect thereto, would not, under Applicable Insolvency
Laws, render such Guarantor's obligations with respect to such
Guaranteed Obligations unenforceable or avoidable or otherwise
subject to recovery under Applicable Insolvency Laws. To the
extent any payment actually made pursuant to the Guaranteed
Obligations exceeds the limitation of the foregoing proviso and
is otherwise subject to avoidance and recovery in any such
proceeding under Applicable Insolvency Laws, the amount subject
to avoidance shall in all events be limited to the amount by
which such actual payment exceeds such limitation and the
Guaranteed Obligations as limited by the foregoing proviso shall
in all events remain in full force and effect and be fully
enforceable against such Guarantor. The foregoing proviso is
intended solely to preserve the rights of the Administrative
Agent hereunder against such Guarantor in such proceeding to the
maximum extent permitted by Applicable Insolvency Laws and
neither such Guarantor, the Borrowers, any other Guarantor nor
any other Person shall have any right or claim under such proviso
that would not otherwise be available under Applicable Insolvency
Laws in such proceeding.
SECTION 3. Nature of Guaranty. Each Guarantor agrees
that this Guaranty is a continuing, unconditional guaranty of
payment and performance and not of collection, and that its
obligations under this Guaranty shall be primary, absolute and
unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in, the
Credit Agreement or any other Loan Document or any other
agreement, document or instrument to which any Borrower or
any Subsidiary thereof is or may become a party;
(b) the absence of any action to enforce this
Guaranty, the Credit Agreement or any other Loan Document or
the waiver or consent by the Administrative Agent or any
Lender with respect to any of the provisions of this
Guaranty, the Credit Agreement or any other Loan Document;
(c) the existence, value or condition of, or failure
to perfect its Lien against, any security for or other
guaranty of the Guaranteed Obligations or any action, or the
absence of any action, by the Administrative Agent or any
Lender in respect of such security or guaranty (including,
without limitation, the release of any such security or
guaranty); or
(d) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor;
it being agreed by each Guarantor that, subject to the proviso in
Section 2 hereof, its obligations under this Guaranty shall not
be discharged until the final payment and performance, in full,
of the Guaranteed Obligations and the termination of the
Aggregate Revolving Credit Commitment. To the extent permitted
by law, each Guarantor expressly waives all rights it may now or
in the future have under any statute (including without
limitation North Carolina General Statutes Section 26-7, et seq.
or similar law), or at law or in equity, or otherwise, to compel
the Administrative Agent or any Lender to proceed in respect of
the Guaranteed Obligations against the Borrowers or any other
party or against any security for or other guaranty of the
payment and performance of the Guaranteed Obligations before
proceeding against, or as a condition to proceeding against, such
Guarantor. To the extent permitted by law, each Guarantor
further expressly waives and agrees not to assert or take
advantage of any defense based upon the failure of the
Administrative Agent or any Lender to commence an action in
respect of the Guaranteed Obligations against the Borrowers, such
Guarantor, any other guarantor or any other party or any security
for the payment and performance of the Guaranteed Obligations.
Each Guarantor agrees that any notice or directive given at any
time to the Administrative Agent or any Lender which is
inconsistent with the waivers in the preceding two sentences
shall be null and void and may be ignored by the Administrative
Agent or such Lender, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this
Guaranty for the reason that such pleading or introduction would
be at variance with the written terms of this Guaranty, unless
the Administrative Agent and the Required Lenders have
specifically agreed otherwise in writing. The foregoing waivers
are of the essence of the transaction contemplated by the Loan
Documents and, but for this Guaranty and such waivers, the
Administrative Agent and Lenders would decline to enter into the
Credit Agreement.
SECTION 4. Demand by the Administrative Agent. In
addition to the terms set forth in Section 3, and in no manner
imposing any limitation on such terms, if all or any portion of
the then outstanding Guaranteed Obligations under the Credit
Agreement are declared to be immediately due and payable, then
the Guarantors shall, upon demand in writing therefor by the
Administrative Agent to the Guarantors, pay all or such portion
of the outstanding Guaranteed Obligations then declared due and
payable. Payment by the Guarantors shall be made to the
Administrative Agent, to be credited and applied upon the
Guaranteed Obligations, in immediately available Dollars to an
account designated by the Administrative Agent or at the address
referenced herein for the giving of notice to the Administrative
Agent or at any other address that may be specified in writing
from time to time by the Administrative Agent.
SECTION 5. Waivers. In addition to the waivers
contained in Section 3, each Guarantor, to the extent permitted
by law, waives and agrees that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit
or advantage of, any appraisal, valuation, stay, extension,
marshalling of assets or redemption laws, or exemption, whether
now or at any time hereafter in force, which may delay, prevent
or otherwise affect the performance by such Guarantor of its
obligations under, or the enforcement by the Administrative Agent
or the Lenders of, this Guaranty. Each Guarantor further hereby
waives, to the extent permitted by Applicable Laws, diligence,
presentment, demand, protest and notice (except as specifically
required herein) of whatever kind or nature with respect to any
of the Guaranteed Obligations and waives, to the extent permitted
by Applicable Laws, the benefit of all provisions of law which
are or might be in conflict with the terms of this Guaranty.
Each Guarantor represents, warrants and agrees that its
obligations under this Guaranty are not and shall not be subject
to any counterclaims, offsets or defenses of any kind against the
Administrative Agent, the Lenders or the Borrowers whether now
existing or which may arise in the future.
SECTION 6. Benefits of Guaranty. The provisions of this
Guaranty are for the benefit of the Administrative Agent and the
Lenders and their respective permitted successors, transferees,
endorsees and assigns, and nothing herein contained shall impair,
as between the Borrowers, the Administrative Agent and the
Lenders, the obligations of the Borrowers under the Loan
Documents. In the event all or any part of the Guaranteed
Obligations are transferred, endorsed or assigned by the
Administrative Agent or any Lender to any Person or Persons as
permitted under the Credit Agreement, any reference to an
"Administrative Agent," or "Lender" herein shall be deemed to
refer equally to such Person or Persons.
SECTION 7. Modification of Loan Documents etc. If the
Administrative Agent or the Lenders shall at any time or from
time to time, with or without the consent of, or notice to, the
Guarantors:
(a) change or extend the manner, place or terms of
payment of, or renew or alter all or any portion of, the
Guaranteed Obligations (including, without limitation, any
increase of the Borrowers' Obligations under the Credit
Agreement pursuant to Section 4.9 of the Credit Agreement);
(b) take any action under or in respect of the Loan
Documents in the exercise of any remedy, power or privilege
contained therein or available to it at law, in equity or
otherwise, or waive or refrain from exercising any such
remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the
Loan Documents;
(d) extend or waive the time for performance by any
Guarantor, any other guarantor, the Borrowers or any other
Person of, or compliance with, any term, covenant or
agreement on its part to be performed or observed under a
Loan Document, or waive such performance or compliance or
consent to a failure of, or departure from, such performance
or compliance;
(e) take and hold security or collateral for the
payment of the Guaranteed Obligations or sell, exchange,
release, dispose of, or otherwise deal with, any property
pledged, mortgaged or conveyed, or in which the
Administrative Agent or the Lenders have been granted a
Lien, to secure any Debt of any Guarantor, any other
guarantor or the Borrowers to the Administrative Agent or
the Lenders;
(f) release anyone who may be liable in any manner for
the payment of any amounts owed by any Guarantor, any other
guarantor or the Borrowers to the Administrative Agent or
any Lender;
(g) modify or terminate the terms of any intercreditor
or subordination agreement pursuant to which claims of other
creditors of any Guarantor, any other guarantor or the
Borrowers are subordinated to the claims of the
Administrative Agent or any Lender; or
(h) apply any sums by whomever paid or however
realized to any Guaranteed Obligations owing by any
Guarantor, any other guarantor or the Borrowers to the
Administrative Agent or any Lender in such manner as the
Administrative Agent or any Lender shall determine in its
reasonable discretion;
then neither the Administrative Agent nor any Lender shall incur
any liability to any Guarantor as a result thereof, and no such
action shall impair or release the obligations of any Guarantor
under this Guaranty.
SECTION 8. Reinstatement. Each Guarantor agrees that,
if any payment made by the Borrowers or any other Person applied
to the Obligations is at any time annulled, set aside, rescinded,
invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid or the proceeds of
any collateral are required to be refunded by the Administrative
Agent or any Lender to the Borrowers, their respective estates,
trustees, receivers or any other party, including, without
limitation, any Guarantor, under any Applicable Law or equitable
cause, then, to the extent of such payment or repayment, each
Guarantor's liability hereunder (and any Lien securing such
liability) shall be and remain in full force and effect, as fully
as if such payment had never been made, and, if prior thereto,
this Guaranty shall have been canceled or surrendered (and if any
Lien or collateral securing such Guarantor's liability hereunder
shall have been released or terminated by virtue of such
cancellation or surrender), this Guaranty (and such Lien) shall
be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of such Guarantor in
respect of the amount of such payment (or any Lien securing such
obligation).
SECTION 9. Representations and Warranties. Each
Guarantor hereby represents and warrants that:
(a) such Guarantor has the corporate right, power
and authority to execute, deliver and perform this
Guaranty and has taken all necessary corporate action
to authorize its execution, delivery and performance
of, this Guaranty;
(b) this Guaranty constitutes the legal, valid
and binding obligation of such Guarantor enforceable in
accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the availability of
equitable remedies;
(c) the execution, delivery and performance of
this Guaranty will not violate any material provision
of any Applicable Law or material contractual
obligation of such Guarantor and will not result in the
creation or imposition of any Lien upon or with respect
to any property or revenues of such Guarantor;
(d) no consent or authorization of, filing with,
or other act by or in respect of, any arbitrator or
Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder
or creditor of such Guarantor), is required in
connection with the execution, delivery, performance,
validity or enforceability of this Guaranty except such
consents its failure to obtain would not be expected to
have a Material Adverse Effect;
(e) no actions, suits or proceedings before any
arbitrator or Governmental Authority are pending or, to
the knowledge of such Guarantor, threatened by or
against such Guarantor or against any of its properties
with respect to this Guaranty or any of the
transactions contemplated hereby;
(f) such Guarantor has such title to the real
property owned by it and a valid leasehold interest in
the real property leased by it, and has good and
marketable title to all of its personal property
sufficient to carry on its business free of any and all
Liens of any type whatsoever, except those permitted by
Section 10.3 of the Credit Agreement; and
(g) such Guarantor owns or possesses rights to
use all franchises, licenses, copyrights, copyright
applications, patents, patent rights or licenses,
patent applications, trademarks, trademark rights,
trade names, trade name rights, copyrights and rights
with respect to the foregoing which are required to
conduct its business except where the failure to do so
could not reasonably be expected to have a Material
Adverse Effect and no event has occurred which, to the
knowledge of such Guarantor, permits, or after notice
or lapse of time or both would permit, the revocation
or termination of any such rights, and, to the
knowledge of such Guarantor, it is not liable to any
Person for infringement under Applicable Law with
respect to any such rights as a result of its business
operations, except as could not reasonably be expected
to have a Material Adverse Effect; and
(h) as of the date hereof, such Guarantor (i) has
capital sufficient to carry on its business and
transactions and all business and transactions in which
it engages and is able to pay its debts as they mature,
(ii) owns property having a value, both at fair
valuation and at present fair saleable value, greater
than the amount required to pay its probable
liabilities (including contingencies) and (iii) does
not believe that it will incur debts or liabilities
beyond its ability to pay such debts or liabilities as
they mature, subject in each case to the proviso of
Section 2 hereof.
SECTION 10. Remedies. Upon the occurrence and during the
continuance of any Event of Default, with the consent of the
Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall,
enforce against the Guarantors their respective obligations and
liabilities hereunder and exercise such other rights and remedies
as may be available to the Administrative Agent hereunder, under
the Loan Documents or otherwise.
SECTION 11. No Subrogation. Notwithstanding any payment
or payments by any of the Guarantors hereunder, or any set-off or
application of funds of any of the Guarantors by the
Administrative Agent or any Lender, or the receipt of any amounts
by the Administrative Agent or any Lender with respect to any of
the Guaranteed Obligations, none of the Guarantors shall be
entitled to be subrogated to any of the rights of the
Administrative Agent or any Lender against the Borrowers or the
other Guarantors or against any collateral security held by the
Administrative Agent or any Lender for the payment of the
Guaranteed Obligations nor shall any of the Guarantors seek any
reimbursement from the Borrowers or any of the other Guarantors
in respect of payments made by such Guarantor in connection with
the Guaranteed Obligations, until all amounts owing to the
Administrative Agent and the Lenders on account of the Guaranteed
Obligations are paid in full and the Aggregate Revolving Credit
Commitment is terminated. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when
all of the Guaranteed Obligations shall not have been paid in
full, such amount shall be held by such Guarantor in trust for
the Administrative Agent, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor,
be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly endorsed by such Guarantor to
the Administrative Agent, if required) to be applied against the
Guaranteed Obligations, whether matured or unmatured, in such
order as set forth in the Credit Agreement.
SECTION 12. Expenses. All costs and expenses (including
reasonable attorneys' fees, legal expenses and court costs)
incurred by the Administrative Agent or any Lender in enforcing
or protecting their rights or remedies hereunder shall be payable
by the Guarantors on demand and shall bear interest (after as
well as before judgment) until paid at the rate then applicable
to Base Rate Loans under the Credit Agreement and shall be
additional Guaranteed Obligations hereunder.
SECTION 13. Notices. All notices and communications
hereunder shall be given to the addresses and otherwise made in
accordance with Section 13.1 of the Credit Agreement.
SECTION 14. Successors and Assigns. This Agreement is
for the benefit of the Administrative Agent and the Lenders and
their permitted successors and assigns, and in the event of an
assignment of all or any of the Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so
assigned, may be transferred with such indebtedness. This
Agreement shall be binding on each Guarantor and its successors
and assigns; provided that no Guarantor may assign any of its
rights or obligations hereunder without the prior written consent
of the Administrative Agent and the Lenders.
SECTION 15. Amendments, Waivers and Consents. No term,
covenant, agreement or condition of this Agreement may be amended
or waived, nor may any consent be given, except in the manner set
forth in Section 13.11 of the Credit Agreement.
SECTION 16. Powers Coupled with an Interest. All
authorizations and agencies herein contained with respect to the
Collateral are irrevocable and powers coupled with an interest.
SECTION 17. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF VIRGINIA, WITHOUT REFERENCE TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES THEREOF.
SECTION 18. Consent to Jurisdiction. Each Guarantor
hereby irrevocably consents to the personal jurisdiction of the
state and federal courts located in Richmond, Virginia in any
action, claim or other proceeding arising out of or any dispute
in connection with this Agreement, any rights or obligations
hereunder, or the performance of such rights and obligations.
Each Guarantor hereby irrevocably consents to the service of a
summons and complaint and other process in any action, claim or
proceeding brought by the Administrative Agent or any Lender in
connection with this Agreement, any rights or obligations
hereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner provided in
Section 13.1 of the Credit Agreement. Nothing in this Section 18
shall affect the right of the Administrative Agent or any Lender
to serve legal process in any other manner permitted by
Applicable Law or affect the right of the Administrative Agent or
such Lender to bring any action or proceeding against any
Guarantor or its properties in the courts of any other
jurisdictions.
SECTION 19. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party,
whether made before or after institution of any judicial
proceeding, any dispute, claim or controversy arising out
of, connected with or relating to this Agreement or any of
the Loan Documents ("Disputes"), between or among the
parties thereto shall be resolved by binding arbitration as
provided herein. Institution of a judicial proceeding by a
party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as
class actions, claims arising from Loan Documents executed
in the future, or claims concerning any aspect of the past,
present or future relationships arising out or connected
with the Loan Documents. Arbitration shall be conducted
under and governed by the Commercial Financial Disputes
Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Washington, D.C.
The expedited procedures set forth in Rule 51, et seq. of
the Arbitration Rules shall be applicable to claims of less
than $1,000,000. All applicable statutes of limitation
shall apply to any Dispute. A judgment upon the award may
be entered in any court having jurisdiction.
Notwithstanding anything foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within
ninety (90) days after such demand thereof and shall be
concluded within one hundred and twenty (120) days after
such demand. These time limitations may not be extended
unless a party hereto shows cause for extension and then
such extension shall not exceed a total of sixty (60) days.
The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge
from the highest court of general jurisdiction, state or
federal, of the state where the hearing will be conducted.
Notwithstanding the foregoing, this paragraph shall not
apply to any interest rate swap agreement that is a Loan
Document. The parties hereto do not waive any applicable
Federal or state substantive law except as provided herein.
(b) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
LAW, THE ADMINISTRATIVE AGENT, EACH LENDER, AND EACH
GUARANTOR, BY THEIR ACCEPTANCE OF THIS AGREEMENT OR THE
BENEFITS HEREOF, HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF OR ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding
the preceding binding arbitration provisions, the parties
hereto and the other Loan Documents preserve, without
diminution, certain remedies that such Person may employ or
exercise freely, either alone, in conjunction with or during
a Dispute. Each such Person shall have and hereby reserves
the right to proceed in any court of proper jurisdiction or
by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of
sale granted in the Loan Documents or under applicable law
or by judicial foreclosure and sale, (ii) all rights of self
help including peaceful occupation of property and
collection of rents, set off, and peaceful possession of
property, (iii) obtaining provisional or ancillary remedies
including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an
involuntary bankruptcy proceeding, and (iv) when applicable,
a judgment by confession of judgment. Preservation of these
remedies does not limit the power of an arbitrator to grant
similar remedies that may be requested by a party in a
Dispute.
SECTION 20. Severability. If any provision hereof is
invalid and unenforceable in any jurisdiction, then, to the
fullest extent permitted by law, (a) the other provisions hereof
shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Administrative Agent
and the Lenders in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (b) the
invalidity or unenforceability of any provisions hereof in any
jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
SECTION 21. Headings. The various headings of this
Agreement are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or any provisions
hereof.
SECTION 22. Counterparts. This Agreement may be executed
by the parties hereto in several counterparts, each of which
shall be deemed to be an original and all of which shall
constitute together but one and the same agreement.
[Signature Pages Follow]
IN WITNESS WHEREOF, each of the Guarantors has executed and
delivered this Guaranty under seal as of the date first above
written.
[CORPORATE SEAL]
By:
Name:
Title:
[CORPORATE SEAL]
By:
Name:
Title:
[CORPORATE SEAL]
By:
Name:
Title:
[CORPORATE SEAL]
By:
Name:
Title:
[CORPORATE SEAL]
By:
Name:
Title:
[CORPORATE SEAL]
By:
Name:
Title:
UNCONDITIONAL GUARANTY AGREEMENT SUPPLEMENT
UNCONDITIONAL GUARANTY AGREEMENT SUPPLEMENT, dated as of
_____________________, (the "Supplement"), made by [INSERT NAME
OF NEW SUBSIDIARY], a __________________ (the "New Guarantor"),
in favor of First Union National Bank, as Administrative Agent
(in such capacity, the "Administrative Agent") under the Credit
Agreement (as defined in the Guaranty Agreement referred to
below) for the ratable benefit of itself and the Lenders (as so
defined).
Section 1. Reference is hereby made to the guaranty
agreement dated as of ________ __, ____ (as amended, supplemented
or otherwise modified as of the date hereof, the "Guaranty
Agreement"), made by the certain Subsidiaries of Chesapeake
Corporation, a corporation organized under the laws of Virginia
(such Subsidiaries, collectively, the "Guarantors"), in favor of
the Administrative Agent. This Supplement supplements the
Guaranty Agreement, forms a part thereof and is subject to the
terms thereof. Capitalized terms used and not defined herein
shall have the meanings assigned to them in the Credit Agreement.
Section 2. The New Guarantor hereby agrees to
unconditionally guarantee to the Administrative Agent for the
ratable benefit of itself and the Lenders, and their respective
successors, endorsees, transferees and assigns, the prompt
payment (whether at stated maturity, by acceleration or
otherwise) and performance of all Obligations of the Borrowers to
the same extent and upon the same terms and conditions as are
contained in the Guaranty Agreement.
Section 3. The New Guarantor hereby agrees that it is a
party to the Guaranty Agreement as if a signatory thereto on the
Closing Date of the Credit Agreement, and the New Guarantor shall
comply with all of the terms, covenants, conditions and
agreements and hereby makes each representation and warranty, in
each case set forth therein. The New Guarantor agrees that the
"Guaranty Agreement" or "Guaranty" as used therein or in any
other Loan Documents shall mean the Guaranty Agreement as
supplemented hereby.
Section 4. The New Guarantor hereby acknowledges it has
received a copy of the Guaranty Agreement and that it has read
and understands the terms thereof.
IN WITNESS WHEREOF, the undersigned hereby causes this
Supplement to be executed and delivered as of the date first
above written.
[CORPORATE SEAL] [INSERT NAME OF NEW SUBSIDIARY]
By:
Name:
Title:
EXHIBIT F
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF NOTICE OF CONVERSION/CONTINUATION
NOTICE OF CONVERSION/CONTINUATION
Dated as of: _____________
First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation (the
"Notice") is delivered to you under Section 4.2 of the Amended
and Restated Credit Agreement dated as of March 15, 1999 (as
amended, restated or otherwise modified, the "Credit Agreement"),
by and among CHESAPEAKE CORPORATION, CHESAPEAKE UK HOLDINGS
LIMITED the lenders party thereto (the "Lenders") and First Union
National Bank, as Administrative Agent.
1. The [Revolving Credit Loan] [Swingline Loan] to which
this Notice relates was made under the [364 Day Facility], [Five
Year Facility] or [is part of the Term Loan] (Delete as
applicable).
2. This Notice is submitted for the purpose of: (Check
one and complete applicable information in accordance with the
Credit Agreement.)
0 Converting all or a portion of a Base Rate Loan
into an Offshore Rate Loan
(a) The aggregate outstanding principal
balance of such Loan is $_______________.
(b) The principal amount of such Loan to be
converted is $_______________.
(c) The requested effective date of the
conversion of such Loan is _______________.
(d) The requested Interest Period applicable
to the converted Loan is _______________.
(e) The Applicable Currency of the converted Loan is
____________.
/ / Converting all or a portion of an Offshore Rate
Loan into a Base Rate Loan
(a) The aggregate outstanding principal
balance of such Loan is $_______________
(b) The last day of the current Interest
Period for such Loan is _______________.
(c) The principal amount of such Loan to be
converted is $_______________.
(d) The requested effective date of the
conversion of such Loan is _______________.
/ / Continuing all or a portion of an Offshore Rate
Loan as an Offshore Rate Loan
(a) The aggregate outstanding principal
balance of such Loan is $_______________.
(b) The last day of the current Interest
Period for such Loan is _______________.
(c) The principal Dollar Equivalent amount
of such Loan to be continued is $_______________.
(d) The requested effective date of the
continuation of such Loan is _______________.
(e) The requested Interest Period applicable
to the continued Loan is _______________.
(f) The Applicable Currency of such Loan is
__________________.
3. The principal amount of all Loans made under the 364
Day Facility outstanding as of the date hereof and the principal
amount of all Loans made under the Five Year Facility outstanding
as of the date hereof does not exceed the maximum amount
permitted to be outstanding under the 364 Day Facility and the
Five Year Facility, respectively, pursuant to the terms of the
Credit Agreement. The principal amount of all Swingline Loans
made under the 364 Day Facility outstanding as of the date hereof
and the principal amount of all Swingline Loans made under the
Five Year Facility outstanding as of the date hereof does not
exceed the maximum amount permitted to be outstanding under the
364 Day Facility Swingline Commitment and the Five Year Facility
Swingline Commitment, respectively, pursuant to the terms of the
Credit Agreement.
4. [Borrower] hereby represents and warrants that no
Default or Event of Default (as defined in the Credit Agreement)
has occurred and is continuing.
5. Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice
of Conversion/Continuation on this ____ day of __________, ____.
[BORROWER]
By:
Name:
Title:
EXHIBIT G
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
OFFICER'S COMPLIANCE CERTIFICATE
The undersigned, on behalf of [CHESAPEAKE UK HOLDINGS
LIMITED/CHESAPEAKE CORPORATION (the "Borrowers"), hereby
certifies to the Administrative Agent, and the Lenders each as
defined in the Credit Agreement referred to below, as follows:
1. This Certificate is delivered to you pursuant to
Section 7.2 of the Amended and Restated Credit Agreement dated as
of March 15, 1999 (as amended, restated or otherwise modified,
the "Credit Agreement"), by and among the Borrowers, the lenders
party thereto (the "Lenders") and First Union National Bank, as
administrative agent (the "Administrative Agent"). Capitalized
terms used herein and not defined herein shall have the meanings
assigned thereto in the Credit Agreement.
2. I have reviewed the financial statements of the Company
and its Subsidiaries dated as of _______________ and for the
_______________ period[s] then ended and such statements present
fairly in all material respects the financial condition of the
Company and its Subsidiaries as of their respective dates and the
results of their operations of the Company and its Subsidiaries
for the respective period[s] then ended, subject to normal year
end adjustments for interim statements.
3. I have reviewed the terms of the Credit Agreement, and
the related Loan Documents and have made, or caused to be made
under my supervision, a review in reasonable detail of the
transactions and the condition of the Company and its
Subsidiaries during the accounting period covered by the
financial statements referred to in Paragraph 2 above. Such
review has not disclosed the existence during or at the end of
such accounting period of any condition or event that constitutes
a Default or an Event of Default, nor do I have any knowledge of
the existence of any such condition or event as at the date of
this Certificate [except, if such condition or event existed or
exists, describe the nature and period of existence thereof and
what action the Borrowers have taken, are taking and propose to
take with respect thereto].
4. The Applicable Margin and information as to the debt
ratings necessary for determining such figure are set forth on
the attached Schedule 1.
5. The Borrowers and their Subsidiaries are in compliance
with the financial covenants contained in Section 10.2 of the
Credit Agreement as shown on such Schedule 1.
[Signature Page Follows]
WITNESS the following signature as of the _____ day of
_________, 199_.
CHESAPEAKE CORPORATION
By:
Name:
Title:
EXHIBIT H
to
Amended and Restated Credit Agreement
dated as of March 15, 1999
by and among
CHESAPEAKE CORPORATION,
CHESAPEAKE UK HOLDINGS LIMITED
Various Lenders party thereto and
First Union National Bank, as
Administrative Agent
FORM OF ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT AND ACCEPTANCE
Dated as of: _________
Reference is made to the Amended and Restated Credit
Agreement dated as of March 15, 1999, as amended, restated or
otherwise modified (the "Credit Agreement") by and among
CHESAPEAKE CORPORATION, CHESAPEAKE UK HOLDINGS LIMITED, the
lenders party thereto (the "Lenders") and First Union National
Bank, as Administrative Agent. Capitalized terms used herein
which are not defined herein shall have the meanings assigned
thereto in the Credit Agreement.
__________________(the "Assignor") and____________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor,
as of the Effective Date (as defined below), (a) a ____% interest
in and to all of the Assignor's interest, rights and obligations
with respect to its 364 Day Facility Commitment and Revolving
Credit Loans and Competitive Bid Loans made under the 364 Day
Facility and the Assignor thereby retains ____% of its interest
therein and (b) a ____% interest in and to all of the Assignor's
interest, rights and obligations with respect to its Five Year
Facility Commitment and Revolving Credit Loans and Competitive
Bid Loans made under the Five Year Facility, which percentage,
when added to the percentage assigned under the 364 Day Facility
Commitment in clause (a) represents not less than [$10,000,000],
unless such percentage equals 100% of such Lender's Aggregate
Revolving Credit Commitment, and the Assignor thereby retains
____% of its interest therein. This Assignment and Acceptance is
entered pursuant to, and authorized by, Section 13.10 of the
Credit Agreement.
2. The Assignor (i) represents that, as of the date
hereof, its 364 Day Facility Commitment Percentage and its Five
Year Facility Commitment Percentage (without giving effect to
assignments thereof which have not yet become effective) under
the Credit Agreement are ____% and ___%, respectively, the
outstanding balances of its Revolving Credit Loans made under the
364 Day Facility and the Five Year Facility (including its Five
Year Commitment Percentage of the outstanding L/C Obligations)
(without giving effect to assignments thereof which have not yet
become effective) under the Credit Agreement are $__________ and
$__________, respectively, and the outstanding balances of its
Competitive Bid Loans made under the 364 Day Facility and the
Five Year Facility (without giving effect to assignments thereof
which have not yet become effective) under the Credit Agreement
are $_________ and $_________, respectively; (ii) makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with the Credit Agreement or any other Loan
Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any
other instrument or document furnished pursuant thereto, other
than that the Assignor is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; (iii) makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or their
respective Subsidiaries or the performance or observance by the
Borrowers or their respective Subsidiaries of any of their
obligations under the Credit Agreement or any other instrument or
document furnished or executed pursuant thereto; and (iv)
attaches the applicable Note(s) delivered to it under the Credit
Agreement and requests that the Borrower exchange such Note(s)
for new Notes payable to each of the Assignor and the Assignee as
follows:
Note Payable to the Order of: Principal Amount of Note:
____________ $_________
____________ $_________
3. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance;
(ii) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 7.1 thereof and such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this
Assignment and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Assignor or any other
Lender or the Administrative Agent and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iv) confirms that it is an
Eligible Assignee; (v) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers
under the Credit Agreement and the other Loan Documents as are
delegated to the Administrative Agent by the terms thereof,
together with such powers as are reasonably incidental thereto;
(vi) agrees that it will perform in accordance with their terms
all the obligations which by the terms of the Credit Agreement
and the other Loan Documents are required to be performed by it
as a Lender; (vii) agrees to hold all confidential information in
accordance with the provisions of Section 13.10(g) of the Credit
Agreement; and (viii) includes herewith for the Administrative
Agent the forms required by Section 4.11(e) of the Credit
Agreement (if not previously delivered).
4. The effective date for this Assignment and Acceptance
shall be as set forth in Section 1 of Schedule 1 hereto (the
"Effective Date"), subject to the consents referred to in the
following sentence. Following the execution of this Assignment
and Acceptance, it will be delivered to the Administrative Agent
for, to the extent required by the Credit Agreement, consent by
the Borrower and the Administrative Agent and acceptance and
recording in the Register.
5. Upon such consents, acceptance and recording, from and
after the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and the other Loan Documents to which
Lenders are parties and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a
Lender under each such agreement, and (ii) the Assignor shall, to
the extent provided in this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit
Agreement and the other Loan Documents.
6. Upon such consents, acceptance and recording, from and
after the Effective Date, the Administrative Agent shall make all
payments in respect of the interest assigned hereby (including
payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date
or with respect to the making of this assignment directly between
themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A
CONTRACT UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA.
ASSIGNOR:
By:
Title:
ASSIGNEE:
By:
Title:
Acknowledged and Consented to on behalf of the Borrowers:3
CHESAPEAKE CORPORATION
By:
Name:
Title:
CHESAPEAKE UK HOLDINGS LIMITED
By:
Name:
Title:
Consented to and Accepted:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By:
Title:
Schedule I
to
Assignment and Acceptance
1. Effective Date ____________, ____
2. Assignor's Interest
Prior to Assignment
(a) (i) 364 Day Facility Commitment Percentage ____ %
(ii) Five Year Facility Commitment Percentage ____ %
(iii)Aggregate Revolving Credit Commitment
Percentage ____%
(b) Outstanding balance of
(i) 364 Day Facility Loans $________
(ii) Five Year Facility Loans $________
(c) Outstanding balance of Assignor's Five Year Facility
Commitment Percentage of the L/C Obligations
$________
3. Assigned Interest (from Section 1) of
(a) 364 Day Facility Loans ____%
(b) Five Year Facility Loans ____%
(c) Aggregate Revolving Credit Commitment Percentage ____%
4. Assignee's Extensions of Credit
After Effective Date
(a) Total Outstanding balance of
Assignee's 364 Day Facility Loans
(line 2(b)(i) times line 3(a)) $_________
(b) Total Outstanding balance of
Assignee's Five Year Facility Loans
(line 2(b)(ii) times line 3(b)) $_________
(c) Total Outstanding balance of
Assignee's Five Year Facility Commitment Percentage
of the L/C Obligations
(line 2(c)(i) times line 3(b)) $_________
5. Retained Interest of Assignor after
Effective Date
(a) Retained Interest (from Section 1):
(i) 364 Day Facility Commitment Percentage ____%
(ii) Five Year Facility Commitment Percentage ____%
(iii)Aggregate Revolving Credit Commitment
Percentage ____%
(b) Outstanding balance of Assignor's Loans:
(i) 364 Day Facility Loans
(line 2(b)(i) times line 5(a)(i)) $________
(ii) Five Year Facility Loans
(line 2(a)(ii) times line 5(a)(ii)) $________
(c) Outstanding balance of Assignor's Five Year Facility
Commitment Percentage of L/C Obligations
(line 2(c)(i) times line 5(a)(ii)) $________
6. Payment Instructions
(a) If payable to Assignor,
to the account of Assignor to:
ABA No.:
Account Name:
Acct. No.
Attn:
Ref:
(b) If payable to Assignee, to the account
of Assignee to:
ABA No.:
Account Name:
Account No.:
Ref:
______________________________
* Guaranteed by Chesapeake Corporation.
1 Complete in accordance with Section 2.5(a) of the Credit
Agreement.
2 Complete in accordance with Section 2.5(b) of the Credit
Agreement.
3 If applicable pursuant to Section 13.10.
EX 11.1
CHESAPEAKE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
for the three years ended December 31, 1998
(Share amounts in thousands, dollar amounts
in millions, except for per share amounts)
1998 1997 1996
---- ---- ----
Basic:
Weighted average number of common
shares outstanding 21,202 23,149 23,528
====== ====== ======
Income before extraordinary item $ 34.0 $ 50.9 $ 30.1
Extraordinary item 13.3 (2.3) -
------ ------ ------
Net income $ 47.3 $ 48.6 $ 30.1
====== ====== ======
Per share amount:
Earnings before extraordinary item $ 1.60 $ 2.20 $ 1.28
Extraordinary item .63 (.10) -
------ ------ ------
$ 2.23 $ 2.10 $ 1.28
====== ====== ======
Diluted:
Weighted average number of common
shares outstanding 21,203 23,149 23,528
Net additional common shares
issuable upon exercise of
dilutive options, determined
by treasury stock method using
the average price 365 211 117
------ ------ ------
Common shares, equivalents, and
other potentially dilutive
securities 21,568 23,360 23,645
====== ====== ======
Income before extraordinary item $ 34.0 $ 50.9 $ 30.1
Extraordinary item 13.3 (2.3) -
------ ------ ------
Net income $ 47.3 $ 48.6 $ 30.1
====== ====== ======
Per share amount:
Earnings before extraordinary
item $ 1.57 $ 2.18 $ 1.27
Extraordinary item .62 (.10) -
------ ------ ------
Earnings $ 2.19 $ 2.08 $ 1.27
====== ====== ======
EX 13.1
Portions of the
CHESAPEAKE CORPORATION
Annual Report to Stockholders
For the year ended December 31, 1998
RECENT QUARTERLY RESULTS
Income(Loss)
Before
Cumulative
Effect Of
Accounting
Change
And Extra- Net
Net Gross ordinary Income
Quarter Sales Profit item (Loss)
- ------------------------------------------------------------
(Dollar amounts in millions except per share amounts)
- ------------------------------------------------------------
1996:
First $ 277.7 $ 53.8 $ 7.9 $ 7.9
Second 276.6 51.5 3.9 3.9
Third 309.3 62.8 9.5 9.5
Fourth 295.0 60.4 8.8 8.8
-------- ------ ------ ------
Year $1,158.6 $228.5 $ 30.1 $ 30.1
========== ======== ======== ========
1997:
First $ 294.5 $ 44.2 $ (3.5) $ (3.5)
Second 264.3 43.2 37.1* 34.8*
Third 233.7 53.9 9.7 9.7
Fourth 228.5 57.6 7.6 7.6
-------- ------ ------ ------
Year $1,021.0 $198.9 $ 50.9* $ 48.6*
======== ====== ====== ======
1998:
First $ 216.8 $ 49.3 $ 8.0** $21.3**
Second 237.0 52.0 10.6 10.6
Third 260.7 59.2 13.2 13.2
Fourth 235.9 57.1 2.2 2.2
-------- ------ ------ ------
Year $ 950.4 $217.6 $ 34.0** $ 47.3**
======== ====== ====== ======
* Includes after-tax gain of $49.1 million, or $2.07 per share,
on the sale of the Divested Businesses to St. Laurent (U.S.)
during the second quarter of 1997.
**Includes after-tax gain of $13.3 million, or $.62 per share, on
the cumulative effect of change in accounting for certain timber
reforestation costs that were previously expensed.
-1-
RECENT QUARTERLY RESULTS, CONTINUED
Earnings(Loss)
Before
Cumulative Effect
Of Accounting
Change And
Extraordinary
Item Earnings(Loss)Dividends Stock Price
Quarter Basic Diluted Basic Diluted Declared High Low
- ---------------------------------------------------------------
(Dollar amounts in millions except per share amounts)
1996:
First $0.33 $0.33 $0.33 $0.33 $0.20 $30.50 $25.25
Second 0.17 0.17 0.17 0.17 0.20 30.50 25.25
Third 0.41 0.40 0.41 0.40 0.20 27.63 23.13
Fourth 0.38 0.37 0.38 0.37 0.20 31.75 26.50
-----
Year $1.28 $1.27 $1.28 $1.27 $0.80
=====
1997:
First $(0.15) $(0.15)$(01.5) $(0.15) $0.20 $32.50 $27.13
Second 1.58* 1.56* 1.48* 1.46* 0.20 36.00 27.25
Third 0.41 0.41 0.41 0.41 0.20 36.50 29.94
Fourth 0.34 0.34 0.34 0.34 0.20 36.75 31.44
-----
Year $2.20* $2.18* $2.10* $2.08* $0.80
=====
1998:
First $0.38* $0.37**$1.00** $0.99** $0.20 $35.63 $31.75
Second 0.51 0.50 0.51 0.50 0.20 39.13 33.63
Third 0.61 0.60 0.61 0.60 0.20 41.75 32.06
Fourth 0.10 0.10 0.10 0.10 0.22 36.88 32.75
-----
Year $1.60** $1.57**$2.23** $2.19** $0.82
=====
* Includes after-tax gain of $49.1 million, or $2.07 per share,
on the sale of the Divested Businesses to St. Laurent (U.S.)
during the second quarter of 1997.
**Includes after-tax gain of $13.3 million, or $.62 per share, on
the cumulative effect of change in accounting for certain timber
reforestation costs that were previously expensed.
-2-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CHESAPEAKE'S BUSINESS
Chesapeake conducts its business in three segments: Tissue;
Specialty Packaging; and Forest Products/Land Development.
Tissue Segment
Chesapeake's Tissue segment, which consists of Wisconsin Tissue
Mills Inc. and Wisconsin Tissue de Mexico, S.A. de C.V.
(collectively, "Wisconsin Tissue" or "WT"), produces tissue for
industrial and commercial markets including full-menu and fast-
food restaurants, hotels, motels, clubs, health care facilities,
schools, office locations, and commercial airlines. Operations of
the Tissue segment include: paper mills in Menasha, WI;
Flagstaff, AZ; and Chicago, IL; and converting and distribution
facilities in Neenah, WI; Bellemont, AZ; Greenwich, NY; and
Toluca, Mexico. The combined operations sell over 2,200 products
including napkins, tablecovers, toweling, placemats, wipers, and
facial and bathroom tissue. Wisconsin Tissue's products are sold
throughout the United States, Canada, and Mexico using a
dedicated sales force and independent distributors.
Specialty Packaging Segment
Chesapeake's Specialty Packaging segment is composed of
Chesapeake Display and Packaging Company ("CD&P"), which designs
and manufactures point-of-sale displays and graphic packaging in
the United States, Canada, and Europe; and Chesapeake Packaging
Co. ("CP"), which produces corrugated shipping containers in the
United States.
Chesapeake Display and Packaging: CD&P designs, manufactures,
and, in some cases, packs and distributes display and promotional
units that are used as marketing tools in supermarkets, video
stores, convenience stores, and other retail locations. Point-of-
sale displays are free-standing and highlight or advertise a
specific product or set of products for customers. Most point-of-
sale displays are temporary and are used to support a specific
product advertisement or roll-out. However, they can also be more
permanent when constructed out of wood and/or plastic. Design
creativity, strength, print quality, and appearance are critical
performance features.
CD&P operates a network of sixteen design, manufacturing,
assembly, packaging, and distribution facilities throughout the
United States and Europe and provides its customers with a wide
range of products and services, including graphic and structural
-3-
design, in-house manufacturing, project management, assembly,
custom packing, and distribution.
CD&P also designs and manufactures light-weight graphic packaging
that is used by consumer products companies to pack, store,
stack, and display retail products. This is a litho-labeled,
printed corrugated product, which is preferred by mass
merchandisers because of its superior graphic appearance and
stacking strength.
As with point-of-sale displays, CD&P offers turn-key service to
its graphic packaging customers by providing CAD-CAM mechanical
design, digital art board, graphic design, die making, product
testing, and full customer support. Chesapeake operates three
dedicated graphic packaging facilities in Visalia, CA, Richmond,
IN, and Pelahatchie, MS, that are capable of servicing national
accounts.
Chesapeake Packaging: CP consists of ten corrugated shipping
container plants located in seven states, which manufacture
corrugated boxes and specialty packaging primarily for customers
within each plant's regional area. The raw materials for the
packaging plants include linerboard and corrugating medium, which
are converted to make the walls of the packaging unit. Various
converting equipment is used to print, cut, slot, and glue the
container to customer specifications.
Forest Products/Land Development Segment
Chesapeake's Forest Products/Land Development segment consists of
Chesapeake Forest Products Company, Chesapeake Building Products
Company, Delmarva Properties, Inc. and Stonehouse Inc. The
Company is currently evaluating strategic alternatives regarding
this segment's timberlands and building products businesses.
Chesapeake Forest Products: Chesapeake Forest Products Company
owns and actively manages approximately 321,000 acres of
timberland located in Virginia, Maryland,and Delaware.
Chesapeake's forests are managed to maximize the harvest of
sawtimber using environmentally sound, modern forestry methods.
Chesapeake Building Products: Chesapeake Building Products
Company operates three sawmills in Virginia and Maryland, which
manufacture pine lumber. Over 50% of the raw timber processed at
the mills is provided from Chesapeake's timberlands. Sawmill
products are sold by an internal sales force to independent
brokers and retailers.
-4-
Delmarva Properties, Inc. and Stonehouse Inc.: Delmarva
Properties, Inc. and Stonehouse Inc. develop and market land that
is more valuable when used as developed property than as
timberland. Delmarva Properties is currently developing
approximately 5,200 acres in Virginia, Maryland, and Delaware,
primarily for residential housing. Sales include large lots and
acreage for third parties to develop for both residential and
commercial uses. A major project involves the development of a
3,200 acre mixed-use site in New Kent, VA. Stonehouse Inc. is a
50% partner in a joint venture with Dominion Capital, Inc. to
develop a 7,600 acre planned community in James City County, VA.
The majority of the land currently being developed by both
entities was timberland formerly owned by Chesapeake Forest
Products Company.
EARNINGS OVERVIEW
The Company reported net income of $47.3 million, or $2.19 per
share, for 1998; $48.6 million, or $2.08 per share, for 1997; and
$30.1 million, or $1.27 per share, for 1996. Results for 1998 and
1997 include unusual items that affect the comparability of
reported results as described below. Earnings per share amounts
are on a diluted basis throughout this discussion.
Graph:
1996 1997 1998
- ---- ---- ----
Diluted Earnings per Share
(Dollars)
As reported 1.27 2.08 2.19
Pro Forma - Ongoing Operations 1.63 1.13 1.98
Unusual Items
Unusual items affecting 1998's results are: 1) a $13.3 million,
or $0.62 per share, after-tax gain resulting from a change in
accounting to capitalize certain timber reforestation costs that
were previously expensed, which the Company believes is
preferable because it achieves better matching of reforestation
costs with the revenues realized from the eventual harvesting of
the timber; and 2) restructuring charges related to Chesapeake's
Tissue and Specialty Packaging segments of $8.8 million after
tax, or $0.41 per share, the details of which are described in
the next section of this report.
-5-
Unusual items affecting 1997's results include: 1) a gain of
$86.3 million ($49.1 million after tax, or $2.07 a share) from
the sale of the West Point, VA, kraft products mill (the "West
Point Mill") and related assets; 2) restructuring and other
special charges related primarily to Chesapeake's Specialty
Packaging businesses of $10.8 million after tax, or $.45 a share;
and 3) an extraordinary loss of $2.3 million after
tax, or $.10 per share, associated with the repurchase of long-
term debt.
Management evaluates the Company's financial performance by
excluding the financial results of divested operations,
restructuring and other special charges, and extraordinary items.
The terms "from ongoing operations" and "pro forma" reflect those
adjustments and will be used throughout the
following analysis. More information about Chesapeake's
businesses is provided under the caption "Business Segment
Highlights" and in Note 15 to the consolidated financial
statements.
Restructuring
During 1998, management initiated a review of the Tissue and
Specialty Packaging segments with the objective of reducing
costs and increasing productivity. The review included
organization and cost structures, facility utilization, and
product offerings. As a result of this review, the Company
formulated a restructuring plan which resulted in a fourth
quarter 1998 charge of $11.8 million before taxes ($8.8 million
after tax, or $.41 per share).
The 1998 restructuring program consists primarily of a 5%
reduction in the Company's global workforce (approximately 250
employees) through the elimination of redundant and overlapping
positions and facility consolidations. The reductions are
taking place in Chesapeake's Tissue and Specialty Packaging
segments.
Wisconsin Tissue has implemented a combination of early
retirement and voluntary severance programs to reduce its work
force by approximately 70 positions. CD&P has implemented a work
force reduction of approximately 60 positions and will close two
facilities in 1999. The 1998 restructuring plan, when completely
executed, is expected to generate annualized pretax savings of
$5.0 million.
-6-
The following table sets forth the details of the restructuring
charge recognized in the fourth quarter of 1998:
Specialty
Tissue Packaging Total
------ --------- -----
Employment reduction $5.0 $4.6 $ 9.6
Facility consolidation:
Closure costs - .9 .9
Inventory write-down - .2 .2
Fixed asset write-down - 1.1 1.1
---- ---- -----
Totals $5.0 $6.8 $11.8
==== ==== =====
During the second quarter of 1997, the Company recorded
restructuring and other special charges of $18.9 million before
taxes ($10.8 million after tax, or $.45 per share) related
primarily to its Specialty Packaging segment. The restructuring
charge provided for the costs associated with management
reorganization and the closures of one point-of-sale display
facility and one graphic packaging facility. The intent of these
initiatives was to eliminate redundant overhead and processes,
improve geographic efficiency, and reduce fixed costs. Execution
of the 1997 restructuring plan was completed during 1998. The
1997 reserve for restructuring costs was completely used by
December 31, 1998.
Divested Businesses
The West Point Mill, four corrugated container plants, and a
building products facility (the "Divested Businesses") were sold
to St. Laurent Paperboard (U.S.) Inc. ("St. Laurent (U.S.)") on
May 23, 1997. In the first half of 1997, the corrugated container
and building products facilities were profitable, while the West
Point Mill, which operates in a highly cyclical industry,
recorded a loss due to unfavorable pricing conditions. The
Divested Businesses contributed $155.5 million in net sales in
1997, and recorded an Earnings Before Interest and Taxes ("EBIT")
loss of $14.3 million. Net sales and EBIT from Divested
Businesses in 1996 were $384.7 million and $7.2 million,
respectively.
RESULTS OF OPERATIONS
Overview
The following analysis of consolidated results highlights major
year-to-year changes in the Company's income statement. More
detail regarding these changes is found under the caption
"Segment Review" below.
-7-
1998 vs. 1997
Sales: Chesapeake's 1998 net sales were $950.4 million, down 7%
from 1997's net sales of $1,021.0 million, due primarily to the
sale of the Divested Businesses. 1998 net sales were 10% higher
than 1997 net sales from ongoing operations of $865.5 million due
primarily to higher Tissue and Specialty Packaging shipments.
Income: Net income for 1998 was $47.3 million, or $2.19 a share,
up 5% from net income of $48.6 million, or $2.08 a share, earned
in 1997. Earnings for 1998 include an extraordinary gain of $13.3
million after tax, or $.62 a share, from the cumulative effect of
an accounting change. The 1998 results also include restructuring
charges related to Chesapeake's Tissue and Specialty Packaging
segments of $8.8 million after tax, or $.41 a share. Net income
for 1998 excluding these unusual items was $42.8 million, or
$1.98 per share, up 75% compared to net income from ongoing
operations for 1997 of $26.4 million, or $1.13 per share, due
primarily to higher EBIT in all segments.
1998 gross profit margin increased by 31_2 points compared to the
previous year due primarily to the sale of the Divested
Businesses in 1997. 1998 gross profit margin compared to 1997
gross margin from ongoing operations, dropped by half a point due
to lower corrugated container and pine lumber margins, partially
offset by increased margins for Wisconsin Tissue and
CD&P.
Selling, General, and Administrative ("SG&A") expenses in 1998
decreased $27.6 million, or 17%, compared to 1997, and were 14%
of net sales in 1998 compared to 16% in 1997. 1998 SG&A expenses
as a percentage of sales dropped by over 31_2 points to 14% from
1997 SG&A expenses from continuing operations as a result of
controls on spending spread over a larger sales base.
EBIT for 1998 was $86.5 million, up $32.4 million, or 60%,
compared to 1997 EBIT from ongoing operations of $54.1 million,
due primarily to higher shipments and improved operating
efficiencies.
Net interest expense decreased $3.1 million from 1997 due
primarily to lower average debt outstanding and interest earned
from the remaining cash proceeds from the sale of the Divested
Businesses in 1997.
The Company's effective income tax rate decreased to 39.1% in
1998 compared to 40.3% in 1997. The decrease is primarily due to
a reduction in goodwill amortization.
-8-
Graph:
1996 1997 1998
---- ---- ----
Interest Expense, Net
(In millions of $)
As reported 33.9 22.0 18.9
Pro Forma 12.3 13.6 18.9
1997 vs. 1996
Sales: Chesapeake's 1997 net sales were $1,021.0 million, down
12% from 1996's net sales of $1,158.6 million, due to partial
year net sales of the Divested Businesses in 1997 compared to
full year net sales of the Divested Businesses in 1996. Net sales
from ongoing operations in 1997 of $865.5 million were 12% higher
than 1996 net sales from ongoing operations of $773.9 million.
Higher shipment volumes for all three business segments were
partially offset by lower average selling prices in the Tissue
segment.
Income: Net income for 1997 was $48.6 million, or $2.08 per
share, up 64% from 1996 net income of $30.1 million, or $1.27 per
share. Earnings for 1997 include a gain of $86.3 million ($49.1
million after tax, or $2.07 a share) from the sale of the
Divested Businesses. Net income for 1997 also includes
restructuring and other special charges related primarily to
Chesapeake's Specialty Packaging segment of $10.8 million after
tax, or $.45 a share, and an extraordinary loss of $2.3 million
after tax, or $.10 per share, associated with the repurchase of
long-term debt. Net income for 1997 from ongoing operations prior
to these unusual items was $26.4 million, or $1.13 per share,
down from net income from ongoing operations of $1.63 per share
in 1996 due primarily to lower Tissue and Specialty Packaging
EBIT.
The gross profit margin in 1997 was unchanged compared to 1996.
1997 gross profit margin from ongoing operations compared to 1996
gross profit margin from ongoing operations was down 21 1/2
points due primarily to lower tissue margins and higher costs in
certain packaging businesses.
SG&A expenses in 1997 increased $6.3 million, or 4%, compared to
1996, and were 16% of net sales in 1997, compared to 13% in 1996.
Certain costs previously allocated to the Divested Businesses
remained in SG&A for the full year in 1997.
-9-
EBIT for 1997 from ongoing operations was $54.1 million compared
to EBIT from ongoing operations of $73.8 million in 1996, due
primarily to lower pricing for tissue products and process cost
inefficiencies in certain packaging businesses.
1997 net interest expense decreased $11.9 million from 1996 due
primarily to lower average debt outstanding and interest earned
on the remaining cash proceeds from the sale of the Divested
Businesses in 1997.
The Company's effective income tax rate increased to 40.3% in
1997 from 36.1% in 1996, primarily due to non-deductible write-
offs associated with the 1997 restructuring program.
SEGMENT REVIEW
Tissue
1998 vs. 1997
Net sales of $433.3 million in 1998 were 6% higher than 1997, due
to growth in converted product volume and higher sales of jumbo
rolls, partially offset by modestly lower average selling prices.
1998 EBIT of $69.6 million was up 25% compared to EBIT of $55.8
million in 1997, while 1998 EBIT return on net sales (operating
margin) rose by 21_2 points to 16.1%. The improvements in EBIT
and operating margin were the result of favorable product mix and
improved papermaking and tissue
converting efficiencies.
Graph:
1996 1997 1998
---- ---- ----
Tissue Segment Net Sales
(In millions of $)
Net sales 392.0 410.7 433.3
Percent change +21% +5% +6%
1997 vs. 1996
Net sales of $410.7 million in 1997 were 5% higher than 1996, due
to growth in converted product volume, partially offset by
lower average selling prices. EBIT of $55.8 million in 1997 was
down 14.2% from EBIT of $65.0 million in 1996, while 1997
operating margin declined by 3 points, to 13.6%, due to higher
wastepaper costs and start-up costs associated with increased
converting capacity.
-10-
Graph:
1996 1997 1998
---- ---- ----
Tissue Segment Operating Margin
(percent)
Operating Margin 16.6 13.6 16.1
Specialty Packaging
1998 vs. 1997
Net sales of $472.3 million in 1998 increased 13% compared to
1997 net sales from ongoing operations due primarily to higher
display and graphic packaging volume and higher corrugated
container prices. The Specialty Packaging segment's 1998 EBIT of
$13.3 million was up $7.9 million from 1997 EBIT from ongoing
operations of $5.4 million, while operating margins improved 11
1/2 points to 2.8%. These improvements were due to volume growth,
higher capacity utilization, and operating cost reductions,
partially offset by slightly lower corrugated container gross
profit margins.
Graph:
1996 1997 1998
---- ---- ----
Specialty Packaging Segment Net sales
(Ongoing Operations)
(In millions of $)
Net sales 357.6 416.8 472.3
Percent change +12% +17% +13%
1997 vs. 1996
Net sales from ongoing operations of $416.8 million increased 17%
compared to 1996 net sales from ongoing operations due to volume
growth and the full year impact of Chesapeake Europe, which was
acquired during the third quarter of 1996. The Specialty
Packaging segment's 1997 EBIT from ongoing operations of $5.4
million was down substantially from 1996 EBIT from
ongoing operations of $17.7 million, while operating margins
dropped to 1.3% in 1997 from 5.0% in 1996. These declines were
due primarily to process cost inefficiencies and additional costs
associated with operating graphic packaging facilities below
capacity.
-11-
Graph:
1996 1997 1998
---- ---- ----
Specialty Packaging Segment Operating Margin
(Ongoing Operations)
(percent)
Operating margin 5.0 1.3 2.8
Forest Products/Land Development
1998 vs. 1997
Net sales for 1998 were $44.8 million, up 18% from 1997's net
sales from ongoing operations of $38.0 million, while EBIT of
$16.3 million for 1998 was up 29% from 1997 EBIT from ongoing
operations due to higher pine lumber volume, the addition of
external pulpwood shipments after the sale of the Divested
Businesses in 1997, and higher land sales, partially offset by
lower pine lumber prices.
Graph:
1996 1997 1998
---- ---- ----
Forest Products/Land Development Segment
Net Sales (Ongoing Operations)
(In millions of $)
Net sales 24.3 38.0 44.8
% change +2% +56% +18%
1997 vs. 1996
Net sales from ongoing operations for 1997 were $38.0 million, up
56% from 1996 net sales from ongoing operations of $24.3
million, due to the addition of external pulpwood sales to St.
Laurent (U.S.), increased lumber shipments, and higher lumber
prices. EBIT from ongoing operations of $12.6 million for 1997
was up 25% from 1996 due to increased shipments, favorable
pricing, and improved sawmill operating efficiency.
Graph:
1996 1997 1998
---- ---- ----
Forest Products/Land Development Segment
EBIT (Ongoing Operations)
(In millions of $)
EBIT 10.1 12.6 16.3
-12-
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company's liquidity in terms of its
overall ability to generate cash to fund its operating and
investing activities. Significant factors affecting the
management of liquidity are cash flows from operating activities,
capital expenditures, adequate bank lines of credit, and
financial flexibility to attract long-term capital with
satisfactory terms.
Capital Structure
Chesapeake uses financial markets worldwide for its financing
needs. The Company is party to various bank credit facilities
which are discussed in Note 4 to the consolidated financial
statements. These credit facilities give Chesapeake the financing
flexibility it needs to take advantage of investment
opportunities that may arise and to satisfy future
funding requirements.
Chesapeake targets a capital structure that is consistent for an
"investment grade" senior debt rating. This capital structure
allows Chesapeake's stockholders to enjoy the benefits of prudent
financial leverage, while protecting debtholder interests and
ensuring ready access to capital markets.
Chesapeake's total capitalization (consisting of long-term debt
net of cash, deferred taxes, and stockholders' equity) was $723.6
million at the end of 1998, compared to $681.4 million at the end
of 1997. The year-end ratio of long-term debt net of cash to
total capital was 28.8% for 1998, up slightly from 28.0% for
1997, but still well below Chesapeake's long-term debt-to-total-
capital ratio target range of 35% to 45%.
Graph:
1996 1997 1998
---- ---- ----
Capital Structure
(In millions of $)
Long Term Debt, net of cash 489.6 191.0 208.0
Deferred Taxes 126.9 67.3 74.3
Stockholders' Equity 469.1 423.1 441.3
------- ----- -----
1,085.6 681.4 723.6
======= ===== =====
During each of 1998 and 1997, the Company paid cash dividends of
$0.80 per share. A 10% increase in the quarterly dividend to $.22
per share was declared in the fourth quarter of 1998 to be
-13-
paid February 12, 1999. Outstanding common stock at year-end 1998
totaled 21.4 million shares, an increase of .1 million shares
from year-end 1997, as purchases of .2 million shares by
the Company during the year were slightly less than the number of
shares issued for employee benefit plans. See Note7 to the
consolidated financial statements for more details on capital
stock and additional paid-in capital. Year-end 1998
stockholders' equity was $441.3 million, or $20.62 per share, up
$.78 compared to year-end 1997. The market price for Chesapeake's
common stock ranged from a low of $31.75 per share to a high of
$41.75 per share in 1998, with a year-end price of $36.88 per
share, up 7% from 1997's year-end price of $34.38 per share.
Graph:
1996 1997 1998
---- ---- ----
Common Stock Price Range & Stockholders'
Equity
(dollars)
Equity Per Share 20.05 19.84 20.62
Common Stock Price Range
High 31.75 36.75 41.75
Low 23.13 27.13 31.75
In August 1997, Standard and Poor's raised its rating on
Chesapeake senior debt from BBB- to BBB, largely as a result of
debt reduction associated with the sale of the Divested
Businesses in May 1997. Moody's maintained its rating at Baa3.
In January 1999, the Company entered into a new $450 million bank
credit facility which will be used primarily to fund the purchase
of Field Group plc, as discussed in Note 14 to the consolidated
financial statements. The credit facility includes a five-year
$250 million revolving line of credit and a 364-day $200 million
revolving line of credit, which is convertible at the Company's
option to a two year term loan.
The Company is considering various alternatives for its Forest
Products businesses that may result in a sale of such businesses.
The net proceeds from any such sale are likely to be used to
reduce the Company's debt, repurchase shares, and finance future
growth opportunities.
The Company believes that existing sources of liquidity are
adequate to meet anticipated borrowing needs at comparable risk-
based interest rates for the foreseeable future.
-14-
Cash Flow
Net cash provided by operating activities of $90.4 million was up
significantly from net cash used by operating activities of $31.4
million in 1997, but down from $131.2 million provided by
operations in 1996. The increase in 1998 net cash flow from
operations compared to 1997 is due primarily to higher EBIT in
all three business segments and lower working capital
requirements.
EBITDA, a measure of internal cash flow combining earnings before
interest and income taxes plus non-cash charges for depreciation,
cost of timber harvested, and amortization, and excluding the
effects of restructuring and accounting changes, was $148.8
million for 1998, 32% higher than 1997's EBITDA of
$112.4 million, excluding the 1997 gain on sale of businesses,
restructuring and other special charges, and extraordinary items
due primarily to higher EBIT in all business segments.
Graph:
1996 1997 1998
---- ---- ----
EBITDA (Ongoing Operations)
(In millions of $)
Earnings Before Interest and Income
Taxes (not including one-time gain,
restructuring, special charges, or
extraordinary item) 73.8 54.1 86.5
Noncash charges for depreciation,
cost of timber harvested, and amortization 48.1 58.3 62.3
----- ----- -----
121.9 112.4 148.8
===== ===== =====
1998 year-end working capital decreased by $10.2 million from
year-end 1997, primarily due to an increase in accounts payable
and accrued expenses and a reclassification of long-term debt,
offset in part by an increase in accounts receivable. For ongoing
operations, the 1998 average collection period of 45 days
improved by 3 days versus 1997, while 1998 net inventory turnover
of 7.2 turns improved by .4 turns. The improvements were due to
Company-wide initiatives to improve working
capital efficiency.
Cash used for investing activities in 1998 of $87.0 million was
down $511.5 million from the prior year's cash provided by
investing activities of $424.5 million as a result of cash
proceeds from the sale of the Divested Businesses in 1997 of
$491.0 million and acquisitions in 1998.
-15-
Cash used in financing activities in 1998 was $14.3 million
compared to $329.6 million in 1997, due to the use in 1997 of the
proceeds from the sale of the Divested Businesses to reduce
credit line borrowings by $179.0 million and long-term debt by
$66.7 million, and to purchase 2.3 million shares of the
Company's common stock at a net cost of $79.4 million. The
Company used $6.9 million to purchase 197,300 shares of its
common stock during 1998. See Note 4 to the consolidated
financial statements for additional information regarding long-
term debt.
Capital Expenditures & Acquisitions
1998: Expenditures for property, plant, and equipment totaled
$73.3 million. Major initiatives included: new tissue converting
equipment at the Menasha, WI, Bellemont, AZ, and Greenwich, NY,
facilities; a new warehouse adjacent to the Bellemont, AZ,
converting facility; new printing equipment at the Visalia, CA,
and Richmond, IN, graphic packaging facilities; implementation of
new information systems throughout the company; and expansion and
modernization of the West Point, VA, sawmill. No other 1998
capital projects were individually material.
Acquisition expenditures in 1998 were $18.1 million and included
the purchase of all of the outstanding capital stock of Capitol
Packaging Corporation in Denver, CO, and substantially all of the
assets and assumption of certain liabilities of Rock City Box
Co., Inc. in Utica, NY.
1997: Expenditures for property, plant, and equipment, totaled
$68.2 million. Major initiatives included new tissue converting
equipment at the Bellemont, AZ, and Greenwich, NY, facilities
and expansion of the Erlanger, KY, display and packaging plant.
No other 1997 capital expenditures were individually material.
There were no business acquisitions completed during 1997.
1996: Expenditures for property, plant, and equipment totaled
$128.8 million and included: expansion of the Visalia, CA,
graphic packaging plant; a new graphic packaging plant in
Pelahatchie, MS; a new custom packing operation in Memphis, TN;
and new tissue converting equipment at the Bellemont, AZ, and
Greenwich, NY, sites.
Acquisition expenditures in 1996 were $47.2 million and included
the purchase of the assets of the Display Division of Dyment
Limited in Erlanger, KY, and Toronto, Canada; the acquisition
of the point-of-sale display and packaging businesses of Salliard
S.A. in France; and the acquisition of certain tissue converting
assets and distribution facilities of Jokel Desarrollos, S.A. de
C.V. and Ambitec, S.A. de C.V. in Mexico.
-16-
1999 Outlook
These forward-looking statements reflect management's view of the
Company's outlook for 1999 as of February 12, 1999. The forward-
looking statements do not reflect the potential impact of any
mergers, acquisitions, divestitures, or other structural changes
in the Company's business that may occur during 1999,
and are subject to certain risks and uncertainties, including
those listed under the caption "Forward-Looking Statements".
- - The Company expects net sales for 1999 to be in the $970
million to $1.0 billion range.
- - Full-year earnings improvements in all three business segments
(Tissue,Specialty Packaging, and Forest Products/Land
Development) are expected in 1999 compared to 1998.
- - The Company's effective income tax rate in 1999 is expected to
be 36.5%.
- - Capital spending for 1999 is expected to be approximately $80
million, compared to $73 million in 1998, excluding acquisitions.
- - Depreciation, cost of timber harvested, and amortization
expenses are expected to total approximately $66 million in 1999,
up from $62 million in 1998.
- - Earnings per share (diluted) expectations are in the range of
$2.15 to $2.35 per share for 1999.
Planned capital spending initiatives include: a cost improvement
project at the Flagstaff, AZ, tissue mill; the continued
implementation of new information systems throughout the Company;
and new printing equipment at the Richmond, IN, manufacturing
facility. The Company's plan tobuild a new tissue mill and
converting facility in Halifax County, NC, was approved by the
board of directors in January 1999. The total cost of the
project is projected to be $160-$180 million, including expected
1999 capital spending of $10-$20 million. No other 1999 projects
are expected to account for more than 5% of the
total planned spending. Projected 1999 capital expenditures are
expected to be funded with internally generated cash.
All 1999 capital projects are expected to be consistent with
Chesapeake's strategy of expanding the Tissue and Specialty
Packaging businesses, reducing costs, and focusing capital
spending on projects that are expected to generate a return on
investment that exceeds the Company's cost of capital. See Note
13 to the consolidated financial statements for information
regarding capital commitments.
-17-
Subsequent Events
In January 1999, the Company announced that it plans to build a
new tissue mill and converting facility in Halifax County, NC.
Construction of this mill is planned to begin in the third
quarter of 1999, with converting production beginning in the
third quarter of 2000 and paper production in the first quarter
of 2001. Total cost is projected to be $160-$180 million.
On January 20, 1999, the Company announced that it made an offer
to acquire all of the outstanding shares of Field Group plc, a
leading European packaging company with headquarters in the
United Kingdom. The all cash offer, as amended, of approximately
$355 million plus the assumption of $50 million in debt values
the total enterprise at $405 million. On March 5, 1999, the
Company announced it had received shareholder acceptances,
irrevocable undertakings, or acquired shares totaling 88% of the
outstanding share capital of Field Group plc and therefore
declared the offer wholly unconditional.
Risk Management
Chesapeake continually evaluates risk retention and insurance
levels for product liability, property damage, and other
potential exposures to risk. The Company devotes significant
effort to maintaining and improving safety and internal control
programs, which are intended to reduce its exposure to certain
risks. Management determines the amount of insurance coverage to
purchase and the appropriate amount of risk to retain based on
the cost and availability of insurance and the likelihood of a
loss. Management believes that the current levels of risk
retention are consistent with those of comparable companies in
the industries in which Chesapeake operates. There can be no
assurance that Chesapeake will not incur losses beyond the limits
of, or outside the coverage of, its insurance. However, the
Company's liquidity, financial position, and profitability are
not expected to be materially affected by the levels of risk
retention that the Company accepts.
Chesapeake's financial results could be affected by changes in
foreign currency exchange rates or weak economic conditions in
the foreign markets in which its products are manufactured or
sold. The Company's currency exposures are cash, debt, and
foreign currency transactions denominated primarily in the French
franc, the Canadian dollar, and the Mexican peso.
Chesapeake manages its foreign currency exposures primarily by
funding certain foreign currency denominated assets with
liabilities in the same currency and, as such, certain exposures
are naturally offset.
-18-
As part of managing its foreign currency exposures, Chesapeake
enters into foreign currency forward exchange contracts. These
agreements are generally used to fix the local currency cost of
purchased goods or services or selling prices denominated in
currencies other than the local currency. The use of these
agreements allows Chesapeake to reduce its overall exposure to
exchange rate fluctuations, as the gains and losses on the
agreements substantially offset the gains and losses on the
liabilities being hedged. Forward exchange agreements are viewed
as risk management tools, involve little complexity, and, in
accordance with Company policy, are not used for trading or
speculative purposes. Chesapeake is not a party to any leveraged
derivatives. As of December 31, 1998, Chesapeake's exposure
resulting from fluctuations in foreign currency exchange rates
was not material.
The Company's long-term debt portfolio consists mostly of fixed
rate instruments. At year-end 1998 the Company did not hold
interest rate derivative contracts.
The Company's cash position includes amounts denominated in
foreign currencies. The Company manages its worldwide cash
requirements considering available funds among its subsidiaries
and the cost effectiveness with which these funds can be
accessed. The repatriation of cash balances from some of the
Company's subsidiaries could have adverse tax consequences.
Year 2000 Readiness Disclosure
Until recently, many computer systems and software products used
only two digit entries to define a year. As a result, computer
programs that have date sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. Unless
remedied, this "Year 2000 problem" could result in disruptions of
normal business operations due to system failures,
miscalculations, or the inability to process necessary
transactions. In addition to computer systems, any equipment
using embedded chips with date sensitive functions, such as
switchgear, machinery and process control systems, and telephone
exchanges, could also be at risk.
-19-
Year 2000 Readiness Initiative
In 1997, Chesapeake established a plan intended to address the
impact of the Year 2000 problem on its internal systems and
facilities, as well as its key suppliers and customers. The
project consists of the following four phases:
- - Phase 1 - inventory and analysis of key business systems and
infrastructure for Year 2000 problems. Phase 1 was completed in
July 1997.
- - Phase 2 - remediation of non-compliant systems. As discussed
below, this phase is underway and should be completed by mid-
1999.
- - Phase 3 - testing of mission critical systems. This phase has
begun and is scheduled to be completed by mid-1999.
- - Phase 4 - development of contingency plans. This phase has
also begun. As discussed below, the Company expects that its
contingency plans will be fully developed by mid-1999.
The Company's Year 2000 team consists of location and business
unit Year 2000 coordinators and project managers who, for the
purpose of this project, report and are accountable to the
Company's Chief Financial Officer.
State of Readiness
Most of the Company's mission critical business systems utilize
packaged applications, which are purchased from third party
software vendors. As part of its overall business strategy, the
Company is installing new integrated Enterprise Resource Planning
("ERP") software that is expected to provide enhanced reporting
and operational benefits. The installation of Year 2000 compliant
ERP software is also the principal element of the Company's Year
2000 remediation plan. The Company's Tissue segment is scheduled
to implement Year 2000 compliant ERP software in April 1999.
Chesapeake's other business segments and corporate headquarters
are in the process of installing Year 2000 compliant ERP
software. Those installations are approximately 50% complete as
of January 1999, and are scheduled to be completed at all
locations by mid-1999.
In addition to the installation of Year 2000 compliant ERP
software, the Company's remediation efforts include the upgrading
or replacement of proprietary computer software systems
(primarily in the Tissue segment), and the upgrading or
replacement of computer hardware, machinery, and equipment,
process control systems, security systems, and telecommunications
equipment. The Company has begun the process of upgrading or
replacing these systems and equipment, as necessary for Year 2000
compliance, and expects the process to be completed by mid-1999.
-20-
Cost to Address Year 2000 Readiness
The cost of installing the new ERP software, no material portion
of which relates specifically to achieving Year 2000 compliance,
is expected to be approximately $20 million. Of this amount,
approximately $16 million is expected to be capitalized, with
$8.6 million capitalized during the Company's fiscal year ending
December 31, 1998. To date, the Company has incurred
approximately $12.4 million of the expected ERP implementation
cost. Other specifically identifiable costs related to Year 2000
compliance are in the range of $2-3 million, approximately $1
million of which has been incurred to date. The Company expects
to fund the costs associated with its Year 2000 compliance
program with cash generated from operations. Management does not
believe that any of Chesapeake's material information technology
projects have been deferred due to the Company's Year 2000
compliance efforts.
Because of the interdependence of information systems today, Year
2000 compliant companies may be affected by the Year 2000
readiness of their material suppliers, customers, and other third
parties. As part of Chesapeake's evaluation of the Year 2000
readiness of its suppliers, customers, and other third parties,
the Company has contacted substantially all of its critical
suppliers to request written assurance that they have
Year 2000 readiness programs in place as well as an affirmation
that they will be compliant when necessary. Responses to these
inquiries are currently being gathered and reviewed. To date, no
such parties have informed the Company that they do not expect to
be Year 2000 compliant in a timeframe that would expose
Chesapeake to material business risks. Further analysis will be
conducted as necessary. Although management has not yet
determined the risk associated with the failure of any such
party to become Year 2000 compliant, the Company can provide no
assurance that such failure would not have a material adverse
effect on the Company's results of operations and financial
condition. However, in an effort to minimize such risks, in most
cases (with utilities and banking institutions as notable
exceptions), the Company utilizes multiple suppliers of goods
and services and is prepared to substitute suppliers if one or
more have Year 2000 related difficulties.
Business Continuity and Contingency Planning
The ultimate effects on the Company or its suppliers or customers
of not being fully Year 2000 compliant cannot be reasonably
estimated. While Chesapeake believes its efforts are adequate to
address its Year 2000 concerns, the Company could experience a
material adverse effect on its results of operations, financial
position, or cash flows if its Year 2000
-21-
compliance schedule is not met, if the costs to remediate the
Company's Year 2000 issues materially exceed current estimates,
or if material suppliers, customers, or other businesses
encounter serious problems in their Year 2000 remediation
efforts. Therefore, the Company is in the process of developing
plans to address such contingencies, with a focus on mission
critical applications and material suppliers. Such contingency
plans may include the development of back-up procedures, the
purchase of additional inventory, and utilization of alternate
suppliers. The Company expects to complete its contingency plans
by mid-1999.
Accounting Developments
The Financial Accounting Standards Board recently issued a new
pronouncement regarding derivatives, which is effective for all
fiscal quarters of all fiscal years beginning after June 15,
1999. When this standard is adopted it is not expected to have a
material impact on the Company's financial statements.
Environmental
Chesapeake has a strong commitment to protecting the environment.
The Company has an environmental audit program to monitor
compliance with environmental laws and regulations. The Company
is committed to abiding by the environmental, health, and safety
principles of the American Forest & Paper Association. Each
expansion project has been planned to comply with applicable
environmental regulations and to enhance environmental protection
at existing facilities. The Company faces increasing capital
expenditures and operating costs to comply with expanding and
more stringent environmental regulations, although compliance
with existing environmental regulations is not expected to have a
material adverse effect on the Company's earnings, financial
position, cash flows, or competitive position.
The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and similar state "Superfund" laws
impose liability, without regard to fault or to the legality of
the original action, on certain classes of persons (referred to
as potentially responsible parties or "PRPs") associated with a
release or threat of a release of hazardous substances into the
environment. Financial responsibility for the clean-up or other
remediation of contaminated property or for natural resource
damages can extend to previously owned or used properties,
waterways, and properties owned by third parties, as well as to
properties currently owned and used by a company even if
contamination is attributable entirely to prior owners. As
-22-
discussed below, the U.S. Environmental Protection Agency ("EPA")
has given notice of its intent to list the lower Fox River in
Wisconsin on the National Priorities List under CERCLA and has
identified WT as a PRP.
Except for the Fox River matter, the Company has not been
identified as a PRP at any CERCLA-related sites. However, there
can be no assurance that the Company will not be named as a PRP
at any other sites in the future, or that the costs associated
with additional sites would not be material to the Company's
financial position, results of operations, or cash flows.
In June 1994, the United States Department of Interior, Fish and
Wildlife Service ("FWS"), a federal natural resources trustee,
notified WT that it had identified WT and four other companies
located along the lower Fox River in northeast Wisconsin as PRPs
for purposes of natural resources liability under CERCLA arising
from alleged releases of polychlorinated biphenyls ("PCBs") in
the Fox River and Green Bay System. Two other companies
subsequently received similar notices from the FWS. The FWS and
other governmental and tribal entities, including the State of
Wisconsin, allege that natural resources, including endangered
species, fish, birds, tribal lands, or lands held by the United
States in trust for various Indian tribes, have been exposed to
PCBs that were released from facilities located along the lower
Fox River. The FWS is proceeding with a natural resource damage
assessment with respect to the alleged discharges. On January 31,
1997, the FWS notified WT of its intent to file suit, subject to
final approval by the Department of Justice, against WT to
recover alleged natural resource damages. WT and other PRPs are
engaged in discussions with the parties asserting trusteeship of
the natural resources concerning the damage assessment and the
basis for resolution of the natural resource damage claims.
WT and other PRPs are also engaged in discussions with the State
of Wisconsin with respect to resolving possible state claims
concerning remediation, restoration, and natural resource damages
related to the alleged discharge of PCBs into the Fox River and
Green Bay System. Under an interim agreement with the State of
Wisconsin, the PRPs are providing funds for an interim phase of
resource damage assessment and restoration work. WT's
obligation under the agreement is not material to the Company's
financial position, results of operations, or cash flows.
On June 18, 1997, the EPA announced that it was initiating the
process of listing the lower Fox River on the CERCLA National
Priorities List of hazardous waste sites. The EPA identified
several PRPs including WT. The EPA and the State of Wisconsin are
proceeding with a remedial investigation/feasibility study of the
lower Fox River site.
-23-
The ultimate cost to WT, if any, associated with these matters
cannot be predicted with certainty at this time due to the
inability to determine the outcome of pending settlement
discussions or, if a settlement cannot be reached, WT's share of
any multi-party clean-up expenses; the uncertain extent of any
contamination; the varying costs of alternative restoration
methods; the evolving nature of clean-up technologies and
governmental regulations; the lack of controlling legal
precedent; the extent to which contribution will be available
from other parties; and the scope of potential recoveries from
insurance carriers and prior owners of WT. Based on presently
available information, the Company believes that there are
additional parties, some of which may have substantial resources,
that may also be identified as PRPs with respect to this matter
and could be expected to participate in any final settlement. The
Company believes that it is entitled to indemnification from a
prior owner of WT, pursuant to a stock purchase agreement between
the parties, with respect to liabilities related to this matter.
The prior owner has reimbursed WT for out-of-pocket costs and
attorneys' fees related to investigation of the matter. The
Company believes that the prior owner intends to, and has the
financial ability to, honor its indemnification obligation under
the stock purchase agreement.
The EPA has stated its intent to develop additional draft rules
under the Clean Water Act and the Clean Air Act, which would
impose new air and water quality standards for pulp and paper
mills (the "Cluster Rules"). The eventual capital cost impact on
the Company of compliance with the additional Cluster Rules is
not presently determinable and will depend on a number of
factors, including the scope of the standards imposed and time
permitted for compliance; the Company's strategic decisions
related to compliance, including potential changes in product mix
and market; and development in compliance technology.
In March 1998, WT's Chicago, IL, tissue mill received a Notice of
Violation from EPA alleging violation of the Illinois State
Implementation Plan as adopted pursuant to the Clean Air Act. The
alleged violation involves the emission of volatile organic
material. WT is in the process of negotiating a possible
resolution of the alleged violation with EPA. The ultimate cost
to WT, if any, associated with the alleged violation cannot be
determined with certainty at this time due to the absence of a
determination that there has been a violation, and, if a
violation is found to have occurred, a determination of the
appropriate capture and control techniques or other corrective
action and the cost thereof, and the amount of any penalties
-24-
imposed by EPA. WT believes that it is entitled to significant
indemnification for any costs or expenses incurred with regard
to this matter from the prior owner of the Chicago mill and that
the prior owner has the financial ability to honor its
indemnification obligation.
On July 17, 1998, WT's Menasha, WI, tissue mill received a Notice
of Violation from the Wisconsin Department of Natural Resources
("WDNR") alleging violations involving emission of volatile
organic compounds and reporting requirements. WT has resolved the
alleged violations by agreement with WDNR without a finding that
violations occurred and without significant financial or
operational effects on WT.
Other Litigation
The Company is a party to various legal actions, including those
which are ordinary and incidental to its business. See Note 10 to
the consolidated financial statements.
Forward-Looking Statements
Forward-looking statements in the foregoing Management's
Discussion and Analysis of Financial Condition and Results of
Operations include statements that are identified by the use of
words or phrases including, but not limited to, the following:
"will likely result", "expected to", "will continue", "is
anticipated", "estimated", "project", "believe" and words or
phrases of similar import. Changes in the following important
factors, among others, could cause Chesapeake's actual results to
differ materially from those expressed in any such forward-
looking statements: competitive products and pricing; production
costs, particularly for raw materials such as waste paper and
corrugated box and display materials; fluctuations in demand;
governmental policies and regulations affecting the environment;
interest rates; currency translation movements; Year 2000
compliance issues; and other risks that are detailed from time to
time in reports filed by the Company with the Securities and
Exchange Commission.
-25-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Chesapeake Corporation:
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of income, retained earnings,
and comprehensive income, and cash flows present fairly, in all
material respects, the financial position of Chesapeake
Corporation and its subsidiaries at December 31, 1998 and 1997
and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements
in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of accounting for
certain timber reforestation costs in 1998.
/s/ PricewaterhouseCoopers LLP
-----------------------------
PricewaterhouseCoopers LLP
Richmond, Virginia
February 12, 1999
-26-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
December 31,
1998 1997
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 62.4 $ 73.3
Accounts receivable, net 127.6 111.8
Inventories 102.7 98.8
Deferred income taxes 12.4 17.8
Other 8.3 6.6
------ ------
Total current assets 313.4 308.3
------ ------
Property, plant, and equipment:
Plant sites and buildings 167.6 160.6
Machinery and equipment 692.1 632.7
Construction in progress 12.7 25.3
------ ------
872.4 818.6
Less accumulated depreciation 385.9 350.1
------ ------
486.5 468.5
Timber and timberlands(less accumulated cost
of timber harvested of $33.9 and $25.5) 56.7 39.8
------ ------
Net property, plant, and equipment 543.2 508.3
------ ------
Goodwill(less accumulated amortization of
$18.7 and $16.4) 50.3 44.0
------ ------
Other assets 72.5 61.3
------ ------
$979.4 $921.9
====== ======
-27-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, Continued
(Millions of dollars, except share data)
December 31,
1998 1997
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 57.4 $ 52.1
Accrued expenses 89.7 83.4
Current maturities of long-term debt 5.8 .6
Dividends payable 4.7 4.3
Income taxes payable - 1.9
------ ------
Total current liabilities 157.6 142.3
------ ------
Long-term debt 270.4 264.3
------ ------
Other long-term liabilities 16.3 5.8
------ ------
Postretirement benefits other than pensions 19.5 19.1
------ ------
Deferred income taxes 74.3 67.3
------ ------
Stockholders' equity:
Common stock, $1 par value; authorized,
60 million shares; outstanding,21.4 million
and 21.3 million shares 21.4 21.3
Additional paid-in capital 20.0 24.7
Accumulated other comprehensive income(loss) (8.7) (1.7)
Retained earnings 408.6 378.8
------ ------
Total stockholders' equity 441.3 423.1
------ ------
$979.4 $921.9
====== ======
The accompanying Notes to Consolidated Financial Statements are
an integral part of the financial statements.
-28-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME, RETAINED EARNINGS,
AND COMPREHENSIVE INCOME
(In millions, except per share data)
For the years ended December 31,
1998 1997 1996
---- ---- ----
Income:
Net sales $950.4 $1,021.0 $1,158.6
Costs and expenses:
Cost of products sold 679.8 749.8 843.0
Depreciation and cost of timber
harvested 59.7 72.3 87.1
Selling, general, and
administrative expenses 132.9 160.5 154.2
Restructuring/special charges 11.8 18.9 -
------ -------- --------
Income from operations 66.2 19.5 74.3
Gain on sale of businesses - 86.3 -
Other income, net 8.5 1.4 6.7
------ -------- --------
Income before interest, taxes,
cumulative effect of accounting
change, and extraordinary item 74.7 107.2 81.0
Interest expense, net (18.9) (22.0) (33.9)
------ -------- --------
Income before taxes, cumulative
effect of accounting change, and
extraordinary item 55.8 85.2 47.1
Income taxes 21.8 34.3 17.0
------ -------- --------
Income before cumulative effect of
accounting change and
extraordinary item 34.0 50.9 30.1
Cumulative effect of accounting
change, net of income taxes of $8.4 13.3 - -
Extraordinary item, net of income
taxes of $1.7 - (2.3) -
------ -------- --------
Net income $ 47.3 $ 48.6 $ 30.1
====== ======== ========
-29-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME, RETAINED EARNINGS,
AND COMPREHENSIVE INCOME, Continued
(In millions, except per share data)
For the years ended December 31,
1998 1997 1996
Basic earnings per share: ---- ---- ----
Earnings before cumulative effect
of accounting change and
extraordinary item $ 1.60 $ 2.20 $ 1.28
Cumulative effect of accounting
change, net of income taxes .63 - -
Extraordinary item, net of income
taxes - (.10) -
------ -------- --------
Basic earnings per share $ 2.23 $ 2.10 $ 1.28
====== ======== ========
Diluted earnings per share:
Earnings before cumulative effect
of accounting change and
extraordinary item $ 1.57 $ 2.18 $ 1.27
Cumulative effect of accounting
change, net of income taxes .62 - -
Extraordinary item, net of income
taxes - (.10) -
------ -------- --------
Diluted earnings per share $ 2.19 $ 2.08 $ 1.27
Retained earnings: ====== ======== ========
Balance, beginning of year $378.8 $ 348.5 $ 337.2
Net income 47.3 48.6 30.1
Cash dividends declared per share,
$0.82 in 1998, $0.80 in 1997 and
1996 (17.5) (18.3) (18.8)
------ -------- --------
Balance, end of year $408.6 $ 378.8 $ 348.5
Comprehensive income: ====== ======== ========
Net income $ 47.3 $ 48.6 $ 30.1
Other comprehensive income (loss),
net of income taxes:
Minimum pension liability (net of
tax expense of $3.4 in 1998) (5.7) - -
Foreign currency translation (net
of tax expense of $0.9 and $1.1
in 1998 and 1997 respectively) (1.3) (1.7) -
------ -------- --------
Comprehensive income $ 40.3 $ 46.9 $ 30.1
====== ======== ========
The accompanying Notes to Consolidated Financial Statements are
an integral part of the financial statements.
-30-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
For the years ended December 31,
1998 1997 1996
---- ---- ----
Operating activities:
Net income $47.3 $48.6 $30.1
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation, cost of timber
harvested, and amortization of
intangibles 62.3 75.8 90.2
Deferred income taxes 9.2 (59.8) 7.8
(Gains) losses on sales of
property, plant, and equipment,net (.6) (.2) 0.5
Gain on sale of businesses - (86.3) -
Restructuring/special charges 11.8 18.9 -
Cumulative effect of accounting
change (21.7) - -
Changes in operating assets and
Liabilities, net of acquisitions
and dispositions:
Accounts receivable, net (13.0) (6.3) 12.8
Inventories 4.5 (2.6) (10.8)
Other assets (17.2) (27.7) (5.0)
Accounts payable and accrued
expenses 6.9 4.9 6.9
Income taxes payable (2.2) 1.2 (2.8)
Other payables 3.1 2.1 1.5
----- ----- -----
Net cash provided by (used in)
operating activities 90.4 (31.4) 131.2
----- ----- -----
Investing activities:
Purchases of property, plant, and
equipment (73.3) (68.2) (128.8)
Acquisitions (18.1) - (47.2)
Proceeds from sales of property,
plant, and equipment 2.8 1.7 3.3
Proceeds from sale of businesses - 491.0 -
Other 1.6 - -
----- ----- -----
Net cash (used in) provided by
investing activities (87.0) 424.5 (172.7)
----- ----- -----
-31-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, Continued
(Millions of dollars)
For the years ended December 31,
1998 1997 1996
---- ---- ----
Financing activities:
Net borrowings (payments) on
credit lines 7.7 (179.0) 84.7
Payments on long-term debt (1.8) (66.7) (15.2)
Proceeds from long-term debt .7 8.5 11.5
Proceeds from issuances of common
stock 1.3 1.5 0.1
Purchases of outstanding common
stock (6.9) (79.4) (16.0)
Dividends paid (17.1) (18.7) (18.9)
Other 1.8 4.2 (0.1)
----- ----- -----
Net cash (used in) provided by
financing activities (14.3) (329.6) 46.1
----- ----- -----
(Decrease) increase in cash and
cash equivalents (10.9) 63.5 4.6
Cash and cash equivalents at
beginning of year 73.3 9.8 5.2
----- ----- -----
Cash and cash equivalents at
end of year $62.4 $73.3 $ 9.8
===== ===== =====
The accompanying Notes to Consolidated Financial Statements are
an integral part of the financial statements.
-32-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
a. Principles of Consolidation: The consolidated financial
statements include the accounts and operations of Chesapeake
Corporation and all of its subsidiaries (the "Company"). All
significant intercompany accounts and transactions are
eliminated. Certain prior-year amounts have been reclassified
to conform to current presentations.
b. Cash and Cash Equivalents: Cash and cash equivalents
include highly liquid, temporary cash investments with original
maturities of three months or less.
c. Inventories: Inventories are valued at the lower of cost or
market. The cost of certain product and manufacturing materials
inventories is determined by the last-in, first-out (LIFO)
method. The cost of other inventories is determined principally
by the average cost method.
d. Property, Plant, and Equipment: Property, plant, and
equipment, except timber and timberlands, are stated at cost.
Timber and timberlands are stated at cost net of the accumulated
cost of timber harvested. The costs of major rebuilds and
replacements of plant and equipment are capitalized, and the
costs of ordinary maintenance and repairs are charged to income
as incurred. The costs of software developed or obtained for
internal use are capitalized in accordance with SOP 98-1,
"Accounting for Computer Software Developed or Obtained for
Internal Use." When properties are sold or retired, their costs
and the related accumulated depreciation are removed from the
accounts, and the gains or losses are reflected in income.
Long-lived assets are periodically reviewed for impairment based
on evaluation of expected future undiscounted cash flows.
Depreciation for financial reporting purposes is computed
principally by the straight-line method, based on the following
estimated useful asset lives:
Buildings and improvements 10 - 40 years
Machinery and equipment 5 - 20 years
Furniture and fixtures 3 - 10 years
In the fourth quarter of 1998, the Company changed its accounting
policy to capitalize certain timber reforestation costs that were
previously expensed in order to achieve a better matching of
these costs with the revenues realized from the eventual
harvesting of timber. The Company believes that this change is
more consistent with industry practice and is preferable under
the circumstances in which the Company now
operates its forest products business. Costs related to pre-
-33-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. Summary of Significant Accounting Policies, Continued
merchantable and merchantable timber that are now capitalized
include a portion of real estate taxes, insect control,
fertilization, and salaries and fringe benefits for certain land
management personnel.
The new capitalization policy was applied retroactively as of
January 1, 1998, and resulted in restating first quarter 1998
results for the cumulative effect of the accounting change
through December 31, 1997. This restatement increased 1998 net
income by $13.3 million (net of an $8.4 million reduction for
income taxes), or $.62 per diluted share. Implementation of the
new accounting method increased 1998 earnings before the
cumulative effect of the accounting change by approximately
$.7 million, or $.03 per diluted share.
Pro forma amounts, assuming the change in accounting was applied
retroactively, are:
(In millions except per share data) 1998 1997 1996
---- ---- ----
Income before
extraordinary item $34.0 $51.7 $30.9
Net income 34.0 49.4 30.9
Basic earnings per share:
Earnings before
extraordinary item $1.60 $2.23 $1.31
Earnings 1.60 2.13 1.31
Diluted earnings per share:
Earnings before
extraordinary item $1.57 $2.21 $1.30
Earnings 1.57 2.11 1.30
----- ----- -----
e. Cost of Timber Harvested: Cost of timber harvested is
computed on quantities cut from individual Company-owned tracts
based on costs and estimated volumes of recoverable timber.
f. Income Taxes: The Company recognizes deferred income taxes
for temporary differences between the financial reporting basis
and income tax basis of assets and liabilities.
g. Earnings Per Share ("EPS"): Basic EPS is calculated using
the weighted average number of outstanding common shares for the
period, which were 21,202,801 in 1998; 23,148,978 in 1997; and
23,527,594 in 1996. Diluted EPS reflects the potential dilution
that could occur if securities are exercised or converted into
-34-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. Summary of Significant Accounting Policies, Continued
common stock or result in the issuance of common stock that would
then share in earnings. Shares used in the diluted
EPS calculation were 21,567,908 in 1998; 23,360,129 in 1997; and
23,644,843 in 1996.
h. Stock-Based Compensation: The Company uses the intrinsic-
value-based method of accounting for its stock options plans as
permitted by SFAS No. 123. Under the intrinsic-value-based
method, compensation cost is the excess, if any, of the quoted
market price of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock.
i. Goodwill: The cost in excess of the estimated fair value of
identifiable assets of acquired businesses is being amortized on
a straight-line basis over 40 years or less. The Company reviews
goodwill annually for impairment by comparing the carrying amount
to estimated future undiscounted cash flows. If this review
indicates that goodwill is not recoverable, the
carrying amount is reduced to fair value. During 1997, goodwill
was reduced by $5.5 million for restructuring write-offs and by
$5.4 million due to sales of businesses.
j. Risks and Uncertainties: Chesapeake operates in three
business segments - Tissue, Specialty Packaging, and Forest
Products/Land Development. The Company is not dependent on any
single customer, group of customers, market, geographic area, or
supplier of materials, labor, or services. Financial statements
include, where necessary, amounts based on the judgments and
estimates of management. These estimates include allowances for
bad debts, accruals for landfill closing costs, environmental
remediation costs, loss contingencies for litigation, self-
insured medical and workers compensation insurance, income taxes,
and determinations of discount and other rate assumptions for
pension and post-retirement benefit expenses. Actual results
could differ from these estimates.
k. Fair Value of Financial Instruments and Risk
Concentrations: The carrying amounts of temporary cash
investments, trade receivables, and trade payables approximate
fair value because of the short maturities of the instruments.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary
cash investments and trade receivables. The Company places its
temporary cash investments in high quality financial instruments
and, by policy, limits the amounts of credit exposure related to
any one instrument. Concentrations of credit risk in regard to
trade receivables are limited due to the large number of
customers and their dispersion across different industries and
-35-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. Summary of Significant Accounting Policies, Continued
geographic areas. The Company had no material derivative
instruments or transactions outstanding as of the end of 1998.
l. New Accounting Standards: The Financial Accounting
Standards Board recently issued a new pronouncement regarding
derivatives. The accounting for this standard is not expected
to have a material impact on the Company's financial statements.
m. Foreign Currencies: Assets and liabilities are translated
at the exchange rate in effect at each year-end. Revenues and
expenses are translated at the average rates of exchange
prevailing during the year. Gains and losses resulting from
foreign currency transactions are included in income currently.
n. Research and Development: The costs associated with
research and development are not significant and are expensed as
incurred.
2. Acquisitions and Divestitures
On November 20, 1998, Chesapeake Corporation acquired all of the
outstanding capital stock of Capitol Packaging Corporation, a
specialty packaging company located in Denver, CO.
On February 2, 1998, Chesapeake Packaging Co. purchased
substantially all of the assets, and assumed certain liabilities,
of Rock City Box Co., Inc., located in Utica, NY. This operation
manufactures corrugated containers, trays, and pallets, as well
as wood and foam packaging products.
Both acquisitions were accounted for using the purchase method of
accounting. Accordingly, the operating results of the acquired
companies have been included in the Company's financial
statements since their respective dates of acquisition.
The purchase prices have been allocated to the assets acquired
and liabilities assumed based on their estimated market values at
the respective dates of acquisition. The purchase prices for the
acquired companies exceeded the fair value of net assets acquired
by approximately $8.8 million, which is being amortized on a
straight line basis over 40 years. The pro forma effects of these
acquisitions on the company's results of operations and financial
position are not material.
On May 23, 1997, the Company completed the sale to St. Laurent
(U.S.), a wholly-owned subsidiary of St. Laurent Paperboard Inc.
("St. Laurent")(Toronto and Montreal: SPI), of: (i) the sole
membership interest in Chesapeake Paper Products Company LLC
-36-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
2. Acquisitions and Divestitures, Continued
(successor to Chesapeake Paper Products Company), a wholly-owned
subsidiary of the Company which, as of the closing date, owned
and operated the Company's kraft products mill located in West
Point, VA; (ii) all of the capital stock of Chesapeake Box
Company which, as of the closing date, owned and operated
directly or through a subsidiary substantially all of the assets
of four of the Company's corrugated box plants; and (iii) all of
the capital stock of Chesapeake Fiber Company which, as of the
closing date, owned and operated directly or through a subsidiary
certain assets related to the West Point Mill's wood procurement
operations. The four box plants involved in the
transaction are located in Richmond, VA; Roanoke, VA; Baltimore,
MD; and North Tonawanda, NY.
The purchase price of approximately $500 million was paid in cash
at closing, with a post-closing adjustment of approximately $10
million paid to the buyer. The transaction resulted in an after-
tax gain for Chesapeake of $49.1 million, or $2.07 a share, which
was recorded in the second quarter of 1997. Chesapeake used
approximately $250 million of the net after-tax proceeds to
reduce debt and $79 million of the net after-tax
proceeds to repurchase its common stock.
Chesapeake retained ownership of its 325,000 acres of timberlands
following the transaction, and entered into a 15-year agreement
with St. Laurent Forest Products Corp., a wholly-owned subsidiary
of St. Laurent (U.S.), to supply the West Point Mill with a
substantial portion of its virgin fiber requirements at market
prices. St. Laurent Paper Products Corp. and St. Laurent
Packaging Corp., each wholly-owned subsidiaries of St. Laurent
(U.S.), entered into five-year agreements with Chesapeake to
supply Chesapeake's remaining packaging operations with a portion
of their linerboard, corrugating medium, and corrugated sheet
requirements.
Chesapeake has agreed to indemnify St. Laurent and St. Laurent
(U.S.) against losses incurred by them which are attributable to
certain breaches of representations, warranties or covenants made
by Chesapeake in the Purchase Agreement, provided notice is given
to Chesapeake within the applicable survival periods specified
therein.
-37-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
3. Inventories
Year-end inventories consist of:
(In millions) 1998 1997
---- ----
Finished goods $ 34.5 $26.7
Work in process 27.0 36.2
Materials and supplies 41.2 35.9
------ -----
Totals $102.7 $98.8
====== =====
Inventories determined by the LIFO method, included in the
preceding chart, totaled (in millions) $42.3 for 1998 and $46.0
for 1997, or $1.8 and $5.3 less than the respective amounts of
such inventories stated at the lower of cost or market.
4. Long-Term Debt
Long-term debt at year-end consists of:
(In millions) 1998 1997
---- ----
Notes payable - banks (unsecured):
Credit lines, interest 3.62% to 6.75% $ 16.4 $ 8.7
Term loan, interest 5.15%, due 2002 8.9 8.3
Unsecured notes:
10.375% notes, due 2000 55.0 55.0
9.875% notes, due 2003 33.6 33.6
7.20% notes, due 2005 85.0 85.0
Industrial development authority
obligations:
5.04% to 6.875% notes, due 1999-2003 8.2 8.3
6.25% to 6.375% notes, due 2019 50.0 50.0
5.55% notes, due 2021 10.0 10.0
Other debt 9.1 6.0
------ ------
Totals 276.2 264.9
Less current maturities 5.8 .6
------ ------
$270.4 $264.3
====== ======
Principal payments on long-term debt (excluding credit lines and
capital leases) for the next five years are (in millions): 1999
$3.8; 2000 $55.9; 2001 $0.9; 2002 $9.7; and 2003 $34.4.
-38-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
4. Long-Term Debt, Continued
The Company maintains credit lines with several banks,
domestically and internationally, maturing in 2000-2002, under
which it can borrow up to $69 million. Nominal facility fees are
paid on the credit lines. Other lines of credit totaling $65
million are maintained with several banks on an uncommitted
basis. See Note 14 "Subsequent Events" in regards to a new credit
facility incurred in connection with the purchase of Field Group
plc.
Certain loan agreements include provisions permitting the holder
of the debt to require the Company to repurchase all or a portion
of such debt outstanding upon the occurrence of specified events
involving a change of control or ownership. In addition, various
loan agreements contain provisions that restrict the disposition
of certain assets, require the Company to maintain a ratio of
long-term debt to total capital not in
excess of 60% and to meet an annual cash flow test.
During 1997, the Company used proceeds from the sale of
businesses to reduce credit line borrowings by $179.0 million and
long-term debt by $66.7 million. The reduction of long-term debt
included open market repurchases of debt that resulted in an
extraordinary loss of $2.3 million after tax.
There was no interest capitalized in 1998. Interest expense is
net of capitalized interest of $0.2 million and $0.3 million for
1997 and 1996, respectively.
The Company has estimated the fair value of long-term debt for
1998 to be $285.7 million, or 6% higher than the book value of
$270.4 million. For 1997, the Company estimated the fair value of
long-term debt to be $282.8 million, or 7% higher than the book
value of $264.3 million. The fair value is based on the quoted
market prices for similar issues or current rates offered for
debt of the same or similar maturities.
-39-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
5. Income Taxes
The provision for income taxes consists of:
(In millions) 1998 1997 1996
---- ---- ----
Currently payable:
Federal $17.9 $85.7 $ 9.4
State - 8.6 (0.2)
Foreign (0.3) 0.1 -
----- ----- -----
Total current 17.6 94.4 9.2
----- ----- -----
Deferred:
Federal 3.5 (52.9) 7.4
State 0.3 (7.1) 1.1
Foreign 0.4 (0.1) (0.7)
----- ----- -----
Total deferred 4.2 (60.1) 7.8
----- ----- -----
Total income taxes $21.8 $34.3 $17.0
===== ===== =====
Significant components of the year-end deferred income tax assets
and liabilities are:
(In millions) 1998 1997
---- ----
Postretirement medical benefits $ 7.5 $ 7.2
Workers compensation accruals 2.2 3.3
Obsolete inventory accruals 1.3 0.9
Tax carryforward benefits 3.8 3.9
Foreign tax carryforward losses 3.3 1.2
Valuation allowance (5.1) (3.8)
Other 11.8 15.5
------ ------
Deferred tax assets 24.8 28.2
------ ------
Accumulated depreciation/depletion (81.6) (70.1)
Pension accruals (2.7) (6.3)
Other (2.4) (1.3)
------ ------
Deferred tax liabilities (86.7) (77.7)
------ ------
Net deferred taxes $(61.9) $(49.5)
====== ======
-40-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
5. Income Taxes, Continued
The valuation allowance primarily relates to state income tax
credit carryforwards that expire from 2001 through 2010.
The differences between the Company's effective income tax rate
and the statutory federal income tax rate are:
1998 1997 1996
---- ---- ----
Federal income tax rate 35.0% 35.0% 35.0%
State income tax, net of
federal income tax benefit 0.2 0.8 1.2
Goodwill and other purchase
accounting adjustments 0.7 4.7 1.1
Foreign losses not benefited 3.4 0.6 1.5
Other, net (0.2) (0.8) (2.7)
----- ----- -----
Consolidated effective income
tax rate 39.1% 40.3% 36.1%
===== ===== =====
The Company's intention is to permanently reinvest the
undistributed earnings of its foreign subsidiaries, thus no
United States income taxes have been provided.
6. Employee Retirement and Postretirement Benefits
The Company maintains several noncontributory defined benefit
retirement plans covering substantially all U.S. and foreign
employees. Pension benefits are based primarily on the employees'
compensation and/or years of service. Annual pension costs are
actuarially determined. The net periodic cost includes
amortization of prior service costs over periods of the greater
of 15 years or the average remaining employee service period.
The Company also provides certain health care and life insurance
benefits to certain hourly and salaried employees who retire
under the provisions of the Company's retirement plans. The
Company does not pre-fund these benefits.
The tables below, based on actuarial valuations as of October 1,
1998 and 1997, provide a reconciliation of the changes in the
plans' benefit obligations and fair values of assets over the two-
year period ending December 31, 1998, and a Statement of the
funded status as of December 31 of each year.
-41-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
6. Employee Retirement and Postretirement Benefits, Continued
Postretirement
Pensions Benefits Other
Benefits Than Pensions
-------------- --------------
(In millions) 1998 1997 1998 1997
---- ---- ---- ----
Reconciliation of
benefit obligation
Benefit obligation at
January 1 $102.8 $138.1 $ 21.2 $ 29.8
Service cost 3.6 4.0 0.7 1.1
Interest cost 7.3 8.3 1.5 1.8
Plan participants'
contributions 0.1 0.1 0.1 0.1
Amendments 0.8 2.1 - -
Actuarial gain 11.4 8.1 0.2 0.5
Curtailments (0.1) (12.6) - (9.8)
Settlements - (43.9) - -
Special termination
benefits 1.2 3.4 - -
Benefits paid (6.4) (4.8) (1.8) (2.3)
------ ------ ------ ------
Benefit obligation at
December 31 120.7 102.8 21.9 21.2
------ ------ ------ ------
Reconciliation of fair
value of plan assets
Fair value of plan assets
at beginning of year 113.3 160.1 - -
Actual return on
plan assets - 29.7 - -
Employer contributions 3.9 1.9 1.7 2.2
Plan participants'
contributions 0.1 0.1 0.1 0.1
Settlements - (73.7) - -
Benefits paid (6.4) (4.8) (1.8) (2.3)
------ ------ ------ ------
Fair value of plan assets
at end of year 110.9 113.3 - -
------ ------ ------ ------
-42-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
6. Employee Retirement and Postretirement Benefits, Continued
Funded status
Funded status at
December 31 (9.8) 10.6 (21.9) (21.2)
Unrecognized actuarial
loss 19.6 0.1 2.4 2.1
Unrecognized transition
obligation (3.1) (3.8) - -
Unrecognized prior
service cost 5.5 5.0 - -
Contribution made
between measurement
date and fiscal year end 0.5 0.4 - -
------ ------ ------ ------
Net amount recognized $ 12.7 $ 12.3 $(19.5) $(19.1)
====== ====== ====== ======
The following table provides the amounts recognized in the
statement of financial position as of December 31 of each year:
Postretirement
Pensions Benefits Other
Benefits Than Pensions
-------------- --------------
(In millions) 1998 1997 1998 1997
---- ---- ---- ----
Prepaid benefit cost $23.6 $23.8 $ - $ -
Accrued benefit liability (23.7) (16.9) (19.5) (19.1)
Intangible asset 3.7 5.4 - -
Accumulated other
comprehensive income 9.1 - - -
----- ----- ------ ------
Net amount recognized $12.7 $12.3 $(19.5) $(19.1)
===== ===== ====== ======
Certain pension plans have accumulated benefit obligations in
excess of plan assets. The accumulated benefit obligation for
these plans was $51.1 million at the end of 1998 and $43.7
million at the end of 1997. The fair value of the plan assets
related to these plans was $24.3 million at the end of 1998 and
$23.7 million at the end of 1997. Postretirement benefit
obligations have no plan assets. The aggregate benefit obligation
for those plans was $21.9 million at the end of 1998 and $21.2
million at the end of 1997.
-43-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
6. Employee Retirement and Postretirement Benefits, Continued
The following table provides the components of net periodic cost
for the plans for 1998 and 1997:
Postretirement
Pensions Benefits Other
Benefits Than Pensions
-------------- --------------
(In millions) 1998 1997 1998 1997
---- ---- ---- ----
Service cost $3.6 $4.0 $0.7 $1.1
Interest cost 7.3 8.3 1.5 1.8
Expected return on
plan assets (9.0) (10.7) - -
Amortization of
unrecognized transition
obligation or asset (0.7) (1.0) - -
Prior service cost recognized 0.5 0.4 - -
Recognized actuarial loss 0.6 0.2 - -
---- ---- ---- ----
Net periodic benefit cost 2.3 1.2 2.2 2.9
Loss due to curtailment 1.2 4.4 - -
---- ---- ---- ----
Net periodic benefit cost
after curtailments $3.5 $5.6 $2.2 $2.9
==== ==== ==== ====
Net periodic benefit costs for 1996 were $1.1 million for pension
benefits and $3.2 million for postretirement benefits other than
pensions.
During 1998, Wisconsin Tissue Mills Inc. ("WT") implemented an
enhanced retirement program for certain salaried employees, which
resulted in a pre-tax charge of approximately $1.2 million
related to pension plans.
During 1997, WT implemented an enhanced retirement program for
certain hourly employees, which resulted in a pre-tax charge of
approximately $1.3 million related to pension plans and a $.3
million service cost related to postretirement benefits.
During 1997, Chesapeake sold the West Point Mill, four box
plants, and other related assets to St. Laurent (U.S.). This
transaction resulted in a pre-tax charge of approximately $11.0
million related to pension settlement, offset in part by a pre-
tax curtailment gain of approximately $10.0 million. This
-44-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
6. Employee Retirement and Postretirement Benefits, Continued
transaction also resulted in a decrease in the postretirement
benefit liability and pre-tax curtailment gain of $9.8 million.
Assumptions used in determining the net domestic pension credit
(based on beginning-of-the-year assumptions) for 1998 and 1997,
and related pensions and postretirement benefits obligations
(based on year-end assumptions) as of October 1 were:
Postretirement
Pensions Benefits Other
Benefits Than Pensions
---------------- ----------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
Discount rate 6.75% 7.25% 7.75% 6.75% 7.25% 7.75%
Expected return
on plan
assets 9.50% 9.25% 9.25% N/A N/A N/A
Rate of
compensation
increase 4.75% 4.75% 4.75% 4.75% 4.75% 4.75%
===== ===== ===== ===== ===== =====
For measurement purposes, an 8% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
1998. The rate was assumed to decrease gradually each year to a
rate of 4.75% for 2004 and remain at that level thereafter.
In regards to postretirement benefits, a 1% change in assumed
health care cost trend rates would have the following effects:
(In millions) 1% Increase 1% Decrease
----------- -----------
Effect on total of service
and interest cost $0.1 $(0.1)
Effect on postretirement
benefit obligation 1.0 (0.9)
==== ======
-45-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. Capital Stock and Additional Paid-In Capital
Changes in common stock and additional paid-in capital during
1996, 1997, and 1998 were:
Common Stock
----------------------
Additional
(Dollar amounts Aggregate Paid-In
in millions) Shares Par Value Capital
------- ------------------
Balances,
January 1, 1996 23,792,433 $23.8 $107.3
Issuances of shares for
employee stock plans 195,748 0.2 5.3
Purchases of shares (590,044) (0.6) (15.4)
---------- ----- ------
Balances,
December 31, 1996 23,398,137 23.4 97.2
Issuances of shares for
employee stock plans 253,232 .2 6.3
Purchases of shares (2,321,138) (2.3) (77.1)
Other - - (1.7)
---------- ----- ------
Balances,
December 31, 1997 21,330,231 21.3 24.7
Issuances of shares for
employee stock plans 306,454 .3 10.0
Purchases of shares (197,300) (.2) (6.7)
Other - - (8.0)
---------- ----- ------
Balances,
December 31, 1998 21,439,385 $21.4 $ 20.0
========== ===== ======
During 1998, in accordance with board of directors
authorizations, the Company repurchased and immediately retired
197,300 shares of its common stock for an aggregate purchase
price of $6.9 million.
In addition to its common stock, the Company's authorized capital
includes 500,000 shares of preferred stock ($100 par), of which
100,000 shares are designated as Series A Junior Participating
Preferred Stock ("Series A Preferred"). No preferred shares were
outstanding during the three years ended December 31, 1998.
-46-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. Capital Stock and Additional Paid-In Capital, Continued
Under the terms of a shareholder rights plan approved February
10, 1998, each outstanding share of the Company's common stock
has attached to it one preferred share purchase right, which
entitles the shareholder to buy one unit (one one-thousandth of a
share) of Series A Preferred at an exercise price of $120 per
share, subject to adjustment. The rights will separate from the
common stock and become exercisable only if a person or group
acquires or announces a tender offer for 15% or more of
Chesapeake's common stock. When the rights are exercisable,
Chesapeake may issue a share of common stock in exchange for each
right other than those held by such person or group. If a person
or group acquires 15% or more of the Company's common stock, each
right shall entitle the holder, other than the acquiring party,
upon payment of the exercise price, to acquire Series A Preferred
or, at the option of Chesapeake, common stock, having a value
equal to twice the right's purchase price. If Chesapeake is
acquired in a merger or other business combination or if 50% of
its earnings power is sold, each right will entitle the holder,
other than the acquiring person, to purchase securities of the
surviving company having a market value equal to twice the
exercise price of the rights. The rights expire on March 15,
2008, and may be redeemed by the Company at any time prior to the
tenth day after an announcement that a 15% position has been
acquired, unless such period has
been extended by the board of directors.
8. Stock Options
The 1997 Incentive Plan provides that the executive compensation
committee of the board of directors or its delegate may grant
stock options, stock appreciation rights ("SARs"), stock awards,
performance shares, or stock units and may make incentive awards
to the Company's key employees and officers. The maximum
aggregate number of shares of common stock that may be issued
under the plan is 1,169,906, plus the number of shares of common
stock surrendered in payment of all or part of the option price
of any option. In addition, the maximum aggregate number of
shares that may be covered by performance shares and that may be
issued in any calendar year as a stock award or in settlement of
stock units is 30% of the number of shares issuable under the
plan. The maximum aggregate number of shares that may be issued
pursuant to the exercise of options may not exceed the lesser of
(1) 1,100,000 shares, or (2) the sum of 5% of the outstanding
shares of common stock as of December 31, 1996, plus the number
of shares of common stock surrendered in payment of all or part
-47-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
8. Stock Options, Continued
of the option price of any option. No individual may be granted
or awarded, in any calendar year, options, corresponding SARs, or
SARs granted independently of options covering more than 100,000
shares of common stock in the aggregate.
Payment of the option price under the 1997 Incentive Plan may be
made by the participant in cash or by surrendering shares of
Chesapeake common stock. Up to 956,512 shares may be issued after
December 31, 1998, upon exercise of options or SARs granted under
the 1997 Incentive Plan. The board of directors has approved an
amendment to the 1997 Incentive Plan, subject to shareholder
approval at the 1999 annual meeting, that increases the number of
shares that may be issued to 1,400,000.
In 1996, the Company chose to replace the Nonemployee Director
Stock Option Plan with the Directors' Stock Option and Deferred
Compensation Plan, which provides for annual grants of stock
options each May 1, beginning May 1, 1997, and ending May 1,
2007, to nonemployee directors as a part of the directors'
compensation, in addition to their cash retainer and meeting
fees. A maximum of 350,000 shares of common stock may be issued
under the Directors' Stock Option and Deferred Compensation Plan.
The option price will be the average closing price of Chesapeake
common stock for the 20 trading days preceding the grant date.
The 1987 Stock Option Plan provided for grants to the Company's
key employees and officers of stock options and corresponding
SARs for up to 1,000,000 shares of Chesapeake's authorized but
unissued common stock and up to 200,000 SARs independent of stock
options. As of December 31, 1998, there were 139,830 shares
issuable related to options granted under this plan. With the
adoption of the 1993 Incentive Plan, awards under this plan were
discontinued.
The 1993 Incentive Plan provided for grants to the Company's key
employees and officers of stock options, SARs, stock awards,
performance shares, stock units and incentive awards for up to
the sum of 1% of the outstanding shares of common stock as of
January 1 of each calendar year during its term. As of December
31, 1998, there were 528,853 shares issuable related to options
granted under this plan. With the adoption of the 1997 Incentive
Plan, awards under this plan were discontinued.
-48-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
8. Stock Options, Continued
The following schedule summarizes stock option activity for the
three years ended December 31, 1998:
Weighted-
Average
Number Of Exercise
Stock Options Price
------------- ---------
Outstanding, January 1, 1996 842,400 $25.32
Granted 228,775 24.95
Exercised 16,317 20.22
Forfeited/expired 11,255 28.44
---------
Outstanding, December 31, 1996 1,043,603 25.28
Granted 226,900 33.15
Exercised 112,233 21.72
Forfeited/expired 133,073 26.20
---------
Outstanding, December 31, 1997 l,025,197 27.29
Granted 245,450 38.11
Exercised 79,866 22.75
Forfeited/expired 21,765 29.96
---------
Outstanding, December 31, 1998 1,169,016 29.82
=========
Exercisable:
December 31, 1996 616,252
December 31, 1997 635,814
December 31, 1998 746,831
Weighted-average fair value of
options granted during the year
1996 $6.78
1997 $9.18
1998 $10.36
-49-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
8. Stock Options, Continued
Information about options outstanding at December 31, 1998, is
summarized below:
Options Outstanding Options Exercisable
- ---------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life(Years) Price Exercisable Price
-------- ----------- ----------- --------------------------
$15.00-$20.00 123,160 3.6 $19.21 123,160 $19.21
$20.00-$25.00 268,750 5.6 23.54 229,273 23.36
$25.00-$30.00 145,538 5.7 27.79 140,783 27.79
$30.00-$35.00 391,318 7.6 33.10 253,448 32.99
$35.00-$40.00 240,250 9.5 38.17 167 35.52
--------- --- ------ ------- ------
1,169,016 6.9 29.82 746,831 26.79
========= === ====== ======= ======
During 1998, the executive compensation committee of the board of
directors made a grant of restricted stock to the Company's
officers and certain managers under the 1998-2001 Performance
Cycle of the Long-Term Incentive Program. In order to receive
these awards, the participants were required to place shares of
stock, of which at least one-half were required to be newly
acquired shares, on deposit with the Company. For each share of
stock placed on deposit, the participant received up to two
shares of time-based restricted stock, and up to one and one-half
shares of performance-based restricted stock. The Company
issued 111,892 shares of time-based restricted stock and 83,919
shares of performance-based restricted stock under this cycle
during 1998. The time-based restricted stock will vest in 25%
installments at the end of each year from 1998 to 2001. The
performance-based restricted stock will be earned any time after
June 30, 1999, that the Company's return on equity (ROE) over the
prior five calendar quarters meets the goals set by the executive
compensation committee. This performance-based restricted stock
will be forfeited if the ROE goals are not achieved. No amounts
of compensation expense have recognized as of December 31, 1998,
with respect to these performance based
shares.
-50-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
8. Stock Options, Continued
During 1996, the executive compensation committee of the board of
directors granted performance shares to the Company's officers
and certain managers under the 1996-2000 Performance Cycle of the
Long-Term Incentive Program. At December 31, 1998, 57,800 of
these performance shares remained outstanding. A portion of the
performance shares were earned and converted to restricted stock
in 1997 when Chesapeake's common stock price
exceeded $35 per share, and additional amounts will be earned
when the price equals or exceeds each $5 per share increment in
excess thereof up to $60 per share.
Information about performance shares is shown below:
1998 1997
---- ----
Outstanding grants January 1 79,308 95,448
New shares granted - 6,550
Shares forfeited (21,508) (13,623)
Shares converted to
restricted stock units - (9,067)
------ ------
Outstanding grants December 31 57,800 79,308
====== ======
Information about restricted stock and stock units is shown
below:
1998 1997
---- ----
Outstanding grants January 1 64,690 47,502
New shares granted 203,811 63,000
Converted performance shares - 9,067
Shares forfeited (3,455) (535)
Shares vested (36,088) (54,344)
------- -------
Outstanding grants December 31 228,958 64,690
======= =======
-51-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
8. Stock Options, Continued
The pro forma effect of applying the fair-value-based method of
accounting for stock options pursuant to SFAS No. 123 is:
(In millions except per share data) 1998 1997
---- ----
Net Income
As reported $47.3 $48.6
Pro forma $45.8 $47.4
Earnings per share
As reported
Basic $2.23 $2.10
Diluted 2.19 2.08
Pro forma
Basic $2.16 $2.05
Diluted 2.12 2.03
===== =====
Pro forma disclosures for stock option accounting are not likely
to be representative of the effects on reported net income for
future years.
The Black-Scholes option pricing model was used to calculate fair
value based on the following assumptions:
1998 1997
---- ----
Dividend yield 2.1% 2.3%
Risk-free interest rates 5.6% 5.9%
Volatility 26.6 26.9
Expected option term 6.0 6.0
==== ====
Under these assumptions, the weighted average fair value of an
option to purchase one share granted in 1998 and 1997,
respectively, was approximately $10.36 and $9.18.
-52-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
9. Employees' Stock Plans and Other Compensation Plans
The Company has stock purchase plans for certain eligible
salaried and hourly employees. Shares of Chesapeake common stock
are purchased based on participant and company contributions. At
December 31, 1998, 936,212 shares remain available for issuance
under these plans.
The Company also sponsors, in accordance with the provisions of
Section 401(k) of the Internal Revenue Code, pre-tax savings
programs for eligible salaried and hourly employees. Certain
participants' contributions are matched up to designated
contribution levels by the Company. Contributions are invested in
several investment options, which may include Chesapeake
common stock, as selected by the participating employee. At
December 31, 1998, 400,000 shares of Chesapeake common stock are
reserved for issuance under these programs.
The 1993 and 1997 Incentive Plans (see Note 8) provide that the
executive compensation committee of the board of directors may
grant performance share awards and stock awards to key employees
and officers and may select certain officers to receive annual
incentive awards in the form of cash, common stock, or a
combination, based on the Company's overall financial performance
and the officer's individual performance. With the adoption of
the 1997 Incentive Plan, awards under the 1993 plan were
discontinued.
The charges to income for these plans approximated $7.2 million
in 1998, $7.4 million in 1997, and $7.8 million in 1996.
10. Litigation
WT has been identified by the federal government and the State of
Wisconsin as a potentially responsible party with respect to
possible natural resource damages and superfund liability in the
Fox River and Green Bay System.
On May 13, 1997, the attorney general of Florida filed a civil
complaint against WT alleging violations of antitrust laws. The
complaint also names nine other commercial and industrial tissue
manufacturers and seeks compensatory monetary damages, civil
penalties, and injunctive relief. At least 35 other private civil
antitrust class actions have also been filed against WT (or
against the Company, identifying WT as a division of the
Company), and against the other defendants. WT and the Company
believe that WT has valid defenses to the plaintiffs' claims, and
intend to defend the actions vigorously.
-53-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
10. Litigation, Continued
The Company is a party to various other legal actions which are
ordinary and incidental to its business.
While the outcome of legal actions cannot be predicted with
certainty, the Company believes the outcome of any of these
proceedings, or all of them combined, will not have a material
adverse effect on its consolidated financial position or results
of operations.
11. Supplemental Balance Sheet Information
(In millions) 1998 1997
---- ----
a. Accounts receivable, net:
Trade $130.5 $114.7
Other 1.2 3.0
Allowance for doubtful accounts (4.1) (5.9)
------ ------
Totals $127.6 $111.8
====== ======
b. Other assets:
Real estate for development $ 28.5 $ 30.9
Other 44.0 30.4
------ ------
Totals $ 72.5 $ 61.3
====== ======
c. Accrued expenses:
Interest $ 5.9 $ 5.5
Compensation and employee benefits 47.6 42.4
Other 36.2 35.5
------ ------
Totals $ 89.7 $ 83.4
====== ======
12. Supplemental Cash Flow Information
(In millions) 1998 1997 1996
---- ---- ----
Cash paid for:
Interest, net $21.4 $23.1 $33.1
===== ===== =====
Income taxes, net of refunds $19.3 $92.4 $12.9
===== ===== =====
-54-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
12. Supplemental Cash Flow Information, Continued
Supplemental investing and
financing non-cash transactions:
Capital lease obligations
assumed in acquisitions $ 2.1 $ - $10.1
Long-term debt assumed in
acquisitions - - 17.1
Issuance of common stock
for employee benefit plans 3.6 5.0 5.4
Dividends declared not paid 4.7 4.3 4.7
Real estate transactions - .5 2.2
Assets obtained by capital lease 4.5 - -
Goodwill reductions:
Restructuring - 5.5 -
Sale of businesses - 5.4 -
13. Commitments and Other Matters
At December 31, 1998, commitments, primarily for capital
expenditures, approximated $35 million of the Company's 1999
capital spending estimate of $80 million. These commitments are
for various capital projects, none of which is individually
material.
The Company leases certain assets (principally manufacturing,
office space, transportation, and information processing
equipment) generally for three-to five-year terms. Rental expense
for operating leases totaled (in millions) $16.5 for
1998, $15.3 for 1997, and $14.9 for 1996. As of December 31,
1998, aggregate minimum rental payments in future years on
noncancelable operating leases approximated $50.9 a million. The
amounts applying to future years are (in millions): 1999 $15.3;
2000 $12.4; 2001 $9.1; 2002 $7.0; 2003 $3.9; and thereafter $3.2.
The Company leases certain assets (principally manufacturing
equipment) under agreements which are classified as capital
leases. As of December 31, 1998, the aggregate minimum payments
under capitalized leases included in other long-term debt totaled
$3.8 million. The amounts applying to future years are (in
millions): 1999 $1.7; 2000 $0.9; 2001 $0.6; 2002 $0.4; and
2003 $0.2. The present value of minimum capitalized lease
payments at year-end was approximately $3.4 million.
During 1998, management initiated a review of its Tissue and
Specialty Packaging segments in an effort to reduce costs and
-55-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
13. Commitments and Other Matters, Continued
increase productivity. The review included organization and cost
structures, facility utilization, and product offerings. As a
result of this review, the Company formulated a restructuring
plan which resulted in a one-time fourth quarter 1998 charge of
$11.8 million before taxes ($8.8 million after tax).
The 1998 restructuring program consists primarily of a 5%
reduction in the Company's global workforce (approximately 250
employees) through the elimination of redundant and overlapping
positions and facility consolidations. The reductions are taking
place in Chesapeake's Tissue and Specialty Packaging segments.
Wisconsin Tissue, based in Menasha, WI, has implemented a
combination of early retirement and voluntary severance programs
to reduce its work force by approximately 70 positions.
Chesapeake Display and Packaging, based in Winston-Salem, NC, has
implemented a work force reduction of approximately 60 positions
and will close two facilities in 1999.
During the second quarter of 1997, the Company recorded
restructuring and other special charges of $18.9 million before
taxes ($10.8 million after tax) related primarily to its
Specialty Packaging segment. The restructuring charge provided
for the costs associated with management reorganization and the
closures of one point-of-sale display facility and one graphic
packaging facility. The intent of these initiatives was to
eliminate redundant overhead and processes, improve geographic
efficiency, and reduce fixed costs. The restructuring liability,
which was established in 1997, was completely utilized by
December 31, 1998.
14. Subsequent Events
In January 1999, the Company announced that it plans to build a
new tissue mill and converting facility in Halifax County, NC.
Construction of this mill is planned to begin in the third
quarter of 1999, with converting production beginning in the
third quarter of 2000 and paper production in the first quarter
of 2001. Total cost is projected to be $160-$180 million.
On January 20, 1999, the Company announced that it made an offer
to acquire all of the outstanding shares of Field Group plc, a
leading European packaging company with headquarters in the
United Kingdom. The all cash offer, as amended, of approximately
$355 million plus the assumption of $50 million in debt values
the total enterprise at $405 million.
-56-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
14. Subsequent Events, Continued
In January 1999, the Company entered into a new $450 million bank
credit facility that will be used primarily to fund the purchase
of Field Group plc. The credit facility includes a five-year $250
million revolving line of credit and a 364-day $200 million
revolving line of credit, which is convertible at the Company's
option to a two-year term loan.
15. Business Segment Information
The Company's business segments are Tissue, Specialty Packaging,
and Forest Products/Land Development. The Tissue segment is
composed of commercial and industrial tissue operations of
Wisconsin Tissue and Wisconsin Tissue de Mexico. The Specialty
Packaging segment is composed of Chesapeake Display and
Packaging, Chesapeake Packaging, and Chesapeake Europe, which
produce and sell point-of-sale displays, graphic packaging, and
corrugated shipping containers. The Forest Products/Land
Development segment includes subsidiaries that together manage
the Company's timberlands and real estate holdings. General
corporate expenses are shown as Corporate.
Segments are determined by the "management approach" as described
in SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information," which the Company adopted in 1998.
Management assesses operations based on operating income derived
from similar groupings of products and services. Segment
operating income consists of revenue less allocable operating
expenses excluding interest and income taxes. In line
with management's assessment of performance, results of divested
businesses, gain on the sale of businesses, and restructuring are
excluded from ongoing operations. Certain businesses that have
the same or similar products, production processes, customers,
performance expectations, or other economic characteristics have
been aggregated for segment presentation.
Intersegment sales not included in the following table are: the
divested kraft products business sales to Specialty Packaging of
$6.9 million in 1997 and $26.0 million in 1996; and the Forest
Products/Land Development segment sales to the divested kraft
business of $22.7 million in 1997 and $48.6 million in 1996.
There were no intersegment sales in 1998. No one customer
represented more than 10% of total net sales.
Segment identifiable assets are those that are directly used in
segment operations. Timberlands and real estate held for sale
-57-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
15. Business Segment Information, Continued
are included in the Forest Products/Land Development segment.
Corporate assets are cash, certain nontrade receivables, and
other assets. Long-lived assets are primarily property, plant,
and equipment, real estate held for development, and goodwill.
Financial information by business segment:
(In millions) 1998 1997 1996
---- ---- ----
Net sales:
Tissue $433.3 $ 410.7 $ 392.0
Specialty Packaging 472.3 416.8 357.6
Forest Products/Land Development 44.8 38.0 24.3
------ -------- --------
Ongoing operations 950.4 865.5 773.9
Divested businesses - 155.5 384.7
------ -------- --------
Consolidated net sales $950.4 $1,021.0 $1,158.6
====== ======== ========
Operating income:
Tissue $ 69.6 $ 55.8 $ 65.0
Specialty Packaging 13.3 5.4 17.7
Forest Products/Land Development 16.3 12.6 10.1
------ -------- --------
99.2 73.8 92.8
Corporate (12.7) (19.7) (19.0)
------ -------- --------
Ongoing operations 86.5 54.1 73.8
Divested businesses - (14.3) 7.2
Gain on sale of businesses - 86.3 -
Restructuring/special charges (11.8) (18.9) -
------ -------- --------
Income before interest, taxes,
cumulative effect of
accounting change, and
extraordinary item 74.7 107.2 81.0
Interest expense, net (18.9) (22.0) (33.9)
------ -------- --------
Income before taxes,
cumulative effect of
accounting change, and
extraordinary item $ 55.8 $ 85.2 $ 47.1
====== ======== ========
-58-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
15. Business Segment Information, Continued
Identifiable assets:
Tissue $447.6 $ 453.9 $ 439.4
Specialty Packaging 330.6 275.6 289.8
Forest Products/Land Development 121.4 94.1 91.5
Corporate 79.8 98.3 9.1
------ -------- --------
Ongoing operations 979.4 921.9 829.8
Divested businesses - - 460.4
------ -------- --------
Consolidated assets $979.4 $ 921.9 $1,290.2
====== ======== ========
Capital expenditures:
Tissue $ 26.4 $ 44.1 $ 53.8
Specialty Packaging 34.5 14.6 39.7
Forest Products/Land Development 7.8 4.7 2.4
Corporate 4.6 0.5 1.1
------ -------- --------
Ongoing operations 73.3 63.9 97.0
Divested businesses - 4.3 31.8
------ -------- --------
Totals $ 73.3 $ 68.2 $ 128.8
====== ======== ========
Depreciation, cost of timber
harvested, and amortization:
Tissue $ 35.5 $ 33.0 $ 28.9
Specialty Packaging 21.8 21.0 15.0
Forest Products/Land Development 3.6 2.6 3.2
Corporate 1.4 1.7 1.0
------ -------- --------
Ongoing operations 62.3 58.3 48.1
Divested businesses - 17.5 42.1
------ -------- --------
Totals $ 62.3 $ 75.8 $ 90.2
====== ======== ========
Geographic information:
Net sales:
United States $856.3 $ 931.8 $1,123.5
International 94.1 89.2 35.1
------ -------- --------
Total $950.4 $1,021.0 $1,158.6
====== ======== ========
Long-lived assets:
United States $636.0 $ 585.1 $ 930.5
International 30.0 28.5 38.9
------ -------- --------
Total $666.0 $ 613.6 $ 969.4
====== ======== ========
-59-
EXCERPT FROM ELEVEN-YEAR COMPARATIVE RECORD
(Dollar amounts in millions except per share data)
1998(1) 1997(2) 1996 1995 1994(3)
------- ------- ---- ---- -------
Operating Results
Net sales $950.4 $1,021.0 $1,158.6 $1,233.7 $990.5
Net costs and expenses
except depreciation,
cost of timber
harvested, and
interest expense 816.0 841.5 990.5 987.7 830.3
Depreciation and cost
of timber harvested 59.7 72.3 87.1 73.6 70.9
Interest expense, net 18.9 22.0 33.9 30.8 31.1
Income before taxes,
extraordinary item, and
cumulative effect of
accounting changes 55.8 85.2 47.1 141.6 58.2
Income taxes 21.8 34.3 17.0 48.2 20.6
Income before
extraordinary item and
cumulative effect of
accounting changes 34.0 50.9 30.1 93.4 37.6
Extraordinary item, net
of income taxes - (2.3) - - -
Cumulative effect of
accounting changes, net
of income taxes 13.3 - - - -
Net income 47.3 48.6 30.1 93.4 37.6
Cash dividends declared
on common stock 17.5 18.3 18.8 18.6 17.1
Net cash provided by
(used in) operating
activities 90.4 (31.4) 131.2 143.7 103.6
Percent of income
Before gain on sale of
businesses,
restructuring and other
special charges,
extraordinary item, and
cumulative effect of
accounting changes
To net sales 4.8% 1.2% 2.6% 7.6% 3.8%
To stockholders'equity 10.1 2.7 6.4 23.7 10.2
To total assets 4.6 1.0 2.6 9.2 4.1
----- ----- ----- ----- -----
-60-
EXCERPT FROM ELEVEN-YEAR COMPARATIVE RECORD
(Dollar amounts in millions except per share data)
1998(1) 1997(2) 1996 1995 1994(3)
------- ------- ---- ---- -------
Common Stock
Number of stockholders
of record at year-end 6,741 6,564 7,567 7,456 7,804
Shares outstanding at
year-end
(in thousands) 21,439 21,330 23,398 23,792 23,754
Per share
Basic earnings before
extraordinary item
and cumulative effect
of accounting changes$1.60 $2.20 $1.28 $3.92 $1.59
Basic earnings 2.23 2.10 1.28 3.92 1.59
Diluted earnings
before extraordinary
item and cumulative
effect of accounting
changes $1.57 $2.18 $1.27 $3.88 $1.58
Diluted earnings 2.19 2.08 1.27 3.88 1.58
Dividends declared 0.82 0.80 0.80 0.78 0.72
Year-end stockholders'
equity 20.62 19.84 20.05 19.68 16.56
----- ----- ----- ----- -----
Financial Position at
Year-end
Working capital $155.8 $166.0 $161.3 $142.3 $144.3
Property, plant and
equipment, net 543.2 508.3 863.5 780.9 646.4
Total assets 979.4 921.9 1,290.2 1,146.31,016.9
Total capital 786.0 754.7 1,095.4 980.5 862.5
Long-term debt 270.4 264.3 499.4 393.6 364.0
Deferred income taxes 74.3 67.3 126.9 118.6 105.2
Stockholders' equity 441.3 423.1 469.1 468.3 393.3
Percent of long-term
debt
To total capital 34.4% 35.0% 45.6% 40.1% 42.2%
To stockholders'
equity 61.3 62.5 106.5 84.0 92.6
----- ----- ----- ----- -----
Additional Data
Capital expenditures
and acquisitions $91.4 $68.2 $176.0 $227.4 $71.0
Acres of timberland
owned at year-end
(in thousands) (4) 320 325 326 325 328
Number of employees
at year-end 5,557 5,184 6,914 5,305 5,209
----- ----- ----- ----- -----
-61-
Notes to Eleven-Year Comparative Record
Accounting policies are stated in Note 1 of the Notes to
Consolidated Financial Statements. Percent of income before
cumulative effect of accounting changes information is calculated
using beginning of year and acquisition amounts where
appropriate.
1. Includes an after-tax restructuring charge of $8.8 million,
and an after-tax gain on the cumulative effect of an accounting
change of $13.3 million or $.62 per share.
2. Includes an after-tax gain of $49.1, million or $2.07 per
share, on the sale of the Divested Businesses to St. Laurent
(U.S.), and after-tax restructuring/special charges of $10.8
million.
3. Includes an after-tax charge of $2.8 million, or $.12 per
share, related to a change to the LIFO method of accounting for
certain inventories.
4. Excludes 12,000-25,000 acres held by land development
subsidiaries during 1988-1998.
-62-
OPERATING MANAGERS AND LOCATIONS
(as of December 31, 1998)
TISSUE
- ------
William A. Raaths
Wisconsin Tissue Mills Inc.
Menasha, Wisconsin
Bellemont, Arizona
Chicago, Illinois
Flagstaff, Arizona
Greenwich, New York
Neenah, Wisconsin
Wisconsin Tissue de Mexico, S.A. de C.V.
Mexico, D.F*
Guadalajara*
Monterrey
Toluca*
SPECIALTY PACKAGING
- -------------------
Octavio Orta
Chesapeake Display & Packaging Company
Winston-Salem, North Carolina
Cincinnati, Ohio*
Cinnaminson, New Jersey*
Erlanger, Kentucky
Marion, Iowa
Mechanicsburg, Pennsylvania*
Memphis, Tennessee*
Pelahatchie, Mississippi
Richmond, Indiana
Rural Hall, North Carolina*
Toronto, Ontario, Canada
Visalia, California*
Chesapeake Display & Packaging - Europe S.A. (France)
Noisy-le-Grand*
Avallon
Ezy sur Eure
Migennes
Rosny sous Bois*
St. Pierre des Corps
Ussel*
-63-
OPERATING MANAGERS AND LOCATIONS
(as of December 31, 1998)
Robert F. Schick
Chesapeake Packaging Co.
Richmond, Virginia*
Binghamton, New York
Buffalo, New York
Denver, Colorado*
Louisville, Kentucky
Madison, Ohio
St. Anthony, Indiana
Scotia, New York
Scranton, Pennsylvania
Utica, New York
LAND DEVELOPMENT
- ----------------
Joel K. Mostrom
Delmarva Properties, Inc.
Richmond, Virginia*
Stonehouse Inc.
Williamsburg, Virginia*
Forest Resources
- ----------------
Jack C. King
Chesapeake Forest Products Company
West Point, Virginia
Keysville, Virginia
Pocomoke City, Maryland
Chesapeake Building Products Company
West Point, Virginia
Milford, Virginia
Princess Anne, Maryland
Corporate Headquarters
1021 East Cary Street, Box 2350
Richmond, Virginia 23218-2350*
(804) 697-1000
www.cskcorp.com
Shared services
Richmond, Virginia*
*leased real property
-64-
EX 18.1
Preferability Letter
January 6, 1999
Mr. William F. Tolley
Chief Financial Officer
Chesapeake Corporation
P.O. Box 2350
Richmond, VA 23218-2350
Dear Mr. Tolley:
We are providing this letter to you for inclusion as an exhibit
to your Form 10-K filing pursuant to Item 601 of Regulation S-K.
We have read management's justification for the change in
accounting related to the capitalization of certain timber costs
which were previously expensed as more fully described in the
Company's Form 10-K for the year ended December 31, 1998. Based
on our reading of the data and discussions with Company officials
about the business judgment and business planning factors
relating to the change, we believe management's justification to
be reasonable. Accordingly, we concur that the newly adopted
accounting principle described above is preferable in the
Company's circumstances to the method previously applied.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
-1-
EX 21.1
SUBSIDIARY CORPORATIONS OF
CHESAPEAKE CORPORATION
December 31, 1998
State of
Name Incorporation
---- -------------
Cary St. Company Delaware
Capitol Packaging Company Colorado
The Chesapeake Corporation of Virginia Virginia
Chesapeake Display and Packaging Company Iowa
Chesapeake Forest Products Company Virginia
Chesapeake Packaging Co. Virginia
Chesapeake Recycling Co. Virginia
Chesapeake Resources Company Virginia
Chesapeake Trading Company Virginia
Chesapeake Trading Company, Inc. U.S. Virgin Islands
Chesapeake Building Products Company Virginia
Delmarva Properties, Inc. Virginia
Stonehouse Inc. Virginia
Wisconsin Tissue Mills Inc. Delaware
Chesapeake International Holding Company Virginia
Wisconsin Tissue de Mexico SA Mexico
Chesapeake Display and Packaging (Canada)
Limited Ontario, Canada
Chesapeake Europe SA France
Chesapeake Display and Packaging Europe France
-1-
EX 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the registration
statements of Chesapeake Corporation on Form S-8 (File Nos. 2-
71595, 33-14926, 2-79636, 33-14925, 33-14927, 33-26150, 33-53478,
33-55558, 33-67384, 33-56473, 33-314189 and 333-30763) of our
report dated February 12, 1999 appearing in the Annual Report to
Shareholders which is incorporated in this Annual Report on Form
10K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule which is included in
this Form 10-K.
We consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-79636) of the Hourly Employees'
Stock Purchase Plan of our report dated March 5, 1999 appearing
in Form 11-K (Exhibit 99.1).
/s/ PricewaterhouseCoopers LLC
------------------------------
PricewaterhouseCoopers LLC
Richmond, Virginia
March 24, 1999
-1-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000019731
<NAME> CHESAPEAKE CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 62,400,000
<SECURITIES> 0
<RECEIVABLES> 127,600,000
<ALLOWANCES> 4,100,000
<INVENTORY> 102,700,000
<CURRENT-ASSETS> 313,400,000
<PP&E> 872,400,000
<DEPRECIATION> 385,900,000
<TOTAL-ASSETS> 979,400,000
<CURRENT-LIABILITIES> 157,600,000
<BONDS> 270,400,000
0
0
<COMMON> 21,400,000
<OTHER-SE> 419,900,000
<TOTAL-LIABILITY-AND-EQUITY> 979,400,000
<SALES> 950,400,000
<TOTAL-REVENUES> 959,000,000
<CGS> 679,800,000
<TOTAL-COSTS> 884,200,000
<OTHER-EXPENSES> 8,600,000
<LOSS-PROVISION> 700,000
<INTEREST-EXPENSE> 18,900,000
<INCOME-PRETAX> 55,800,000
<INCOME-TAX> 21,800,000
<INCOME-CONTINUING> 34,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 13,300,000
<NET-INCOME> 47,300,000
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 2.19
</TABLE>
EX 99.1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 [FEE REQUIRED]
for the fiscal year ended November 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
for the transition period from _______ to _______
Commission file number 2-79636
HOURLY EMPLOYEES' STOCK PURCHASE PLAN
CHESAPEAKE CORPORATION
1021 East Cary Street
P.O. Box 2350
Richmond, Virginia 23218-2350
-1-
HOURLY EMPLOYEES' STOCK PURCHASE PLAN
Administration of the Plan:
The Plan is administered by the Hourly Employees' Stock Purchase
Plan Committee (the "Committee") under the direction of the Board
of Directors of Chesapeake Corporation (the "Corporation"). At
November 30, 1998, the Committee members were:
Name Address
Thomas A. Smith*(1) Richmond, Virginia 23218
J.P. Causey Jr. (2) Richmond, Virginia 23218
William T. Tolley (3) Richmond, Virginia 23218
(1) Mr. Smith is Vice President - Human Resources & Assistant
Secretary of the Corporation.
(2) Mr. Causey is Senior Vice President, Secretary & General
Counsel of the Corporation.
(3) Mr. Tolley is Senior Vice President - Finance & Chief
Financial Officer of the Corporation.
*Committee Chairman
Committee members are appointed by and serve at the pleasure
of the Board of Directors of the Corporation. Committee
members are employees of the Corporation and receive no
additional compensation for serving on the Committee. The
Plan provides that the Corporation will indemnify members of
the Committee to the same extent and on the same terms as it
indemnifies its officers and directors by reason of their
being officers and directors.
Financial Statements and Exhibits:
(a) Financial statements:
Hourly Employees' Stock Purchase Plan:
Statements of Financial Condition
Statements of Income and Changes in Plan Equity
(b) Exhibits:
See Exhibit 23.1 to the Chesapeake Corporation Annual
Report on Form 10-K for the year ended December 31,
1998 for consent of independent accountants.
-2-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the members of the Committee have duly caused this annual
report to be signed by the undersigned hereunto duly authorized.
HOURLY EMPLOYEES' STOCK PURCHASE PLAN
BY: /S/ THOMAS A. SMITH
-------------------------------------
THOMAS A. SMITH, CHAIRMAN OF THE
COMMITTEE
March 5, 1999
-3-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Hourly Employees' Stock
Purchase Plan Committee:
In our opinion, the accompanying statements of financial
condition and the related statements of income and changes in
plan equity present fairly, in all material respects, the
financial position of the Hourly Employees' Stock Purchase Plan
(the "Plan") as of November 30, 1998, and the changes in plan
equity for each of the three years in the period ended November
30, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of
the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
March 5, 1999
-4-
HOURLY EMPLOYEES' STOCK PURCHASE PLAN
STATEMENTS OF FINANCIAL CONDITION
November 30, 1998 and 1997
1998 1997
---- ----
Asset:
Funds held by Chesapeake Corporation and
participating subsidiaries (Note 4) $5,199 $4,598
====== ======
Plan equity $5,199 $4,598
====== ======
-5-
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY
for the years ended November 30, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Contributions:
Employees, net of refunds $325,114 $301,928 $1,226,144
Employer; $105,007 in 1998,
$144,964 in 1997, and $598,671
in 1996; less withheld taxes of
$42,753, $59,132 and $245,301,
respectively 62,254 85,832 353,370
-------- -------- ----------
387,368 387,760 1,579,514
-------- -------- ----------
Deductions:
Purchase and distribution to
participants at year end of
10,876 shares in 1998 ($35.45
per share), 11,764 shares in
1997 ($32.89 per share), and
53,574 shares in 1996 ($29.17
per share) of common stock of
Chesapeake Corporation (Note 1) 385,551 386,907 1,562,687
-------- -------- ----------
385,551 386,907 1,562,687
Net transfers to Salaried
Employees' Stock Purchase Plan 1,216 516 2,640
Net transfers due to sale to St.
Laurent Paperboard Inc. (Note 7) - 7,961 -
Net transfers to the Wisconsin
Tissue Mill Hourly Employees'
Stock Purchase Plan - - 14,792
-------- -------- ----------
386,767 395,384 1,580,119
-------- -------- ----------
Increase (decrease) in
plan equity 601 (7,624) (605)
Plan equity, beginning of year 4,598 12,222 12,827
-------- -------- ----------
Plan equity, end of year $ 5,199 $ 4,598 $ 12,222
======== ======== ==========
The accompanying notes are an integral part of these financial
statements.
-6-
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN:
The stockholders of Chesapeake Corporation (the "Corporation")
have approved the Hourly Employees' Stock Purchase Plan (the
"Plan") and reserved a total of 900,000 shares of the
Corporation's common stock for sale to eligible hourly employees,
as defined, of the Corporation and participating subsidiaries
(the "Employer").
The Plan is administered by a committee (the "Committee")
appointed by the Corporation's Board of Directors. Participants
in the Plan, which became effective in December 1982, are
permitted to invest between one and five percent of their basic
compensation, as defined. The Employer contributes to the Plan,
as of the end of the Plan Year (see Note 3), a percentage
(determined by the Committee of the Plan, generally 30% to 50%)
of the participant's contribution reduced by amounts required to
be withheld under income tax, Federal Insurance Contributions Act
tax and comparable laws. The combined amount becomes available
to purchase from the Corporation, shares of its common stock at a
price equal to the average of the closing prices of such common
stock on the New York Stock Exchange (composite tape) for the 20
consecutive trading days immediately preceding the last day of
the Plan Year. The funds held by the Employer at the end of the
year represent the remaining amounts in participants' accounts
after the purchase of whole shares as the Plan does not provide
for the purchase of fractional shares. A participant may
terminate his participation in the Plan at any time. Upon
termination, the Employer will return his contributions and the
participant will forfeit all rights to any contribution which
would have been made at the end of the plan year.
As of November 30, 1998, 683,858 shares (10,876 shares in the
current year and 672,982 in prior years) of the Corporation's
common stock had been issued under the Plan and 216,142 shares
were available for future issuance.
Hourly paid employees of certain divisions of Chesapeake Display
and Packaging Company, Chesapeake Packaging Co., and Chesapeake
Forest Products Company are eligible to become participants in
the Hourly Employees' Stock Purchase Plan provided that such
employees otherwise meet the requirements for participation set
forth in the Plan.
2. RECLASSIFICATIONS:
Certain 1997 and 1996 amounts have been reclassified to conform
with the current year's presentation.
-7-
3. PLAN YEAR:
The fiscal year of the Plan ends each November 30.
4. FUNDS HELD BY CHESAPEAKE CORPORATION AND PARTICIPATING
SUBSIDIARIES:
Funds received or held by the Employer with respect to the Plan
may be used for any corporate purpose; therefore, the Plan does
not prevent the Employer from creating a lien on these funds.
5. TAXES AND EXPENSES:
The Plan is not qualified under Section 401(a) of the Internal
Revenue Code and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974. The Employer's
contribution, when made to the Plan, is taxable to a participant
as ordinary income. Purchases of stock by the Plan result in no
gain or loss to the participant; therefore, no tax consequences
are incurred by a participant upon receipt of stock purchased
under the Plan. Sale by a participant of shares acquired under
the Plan will result in a gain or loss in an amount equal to the
difference between the sale price and the price paid for the
stock acquired pursuant to the Plan. The Plan is not subject to
income taxes.
Expenses of administering the Plan are borne by the Employer.
6. CONTRIBUTIONS TO THE PLAN:
Contributions (net of withheld taxes and refunds) were as
follows:
1998
---------------------
Employer Employees
Chesapeake Corporation Subsidiaries:
Chesapeake Display and
Packaging Company $46,623 $262,825
Chesapeake Packaging Co. 11,284 37,521
Chesapeake Paper Products
Company - -
Chesapeake Forest Products
Company 4,347 24,768
Wisconsin Tissue Mills, Inc.* - -
------- --------
Totals $62,254 $325,114
======= ========
-8-
6. CONTRIBUTIONS TO THE PLAN, CONTINUED:
1997
---------------------
Employer Employees
Chesapeake Corporation Subsidiaries:
Chesapeake Display and
Packaging Company $69,759 $236,640
Chesapeake Packaging Co. 11,067 36,869
Chesapeake Paper Products
Company - -
Chesapeake Forest Products
Company 5,006 28,419
Wisconsin Tissue Mills, Inc.* - -
------- --------
Totals $85,832 $301,928
======= ========
1996
---------------------
Employer Employees
Chesapeake Corporation Subsidiaries:
Chesapeake Display and
Packaging Company $ 70,704 $ 239,249
Chesapeake Packaging Co. 32,143 108,514
Chesapeake Paper Products
Company 237,010 804,273
Chesapeake Forest Products
Company 13,513 59,316
Wisconsin Tissue Mills, Inc.* - 14,792
-------- ----------
Totals $353,370 $1,226,144
======== ==========
*During 1996 contributions totaling $14,792 attributable to
Wisconsin Tissue Mills, Inc. hourly employees were made to the
Plan. Such contributions were made prior to the establishment of
the Wisconsin Tissue Mills Hourly Employees' Stock Purchase Plan
("WTM Plan"). Such assets were transferred to the WTM Plan on
November 1, 1996.
7. SALE TO ST. LAURENT PAPERBOARD INC.:
On May 22, 1997, the Corporation sold certain kraft and packaging
facilities to St. Laurent Paperboard Inc. ("St. Laurent"). The
Corporation transferred accumulated 1996 carryover employee and
employer contributions and 1997 employee contributions made to
the Plan prior to the date of the sale to St. Laurent.
-9-
