<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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 1-8247
MANVILLE CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-0856796
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 17th Street
Denver, Colorado 80202
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(303) 978-2000
--------------
(Registrant's telephone number, including area code)
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
At August 10, 1994, 122,385,436 shares of the registrant's common stock
were outstanding.
<PAGE>
*PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
--------------------
* "Manville" or the "Company" when used in this report refers to Manville
Corporation, incorporated in the State of Delaware in 1981, and includes
where applicable its consolidated subsidiaries.
I-1
<PAGE>
MANVILLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of dollars)
(Unaudited)
June 30, December 31,
ASSETS 1994 1993
- - --------------------------------------------------------------------------------
Current Assets
Cash and equivalents $ 97,176 $ 153,093
Marketable securities, at cost
(approximates market) 37,796 75,062
Receivables, net of allowances 341,105 304,114
Inventories 206,693 207,702
Prepaid expenses 32,875 26,747
Deferred tax assets 44,395 50,179
--------------------------------
Total Current Assets 760,040 816,897
Property, Plant and Equipment,
net of accumulated depreciation
and depletion of $1,054,928 and
$1,017,178, respectively 2,190,403 2,113,629
Deferred Tax Assets 335,936 331,292
Other Assets 386,985 354,419
--------------------------------
$3,673,364 $3,616,237
================================================================================
See Notes to Condensed Consolidated Financial Statements.
I-2
<PAGE>
MANVILLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Thousands of dollars)
(Unaudited)
June 30, December 31,
LIABILITIES 1994 1993
- - --------------------------------------------------------------------------------
Current Liabilities
Accounts and notes payable $ 199,123 $ 208,068
Compensation and employee benefits 128,752 135,024
Income taxes 21,795 21,770
Accrued dividends - Cumulative Preference
Stock, Series B 24,923 22,846
Other accrued liabilities 121,580 107,440
--------------------------------
Total Current Liabilities 496,173 495,148
Long-Term Debt, less current portion 1,392,030 1,390,988
Postretirement Benefits Other Than Pensions 254,610 246,525
Deferred Income Taxes and Other Non-Current
Liabilities 405,300 392,431
Common Stock Dividends Accrued
Not Declared (Note 3) 102,853 102,856
Cumulative Preference Stock Dividends
Accrued Not Declared (Note 3) 37,384 49,845
--------------------------------
2,688,350 2,677,793
--------------------------------
Profit Sharing Obligation (Note 4)
Contingencies and Commitments (Notes 4 and 9)
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 96,154 92,375
STOCKHOLDERS' EQUITY
- - --------------------------------------------------------------------------------
Cumulative Preference Stock, Series B 118,409 105,947
Common Stock 1,224 1,224
Treasury Stock, at cost (407)
Capital in Excess of Par Value 900,562 900,562
Unearned Restricted Stock Compensation (2,063) (2,663)
Accumulated Deficit (126,881) (142,467)
Pension Liability Adjustment (4,345) (4,345)
Cumulative Currency Translation
Adjustment 2,361 (12,189)
--------------------------------
888,860 846,069
--------------------------------
$3,673,364 $3,616,237
================================================================================
See Notes to Condensed Consolidated Financial Statements.
I-3
<PAGE>
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
AND ACCUMULATED DEFICIT
(Thousands of dollars)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-----------------------------------------------
INCOME 1994 1993 1994 1993
- - --------------------------------------------------------------------------------
Net Sales $636,464 $587,516 $1,167,683 $1,091,827
Cost of Sales 477,556 459,529 889,015 857,401
Selling, General and
Administrative 68,452 62,564 130,293 121,864
Research, Development
and Engineering 9,585 9,874 18,506 19,314
Restructuring of Operations
Gain (Loss), net (4,067) (4,067)
Other Income (Loss), net (3,641) (1,534) (7,692) (3,375)
----------------------------------------------
Income from Operations 77,230 49,948 122,177 85,806
Interest Income 2,166 4,812 4,337 22,123
Interest Expense 34,090 37,456 66,027 74,189
Profit Sharing Expense
(Note 4) 5,233 6,385 7,310 10,198
----------------------------------------------
Income before Income Taxes 40,073 10,919 53,177 23,542
Income Tax (Benefit) 17,370 (17,184) 22,628 (34,943)
----------------------------------------------
Income before Minority
Interest and Cumulative
Effect of Accounting Change 22,703 28,103 30,549 58,485
Minority Interest in
Consolidated Subsidiary (2,042) (734) (2,502) (1,450)
----------------------------------------------
Income before Cumulative
Effect of Accounting Change 20,661 27,369 28,047 57,035
Cumulative Effect of a
Change in Accounting for
Postemployment Benefits,
net of tax (13,881)
----------------------------------------------
Net Income 20,661 27,369 28,047 43,154
Preference Stock
Dividends/Accretion (6,230) (5,629) (12,461) (11,068)
----------------------------------------------
Net Income Applicable to
Common Stock $ 14,431 $ 21,740 $ 15,586 $ 32,086
================================================================================
See Notes to Condensed Consolidated Financial Statements.
I-4
<PAGE>
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
AND ACCUMULATED DEFICIT (Continued)
(Thousands of dollars, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------------------------
ACCUMULATED DEFICIT 1994 1993 1994 1993
- - --------------------------------------------------------------------------------
Accumulated Deficit at
Beginning of Period $(141,312) $(157,358) $(142,467) $(167,704)
Net Income 20,661 27,369 28,047 43,154
Preference Stock
Dividends/Accretion (6,230) (5,629) (12,461) (11,068)
-------------------------------------------------
Accumulated Deficit
at End of Period $(126,881) $(135,618) $(126,881) $(135,618)
================================================================================
EARNINGS (LOSS) PER COMMON SHARE
(AFTER PREFERENCE STOCK
DIVIDENDS/ACCRETION)
- - --------------------------------------------------------------------------------
Primary and Fully Diluted:
Income before Minority
Interest and Cumulative
Effect of Accounting Change $ .14 $ .19 $ .15 $ .38
Minority Interest in
Consolidated Subsidiary (.02) (.01) (.02) (.01)
-------------------------------------------------
Income before Cumulative
Effect of Accounting Change .12 .18 .13 .37
Cumulative Effect of a
Change in Accounting for
Postemployment Benefits,
net of tax (.11)
-------------------------------------------------
Net Income Applicable to
Common Stock $ .12 $ .18 $ .13 $ .26
================================================================================
See Notes to Condensed Consolidated Financial Statements.
I-5
<PAGE>
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-----------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Net income(before Preference Stock
Dividends/Accretion) $ 28,047 $ 43,154
Non-cash items included in net income:
Depreciation, depletion and amortization 73,750 76,784
Deferred taxes 10,260 (29,844)
Other postretirement benefits expense 12,410 13,573
Pension expense 1,375 1,137
Cumulative effect of accounting change 13,881
Profit sharing expense 7,310 10,198
Translation loss 4,432 6,817
Restructuring (gain) loss 4,067
Roofing guarantee income 2,306 2,006
Interest accretion 1,578
Minority interest in net income of
consolidated subsidiary 2,502 1,450
Other, net 7,425 (6,476)
(Increase) decrease in current assets:
Receivables (48,368) (31,953)
Inventories 4,771 (25,803)
Prepaid expenses (6,739) (2,389)
Increase (decrease) in current liabilities:
Accounts payable (8,526) 10,852
Compensation and employee benefits (13,562) (14,832)
Income taxes (573) (5,338)
Other accrued liabilities 5,156 6,184
Decrease in postretirement benefits
other than pensions (4,239) (4,135)
Increase (decrease) in other non-current liabilities (4,325) 5,774
-----------------------
Net cash provided by operating activities 73,412 76,685
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- - --------------------------------------------------------------------------------
Purchases of property, plant and equipment (162,662) (163,359)
Proceeds from sales of assets 35,514 1,042
Proceeds from sale of marketable securities 109,993 68,537
Purchases of marketable securities (72,728) (27,973)
Increase in other assets (31,718) (5,663)
Acquisitions (6,275)
-----------------------
Net cash used in investing activities (121,601) (133,691)
-----------------------
</TABLE>
I-6
<PAGE>
MANVILLE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Thousands of dollars)
(Unaudited)
Six Months
Ended June 30,
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES: 1994 1993
- - --------------------------------------------------------------------------------
Issuance of debt 48,438 83,598
Payments on debt (44,572) (61,675)
Dividends on Preference Stock (10,384)
Dividends on Common Stock (127,067)
Dividends to minority shareholders of
consolidated subsidiary (968) (968)
Treasury stock (407)
Stock options exercised 522
----------------------
Net cash provided by (used in) financing activities (7,893) (105,590)
----------------------
Effect of Exchange Rate Changes on Cash 165 (315)
----------------------
Net Increase (Decrease) in Cash and Equivalents (55,917) (162,911)
Cash and Equivalents at Beginning of Period 153,093 392,172
----------------------
Cash and Equivalents at End of Period $ 97,176 $ 229,261
================================================================================
See Notes to Condensed Consolidated Financial Statements.
I-7
<PAGE>
MANVILLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Manville Corporation is an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood")
and Schuller International ("Schuller"), collectively referred to as "the
Company". When referring to the parent company only, Manville Corporation
is defined as the "Manville holding company". The Manville holding company
owns approximately 81.5 percent of Riverwood and 100 percent of Schuller.
Additional information regarding the Company's reorganization proceedings,
accounting policies, operations and financial position is contained in the
Company's 1993 Annual Report and Form 10-K filed with the Securities and
Exchange Commission.
The condensed consolidated financial statements as of June 30, 1994 and
December 31, 1993 and for the three and six month periods ended June 30,
1994 and 1993 reflect all normal, recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
condition and the results of operations for the periods presented. The
year-end condensed consolidated balance sheet was derived from audited
financial statements, and as presented does not include all disclosures
required by generally accepted accounting principles.
The Company has reclassified the presentation of certain prior period
information to conform with the current presentation format.
Note 1 - Inventories
The major classes of inventories were as follows:
(Thousands of dollars)
June 30, December 31,
1994 1993
---------------------
Finished goods $ 82,678 $86,664
Work-in-process 22,917 19,703
Raw materials 53,091 55,883
Supplies 48,007 45,452
---------------------
$206,693 $207,702
=====================
Note 2 - Long-Term Debt
On June 30, 1994, subsequent to the second quarter financial statements
presented herein, Riverwood completed a public offering (the "Riverwood
Refinancing") of $100 million face value of 10-3/8 percent Senior
Subordinated Notes due 2004 and entered into a bank credit facility which
provides for borrowings of up to $125 million at an initial variable
interest rate equal to 1.875 percent over the London Interbank Offered
Rate.
I-8
<PAGE>
Riverwood borrowed $100 million under the bank credit facility and used
such amount together with the proceeds of the Senior Subordinated Notes to
prepay approximately $179 million principal of notes payable to insurance
companies and banks, to pay approximately $3 million of related accrued
interest and to pay expenses of the Riverwood Refinancing. The Company
estimates that the charge for this early retirement of debt will be
approximately $7.9 million, net of tax of approximately $5 million, to be
recorded in the third quarter of 1994 (see Note 9 - Subsequent Events).
Under terms of Riverwood's public debt agreements, the remaining amount
available under the bank credit facility can be used only to refinance
certain of Riverwood's indebtedness as it matures. Borrowings under the
bank credit facility are collateralized by substantially all of the fixed
assets of Riverwood's Macon, Georgia mill which were previously collateral
for the notes repaid.
The Senior Subordinated Notes due 2004 are redeemable by Riverwood in whole
or in part beginning in 1999 at redemption prices expressed as a percent of
the principal amount redeemed, which range from 104.611 percent in 1999 to
100.0 percent in 2003. Prior to June 30, 1997, up to 35 percent of the
principal amount can be redeemed under specified conditions at 110.375
percent. Interest is payable semiannually. The $125 million bank credit
facility provides for borrowings on a revolving basis through June 1996,
whereupon it converts to a term loan facility with principal installments
payable from 1998 through 2000.
Under existing loan agreements, and after giving effect to the use of $200
million of proceeds under the Riverwood Refinancing, Riverwood is scheduled
to repay principal of approximately $15 million in 1994, $21 million in
1995, $47 million in 1996 and $103 million in 1997.
At June 25, 1994, Riverwood had approximately $98 million in revolving
credit facilities for its U.S. and international subsidiaries, of which
approximately $82 million was available for borrowing. Included as part of
Riverwood's revolving credit facilities was a $24 million revolving credit
agreement for working capital needs. This agreement was canceled on June
30, 1994, in conjunction with the Riverwood Refinancing. The remaining $74
million in revolving credit facilities includes a $50 million U.S. credit
facility with banks to be used for working capital purposes through
December 1995. This facility is collateralized by certain U.S. inventories
and receivables.
After giving effect to the Riverwood Refinancing, as of June 30, 1994
Riverwood had approximately $199 million in revolving credit facilities for
its U.S. and international subsidiaries, of which approximately $87 million
was available for borrowing, $25 million of which can only be used to
refinance certain indebtedness as it matures.
I-9
<PAGE>
Note 3 - Dividends Accrued Not Declared
Presently, $102.9 million of Common Stock Dividends Accrued Not Declared
are reflected in the June 30, 1994 condensed consolidated balance sheet.
These dividends were previously accrued based upon a refinancing
arrangement, since terminated, that had been negotiated between the Company
and the Manville Personal Injury Settlement Trust (the "PI Trust"). Even
though the refinancing arrangement is no longer in effect, the Company's
Board of Directors may consider declaring and paying common dividends from
time to time. In making such decisions, the Board will evaluate the
Company's capital needs, its debt levels and the economic environment of
the markets served by the Company's businesses. The condensed consolidated
balance sheet also reflects Cumulative Preference Stock Dividends Accrued
Not Declared of $37.4 million at June 30, 1994, as part of the accounting
for the refinancing arrangement. Although the common stock and preference
stock dividends remain accrued, no assurance can be given that these
dividends will be declared and paid by the Company.
Note 4 - Contingencies and Commitments
The Company has an obligation to pay annually 20 percent of its net
earnings (as adjusted) to the PI Trust. Payments to the PI Trust are due
each year based on the prior year's net earnings and will continue for as
long as the PI Trust is in existence and any personal injury asbestos
claims filed against the PI Trust remain unpaid. After termination of the
PI Trust, an independent profit sharing obligation computed under the same
terms arises in favor of the Manville Property Damage Settlement Trust.
Based upon a review of the existing and potential claims facing the two
trusts, the Company believes that the profit sharing, for all practical
purposes, will be payable in perpetuity unless the Company and the trusts
agree to a restructuring or modification of the profit sharing obligations
at some future date. In the first half of 1994, the Company recorded $7.3
million of profit sharing expense to be paid in 1995.
Riverwood is in the process of converting one of the two linerboard
machines at its Macon, Georgia mill to coated board production. Total
capital expenditures for the paper machine conversion and new recovery
boiler were approximately $62 million during the first six months of 1994.
Coated board production at the Macon mill began in April 1994 with the
start-up of the on-line coater, resulting in approximately 24,400 tons of
coated board production during the second quarter of 1994. On July 11,
1994, Riverwood began a 45-day production shut-down to complete the
conversion of the paper machine to coated board production. As of June 25,
1994, outstanding purchase commitments relating to the conversion and other
related capital projects totaled approximately $22 million, which will be
funded with operating cash flow and from existing cash and marketable
securities balances.
I-10
<PAGE>
In December 1988 and January 1989, the Company acquired certain phenolic
roofing insulation assets and related technology from Beazer East, Inc.
("Beazer"), the successor to Koppers Company, Inc. The Company exited the
phenolic roofing business in February 1992. The Company has learned that
phenolic roofing insulation may, under certain circumstances, contribute to
corrosion of steel decks on which the insulation is installed.
In 1992, the Company commenced an inspection and sampling program of decks
where its phenolic product was installed between 1989 and 1992. Based on
experience and the information available, the Company recorded an estimated
loss in the fourth quarter of 1993 of approximately $19.7 million for
anticipated sampling, inspection and remediation costs. Through June 30,
1994, the total expenditures by the Company for inspections and claims
sampling totaled approximately $5 million and the total expenditures for
remediation were approximately $4 million. It is possible the ultimate
loss, which cannot be determined at this time, could exceed the $19.7
million estimated loss recorded in 1993.
Any determination of the ultimate cost to the Company for phenolic-related
deck corrosion must take into consideration insurance that is available to
address such claims as well as other sources of indemnification. The
Company has insurance which applies to property damage resulting from metal
deck corrosion; however, the Company is presently engaged in litigation
over the extent of such coverage with its primary insurance carrier. At
this time the Company believes it will be successful by verdicts or
settlements in its efforts to recover from its insurance carriers the
receivable of $7 million reflected in the Company's financial statements at
June 30, 1994. The Company's belief that it will be successful in this
action is based on its interpretation of the language of the relevant
insurance policies and the Company's factual investigation to date.
Because of the uncertainties involved in pending litigation, no assurances
are possible.
During 1993, the Company filed a lawsuit against Beazer. The Company seeks
recovery from Beazer for all costs and damages incurred as a result of the
acquisition of the phenolic business. Additionally, to the extent
negligence of others (contractors, architects, manufacturers of other
roofing system components) is a contributing factor to roof deck corrosion,
the Company may have rights in contribution for recovery of a portion of
its costs from such third parties.
With respect to environmental costs, the Company is committed to full
compliance with all applicable environmental laws and regulations. Based
on current information and regulatory requirements, the Company believes
accruals established for environmental expenditures are adequate.
I-11
<PAGE>
Note 5 - Income Taxes
In the first quarter of 1994, the Company recognized a deferred tax benefit
of $0.8 million primarily related to a tax law change in Sweden that
reduced the statutory Swedish federal tax rate to 28 percent from 30
percent.
For the quarter ended June 30, 1993, the Company reported a net income tax
benefit of $17.2 million, which included a $33.9 million tax benefit on the
portion of the June 1993 common dividend that was paid to the PI Trust,
partially offset by an additional deferred tax asset valuation allowance of
$7 million.
The Company records a tax benefit, for financial reporting purposes, on the
amount of common dividends paid to the PI Trust, in the years in which
those dividends are paid. For income tax purposes, the Company is entitled
to a tax benefit on the amount of common dividends paid to the PI Trust in
the years in which those dividends are transferred to a specific settlement
fund within the PI Trust or paid to claimants. Accordingly, in June 1993,
the Company recorded an increase in deferred tax assets, partially offset
by an additional deferred tax asset valuation allowance of $7 million, due
primarily to the income tax benefit attributable to payment of the common
dividend. In accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," the Company's valuation allowance
on all deferred tax assets is subject to change as earnings forecasts and
the estimated timing of the utilization of the Company's tax benefits are
revised.
The year-to-date income tax benefit at June 30, 1993 of $34.9 million also
includes the effect of a U.S. income tax refund of $32.1 million from the
U.S. Internal Revenue Service due to a retroactive change in U.S. income
tax regulations, which was recorded as a reduction to income tax expense of
$18.7 million and an increase to interest income of $13.4 million. The
Company's first quarter 1993 income tax benefit also includes a $4.8
million tax benefit due to changes in Brazilian income tax laws.
Exclusive of the unusual items and their effect on income taxes, the
Company's 1994 and 1993 tax rates for the first six months on operations
were 44 percent and 68 percent, respectively. These are higher than the
U.S. federal statutory rate primarily due to U.S. state and local taxes and
higher foreign effective rates.
Note 6 - Cumulative Effect of a Change in Accounting Principle
In the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993. Accordingly, the June 30, 1993
financial information has been restated to recognize an accumulated
postemployment benefit obligation of $13.9 million, net of taxes of $8.6
million.
I-12
<PAGE>
Note 7 - Restructuring of Operations
The $4.1 million of restructuring of operations loss in the second quarter
of 1993 represents a provision for severance, outplacement and relocation
costs associated with the restructuring of the Company's worldwide mats and
reinforcement business.
Note 8 - Earnings Per Common Share
For the second quarter of 1994, primary and fully diluted earnings per
common share amounts were based on 122,321,000 and 122,312,000 weighted
average common equivalent shares outstanding, respectively. Primary and
fully diluted earnings per common share amounts for the first six months of
1994 were based on 122,408,000 weighted average common equivalent shares
outstanding.
The 1993 second quarter primary and fully diluted earnings per common share
amounts were based on 122,447,000 and 122,426,000 weighted average common
equivalent shares outstanding, respectively. Primary and fully diluted
earnings per common share amounts for the first six months of 1993 were
based on 122,682,000 weighted average common equivalent shares outstanding.
Dividends on the Company's Cumulative Preference Stock, Series B may be
paid beginning in 1994 at an annual rate of $2.70 per share, payable
quarterly, but only at the discretion of the Company's Board of Directors.
The Preference Stock Dividends/Accretion of $6.2 million and $12.5 million
represents the dividends for the second quarter and first six months of
1994, respectively. Two dividends have been declared and paid in 1994
totaling $10.4 million. At June 30, 1994, there are no dividends in
arrears. The Preference Stock Dividends/Accretion of $5.6 million and
$11.1 million for the second quarter and six months ended June 30, 1993,
respectively, is the accretion to increase the carrying values of the
preference stock and the preference stock dividend accrual based on the
interest method.
Earnings per share amounts were calculated after the deduction for
preference stock dividends/accretion.
Note 9 - Subsequent Events
Riverwood reports its interim quarterly results based generally on a 13-
week period ending on a Saturday. Accordingly, Riverwood's 1994 second
quarter ended on June 25, 1994. On June 30, 1994 Riverwood completed a
refinancing program through the sale of $100 million of 10-3/8 percent
Senior Subordinated Notes due 2004 and through the completion of a $125
million six-year bank facility. The proceeds from these transactions were
used to prepay private placement and bank debt and to pay expenses of the
refinancing. The Company estimates the extraordinary loss on this early
retirement of debt will be
I-13
<PAGE>
$7.9 million, net of related income taxes of $5 million. Due to Riverwood's
reporting period, this loss will be reflected in the Company's third
quarter 1994 financial statements.
In July 1994, Riverwood entered into an agreement in principle to sell just
under 50 percent of its Brazilian subsidiary, together with a 25 percent
interest in an entity holding the multiple packaging business in Brazil.
The sale, which is subject to negotiation of definitive agreements, due
diligence, Board of Directors' and certain third party approvals, is
expected to close in January 1995. In addition, Riverwood entered into a
letter of intent to sell oil and gas mineral rights on its U.S.
timberlands. Subject to negotiation and approval of definitive agreements,
the mineral rights sale is expected to close in 1994. The Company expects
gross cash proceeds from these sales to be approximately $110 million.
However, for financial reporting purposes, the Brazilian and mineral rights
transactions, if consummated, will result in a significant non-recurring
charge to net income in 1994, principally due to charges for income taxes
in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
I-14
<PAGE>
Note 10 - Business Segment Information
<TABLE>
<CAPTION>
(Thousands of dollars)
Manville Corporation Three Months
Consolidated Major Business Segments Ended June 30,
1994 1993
---------------------------------------------------------------------------
<S> <C> <C>
Net Sales
---------------------------------------------------------------------------
Riverwood International:
Coated Board System $211,397 $198,894
Containerboard 65,420 57,606
U.S. Timberlands/Wood Products 42,285 35,164
Corporate and Eliminations (5,107) (4,615)
---------------------------------------------------------------------------
313,995 287,049
---------------------------------------------------------------------------
Schuller International:
Building Products 185,229 172,980
Engineered Products 144,347 138,588
---------------------------------------------------------------------------
329,576 311,568
Corporate and Eliminations (7,107) (11,101)
---------------------------------------------------------------------------
Total Company Net Sales $636,464 $587,516
===========================================================================
Income (Loss) From Operations
---------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 31,359 $ 29,909
Containerboard 1,222 (7,386)
U.S. Timberlands/Wood Products 14,453 10,457
Corporate and Eliminations (6,255) (5,279)
---------------------------------------------------------------------------
40,779 27,701
---------------------------------------------------------------------------
Schuller International:
Building Products 28,028 14,952
Engineered Products 19,939 14,534
---------------------------------------------------------------------------
47,967 29,486
Corporate and Eliminations (11,516) (7,239)
---------------------------------------------------------------------------
Total Company Income from
Operations $ 77,230 $ 49,948
===========================================================================
</TABLE>
Net sales included in Corporate and Eliminations relate primarily to the
elimination of intersegment sales (at prices approximating market).
I-15
<PAGE>
<TABLE>
<CAPTION>
(Thousands of dollars)
Manville Corporation Six Months
Consolidated Major Business Segments Ended June 30,
1994 1993
---------------------------------------------------------------------------
<S> <C> <C>
Net Sales
---------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 381,349 $ 370,079
Containerboard 129,841 111,360
U.S. Timberlands/Wood Products 76,811 71,397
Corporate and Eliminations (9,098) (9,297)
---------------------------------------------------------------------------
578,903 543,539
---------------------------------------------------------------------------
Schuller International:
Building Products 330,368 301,946
Engineered Products 270,439 263,830
---------------------------------------------------------------------------
600,807 565,776
Corporate and Eliminations (12,027) (17,488)
---------------------------------------------------------------------------
Total Company Net Sales $1,167,683 $1,091,827
===========================================================================
Income (Loss) from Operations
---------------------------------------------------------------------------
Riverwood International:
Coated Board System $ 55,012 $ 50,497
Containerboard (5,777) (12,001)
U.S. Timberlands/Wood Products 26,670 23,205
Corporate and Eliminations (12,628) (12,149)
---------------------------------------------------------------------------
63,277 49,552
---------------------------------------------------------------------------
Schuller International:
Building Products 42,327 23,978
Engineered Products 34,185 27,038
---------------------------------------------------------------------------
76,512 51,016
Corporate and Eliminations (17,612) (14,762)
---------------------------------------------------------------------------
Total Company Income from
Operations $ 122,177 $ 85,806
===========================================================================
</TABLE>
Net sales included in Corporate and Eliminations relate primarily to the
elimination of intersegment sales (at prices approximating market).
I-16
<PAGE>
Report of Independent Accountants
To the Stockholders and Directors
of Manville Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Manville Corporation as of June 30, 1994 and the related condensed
consolidated statement of income and accumulated deficit for the three
month and six month periods ended June 30, 1994 and 1993 and cash flows for
the six month periods ended June 30, 1994 and 1993. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1993, and the
related consolidated statements of income, stockholders' equity and cash
flows for the year then ended (not presented herein); and in our report
dated February 4, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
December 31, 1993, is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/s/ COOPERS & LYBRAND
---------------------
COOPERS & LYBRAND
Denver, Colorado
July 21, 1994
I-17
<PAGE>
Item 2.
MANVILLE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Manville Corporation is an international holding company with two principal
operating subsidiaries, Riverwood International Corporation ("Riverwood") and
Schuller International ("Schuller"), collectively referred to as "the Company."
When referring to the parent company only, Manville Corporation is defined as
the "Manville holding company." The Manville holding company owns approximately
81.5 percent of Riverwood and 100 percent of Schuller.
Riverwood and Schuller report the results of their operations in five business
segments. Riverwood reports its results in three business segments: Coated
Board System, Containerboard and U.S. Timberlands/Wood Products. The Coated
Board System segment includes the production of coated board at paperboard mills
in the United States and Europe; converting facilities in the United States,
Australia and Europe; and worldwide packaging machinery operations related to
the production and sale of beverage and folding cartons. The Containerboard
segment includes timberlands and associated containerboard mills and corrugated
box plants in Brazil as well as kraft paper, linerboard and corrugating medium
production at two U.S. mills. The U.S. Timberlands/Wood Products segment
includes timberlands and operations engaged in the supply
I-18
<PAGE>
of pulpwood to the U.S. mill operations, and the manufacture of lumber and
plywood.
Schuller operates 35 manufacturing facilities in the United States, Canada and
Germany and reports its results in two business segments: Building Products and
Engineered Products. The Building Products segment manufactures building
insulation products, roofing products and mechanical insulation products at
plants in both the United States and Canada. Building insulation products
include thermal and acoustical fiberglass insulation products that are suitable
for use in various residential and commercial building applications. Roofing
products include roof insulations, membranes and accessories for use in various
commercial and industrial building applications. Mechanical insulation products
include fiberglass air duct systems, thermal acoustical blankets and mechanical
piping insulation. The Engineered Products segment is comprised of Schuller's
mats and reinforcements business, including Schuller GmbH, Schuller's German
subsidiary, and the equipment insulations and filtration businesses. The mats
and reinforcements business manufactures continuous filament fiberglass
products, including mats and fibers for roofing applications, fiberglass for
plastics reinforcements, textile glass products used primarily for wall
coverings and nonwoven fiberglass mats for specialty applications. The
equipment insulations business manufactures insulation for heating, ventilating
and air conditioning equipment; aircraft; appliances; and acoustic applications;
and fiberglass
I-19
<PAGE>
wool for automotive headliner and hoodliner parts. Filtration products include
air filtration media for commercial and industrial buildings and microfibers for
use in battery separators and clean room air filters.
Financial results for the Manville holding company's oil and gas property (which
was sold in the third quarter of 1993) and its equity investment in the
Stillwater platinum and palladium mining operations are included in Corporate
and Eliminations for business segment reporting purposes.
Results by Segment
- - ------------------
Riverwood's net sales increased $26.9 million, or 9.4 percent, from the second
quarter of 1993 and $35.4 million, or 6.5 percent, from the first six months of
1993 due to higher sales in all segments of Riverwood. The Coated Board System
segment's net sales increased $12.5 million, or 6.3 percent, in the second
quarter and $11.3 million, or 3 percent, in the first six months over the same
periods of 1993, due principally to revenues from increased volume in North
American and European beverage markets and European folding carton markets. The
second quarter increase was partially offset by a decline in international
selling prices and lower volume of coated board sold in the open markets also
offset the increase for the six months. In addition, the net effect of stronger
U.S. dollar currency rates in Europe and weaker U.S. dollar currency rates in
the Asia-Pacific region reduced reported
I-20
<PAGE>
U.S. dollar net sales from international Coated Board System operations by
approximately $4.5 million for the six months of 1994. Net sales in the
Containerboard segment increased $7.8 million, or 13.6 percent, for the second
quarter and $18.5 million, or 16.6 percent, for the six months of 1994 over the
same periods of 1993, primarily due to volume and selling price increases for
the U.S. operations, offset in part by lower U.S. dollar reported net sales in
Brazil. Net sales in the U.S. Timberlands/Wood Products segment increased $7.1
million, or 20.3 percent, for the second quarter and $5.4 million, or 7.6
percent, for the six months of 1994 compared with 1993, due principally to
selling price increases in lumber.
Riverwood's gross profit increased $13.7 million and $18.4 million for the
second quarter and first six months of 1994, respectively, from the same periods
of 1993. During the second quarter of 1994, the gross profit margin increased
to 23.5 percent from 20.9 percent and increased to 22.8 percent from 21 percent
for the six months over 1993. The Coated Board System segment's gross profit
increased by $2.9 million to $53 million for the second quarter of 1994, while
its gross profit margin remained relatively unchanged at 25.1 percent. Gross
profit in the Coated Board System segment for the six months increased $8.5
million to $97.2 million, and its gross profit margin increased to 25.5 percent
from 24 percent due primarily to higher volume in the U.S. beverage markets and
productivity improvements which offset some price declines. Gross
I-21
<PAGE>
profit in the Containerboard segment increased $7 million to $6.3 million in the
second quarter of 1994 from a loss in 1993, and increased $6.7 million to $8.1
million for the six months of 1994, due to higher selling prices and
productivity improvements. Gross profit in the U.S. Timberlands/Wood Products
segment increased $4 million to $14.8 million in the second quarter of 1994 over
1993, and its gross profit margin increased to 35 percent from 30.8 percent due
principally to selling price increases in both lumber and plywood and to a
favorable mix of products sold. The U.S. Timberlands/Wood Products segment
gross profit for the first six months of 1994 increased $3.4 million to $27.4
million and its gross profit margin increased to 35.7 percent from 33.7 percent
due principally to selling price increases in lumber.
Total board mill shipments, including shipments to integrated converting plants,
in 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
(Thousands of Tons)
-------------------
Second Quarter Six Months
-------------- ----------
1994 1993 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
Coated Board 232.3 193.0 416.2 372.5
Containerboard 243.2 223.7 486.8 412.3
----- ----- ----- -----
475.5 416.7 903.0 784.8
===== ===== ===== =====
</TABLE>
Riverwood's selling, general and administrative expense increased $1.6 million
in the second quarter and $3.8 million in the first six months of 1994 over the
same periods of 1993, due to the
I-22
<PAGE>
additional infrastructure established to support the packaging machinery
operations and the worldwide marketing of coated board, partially offset by
lower administrative expenses. As a percent of net sales, selling, general and
administrative expenses declined slightly in the second quarter and remained
unchanged for the six months.
Riverwood's income from operations increased in all segments for the second
quarter of 1994 by a total of $13.1 million, or 47.2 percent, compared with
1993. For the six months of 1994 Riverwood's income from operations increased
$13.7 million, or 27.7 percent, compared with 1993. Riverwood's operating
margin as a percent of net sales increased to 13 percent from 9.7 percent for
the second quarter of 1994 and to 10.9 percent from 9.1 percent for the six
months of 1994, over the same periods of 1993. The Coated Board System
segment's income from operations increased $1.5 million, or 4.9 percent, for the
second quarter of 1994 over 1993. Income from operations increased $4.5
million, or 8.9 percent, for the first six months of 1994. Higher volume in
beverage carton markets and production efficiencies in its papermills and
converting plants were offset in part by increases in manufacturing costs and
selling expenses to penetrate international multiple packaging markets.
Income from operations in the Containerboard segment increased $8.6 million to
$1.2 million in the second quarter of 1994 from a loss in 1993, due primarily to
increased selling prices and productivity improvements. The operating loss
I-23
<PAGE>
in the first six months of 1994 in the Containerboard segment decreased $6.2
million compared with the same period of 1993 to a loss of $5.8 million. Income
from operations in the U.S. Timberlands/Wood Products segment increased $4
million to $14.4 million, for the second quarter of 1994 over 1993, due
principally to selling price increases in both lumber and plywood and
productivity improvements. The U.S. Timberlands/Wood Products segment income
from operations increased $3.5 million to $26.7 million, in the first six months
of 1994 over 1993 due principally to lumber selling price increases.
Net sales for Schuller's Building Products segment increased by 7.1 percent in
the second quarter of 1994 and by 9.4 percent in the first half of 1994 compared
with the same periods of 1993. These increases resulted primarily from
increased sales volumes associated with strong construction activity, along with
an improved pricing environment, particularly in the building insulation
business.
Improved operating leverage, combined with the favorable impact of Schuller's
exchange of its residential roofing business for Owens-Corning Fiberglas
Corporation's commercial and industrial roofing business in January 1994,
resulted in an improvement in gross profit margin for the Building Products
segment to 27.8 percent and 25.9 percent in the second quarter and first six
months of 1994,
I-24
<PAGE>
compared with 20.4 percent and 20.6 percent, respectively, for the same periods
in 1993.
The Building Products segment reported income from operations of $28 million in
the second quarter of 1994, a $13.1 million increase from the second quarter of
1993. For the first six months of 1994, income from operations was $42.3
million, up $18.3 million from the first half of 1993.
Net sales for Schuller's Engineered Products segment were 4.2 percent higher in
the second quarter of 1994 compared with the second quarter of 1993 and 2.5
percent higher in the first six months of 1994 compared with the first six
months of 1993. Improvement in 1994 sales for this segment is due primarily to
strengthening in European markets and increases in construction activity.
The Engineered Products segment's gross profit margins in the second quarter and
first six months of 1994 of 23.5 percent and 22.5 percent, respectively, were
essentially unchanged from the gross profit margins reported for the same
periods of 1993. The 1993 results include the reversal of a provision for the
early rebuild of a portion of a glass furnace. Excluding the effect of this
reversal on cost of sales, the segment's 1993 gross profit margin for the
quarter and six months would have been approximately 21 percent for both
periods. The improvement in gross profit
I-25
<PAGE>
margins for 1994 compared with 1993 excluding the furnace rebuild reversal
resulted from higher selling prices and production efficiencies.
Schuller's Engineered Products segment's income from operations of $19.9 million
in the second quarter of 1994 represents an increase of $5.4 million, or 37.2
percent, from the $14.5 million in income from operations reported for the
second quarter of 1993, which for 1993 includes a $4.1 million restructuring
loss associated with the rationalization of Schuller's worldwide mats and
reinforcements businesses. For the first six months of 1994, income from
operations was $34.2 million, $7.1 million higher than the first half of 1993.
Manville consolidated income from operations increased $27.3 million to $77.2
million in the second quarter and increased $36.4 million to $122.2 million for
the first six months of 1994 over the same periods of 1993. These improvements
were due to increases at both Riverwood and Schuller offset by higher corporate
expenses primarily arising from a write down of excess leased office space
included in other income (loss), net.
Interest Income
Compared with the corresponding periods of 1993, interest income for the second
quarter and first six months of 1994 decreased by $2.6 million and $17.8
million, respectively. Year-to-date 1993
I-26
<PAGE>
interest income includes $13 million of interest income received on the income
tax refund described below. In addition, the lower interest earnings in both
periods reflect the effect of interest earned on lower 1994 average cash and
marketable securities balances.
Interest Expense
Gross interest expense incurred, before capitalization of interest, was $78.9
million for the first six months of 1994, a decrease of $3.1 million when
compared with $82 million for the same period in 1993. The decrease in interest
expense was primarily due to a partial prepayment in August 1993 of debt owed to
the Manville Personal Injury Settlement Trust (the "PI Trust") and higher levels
of capitalized interest in 1994, offset in part by Riverwood's issuance of $125
million of 6.75 percent Convertible Subordinated Notes in September 1993.
During the first six months of 1994 and 1993, the Company capitalized interest
totaling $12.9 million and $7.8 million, respectively, of which the majority was
capitalized principally in connection with expenditures for the coated board
capacity expansion program.
Profit Sharing Expense
Profit sharing expense for the second quarters of 1994 and 1993 totaled $5.2
million and $6.4 million, respectively (see Relationship of Manville to the
Personal Injury Trust). Year-to-
I-27
<PAGE>
date profit sharing expense for 1994 totaled $7.3 million compared with $10.2
million for the same period in 1993, a decrease of $2.9 million. Both the
quarterly and year-to-date decreases in profit sharing expense are principally
due to the income tax related benefits reported during 1993, partially offset by
improved income from operations in 1994.
Income Taxes
In the first quarter of 1994, the Company recognized a deferred tax benefit of
$0.8 million primarily related to a tax law change in Sweden that reduced the
statutory Swedish federal tax rate to 28 percent from 30 percent.
For the quarter ended June 30, 1993, the Company reported a net income tax
benefit of $17.2 million, which included a $33.9 million tax benefit on the
portion of the June 1993 common dividend that was paid to the PI Trust,
partially offset by an additional deferred tax asset valuation allowance of $7
million.
The Company records a tax benefit, for financial reporting purposes, on the
amount of common dividends paid to the PI Trust, in the years in which those
dividends are paid. For income tax purposes, the Company is entitled to a tax
benefit on the amount of common dividends paid to the PI Trust in the years in
which those dividends are transferred to a specific settlement fund within the
PI Trust or paid to claimants. Accordingly, the Company recorded
I-28
<PAGE>
an increase in deferred tax assets during the second quarter of 1993. The
Company believes, based upon its past earnings, forecasts of future earnings and
potential tax planning strategies, that the additional valuation allowance of $7
million recorded in 1993 was necessary. In accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," the
Company's valuation allowance on all deferred tax assets is subject to change as
earnings forecasts and the estimated timing of the utilization of the Company's
tax benefits are revised.
The year-to-date income tax benefit at June 30, 1993 of $34.9 million also
includes the effect of a U.S. income tax refund of $32.1 million from the U.S.
Internal Revenue Service due to a retroactive change in U.S. income tax
regulations, which was recorded as a reduction to income tax expense of $18.7
million and an increase to interest income of $13.4 million. The Company's
first quarter 1993 income tax benefit also includes a $4.8 million tax benefit
due to changes in Brazilian income tax laws.
Exclusive of unusual items and their effect on income taxes, the Company's 1994
and 1993 tax rates for the first six months on operations were 44 and 68
percent, respectively. These are higher than the U.S. federal statutory rate
primarily due to U.S. state and local taxes and higher foreign effective income
tax rates.
I-29
<PAGE>
Cumulative Effect of a Change in Accounting Principle
In the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1993. Accordingly, the June 30, 1993 financial
information has been restated to recognize an accumulated postemployment benefit
obligation of $13.9 million, net of taxes of $8.6 million.
Net Income
Net income applicable to common stock, which is after preference stock
dividends/accretion, for the second quarter of 1994 decreased $7.3 million to
$14.4 million from the same period in 1993. Year-to-date net income applicable
to common stock for 1994 decreased $16.5 million to $15.6 million from the same
period in 1993.
As previously described, 1993 year-to-date net income includes the effect of a
U.S. income tax refund and the related interest income, the Company's share of
an income tax benefit at Riverwood and an income tax benefit on the portion of
the common dividend that was paid to the PI Trust.
Excluding each of these items and their effect on profit sharing expense from
results reported in 1993, the Company would have reported a second quarter 1993
net loss applicable to common stock of approximately $1.6 million, or $0.01 per
share, and for the six
I-30
<PAGE>
months ended June 30, 1993, the Company would have reported a 1993 net loss of
approximately $6 million, or $0.05 per share.
Income Per Common Share
Primary and fully diluted earnings per common share for the second quarter of
1994 were both $0.12 as compared with primary and fully diluted earnings per
common share of $0.18 each for the same period in 1993. Primary and fully
diluted earnings per common share for the six month periods ended June 30, 1994
and 1993 were $0.13 and $0.26, respectively. Earnings per common share amounts
were calculated after deducting preference stock dividends/accretion.
For the second quarter of 1994, primary and fully diluted earnings per common
share amounts were based on 122,321,000 and 122,312,000 weighted average common
equivalent shares outstanding, respectively. For the first six months of 1994,
both primary and fully diluted earnings per common share amounts were based on
122,408,000 weighted average common equivalent shares outstanding.
The 1993 second quarter primary and fully diluted earnings per common share
amounts were based on 122,447,000 and 122,426,000 weighted average common
equivalent shares outstanding, respectively. Primary and fully diluted earnings
per common share amounts for the first six months of 1993 were both based on
122,682,000 weighted average common equivalent shares outstanding.
I-31
<PAGE>
Liquidity and Capital Resources
- - -------------------------------
The Company broadly defines liquidity as its ability to generate sufficient cash
flow to satisfy operating requirements, fund capital expenditures and meet its
existing obligations and commitments. In addition, liquidity includes the
ability to obtain appropriate debt and equity financing and to convert into cash
those assets that are no longer required to meet existing strategic and
financial objectives. Therefore, liquidity cannot be considered separately from
capital resources, which consist of current or potentially available funds for
use in achieving long-range business objectives and meeting debt service
commitments. Additionally, the Company's relationship with the PI Trust should
also be considered in analyzing liquidity.
Cash flow provided by operating activities during the first six months of 1994
was $73.4 million. The Manville holding company's ability to generate
sufficient cash in 1994 and beyond is dependent upon funds generated from a tax
sharing agreement with Riverwood, dividends declared by Riverwood, Schuller
operations, asset dispositions and capital raised through external sources. As
a result of the Riverwood public offerings completed during 1992, the Manville
holding company no longer has unrestricted access to cash flows generated by
Riverwood. In addition, certain of the Company's subsidiaries may be restricted
in the amount of dividends that can be repatriated due to governmental
regulations, economic conditions or provisions contained in financing
agreements.
I-32
<PAGE>
A tax-sharing agreement between the Manville holding company and Riverwood
provides that Riverwood's U.S. taxes be calculated in accordance with the tax-
sharing agreement as if it were a fully independent entity and that such tax
amounts are to be remitted to the Manville holding company. The Company is able
to apply its tax benefits to reduce the consolidated domestic tax obligation,
allowing the Manville holding company to retain a large portion of the cash
remitted by Riverwood. The Manville holding company currently intends to
maintain at least an 80 percent ownership interest in Riverwood in order to
preserve the consolidated tax entity and utilize existing tax benefits.
Riverwood's ability to generate cash in 1994 and beyond is dependent upon funds
generated from operations and the flow of funds from subsidiaries. Funds from
operations are dependent, in part, upon Riverwood's ability to successfully
market the additional capacity from the Macon mill at prices satisfactory to
Riverwood and Riverwood's ability to successfully implement its reengineering
and cost reduction programs.
Riverwood has paid quarterly cash dividends of $0.04 per share on its common
stock since December, 1992. As Riverwood's majority shareholder, the Manville
holding company received $2 million during both the second quarters of 1994 and
1993 and $4 million in the first six months of 1994 and 1993 in connection with
the payment of Riverwood common dividends. Riverwood currently intends
I-33
<PAGE>
to continue paying quarterly dividends of $0.04 per share on its common stock
subject to a number of conditions, including approval by Riverwood's Board of
Directors and compliance with covenants in debt instruments and other
agreements.
Dividends on the Company's Cumulative Preference Stock, Series B may be paid
quarterly beginning in 1994 at an annual rate of $2.70 per share, but only at
the discretion of the Company's Board of Directors after other funding
requirements under the Plan (defined below) have been met. Manville paid a cash
dividend of $4.2 million, or $0.45 per share, on March 1, 1994 to Cumulative
Preference Stock, Series B stockholders of record on February 21, 1994.
Manville also paid a cash dividend of $6.2 million, or $0.675 per share, on June
1, 1994 to Cumulative Preference Stock, Series B stockholders of record on May
20, 1994. In August 1994, the Company declared a dividend on its Cumulative
Preference Stock, Series B of $0.675 per share, payable September 1, 1994 to
stockholders of record on August 19, 1994.
At June 30, 1994 the Company had net working capital of $264 million, including
cash and marketable securities of $135 million. Approximately $36 million of
cash and marketable securities is located outside of the United States and
Canada and approximately $70 million is held by Riverwood, of which $15 million
is located outside of the United States.
I-34
<PAGE>
Cash and marketable securities decreased by $93.2 million during the first six
months of 1994. This decrease is primarily attributable to capital expenditures
related to the coated board capacity expansion project and packaging machinery
installations, offset in part by cash generated from operations and from a sale
and leaseback financing arrangement. On June 22, 1994, Riverwood entered into a
financing agreement structured as a sale and leaseback transaction. Under terms
of the agreement, Riverwood received sales proceeds of $25 million. The assets
sold have been leased back by Riverwood under a one-year operating lease, which
allows for four one-year renewals for a maximum term of five years. Lease
payments are comprised of a fixed and variable component which, based on
interest rates in effect at the inception of the agreement, would approximate $4
million annually.
Overall, the Company's debt increased during the first six months of 1994 by
$7.8 million principally as a result of new borrowings by foreign subsidiaries.
Principal reductions on long-term debt payable to lenders other than the PI
Trust are expected to be approximately $17 million for 1994, reflecting
Riverwood's June 30, 1994 refinancing (discussed below). Total scheduled
payments to the PI Trust during 1994 consist of $41 million of principal and
accrued interest pertaining to the regularly scheduled payments due on the Trust
Bonds (defined below).
I-35
<PAGE>
On June 30, 1994, subsequent to the second quarter financial statements
presented herein, Riverwood completed a public offering (the "Riverwood
Refinancing") of $100 million face value of 10-3/8 percent 10-year Senior
Subordinated Notes due 2004 and entered into a bank credit facility which
provides for borrowings of up to $125 million at an initial variable interest
rate equal to 1.875 percent over the London Interbank Offered Rate. Riverwood
borrowed $100 million under the bank credit facility and used such amount
together with the proceeds of the Senior Subordinated Notes to prepay
approximately $179 million principal of notes payable to insurance companies and
banks, to pay approximately $3 million of related accrued interest and to pay
expenses of the refinancing. The Company estimates that the charge for this
early retirement of debt will be approximately $7.9 million, net of tax of
approximately $5 million, to be recorded in the third quarter of 1994 (see
Subsequent Events). Under terms of Riverwood's public debt agreements, the
remaining amount available under the bank credit facility can be used only to
refinance certain of Riverwood's indebtedness as it matures. Borrowings under
the bank credit facility are collateralized by substantially all of the fixed
assets of the Macon mill which were previously collateral for the notes repaid.
The Senior Subordinated Notes due 2004 are redeemable by Riverwood in whole or
in part beginning in 1999 at redemption prices expressed as a percent of the
principal amount redeemed, which
I-36
<PAGE>
range from 104.611 percent in 1999 to 100.0 percent in 2003. Prior to June 30,
1997, up to 35 percent of the principal amount can be redeemed under specified
conditions at 110.375 percent. Interest is payable semiannually. The $125
million bank credit facility provides for borrowings on a revolving basis
through June 1996, whereupon it converts to a term loan facility with principal
installments payable from 1998 through 2000.
Under existing loan agreements, and after giving effect to the use of $200
million of proceeds under the Riverwood Refinancing, Riverwood is scheduled to
repay principal of approximately $15 million in 1994, $21 million in 1995, $47
million in 1996 and $103 million in 1997. The Company currently anticipates
that Riverwood's indebtedness, its capital spending program and other ongoing
operating costs will be paid out of its operating cash flow, proceeds from the
sale of nonstrategic assets, access to private and capital markets and amounts
available under revolving credit facilities.
At June 25, 1994, Riverwood had approximately $98 million in revolving credit
facilities for its U.S. and international subsidiaries, of which approximately
$82 million was available for borrowing. Included as part of Riverwood's
revolving credit facilities was a $24 million revolving credit agreement for
working capital needs. This agreement was canceled on June 30, 1994, in
conjunction with the Riverwood Refinancing. The remaining
I-37
<PAGE>
$74 million in revolving credit facilities includes a $50 million U.S. credit
facility with banks to be used for working capital purposes through December
1995. This facility is collateralized by certain U.S. inventories and
receivables.
After giving effect to the Riverwood Refinancing, as of June 30, 1994, Riverwood
had approximately $199 million in revolving credit facilities for its U.S. and
international subsidiaries, of which approximately $87 million was available for
borrowing, $25 million of which can only be used to refinance certain
indebtedness as it matures.
In addition, Riverwood had arrangements with certain international banks for
discounting receivables. As of June 30, 1994, approximately $32 million of
overseas receivables were discounted.
The Company has a $100 million receivables sale facility for Schuller's domestic
operations which requires, among other things, the Company to maintain a
specified level of tangible net worth. At June 30, 1994 the Company met the
financial covenants of the receivables sale facility. At June 30, 1994, after
giving effect to the Riverwood Refinancing, the Company had credit facilities
totaling approximately $359 million under the domestic receivables sale facility
and various domestic and international revolving credit facilities, of which
approximately $242 million was available for use.
I-38
<PAGE>
The Company's capital expenditures, exclusive of capitalized interest, for
1994 are expected to be approximately $305 million. Riverwood is in the
process of converting one of the two linerboard machines at the Macon mill to
coated board production. Included in the Company's capital expenditures of $305
million are Riverwood's expenditures at the Macon mill, the cost of additional
packaging machinery placements, projects that will add worldwide press and
converting capacity, and costs for environmental compliance, which are expected
to be approximately $210 million during 1994. Total capital expenditures for
the paper machine conversion and new recovery boiler were approximately $62
million during the first six months of 1994. Coated board production at the
Macon mill began in April 1994 with the start-up of the on-line coater,
resulting in approximately 24,400 tons of coated board production during the
second quarter of 1994. On July 11, 1994, Riverwood began a 45-day production
shut-down to complete the conversion of the paper machine to coated board
production. Riverwood expects to complete the conversion project during 1994
and expects to produce more than 70,000 tons of coated board at the Macon mill
during 1994. The 45-day production shut-down and the associated coated board
production start-up are expected to reduce Riverwood's income from operations by
approximately $5 million to $8 million in the third quarter of 1994. Riverwood
expects to capitalize approximately $20 million of interest expense during 1994.
Due to the anticipated completion of the Macon mill conversion project in 1994,
the Company does not expect to continue capitalizing interest at a similar rate
in 1995.
I-39
<PAGE>
Outstanding purchase commitments relating to the conversion and other related
projects under way at the Macon mill totaled approximately $22 million at
quarter-end. During 1993, Schuller initiated a program to expand its fiberglass
wool capacity used for building insulation products. The planned capital
spending associated with the expansion will occur through 1995 and is estimated
at approximately $100 million and, as a result, Schuller's building insulation
capacity will increase by approximately 20 percent.
In the fourth quarter of 1993, Riverwood recorded a $25 million charge for the
write-down of assets and provisions for severance, relocation and related costs
as Riverwood restructures and consolidates certain operations and infrastructure
levels. Riverwood is continuing its plan to streamline operations, increase
efficiency and cost effectiveness, and enhance worldwide customer service
capability. Approximately $20 million of the restructuring reserve relates to
provisions for cash expenditures that are expected to occur through 1995 and
will be funded from existing cash, operations and anticipated savings. The
remainder of the reserve is being used to write down the book value of certain
related assets. Through June 1994, approximately $10.5 million had been charged
against the restructuring reserve, of which approximately $7.1 million related
to cash expenditures. Riverwood estimates that the restructuring program could
reduce 1994 expenses
I-40
<PAGE>
by approximately $7 million, with additional benefits to be realized in later
years.
During 1993 Schuller initiated various activities to restructure its domestic
and international operations in order to reduce its cost structure and remain
competitive. Accordingly, during 1993, Schuller recorded a restructuring charge
aggregating $26.5 million related to (i) expenses for sampling, inspection and
remediation associated with a former phenolic roofing insulation business,
offset in part by expected insurance recoveries; (ii) additional severance costs
for ongoing programs to reduce costs; and (iii) estimated costs associated with
the exchange of the Company's residential roofing business for Owens-Corning
Fiberglas Corporation's North American commercial and industrial roofing
business. Approximately $21 million of these 1993 restructuring charges will
result in future cash expenditures that are expected to occur through 1997 and
will be funded from existing cash, operations and anticipated savings.
Approximately $2 million of the 1993 restructuring charges related to the write-
down of assets in conjunction with the Company's exchange of roofing businesses.
Approximately $13 million has been charged against these reserves through June
1994, of which $10 million was charged during the first and second quarters of
1994.
Schuller has implemented a portion of the separations anticipated in connection
with the restructuring plan, and in January of 1994,
I-41
<PAGE>
completed the exchange of its residential roofing business for a commercial and
industrial roofing business. Schuller believes that it has already begun to
realize benefit from its restructuring activities implemented to date, evidenced
in part by the improvement in the gross profit margin reported in the Building
Products segment during the first half of 1994. Schuller estimates that
separations implemented as a result of the restructuring program will reduce
1994 expenses by approximately $10 million.
In December 1988 and January 1989, the Company acquired certain phenolic roofing
insulation assets and related technology from Beazer East, Inc. ("Beazer"), the
successor to Koppers Company, Inc. The Company exited the phenolic roofing
business in February 1992. The Company has learned that phenolic roofing
insulation may, under certain circumstances, contribute to corrosion of steel
decks on which the insulation is installed.
In 1992, the Company commenced an inspection and sampling program of decks where
its phenolic product was installed between 1989 and 1992. Based on experience
and the information available, the Company recorded an estimated loss in the
fourth quarter of 1993 of approximately $19.7 million (included in Schuller's
1993 restructuring charge of $26.5 million) for anticipated sampling, inspection
and remediation costs. Through June 30, 1994, the total expenditures by the
Company for inspections and claims sampling totaled approximately $5 million and
the total expenditures for
I-42
<PAGE>
remediation were approximately $4 million. It is possible the ultimate loss,
which cannot be determined at this time, could exceed the $19.7 million
estimated loss recorded in 1993.
Any determination of the ultimate cost to the Company for phenolic-related deck
corrosion must take into consideration insurance that is available to address
such claims as well as other sources of indemnification. The Company has
insurance which applies to property damage resulting from metal deck corrosion;
however, the Company is presently engaged in litigation over the extent of such
coverage with its primary insurance carrier. At this time the Company believes
it will be successful by verdicts or settlements in its efforts to recover from
its insurance carriers the receivable of $7 million reflected in the Company's
financial statements at June 30, 1994. The Company's belief that it will be
successful in this action is based on its interpretation of the language of the
relevant insurance policies and the Company's factual investigation to date.
Because of the uncertainties involved in pending litigation, no assurances are
possible.
During 1993, the Company filed a lawsuit against Beazer. The Company seeks
recovery from Beazer for all costs and damages incurred as a result of the
acquisition of the phenolic business. Additionally, to the extent negligence of
others (contractors, architects, manufacturers of other roofing system
components) is a contributing factor to roof deck corrosion, the Company may
have
I-43
<PAGE>
rights in contribution for recovery of a portion of its costs from such third
parties.
The Company believes that there are certain areas that may require financial
commitments in excess of liabilities currently reflected on the consolidated
balance sheet, although such amounts are not expected to have a material impact
on the financial position of the Company. With respect to environmental costs,
the Company is committed to full compliance with all applicable environmental
laws and regulations. Environmental law at the present is dynamic, and as a
result, costs which are unforeseeable at this time may be incurred when new laws
are enacted, and/or the environmental agencies promulgate or revise regulations
in furtherance of such legislation. For example, the Company is currently
awaiting the federal Environmental Protection Agency's implementation of the
1990 Amendments to the Clean Air Act to determine their impact on the Company's
business segments. In addition, the federal Environmental Protection Agency has
issued new proposed regulations for the pulp and paper industry (the "Proposed
Regulations"). It is expected that the earliest time for industry compliance
with the Proposed Regulations should not be prior to the first quarter of 1999.
At this time, the Company estimates capital spending that may be required to
comply with the Proposed Regulations could be between $20 million and $40
million to be spent over a three-year period beginning in 1996.
I-44
<PAGE>
The Company is engaged in environmental remediation projects for properties
currently owned or operated by the Company and properties divested by the
Company for which responsibility was retained for pre-existing conditions. In
addition, the Company has been identified as a potentially responsible party at
certain sites under the federal Comprehensive Environmental Response,
Compensation and Liability Act or similar state legislation, and as such could
be jointly and severally liable for remediation costs at these sites. The
Company's actual final costs in some instances cannot be estimated until the
remediation process is substantially completed. To address these contingent
environmental costs, the Company has established appropriate accruals where such
costs are probable and can be reasonably estimated. The Company believes that
based on current information and regulatory requirements, the accruals
established by the Company for environmental expenditures are adequate.
The Company believes that with cash generated from operations, its current cash
and marketable securities position, proceeds from the sale of nonstrategic
assets, and access to private and capital markets and credit facilities, it can
adequately fund normal debt service requirements, its planned capital spending
program and its other commitments.
I-45
<PAGE>
Relationship of Manville to the Personal Injury Trust
In 1982 the Company and its principal U.S. and Canadian subsidiaries filed
petitions for reorganization under Chapter 11 of the federal Bankruptcy Code.
The filings were precipitated by contingent liabilities resulting from
litigation arising out of the Company's previous asbestos-related business
operations.
The Company's Plan of Reorganization (the "Plan") was confirmed in 1986 and
consummated on November 28, 1988. The Plan relieves the Company of the burden
of defending thousands of asbestos lawsuits through the creation of two
independent trusts created to assume, administer, settle and pay claims. The
Plan, a court order (the "Injunction") and the federal Bankruptcy Code together
operate to prohibit all persons from taking any actions against the Company with
respect to any past, present or future asbestos-related liabilities.
In lieu of bringing actions against the Company, asbestos claimants may assert
their claims only against the PI Trust or the Manville Property Damage
Settlement Trust (the "PD Trust"), which have been and will continue to be
funded by the Company pursuant to the Plan. The PI Trust holds all of the
Company's non-interest bearing long-term bonds (the "Trust Bonds") with a
current face value of $1 billion (present value of $323 million at June 30, 1994
as reflected in long-term debt on the Company's condensed consolidated balance
sheet), and approximately 80 percent of the Company's
I-46
<PAGE>
common stock. In addition, the Company has an obligation to pay 20 percent of
its profits (as defined in the Amended and Restated Supplemental Agreement
between the PI Trust and the Manville holding company) to the PI Trust. Profit
sharing payments to the PI Trust are due each year based on the prior year's net
earnings and will continue for as long as the PI Trust is in existence and any
personal injury asbestos claims filed against the PI Trust remain unpaid. After
termination of the PI Trust, an independent profit sharing obligation computed
under the same terms arises in favor of the PD Trust. Based upon a review of
the existing and potential claims facing the two trusts, the Company believes
that the profit sharing, for all practical purposes, will be payable in
perpetuity unless the Company and the trusts agree to a restructuring or
modification of the profit sharing obligations at some future date. The Company
paid $13 million to the PI Trust in April 1994 related to 1993 profit sharing.
On November 19, 1990, the Company and the PI Trust entered into formal
agreements with respect to a refinancing arrangement (the "Refinancing
Arrangement") that was designed to enhance the PI Trust's liquidity, including
the payment of a series of special dividends (the "Special Dividends") to all
stockholders of up to $650 million over seven years. Dividends of $1.04 per
common share were paid by the Company on December 28, 1992 and June 14, 1993.
I-47
<PAGE>
Certain aspects of the Refinancing Arrangement, including the Special Dividends,
restructuring of the Trust Bonds and covenant modification were dependent on
final court approval of a settlement of a class action lawsuit (the "Class
Action") instituted to restructure the method by which the PI Trust pays claims.
The Company is not a party to the Class Action. On June 27, 1991, the United
States District Courts for the Eastern and Southern Districts of New York (the
"Courts") entered an order approving the settlement of the Class Action. On
December 4, 1992, the United States Court of Appeals for the Second Circuit
vacated and remanded for further proceedings the decision of the Courts. The
Court of Appeal's decision has become final and accordingly, those aspects of
the Refinancing Arrangement conditioned upon final court approval of the Class
Action settlement have terminated.
On July 27, 1994, the PI Trust announced that, subject to one open issue
concerning procedural issues in Maryland cases, the parties to the Class Action
had reached a settlement in principle to equitably redistribute the PI Trust's
assets, and that the settlement will be filed in the courts within a few weeks.
According to the announcement, fairness hearings regarding the settlement are
expected to begin on November 1, 1994. The Company is not a party to this
settlement.
I-48
<PAGE>
Dividends Accrued Not Declared
Presently, $102.9 million of Common Stock Dividends Accrued Not Declared are
reflected in the June 30, 1994 condensed consolidated balance sheet. This
accrual represents the amount of the proposed third and fourth Special Dividends
under the Refinancing Arrangement which has since terminated. Even though the
Refinancing Arrangement is no longer in effect, the Company's Board of Directors
may consider declaring and paying common dividends from time to time. In making
such decisions, the Board may evaluate the Company's capital needs, its debt
levels and the economic environment of the markets served by the Company's
businesses. The Company also reflects Cumulative Preference Stock Dividends
Accrued Not Declared of $37.4 million at June 30, 1994, as part of the
accounting for the Refinancing Arrangement. Although the common stock and
preference stock dividends remain accrued, no assurance can be given that these
dividends will be declared and paid by the Company.
Additional information regarding the Company's accounting policies, the Plan,
the Injunction, the PI Trust, the PD Trust, the Refinancing Arrangement, the
Trust Bonds, the Special Dividends and the Class Action, is contained in the
Company's 1993 Annual Report and Form 10-K filed with the Securities and
Exchange Commission dated December 31, 1993.
I-49
<PAGE>
Subsequent Events
Riverwood reports its interim quarterly results based generally on a 13-week
period ending on a Saturday. Accordingly, Riverwood's 1994 second quarter ended
on June 25, 1994. On June 30, 1994 Riverwood completed a refinancing program
through the sale of $100 million of 10-3/8 percent 10-year Senior Subordinated
Notes and through the completion of a $125 million six-year bank facility. The
proceeds from these transactions were used to prepay private placement and bank
debt and to pay expenses of the refinancing. The Company estimates the
extraordinary loss on this early retirement of debt will be $7.9 million, net of
related income taxes of $5 million. Due to Riverwood's reporting period, this
loss will be reflected in the Company's third quarter 1994 financial statements.
In July 1994, Riverwood entered into an agreement in principle to sell just
under 50 percent of its Brazilian subsidiary, together with a 25 percent
interest in an entity holding the multiple packaging business in Brazil. The
sale, which is subject to negotiation of definitive agreements, due diligence,
Board of Directors' and certain third party approvals, is expected to close
in January 1995. In addition, Riverwood entered into a letter of intent to sell
oil and gas mineral rights on its U.S. timberlands. Subject to negotiation and
approval of definitive agreements, the mineral rights sale is expected to close
in 1994. The Company expects gross cash proceeds from these sales to be
approximately
I-50
<PAGE>
$110 million. However, for financial reporting purposes, the Brazilian and
mineral rights transactions, if consummated, will result in a significant non-
recurring charge to net income in 1994, principally due to charges for income
taxes in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
Additionally, Riverwood is holding discussions with several parties regarding
the potential sale of its U.S. wood products business. This business consists
of lumber and plywood operations in Louisiana, lumber operations in Arkansas,
and approximately 150,000 acres of surrounding timberlands. Riverwood will
retain its plantation timberlands to support production at its West Monroe paper
mill.
I-51
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
-----------------
The Company has provided detailed disclosures on its reorganization proceedings,
asbestos-health and asbestos property damage claims and other material
litigation in its earlier reports filed with the Securities and Exchange
Commission. Parties interested in obtaining the earlier reports may contact the
Company in care of Investor Relations, Manville Corporation, P.O. Box 5108,
Denver, Colorado 80217-5108, specifying the information desired. In addition,
the description below of the Company's Second Amended and Restated Plan of
Reorganization (the "Plan"), as modified, which was re-filed with the Securities
and Exchange Commission as an exhibit to the Company's Form 10-K for the fiscal
year ended December 31, 1992, is qualified in its entirety by reference to the
Plan. Copies of the Plan are also available from the Company upon request.
Plan of Reorganization and Related Injunction
In 1982, Manville and its principal U.S. and Canadian subsidiaries filed
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code. The filings were precipitated by contingent liabilities resulting from
litigation arising out of the Company's previous asbestos-related business
operations. A separate Plan of Reorganization for Riverwood International USA,
Inc., a principal subsidiary of Riverwood International Corporation
("Riverwood"), a majority-owned subsidiary of the Company, was confirmed by the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") in 1984. In December 1986, the Plan was confirmed by the
Bankruptcy Court. The order confirming the Plan became final in 1988 and the
Plan was consummated on November 28, 1988. During the fourth quarter of 1988,
the Company made various distributions to creditors and equity holders as
required under the Plan.
The Plan relieves the Company of the burden of defending thousands of asbestos
lawsuits. This is accomplished through independent trusts created to assume,
administer, settle and pay claims. In lieu of bringing actions against the
Company, asbestos claimants may assert their claims only against the Manville
Personal Injury Settlement Trust (the "PI Trust") or the Manville Property
Damage Settlement Trust (the "PD Trust"), which are funded by the Company
pursuant to the Plan. Only claims filed by May 31, 1985 may be brought against
the PD Trust. The Plan, the Injunction issued in connection with the Plan, and
the federal Bankruptcy Code together operate to prohibit all persons from taking
any actions against the Company with respect to any past, present or future
asbestos-related liabilities. The Injunction and the Plan also prohibit the
assertion of punitive damage claims by asbestos claimants against the Company,
the PI Trust or the PD Trust.
II-1
<PAGE>
The Injunction is a unique feature of the Company's Chapter 11 proceedings and
could be challenged in future legal proceedings. The Company believes, and the
Bankruptcy Court has found, that the Injunction is essential to the Company's
ability to continue to operate its businesses and to make required payments to
the PI Trust and the PD Trust. The Company also believes that any attempt to
vacate or modify the Injunction will be unsuccessful.
On November 19, 1990, the Company and the PI Trust entered into formal
agreements with respect to an arrangement (the "Refinancing Arrangement") which,
if consummated, would have enhanced the PI Trust's liquidity. Also on November
19, 1990, five asbestos plaintiffs filed a limited fund class action lawsuit
(the "Class Action") against the Trustees of the PI Trust in the United States
District Courts for the Eastern and Southern Districts of New York (the
"Courts"). The Class Action was filed on behalf of all beneficiaries of the PI
Trust and seeks to restructure the methods by which the PI Trust administers and
pays claims. The Company is not a party to the Class Action. The Class Action
was settled on November 23, 1990 (the "Restructuring Settlement"). Certain
provisions of the Refinancing Arrangement were subject to numerous approvals and
conditions, including, among other things, a final order approving the
Restructuring Settlement. On November 26, 1990, the Company filed a separate
motion asking the Courts and the Bankruptcy Court to issue orders reaffirming
the Injunction.
The Courts and the Bankruptcy Court entered an order, as modified in July 1991
(the "Order"), which, among other things, reaffirmed the Injunction (the
"Reaffirmation Order") and approved settlement of the Restructuring Settlement.
Thirteen appeals of the Order were filed by various parties; however, the
Reaffirmation Order was not challenged in the lower court or on appeal. On
February 24, 1992, the Court of Appeals for the Second Circuit (the "Second
Circuit") heard the various appeals of the Order.
On December 4, 1992, the Second Circuit vacated and remanded the Order. The
Second Circuit found, among other reasons for remanding the Restructuring
Settlement, that the representatives of the class may not have fairly
represented the interests of all persons who were made part of the Class Action.
The decision of the Second Circuit, as subsequently modified, has become final.
As a result, various aspects of the Refinancing Arrangement have terminated.
On July 27, 1994, the PI Trust announced that, subject to one open issue
concerning procedural issues in Maryland cases, the parties to the Class Action
had reached a settlement in principle to equitably redistribute the PI Trust's
assets, and that the settlement will be filed in the courts within a few weeks.
According to the announcement, fairness hearings regarding the settlement are
expected to begin on November 1, 1994.
II-2
<PAGE>
Those aspects of the Refinancing Arrangement which terminated when the Second
Circuit decision became final and non-appealable include:
1) Payment of the remaining special dividends: $.42 per share payable
not earlier than 1996; $.42 per share payable one year later; and,
depending on the Company's performance, additional annual dividends
with a cumulative cap of $300 million over four years commencing not
earlier than 1996;
2) Restructuring of the two bonds of the Company issued to the PI Trust
under the Plan; and
3) Modification of certain restrictive covenants contained in contracts
between the Company and the PI Trust.
Certain of the aspects of the Refinancing Arrangement referred to in (2) and (3)
of the preceding paragraph were addressed in a Bond Prepayment Agreement dated
August 25, 1993 (the "Agreement"), pursuant to which Manville made a partial
prepayment of certain of its obligations to the PI Trust under the bonds issued
to the PI Trust. The partial prepayment consisted of a cash payment of $150
million and an assignment to the PI Trust of $100 million principal amount of
Riverwood's currently outstanding notes held by Manville (the "Notes"), plus
accrued interest. The Agreement also provided for certain registration rights
with respect to the Notes pursuant to which Riverwood registered the Notes under
the Securities Act of 1933, as amended. On October 14, 1993, the PI Trust
completed a public secondary sale of the Notes. Neither the Company nor
Riverwood received any of the proceeds from the offering made by the PI Trust.
Manville is committed to the general principles underlying the terminated
Refinancing Arrangement and to fulfilling its obligations to the PI Trust and to
all stockholders under the Plan.
Environmental Proceedings
The Company's landfill at its Waukegan, Illinois facility continues to be
included on the National Priorities List ("NPL") pursuant to CERCLA. Remedial
action began during the fourth quarter of 1988 and was completed during the
third quarter of 1991. During the first quarter of 1993, the EPA issued a
supplemental CERCLA decision document, i.e., an Explanation of Significant
--------------------------
Differences ("ESD"), to reflect that, inter alia, remedial action was taken on-
- - -----------
site which was in addition to that described in the Record of Decision and the
Consent Decree. The EPA is now seeking both a modification to the Consent
Decree to incorporate the additional remedial action described in the ESD as
well as appropriate deed restrictions for the site. The Company has been
informed that the Consent Decree modification and the deed restrictions should
be approved in the third quarter of 1994. After these approvals, the Company
will apply for the Certificate of Completion (the "Certificate") and the Company
is informed that the EPA will likely issue the Certificate in 1995. After the
Certificate is issued, the Company will seek to have the site deleted from the
NPL.
II-3
<PAGE>
Regarding a landfill located in Manville, New Jersey, the Company has submitted
a revised closure plan to the New Jersey Department of Environmental Protection
and Energy ("NJDEPE"). Closure of the landfill will follow NJDEPE's approval of
the plan.
In connection with the Macon paper mill acquisition, Riverwood International
Georgia, Inc. ("RVW Georgia"), a wholly owned subsidiary of Riverwood, has made
appropriate applications and requests for all necessary permits for the
operation of the Macon facility, including an air permit for operation of a
recovery boiler that was subject to a consent order previously issued to Macon
Kraft, Inc. by the Georgia Department of Natural Resources ("GDNR"). A Consent
Order dated November 5, 1992 was entered into by RVW Georgia and GDNR (the "RVW
Consent Order"), which supersedes the original consent order between Macon
Kraft, Inc. and GDNR. The terms of the RVW Consent Order require that
construction of a new recovery boiler be completed, and compliance with GDNR's
total reduced sulfur ("TRS") emission limits be demonstrated, no later than
September 29, 1994. A payment of $500,000 by RVW Georgia to GDNR was also
required. If compliance with the TRS limits is not demonstrated by September
29, 1994, an additional payment of $200,000 will be required from RVW Georgia to
GDNR. Riverwood is presently in the final stages of checkout and testing of the
recovery boiler, which began operation in the first quarter of 1994. Riverwood
anticipates that it will demonstrate compliance with GDNR's TRS emission limits
prior to September 29, 1994.
The Company has also been informed of certain environmental problems associated
with former disposal sites (most of which were never owned or operated by the
Company), in California, Colorado, Florida, Georgia, Illinois, Indiana,
Louisiana, Maine, Massachusetts, Michigan, Mississippi, New Hampshire, New
Jersey, New York, North Carolina, Ohio, Oklahoma, Tennessee, Utah and Wisconsin.
These problems include, in certain cases, the purported application of CERCLA,
RCRA, and their state law equivalents.
ITEM 2. CHANGES IN SECURITIES.
---------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
-------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
Not applicable.
II-4
<PAGE>
ITEM 5. OTHER INFORMATION.
------------------
Riverwood Debt Offering
On June 30, 1994, Riverwood completed both its public offering of $100 million
of 10 3/8% Senior Subordinated Notes due 2004 and a $125 million underwritten
bank facility.
National Toxicology Program
Schuller International, Inc., an indirect wholly owned subsidiary of the
Company, manufactures, processes and sells products which contain fiberglass
wool. The Company has previously provided disclosure on studies relating to
fiberglass wool in its Form 10-K for the fiscal year ended December 31, 1993,
which is available from the Company upon request. On June 24, 1994, the
Department of Health & Human Services ("HHS") announced its decision to act on
the recommendation of the National Toxicology Program ("NTP") and list
fiberglass in the Seventh Annual Report on Carcinogens ("ARC") as a substance
which "may be reasonably anticipated" to be a carcinogen. The NTP listing
criteria provides that a substance must be listed if there are two or more
animal studies showing carcinogenic effect, regardless of route of exposure and
notwithstanding any other evidence. The NTP concluded that the results of the
animal implantation studies previously conducted on fiberglass wool provided
sufficient evidence to support the listing. HHS explained that the NTP
"reasonably anticipated" category for fiberglass essentially corresponds to the
International Agency for Research on Cancer 1987 "possibly carcinogenic"
classification.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
1. Exhibits.
--------
Exhibit 4.1, Indenture of Riverwood International Corporation for $100
million 10 3/8% Senior Subordinated Notes due 2004, dated June 30,
1994.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company hereby
agrees to furnish a copy of the $125 million Credit Agreement, among
Riverwood International Corporation, various listed banks, Morgan
Guaranty Trust Company of New York and Canadian Imperial Bank of
Commerce, dated June 30, 1994.
2. Form 8-K.
--------
None.
II-5
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANVILLE CORPORATION
--------------------
(Registrant)
Date: August 12, 1994 By: /s/ R. B. Von Wald
--------------------------------
R. B. Von Wald
Senior Vice President,
General Counsel and Secretary
Date: August 12, 1994 By: /s/ Robert E. Cole
--------------------------------
Robert E. Cole
Senior Vice President and
Chief Financial Officer
II-6
<PAGE>
EXHIBIT 4.1
<PAGE>
================================================================================
RIVERWOOD INTERNATIONAL CORPORATION
$100,000,000
10 3/8% Senior Subordinated Notes due 2004
_________________
INDENTURE
Dated as of June 30, 1994
_________________
The Bank of New York,
as Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
Indenture
Trust Indenture Act Section Section
- - --------------------------- ---------
(S) 310(a)(1)............................... 7.10
(a)(2)............................... 7.10
(a)(3)............................... N.A.
(a)(4)............................... N.A.
(a)(5)............................... N.A.
(b).................................. 7.08; 7.10; 11.02
(c).................................. N.A.
(S) 311(a).................................. 7.11
(b).................................. 7.11
(c).................................. N.A.
(S) 312(a).................................. 2.05
(b).................................. 11.03
(c).................................. 11.03
(S) 313(a).................................. 7.06
(b)(1)............................... N.A.
(b)(2)............................... 7.06
(c).................................. 7.06; 11.02
(d).................................. 7.06
(S) 314(a).................................. 4.11; 4.12; 11.02
(b).................................. N.A.
(c)(1)............................... 11.04
(c)(2)............................... 11.04
(c)(3)............................... N.A.
(d).................................. N.A.
(e).................................. 11.05
(f).................................. N.A.
(S) 315(a).................................. 7.01(b)
(b).................................. 7.05; 11.02
(c).................................. 7.01(a)
(d).................................. 7.01(c)
(e).................................. 6.11
(S) 316(a)(last sentence)................... 2.09
(a)(1)(A)............................ 6.05
(a)(1)(B)............................ 6.04
(a)(2)............................... N.A.
(b).................................. 6.07
(c).................................. N.A.
(S) 317(a)(1)............................... 6.08
(a)(2)............................... 6.09
(b).................................. 2.04
(S) 318(a).................................. 11.01
- - --------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.......................................... 1
SECTION 1.02. Other Definitions.................................... 20
SECTION 1.03. Incorporation by Reference of
Trust Indenture Act............................... 21
SECTION 1.04. Rules of Construction................................ 21
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating...................................... 22
SECTION 2.02. Execution and Authentication......................... 22
SECTION 2.03. Registrar and Paying Agent........................... 23
SECTION 2.04. Paying Agent To Hold Money in Trust.................. 24
SECTION 2.05. Securityholder Lists................................. 24
SECTION 2.06. Transfer and Exchange................................ 24
SECTION 2.07. Replacement Securities............................... 25
SECTION 2.08. Outstanding Securities............................... 25
SECTION 2.09. Treasury Securities.................................. 26
SECTION 2.10. Temporary Securities................................. 26
SECTION 2.11. Cancellation......................................... 26
SECTION 2.12. Defaulted Interest................................... 26
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee................................... 27
SECTION 3.02. Selection of Securities To Be
Redeemed.......................................... 27
SECTION 3.03. Notice of Redemption................................. 28
SECTION 3.04. Effect of Notice of Redemption....................... 28
SECTION 3.05. Deposit of Redemption Price.......................... 29
SECTION 3.06. Securities Redeemed in Part.......................... 29
-i-
<PAGE>
Page
----
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities................................ 29
SECTION 4.02. Maintenance of Office or Agency...................... 30
SECTION 4.03. Limitation on Transactions with
Affiliates........................................ 30
SECTION 4.04. Limitation on Indebtedness........................... 32
SECTION 4.05. Limitation on Asset Dispositions..................... 32
SECTION 4.06. Limitation on Restricted Payments.................... 35
SECTION 4.07. Corporate Existence.................................. 37
SECTION 4.08. Payment of Taxes and Other Claims.................... 38
SECTION 4.09. Notice of Defaults................................... 38
SECTION 4.10. Maintenance of Properties............................ 39
SECTION 4.11. Compliance Certificate............................... 39
SECTION 4.12. Reports.............................................. 40
SECTION 4.13. Waiver of Stay, Extension or Usury
Laws.............................................. 40
SECTION 4.14. Change of Control Offer.............................. 40
SECTION 4.15. Limitations on Senior Subordinated
Debt.............................................. 42
SECTION 4.16. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.............. 42
SECTION 4.17. Limitation on Certain Investments.................... 43
SECTION 4.18. Limitation on Sale or Issuance of
Stock of Subsidiaries............................. 45
SECTION 4.19 Limitation on Liens.................................. 45
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers and Consolidations
and Sales of Assets............................... 45
SECTION 5.02. Successor Corporation Substituted.................... 47
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.................................... 47
SECTION 6.02. Acceleration......................................... 49
SECTION 6.03. Other Remedies....................................... 50
SECTION 6.04. Waiver of Past Default............................... 50
SECTION 6.05. Control by Majority.................................. 51
-ii-
<PAGE>
Page
----
SECTION 6.06. Limitation on Suits.................................. 51
SECTION 6.07. Rights of Holders To Receive Payment................. 52
SECTION 6.08. Collection Suit by Trustee........................... 52
SECTION 6.09. Trustee May File Proofs of Claim..................... 52
SECTION 6.10. Priorities........................................... 53
SECTION 6.11. Undertaking for Costs................................ 53
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.................................... 54
SECTION 7.02. Rights of Trustee.................................... 55
SECTION 7.03. Individual Rights of Trustee......................... 56
SECTION 7.04. Trustee's Disclaimer................................. 57
SECTION 7.05. Notice of Defaults................................... 57
SECTION 7.06. Reports by Trustee to Holders........................ 57
SECTION 7.07. Compensation and Indemnity........................... 57
SECTION 7.08. Replacement of Trustee............................... 59
SECTION 7.09. Successor Trustee by Merger, etc..................... 60
SECTION 7.10. Eligibility; Disqualification........................ 60
SECTION 7.11. Preferential Collection of Claims
Against Company................................... 60
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior
Debt.............................................. 61
SECTION 8.02. No Payment on Securities in Certain
Circumstances..................................... 61
SECTION 8.03. Payment Over of Proceeds Upon
Dissolution, etc.................................. 62
SECTION 8.04. Subrogation.......................................... 64
SECTION 8.05. Obligations of Company Unconditional................. 65
SECTION 8.06. Notice to Trustee.................................... 66
SECTION 8.07. Reliance on Judicial Order or
Certificate of Liquidating Agent.................. 67
SECTION 8.08. Trustee's Relation to Senior
Indebtedness...................................... 67
SECTION 8.09. Subordination Rights Not Impaired
by Acts or Omissions of the Company
or Holders of Senior Debt......................... 68
-iii-
<PAGE>
Page
----
SECTION 8.10. Securityholders Authorize Trustee
To Effectuate Subordination of
Securities........................................ 68
SECTION 8.11. This Article Not To Prevent Events
of Default........................................ 68
SECTION 8.12. Trustee's Compensation Not Prejudiced................ 68
SECTION 8.13. No Waiver of Subordination Provisions................ 69
SECTION 8.14. Payments May be Paid Prior to
Dissolution....................................... 69
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations................. 69
SECTION 9.02. Application of Trust Money........................... 71
SECTION 9.03. Repayment to Company................................. 71
SECTION 9.04. Reinstatement........................................ 72
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders........................... 72
SECTION 10.02. With Consent of Holders.............................. 72
SECTION 10.03. Compliance with Trust Indenture Act.................. 73
SECTION 10.04. Revocation and Effect of Consents.................... 73
SECTION 10.05. Notation on or Exchange of Securities................ 74
SECTION 10.06. Trustee To Sign Amendments, etc...................... 74
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls......................... 75
SECTION 11.02. Notices.............................................. 75
SECTION 11.03. Communications by Holders with Other
Holders........................................... 76
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent......................................... 76
SECTION 11.05. Statements Required in Certificate or
Opinion........................................... 77
-iv-
<PAGE>
Page
----
SECTION 11.06. Rules by Trustee, Paying Agent,
Registrar......................................... 77
SECTION 11.07. Governing Law........................................ 78
SECTION 11.08. No Recourse Against Others........................... 78
SECTION 11.09. Successors........................................... 78
SECTION 11.10. Counterpart Originals................................ 78
SECTION 11.11. Severability......................................... 78
SECTION 11.12. No Adverse Interpretation of Other
Agreements........................................ 78
SIGNATURES............................................................ 79
EXHIBIT A - Form of Security.......................................... A-1
- - --------------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-v-
<PAGE>
INDENTURE dated as of June 30, 1994 between RIVERWOOD INTERNATIONAL
CORPORATION, a Delaware corporation (the "Company"), and THE BANK OF NEW YORK, a
New York banking corporation, Trustee (the "Trustee").
Intending to be legally bound hereby, both parties agree as follows
for the benefit of the other and for the equal and ratable benefit of the
Holders of the Company's 10 3/8% Senior Subordinated Notes Due 2004 (the
"Securities").
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
-----------
"Affiliate" means, with respect to any specified Person, any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar. See
-----
Section 2.03.
"Asset Acquisition" means (i) a transaction by the Company or by any
-----------------
Restricted Subsidiary involving any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged with the Company or any
Restricted Subsidiary or (ii) the acquisition by the Company or by any
Restricted Subsidiary of assets of any Person comprising a division or line of
business of such Person.
"Asset Disposition" means any sale, transfer or other disposition of
-----------------
(i) shares of Capital Stock of a Subsidiary (other than directors' qualifying
shares) or (ii) property or assets of the Company or any Restricted Subsidiary;
provided, however, that an Asset Disposition shall not include (a) any sale,
- - -------- -------
transfer or other disposition of shares of Capital Stock, property or assets by
a Restricted Subsidiary to the Company or to a Restricted Subsidiary or by the
Company to a Restricted Subsidiary, (b) any sale, transfer or other disposition
of
<PAGE>
-2-
defaulted receivables for collection or any sale, transfer or other disposition
of property or assets in the ordinary course of business (including any sale of
receivables by any Subsidiary in the ordinary course of business of such
Subsidiary in a manner consistent with customary practice in such Subsidiary's
country of business), or (c) sales, transfers and other dispositions of property
or assets of the Company and its Restricted Subsidiaries with a fair market
value of less than $15,000,000 in the aggregate in any consecutive four fiscal
quarters. Notwithstanding any of the foregoing, an Asset Disposition shall
include any sale, transfer or other disposition by the Company or a Restricted
Subsidiary to an Unrestricted Subsidiary of the shares, property or assets
referred to in clauses (i) and (ii).
"Asset Sale" means (i) a transaction by the Company or by any
----------
Restricted Subsidiary pursuant to which a Subsidiary of the Company shall cease
to be a Subsidiary of the Company or (ii) the sale, transfer or other
disposition by the Company or by any Restricted Subsidiary of assets comprising
a division or line of business of the Company or of a Restricted Subsidiary.
"Bank Facility" means the Credit Agreement dated as of June 30, 1994,
-------------
between the Company, as borrower thereunder, and the banks named therein,
including Morgan Guaranty Trust Company of New York, as agent and Canadian
Imperial Bank of Commerce, as co-agent and security agent thereunder, as such
facility may be amended, restated, supplemented or otherwise modified from time
to time, not to exceed $125 million principal amount at any one time
outstanding.
"Board of Directors" means the Board of Directors of the Company or
------------------
any authorized committee of that Board.
"Board Resolution" means, with respect to any Person, a duly adopted
----------------
resolution of the Board of Directors of such Person.
"Brazilian Subsidiaries" means Igaras Papeis e Embalagens, Ltda.;
----------------------
Igaras Agro-Florestal Ltda.; Papelok S.A. Industria e Comercio; Agrok Agro-
Florestal Ltda.; and New Materials, Ltd.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday that is not a day on which banking institutions in the City of New York
are authorized or obligated by law, resolution or executive order to close.
<PAGE>
-3-
"Capital Lease Obligation" of any Person means any obligations under
------------------------
any capital lease of real or personal property which, in accordance with GAAP,
has been recorded as a capitalized lease obligation.
"Capital Stock" means any and all shares, interests, participations or
-------------
other equivalents (however designated) of Capital Stock of a corporation or any
and all equivalent ownership interests in a Person other than a corporation.
"Change of Control" means such time as (i) a "person" or "group"
-----------------
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other
than Manville or the PI Trust, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of more than 35% of the outstanding Voting
Stock of the Company; or (ii) during any period of two consecutive calendar
years, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with (A) any new directors whose election by
the Board of Directors of the Company or whose nomination for election was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved, and (B) any new directors
designated for election or whose election to the Board of Directors of the
Company was approved by the PI Trust) cease for any reason to constitute a
majority of the directors then in office.
"Change of Control Triggering Event" means the occurrence of both a
----------------------------------
Change of Control and a Rating Decline.
"Company" means the Person named as the "Company" in the first
-------
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" or "Company Order" means a written request or order
--------------- -------------
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Amortization Expense" means, for any period, the
---------------------------------
amortization expense of the Company and its
<PAGE>
-4-
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Cash Flow Available for Interest Expense" means, for any
-----------------------------------------------------
period, (a) the sum, without duplication, of the amounts for such period of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) Consolidated
Income Tax Expense, (iv) Consolidated Depreciation Expense, (v) Consolidated
Amortization Expense, (vi) Consolidated Cost of Timber Harvested, and (vii)
other non-cash items reducing Consolidated Net Income, minus (b) non-cash items
-----
increasing Consolidated Net Income, all as determined on a consolidated basis
for the Company and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Cost of Timber Harvested" means, for any period, the
-------------------------------------
cost of timber harvested of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Depreciation Expense" means, for any period, the
---------------------------------
depreciation expense of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Income Tax Expense" means, for any period, the aggregate
-------------------------------
of the income tax expense of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means, for any period, the
------------------------------------
ratio of (i) Consolidated Cash Flow Available for Interest Expense plus one-
----
third of Consolidated Rental Expense to (ii) Consolidated Interest Expense plus
----
one-third of Consolidated Rental Expense. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated Cash Flow
Available for Interest Expense" and "Consolidated Interest Expense" shall be
calculated after giving effect on a pro forma basis for the period of such
--- -----
calculation to (i) the incurrence (and the application of the proceeds thereof)
or repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries giving rise to the need to make such calculation and any incurrence
(and the application of the proceeds thereof) or repayment of other Indebtedness
(including the Securities), other than the incurrence or repayment of
Indebtedness in the ordinary course of business pursuant to working capital
facilities (including, without limitation,
<PAGE>
-5-
under the Miscellaneous Available Credit Facilities), at any time subsequent to
the first day of the four full most recent fiscal quarters for which financial
information is or should have been filed with the SEC (the "Four Quarter
Period") ending on or prior to the date of the transaction or event giving rise
to the need to calculate the Consolidated Interest Coverage Ratio of the Company
(the "Transaction Date") and on or prior to the Transaction Date, as if such
incurrence (and the application of the proceeds thereof) or repayment, as the
case may be, occurred on the first day of the Four Quarter Period and (ii) any
Asset Sale or Asset Acquisition (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of any such Asset Acquisition) incurring,
assuming or otherwise being liable for Indebtedness) at any time subsequent to
the first day of the Four Quarter Period and on or prior to the Transaction
Date, as if such Asset Sale or Asset Acquisition (including the incurrence,
assumption or liability for any such Indebtedness and also including any
Consolidated Cash Flow Available for Interest Expense associated with such Asset
Acquisition) occurred on the first day of the Four Quarter Period; provided,
--------
however, that the Consolidated Cash Flow Available for Interest Expense of any
- - -------
Person becoming a Restricted Subsidiary shall not be included to the extent the
net income of such Restricted Subsidiary would be excluded pursuant to clause
(iii) of the definition of "Consolidated Net Income."
"Consolidated Interest Expense" means, for any period, the interest
-----------------------------
expense (including the interest component of all Capital Lease Obligations and
the earned discount or yield with respect to a sale of receivables constituting
Indebtedness) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP, plus the aggregate
amount of Preferred Dividends recognized by the Company and its Restricted
Subsidiaries, whether or not declared during such period.
"Consolidated Net Assets" means, with respect to the Company and its
-----------------------
Restricted Subsidiaries, as at any date, the total amount of assets of the
Company and its Restricted Subsidiaries (less applicable reserves) after
deducting therefrom (i) all current liabilities (excluding any thereof which are
by their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is being
computed) and (ii)
<PAGE>
-6-
appropriate adjustments on account of minority interests of other Persons
holding shares of Restricted Subsidiaries, all as set forth on the most recent
consolidated balance sheet of the Company and its Restricted Subsidiaries and
computed in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or
-----------------------
loss) of the Company and its Restricted Subsidiaries on a consolidated basis for
such period taken as a single accounting period, determined in accordance with
GAAP; provided, however, that there shall be excluded therefrom: (i) the net
-------- -------
income (or loss) of any Person which is not a Restricted Subsidiary, except (A)
to the extent of the amount of dividends or other distributions actually
received in cash or tangible property or tangible assets (such property or
assets to be valued at their fair market value net of any obligations secured
thereby) by the Company or any of its Restricted Subsidiaries from such Person
during such period (subject, in the case of any dividend or distribution
received by a Restricted Subsidiary, to the limitations imposed by clause (iii)
below) and (B) without duplication of any amount otherwise included in
Consolidated Net Income, cash realized by the Company or any of its Restricted
Subsidiaries (subject in the case of a Restricted Subsidiary to the limitations
imposed by clause (iii) below) during such period on account of dividends or
distributions paid in other than cash or tangible property, (ii) except to the
extent includible pursuant to the foregoing clause (i), the net income (or loss)
of any Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged with or into or consolidated with the Company or any of its Restricted
Subsidiaries or that Person's property or assets are acquired by the Company or
any of its Restricted Subsidiaries, (iii) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that income is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary, (iv) the excess (but not the deficit), if any, of
(x) any gain which must be treated as an extraordinary item under GAAP or any
gain realized upon the sale or other disposition of any asset that is not sold
in the ordinary course of business or of any Capital Stock of a Subsidiary over
(y) any loss which must be treated as an extraordinary item under GAAP or any
loss realized upon the sale or other disposition of any asset that is not sold
in the ordinary course of business or of any Capital Stock of a Subsidiary, and
<PAGE>
-7-
(v) the recognition of the cumulative effect of changes in accounting
principles.
"Consolidated Net Worth" means the amount which at any date of
----------------------
determination, in accordance with GAAP, would be set forth under the caption
"stockholders' equity" (or any like caption) on the consolidated balance sheet
of the Company and its Restricted Subsidiaries, exclusive of amounts
attributable to Redeemable Stock.
"Consolidated Rental Expense" means, for any period, the aggregate of
---------------------------
the rental expense of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the address of the
-------------------------------------
Trustee specified in Section 11.02 or such other address as the Trustee may give
notice to the Company.
"Default" means any event which is, or after notice or passage of
-------
time or both would be, an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the SEC thereunder.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary whose
-----------------------------
jurisdiction of incorporation is outside the United States.
"Foreign Subsidiary" means a Subsidiary whose jurisdiction of
------------------
incorporation is outside the United States.
"Four Quarter Period" has the meaning set forth under the definition
-------------------
of "Consolidated Interest Coverage Ratio."
"GAAP" means generally accepted accounting principles, consistently
----
applied, as in effect from time to time in the United States of America, set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as is approved by a significant segment of the
accounting profession.
<PAGE>
-8-
"Holder" or "Securityholder" means the Person in whose name a Security
------ --------------
is registered on the books of the Registrar or any co-Registrar.
"Indebtedness" means, with respect to any Person and without
------------
duplication:
(a) any liability of such Person (1) for borrowed money, or (2)
for any letter of credit for the account of such Person supporting other
obligations of such Person included in this definition, or (3) evidenced by
a bond, note, debenture or similar instrument (including any purchase money
obligation) (other than a trade payable or a current liability arising in
the ordinary course of business), or (4) for the payment of money relating
to a Capital Lease Obligation;
(b) all Redeemable Stock issued by such Person (the amount of the
Indebtedness represented by any Redeemable Stock will equal the greater of
the voluntary or involuntary liquidation preference plus accrued and unpaid
dividends);
(c) the proceeds of the sale of any receivables, with or without
recourse, except for any sale of receivables by a Restricted Subsidiary in
the ordinary course of business of such Restricted Subsidiary for the
purpose of collection rather than as a financing arrangement and in a
manner consistent with customary practice in such Restricted Subsidiary's
country of business;
(d) if such Person is a Subsidiary, all Preferred Stock issued by
such Subsidiary (the amount of Indebtedness represented by any such
Preferred Stock will equal the greater of the voluntary or involuntary
liquidation preference plus accrued and unpaid dividends);
(e) any liability of others described in the preceding clause (a)
that the Person has guaranteed or that is otherwise its legal liability;
and
(f) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses
(a), (b), (c) and (e) above.
<PAGE>
-9-
For purposes of determining any particular amount of Indebtedness under this
definition solely in connection with calculating the Consolidated Interest
Coverage Ratio in clause (2) of Section 4.04, (x) guarantees of (or obligations
with respect to letters of credit supporting) Indebtedness otherwise included in
the determination of such amount and (y) any premium, interest, penalties,
reimbursement or indemnification amounts, fees or expenses with respect to any
Indebtedness shall not also be included. For the purpose of determining
compliance with Section 4.04, in the event that an item of Indebtedness meets
the criteria of more than one of the types of Indebtedness described in the
above clauses or more than one of the clauses of the definition of "Permitted
Indebtedness," the Company, in its sole discretion, shall not be required to
include the amount and type of such Indebtedness in more than one of such
clauses and the amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
"Indenture" means this Indenture as amended or supplemented from time
---------
to time.
"Intercompany Agreement" means the Intercompany Agreement dated as of
----------------------
June 1, 1992 between the Company and Manville.
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Securities.
"Issue Date" means the date of first issuance of the Securities under
----------
this Indenture.
"Lien" means any mortgage, charge, pledge, lien, privilege, security
----
interest or other encumbrance upon or with respect to any property of any kind
of the Company or any of its Restricted Subsidiaries, real or personal, moveable
or immovable, now owned or hereafter acquired.
"Manville" means Manville Corporation, a Delaware corporation.
--------
"Maturity Date" means the date, which is set forth on the face of the
-------------
Securities, on which the Securities will mature.
<PAGE>
-10-
"Miscellaneous Available Credit Facilities" means an aggregate of $26
-----------------------------------------
million of Indebtedness of the Company's foreign Restricted Subsidiaries either
outstanding or available on the date of this Indenture pursuant to lines of
credit or other similar arrangements existing on June 24, 1992.
"Moody's" means Moody's Investors Service, Inc. and its successors.
-------
"Net Cash Proceeds" means, with respect to any Person, the proceeds
-----------------
received in cash or cash equivalents (including any cash received by way of
deferred payment, monetization of a note or receivable or otherwise, but only as
and when received and excluding the portion of any such deferred payment which
in accordance with GAAP constitutes interest) by such Person from any Asset
Disposition net of (i) the direct costs relating to such Asset Disposition
(including, without limitation, legal, accounting and investment banking fees
and sale commissions), (ii) taxes paid or payable (including, without
limitation, income taxes reasonably estimated to be actually payable as a result
of such Asset Disposition within two years of the date thereof) and (iii) any
reserve for adjustment of the sale price of such property, or other post closing
adjustments, established in accordance with GAAP.
"Obligations" means any principal, premiums, interest, penalties, fees
-----------
and other liabilities payable under the documentation governing any
Indebtedness.
"Officer" means the Chairman, the President, any Vice President, the
-------
Chief Financial Officer, the Treasurer, or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
---------------------
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 11.04 and 11.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
<PAGE>
-11-
"Permitted Indebtedness" means:
----------------------
(a) Indebtedness of the Company or of any Restricted Subsidiary in the
amount outstanding on the date of this Indenture or available under
Miscellaneous Available Credit Facilities;
(b) Indebtedness incurred by the Company under the Securities;
(c) Indebtedness incurred by the Company under the Bank Facility;
(d) Indebtedness of the Company to any Restricted Subsidiary or of a
Restricted Subsidiary to the Company or to another Restricted Subsidiary
(and any refinancing of any thereof) in each case for so long as held by
the Company or by a Restricted Subsidiary;
(e) additional Indebtedness of the Company or of Restricted
Subsidiaries for working capital purposes (including financing arrangements
involving the sale of receivables) in an aggregate principal amount
(including, in the case of receivables financing arrangements, the proceeds
obtained from such arrangements with respect to receivables that remain
uncollected) at any one time outstanding for the Company and the Restricted
Subsidiaries pursuant to this clause (e) not to exceed the greater of (A)
$100,000,000 and (B) 7.5% of Consolidated Net Assets calculated at the end
of the fiscal quarter ending immediately prior to the incurrence of such
Indebtedness, and any refinancing of any such Indebtedness; provided,
--------
however, that such refinancing shall not increase the total of the
-------
aggregate amount outstanding that is permitted by this clause (e), plus the
amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness and plus the amount of reasonable expenses
incurred by the Company or any Restricted Subsidiary in connection with
such refinancing;
(f) additional Indebtedness of the Company or of any of the Restricted
Subsidiaries in an aggregate principal amount at any one time outstanding
not to exceed $50,000,000, and any refinancing of any such Indebtedness;
provided, however, that such refinancing shall not increase the total of
-------- -------
the aggregate amount outstanding that is permitted by this clause (f), plus
the amount of
<PAGE>
-12-
any premium required to be paid under the terms of the instrument governing
such Indebtedness and plus the amount of reasonable expenses incurred by
the Company or any Restricted Subsidiary in connection with such
refinancing;
(g) Indebtedness assumed by the Company or by any Restricted
Subsidiary in connection with the acquisition of assets from a Person not
an Affiliate of the Company; provided, however, that (1) such Indebtedness
-------- -------
was not incurred by the Company or by any Restricted Subsidiary or such
other Person in connection with or in contemplation or in anticipation of
such acquisition of assets, (2) immediately before and immediately after
giving pro forma effect to the incurrence of such Indebtedness the Company
--- -----
could incur $1 of additional Indebtedness not constituting Permitted
Indebtedness pursuant to clause (2) of Section 4.04 and (3) such
Indebtedness is not incurred in connection with the acquisition of assets
from the Company;
(h) any renewals, extensions, substitutions, refinancings or
replacements (herein, a "refinancing" with "refinance" and "refinanced"
having correlative meanings) of any Indebtedness incurred pursuant to
clause (2) of Section 4.04 or clauses (a), (b), (c) and (g) of this
"Permitted Indebtedness" definition (in each case assuming all available
amounts were borrowed), including any successive refinancings so long as in
each case (i) the amount of refinancing Indebtedness shall not exceed the
aggregate amount of Indebtedness being refinanced, plus the amount of any
premium required to be paid under the terms of the instrument governing the
Indebtedness being refinanced and plus the amount of reasonable expenses
incurred by the Company or a Restricted Subsidiary in connection with such
refinancing (if such refinancing Indebtedness is issued at a price less
than the principal amount thereof, an increase shall not be deemed to have
occurred unless the gross proceeds of such refinancing Indebtedness is in
excess of the total of the aggregate principal amount of the Indebtedness
being refinanced as of the date of such proposed refinancing plus the
amount of any premium required to be paid under the terms of the instrument
governing such Indebtedness being refinanced plus the amount of expenses
incurred by the Company or a Restricted Subsidiary in connection with such
refinancing), (ii) the average life and the date such Indebtedness is
scheduled to mature is not shortened, (iii) the new Indebtedness is not
senior in right of payment to the Indebtedness that is
<PAGE>
-13-
being refinanced and is subordinated to the Securities at least to the same
extent and in the same manner as the Indebtedness that is being refinanced,
(iv) if the Indebtedness being refinanced was incurred by the Company, then
the new Indebtedness shall be incurred by the Company, and (v) such
Indebtedness being incurred to refinance the existing Indebtedness is not
incurred more than 90 days prior to such refinancing; and
(i) Indebtedness of the Company or of any Restricted Subsidiary in
respect of trade letters of credit, accommodation guarantees for the
benefit of trade creditors of wholly-owned Restricted Subsidiaries, standby
letters of credit, performance bonds and surety bonds, in each case,
incurred in the ordinary course of business, but excluding any such
instruments that are equivalent to or issued in support of any other
obligation included in the definition of "Indebtedness."
"Permitted Liens" means, as of any particular time, any one or more of
---------------
the following:
(a) Liens securing any receivables or inventory financings permitted
under clause (e) of the definition of "Permitted Indebtedness," or Liens
securing Indebtedness permitted to be incurred under this Indenture (other
than any direct or indirect guarantee or other assumption by a Restricted
Subsidiary of Indebtedness of the Company that ranks pari passu with or is
---- -----
subordinate to the Securities, or any guarantee in respect thereof);
(b) Liens permitted to be granted pursuant to the terms of any
instrument governing Indebtedness of the Company outstanding on the date of
this Indenture;
(c) Liens granted in respect of Senior Indebtedness incurred in
accordance with this Indenture;
(d) Liens for taxes, rates and assessments not yet due or, if due, the
validity of which is being contested diligently and in good faith by the
Company or any of its Subsidiaries; and Liens for the excess of the amount
of any past due taxes for which a final assessment has not been received
over the amount of such taxes as estimated and paid;
<PAGE>
-14-
(e) the Lien of any judgment rendered which is being contested
diligently and in good faith by the Company or any of its Subsidiaries and
which does not have a material adverse effect on the ability of the Company
and its Subsidiaries to operate their business or operations;
(f) other than in connection with Indebtedness, any Lien arising in
the ordinary course of business, such as (i) Liens to secure payments of
workers' compensation, unemployment insurance, pension or other social
security or retirement benefits, or to secure the performance of bids,
tenders, leases, progress payments, contracts (other than for the payment
of money) or to secure public or statutory obligations of the Company, or
any Subsidiary of the Company, or to secure surety or appeal bonds to which
the Company or any Subsidiary of the Company is a party and (ii) any Lien
imposed by law dealing with materialmen's, mechanics', workmen's,
repairmen's, warehousemen's, landlords', vendors' or carriers' Liens
created by law, or deposits or pledges;
(g) servitudes, licenses, easements, encumbrances, restrictions,
rights-of-way and rights in the nature of easements or similar charges
which will not in the aggregate materially adversely impair the use of the
subject property by the Company or a Subsidiary of the Company as such
property is used as of the date of this Indenture or in respect of which
the Company or any of its Subsidiaries has made satisfactory arrangements
for relocation so that such use will not in the aggregate be materially and
adversely impaired;
(h) zoning and building by-laws and ordinances, municipal by-laws and
regulations, and restrictive covenants, which do not materially interfere
with the use of the subject property by the Company or a Subsidiary of the
Company as such property is used as of the date of this Indenture;
(i) Liens securing purchase money obligations incurred in compliance
with the provisions of this Indenture with respect to assets acquired from
a Person not an Affiliate of the Company, limited to the property acquired
in the transaction in which the purchase money obligation was incurred;
<PAGE>
-15-
(j) any other Lien existing on the date of this Indenture;
(k) Liens on assets acquired by the Company or any Subsidiary of the
Company after the date of this Indenture, whether by acquisition of shares,
assets or otherwise; provided, however, that such Lien existed on the date
-------- -------
such asset was acquired and was not incurred in anticipation of or in
connection with such acquisition;
(l) any interest in or title of a lessor to any property subject to
any Capital Lease Obligation or operating lease which, in each case, is
permitted under this Indenture; or
(m) any extension, renewal, substitution or replacement (or successive
extensions, renewals, substitutions or replacements), as a whole or in
part, of any of the Liens referred to in clauses (a) through (l) of this
definition (including, without limitation, in connection with any
refinancing of the Indebtedness secured thereby to the extent consummated
in compliance with this Indenture); provided, however, that (1) such
-------- -------
extension, renewal, substitution or replacement Lien shall be limited to
all or any part of the same property or assets, owned on the date of this
Indenture or thereafter acquired, that secured the Lien extended, renewed,
substituted or replaced (plus improvements on such property or assets) and
(2) the Indebtedness secured by such Lien (assuming all available amounts
were borrowed) at such time is not increased.
"Permitted Payments" means:
------------------
(a) the payment of any dividend on share capital within 60 days after
the date of declaration thereof, if at such declaration date such
declaration complied with the provisions of this Indenture;
(b) the prepayment, repurchase, redemption or other acquisition or
retirement of (i) any shares of any class of share capital or (ii) any
Indebtedness that is subordinate to the Securities, effected through the
exchange of (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu
of the issuance of fractional shares or scrip), or out of the net cash
proceeds of a substantially concurrent issue and sale (other than to a
<PAGE>
-16-
Subsidiary of the Company) of, shares of Capital Stock of the Company other
than Redeemable Stock;
(c) the prepayment, repurchase, redemption or other acquisition or
retirement of Indebtedness that is subordinate in right of payment to the
Securities from the proceeds of a refinancing that complies with all of the
conditions specified in clause (h) of the definition of "Permitted
Indebtedness"; and
(d) payments pursuant to the Intercompany Agreement, the Treasury
Management Agreement and the Tax Sharing Agreement, in each case as in
effect on the date of this Indenture;
provided, however, that in the case of clause (a) no Default or Event of Default
- - -------- -------
shall have occurred and be continuing at the date of such payment.
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"PI Trust" means the Manville Personal Injury Settlement Trust.
--------
"Preferred Dividend" means, for any dividend payable by a Person with
------------------
regard to Redeemable Stock issued by it and, if such Person is a Subsidiary,
Preferred Stock issued by such Subsidiary (other than to the Company or a
wholly-owned Restricted Subsidiary), the quotient of the dividend divided by the
difference between one and the maximum statutory income tax rate (expressed as a
decimal number between 1 and 0) then applicable to such Person.
"Preferred Stock" means, with respect to any Person, any and all
---------------
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued
after the date of this Indenture, and includes, without limitation, all classes
and series of preferred or preference stock.
"principal" of a debt security means the principal of the security
---------
plus, when appropriate, the premium, if any, on the security.
<PAGE>
-17-
"Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or
---------------
Moody's or both are not making ratings of the Securities publicly available, a
nationally recognized securities rating agency or agencies as the case may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
---------------
categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's, any of the following categories:
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
and (iii) the equivalent of any such category of S&P or Moody's used by another
Rating Agency. In determining whether a rating of the Securities has decreased
by one or more gradations, gradations within Rating Categories (+ and - for S&P;
1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency)
will be taken into account (e.g., with respect to S&P, a decline in a rating
---
from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one
gradation).
"Rating Date" means the date which is 90 days prior to the earlier of
-----------
(i) a Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of the Company to effect a Change of Control.
"Rating Decline" means the occurrence of the following on, or within
--------------
90 days after, the date of public notice of the occurrence of a Change of
Control or of the intention by the Company to effect a Change of Control (which
period shall be extended so long as the rating of the Securities is under
publicly announced consideration for possible downgrade by either of the Rating
Agencies): the rating of the Securities by either Rating Agency shall be (i)
decreased by two or more gradations (including gradations within Rating
Categories as well as between Rating Categories) from the rating by such Rating
Agency in effect on the Rating Date, if the rating by such Rating Agency in
effect on the Rating Date is one or more gradations higher than the rating by
such Rating Agency in effect on the date of original issuance of the Securities
or (ii) decreased by one or more gradations (including gradations within Rating
Categories as well as between Rating Categories) from the rating by such Rating
Agency in effect on the Rating Date if the rating by such Rating Agency in
effect on the Rating Date is equal to or lower than the rating by such Rating
Agency in effect on the date of original issuance of the Securities; unless,
after the decrease referred to in either clause
<PAGE>
-18-
(i) or (ii), the Securities continue to be rated in one of the four highest
Rating Categories used by such Rating Agency.
"Redeemable Stock" means any class or series of share capital that by
----------------
its terms or otherwise is required to be redeemed prior to the Stated Maturity
of the Securities, or is redeemable at the option of the holder thereof at any
time prior to the Stated Maturity of the Securities.
"redemption date," when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be
----------------
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed as Exhibit A.
"refinancing" has the meaning set forth under clause (h) of the
-----------
definition of "Permitted Indebtedness."
"Restricted Subsidiary" means any Subsidiary of the Company other than
---------------------
an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Corporation and its successors.
---
"SEC" means the Securities and Exchange Commission.
---
"Securities" means the 10 3/8% Senior Subordinated Notes due 2004, as
----------
amended or supplemented from time to time pursuant to the terms of this
Indenture, that are issued under this Indenture.
"Senior Indebtedness" means, at any date all Indebtedness of the
-------------------
Company for borrowed money, unless the instrument under which such Indebtedness
of the Company for money borrowed is created, incurred, assumed or guaranteed
expressly provides that such Indebtedness for money borrowed is not senior or
superior in right of payment to the Securities, and all renewals, extensions,
modifications, amendments or refinancings thereof. Senior Indebtedness shall
not include Indebtedness which is pursuant to its terms or any agreement
relating thereto or by operation of law subordinated or junior in right of
payment or otherwise to any Indebtedness of the Company.
<PAGE>
-19-
"Stated Maturity," when used with respect to any Security or any
---------------
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) any corporation of
----------
which at least a majority in interest of the outstanding Capital Stock having by
the terms thereof voting power under ordinary circumstances to elect directors
of such corporation, irrespective of whether or not at the time stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such Person, or by one or more other
corporations a majority in interest of such stock of which is similarly owned or
controlled, or by such Person and one or more other corporations a majority in
interest of such stock of which is similarly owned or controlled or (ii) any
other Person (other than a corporation) in which such Person, directly or
indirectly, at the date of determination thereof, has at least a majority equity
ownership interest.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as June
---------------------
17, 1992 between the Company and Manville.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
---
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 10.03.
"Transaction Date" has the meaning set forth under the definition of
----------------
"Consolidated Interest Coverage Ratio."
"Treasury Management Agreement" means the Treasury Management
-----------------------------
Agreement dated as of June 17, 1992 between the Company and Manville.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
-------------
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
<PAGE>
-20-
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"Unrestricted Subsidiary" means (i) each of the Brazilian
-----------------------
Subsidiaries, (ii) Riverwood International Machinery, Inc., a Delaware
corporation and (iii) any other Subsidiary all of the Capital Stock or assets of
which are first acquired by the Company or another Subsidiary of the Company
after the date of this Indenture from any Person other than the Company or a
Restricted Subsidiary and all of the Indebtedness of which is without recourse
to the Company or to any Restricted Subsidiary or to any of their respective
properties or assets, which Subsidiary has not been designated a "Restricted
Subsidiary" for purposes of this Indenture by the Company. A Subsidiary may be
designated to be a Restricted Subsidiary only if, at the time of such
designation, all Indebtedness and Liens of such Subsidiary could be incurred
under this Indenture.
"United States" means the United States of America and its territories
-------------
and possessions.
"Voting Stock" means, with respect to any Person, securities of any
------------
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors of such Person.
SECTION 1.02 Other Definitions.
-----------------
Term Defined in Section
----- ------------------
"Asset Disposition Offer" 4.05
"Asset Disposition Offer Amount" 4.05
"Asset Disposition Payment Date" 4.05
"Bankruptcy Law" 6.01
"Basket Restricted Investment" 4.17
"Change of Control Offer" 4.14
"Change of Control Payment Date" 4.14
"Change of Control Purchase Price" 4.14
"Custodian" 6.01
"Event of Default" 6.01
"Excess Restricted Investment" 4.17
"incur" 4.04
<PAGE>
-21-
"Paying Agent" 2.03
"Payment Blockage Period" 8.02
"Payment Restriction" 4.16
"Registrar" 2.03
"Restricted Investment" 4.17
"Restricted Payment Basket Credits" 4.06
"United States Government Obligation" 9.01
SECTION 1.03 Incorporation by Reference of Trust
Indenture Act.
-----------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
----------
"indenture securities" means the Securities.
--------------------
"indenture security holder" means a Securityholder.
------------------
"indenture to be qualified" means this Indenture.
---------------
"indenture trustee" or "institutional trustee" means the Trustee.
----------------- ---------------------
"obligor" on the indenture securities means the Company or any
-------
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.04 Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
from time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
<PAGE>
-22-
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
---------------
The Securities and the Trustee's certificates of authentication shall
be substantially in the form of Exhibit A. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. Any
notations, legends or endorsements not contained in the form of Security
contained in Exhibit A shall be delivered in writing to the Trustee. The
Company shall approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the form of the Securities,
annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a
part of this Indenture.
SECTION 2.02. Execution and Authentication.
----------------------------
Two Officers shall sign the Securities for the Company by facsimile
signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
<PAGE>
-23-
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $100,000,000, upon a written order of the
Company signed by two Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Company. The order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated. The aggregate principal amount of Securities
outstanding at any time may not exceed $100,000,000 except as provided in
Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities other than upon original issuance. The
Company shall pay all fees payable to the authenticating agent. Any
authenticating agent appointed hereunder shall be entitled to the benefits of
Section 7.07. Unless limited by the terms of such appointment, any
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate as provided in Section 7.03.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Company may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with the provisions of Section 7.07.
<PAGE>
-24-
The Company initially appoints the Trustee as Registrar and Paying
Agent. The Company shall give written notice to the Trustee in the event that
the Company decides to act as Registrar or Paying Agent.
SECTION 2.04. Paying Agent To Hold Money in Trust.
-----------------------------------
The Company shall require each Paying Agent to agree in writing to
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest on the
Securities (whether such money has been paid to it by the Company or any other
obligor on the Securities), and the Company and the Paying Agent shall each
notify the Trustee of any default by the Company (or any other obligor on the
Securities) in making any such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money and hold it as a separate trust fund.
The Company at any time may require a Paying Agent to pay all money held by it
to the Trustee and account for any funds disbursed and the Trustee may at any
time during the continuance of any payment default, upon written request to a
Paying Agent, require such Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed. Upon making such payment the
Paying Agent shall have no further liability for the money delivered to the
Trustee.
SECTION 2.05. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Securityholders.
SECTION 2.06. Transfer and Exchange.
---------------------
When Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations, the Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transactions are met. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Securities. The
date of any
<PAGE>
-25-
Security issued pursuant to this Section 2.06 shall be the date of such transfer
or exchange. No service charge shall be made to the Securityholder for any
registration of transfer or exchange, but the Company may require from the
Securityholder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges pursuant to
Section 2.10, 3.06 or 10.05, in which event the Company shall be responsible for
the payment of such taxes).
SECTION 2.07. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. An indemnity bond in an amount
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced may be required by the Trustee or the Company. The
Company and the Trustee each may charge such Holder for its expenses in
replacing such Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities that have been
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
A Security does not cease to be outstanding because the Company or one of its
Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of the Company) holds on a redemption date or Maturity Date money
sufficient to pay the principal of, and interest on Securities payable on that
date, then on and
<PAGE>
-26-
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or an Affiliate of the Company shall be disregarded, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which the
Trustee actually knows are so owned shall be so disregarded.
The Trustee may require an Officers' Certificate listing securities
owned by the Company or an Affiliate.
SECTION 2.10 Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
such exchange, temporary Securities shall be entitled to the same rights,
benefits and privileges as definitive Securities.
SECTION 2.11 Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee and no one else shall cancel all Securities surrendered for transfer,
exchange, payment or cancellation. The Company may not issue new Securities to
replace, or reissue or resell, Securities which the Company has redeemed, paid,
purchased on the open market or otherwise, or otherwise acquired or have been
delivered to the Trustee for cancellation. The Trustee (subject to the record-
retention requirements of the Exchange Act) may, but shall not be required to
destroy cancelled Securities.
<PAGE>
-27-
SECTION 2.12 Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus any interest payable on the defaulted
interest pursuant to Section 4.01 hereof, to the persons who are Securityholders
on a subsequent special record date, and such term, as used in this Section 2.12
with respect to the payment of any defaulted interest, shall mean the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day. At least 15 days before
such special record date, the Company shall mail to each Securityholder and to
the Trustee a notice that states such special record date, the payment date and
the amount of defaulted interest to be paid.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the redemption date and the principal amount of
Securities to be redeemed.
The Company shall give the notice provided for in this Section at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 thereof, the Trustee shall select the Securities to be redeemed pro
---
rata or by lot or in such other manner as the Trustee shall deem appropriate and
- - ----
fair. The Trustee shall make the selection from the Securities then
outstanding, subject to redemption and not previously called for redemption.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called
<PAGE>
-28-
for redemption also apply to portions of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption by first class mail to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the CUSIP number;
(4) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Paying
Agent; and
(7) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense.
<PAGE>
-29-
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon to the redemption date, but
interest installments whose maturity is on or prior to such redemption date
shall be payable to the Holders of record at the close of business on the
relevant record dates referred to in the Securities. The Trustee shall not be
required to (i) issue, authenticate, register the transfer of or exchange any
Security during a period beginning 15 days before the date a notice of
redemption is mailed and ending at the close of business on the date the
redemption notice is mailed, or (ii) register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
At least one Business Day before the redemption date, the Company
shall deposit with the Paying Agent (or if the Company is its own Paying Agent,
shall, on or before the redemption date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest on all Securities
to be redeemed on that date other than Securities or portions thereof called for
redemption on that date which have been delivered by the Company to the Trustee
for cancellation.
SECTION 3.06. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities. An installment of principal or
interest shall be considered paid on the date due if the Trustee or Paying Agent
(other than the
<PAGE>
-30-
Company, a Subsidiary or an Affiliate of the Company) holds on that date money
designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders of the Securities pursuant to
the terms of this Indenture.
The Company shall pay interest on overdue principal at the same rate
per annum borne by the Securities. The Company shall pay interest on overdue
- - --- -----
installments of interest at the same rate per annum borne by the Securities, to
--- -----
the extent lawful.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
- - --------
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 4.03. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any loan, advance, guaranty or
capital contribution to, or for the benefit of, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or for the benefit of,
or purchase or lease any property or asset from, or enter into
<PAGE>
-31-
or amend any contract, agreement or understanding with, or for the benefit of,
any Affiliate (other than a wholly-owned Restricted Subsidiary) of the Company
or of any of its Subsidiaries (other than the Company) unless (i) such
transaction or series of transactions is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary, as the case may be, than
those that reasonably could have been obtained in a comparable transaction on an
arm's length basis from a Person that is not such an Affiliate, and (ii) (a)
with respect to a transaction or series of transactions with a fair market value
of less than $10 million but equal to or greater than $5 million, the Company
delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of transactions complies with clause (i) above or (b) with
respect to a transaction or series of transactions with a fair market value of
$10 million or more, (1) the transaction or series of transactions is approved
by a majority of the Board of Directors of the Company (including a majority of
the directors who are not officers or employees of, or otherwise interested in,
the Company (except as directors) or officers, employees or directors of, or
otherwise interested in, such Affiliate) or (2) the Company or such Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Subsidiary from a financial point of view; provided, however, (x) that with
-------- -------
respect to any transaction or series of transactions that constitutes a
Restricted Investment but is permitted by Section 4.17, delivery of the
Officers' Certificate referred to in clause (a) above will only be required if
the fair market value of such transaction or series of transactions is $10
million or more and less than $20 million, and approval by the Board of
Directors of the Company or delivery of the opinion of a nationally recognized
investment banking firm as described in clause (b) above will only be required
if the fair market value of such transaction or series of transactions is $20
million or more and (y) the requirements of clause (ii) shall not apply to
operating activities in the ordinary course of business (reasonably related to
the business conducted by the Company and its Subsidiaries on the date of this
Indenture) between the Company or any Restricted Subsidiaries, on the one hand,
and any of the Unrestricted Subsidiaries, on the other hand. Notwithstanding the
foregoing, this restriction shall not apply to (i) payments pursuant to the
Intercompany Agreement, the Treasury Management Agreement or the Tax Sharing
Agreement, in each case as in effect on the date of this Indenture, (ii) the
payment of reasonable and customary regular fees to directors of the Company and
its
<PAGE>
-32-
Subsidiaries who are not employees of the Company or its Subsidiaries and (iii)
Restricted Payments permitted by Section 4.06 and Permitted Payments under
clause (c) of the definition of Permitted Payments.
SECTION 4.04. Limitation on Indebtedness.
--------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries (or any entity that will become a Restricted Subsidiary in a
transaction in connection with which such Indebtedness is incurred, created,
assumed or guaranteed) to, incur, assume, create, guarantee or in any other
manner become directly or indirectly liable (including in a transaction
permitted by Section 5.01) with respect to or responsible for the payment of any
Indebtedness (collectively, "incur," with "incurred," "incurring" and
"incurrence" having correlative meanings), except: (1) Permitted Indebtedness;
and (2) Indebtedness of the Company or of any Restricted Subsidiary if at the
time of the proposed incurrence thereof and after giving effect thereto the
Consolidated Interest Coverage Ratio of the Company would be greater than 2.0 to
1 for Indebtedness incurred on or prior to March 31, 1995 and would be greater
than 2.25 to 1 for Indebtedness incurred thereafter. For purposes of the
foregoing covenant, any Indebtedness of an entity existing at the time it
becomes a Restricted Subsidiary will be deemed to be incurred as of the date
such entity becomes a Restricted Subsidiary; provided, however, that such
-------- -------
Indebtedness shall be deemed incurred as of the first day of the Four Quarter
Period for purposes of calculating the Consolidated Interest Coverage Ratio with
respect to such incurrence.
SECTION 4.05. Limitation on Asset Dispositions.
--------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, make any Asset Disposition unless (A) the Company or the Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Disposition at least equal to the fair market value of the assets sold or
otherwise disposed of (which shall be determined in good faith and (x) in the
case of dispositions of assets having a fair market value of $25 million or
more, by the Board of Directors of the Company, whose reasonable determination
shall be conclusive and evidenced by a resolution of the Board of Directors, or
(y) in the case of dispositions of assets having a fair market value of less
than $25 million but more than $15 million, by officers of the Company, whose
reasonable determination shall be conclusive and evidenced by an Officers'
Certificate)
<PAGE>
-33-
and, with respect to any Asset Disposition or series of related Asset
Dispositions having a fair market value of $50 million or more, at least 75% of
the gross proceeds from such Asset Disposition consist of cash or cash
equivalents (other than with respect to an Asset Disposition consisting of an
exchange of timberlands or an exchange of equipment for use in related lines of
business), and (B) the Company shall apply or cause to be applied an amount
equal to the aggregate Net Cash Proceeds received by the Company or by any
Restricted Subsidiary from all Asset Dispositions or series of related Asset
Dispositions occurring subsequent to the date of the receipt by the Company and
the Restricted Subsidiaries of consideration having a fair market value in
excess of $50 million from all Asset Dispositions or series of related Asset
Dispositions occurring subsequent to the date of this Indenture as follows: (a)
to the payment within twelve months after such Asset Disposition of any Senior
Indebtedness of the Company secured by a Lien on the assets that are the subject
of such Asset Disposition if and to the extent required by the terms of such
Senior Indebtedness, or if the Asset Disposition relates to assets of a
Restricted Subsidiary, to the payment of any Indebtedness of such Restricted
Subsidiary secured by a Lien on the assets that are the subject of such Asset
Disposition if and to the extent required by the terms of such Indebtedness
within twelve months after such Asset Disposition, or (b) to replace within
twelve months after such Asset Disposition the properties and assets that were
the subject of such Asset Disposition with properties and assets that will be
used in the business of the Company and its Restricted Subsidiaries reasonably
related to those existing on the date of this Indenture or, if such replacement
is with respect to a project to be completed within a period greater than twelve
months from such Asset Disposition, then within the period of time necessary to
complete such project, or (c) to the prepayment or purchase of any Indebtedness
that ranks pari passu to the Securities existing on the date of this Indenture
---- -----
that pursuant to its terms requires an offer to purchase be made with the Net
Cash Proceeds from such Asset Disposition or series of related Asset
Dispositions or (d) to the purchase or repayment of any Senior Indebtedness or
any Indebtedness of any Restricted Subsidiary within twelve months of such Asset
Disposition; provided, however, that (x) in the case of applications
-------- -------
contemplated by clause (b), the Board of Directors has, within such twelve-month
period, adopted in good faith a resolution committing such Net Cash Proceeds to
such replacement, (y) except as provided in the next sentence, none of such Net
Cash Proceeds shall be used to make any Restricted Payment or Restricted
Investment and (z) if the amount of Net
<PAGE>
-34-
Cash Proceeds not applied in accordance with clauses (a), (b), (c) and/or (d)
above is greater than $50 million, then the Company shall make an offer to
purchase up to an aggregate principal amount of the Securities equal to such Net
Cash Proceeds (the "Asset Disposition Offer Amount") at 100% of principal amount
plus accrued and unpaid interest to the Asset Disposition Payment Date (as
defined below). If after being applied in accordance with clauses (a), (b), (c)
and (d) above there remain Net Cash Proceeds, the Company may apply such Net
Cash Proceeds to the general corporate purposes of the Company or of any
Restricted Subsidiary of the Company. An offer to purchase the Securities
required to be made pursuant to this covenant is an "Asset Disposition Offer"
and the date on which the purchase of the Securities relating to any such Asset
Disposition Offer is to be made is an "Asset Disposition Payment Date."
Notwithstanding the foregoing, to the extent the Company or any of its
Restricted Subsidiaries receives securities or other non-cash property or assets
as proceeds of an Asset Disposition, the Company shall not be required to make
any application required by the preceding paragraph until it receives cash
proceeds from a sale, repayment, exchange, redemption or retirement of or
extraordinary dividend or return of capital on such non-cash property. Any
amounts deferred pursuant to the preceding sentence shall be applied in
accordance with the preceding paragraph when cash proceeds are thereafter
received from a sale, repayment, exchange, redemption or retirement of or
extraordinary dividend or return of capital on such non-cash property.
Notice of an Asset Disposition Offer shall be mailed on behalf of the
Company by the Trustee to all Holders at their last registered addresses not
less than 30 days nor more than 60 days before the Asset Disposition Payment
Date, which shall be a date not more than 400 days after the Asset Disposition
giving rise to such Asset Disposition Offer; provided, however, that the Asset
-------- -------
Disposition Payment Date shall be a date subsequent to any analogous payment
date relating to Senior Indebtedness as set forth in the instruments with
respect thereto. The Company will provide the form of Notice of an Asset
Disposition Offer to the Trustee at least two Business Days prior to such date
of mailing. The Asset Disposition Offer shall remain open from the time of the
mailing of such notice until not more than five Business Days before the Asset
Disposition Payment Date.
<PAGE>
-35-
On the relevant Asset Disposition Payment Date, the Company shall
accept for payment the Securities or portions thereof tendered pursuant to the
Asset Disposition Offer in an aggregate principal amount equal to the Asset
Disposition Offer Amount or such lesser amount of Securities as shall have been
tendered, and the Company shall deposit money sufficient to pay the purchase
price of all Securities or portions thereof so accepted. If the aggregate
principal amount of Securities tendered in the relevant Asset Disposition Offer
exceeds the Asset Disposition Offer Amount, the Company shall select the
Securities to be purchased on a pro rata basis to the nearest $1,000 of
--- ----
principal amount. The Paying Agent shall promptly mail or deliver to Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Company shall execute and the Trustee shall promptly authenticate and mail or
make available for delivery to such Holders a new Security equal in principal
amount to any unpurchased portion of the Securities so surrendered. The Company
will publicly announce the results of the Asset Disposition Offer.
With respect to any Asset Disposition Offer, the Company shall comply
with the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, if
applicable.
SECTION 4.06. Limitation on Restricted Payments.
---------------------------------
The Company (a) shall not directly or indirectly declare or pay any
dividend on, or make any distribution to the holders of, any of its Capital
Stock (other than dividends or distributions payable solely in shares of its
Capital Stock or in options, warrants or other rights to purchase such Capital
Stock, but excluding dividends or distributions payable in Redeemable Stock or
in options, warrants or other rights to purchase Redeemable Stock) and (b) shall
not and shall not cause or permit any of its Restricted Subsidiaries to (i)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or of any Affiliate or any options, warrants or other rights to
acquire such Capital Stock unless all the proceeds thereof are paid to the
Company or, in the case of a purchase or redemption by a Restricted Subsidiary,
to the Company or to a wholly-owned Restricted Subsidiary, or (ii) prepay,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Indebtedness that is subordinate in right of payment to the
Securities (each of the foregoing actions set forth in clauses (a) and (b) being
referred to as a "Restricted
<PAGE>
-36-
Payment") unless, at the time of such Restricted Payment and after giving effect
thereto, (x) no Default or Event of Default shall have occurred and be
continuing; and (y) the aggregate amount of all Restricted Payments made after
July 1, 1992 shall not exceed the difference between (A) the sum of: (I) 50% of
the aggregate Consolidated Net Income (or, in the event Consolidated Net Income
is a deficit, minus 100% of such deficit) of the Company accrued on a cumulative
basis for the period (taken as one accounting period) beginning on July 1, 1992
and ending on the last day of the most recent fiscal quarter ending prior to the
30th day preceding the date of the proposed Restricted Payment; provided,
--------
however, that if the Securities are rated at least BBB- by S&P and Baa3 by
- - -------
Moody's during any fiscal quarter, the percentage for solely such fiscal quarter
(and for any other fiscal quarter where on the first day of such fiscal quarter
the Securities are so rated by each of S&P and Moody's) will be 75% of
Consolidated Net Income during such fiscal quarter (but not for any other fiscal
quarter unless the conditions of this proviso apply); and provided, further,
-------- -------
that if any Restricted Payment is to be made in reliance upon the additional
amount permitted by the immediately preceding proviso, the Securities must have
the ratings set forth therein (or higher) from each of S&P and Moody's at the
time such Restricted Payment is declared and made; (II) the aggregate net cash
proceeds received on or after July 1, 1992 by the Company from the issuance or
sale (other than to any of the Subsidiaries of the Company) of Capital Stock
(other than Redeemable Stock) of the Company or warrants to purchase such
Capital Stock (other than Redeemable Stock) plus the aggregate principal amount
of Indebtedness (as reflected in the most recent balance sheet of the Company
prepared in accordance with GAAP immediately prior to the date in question) of
the Company or of any Restricted Subsidiary issued for cash after July 1, 1992
(other than to the Company or to any Subsidiary of the Company) that has been
exchanged or exercised for, or converted into, Capital Stock of the Company
(other than Redeemable Stock); and (III) $25,000,000; minus (B) the sum of all
(I) Basket Restricted Investments made since July 1, 1992 and (II) Excess
Restricted Investments made since the date of this Indenture, in each case net
of any Restricted Payment Basket Credits amount.
Nothing in this Section will limit or restrict the making of any
Permitted Payment, and a Permitted Payment described in clauses (b) or (d) of
the definition thereof shall not be treated as a Restricted Payment for purposes
of determining amounts available for other Restricted Payments pursuant
<PAGE>
-37-
to the preceding paragraph; provided, however, that the proceeds from
-------- -------
any sale of Capital Stock effected in connection with any Permitted Payment
shall not be included in the computation of aggregate net cash proceeds received
from the sale of Capital Stock under clause (A)(II) of the preceding paragraph.
For the purpose of determining at any date the amount of Restricted
Payments permitted to be made pursuant to this covenant or Restricted
Investments permitted to be made pursuant to Section 4.17, the calculation of
any Restricted Investments shall exclude (A) the amount of any return of capital
representing a loan or other advance and the fair market value of the
consideration received by the Company or by any Restricted Subsidiary after the
date of this Indenture from the sale or other disposition of any Restricted
Investment, not to exceed in any such case the amount of such Restricted
Investment determined as of the date of its making; provided, however, that no
-------- -------
such return of capital or consideration so received shall reduce the amount of
any such calculation to the extent it has been reflected in the calculation of
Consolidated Net Income and (B) the Company's investment in any Unrestricted
Subsidiary designated in accordance with this Indenture as a Restricted
Subsidiary after the date of this Indenture, not to exceed in any event the
amount of Restricted Investments (measured as of the date of the making of each
thereof) made in such Unrestricted Subsidiary by the Company and the Restricted
Subsidiaries subsequent to July 1, 1992 to and including the date of such
designation (the aggregate amounts determined under (A) and (B) of this sentence
at any time are herein referred to as "Restricted Payment Basket Credits"). The
fair market value of any non-cash consideration received by the Company or by
any Restricted Subsidiary upon any sale or other disposition of any Restricted
Investment shall be determined by the Board of Directors, whose reasonable
determination shall be conclusive.
The amount of any Restricted Payment, if other than cash, shall be
determined by the Board of Directors, whose reasonable determination shall be
conclusive.
SECTION 4.07. Corporate Existence.
-------------------
Subject to Article 5, the Company shall do or shall cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Restricted
Subsidiary in accordance with the respective organizational documents
<PAGE>
-38-
of each Subsidiary and the rights (charter and statutory) and material
franchises of the Company and the Restricted Subsidiaries; provided, however,
-------- -------
that the Company shall not be required to preserve any such right or franchise,
or the corporate existence of any Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and the Restricted Subsidiaries,
taken as a whole, and that the loss thereof is not, and will not be, adverse in
any material respect to the Holders; provided, further, however, that a
-------- ------- -------
determination of the Board of Directors of the Company shall not be required in
the event of (i) a merger of one or more wholly-owned Restricted Subsidiaries
with or into another wholly-owned Restricted Subsidiary or another Person, if
the surviving Person is a wholly-owned Restricted Subsidiary organized under the
laws of the United States or a State thereof or of the District of Columbia or
(ii) a merger of one or more wholly-owned Foreign Restricted Subsidiaries that
are organized under the laws of the same jurisdiction with or into another
wholly-owned Foreign Restricted Subsidiary or another Person, if the surviving
Person is a wholly-owned Foreign Restricted Subsidiary organized under the laws
of the same jurisdiction under which the Foreign Restricted Subsidiaries were
organized prior to the merger.
SECTION 4.08. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (2)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a material liability, or Lien upon the property, of
the Company or any Restricted Subsidiary; provided, however, that the Company
-------- -------
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate provision has been made.
SECTION 4.09. Notice of Defaults.
------------------
(1) In the event that any Indebtedness of the Company or any of the
Restricted Subsidiaries is declared due and payable before its maturity because
of the occurrence of any
<PAGE>
-39-
default (or any event which, with notice or lapse of time, or both, would
constitute such a default) under such Indebtedness, the Company shall promptly
give written notice to the Trustee of such declaration, the status of such
default or event and what action the Company is taking or proposes to take with
respect thereto.
(2) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.10. Maintenance of Properties.
-------------------------
The Company shall cause all material properties owned by or leased to
it or any Restricted Subsidiary and used or useful in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in normal condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
--------
however, that nothing in this Section shall prevent the Company or any
- - -------
Restricted Subsidiary from discontinuing the use, operation or maintenance of
any of such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors or of the board of
directors of the Restricted Subsidiary concerned, or of an officer (or other
agent employed by the Company or of any of its Restricted Subsidiaries) of the
Company or such Restricted Subsidiary having managerial responsibility for any
such property, desirable in the conduct of the business of the Company or any
Restricted Subsidiary, and if such discontinuance or disposal is not adverse in
any material respect to the Holders.
SECTION 4.11. Compliance Certificate.
----------------------
The Company shall deliver to the Trustee within 55 days after the end
of each of the first three fiscal quarters of the Company and within 100 days
after the close of each fiscal year a certificate signed by the principal
executive officer, principal financial officer or principal accounting officer
stating that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has
<PAGE>
-40-
occurred and whether or not the signers know of any Default or Event of Default
by the Company that occurred during such fiscal quarter or fiscal year. If they
do know of such a Default or Event of Default, the certificate shall describe
all such Defaults or Events of Default, their status and the action the Company
is taking or proposes to take with respect thereto. The first certificate to be
delivered by the Company pursuant to this Section 4.11 shall be for the fiscal
quarter ending September 24, 1994.
SECTION 4.12. Reports.
-------
So long as any Security is outstanding, the Company shall file with
the Commission and, within 15 days after it files them with the Commission, file
with the Trustee and mail or cause the Trustee to mail to the Holders at their
addresses as set forth in the register of the Securities copies of the annual
reports and of the information, documents and other reports which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or which the Company would be required to file with the Commission
if the Company then were required to have a class of securities registered under
the Exchange Act. In addition, the Company shall cause its annual report to
stockholders and any quarterly or other financial reports furnished to its
stockholders generally to be filed with the Trustee and mailed, no later than
the date such materials are mailed or made available to the Company's
stockholders, to the Holders at their addresses as set forth in the register of
Securities.
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law, which would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
<PAGE>
-41-
SECTION 4.14. Change of Control Offer.
-----------------------
(a) Within 30 days following the occurrence of a Change of Control
Triggering Event, the Company will notify the Trustee in writing of the
occurrence of the Change of Control Triggering Event and make an offer to
purchase (the "Change of Control Offer") the Securities at a purchase price
equal to 100% of the principal amount thereof plus any accrued and unpaid
interest thereon to the Change of Control Payment Date (the "Change of Control
Purchase Price") in accordance with the procedures set forth in subsection (b)
of this Section 4.14.
(b) Within 30 days following the occurrence of a Change of Control
Triggering Event, the Company shall (i) cause a notice of the Change of Control
Offer to be sent at least once to the Dow Jones News Service or similar business
news service in the United States and (ii) send by first-class mail, postage
prepaid, to the Trustee and to each Holder of the Securities, at his or her
address appearing in the register maintained by the Registrar, a notice stating:
(A) that the Change of Control Offer is being made pursuant to this Section 4.14
and that all the Securities tendered shall be accepted for payment; (B) the
Change of Control Purchase Price and the purchase date (which shall be a
business day no earlier than 30 days nor later than 45 days from the date such
notice is mailed) (the "Change of Control Payment Date"); provided, however,
-------- -------
that the Change of Control Payment Date shall be a date subsequent to any
analogous payment date relating to Senior Indebtedness as set forth in the
instruments with respect thereto; (C) that any Security not tendered shall
continue to accrue interest; (D) that unless the Company defaults in the payment
of the Change of Control Purchase Price, any Securities accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date; (E) that Holders accepting the offer to have
their Securities purchased pursuant to a Change of Control Offer shall be
required to surrender such Securities to the Paying Agent at the address
specified in the notice prior to the close of business on the business day
preceding the Change of Control Payment Date; (F) that Holders shall be entitled
to withdraw their acceptance if the Paying Agent receives, not later than the
close of business on the third business day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Securities delivered for
purchase, and a statement that such Holder is withdrawing his or her election to
have such Securities purchased; (G) that Holders whose Securities are being
<PAGE>
-42-
purchased only in part shall be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered, provided that each
Security purchased and each such new Security issued shall be in an original
principal amount of $1,000 or integral multiples thereof; and (H) any other
procedures that a Holder must follow to accept a Change of Control Offer or
withdrawal of such acceptance.
(c) A third party may also make and consummate a Change of Control
Offer in the manner and at the times and otherwise in compliance with this
Section 4.14.
(d) The Company shall comply with all applicable tender offer rules
(including, without limitation, Rule 14e-1 under the Exchange Act) in the event
that the payment option is triggered under the circumstances described in this
Section 4.14.
SECTION 4.15. Limitation on Senior Subordinated Debt.
--------------------------------------
The Company shall not incur any Indebtedness that by its terms would
expressly rank senior in right of payment to the Securities and expressly rank
subordinate in right of payment to any Senior Indebtedness.
SECTION 4.16. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
----------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distribution on its Capital Stock, (b) pay any Indebtedness owed to the Company
or to any Restricted Subsidiary, (c) make loans or advances to the Company or to
any Restricted Subsidiary or (d) transfer any of its property or assets to the
Company or to any Restricted Subsidiary (any such encumbrance or restriction set
forth in clauses (a), (b), (c) or (d), a "Payment Restriction") except (i)
consensual encumbrances or restrictions in financing agreements in effect on the
date of this Indenture, (ii) consensual encumbrances or restrictions in new
agreements pertaining to Foreign Restricted Subsidiaries; provided, however,
-------- -------
that no such consensual encumbrance or restriction in a new agreement pertaining
to a Foreign Restricted Subsidiary will be permitted unless, at the time of such
new agreement, the Foreign Restricted Subsidiary to which
<PAGE>
-43-
such new agreement pertains, together with all other Foreign Restricted
Subsidiaries that have entered into new agreements permitted by this clause
(ii), accounted for less than 10% of the Company's Consolidated Cash Flow
Available for Interest Expense for the Four Quarter Period immediately prior to
such new agreement; and provided, further, that at the time of any such new
-------- -------
agreement, the Company would be permitted to incur an additional dollar of
Indebtedness (not constituting Permitted Indebtedness) under clause (2) of
Section 4.04 without giving effect to the net income of the Foreign Restricted
Subsidiary to which such new agreement pertains except to the extent of net
income which could be paid as dividends or other distributions on Capital Stock
permitted by such new agreement, (iii) any consensual encumbrances and
restrictions of the type described in this Section 4.16 contained in agreements
refinancing any of the agreements described in clauses (i) and (ii) that are not
more restrictive than those contained in the agreements being refinanced and
(iv) encumbrances or restrictions arising under (A) applicable law and (B) this
Indenture.
SECTION 4.17. Limitation on Certain Investments.
---------------------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, (A) make any advance, loan or capital
contribution to or purchase any shares, bonds, notes, debentures or other
securities of, (B) acquire, by purchase or otherwise, all or a substantial part
of the business or assets or shares or other evidence of beneficial ownership
of, or (C) make any investment in or guarantee any Indebtedness of, any
Affiliate of the Company or to, in or of any entity that would become an
Affiliate of the Company (including, without limitation, an Unrestricted
Subsidiary) after giving effect to any such action (any such transaction set
forth in clauses (A), (B), and (C), a "Restricted Investment"); provided,
--------
however that the foregoing shall not prohibit any Restricted Investment if at
- - -------
the time of such proposed Restricted Investment and immediately after giving
effect thereto, the aggregate amount of all Restricted Investments made since
July 1, 1992 (net of any Restricted Payment Basket Credits amount) shall not
exceed 6% of Consolidated Net Assets as set forth on the most recent
consolidated balance sheet of the Company immediately prior to the date of such
proposed Restricted Investment. In addition, the Company shall be permitted to
make Restricted Investments in excess of the amounts permitted by the proviso of
the preceding sentence, if (1) immediately prior to making any such Restricted
Investment, the Company could make a Restricted Payment at least equal in
<PAGE>
-44-
amount to the amount of such Restricted Investment (any such Restricted
Investment made pursuant to this clause (1), a "Basket Restricted Investment")
or (2) at such time as the Company is unable to make a Restricted Investment
under the preceding sentence and clause (1) of this sentence, immediately after
giving pro forma effect to such Restricted Investment (as if consummated on the
--- -----
first day of the Four Quarter Period) the Company could incur at least one
additional dollar of Indebtedness (not constituting Permitted Indebtedness)
under clause (2) of Section 4.04 (any such Restricted Investment made pursuant
to this clause (2), an "Excess Restricted Investment"); provided, however, that
-------- -------
no Restricted Investment pursuant to this clause (2) may be made in or for the
benefit of any direct or indirect parent of the Company, or in or for the
benefit of any Affiliate of any such direct or indirect parent (other than the
Company or any Subsidiary of the Company). For purposes of this Section 4.17
only, "Affiliate" does not include any direct or indirect wholly-owned
Restricted Subsidiary of the Company that is not subject to a Payment
Restriction, but does include any partnership in which the Company or any
Restricted Subsidiary is a general partner and any joint venture or similar
entity or enterprise in which the Company or any Restricted Subsidiary owns at
least a 10% equity or voting interest.
For the purpose of determining at any date the amount of Restricted
Investments that could be made pursuant to the proviso of the first sentence of
the preceding paragraph, the calculation of the aggregate of all Restricted
Investments made since July 1, 1992 shall exclude (A) the amount of any return
of capital representing a loan or other advance and the fair market value of the
consideration received by the Company or by any Restricted Subsidiary after the
date of this Indenture from the sale or other disposition of any Restricted
Investment, not to exceed in any such case the amount of such Restricted
Investment determined as of the date of its making; provided, however, that no
-------- -------
such return of capital or consideration so received shall reduce the amount of
any such calculation to the extent such consideration has been reflected in the
calculation of Consolidated Net Income and (B) the Company's investment in any
Unrestricted Subsidiary designated in accordance with this Indenture as a
Restricted Subsidiary after the date of this Indenture, not to exceed in any
event the amount of Restricted Investments (measured as of the date of the
making of each thereof) made in such Unrestricted Subsidiary by the Company and
the Restricted Subsidiaries subsequent to July 1, 1992 to and including the date
of such designation. The fair market value of any consideration received by the
Company or by any
<PAGE>
-45-
Restricted Subsidiary upon any sale or other disposition of any Restricted
Investment shall be determined by the Board of Directors, whose reasonable
determination shall be conclusive.
SECTION 4.18. Limitation on Sale or Issuance
of Stock of Subsidiaries.
------------------------------
The Company shall not sell, and shall not permit any Subsidiary to
issue or sell, directly or indirectly, less than 100% of the Capital Stock of a
Restricted Subsidiary (other than to the Company or a wholly-owned Restricted
Subsidiary). Any issuance or sale permitted hereunder shall be treated as an
"Asset Disposition" for purposes of Section 4.05.
SECTION 4.19. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, create, incur, assume, affirm or suffer to exist any Lien of any
kind upon any of their respective assets or properties, or on any income or
profits therefrom, now owned or hereafter acquired, without making effective
provision whereby all of the Securities shall be directly secured equally and
ratably with (and, in the case of any Indebtedness which is subordinate to the
Securities, prior to) the obligation or liability secured by such Lien, except
(i) Permitted Liens; and (ii) Liens granted by a Restricted Subsidiary on its
assets in respect of Indebtedness of such Subsidiary incurred in accordance with
this Indenture if such Indebtedness is not a direct or indirect guarantee or
other assumption of Indebtedness of the Company that ranks pari passu with or is
---- -----
subordinated to the Securities, or any guarantee in respect thereof.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Restriction on Mergers and
Consolidations and Sales of Assets.
----------------------------------
The Company (a) shall not consolidate with or merge with or into
Manville or any of its Affiliates that are not Subsidiaries of the Company
(whether or not the Company shall be the surviving corporation), or sell,
assign, transfer or lease all or substantially all of its properties and assets
as an entirety or substantially as an entirety to Manville or any of its
Affiliates that are not Subsidiaries of the Company, in
<PAGE>
-46-
one transaction or a series of related transactions; and (b) shall not
consolidate with, merge with or into any other corporation (whether or not the
Company shall be the surviving corporation), or sell, assign, transfer or lease
all or substantially all of its properties and assets as an entirety or
substantially as an entirety to any other Person or group of affiliated Persons,
in one transaction or a series of related transactions, unless, solely in the
case of this clause (b):
(1) either the Company shall be the surviving Person or the Person (if
other than the Company) formed by such consolidation or with which or into
which the Company is merged or the Person (or group of affiliated Persons)
to which all or substantially all the properties and assets of the Company
are sold, assigned, transferred or leased is a corporation organized under
the laws of the United States or any State thereof or the District of
Columbia and expressly assumes, by indentures supplemental to this
Indenture, all the obligations of the Company under the Securities and this
Indenture;
(2) immediately after giving effect to such transaction, no Event of
Default, and no Default, with respect to the Securities shall have occurred
and be continuing;
(3) immediately after giving effect to such transaction on a pro forma
--- -----
basis, but prior to any purchase accounting adjustments resulting from the
transaction, the Consolidated Net Worth of the Company (or of the
surviving, consolidated or transferee entity if the Company is not
continuing, treating such entity as the Company for purposes of determining
Consolidated Net Worth) shall be at least equal to the Consolidated Net
Worth of the Company immediately before such transaction;
(4) immediately after giving effect to such transaction the Company
(or the surviving, consolidated or transferee entity if the Company is not
continuing, but treating such entity as the Company for purposes of making
such determination) would be permitted to incur an additional dollar of
Indebtedness (not constituting Permitted Indebtedness) under clause (2) of
Section 4.04; and
(5) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment,
<PAGE>
-47-
transfer or lease and such supplemental indenture comply with this
Indenture.
If, upon any consolidation or merger, or upon any sale, assignment,
transfer or lease, as provided in this Section 5.01, any material property of
the Company or any Restricted Subsidiary or any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary owned immediately prior thereto would
thereupon become subject to any Lien securing any Indebtedness for borrowed
money of, or guaranteed by, such other corporation or Person (other than any
Permitted Lien), the Company, prior to such consolidation, merger, sale,
assignment, transfer or lease, will secure the due and punctual payment of the
principal of, and premium, if any, and interest on the Securities then
outstanding (together with, if the Company shall so determine, any other
Indebtedness of, or guaranteed by, the Company or any Restricted Subsidiary then
existing or thereafter created) equally and ratably with (or, at the option of
the Company, prior to) the Indebtedness secured by such Lien.
SECTION 5.02. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger, or any sale, assignment, transfer or
lease of all or substantially all of the assets of the Company in accordance
with Section 5.01, the surviving Person shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such surviving Person had been named as the Company
herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Securities when the same
becomes due and payable and the Default continues for a period of 30 days,
whether or not such payment is prohibited by Article Eight hereof;
(2) the Company fails to pay the principal of (or premium, if any, on)
any Securities when the same becomes due and payable at maturity, upon
redemption, upon
<PAGE>
-48-
repurchase pursuant to an Asset Disposition Offer or Change of Control
Offer or otherwise, whether or not such payment is prohibited by Article
Eight hereof;
(3) the Company fails to observe or perform any other covenant,
warranty or agreement contained in the Securities or this Indenture, and
the Default continues for the period and after the notice specified in the
last paragraph of this Section 6.01;
(4) a default or defaults under any mortgage, bond, debenture, note or
other evidence of Indebtedness in excess of $20,000,000 in the aggregate of
the Company and/or any of its Restricted Subsidiaries, whether such
Indebtedness exists on the date of this Indenture or shall hereafter be
created, which default involves the failure to pay principal on
Indebtedness at the final maturity thereof or has resulted in the
declaration of acceleration thereunder; or
(5) there shall have been entered in courts of competent jurisdiction
judgments or decrees involving an aggregate liability of $10,000,000 or
more rendered against the Company and/or any of its Restricted
Subsidiaries, and such judgments or decrees are not vacated, discharged,
satisfied or stayed within 60 days after the date of the entering of such
judgments or decrees;
(6) the Company or any Restricted Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
<PAGE>
-49-
(A) is for relief against the Company or any Restricted
Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Restricted
Subsidiary or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any Restricted
Subsidiary,
and in each case the order or decree remains unstayed and in effect for 30
days; provided, however, that if the entry of such order or decree is
-------- -------
appealed and dismissed on appeal then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed to have been
cured.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
A Default under clause (3) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal amount
of the outstanding Securities notify the Company and the Trustee, of the Default
in writing and the Company does not cure the Default within 30 days after
receipt of the notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default." Such notice shall
be given by the Trustee if so requested by the Holders of at least 25% in
principal amount of the Securities then outstanding. When a Default is cured,
it ceases.
SECTION 6.02. Acceleration.
------------
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (6) or (7) of Section 6.01) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities by notice in writing to the Company (and to
the Trustee if given by the Holders) may declare the unpaid principal of (and
premium, if any) and accrued interest to the date of acceleration on all the
outstanding Securities to be due and payable immediately and, upon any such
declaration,
<PAGE>
-50-
such principal amount (and premium, if any) and accrued interest shall become
immediately due and payable.
If an Event of Default specified in clause (6) or (7) of Section 6.01
occurs all unpaid principal of and accrued interest on the outstanding
Securities shall ipso facto become immediately due and payable without any
---- -----
declaration or other act on the part of the Trustee or any Holder thereof.
Any such declaration with respect to the Securities may be annulled
and past Events of Default and Defaults (except, unless theretofore cured, an
Event of Default or a Default in payment of principal of (and premium, if any)
or interest on the Securities) may be waived by the Holders of a majority of the
principal amount of the outstanding Securities in accordance with Section 6.04.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
maturing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
----------------------
Subject to Sections 2.09, 6.07 and 10.02, the Holders of a majority in
aggregate principal amount of the outstanding Securities by written notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (1) and (2) of Section 6.01. The Company shall
deliver to the Trustee an Officers' Certificate stating that the requisite
percentage of Holders have consented to such waiver and attaching copies of such
consents. When a Default or Event of Default is so waived, it is cured.
<PAGE>
-51-
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another Securityholder, or
that may involve the Trustee in personal liability; provided that the Trustee
--------
may take any other action deemed proper by the Trustee which is not inconsistent
with such direction. In the event the Trustee takes any action or follows any
direction pursuant to this Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue a remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities (excluding Affiliates of the Company)
do not give the Trustee a direction which, in the opinion of the Trustee,
is inconsistent with the request.
<PAGE>
-52-
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on the Security, on
or after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of interest or principal specified
in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
--- -----
Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses,
<PAGE>
-53-
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Securityholder
in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article
6, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 shall not apply to a suit by the Trustee, a suit by Holders of
more than 10% in aggregate principal amount of the outstanding Securities, or to
any suit instituted by any Holder for the enforcement or the payment of the
principal or
<PAGE>
-54-
interest on any Securities on or after the respective due dates expressed in the
Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default actually known to the Trustee has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(1) The Trustee need perform only those duties as are specifically set
forth herein and no others and no implied covenants or obligations shall be
read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions and such
other documents delivered to it pursuant to Section 10.04 hereof furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
<PAGE>
-55-
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity satisfactory to it in
its sole discretion against such risk, liability, loss, fee or expense which
might be incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and an Opinion of Counsel, which shall conform to the
provisions of Section 11.05. The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through attorneys and agents of its selection
and shall not be responsible for the misconduct or negligence of any agent
or attorney (other than an agent who is an employee of the Trustee)
appointed with due care.
<PAGE>
-56-
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders pursuant to this Indenture, unless such
Securithyholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same
<PAGE>
-57-
with like rights. However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
------------------
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Securityholder notice of the Default or Event of Default within 30 days after
receipt of such notice. Except in the case of a Default or an Event of Default
in payment of principal of or interest on any Security, the Trustee may withhold
the notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S) 313(a), within 60 days after each June 15
beginning with the June 15 following the date of this Indenture, the Trustee
shall mail to each Securityholder a report dated as of such June 15 that
complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)
313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall
<PAGE>
-58-
from time to time agree in writing for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including fees, disbursements and expenses
of its agents and counsel) incurred or made by it in addition to the
compensation for its services except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee for, and hold it harmless
against any and all loss, damage, claims, liability or expense, including taxes
(other than taxes based upon, measured by or determined by the income of the
Trustee), arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent that
such loss, damage, claim, liability or expense is due to its own negligence or
bad faith. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. However, the failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee shall
cooperate in the defense (and may employ its own counsel) at the Company's
expense. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of the violation of this Indenture by the Trustee.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities against all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses (including the
reasonable fees and
<PAGE>
-59-
expenses of its agents and counsel) and the compensation for the services shall
be preferred over the status of the Holders in a proceeding under any Bankruptcy
Law and are intended to constitute expenses of administration under any
Bankruptcy Law. The Company's obligations under this Section 7.07 and any claim
arising hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article Eight and any
rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's consent. The Company may remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under
<PAGE>
-60-
this Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee shall have
a combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. If the Trustee has or shall
acquire any "conflicting interest" within the meaning of TIA (S) 310(b), the
Trustee and the Company shall comply with the provisions of TIA (S) 310(b). If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 7.11. Preferential Collection of Claims
Against Company.
---------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee
<PAGE>
-61-
who has resigned or been removed shall be subject to TIA (S) 311(a) to the
extent indicated therein.
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Debt.
--------------------------------------
The Company covenants and agrees, and the Trustee and each Holder of
the Securities by his acceptance thereof likewise covenant and agree, that all
Securities shall be issued subject to the provisions of this Article; and each
person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of and interest on the Securities by the Company shall, to the extent
and in the manner set forth in this Article, be subordinated and junior in right
of payment to the prior payment in full of all amounts payable under Senior
Indebtedness (including any interest accruing subsequent to an event specified
in clause (6) or (7) of Section 6.01 to the extent that such interest is an
allowed claim enforceable against the debtor in a bankruptcy case under Title 11
of the United States Code).
SECTION 8.02. No Payment on Securities in
Certain Circumstances.
---------------------------
(a) No direct or indirect payment by or on behalf of the Company of
principal of or interest on the Securities whether pursuant to the terms of the
Securities or upon acceleration, on an Asset Disposition Offer, a Change of
Control Offer or otherwise shall be made if, at the time of such payment, there
exists a default in the payment of all or any portion of the obligations on any
Senior Indebtedness (and the Trustee has received written notice thereof), and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Senior Indebtedness. In
addition, during the continuance of any non-payment default or event of default
with respect to Senior Indebtedness in an aggregate principal amount of at least
$15 million pursuant to which the maturity thereof may be accelerated, and upon
receipt by the Trustee of written notice from the holders of such Senior
Indebtedness, then, unless and until such default or event of default has been
cured or waived or has ceased to exist, no payment or distribution shall be made
by or on behalf of the Company on account of or with respect to
<PAGE>
-62-
the Securities, except from those funds held in trust for the benefit of the
Holders of any Securities to such Holders, during a period (a "Payment Blockage
Period") commencing on the date of receipt of such notice by the Trustee and
ending 179 days thereafter.
Notwithstanding anything herein to the contrary, (x) in no event shall
a Payment Blockage Period extend beyond 179 days from the date the payment on
the Securities was due and (y) there must be 180 days in any 365-day period
during which no Payment Blockage Period is in effect. Not more than one Payment
Blockage Period may be commenced with respect to the Securities during any
period of 365 consecutive days. No default or event of default that existed or
was continuing on the date of commencement of any Payment Blockage Period with
respect to the Senior Indebtedness initiating such Payment Blockage Period may
be, or be made, the basis for the commencement of any Payment Blockage by the
holders of such Senior Indebtedness, whether or not within a period of 365
consecutive days, unless such default or event of default has been cured or
waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 8.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that, upon notice from
the Trustee to the holders of Senior Indebtedness that such prohibited payment
has been made, the holders of the Senior Indebtedness (or their representative
or representatives or a trustee) notify the Trustee in writing of the amounts
then due and owing on the Senior Indebtedness, if any, and only the amounts
specified in such notice to the Trustee shall be paid to the holders of Senior
Indebtedness.
SECTION 8.03. Payment Over of Proceeds Upon Dissolution, etc.
----------------------------------------------
(a) Upon any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, upon
any dissolution or winding-up or total or partial liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due
<PAGE>
-63-
or to become due with respect to Senior Indebtedness (including any interest
accruing subsequent to an event of bankruptcy to the extent that such interest
is an allowed claim enforceable against the debtor under the United States
Bankruptcy Code) shall first be paid in full, or payment provided for, before
the Holders of the Securities or the Trustee on behalf of such Holders shall be
entitled to receive any payment by the Company of the principal of or interest
on the Securities, or any payment to acquire any of the Securities for cash,
property or securities, or any distribution with respect to the Securities of
any cash, property or securities. Before any payment may be made by, or on
behalf of, the Company of the principal of or interest on the Securities upon
any such dissolution or winding-up or liquidation or reorganization, any payment
or distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Securities
or the Trustee on their behalf would be entitled, but for the subordination
provisions of this Indenture, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness (pro
---
rata to such holders on the basis of the respective amounts of Senior
- - ----
Indebtedness held by such holders) or their representatives or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities, shall be received by the Trustee or any Holder of Securities at a
time when such payment or distribution is prohibited by Section 8.03(a) and
before all obligations in respect of Senior Indebtedness are paid in full, or
payment provided for, such payment or distribution shall be received and held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
--- ----
amounts of Senior Indebtedness held by such holders) or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment
<PAGE>
-64-
of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has
been paid in full, or payment provided for, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Indebtedness.
(c) For purposes of this Section, the words "cash, property or
securities" shall not be deemed to include, so long as the effect of these
clauses (x) and (y) is not to cause the Securities to be treated in any case or
proceeding or similar event described in this Section as part of the same class
of claims as the Senior Indebtedness or any class of claims on a parity with or
senior to the Senior Indebtedness for any payment or distribution, (x) any
payment or distribution of securities of the Company or any other corporation
authorized by an order or decree giving effect, and stating in such order or
decree that effect is given, to the subordination of the Securities to the
Senior Indebtedness, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy, insolvency or other
similar law, or (y) securities of the Company or any other corporation provided
for by a plan of reorganization or readjustment which are subordinated, to at
least the same extent as the Securities, to the payment of all Senior
Indebtedness then outstanding; provided that (i) if a new corporation results
--------
from such reorganization or readjustment, such corporation assumes the Senior
Indebtedness and (ii) the rights of the holders of the Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of its property as an entirety,
or substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution, winding-
up, liquidation or reorganization for the purposes of this Section if such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Five.
SECTION 8.04. Subrogation.
-----------
Upon the payment in full of all Senior Indebtedness, or provision for
payment, the Holders of the Securities shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company made on such Senior Indebtedness
<PAGE>
-65-
until the principal of and interest on the Securities shall be paid in full;
and, for the purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee on their behalf would be entitled
except for the provisions of this Article, and no payment over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by Holders of
the Securities or the Trustee on their behalf shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness. It is understood that the provisions of this Article are
and are intended solely for the purpose of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article shall
have been applied, pursuant to the provisions of this Article, to the payment of
all amounts payable under Senior Indebtedness, then and in such case, the
Holders of the Securities shall be entitled to receive from the holders of such
Senior Indebtedness any payments or distributions received by such holders of
Senior Indebtedness in excess of the amount required to make payment in full, or
provision for payment, of such Senior Indebtedness.
SECTION 8.05. Obligations of Company Unconditional.
------------------------------------
Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Company and the
Holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Holder of any Security or the Trustee on their behalf from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of the Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
<PAGE>
-66-
Without limiting the generality of the foregoing, nothing contained in
this Article shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Indebtedness then due
and payable shall first be paid in full before the Holders of the Securities or
the Trustee are entitled to receive any direct or indirect payment from the
Company of principal of or interest on the Securities.
SECTION 8.06. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities pursuant to the provisions of this
Article. The Trustee shall not be charged with knowledge of the existence of any
default or event of default with respect to any Senior Indebtedness or of any
other facts which would prohibit the making of any payment to or by the Trustee
unless and until the Trustee shall have received notice in writing at its
Corporate Trust Office to that effect signed by an Officer of the Company, or by
a holder of Senior Indebtedness or trustee or agent therefor; and prior to the
receipt of any such written notice, the Trustee shall, subject to Article Seven,
be entitled to assume that no such facts exist; provided that if the Trustee
shall not have received the notice provided for in this Section at least three
Business Days prior to the date upon which by the terms of this Indenture any
moneys shall become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Security), then, regardless of
anything herein to the contrary, the Trustee shall have full power and authority
to receive any moneys from the Company and to apply the same to the purpose for
which they were received, and shall not be affected by any notice to the
contrary which may be received by it on or after such prior date. Nothing
contained in this Section 8.06 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by Section 8.03. The Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Indebtedness (or a
trustee on behalf of, or other representative of, such holder) to establish that
such notice has been given by a holder of such Senior Indebtedness or a trustee
or representative on behalf of any such holder.
<PAGE>
-67-
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 8.07. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets or securities referred to
in this Article, the Trustee and the Holders of the Securities shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which bankruptcy, dissolution, winding-up, liquidation or reorganization
proceedings are pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, delivered to the Trustee or to the Holders of the Securities for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 8.08. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness which may at
any time be held by it in its individual or any other capacity to the same
extent as any other holder of Senior Indebtedness, and nothing in this Indenture
shall deprive the Trustee or any Paying Agent of any of its rights as such
holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
<PAGE>
-68-
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness (except as provided in
Section 8.03(b)).
SECTION 8.09. Subordination Rights Not Impaired
by Acts or Omissions of the Company
or Holders of Senior Indebtedness.
-----------------------------------
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The provisions of this Article are intended to be for the benefit of, and shall
be enforceable directly by, the holders of Senior Indebtedness.
SECTION 8.10. Securityholders Authorize Trustee To
Effectuate Subordination of Securities.
--------------------------------------
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Company, the filing of a claim for the unpaid balance of its or his
Securities in the form required in those proceedings.
SECTION 8.11. This Article Not To Prevent Events of Default.
---------------------------------------------
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article shall not be
construed as preventing the occurrence of an Event of Default.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
-------------------------------------
Nothing in this Article shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
<PAGE>
-69-
SECTION 8.13. No Waiver of Subordination Provisions.
-------------------------------------
Without in any way limiting the generality of Section 8.09, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the Securities,
without incurring responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness and (d) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 8.14. Payments May Be Paid Prior to Dissolution.
-----------------------------------------
Nothing contained in this Article or elsewhere in this Indenture shall
prevent (i) the Company, except under the conditions described in Section 8.02,
from making payments of principal of and interest on the Securities, or from
depositing with the Trustee any moneys for such payments, or (ii) the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of and interest on the Securities, to the
holders entitled thereto unless at least three Business Days prior to the date
upon which such payment becomes due and payable, the Trustee shall have received
the written notice provided for in Section 8.02(b) or in Section 8.06. The
Company shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Company.
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations.
------------------------------------
Subject to the provisions of Article Eight, the Company may terminate
its substantive obligations in respect of the Securities by delivering all
outstanding Securities to the
<PAGE>
-70-
Trustee for cancellation and paying all sums payable by it on account of
principal of and interest on all Securities or otherwise. In addition to the
foregoing, the Company may terminate its substantive obligations in respect of
the Securities (except for its obligations to pay the principal of (and premium,
if any, on) and interest on the Securities) by (i) depositing with the Trustee,
under the terms of an irrevocable trust agreement, money or direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged ("United States Government
Obligations") sufficient (without reinvestment) to pay all remaining
indebtedness on the Securities, (ii) delivering to the Trustee either an Opinion
of Counsel or a ruling directed to the Trustee from the Internal Revenue Service
to the effect that the Holders of the Securities will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
termination of obligations, (iii) delivering to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
paragraph will not result in any of the Company, the Trustee or the trust
created by the Company's deposit of funds pursuant to this provision becoming or
being deemed to be an "investment company" under the Investment Company Act of
1940, as amended, and (iv) delivering to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating compliance with all
conditions precedent provided for herein. In addition, subject to the
provisions of Article Eight with respect to the creation of the defeasance trust
provided for in the following clause (i), the Company may terminate all of its
substantive obligations in respect of the Securities (including its obligations
to pay the principal of and interest on the Securities) by (i) depositing with
the Trustee, under the terms of an irrevocable trust agreement, money or United
States Government Obligations sufficient (without reinvestment) to pay all
remaining indebtedness on the Securities, (ii) delivering to the Trustee either
a ruling directed to the Trustee from the Internal Revenue Service to the effect
that the Holders of the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and termination of
obligations or an Opinion of Counsel based upon such a ruling addressed to the
Trustee or a change in the applicable Federal tax law since the date of this
Indenture to such effect, (iii) delivering to the Trustee an Opinion of Counsel
to the effect that the Company's exercise of its option under this paragraph
will not result in any of the Company, the Trustee or the trust created by the
Company's deposit of funds pursuant to this provision becoming or being deemed
to be an "investment company" under the
<PAGE>
-71-
Investment Company Act of 1940, as amended, and (iv) delivering to the Trustee
an Officers' Certificate and an Opinion of Counsel each stating compliance with
all conditions precedent provided for herein.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 4.01 (but not with respect to termination
of substantive obligations pursuant to the third sentence of the foregoing
paragraph), 4.02, 7.07, 7.08, 9.03 and 9.04 shall survive until the Securities
are no longer outstanding. Thereafter the Company's obligations in Sections
7.07, 9.03 and 9.04 shall survive.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
SECTION 9.02. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
SECTION 9.03. Repayment to Company.
--------------------
Subject to Sections 7.07 and 9.01, the Trustee shall promptly pay to
the Company upon written request any excess money held by it at any time. The
Trustee shall pay to the Company upon written request any money held by it for
the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
- - -------- -------
may at the expense of the Company cause to be published once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Securityholders
entitled to money must look to the Company for payment as general creditors
unless an applicable abandoned property law
<PAGE>
-72-
designates another person and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.
SECTION 9.04. Reinstatement.
-------------
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 9.01 until
such time as the Trustee is permitted to apply all such money or United States
Government Obligations in accordance with Section 9.01; provided, however, that
-------- -------
if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or United States Government Obligations held by the
Trustee.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
--------------------------
The Company, when authorized by a resolution of its Board of
Directors, and the Trustee may amend or supplement this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article 5; or
(3) to make any change that does not materially and adversely affect
the rights of any Securityholder.
SECTION 10.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Company, when authorized by a resolution
of its Board of Directors, and the Trustee may amend or supplement this
Indenture or the Securities with the written consent of the Holders of at least
a majority in principal amount of the outstanding Securities. Subject to
Section
<PAGE>
-73-
6.07, the Holders of a majority in principal amount of the outstanding
Securities may waive compliance by the Company with any provision of this
Indenture or the Securities. However, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) change the Stated Maturity of the principal of or interest on any
Security after the optional redemption or repurchase provisions of the
Security and this Indenture in a manner adverse to the holders of the
Securities or reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate or extend the time for payment of interest on any
Security;
(3) modify any scheduled payments of principal or interest or alter
the ranking of the Securities; or
(4) waive a default in the payment of the principal of, interest on,
or redemption payment with respect to, any Security.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 10.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that
<PAGE>
-74-
Security that evidences the same debt as the consenting Holder's Security, even
if notation of the consent is not made on any Security. However, any such Holder
or subsequent Holder may revoke the consent as to his Security or portion of a
Security. Such revocation shall be effective only if the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (4) of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06. Trustee To Sign Amendments, etc.
-------------------------------
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel
<PAGE>
-75-
stating that the execution of any amendment, supplement or waiver authorized
pursuant to this Article Ten is authorized or permitted by this Indenture and
that such amendment, supplement or waiver constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms
(subject to customary exceptions). The Trustee may, but shall not be obligated
to, execute any such amendment, supplement or waiver which affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise. In signing
any amendment, supplement or waiver, the Trustee shall be entitled to receive an
indemnity satisfactory to it in its sole discretion.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 11.02. Notices.
-------
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
if to the Company:
Riverwood International Corporation
3350 Cumberland Circle, #1600
Atlanta, Georgia 30339
Attention: Senior Vice President-Finance
Facsimile: (404) 644-2923
Telephone: (404) 644-3000
<PAGE>
-76-
with a copy to:
Manville Corporation
717 17th Street
Denver, Colorado 80202
Attention: Treasurer
Facsimile: (303) 978-3103
Telephone: (303) 978-2000
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporation Trust Department
Facsimile: (212) 815-5915
Telephone: (212) 815-2745
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, first class, postage prepaid, to a
Securityholder, including any notice delivered in connection with TIA (S)
310(b), TIA (S) 313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to
him at his address as set forth on the registration books of the Registrar and
shall be sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA (S) 312(c).
<PAGE>
-77-
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent.
----------------------------------------
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance satisfactory
to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to
the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
-------- -------
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
<PAGE>
-78-
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.07. Governing Law.
-------------
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 11.08. No Recourse Against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability.
SECTION 11.09. Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.10. Counterpart Originals.
---------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.11. Severability.
------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SECTION 11.12. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
<PAGE>
-79-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the date first written above.
RIVERWOOD INTERNATIONAL
CORPORATION
[SEAL]
By: /s/ Frank R. McCauley
-------------------------
Name: Frank R. McCauley
Title: Sr. Vice President, Finance
Attest:/s/ Carol B. Tome
--------------------
THE BANK OF NEW YORK, as Trustee
[SEAL]
By:/s/ W. J. Cunningham
-------------------------
Name: W. J. Cunningham
Title: Vice President
Attest:/s/ Alfia Monastra
--------------------
<PAGE>
EXHIBIT A
RIVERWOOD INTERNATIONAL CORPORATION
No. $
10 3/8% SENIOR SUBORDINATED NOTE DUE 2004
Riverwood International Corporation promises to pay to or
registered assigns the principal sum of _____ Dollars on the Maturity Date
of June 30, 2004. Interest Payment Dates: June 30 and December 31
Record Dates: June 15 and December 15
IN WITNESS WHEREOF, RIVERWOOD INTERNATIONAL CORPORATION has caused
this instrument to be executed in its corporate name by a facsimile signature of
its _________________ and its ___________________ and has caused the facsimile
of its corporate seal to be affixed hereunto or imprinted hereon.
RIVERWOOD INTERNATIONAL
CORPORATION
By
-------------------------
Title:
[SEAL]
Dated: By
-------------------------
Title:
Certificate of Authentication:
This is one of the 10 3/8% Senior Subordinated Notes due 2004 referred
to in the within-mentioned Indenture.
By Date:
--------------------
Authorized Signatory
<PAGE>
A-2
(REVERSE OF SECURITY)
RIVERWOOD INTERNATIONAL CORPORATION
10 3/8% Senior Subordinated Note due 2004
1. Interest.
--------
Riverwood International Corporation, a Delaware corporation (the
"Company"), promises to pay interest at the rate of 10 3/8% per annum on the
principal amount of this Security semiannually commencing on December 31, 1994,
until the principal hereof is paid or made available for payment. Interest on
the Securities will accrue from and including the most recent date to which
interest has been paid or, if no interest has been paid, from and including June
30, 1994, through but excluding the date on which interest is paid. If an
Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
2. Method of Payment.
-----------------
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the person in whose name this Security is registered at the close of
business on the regular record date, which shall be the June 15 or December 15
(whether or not a Business Day) next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid to the
person in whose name this Security is registered at the close of business on a
special record date for the payment of such defaulted interest to be fixed by
the Company, notice of which shall be given to Holders not less than 15 days
prior to such special record date. Payment of the principal of and interest on
this Security will be made at the agency of the Company maintained for that
purpose in New York, New York and at any other office or agency maintained by
the Company for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal
<PAGE>
A-3
tender for payment of public and private debts; provided, however, that at the
-------- -------
option of the Company payment of interest may be made by check mailed to the
address of the person entitled thereto as such address shall appear in the
Security register.
3. Paying Agent and Registrar.
--------------------------
Initially, The Bank of New York (the "Trustee") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders of Securities. The Company or any of
its Subsidiaries may act as Registrar, co-Registrar or, except in certain
circumstances specified in the Indenture, Paying Agent.
4. Indenture.
---------
This Security is one of a duly authorized issue of Securities of the
Company, designated as its 10 3/8% Senior Subordinated Notes due 2004 (the
"Securities"), limited in aggregate principal amount to $100,000,000 (except for
Securities issued in substitution for destroyed, lost or stolen Securities)
issuable under an indenture dated as of June 30, 1994 (the "Indenture"), between
the Company and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by the Trust Indenture Act
of 1939 (the "Act") (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date
of the Indenture and the date the Indenture is qualified under the Act. The
Securities are subject to all such terms, and Holders of Securities are referred
to the Indenture and the Act for a statement of them.
The Securities are subordinated in right of payment to all Senior
Indebtedness of the Company to the extent and in the manner provided in the
Indenture. Each Holder of a Security by accepting a Security agrees to such
subordination, authorizes the Trustee to give effect to such subordination and
appoints the Trustee as attorney-in-fact for such purpose.
Capitalized terms contained in this Security to the extent not defined
herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
-------------------
The Securities are not redeemable prior to June 30, 1999. On and
after such date, the Securities may be redeemed at any time, in whole or in
part, at the option of the Company,
<PAGE>
A-4
at redemption prices (expressed as percentages of the principal amount) set
forth below, if redeemed during the 12-month period beginning June 30 of the
year indicated below, in each case together with interest accrued to the date
fixed for redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999............... 104.611%
2000............... 103.458%
2001............... 102.306%
2002............... 101.153%
2003............... 100.000%
</TABLE>
In addition, at any time prior to June 30, 1997, the Company may
redeem up to 35% of the principal amount of the Securities with the cash
proceeds received by the Company from one or more sales of Capital Stock of the
Company (other than Redeemable Stock), at any time or from time to time, at a
redemption price (expressed as a percentage of the principal amount) of 110.375%
of the principal amount thereof, plus accrued and unpaid interest to the date
fixed for redemption; provided, however, that at least $65 million in aggregate
-------- -------
principal amount of the Securities remains outstanding immediately after any
such redemption.
6. Purchase upon Occurrence of a
Change of Control Triggering Event.
----------------------------------
Within 30 days of the occurrence of a Change of Control Triggering
Event, the Company will offer to purchase the Securities, in whole and not in
part, at a purchase price equal to 100% of the principal amount thereof plus any
accrued and unpaid interest thereon.
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part. On and after the
redemption date, interest ceases to accrue on those Securities or portion of
them called for redemption.
<PAGE>
A-5
8. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not transfer or exchange any Securities selected for redemption.
9. Persons Deemed Owners.
---------------------
The registered Holder of a Security may be treated as the owner of it
for all purposes.
10. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee or Paying Agent will repay the funds to the Company at
its request. After such repayment Holders of Securities entitled to such funds
must look to the Company for payment unless an abandoned property law designates
another person.
11. Discharge Prior to Redemption or Maturity.
-----------------------------------------
The Indenture will be discharged and cancelled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
12. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the outstanding Securities, and any past default or
compliance with any provision may be waived with the consent of the Holders of a
majority in principal amount of the outstanding Securities. Without the consent
of any Holder, the Company and the Trustee may amend or supplement the Indenture
or the Securities to cure any ambiguity, defect or inconsistency, or to make any
change that does not materially and adversely affect the rights of any Holder of
Securities.
<PAGE>
A-6
13. Restrictive Covenants.
---------------------
The Securities are general obligations of the Company limited to the
aggregate principal amount of $100,000,000. The Indenture restricts the ability
of the Company or any of its Restricted Subsidiaries to permit any Liens to be
imposed on their assets, to make certain payments and investments, limits the
Indebtedness which the Company and its Restricted Subsidiaries may incur and
limits the terms on which the Company may engage in Asset Sales. The Company is
also obligated under certain circumstances to make an offer to purchase
Securities with the net cash proceeds of certain Asset Sales. The Company must
report quarterly to the Trustee on compliance with certain covenants in the
Indenture.
14. Successor Corporation.
---------------------
Pursuant to the Indenture, the ability of the Company to consolidate
with, merge with or into or transfer its assets to another person is conditioned
upon certain requirements, including certain financial requirements applicable
to the surviving Person.
15. Defaults and Remedies.
---------------------
An Event of Default consists of: a default for 30 days in payment of
interest on the Securities or default in payment of principal (or premium, if
any,) on the Securities due and payable at maturity, upon redemption upon
repurchase pursuant to an Asset Disposition Offer or a Change of Control Offer
or otherwise; failure by the Company to comply with any of its other agreements
in the Indenture or the Securities, in any such case 30 days after notice from
the Trustee or the holders of 25% in principal amount of the outstanding
Securities; a default or defaults under any mortgage, bond, debenture, note or
other evidence of Indebtedness in excess of $20,000,000 in the aggregate of the
Company and/or any of its Restricted Subsidiaries whether such Indebtedness
exists on the date of the Indenture or shall thereafter be created, which
default involves the failure to pay principal at the final maturity thereof or
has resulted in the declaration of acceleration thereunder; the entering against
the Company and/or any of its Restricted Subsidiaries of judgments or decrees
involving an aggregate liability of $10,000,000 or more if such judgments or
decrees are not vacated, discharged, satisfied or stayed within 60 days after
the date of the entering of such judgments or decrees; and certain events of
bankruptcy, insolvency or reorganization. If an Event of Default occurs and is
<PAGE>
A-7
continuing, the Trustee or the Holders of at least 25% in principal amount of
the outstanding Securities may declare all the outstanding Securities to be due
and payable immediately. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in principal amount of the
outstanding Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of a continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company is required to file
periodic reports with the Trustee as to the absence of Default and to notify the
Trustee promptly after it becomes aware of any Default.
16. Trustee Dealings with Company.
-----------------------------
The Trustee in its individual or any other capacity, may make loans
to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Trustee.
17. No Recourse Against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
18. Authentication.
--------------
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Indenture.
---------
Each Securityholder, by accepting a Security, agrees to be bound to
all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
<PAGE>
A-8
20. Abbreviations.
-------------
Customary abbreviations may be used in the name of Securityholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
<PAGE>
A-9
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Security to:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
--------------------------------------
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: Signed:
------------------ ----------------------
(Sign exactly as
name appears on the
other side of this
Security)
Signature Guarantee:
--------------------------------------------------------
<PAGE>
A-10
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Company,
check the box: [ ]
If you want to elect to have only part of this Security purchased by the
Company, state the amount: $
-----------
Date: Your signature:
------------ ---------------------
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guarantee:
----------------------------------------------------------
