SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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: 20473
FORT HOWARD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 39-1090992
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1919 South Broadway, Green Bay, Wisconsin 54304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: 414/435-8821
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common Stock $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [Not Applicable] The registrant did not have a class
of equity securities during the reporting period registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
The aggregate market value of voting stock held by nonaffiliates of the
Registrant, based on the closing bid price reported by the Nasdaq National
Market on March 17, 1995, was $494.3 million.
As of March 17, 1995 63,101,239 shares of $.01 par value Voting Common Stock
were outstanding.
PART I
ITEM 1. BUSINESS
GENERAL
Fort Howard Corporation (the "Company"), founded in 1919, is a leading
manufacturer, converter and marketer of sanitary tissue products, including
specialty dry form products, in the United States and the United Kingdom. Its
principal products, which are sold in the commercial (away-from-home) and
consumer (at-home) markets, include paper towels, bath tissue, table napkins,
wipers and boxed facial tissue manufactured from virtually 100% recycled
fibers. The Company produces and ships its products from manufacturing
facilities located in Wisconsin, Oklahoma, Georgia and the United Kingdom.
The Company believes that it is the leading producer of tissue products
in the domestic commercial market with a 26% market share and has focused
two-thirds of its capacity on this faster growing segment of the tissue
market. In the domestic consumer market, where the Company has a 9% market
share, its principal brands include Mardi Gras printed napkins (which hold the
leading domestic market position) and paper towels, Soft 'N Gentle bath and
facial tissue, So-Dri paper towels, Page paper towels, bath tissue and table
napkins, and Green Forest, the leading domestic line of environmentally
positioned, recycled tissue paper products. Fort Howard also manufactures and
distributes its products in the United Kingdom where it currently has the
fourth largest market share primarily in the consumer segment of the market.
From 1984 to 1994, the Company has doubled its production capacity by
constructing world-class, integrated, regional tissue mills which utilize the
Company's proprietary de-inking technology to produce quality tissue from a
broad range of wastepaper grades. These mills enable the Company to produce
low cost, quality tissue products because they: (i) include state-of-the-art
wastepaper de-inking and processing systems that process relatively low grades
of wastepaper to produce low cost fiber for making tissue paper; (ii) contain
eight of the eleven largest (270-inch) tissue paper machines in the world,
which significantly increase labor productivity; (iii) are geographically
located to minimize distribution costs; (iv) generate their own steam and
electrical power and (v) manufacture certain of their own process chemicals
and converting materials.
THE RECAPITALIZATION
On March 16, 1995 (the "Closing Date"), the Company completed the initial
components of a recapitalization plan (the "Recapitalization") to prepay or
redeem a substantial portion of its indebtedness in order to reduce the level
and overall cost of its debt, extend certain maturities, increase
shareholders' equity and enhance its access to capital markets.
The Recapitalization includes the following components:
(1) The offer and sale by the Company on the Closing Date of 25,000,000
shares of Common Stock at $12 per share in the United States and
internationally (the "Offering");
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(2) Entering into a bank credit agreement (the "New Bank Credit
Agreement") consisting of a $300 million revolving credit facility (the "1995
Revolving Credit Facility"), an $810 million term loan (the "1995 Term Loan
A") and a $330 million term loan (the "1995 Term Loan B" and, together with
the 1995 Term Loan A, the "New Term Loans"); and entering into a receivables
credit agreement consisting of a $60 million term loan (the "1995 Receivables
Facility");
(3) The application on the Closing Date of the net proceeds of the
Offering, together with borrowings under the New Term Loans and the 1995
Receivables Facility, to prepay or redeem all of the Company's indebtedness
outstanding under (a) the Company's Amended and Restated Credit Agreement,
dated as of October 24, 1988, as amended (the "1988 Bank Credit Agreement"),
(b) the Company's term loan agreement dated as of March 22, 1993 (the "1993
Term Loan Agreement;" the borrowings under the New Term Loans and the 1995
Receivables Facility and the prepayment of the 1988 Bank Credit Agreement and
the 1993 Term Loan Agreement with such borrowings are collectively referred to
as the "Bank Refinancing") and (c) all of the then outstanding Senior Secured
Floating Rate Notes (the "Senior Secured Notes") due 1997 through 2000 (the
"Senior Secured Note Redemption"); and
(4) The planned application on April 15, 1995, of borrowings under the
New Term Loans, the 1995 Receivables Facility and the 1995 Revolving Credit
Facility to redeem (a) all outstanding 14 1/8% Junior Subordinated Discount
Debentures (the "14 1/8% Debentures") due 2004 (the "14 1/8% Debenture
Redemption") and (b) all outstanding 12 5/8% Subordinated Debentures (the
"12 5/8% Debentures") due 2000 (the "12 5/8% Debenture Redemption"), at 102.5%
of the principal amount thereof. The Senior Secured Note Redemption, 12 5/8%
Debenture Redemption and 14 1/8% Debenture Redemption are collectively
referred to as the "1995 Debt Redemptions."
The sources and uses of funds required to complete the Recapitalization,
assuming that the 1995 Debt Redemptions also occurred on March 15, 1995, are
as follows (in millions):
AMOUNT
Sources of Funds: ------
Proceeds of the Offering.......................................... $ 300.0
1995 Term Loan A.................................................. 810.0
1995 Term Loan B.................................................. 330.0
1995 Revolving Credit Facility.................................... 209.3
1995 Receivables Facility......................................... 60.0
--------
Total Sources of Funds............................................ $1,709.3
========
Uses of Funds:
14 1/8% Debenture Redemption...................................... $ 566.9
Senior Secured Note Redemption.................................... 300.0
1988 Revolving Credit Facility Prepayment......................... 300.0
1988 Term Loan Prepayment......................................... 224.5
12 5/8% Debenture Redemption (including 2.5% redemption premium).. 149.5
1993 Term Loan Prepayment......................................... 100.0
Company Transaction Fees and Expenses(a).......................... 68.4
--------
Total Uses of Funds............................................... $1,709.3
========
------------
(a) Includes underwriters' commissions and other transaction fees and
expenses of the Recapitalization payable or reimbursable by the Company.
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DOMESTIC TISSUE OPERATIONS
Products
Commercial Products. Fort Howard's commercial tissue products include
folded and roll towels, bath and facial tissue, bulk and dispenser napkins,
disposable wipers, specialty printed merchandise and dispensers. Because
commercial market manufacturers offer similar product attributes to this value
conscious market, competition principally involves value pricing and service.
The Company constantly strives to grow in new or underdeveloped
subsegments of its commercial products business. With the Envision line, made
from 100% recycled paper, Fort Howard was the first company to position a line
of tissue paper products as made from recycled paper that meet or exceed U.S.
Environmental Protection Agency ("U.S. EPA") guidelines for post-consumer
wastepaper ("PCW") content of 5% to 40%. The Company believes Envision is the
market leader in the rapidly growing environmental segment of the commercial
market. Utilizing its advanced deinking technology, Fort Howard set the
standard dramatically higher for PCW content in commercial products by
increasing the minimum PCW content of its Envision line to 90% or higher and
by commissioning an outside audit of its internal controls which are
maintained to assure that Envision manufacturing processes yield the stated
minimum PCW content.
In addition, the Company also produces parent rolls for sale to
converters in international markets, including Latin America and the Middle
East.
Specialty Dry Form Products. In another growing product area, dry form
products (used to make baby wet wipes and a key component in feminine hygiene
products), the Company believes it is the largest domestic producer and one of
only 13 manufacturers in the world. Dry form production is a process that
converts soft, randomly laid fibers made from wood pulp into a sturdy and
absorbent pulp web using air instead of water to transfer the pulp. Synthetic
bonding agents are then sprayed on the pulp web, creating a sheet of fabric-
like paper. Dry form is principally sold in parent roll form to meet rigorous
specifications for large consumer product companies which convert it into
their branded products. The Company believes that it is the leading marketer
of dry form to companies in the domestic private label baby wipe market. The
growth rate for this business to date has exceeded the growth rate of the
tissue industry as a whole. In addition, the Company converts dry form paper
into premium wipers and dinner napkins for the commercial market.
Consumer Products. Fort Howard's consumer product growth strategy has
targeted the branded value and private label segments of the market, where the
Company enjoys a competitive advantage as a low cost producer.
The Company's value branded products such as Mardi Gras, Soft 'N Gentle
and Green Forest offer a high level of softness, absorbency and brightness at
substantial price savings. The appeal of Mardi Gras napkins and paper towels
is enhanced by their multi-color prints with changing patterns and special
seasonal designs. The attractiveness of the Mardi Gras designs and its value
positioning have enabled the Company to increase the Mardi Gras napkin market
share to approximately 14% in 1994, giving the Company the leading consumer
napkin share.
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Soft 'N Gentle bath tissue is the Company's largest selling consumer
brand. Soft 'N Gentle bath tissue is a quality product that targets retail
pricing at 20-25% below premium tissue products. The Company introduced the
Green Forest line of bath tissue, paper towels and napkins in 1990 on the 20th
anniversary of Earth Day. Environmentally oriented consumers have made the
Green Forest line the leading brand in the environmentally positioned segment.
The Company's Page bath tissue, paper towels and napkins and So-Dri paper
towels are targeted to the more price conscious shopper in the economy segment
of the consumer market. The retail prices of these products are typically
targeted at 25-30% below the premium brands.
Fort Howard is the leading tissue producer in the growing consumer
private label business with an estimated one-third market share in 1994. Many
national grocery chains have focused on the development of private label
tissue products to support the positioning of the chain with their shoppers as
well as to enhance margins. Since 1984, Fort Howard's private label business
has tripled and in 1994 represented approximately 40% of Fort Howard's
consumer tissue sales. Typically offered on a limited supplier basis, private
label products enable the Company to form close relationships with many of the
nation's fastest growing, leading grocery chains and mass merchandisers and
afford opportunities for Fort Howard's branded products with these same
customers.
Marketing
Approximately two-thirds of the Company's products are sold through
paper, institutional food and janitorial distributors into the commercial
market, with the balance being principally sold through brokers to major food
store chains, wholesale grocers and mass merchandisers for household (or
"consumer") use. These products are produced in a broad range of weights,
textures, sizes, colors and package configurations providing Fort Howard with
distinct advantages as a full-line manufacturer. The Company also creates and
prints logos, commercial messages and artistic designs on paper napkins and
place mats for commercial customers and party goods and specialty print
merchandisers. Most products are sold under Company-owned brand names, with
an increasing percentage of products being sold under private labels. In the
commercial segment the Company sells its products primarily under the
Fort Howard name. Principal brand names of consumer products include
Soft 'N Gentle, Mardi Gras, Green Forest, So-Dri and Page.
Commercial Market. Fort Howard's commercial sales force of over 200
salaried representatives combines broad geographical reach and frequency of
contact with the Company's major commercial customers, including large
distributors, national accounts and club warehouses. Because the commercial
sales force is dedicated to the sale of the Company's commercial tissue
products, the Company's sales representatives are able to devote substantial
time to developing end user demand, an important selling point for the
Company's distributors.
The Company is forging a growing number of strategic alliances with
customers. The Company believes Fort Howard offers customers a number of
important competitive advantages, including: (i) a profitable market growth
strategy; (ii) a broad line of tissue paper products that permits distributors
to limit the number of suppliers they use, increase inventory turns and
profits, and reduce warehouse requirements and (iii) significant end user
demand that makes Fort Howard an attractive product line.
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The continued development of the Company's national accounts business in
the foodservice, health care, lodging, buildings and industrial subsegments of
the commercial market has been an important factor in growing the Company's
leading commercial market share. The Company's national accounts sales team
focuses on meeting the special requirements of these large customers who
prefer to negotiate purchases directly with the Company. Such requirements
include, for example, strict sanitary production requirements, the ability to
service locations nationwide, EDI capabilities and superior on-time and
complete order shipping performance. Certain of these customers, particularly
the large, environmentally conscious fast food or other national chains,
increasingly require the ability to offer 100% recycled paper products.
The Company's newly organized club warehouse sales and marketing team
focuses on the special requirements of these customers, including unique
product specifications, packaging sizes and design, palletized distribution,
EDI capabilities, the ability to service locations nationwide, superior on-
time and complete order shipping performance and the ability to grow rapidly
to support new warehouse openings.
Consumer Market. Sales of the Company's consumer products are
principally made through a nationwide network of independent food brokers.
Regional sales managers focus on sustaining close relationships with brokers
and retailers by emphasizing Fort Howard's historic strengths--value,
competitive pricing and enhanced margins for retailers. The Company's
national accounts sales force focuses on mass merchandisers and on
implementing their "everyday low pricing" strategies. The private label sales
team deals with both national accounts and food brokers and their customers.
In contrast to tissue producers who emphasize marketing of their consumer
products through advertising and promotion to the end consumer, Fort Howard
incurs minimal advertising expense. Rather, the Company focuses its marketing
efforts for consumer products on trade promotion and incentive programs
targeted to grocery and mass merchandising retailers.
INTERNATIONAL TISSUE OPERATIONS
Products
When it was acquired by Fort Howard in 1982, Fort Sterling Limited
("Fort Stering") was an independent recycler of wastepaper into sanitary
tissue paper products sold principally under private labels into the consumer
market. Since 1982, Fort Sterling has funded significant investments in
recycling and other process technologies and equipment through cash flow from
operations and borrowings, doubled its U.K. market share, introduced premium
quality Nouvelle tissue paper products produced from 100% wastepaper to the
United Kingdom consumer market, expanded into the commercial market and
developed a strong local management team and workforce. Today, Fort Sterling
is one of the four fully integrated tissue companies in the United Kingdom.
For an analysis of net sales, operating income (loss) and identifiable
operating assets in the United States and the U.K., see Note 16 to the audited
consolidated financial statements.
Consumer Products. Unlike the Company's domestic tissue operations,
Fort Sterling's operations are directed toward the larger consumer segment of
the United Kingdom tissue market where over 85% of its sales are targeted. In
a market where private label represents slightly less than half of all tissue
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sales, the Company believes that Fort Sterling maintains a leading share of
the consumer private label market. Approximately two-thirds of Fort
Sterling's consumer business in 1994 was sold under private labels to large
grocers and convenience stores. Fort Sterling's principal brand is its
Nouvelle line of tissue paper products. The Nouvelle line is positioned as
100% recycled with the product attributes approaching those of the leading
United Kingdom premium brands.
Commercial Products. Fort Sterling's commercial market volume in the
United Kingdom has grown from less than 1% of the U.K. commercial market upon
its acquisition in 1982 to 5% in 1994.
Marketing
Fort Sterling maintains a direct sales force serving large and
independent grocers and mass merchandisers in the consumer market. Fort
Sterling has a commercial sales force which markets the Company's products via
a network of independent distributors. A separate national accounts sales
team targets commercial foodservice, health care and national industrial
accounts.
CAPITAL EXPENDITURES
The Company has invested heavily in its manufacturing operations. Capital
expenditures in the Company's tissue business were approximately $724 million
for the five year period ended December 31, 1994, $538 million of which was
incurred for capacity expansion projects. In addition, the Company's annual
capital spending program includes significant investments for the ongoing
modernization of each of its mills. For example, as new deinking technologies
and converting equipment are developed, the Company adds such technology and
equipment at each mill to maintain low cost structures.
A significant portion of the Company's capital budget since 1985 has been
invested in the Savannah mill, which was completed in 1991. Total
expenditures for the Savannah mill were $570 million. In 1993, the Company
completed an expansion of its Green Bay tissue mill, including the addition of
a new tissue paper machine and related environmental protection, pulp
processing, converting, and steam generation equipment. The newest tissue
paper machine at the Green Bay mill commenced production in August 1992.
Total expenditures for the expansion project were $180 million. In 1994, the
Company completed the installation of a fifth tissue paper machine,
environmental protection equipment and associated facilities at its Muskogee
tissue mill. Total expenditures for the expansion were approximately
$140 million.
In recent years, Fort Sterling has increased its capital spending to
expand significantly the productive capacity of its two older tissue paper
machines and to improve the capacity and productivity of its converting
operations. In 1993, Fort Sterling completed a $96 million expansion which
doubled the capacity of its paper mill. The expansion project added a
206-inch tissue paper machine and related deinking and pulp processing plants.
In September 1992, Fort Sterling acquired Stuart Edgar Limited ("Stuart
Edgar"), a converter of consumer tissue products. The acquisition
significantly increased Fort Sterling's converting capacity at a low capital
cost and provided Fort Sterling with a modern converting plant.
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RAW MATERIALS AND ENERGY SOURCES
The principal raw materials and supplies used to manufacture tissue
products are wastepaper (which is processed to reclaim fiber), chemicals,
corrugated shipping cases and packaging materials. Fort Howard has led the
industry in developing sanitary tissue paper products from recycled
wastepaper. Fort Howard uses 100% wastepaper for all but a limited number of
dry form and specialty products representing approximately 3% of its volume.
Currently, Fort Howard recycles over 1.4 million tons of wastepaper
annually into tissue products. The deinking technology employed by the
Company allows it to use a broad range of wastepaper grades, which effectively
increases both the number of sources and the quantity of wastepaper available
for its manufacturing process. The Company believes that its use of
wastepaper for substantially all of its fiber requirements gives it a cost
advantage over its competitors.
The Company has developed the largest network for obtaining deinking
grades of wastepaper in the domestic tissue industry. A large portion of its
wastepaper requirements is sourced through Harmon Assoc. Corp. ("Harmon"), the
Company's 100% owned wastepaper brokerage subsidiary. The remainder of the
Company's wastepaper requirements are sourced through an in-house wastepaper
purchasing group. As a wastepaper broker, Harmon can accept the total
wastepaper generation from a supplier whether or not all the wastepaper is
needed to meet Fort Howard's production requirements. This ability
effectively increases the sources of supply to Fort Howard. In addition,
Harmon's activities in export markets, as well as in grades not usually
purchased by Fort Howard, provide the Company with valuable intelligence on
trends in the worldwide wastepaper market. The Company also maintains
innovative curbside collection programs with several municipalities and enters
into contracts with large office complexes to effectively increase its sources
of wastepaper supply.
The price of wastepaper is affected by demand which is primarily
dependent upon deinking and recycling capacity levels in the paper industry
overall and by the price of market pulp. Prices for deinking grades of
wastepaper used by tissue producers increased sharply beginning in the third
quarter of 1994. Wastepaper prices for the grades of wastepaper used in Fort
Howard's products more than doubled from July 1994 to January 1995. Such
wastepaper prices may increase further because of increased demand resulting
from substantial additions of deinking and recycling capacity in the paper
industry which are expected to come on line during 1995 and 1996, increasing
market pulp prices and other factors. If the current trend in the Company's
wastepaper costs continues, there can be no assurance that the Company will be
able to recover increases in the cost of wastepaper through price increases
for its products. Further, a reduction in supply of wastepaper due to
increased demand or other factors could have an adverse effect on the
Company's business.
The Company manufactures some of the process chemicals required for the
Company's tissue production at each of its domestic mill locations. The
balance of its chemical requirements is purchased from outside sources. The
Company also purchases significant quantities of coal for generation of
electrical power and steam at all three of its domestic tissue mills. The
Company seeks to maintain inventories of wastepaper, other raw materials and
supplies which are adequate to meet its anticipated manufacturing needs.
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Each of the Company's domestic mills includes a coal-fired cogeneration
plant for the production of all its steam, which Fort Howard uses both in
manufacturing tissue and in generating virtually all its electricity. The
Savannah mill can also generate electrical power by burning natural gas in
combustion turbines. In recent years, the Company has installed fluidized bed
boilers to burn lower cost coal and petroleum coke efficiently and in
conformity with environmental standards. The primary sources of energy for
the Company's United Kingdom tissue facilities are purchased electrical power
and natural gas.
COMPETITION
All the markets in which the Company sells its products are extremely
competitive. The Company's tissue products compete directly with those of a
number of large diversified paper companies, including Chesapeake Corporation,
Georgia-Pacific Corporation, James River Corporation of Virginia,
Kimberly-Clark Corporation, Pope & Talbot, Inc., Scott Paper Company and the
Procter & Gamble Company, as well as regional manufacturers, including
converters of tissue into finished products who buy tissue directly from
tissue mills. Many of the Company's competitors are larger and more strongly
capitalized than the Company which may enable them to better withstand periods
of declining prices and adverse operating conditions in the tissue industry.
Although customers generally take into account price, quality, distribution
and service as factors when considering the purchase of products from the
Company, over the last four years, price has become a more important
competitive factor affecting tissue producers.
CUSTOMERS AND BACKLOG
The Company principally markets its products to customers in the United
States and, to a lesser extent, the United Kingdom, Mexico, Canada and the
Middle East. The business of the Company is not dependent on a single
customer. Currently, a substantial portion of the Company's sales are
pursuant to contracts which generally specify pricing over periods of three
months to one year.
The Company's products are manufactured with relatively short production
time from basic materials. Products marketed under the Company's trademarks
and stock items are sold from inventory. The backlog of customer orders is
not significant in relation to sales.
RESEARCH AND DEVELOPMENT
The Company maintains laboratory facilities with a permanent staff of
engineers, scientists and technicians who are responsible for improving
existing products, development of new products and processes, product quality,
process control and providing technical assistance in adhering to regulatory
standards. Continuing emphasis is being placed upon expanding the Company's
capability to deink a broader range of wastepaper grades, designing new
products, further automating manufacturing operations and developing improved
manufacturing and environmental processes.
PATENTS, LICENSES, TRADEMARKS AND TRADE NAMES
While the Company owns or is a licensee of a number of patents, its
operations and products are not materially dependent on any patent. The
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Company relies on trade secret protection for its proprietary deinking
technology which is not covered by patent. The Company's domestic tissue
products for at-home use are sold under the principal brand names
Soft 'N Gentle, Mardi Gras, Green Forest, So-Dri and Page. For the Company's
domestic commercial tissue business, principal brand names include Envision
and Generation II. All brand names are registered trademarks of the Company.
A portion of the Company's tissue products are sold under private labels or
brand names owned by customers.
EMPLOYEES
At December 31, 1994, the Company's world-wide employment was
approximately 6,800, of which 5,800 persons were employed in the United States
and 1,000 persons were employed in the United Kingdom. There is no union
representation at any of the Company's domestic facilities. The Company's
employees at its facilities in the United Kingdom are unionized and the union
contracts generally require annual renegotiation of employee wage awards. The
Company considers its relationship with its employees to be good.
ENVIRONMENTAL MATTERS
The Company is subject to substantial regulation by various federal,
state and local authorities in the U.S., and by national and local authorities
in the U.K. concerned with the impact of the environment on human health, the
limitation and control of emissions and discharges to the air and waters, the
quality of ambient air and bodies of water and the handling, use and disposal
of specified substances and solid waste at, among other locations, the
Company's process waste landfills.
Compliance with existing laws and regulations presently requires the
Company to incur substantial capital expenditures and operating costs. In
addition, environmental legislation and regulations and the interpretation and
enforcement thereof are expected to become increasingly stringent and to
further limit emission and discharge levels and to expand the scope of
regulation. As a result, it is likely that certain of the Company's operating
expenses will increase and that the Company will be required to make
additional capital expenditures. In addition, the operating flexibility of
the Company's manufacturing operations is likely to be adversely impacted.
Because other paper manufacturers are generally subject to similar
environmental restrictions, the Company believes that compliance with
environmental laws and regulations is not likely to have a material adverse
effect on its competitive position. It is possible, however, that such
compliance could have a material adverse effect on the Company's financial
condition and results of operations at some point in the future.
In 1994, the Company made capital expenditures of $9 million with respect
to pollution abatement and environmental compliance. Included in the 1994
capital expenditures was $4 million for pollution abatement equipment in
connection with completing expansion projects initiated in 1993 and prior
years. The Company expects to commit to approximately $12 million of capital
expenditures to maintain compliance with environmental control standards at
its facilities during 1995 and 1996. Included in the 1995-96 expected
expenditures is $1 million for pollution abatement equipment to be installed
in connection with constructing a coal-fired boiler at the Company's Savannah
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mill. Although some pollution abatement and solid waste disposal facilities
produce improvements in operating efficiency, most increase product costs
without enhancing capacity or operating efficiency. Because the impact of new
environmental laws and regulations and the implementation and enforcement of
existing laws and regulations cannot be determined with certainty at this
time, it is possible that there will be additional capital expenditures during
these years, including but not limited to those described below.
The U.S. EPA issued "Final Guidance" for basin-wide water quality
standards pursuant to the Great Lakes Water Quality Agreement between the U.S.
and Canada regarding the development of water quality standards for the Great
Lakes and their tributaries on March 13, 1995. Under the Final Guidance the
affected states will be required within two years to implement specific
regulations which are as protective as the provisions of the Final Guidance.
Dischargers would then have an additional period of up to five years in which
to comply with any new more stringent permit limits derived under the Final
Guidance. In its proposed form the guidance would have imposed limitations on
the Company's wastewater discharge from its Green Bay Mill into the Fox River
that as a practical matter would have prohibited the Company from discharging
any wastewater into the Fox River. Based upon that analysis, the Company
explored alternative technologies to enable it to discontinue all wastewater
discharge to the Fox River, if required, and developed cumulative capital
expenditure estimates which indicated approximately $65 million (which
includes $20 million of currently planned capital expenditures) over a several
year period.
The Company is reviewing the Final Guidance to determine the impact it
will have on the Company's operations. The Final Guidance appears to have
been modified to address concerns that the terms of the guidance in its
proposed form were unnecessarily complex, burdensome and environmentally
unjustified. The ultimate impact of the Final Guidance on the Company's
operations could vary depending upon several factors, including, among others:
(i) the form and substance of state laws or regulations implementing the Final
Guidance; (ii) delays or changes resulting from potential administrative and
judicial challenges to the guidance which might be filed and (iii) new
developments in control and process technology. The Company presently
believes that the cost of complying with the final guidance will not exceed
the amounts of its earlier estimates.
The U.S. EPA has proposed new air emission and revised wastewater
discharge standards for the pulp and paper industry which are commonly known
as the "Cluster Rules." The components of the Cluster Rules that deal with
wastewater discharges are expected to be finalized by late 1995 or early 1996.
If the final rules on wastewater discharges are substantially the same as the
proposed rules, the Company estimates that it will incur additional aggregate
capital expenditures of approximately $1.2 million.
Components of the currently proposed Cluster Rules that address air
emissions will have little impact on de-inking paper mills such as the
Company's mills. However, additional installments of the Cluster Rules,
expected to be proposed during 1996 with expected compliance deadlines as late
as the year 2000, are expected to specifically address chloroform and other
air emissions from deinking mills and likely will have a greater impact on the
Company. The Company is presently unable to estimate that impact since the
applicable rules have not been proposed and therefore no assurances can be
given as to whether the impact will be material to the Company.
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The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") imposes liability, without regard to fault or to the legality of
the original action, on certain classes of persons (referred to as potentially
responsible parties or PRPs) associated with a release or threat of a release
of hazardous substance into the environment. Financial responsibility for the
clean-up or other remediation of contaminated property or for natural resource
damages can extend to previously owned or used properties, waterways and
properties owned by third parties, as well as to properties currently owned
and used by the Company even if contamination is attributable entirely to
prior owners. The Company is involved in a voluntary investigation and
potential clean-up of the Lower Fox River and has been named a PRP for alleged
natural resource damages to the Fox River, both of which are discussed in
"Legal Proceedings" below. Except for the United States Department of
Interior, Fish and Wildlife Service ("FWS") assessment of the Fox River
described in "Legal Proceedings," the Company is not presently named as a PRP
at any CERCLA-related sites. However, there can be no certainty that the
Company will not be named as a PRP at any other sites in the future or that
the costs associated with additional sites would not be material to the
Company's financial condition or results of operations.
Based upon currently available information and analysis, the Company
recorded a $20 million charge in the fourth quarter of 1994 for estimated or
anticipated liabilities and legal and consulting costs relating to
environmental matters arising from past operations. The Company expects these
costs to be incurred over an extended number of years. While the charge
reflects the Company's current estimates of the costs of these environmental
matters, there can be no assurance that the amount accrued will be adequate.
ITEM 2. PROPERTIES
Fort Howard produces its domestic tissue products at three facilities:
its original facility in Green Bay, Wisconsin; its Muskogee, Oklahoma mill
constructed as a greenfield site which commenced papermaking production in
1978; and its greenfield mill near Savannah, Georgia which commenced
production in 1987. Each of these facilities is a world-class, fully
integrated tissue mill that can de-ink and process fiber from low cost
wastepaper to provide virtually all of the mill's tissue fiber. In addition,
each mill contains at least two 270-inch tissue paper machines, is
geographically located to minimize distribution costs to its regional markets,
produces all its steam and electrical power, manufactures some of the
chemicals used in whitening tissue fiber and some of its converting materials,
and converts, prints and packages Fort Howard's tissue products.
Fort Howard has installed eight of the eleven largest (270-inch) tissue
paper machines in the world which provide long-term productivity advantages.
Approximately 90% of Fort Howard's domestic production comes from tissue paper
machines capable of making 50,000 tons or more annually. Approximately 50% of
Fort Howard's papermaking capacity came on-line during the last 10 years.
With each new capacity expansion, Fort Howard installed new, world-class
supporting equipment consisting of large scale wastepaper processing and
cleaning systems and converting equipment that provide further productivity
advantages.
- 12 -
In Green Bay, Wisconsin, the Company operates nine tissue paper machines,
including two world-class 270-inch tissue paper machines completed in 1984 and
1992. In addition, the Green Bay mill contains two dry form machines which
commenced operation in 1978 and 1989. Although the Green Bay mill is the
Company's original facility, having commenced production in 1920, it is well
maintained, includes virtually all of Fort Howard's latest technologies and
equipment and is cost competitive with the Company's newer facilities. The
Company's Muskogee, Oklahoma mill contains a new 270-inch tissue paper machine
which was added during the first quarter of 1994, and another 270-inch and
three 200-inch tissue paper machines which were installed between 1978 and
1985. Fort Howard's greenfield mill located near Savannah, Georgia contains
four 270-inch tissue paper machines that commenced production in 1987, 1988,
1989 and 1991.
Each of the Company's domestic mills also includes a coal-fired
cogeneration power plant capable of producing all of the mill's steam and
electricity, a modern de-inking and pulp processing plant that processes
virtually all of the mill's fiber requirements from wastepaper, a chemical
plant that produces high volume chemicals used in whitening fibers, high speed
converting equipment for cutting, folding, printing and packaging paper into
the Company's finished products and related facilities and warehousing. The
Muskogee mill also includes a polywrap manufacturing plant that processes
approximately one-half of the polywrap required by the Company's domestic
mills and the Green Bay mill includes a large machine shop that services all
the Company's domestic mills.
Fort Sterling currently operates three tissue paper machines and a
deinking and wastepaper processing plant at its Ramsbottom paper mill and
cuts, folds, prints and packages paper into finished tissue products at its
Bolton and Wigan converting facilities, all of which are located in Greater
Manchester, England.
Except for certain facilities and equipment constructed or acquired in
connection with sale and leaseback transactions pursuant to which the Company
continues to possess and operate such facilities and equipment, substantially
all the Company's manufacturing facilities and equipment are owned in fee.
The Company's domestic and United Kingdom tissue manufacturing facilities are
pledged as collateral under the terms of the Company's debt agreements. See
Note 8 to the audited consolidated financial statements.
The Green Bay, Muskogee, Savannah, and United Kingdom facilities
generally operate tissue paper machines at full capacity seven days per week,
except for downtime for routine maintenance and the temporary shut-downs of
one or two small tissue paper machines at the Green Bay mill. Converting
facilities are generally operated on a 3-shift, 5-day per week basis or a 7-
day per week schedule. Converting capacity could be expanded by working
additional hours and/or adding converting equipment.
ITEM 3. LEGAL PROCEEDINGS
On December 16, 1994, the Company received a Civil Investigative Demand
("CID") issued by the U.S. Department of Justice, Antitrust Division pursuant
to the Antitrust Civil Process Act, Title 15 of the United States Code. The
CID seeks documents and information as part of an Antitrust Division civil
investigation to determine whether there are agreements in restraint of trade
- 13 -
in connection with sales of sanitary paper products. The Company is
cooperating with the investigation.
Since July 1992, the Company has been participating with a coalition
consisting of industry, local government, state regulatory commission and
public interest members studying the nature and extent of PCB (polychlorinated
biphenyl) and other sediment contamination of the Lower Fox River in northeast
Wisconsin. The objective of the coalition is to identify, recommend and
implement cost effective remediation of contaminated deposits which can be
implemented on a voluntary basis. Based upon presently available information,
the Company believes that there are additional parties, some of which may have
substantial resources, who may in the future contribute to the remediation
effort. One of the current industry coalition members, in cooperation with the
Wisconsin Department of National Resources, is in the process of undertaking a
demonstration of river remediation techniques on the Lower Fox River to
remediate one sediment deposit located approximately 35 miles upstream from
the Company's Green Bay mill. The Company's participation in the studies
undertaken by the coalition is voluntary and its contributions to funding
those activities to date have not been significant. The Company's
participation in the coalition is not an admission of liability for any
portion of any remediation and the Company does not believe its participation
will prejudice any defenses available to the Company.
On June 20, 1994, the FWS, a federal natural resources trustee, informed
the Company that it had identified the Company and four other companies with
facilities located along the Lower Fox River as PRPs for purposes of natural
resource liability under CERCLA, commonly known as the "Superfund Act," and
the Federal Water Pollution Control Act arising from alleged releases of PCBs
to the Fox River and Green Bay system. The FWS alleges that natural resources
including endangered species, fish, birds and tribal lands or lands held by
the United States in trust for various tribes have been exposed to PCBs that
were released from facilities located along the Fox River. The FWS has stated
that it intends to undertake an assessment to determine and quantify the
nature and extent of injury to natural resources. The FWS has invited the
Company and the other four companies to participate in the development of the
type and scope of the assessment and in the performance of the assessment,
pursuant to federal regulations. It is anticipated that any assessment would
require considerable time to complete. Based upon presently available
information, the Company believes that there are additional parties, some of
which may have substantial resources, who may be identified as PRPs for
alleged natural resource damages.
On July 15, 1992, Region V of the U.S. EPA issued a Finding of Violation
to the Company concerning the No. 8 boiler at its Green Bay mill. The Finding
alleged violation of regulations issued by the U.S. EPA under the Clean Air
Act relating to New Source Performance Standards for Fossil Fuel Fired Steam
Generators. In response to an accompanying Request for Information, the
Company furnished certain information concerning the operation of the boiler.
The Company met with representatives of the U.S. EPA in August 1992 and
February 1993 to discuss the alleged violations. On January 11, 1994, the
U.S. EPA informally advised the Company that, due to its internal guidelines
that limit the authority of the agency to administratively resolve matters
that include alleged violations extending over a period of more than one year,
disposition of the Finding of Violation was being transferred to the U.S.
Department of Justice. The Company met with representatives of the U.S. EPA
and the U.S. Department of Justice in September 1994. On October 5, 1994, the
Company and the U.S. EPA, with concurrence from the U.S. Department of
- 14 -
Justice, reached an agreement in principle whereby the Company, without
admitting any wrongdoing, has agreed to make certain modifications to the
boiler which will limit its physical capacity to the level specified in the
alleged relevant New Source Performance Standards. The physical
modifications, which require expenditures of approximately $40,000, will not
affect the utility of the No. 8 boiler. In addition, the Company has agreed
to pay $350,000 to settle this matter.
The Company believes, based upon currently available information and
analysis, that the environmental charge it has accrued in the fourth quarter
of 1994 for environmental matters adequately reflects the Company's estimated
or anticipated liabilities and legal and consulting costs relating to
environmental matters arising from past operations. The Company expects these
costs to be incurred over an extended number of years. While the charge
reflects the Company's current estimates of the costs of these environmental
matters, there can be no assurance that the amount accrued will be adequate.
In 1992, the IRS issued a statutory notice of deficiency (the "Notice")
to the Company for additional income tax due for the 1988 tax year. In the
Notice, the IRS disallowed deductions for its 1988 tax year for fees and
expenses, other than interest, related to the 1988 debt financing and
refinancing transactions. In disallowing these deductions, the IRS relied on
Code Section 162(k) (which denies deductions for otherwise deductible amounts
paid or incurred in connection with stock redemptions). The Company had
deducted a portion of the disallowed fees and expenses in 1988 and has been
deducting the balance of the fees and expenses over the terms of the 1988
long-term debt financing and refinancing. Following receipt of the Notice,
the Company filed a petition in the U.S. Tax Court contesting the deficiency.
In August 1994, the U.S. Tax Court issued its opinion in which it essentially
adopted the interpretation of Code Section 162(k) advanced by the IRS and
disallowed the deductions claimed by the Company. At present, the U.S. Tax
Court is preparing an order in which it will determine the amount of the tax
deficiency owed by the Company as a result of the court's decision. The
Company intends to appeal the U.S. Tax Court decision to the U.S. Court of
Appeals for the Seventh Circuit. In anticipation of its appeal, the Company
has paid to the IRS tax of approximately $5 million potentially due for its
1988 tax year pursuant to the U.S. Tax Court opinion along with $4 million for
the interest accrued on such tax. If the decision of the U.S. Tax Court is
ultimately sustained, the Company estimates that the potential amount of
additional taxes due on account of such disallowance for the period 1989
through 1994 would be approximately $34 million and for the period after 1994
(assuming current statutory tax rates) would be approximately $4 million, in
each case exclusive of interest. While the Company is unable to predict the
final result of its appeal of the U.S. Tax Court decision with certainty, it
has accrued for the potential tax liability as well as for the interest
charges thereon for the period 1989 through 1994 and thus the Company believes
that the ultimate resolution of this case will not have a material adverse
effect on the Company's financial condition or on its results of operations.
The Company and its subsidiaries are parties to other lawsuits and state
and federal administrative proceedings in connection with their businesses.
Although the final results in all suits and proceedings cannot be predicted
with certainty, the Company presently believes that the ultimate resolution of
all such lawsuits and proceedings, after taking into account the liabilities
accrued with respect to such matters, will not have a material adverse effect
on the Company's financial condition or results of operations.
- 15 -
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders during the
fourth quarter of 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
During each of the fiscal years ended December 31, 1993 and December 31,
1994, there was no public market for the Company's Common Stock. The
Company's Common Stock began trading under the symbol FORT on The Nasdaq
National Market on March 10, 1995. The number of holders of record of the
Company's Common Stock immediately prior to the Offering was 59.
The Company anticipates that all its earnings in the near future will be
used for the repayment of indebtedness and for the development and expansion
of its business and, therefore, does not anticipate paying dividends on its
Common Stock in the foreseeable future. The New Bank Credit Agreement, the
1995 Receivables Facility and the Company's outstanding debt obligations
limit, in each case with certain exceptions, the ability of the Company to pay
dividends on the Common Stock. Subject to such restrictions, any
determination to pay cash dividends in the future will be at the discretion of
the Company's Board of Directors and will be dependent upon the Company's
results of operations, financial condition, contractual restrictions and other
factors deemed relevant at the time by the Board of Directors.
- 16 -
ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In millions except ratios and per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales .............................. $ 1,274 $ 1,187 $ 1,151 $ 1,138 $ 1,151
Cost of sales (a)........................ 867 784 726 713 719
------- ------- ------- ------- -------
Gross income............................. 407 403 425 425 432
Selling, general, and
administrative (a)(b).................. 110 97 97 98 105
Amortization of goodwill (c)............. -- 43 57 57 57
Goodwill write-off (c)................... -- 1,980 -- -- --
Environmental change (d)................. 20 -- -- -- --
------- ------- ------- ------- -------
Operating income (loss) (d).............. 277 (1,717) 271 270 270
Interest expense......................... 338 342 338 371 423
Other (income) expense, net ............. -- (3) 2 (3) (33)
------- ------ ------- ------- -------
Loss before taxes (d).................... (61) (2,056) (69) (98) (120)
Income taxes (credit).................... (19) (16) -- (24) (37)
------- ------ ------- ------- -------
Loss before equity earnings,
extraordinary items and
adjustment for accounting change....... (42) (2,040) (69) (74) (83)
Equity in net loss of
unconsolidated subsidiaries (e)........ -- -- -- (32) (23)
------- ------ ------- ------- -------
Net loss before extraordinary items
and adjustment for accounting change... (42) (2,040) (69) (106) (106)
Extraordinary items - losses on debt
repurchases (net of income taxes)...... (28) (12) -- (5) --
Adjustment for adoption of SFAS No. 106
(net of income taxes) (f).............. -- -- (11) -- --
------- ------ ------- ------- -------
Net loss (a)(d).......................... $ (70) $(2,052) $ (80) $ (111) $ (106)
======= ======= ======= ======= =======
Loss per share (d)(g).................... $ (1.85) $(53.85) $ (2.10) $ (3.17) $ (3.64)
OTHER DATA:
EBITDA (h)............................... $ 393 $ 387 $ 410 $ 444 $ 441
EBITDA as a percent of net sales (h)..... 30.8% 32.6% 35.6% 39.0% 38.3%
Depreciation of property, plant
and equipment (a)...................... $ 96 $ 88 $ 81 $ 116 $ 112
Non-cash interest expense................ 74 101 140 141 145
Capital expenditures..................... 84 166 233 144 97
Weighted average number of shares
of Common Stock outstanding
(in thousands) (g)..................... 38,103 38,107 38,107 34,868 29,197
BALANCE SHEET DATA (at end of
period):
Total assets............................. $ 1,681 $ 1,650 $ 3,575 $ 3,470 $ 3,627
Working capital (deficit)................ (98) (92) (124) 2 (80)
Long-term debt (including current
portion) and Common Stock with
put right.............................. 3,318 3,234 3,104 2,947 3,125
Shareholders' equity (deficit)........... (2,148) (2,081) (29) 62 13
</TABLE>
- 17 - <PAGE>
(a) Effective January 1, 1992, the Company prospectively changed its estimates
of the depreciable lives of certain machinery and equipment. The change had
the effect of reducing depreciation expense by approximately $38 million and
net loss by $24 million in 1992.
(b) Selling, general and administrative expense in 1993 reflects an $8 million
reduction for the reversal of all employee stock compensation expense accrued
prior to 1993. See Note 13 of the Company's audited consolidated financial
statements.
(c) During the third quarter of 1993, the Company wrote off the remaining
unamortized balance of its goodwill of $1.98 billion and, accordingly, there
is no amortization of goodwill for periods subsequent to September 30, 1993.
See "Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations" and Note 4 of the Company's audited consolidated
financial statements.
(d) During the fourth quarter of 1994, the Company recorded an environmental
charge totaling $20 million. Excluding the effects of the environmental
charge, the Company's operating income, loss before taxes, net loss and loss
per share in 1994 would have been $296.8 million, $41 million, $56.1 million
and $1.47 per share, respectively.
(e) In 1989, the Company transferred all the capital stock of Fort Howard Cup
to Sweetheart for a 49.9% equity interest in Sweetheart and other assets for a
total consideration of $620 million. The Company also undertook a plan to
divest all its remaining international cup operations. As a result, the
Company recorded a $120 million charge in 1989. As of December 31, 1991, the
Company had sold all its international cup operations and had discontinued
recording equity in net losses of Sweetheart because the carrying value of the
Company's investment in Sweetheart was reduced to zero.
(f) Reflects the cumulative effect on years prior to 1992 of adopting SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
This change in accounting principle, excluding the cumulative effect,
decreased operating income for 1992 by $1.2 million.
(g) The computation of loss per share is based on the weighted average number
of shares of Common Stock outstanding during the period plus (in periods in
which they have a dilutive effect) the effect of shares of Common Stock
contingently issuable upon the exercise of stock options.
(h) EBITDA represents operating income plus depreciation of property, plant
and equipment, amortization of goodwill, the goodwill write-off, the 1994
environmental charge and the effects of 1993 employee stock compensation
(credits). EBITDA is presented here as a measure of the Company's debt
service ability. Certain financial and other restrictive covenants in the New
Bank Credit Agreement and other instruments governing the Company's
indebtedness are based on the Company's EBITDA, subject to certain
adjustments.
- 18 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Industry Conditions
Sales of the Company's tissue products are generally subject to changes
in industry capacity and cyclical changes in the economy, both of which can
significantly impact net selling prices and the Company's profitability. From
1990 through 1992, domestic tissue industry capacity additions significantly
exceeded historic capacity addition rates. At the same time, commercial
demand weakened as a result of the recession. These and other factors caused
industry operating rates and pricing to fall. The Company's average domestic
net selling prices declined by approximately 5% in each of 1991 and 1992 and
by 1.2% in 1993 which adversely affected the Company's operating results. Due
to the impact of industry conditions on the Company's then projected operating
results, which assumed that net selling price and cost increases would
approximate 1% per year and that further capacity expansion would not be
justifiable given the Company's high leverage and adverse tissue industry
operating conditions, the Company wrote off its remaining goodwill balance of
$1.98 billion in the third quarter of 1993. Low industry operating rates,
competitive pricing and other factors continued to adversely affect the
Company's operating results in 1994. In addition, the Company's operating
results in the fourth quarter of 1994 were adversely affected by rising
wastepaper costs as discussed below.
The Company currently believes that pricing and demand in the tissue
sector of the domestic paper industry are beginning to improve. While the
Company's introduction of three price increases in the commercial market in
1993 and one in April 1994 led to a decline in commercial volume for the first
nine months of 1994 compared to the same period in 1993, the Company's
commercial volume improved slightly during the fourth quarter of 1994 compared
to the same period in 1993. The Company introduced another commercial price
increase in mid-October 1994. Because a substantial portion of the Company's
commercial sales are pursuant to contracts which generally specify pricing
over periods of three months to one year, there is a time lag before the
Company realizes the full benefit of commercial market price increases. The
Company believes that retail shelf prices in the consumer market improved
slightly in 1993 and 1994 but remained competitive. Overall domestically, the
Company realized average price increases of 5% in 1994 as compared to 1993.
Further price increases were announced for the commercial and consumer markets
effective in January 1995. Taking into account announced tissue papermaking
capacity additions and normal population growth, the Company believes that the
rate of capacity growth in 1995, 1996 and 1997 will fall short of the demand
increase, resulting in higher industry operating rates for the period.
Historically, tissue manufacturers have sought price increases during periods
of higher operating rates. Accordingly, while there can be no assurance that
pricing will continue to increase, the Company believes that in addition to
the Company's price increases announced for the commercial and consumer
markets for January 1995, further price increases are likely in 1995.
The Company's operating results are also affected by the price it pays
for wastepaper. Wastepaper is the principal raw material used in
manufacturing the Company's tissue products. The price of wastepaper is
affected by demand which is primarily dependent upon deinking and recycling
capacity levels in the paper industry overall and by the price of market pulp.
- 19 -
Prices for deinking grades of wastepaper used by tissue producers increased
sharply beginning in the third quarter of 1994. Industry costs for wastepaper
and market pulp have recently begun to increase sharply. From July 1994 to
January 1995, wastepaper prices for the grades of wastepaper used in the
Company's products more than doubled. Wastepaper prices may increase further
because of increased demand resulting from substantial additions of deinking
and recycling capacity in the paper industry which are expected to come on
line during 1995 and 1996, increasing market pulp prices and other factors.
Since late 1993, market pulp prices have also nearly doubled as a result of
increased demand and the Company expects such prices to continue to increase
due to worldwide tightening supply/demand conditions for market pulp. If the
current trend in the Company's wastepaper costs continues, there can be no
assurance that the Company will be able to recover increases in the cost of
wastepaper through price increases for its products. Further, a reduction in
supply of wastepaper due to increased demand or other factors could have an
adverse effect on the Company's business.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FOR THE YEARS ENDED
DECEMBER 31, DECEMBER 31,
-------------- -------------------------
1994 1993 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales:
Domestic tissue........................... $ 284 $ 247 $1,060 $ 1,004 $ 978
International operations.................. 35 33 131 143 143
Other..................................... 25 12 83 40 30
----- ----- ------ ------- ------
Consolidated.............................. $ 344 $ 292 $1,274 $ 1,187 $1,151
===== ===== ====== ======= ======
Operating income (loss):
Domestic tissue (a)(b)(c)................. $ 49 $ 70 $ 264 $(1,715) $ 252
International operations (a).............. 2 -- 8 (1) 17
Other (a)................................. 2 1 5 (1) 2
----- ----- ------ ------- ------
Consolidated (a)(b)(c).................... 53 71 277 (1,717) 271
Amortization of goodwill and goodwill
write-off (a)............................. -- -- -- 2,023 57
Depreciation................................ 26 26 96 89 82
Environmental charge (b).................... 20 -- 20 -- --
Employee stock compensation (c)............. -- -- -- (8) --
----- ----- ------ ------- ------
EBITDA(d)................................. $ 99 $ 97 $ 393 $ 387 $ 410
===== ===== ====== ======= ======
Consolidated net loss....................... $ (25) $ (6) $ (70) $(2,052) $ (80)
===== ===== ====== ======= ======
EBITDA as a percent of net sales(d)......... 28.8% 33.1% 30.8% 32.6% 35.6%
</TABLE>
------------
(a) During the third quarter of 1993, the Company wrote off the remaining
unamortized balance of its goodwill of $1.98 billion. See Note 4 to the
Company's audited consolidated financial statements.
(b) During the fourth quarter of 1994, operating income for domestic tissue
operations was reduced by a $20 million environmental charge. See Note 15 to
the Company's audited consolidated financial statements.
- 20 -
<PAGE>
(c) Selling, general and administrative expense in 1993 reflects an $8 million
reduction for the reversal of all employee stock compensation expense accrued
prior to 1993. See Note 13 to the Company's audited consolidated financial
statements.
(d) EBITDA represents operating income plus depreciation of property, plant
and equipment, amortization of goodwill, the goodwill write-off, the 1994
environmental charge and the effects of 1993 employee stock compensation
(credits). EBITDA is presented here as a measure of the Company's debt
service ability. Certain financial and other restrictive covenants in the New
Bank Credit Agreement and other instruments governing the Company's
indebtedness are based on the Company's EBITDA, subject to certain
adjustments.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
Net Sales. Consolidated net sales for 1994 increased 7.3% compared to
1993, while consolidated net sales for the fourth quarter of 1994 increased
17.9% as compared to the comparable quarter in 1993. These increases were due
to increases in domestic tissue net sales and significant net sales increases
by the Company's wastepaper brokerage subsidiary. Domestic tissue net sales
increased 5.5% for fiscal year 1994 and 15.0% during the fourth quarter of
1994, in each case as compared to 1993. For 1994, the higher domestic tissue
net sales were due to higher net selling prices principally in the commercial
market and higher sales volume in the consumer and parent roll export markets
that were partially offset by volume decreases in the commercial market during
the first nine months of 1994. Overall, domestic tissue sales volume for 1994
increased slightly over 1993. The Company's decision to implement net selling
price increases in the commercial market during each of the first three
quarters of 1993 and to follow with a price increase in the second quarter of
1994 led to the decline in commercial volume during the first nine months of
1994. For the fourth quarter of 1994, the higher domestic tissue net sales
were due to higher net selling prices and slightly higher volume in the
commercial market, significantly higher volume offset by lower net selling
prices in the consumer market and higher sales volume in parent roll export
markets. The Company announced further price increases in the commercial
market effective mid-October 1994 and January 1995 and a price increase in the
consumer market effective in January 1995. Because a substantial portion of
the Company's commercial sales are pursuant to contracts which generally
specify pricing over periods of three months to one year, there is a time lag
before the Company realizes the full benefit of commercial market price
increases. Net sales of the Company's international operations decreased 8.4%
for fiscal year 1994 and increased 4.7% for the fourth quarter of 1994 as
compared to 1993. The decrease in international net sales in 1994 was due to
significantly lower net selling prices on flat volume. The increase in
international net sales for the fourth quarter was due to higher volume
partially offset by lower net selling prices. The international net selling
price declines were attributable to product mix changes and continued
competitive conditions. The significant increase in net sales of the
Company's wastepaper brokerage subsidiary during 1994 and for the fourth
quarter of 1994 compared to 1993 principally reflects higher net selling
prices.
Gross income. For fiscal year 1994 and the fourth quarter of 1994,
consolidated gross margins decreased to 31.9% and 29.3% from 34.0% and 33.5%
for the same periods in 1993, respectively, principally due to lower margins
in domestic tissue operations where unit manufacturing cost increases exceeded
- 21 -
net selling price increases. Such cost increases primarily resulted from
higher wastepaper and other raw material costs, lower converting volume,
higher depreciation expense resulting from the start-up of a new paper machine
at the Muskogee mill late in the first quarter of 1994 and higher maintenance
costs. From July 1994 to January 1995, wastepaper prices for the grades of
wastepaper used in Fort Howard's products more than doubled and wastepaper
prices may increase further due to increased demand for those wastepaper
grades used by the Company. Gross margins of international operations
declined in 1994 compared to 1993 principally due to the lower net selling
prices. For the fourth quarter of 1994 compared to the same period in 1993,
gross margins of international operations improved due to lower promotional
costs and the results of cost containment activities. However, from July 1994
to January 1995, wastepaper prices for the grades of wastepaper used by
international operations increased approximately 65% and wastepaper prices are
expected to increase further for such operations due to increased demand for
those wastepaper grades used by the Company. In addition, consolidated gross
margins were negatively affected for fiscal year 1994 and the fourth quarter
of 1994 by the increased proportion of net sales represented by the Company's
wastepaper brokerage subsidiary which typically has lower margins than
domestic tissue operations.
Selling, General and Administrative Expenses. In the third quarter of
1993, the Company reversed all previously accrued employee stock compensation
expense resulting in a reduction of selling, general and administrative
expenses of $8 million for 1993. Excluding the effects of the reversal,
selling, general and administrative expenses, as a percent of net sales, were
8.6% and 8.2% for fiscal year 1994 and fourth quarter of 1994, compared to
8.8% and 9.0% for fiscal year 1993 and fourth quarter of 1993, respectively.
The decreases resulted principally from the increased proportion of net sales
represented by the Company's wastepaper brokerage subsidiary and, to a lesser
degree, cost containment.
Amortization of Goodwill. As a result of the goodwill write-off in the
third quarter of 1993, there was no amortization of goodwill in 1994 compared
to $43 million for fiscal year 1993. There was no goodwill amortization in
the fourth quarter of 1994 or 1993.
Environmental Charge. Based upon currently available information and
analysis, the Company recorded a $20 million charge in the fourth quarter of
1994 for estimated or anticipated liabilities and legal and consulting costs
relating to environmental matters arising from past operations. The Company
expects these costs to be incurred over an extended number of years. See
"Environmental Matters" and "Legal Proceedings" and Note 15 of the Company's
audited consolidated financial statements.
Operating Income (Loss). Operating income increased to $277 million in
1994 compared to an operating loss of $1,717 million in 1993. The operating
loss in 1993 resulted entirely from the goodwill write-off in the third
quarter of 1993. Excluding the environmental charge from 1994 results and
amortization of goodwill, the goodwill write-off and the reversal of employee
stock compensation expense from 1993 results, operating income would have
declined to $297 million in 1994 from $299 million in 1993. For the fourth
quarters of 1994 and 1993, operating income was $53 million and $71 million,
respectively. Excluding the environmental charge from 1994 results, operating
income would have increased to $73 million in the fourth quarter of 1994.
- 22 -
Income Taxes. The income tax credits for 1994 and 1993 principally
reflect the reversal of previously provided deferred income taxes.
Extraordinary Losses. The Company's net loss in 1994 was increased by an
extraordinary loss of $28 million (net of income taxes of $15 million)
representing the redemption premiums on the repurchases of all the Company's
remaining 12 3/8% Notes at the redemption price of 105% of the principal
amount thereof and of $238 million of 12 5/8% Debentures at the redemption
price of 105% of the principal amount thereof on March 11, 1994, and the write
off of deferred loan costs associated with the prepayment of $100 million of
the 1988 Term Loan on February 10, 1994, and the repurchases of the 12 3/8%
Notes and the 12 5/8% Debentures. The Company's net loss in 1993 was
increased by an extraordinary loss of $12 million (net of income taxes of
$7 million) representing the write-off of deferred loan costs associated with
the prepayment of $250 million of the 1988 Term Loan on March 23, 1993, the
repurchase of all outstanding 14 5/8% Debentures on April 21, 1993 and the
repurchase of $50 million of 12 3/8% Notes on November 1, 1993.
Net Loss. The Company reported net losses of $70 million and $25 million
for fiscal year 1994 and the fourth quarter of 1994, respectively, as compared
to net losses of $2,052 million and $6 million for the same periods in 1993.
The increase in the net loss in the fourth quarter of 1994 is principally due
to the environmental charge. The significant net loss for fiscal year 1993
resulted principally from the goodwill write-off in the third quarter of 1993.
FISCAL YEAR 1993 COMPARED TO FISCAL YEAR 1992
Net Sales. Consolidated net sales for 1993 increased 3.1% compared to
1992. Domestic tissue net sales for 1993 increased 2.7% compared to 1992 due
to volume increases that were largely offset by lower net selling prices. In
mid-1992, average net selling prices rose principally as a result of an
attempted price increase in the commercial market but then fell to pre-price
increase levels in the fourth quarter of 1992 and fell again in the first
quarter of 1993, periods of seasonally lower volume shipments. Average net
selling prices held flat from the first quarter of 1993 to the second quarter
of 1993 and increased in each of the third and fourth quarters of 1993 from
the previous quarter levels. However, in spite of introductions of net
selling price increases in each of the first three quarters of 1993, average
net selling prices for 1993 were below average net selling prices for 1992.
Net sales of the Company's international operations were flat in 1993 compared
to 1992 primarily due to significantly lower net selling prices and lower
exchange rates offset by volume increases resulting from the acquisition of
Stuart Edgar Limited ("Stuart Edgar") and the start-up of a new paper machine.
United Kingdom retailers engaged in increasingly competitive pricing activity
in 1993 across a broad range of consumer products including disposable paper
products.
Gross Income. Consolidated gross margins decreased to 34.0% in 1993
compared to 36.9% in 1992. Domestic tissue gross margins decreased to 37.4%
in 1993 from 40.0% in 1992 primarily due to lower net selling prices and an
increase in wastepaper costs as prices for wastepaper grades utilized by the
Company returned to pre-recession levels. Gross margins of international
operations also declined in 1993 principally due to the lower net selling
prices. Unit manufacturing costs of international operations declined in 1993
compared to 1992 as a result of the start-up of a new paper machine and
- 23 -
related facilities in the first quarter of 1993 at the Company's United
Kingdom tissue operations.
Selling, General and Administrative Expenses. Due to the effects of
adverse tissue industry operating conditions on its long-term earnings
forecast as of September 30, 1993, the Company decreased the estimated fair
market valuation of its Common Stock. Accordingly, in 1993 the Company
reversed all previously accrued employee stock compensation expense of
$8 million, resulting in a decrease in selling, general and administrative
expenses, as a percent of net sales, to 8.2% in 1993 from 8.5% in 1992.
Excluding the effects of employee stock compensation from both years, selling,
general and administrative expenses, as a percent of net sales, would have
increased slightly in 1993 to 8.8% from 8.4% for 1992.
Goodwill Write-Off. As further described below, low industry operating
rates and aggressive competitive pricing among tissue producers resulting from
the 1991-1992 recession, additions to industry capacity and other factors
adversely affected tissue industry operating conditions and the Company's
operating results beginning in 1991 and through the third quarter of 1993.
Declining selling prices. Although sales volume increased, industry
pricing was very competitive due to the factors discussed below. The
Company's average domestic net selling prices declined by approximately 5% in
each of 1991 and 1992. Commercial market price increases attempted in
mid-1992 were not achieved as commercial market pricing fell to pre-price
increase levels in the fourth quarter of 1992 and fell again in the first
quarter of 1993, periods of seasonally lower volume shipments. Average net
selling prices held flat from the first quarter of 1993 to the second quarter
of 1993 and increased from the second to the third quarter of 1993. However,
in spite of introductions of net selling price increases in each of the first
three quarters of 1993, average net selling prices for the first nine months
of 1993 were below average net selling prices for the same period in 1992.
Pricing in the Company's international markets declined significantly over
this time period as well.
Industry Operating Rates. Based on publicly available information,
including data collected by the American Forest & Paper Association ("AFPA"),
industry capacity additions in 1990 through 1992 significantly exceeded
historic capacity addition rates. Such additions and weak demand caused
industry operating rates to fall to very low levels in 1991 and 1992 in
comparison to historic rates. Tissue industry operating rates increased only
slightly during the first nine months of 1993 from the low levels experienced
in 1991 and 1992. Announced tissue industry capacity additions through 1995,
as reported by the AFPA through the first three quarters of 1993, approximated
average industry shipment growth rates after 1990. For the first nine months
of 1993, the industry shipment growth rate fell sharply from the already low
rates in 1991 and 1992. Consequently, without an improved economic recovery
and improved industry demand, tissue industry operating rates were expected to
remain at relatively low levels for the near term, adversely affecting
industry pricing.
Economic Conditions. The 1991-1992 recession and weak recovery
adversely affected tissue market growth. Job formation is an important
stimulus for growth in the commercial tissue market where approximately two-
thirds of the Company's domestic tissue sales are targeted. From 1990 through
the first nine months of 1993, job formation was weak and was projected to
improve only slightly in 1994. Accordingly, demand growth was weak in 1991,
- 24 -
1992 and in the first nine months of 1993, and did not appear to offer any
substantial relief to the outlook for industry operating rates and pricing for
the near term.
Gross Margins. The Company's gross margins steadily declined in
1991, 1992 and 1993 as a result of the three factors noted above. In the
first nine months of 1993, the Company's gross margins were also affected by
increased wastepaper costs as prices for wastepaper grades utilized by the
Company returned to pre-recession levels.
As a result of these conditions, the Company expected that the
significant pricing deterioration experienced in 1991 through mid-1993 would
be followed by average annual price increases that approximated the Company's
annual historical price increase trend for the years 1984 through 1993 of
approximately 1% per year. Accordingly, during the second quarter of 1993,
the Company commenced an evaluation of the carrying value of its goodwill for
possible impairment. The Company revised its projections as of September 30,
1993 and concluded its evaluation in the third quarter of 1993 determining
that its forecasted cumulative net income before goodwill amortization was
inadequate to recover the future amortization of the Company's goodwill
balance over the remaining amortization period of the goodwill.
For a more detailed discussion of the methodology and assumptions
employed to assess the recoverability of the Company's goodwill, refer to
Note 4 of the Company's audited consolidated financial statements.
Operating Income (Loss). As a result of the goodwill write-off, the
Company's operating loss was $1,717 million for 1993 compared to operating
income of $271 million for 1992. Excluding amortization of goodwill, the
goodwill write-off and the reversal of employee stock compensation expense
from 1993 and 1992 results, operating income declined to $299 million for 1993
from $328 million for 1992.
Income Taxes. The income tax credit for 1993 principally reflects the
reversal of previously provided deferred income taxes. The income tax credit
for 1992 reflects the reversal of previously provided deferred income taxes
related to domestic tissue operations offset almost entirely by foreign income
taxes.
Extraordinary Loss and Accounting Change. The Company's net loss in 1993
was increased by an extraordinary loss of $12 million (net of income taxes of
$7 million) representing the write-off of unamortized deferred loan costs
associated with the repayment of $250 million of indebtedness under the 1993
Term Loan, the repurchase of all the 14 5/8% Debentures and the repurchase of
$50 million of the 12 3/8% Notes. The net loss for 1992 was increased by the
Company's adoption of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
No. 106"). The cumulative effect on years prior to 1992 of adopting SFAS
No. 106 is stated separately in the Company's unaudited condensed consolidated
statement of income for 1992 as a one-time, after-tax charge of $11 million.
Net Loss. For 1993, the Company's net loss increased, principally due to
the goodwill write-off, to $2,052 million compared to $80 million for 1992.
- 25 -
FINANCIAL CONDITION
Year Ended December 31, 1994
During 1994, cash increased $195,000. Capital additions of $84 million
and debt repayments of $759 million, including the prepayment of $100 million
of the 1988 Term Loan, the repurchases of all outstanding 12 3/8% Notes and of
$238 million of the 12 5/8% Debentures, a reduction in the 1988 Revolving
Credit Facility and the purchase of interest rate cap agreements for
$10 million were funded by cash provided from operations of $125 million and
net proceeds of the sale of 8 1/4% Notes and 9% Notes of $728 million in
February 1994. Receivables increased $17 million during 1994 due principally
to higher net selling prices in the domestic tissue and wastepaper brokerage
operations and sales volume increases in domestic tissue operations in the
fourth quarter of 1994. The $13 million increase in inventories in 1994
resulted from increases in inventory quantities to improve service levels and
the revaluation of inventories to reflect higher manufacturing costs. The
liability for interest payable increased $29 million due to a change in
interest payment schedules resulting from the 1994 debt repurchases from the
net proceeds of the sale of the 8 1/4% Notes and 9% Notes in 1994 and for the
liability with respect to the 14 1/8% Debentures for interest accruing in cash
commencing on November 1, 1994. As a result of all these changes, the net
working capital deficit increased to $98 million at December 31, 1994, from a
deficit of $92 million at December 31, 1993. The $15 million increase in
long-term other liabilities in 1994 principally reflects the classification of
$18 million of the environmental charge taken in the fourth quarter as a
long-term liability. Deferred and other long-term income taxes declined
$34 million from 1993 to 1994 principally due to the reversal of deferred
income taxes related to continuing operations and the extraordinary item.
Cash provided from operations declined in 1994 compared to 1993
principally due to increased interest payments resulting from the 1993
repurchases of all outstanding 14 5/8% Debentures (which accrued interest in
kind) from the net proceeds of the sale of the 9 1/4% Notes and 10% Notes in
1993 (which accrue interest in cash) and higher floating interest rates. Cash
provided from operations was further impacted by the increase in receivables.
Year Ended December 31, 1993
During 1993, cash increased $39,000. Capital additions of $166 million
and debt repayments of $841 million, including the prepayment of $250 million
of the 1988 Term Loan, the repurchase of all outstanding 14 5/8% Debentures,
and the repurchase of $50 million of the 12 3/8% Notes, were funded
principally by cash provided from operations of $151 million, net proceeds
from the sale of the 9 1/4% Notes and 10% Notes of $729 million, net proceeds
of the 1993 Term Loan of $95 million, borrowings of $28 million under the 1988
Revolving Credit Facility and borrowings of $9 million by Fort Sterling under
its credit agreements.
Inventories and interest payable increased $17 million and $22 million,
respectively, during 1993. The Company increased inventories principally to
improve its service levels, and secondarily due to the effects of lower volume
resulting from increases in net selling prices in the third quarter of 1993,
immediately preceding a period of seasonally lower volume. Interest payable
increased in 1993 principally due to the repurchase of all outstanding 14 5/8%
Debentures (which accrued interest in kind) from the net proceeds of the sale
of the 9 1/4% Notes and 10% Notes (which accrue interest in cash). The net
- 26 -
working capital deficit declined $32 million from $124 million at December 31,
1992 to $92 million at December 31, 1993, principally due to a $25 million
reduction in the current portion of long-term debt as a result of lower
current maturities under the 1988 Term Loan.
Liquidity and Capital Resources; The Recapitalization
The Company's principal uses of cash for the next several years will be
interest and principal payments on its indebtedness and capital expenditures.
The Company is implementing the Recapitalization to prepay or redeem a
substantial portion of its indebtedness in order to reduce the level and
overall cost of its debt, extend certain maturities, increase shareholders'
equity and enhance its access to capital markets. The Recapitalization
includes the following primary components: (i) the Offering; (ii) the Bank
Refinancing and (iii) the 1995 Debt Redemptions. Proceeds of the
Recapitalization were used to prepay or redeem all of the Company's remaining
indebtedness under its 1988 Bank Credit Agreement, the Senior Secured Notes
and the 1993 Term Loan on the Closing Date and will be used to redeem the 12
5/8% Debentures and the 14 1/8% Debentures in mid April. After giving effect
to the Recapitalization, on a pro forma basis as of December 31, 1994, the
Company would have had approximately $3,078 million of long-term debt
outstanding. Following the Recapitalization, the Company will have estimated
repayment obligations of $9 million in 1995, $60 million in 1996, $115 million
in 1997, $138 million in 1998 and $153 million in 1999 (and increasing
thereafter). In addition, there may be additional required payments under the
New Bank Credit Agreement out of excess cash flow, if any, and from proceeds
of asset sales, if any.
Capital expenditures were $84 million, $166 million and $233 million in
1994, 1993 and 1992, respectively, including an aggregate of over $350 million
during those periods for capacity expansions. Subject to market conditions and
the successful completion of the Recapitalization, the Company's current plans
to support growth in domestic tissue shipments include adding one world-class
(270-inch) tissue paper machine over the next five years and the start up of
another dry form machine in the next few years. The New Bank Credit Agreement
imposes limits for domestic capital expenditures, with certain exceptions, of
$75 million per year. The Company is also permitted to spend up to $250
million for domestic expansion projects including, without restriction, an
additional tissue paper machine at one of its existing domestic mills. Other
domestic expansion projects are restricted unless the Company's ratio of
Consolidated EBITDA to Consolidated Interest Expense (as such terms are
defined in the New Bank Credit Agreement) exceeds certain amounts. In
addition, the Company is permitted to make capital expenditures for
international expansion of up to $40 million through June 30, 1996, and up to
$100 million in the aggregate after June 30, 1996 if the Company's ratio of
Consolidated EBITDA to Consolidated Interest Expense exceeds certain amounts.
Under the New Bank Credit Agreement, the Company may carry over to one or more
years (thereby increasing the scheduled permitted limit for capital
expenditures in respect of such year) the amount by which the scheduled
permitted limit for each year (beginning with fiscal year 1995) exceeded the
capital expenditures actually made in respect of such prior year. The Company
does not believe such limitations will impair its plans for capital
expenditures. Capital expenditures are projected to approximate $55 to
$75 million annually for the next several years, plus $225 million of domestic
expansion capital spending that is subject to market conditions. The portion
- 27 -
of the above capital expenditures which are attributable to environmental
matters is described in "Environmental Matters."
The 1995 Revolving Credit Facility matures on March 16, 2002. After
completion of the Recapitalization and the 1995 Debt Redemptions, the Company
expects to have approximately $90 million in available capacity under the 1995
Revolving Credit Facility.
Approximately $1.5 billion (or 46%) of the Company's outstanding
indebtedness bears interest at floating rates. The Company's policy is to
enter into interest rate cap and swap agreements as a hedge to effectively fix
or limit its exposure to floating interest rates to, at a minimum, comply with
the terms of its senior secured debt agreements. The Company is a party to
LIBOR-based interest rate cap agreements which effectively limit the interest
cost to the Company with respect to $500 million of floating rate obligations
to 6% plus the Company's borrowing margin until June 1, 1996, and to 8% plus
the Company's borrowing margin from June 1, 1996 to June 1, 1999. Interest
rates began to increase in 1994 and if they continue to rise in 1995 the
Company may be less able to meet its debt service obligations. The Company
monitors the risk of default by the counterparties to the interest rate cap
agreements and does not anticipate nonperformance. See Note 8 to the
Company's audited consolidated financial statements for additional information
concerning these agreements.
The limitations contained in the New Bank Credit Agreement and in the
Company's indentures on the ability of the Company and its subsidiaries to
incur indebtedness, together with the highly leveraged position of the
Company, could limit the Company's ability to effect future financings and may
otherwise restrict corporate activities, including the Company's ability to
respond to market conditions, to provide for unanticipated capital
expenditures (including capital expenditures for environmental matters) or to
take advantage of business opportunities which may arise or to take actions
that require funds in excess of those available to the Company. However, the
Company believes that cash provided by operations, unused borrowing capacity
under the 1995 Revolving Credit Facility and access to financing in public and
private markets will be sufficient to enable it to fund capital expenditures
(including planned capital expenditures for environmental matters) and meet
its debt service requirements for the foreseeable future.
Assuming a favorable resolution of the U.S. Tax Court appeal discussed in
"Legal Proceedings," the Company will have approximately $131 million of net
operating loss ("NOL") carryforwards as of December 31, 1994 for federal
income tax purposes which expire as follows: $11 million in 2007, $47 million
in 2008 and $73 million in 2009. The aggregate amount of net operating loss
carryforwards available to the Company as of December 31, 1994 could be
reduced to approximately $71 million if the U.S. Tax Court decision is
affirmed. Further, under the Internal Revenue Code of 1986, as amended (the
"Code"), the utilization of NOL carryforwards against future taxable income is
potentially limited if the Company experiences an "ownership change," as
defined in the Code. The Company believes that it did not experience an
ownership change in connection with the Offering or that, if it did, the
resulting limitation on NOL carryforward utilization is not expected to have a
significant effect on the Company's financial condition or on its results of
operations. It is possible, however, that following the Offering, future
events (such as transfers of Common Stock by shareholders, or certain Common
Stock issuances) could cause an ownership change which under the circumstances
- 28 -
at that time could result in a limitation on the Company's ability to utilize
NOL carryforwards existing at such time to offset future taxable income.
Refer to Note 7 to the audited consolidated financial statements for a
description of certain matters related to income taxes. See "Legal
Proceedings."
Seasonality
During the years ended December 31, 1994, 1993, and 1992, a slightly
higher amount of the Company's revenues and EBITDA have been recognized during
the second and third quarters. The Company expects to fund seasonal working
capital needs from the 1995 Revolving Credit Facility.
- 29 -
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of FORT HOWARD CORPORATION:
We have audited the accompanying consolidated balance sheets of
Fort Howard Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income
and cash flows for the years ended December 31, 1994, 1993 and 1992. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Fort Howard Corporation and subsidiaries as of December 31, 1994 and 1993,
and the consolidated results of their operations and their cash flows for the
years ended December 31, 1994, 1993 and 1992, in conformity with generally
accepted accounting principles.
As discussed in Notes 1 and 10 to the consolidated financial statements,
effective January 1, 1992, the Company changed its method of accounting for
postretirement benefits other than pensions.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 31, 1995
- 30 -
FORT HOWARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
For the Years Ended December 31,
--------------------------------
1994 1993 1992
---- ---- ----
Net sales............................. $1,274,445 $ 1,187,387 $1,151,351
Cost of sales......................... 867,357 784,054 726,356
---------- ----------- ----------
Gross income.......................... 407,088 403,333 424,995
Selling, general and administrative... 110,285 96,966 97,620
Amortization of goodwill.............. -- 42,576 56,700
Goodwill write-off.................... -- 1,980,427 --
Environmental charge.................. 20,000 -- --
---------- ----------- ----------
Operating income (loss)............... 276,803 (1,716,636) 270,675
Interest expense...................... 337,701 342,792 338,374
Other (income) expense, net........... 118 (2,996) 2,101
---------- ----------- ----------
Loss before taxes..................... (61,016) (2,056,432) (69,800)
Income taxes (credit)................. (18,891) (16,314) (398)
---------- ----------- ----------
Loss before extraordinary items
and adjustment for
accounting change................... (42,125) (2,040,118) (69,402)
Extraordinary items--losses on
debt repurchases (net of income
taxes of $14,731 in 1994 and
$7,333 in 1993).................... (28,170) (11,964) --
Adjustment for adoption of
SFAS No. 106 (net of income
taxes of $6,489)................... -- -- (10,587)
---------- ----------- ----------
Net loss.............................. $ (70,295) $(2,052,082) $ (79,989)
========== =========== ==========
Loss per share:
Net loss before extraordinary
items and adjustment for
accounting change................... $ (1.11) $ (53.54) $ (1.82)
Extraordinary items................. (0.74) (0.31) --
Adjustment for adoption of
SFAS No. 106..................... -- -- (0.28)
---------- ----------- ----------
Net loss............................ $ (1.85) $ (53.85) $ (2.10)
========== =========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
- 31 -
FORT HOWARD CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
-------------------
1994 1993
---- ----
Assets
Current assets:
Cash and cash equivalents.................. $ 422 $ 227
Receivables, less allowances of $1,589
in 1994 and $2,366 in 1993............... 123,150 105,834
Inventories................................ 130,843 118,269
Deferred income taxes...................... 20,000 14,000
Income taxes receivable.................... 5,200 9,500
----------- -----------
Total current assets..................... 279,615 247,830
Property, plant and equipment................ 1,932,713 1,845,052
Less: Accumulated depreciation............. 611,762 516,938
----------- -----------
Net property, plant and equipment........ 1,320,951 1,328,114
Other assets................................. 80,332 73,843
----------- -----------
Total assets........................... $ 1,680,898 $ 1,649,787
=========== ===========
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable........................... $ 100,981 $ 101,665
Interest payable........................... 84,273 54,854
Income taxes payable....................... 224 122
Other current liabilities.................. 75,450 70,138
Current portion of long-term debt.......... 116,203 112,750
----------- -----------
Total current liabilities................ 377,131 339,529
Long-term debt............................... 3,189,644 3,109,838
Deferred and other long-term income taxes.... 209,697 243,437
Other liabilities............................ 41,162 26,088
Common Stock with put right.................. 11,711 11,820
Shareholders' deficit:
Common Stock............................... 600,471 600,459
Cumulative translation adjustment.......... (2,330) (5,091)
Retained deficit........................... (2,746,588) (2,676,293)
---------- -----------
Total shareholders' deficit.............. (2,148,447) (2,080,925)
---------- -----------
Total liabilities and shareholders'
deficit.............................. $ 1,680,898 $ 1,649,787
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
- 32 -
FORT HOWARD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended December 31,
-------------------------------
1994 1993 1992
---- ---- ----
Cash provided from (used for) operations:
Net loss.................................. $(70,295) $(2,052,082) $(79,989)
Depreciation and amortization............. 95,727 130,671 137,977
Goodwill write-off........................ -- 1,980,427 --
Non-cash interest expense................. 74,238 100,844 139,700
Deferred income taxes (credit)............ (33,832) (17,874) (17,799)
Environmental charge...................... 20,000 -- --
Employee stock compensation............... -- (7,832) 1,120
Pre-tax loss on debt repurchases.......... 42,901 19,297 --
Pre-tax adjustment for adoption of
SFAS No. 106............................ -- -- 17,076
Increase in receivables................... (17,316) (2,343) (5,284)
Increase in inventories................... (12,574) (17,294) (1,215)
(Increase) decrease in income taxes
receivable.............................. 4,300 (7,000) (2,500)
Increase (decrease) in accounts payable... (684) (2,740) 13,572
Increase (decrease) in interest payable... 29,419 21,797 (298)
Increase (decrease) in income taxes
payable................................. 102 (1,670) (5,094)
All other, net............................ (6,896) 6,848 12,684
-------- ------------ --------
Net cash provided from operations..... 125,090 151,049 209,950
Cash used for investment activities:
Additions to property, plant and
equipment............................... (83,559) (165,539) (232,844)
Acquisition of Stuart Edgar Limited,
net of acquired cash of $749............ -- -- (8,302)
-------- ------------ --------
Net cash used for investment
activities.......................... (83,559) (165,539) (241,146)
Cash provided from (used for)
financing activities:
Proceeds from long-term borrowings........ 750,000 887,088 189,518
Repayment of long-term borrowings......... (759,202) (841,399) (167,731)
Debt issuance costs....................... (32,134) (31,160) --
-------- ------------ --------
Net cash provided from (used for)
financing activities................ (41,336) 14,529 21,787
-------- ------------ --------
Increase (decrease) in cash................. 195 39 (9,409)
Cash, beginning of year..................... 227 188 9,597
-------- ------------ --------
Cash, end of year..................... $ 422 $ 227 $ 188
======== ============ ========
Supplemental Cash Flow Disclosures:
Interest paid............................. $237,650 $ 228,360 $208,051
Income taxes paid, net.................... $ 2,483 $ 4,432 $ 9,997
The accompanying notes are an integral part of these consolidated financial
statements.
- 33 -
FORT HOWARD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Fort Howard Corporation and all domestic and foreign
subsidiaries. Assets and liabilities of foreign subsidiaries are translated
at the rates of exchange in effect at the balance sheet date. Income amounts
are translated at the average of the monthly exchange rates. The cumulative
effect of translation adjustments is deferred and classified as a cumulative
translation adjustment in the consolidated balance sheet. The Company does
not hedge its translation exposure. The Company does not engage in material
hedging activity with respect to foreign currency transaction risks. All
significant intercompany accounts and transactions have been eliminated.
Certain reclassifications have been made to conform prior years' data to the
current format.
On September 4, 1992, Fort Sterling Limited ("Fort Sterling"), the
Company's United Kingdom tissue operations, acquired for $25 million,
including debt assumed of $17 million, Stuart Edgar Limited ("Stuart Edgar"),
a converter of consumer tissue products with annual net sales approximating
$43 million. The operating results of Stuart Edgar are included in the
consolidated financial statements since September 4, 1992.
(B) CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. The carrying amount of cash equivalents approximates fair value
due to the short maturity of the investments.
(C) INVENTORIES -- Inventories are carried at the lower of cost or
market, with cost principally determined on a first-in, first-out basis (see
Note 2).
(D) PROPERTY, PLANT AND EQUIPMENT -- Prior to August 9, 1988, property,
plant and equipment were stated at original cost and depreciated using the
straight-line method. Effective with the Acquisition (as defined below),
properties were adjusted to their estimated fair values and are being
depreciated on a straight-line basis over useful lives of 30 to 50 years for
buildings and 2 to 25 years for equipment.
Assets under capital leases principally arose in connection with sale and
leaseback transactions as described in Note 9 and are stated at the present
value of future minimum lease payments. These assets are amortized over the
respective periods of the leases which range from 15 to 25 years.
Amortization of assets under capital leases is included in depreciation
expense.
The Company follows the policy of capitalizing interest incurred in
conjunction with major capital expenditure projects. The amounts capitalized
in 1994, 1993 and 1992 were $4,230,000, $8,369,000 and $11,047,000,
respectively.
(E) REVENUE RECOGNITION -- Sales of the Company's paper products are
recorded upon shipment of products.
- 34 -
(F) ENVIRONMENTAL EXPENDITURES -- Environmental expenditures that relate
to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations,
and which do not contribute to current or future revenue generation, are
expensed. Liabilities are recorded when material environmental assessments
and/or remedial efforts are probable, and the cost can be reasonably
estimated. Recoveries of environmental remediation costs from other
potentially responsible parties and recoveries from insurance carriers are not
recorded as assets until such time as their receipt is deemed probable and the
amounts are reasonably estimable.
(G) GOODWILL -- In 1988, FH Acquisition Corp., a company organized on
behalf of The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"),
acquired the Company in a leveraged buyout and was subsequently merged with
and into the Company (the "Acquisition"). Goodwill (the acquisition costs in
excess of the fair value of net assets of acquired businesses) acquired in
connection with the Acquisition and the purchases of other businesses was
amortized on a straight-line basis over 40 years through the third quarter of
1993 when the Company wrote off its remaining goodwill balance (see Note 4).
The Company evaluates the carrying value of goodwill for possible impairment
using a methodology which assesses whether forecasted cumulative net income
before goodwill amortization is adequate to recover the future amortization of
the Company's goodwill balance over the remaining amortization period of the
goodwill.
(H) EMPLOYEE BENEFIT PLANS -- A substantial majority of the Company's
employees are covered under defined contribution plans. The Company's annual
contributions to defined contribution plans are based on pre-tax income,
subject to percentage limitations on participants' earnings and a minimum
return on shareholders' equity. In recent years, the Company made
discretionary contributions as permitted under the plans. Participants may
also contribute a certain percentage of their wages to the plans. Costs
charged to operations for defined contributions plans were approximately
$12,716,000, $12,725,000 and $11,716,000 for the years ended December 31,
1994, 1993 and 1992, respectively.
Employees retiring prior to February 1, 1990 from the Company's U.S.
tissue operations who had met certain eligibility requirements are entitled to
postretirement health care benefit coverage. These benefits are subject to
deductibles, copayment provisions, a lifetime maximum benefit and other
limitations. In addition, employees who retire after January 31, 1990 at age
55 or older with ten years of service may purchase health care benefit
coverage from the Company up to age 65. The Company has reserved the right to
change or terminate this benefit for active employees at any time. As of
January 1, 1992, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." The standard requires that the expected cost of
postretirement health care benefits be charged to expense during the years
that employees render service (see Note 10). Prior to 1992, the annual cost
of these benefits had been expensed as claims and premiums were paid.
Employees of the Company's U.K. tissue operations are not entitled to Company-
provided postretirement benefit coverage.
In November 1992, the Financial Accounting Standards Board issued SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." This new
standard requires that the expected cost of benefits to be provided to former
or inactive employees after employment but before retirement be charged to
- 35 -
expense during the years that the employees render service. In the fourth
quarter of 1992, the Company retroactively adopted the new standard effective
January 1, 1992. Adoption of the new accounting standard had no effect on the
Company's 1992 consolidated statement of income.
(I) INTEREST RATE CAP AND SWAP AGREEMENTS -- The cost of interest rate
cap agreements is amortized over the respective lives of the agreements. The
differential to be paid or received in connection with interest rate swap
agreements is accrued as interest rates change and is recognized over the
lives of the agreements.
(J) INCOME TAXES -- The Company follows SFAS No. 109, "Accounting for
Income Taxes." As a result, deferred income taxes are provided to recognize
temporary differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities using enacted tax rates in effect in
the years in which the differences are expected to reverse. The principal
difference relates to depreciation expense. Deferred income tax expense
represents the change in the deferred income tax asset and liability balances,
excluding the deferred tax benefit related to extraordinary losses.
(K) SUBSEQUENT EVENT -- On January 31, 1995, the Company's shareholders
approved an increase in the number of authorized shares of voting Common Stock
to 99,400,000 shares and approved a 6.5-for-one stock split of the Common
Stock, effective January 31, 1995. All share and per share amounts included
in the consolidated financial statements and notes thereto have been restated
to give effect to the increase in authorized shares and the stock split.
(L) LOSS PER SHARE -- Loss per share has been computed on the basis of
the average number of common shares outstanding during the years. The average
number of shares used in the computation was 38,103,215, 38,107,154 and
38,107,453 for the years ended December 31, 1994, 1993 and 1992, respectively.
The assumed exercise of all outstanding stock options has been excluded from
the computation of loss per share in 1994, 1993 and 1992 because the result
was antidilutive.
(M) SEGMENT INFORMATION -- The Company operates in one industry segment
as a manufacturer, converter and marketer of a diversified line of single-use
paper products for the home and away-from-home markets.
- 36 -
2. INVENTORIES
Inventories are summarized as follows:
December 31,
----------------
1994 1993
---- ----
(In thousands)
Components
Raw materials and supplies.......................... $ 63,721 $ 61,285
Finished and partly-finished products............... 67,122 56,984
-------- --------
$130,843 $118,269
======== ========
Value at lower of cost or market:
First-in, first-out (FIFO).......................... $107,493 $ 94,436
Average cost by specific lot........................ 23,350 23,833
-------- --------
$130,843 $118,269
======== ========
3. PROPERTY, PLANT AND EQUIPMENT
The Company's major classes of property, plant and equipment are:
December 31,
-------------------
1994 1993
---- ----
(In thousands)
Land.............................................. $ 44,422 $ 44,429
Buildings......................................... 325,395 318,955
Machinery and equipment........................... 1,527,865 1,367,839
Construction in progress.......................... 35,031 113,829
---------- ----------
$1,932,713 $1,845,052
========== ==========
Included in the property, plant and equipment totals above are assets
under capital leases, as follows:
December 31,
----------------
1994 1993
---- ----
(In thousands)
Buildings......................................... $ 4,012 $ 3,989
Machinery and equipment........................... 186,281 185,624
-------- --------
Total assets under capital leases............. $190,293 $189,613
======== ========
- 37 -
4. GOODWILL
Changes in the Company's goodwill are summarized as follows:
Year Ended December 31,
-----------------------
1993 1992
---- ----
(In thousands)
Balance, beginning of year........................ $ 2,023,416 $2,075,525
Acquisition of Stuart Edgar....................... -- 6,043
Amortization of goodwill.......................... (42,576) (56,700)
Effects of foreign currency translation........... (413) (1,452)
Goodwill write-off................................ (1,980,427) --
----------- ----------
Balance, end of year.............................. $ -- $2,023,416
=========== ==========
Low industry operating rates and aggressive competitive activity among
tissue producers resulting from the recession, additions to capacity and other
factors adversely affected tissue industry operating conditions and the
Company's operating results from 1991 through September 30, 1993.
Accordingly, the Company revised its projections and determined that its
projected results would not support the future amortization of the Company's
remaining goodwill balance of approximately $1.98 billion at September 30,
1993.
The methodology employed to assess the recoverability of the Company's
goodwill first involved the projection in September 1993 of operating results
forward 35 years, which approximated the remaining amortization period of the
goodwill as of October 1, 1993. The Company then evaluated the recoverability
of goodwill on the basis of this forecast of future operations as of
September 30, 1993. Based on such forecast, the cumulative net income before
goodwill amortization of approximately $100 million over the remaining 35-year
amortization period was insufficient to recover the goodwill balance.
Accordingly, the Company wrote off its remaining goodwill balance of $1.98
billion in the third quarter of 1993.
The Company's forecast as of September 30, 1993 assumed that sales volume
increases would be limited to production from a new paper machine then under
construction at the Company's Muskogee mill which was subsequently started-up
in 1994 and that further capacity expansion was not justifiable given the
Company's high leverage and adverse tissue industry operating conditions.
Such projections assumed that net selling price and cost increases would
approximate 1% per year, based on the Company's annual historical price
increase trend for the years 1984 through 1993 and management's estimates of
future performance. Through the year 2001, the Company's projections as of
September 30, 1993 indicated that interest expense would exceed operating
income, which is determined after deducting annual depreciation expense.
However, projected operating income before depreciation was adequate to cover
projected interest expense. Inflation and interest rates were assumed to
remain low at 1993 levels during the projected period. Each of the Company's
- 38 -
then outstanding higher yielding debt securities, the 12 3/8% Senior
Subordinated Notes due 1997 (the "12 3/8% Notes"), the 12 5/8% Subordinated
Debentures due 2000 (the "12 5/8% Debentures") and the 14 1/8% Junior
Subordinated Discount Debentures due 2004 (the "14 1/8% Debentures"), were
further assumed to be refinanced at lower interest rates. Total capital
expenditures were projected to approximate $55-$80 million annually over the
ten years ending December 31, 2003 plus $32 million in 1994 to complete the
Muskogee mill expansion and another $32 million over 1994 and 1995 for a new
coal-fired boiler under construction at the Company's Savannah mill.
Management believed that the projected future results based on these
assumptions were the most likely scenario at the time given the Company's high
leverage and adverse tissue industry operating conditions experienced for the
period 1991 through September 30, 1993.
5. OTHER ASSETS
The components of other assets are as follows:
December 31,
---------------
1994 1993
---- ----
(In thousands)
Deferred loan costs, net of accumulated amortization.... $76,640 $71,459
Prepayments and other................................... 3,692 2,384
------- -------
$80,332 $73,843
======= =======
Amortization of deferred loan costs for the years ended December 31,
1994, 1993 and 1992 totaling $13,466,000, $13,488,000 and $14,910,000,
respectively, is reported as non-cash interest expense. During 1994,
$14,195,000 of deferred loan costs were written off in conjunction with the
retirement of long-term debt, $21,584,000 of deferred loan costs were incurred
for the issuance of the 8 1/4% Senior Notes due 2002 (the "8 1/4% Notes") and
the 9% Senior Subordinated Notes due 2006 (the "9% Notes"), and $10,550,000 of
deferred loan costs were incurred for the purchase of interest rate cap
agreements. During 1993, $19,297,000 of deferred loan costs were written off
in conjunction with the retirement of long-term debt and $31,160,000 of
deferred loan costs were incurred for the issuance of a new bank term loan
(the "1993 Term Loan"), the 9 1/4% Senior Unsecured Notes due 2001 (the
"9 1/4% Notes") and the 10% Subordinated Notes due 2003 (the "10% Notes") and
for the purchase of an interest rate cap agreement (see Note 8).
- 39 -
6. OTHER CURRENT LIABILITIES
The components of other current liabilities are as follows:
December 31,
---------------
1994 1993
---- ----
(In thousands)
Salaries and wages...................................... $41,959 $38,152
Contributions to employee benefit plans................. 12,816 12,805
Taxes other than income taxes........................... 5,615 5,492
Other accrued expenses.................................. 15,060 13,689
------- -------
$75,450 $70,138
======= =======
7. INCOME TAXES
The income tax provision (credit) includes the following components:
Year Ended December 31,
-----------------------------
1994 1993 1992
---- ---- ----
(In thousands)
Current
Federal.................................. $ 1,800 $ (6,012) $ 10,501
State.................................... 509 465 411
Foreign.................................. (2,099) (225) --
-------- -------- --------
Total current........................ 210 (5,772) 10,912
Deferred
Federal.................................. (18,826) (7,731) (13,678)
State.................................... (2,793) (2,956) (2,380)
Foreign.................................. 2,518 145 4,748
-------- -------- --------
Total deferred....................... (19,101) (10,542) (11,310)
-------- -------- --------
$(18,891) $(16,314) $ (398)
======== ======== ========
- 40 -
The effective tax rate varied from the U.S. federal tax rate as a result
of the following:
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
U.S. federal tax rate............................ (34.0)% (34.0)% (34.0)%
Amortization of intangibles...................... -- 33.4 27.6
State income taxes net of U.S. tax benefit....... (4.1) (0.1) (3.0)
Interest on long-term income taxes............... 3.3 -- 5.7
Permanent differences related to accruals........ 3.3 -- --
Other, net....................................... 0.5 (0.1) 3.1
----- ----- -----
Effective tax rate............................... (31.0)% (0.8)% (0.6)%
===== ===== =====
The domestic and foreign components of loss before income taxes are as
follows:
Year Ended December 31,
-----------------------------
1994 1993 1992
---- ---- ----
(In thousands)
Domestic................................. $(62,711) $(2,048,746) $(85,597)
Foreign.................................. 1,695 (7,686) 15,797
-------- ----------- --------
$(61,016) $(2,056,432) $(69,800)
======== =========== ========
The net deferred income tax liability at December 31, 1994 includes $232
million related to property, plant and equipment. All other components of the
gross deferred income tax assets and gross deferred income tax liabilities are
individually not significant. The Company has not recorded a valuation
allowance with respect to any deferred income tax asset.
In 1992, the Internal Revenue Service (the "IRS") issued a statutory
notice of deficiency (the "Notice") to the Company for additional income tax
due for the 1988 tax year. In the Notice, the IRS disallowed deductions for
its 1988 tax year for fees and expenses, other than interest, related to the
1988 debt financing and refinancing transactions. In disallowing these
deductions, the IRS relied on Section 162(k) of the Internal Revenue Code (the
"Code") (which denies deductions for otherwise deductible amounts paid or
incurred in connection with stock redemptions). The Company had deducted a
portion of the disallowed fees and expenses in 1988 and has been deducting the
balance of the fees and expenses over the terms of the 1988 long-term debt
financing and refinancing. Following receipt of the Notice, the Company filed
a petition in the U.S. Tax Court contesting the deficiency. In August 1994,
the U.S. Tax Court issued its opinion in which it essentially adopted the
interpretation of Code Section 162(k) advanced by the IRS and disallowed the
deductions claimed by the Company. At present, the U.S. Tax Court is
preparing an order in which it will determine the amount of the tax deficiency
owed by the Company as a result of the court's decision. The Company intends
to appeal the U.S. Tax Court decision to the U.S. Court of Appeals for the
- 41 -
Seventh Circuit. In anticipation of its appeal, the Company has paid to the
IRS tax of approximately $5 million potentially due for its 1988 tax year
pursuant to the U.S. Tax Court opinion along with $4 million for the interest
accrued on such tax. If the decision of the U.S. Tax Court is ultimately
sustained, the Company estimates that the potential amount of additional taxes
due on account of such disallowance for the period 1989 through 1994 would be
approximately $34 million and for the period after 1994 (assuming current
statutory tax rates) would be approximately $4 million, in each case exclusive
of interest. While the Company is unable to predict the final result of its
appeal of the U.S. Tax Court decision with certainty, it has accrued for the
potential tax liability as well as for the interest charges thereon for the
period 1989 through 1994 and thus the Company believes that the ultimate
resolution of this case will not have a material adverse effect on the
Company's financial condition or on its results of operations.
Assuming a favorable resolution of the U.S. Tax Court appeal, the Company
will have approximately $131 million of net operating loss carryforwards as of
December 31, 1994 for federal income tax purposes which expire as follows:
$11 million in 2007, $47 million in 2008 and $73 million in 2009. The
aggregate amount of net operating loss carryforwards available to the Company
as of December 31, 1994 could be reduced to approximately $71 million if the
U.S. Tax Court decision is affirmed. During 1994, the Company reclassified
$11 million from the liability for other long-term income taxes to the
liability for current income taxes principally to reflect the payments
totaling $9 million made to the IRS with respect to the 1988 tax year.
- 42 -
8. LONG-TERM DEBT
Long-term debt and capital lease obligations, including amounts payable
within one year, are summarized as follows:
December 31,
----------------
1994 1993
---- ----
(In thousands)
1988 Term Loan, at prime plus 1.50% or, subject to
certain limitations, at a reserve adjusted
Eurodollar rate plus 2.25% subject to downward
adjustment if certain financial criteria are
met (at a weighted average rate of 8.19% at
December 31, 1994), due in varying annual
repayments with a final maturity of
December 31, 1996.................................... $ 224,534 $ 331,753
1988 Revolving Credit Facility, at prime plus
1.50% or, subject to certain limitations,
at a reserve adjusted Eurodollar rate plus
2.25% subject to downward adjustment if certain
financial criteria are met (at a weighted
average rate of 8.66% at December 31, 1994),
due December 31, 1996................................ 196,500 243,700
1993 Term Loan, at prime plus 1.75% or, subject
to certain limitations, at a reserve adjusted
Eurodollar rate plus 3.0% (8.57% at
December 31, 1994), due May 1, 1997.................. 100,000 100,000
Senior Secured Notes, at three month LIBOR plus
2.75% to 3.50% (9.13% to 9.88% at December 31, 1994),
due in varying amounts between 1996 and 2000......... 300,000 300,000
Senior Unsecured Notes, 9 1/4%, due March 15, 2001..... 450,000 450,000
Senior Unsecured Notes, 8 1/4%, due February 1, 2002... 100,000 --
Senior Subordinated Notes, 12 3/8%, repurchased
in 1994.............................................. -- 333,910
Senior Subordinated Notes, 9%, due February 1, 2006.... 650,000 --
Subordinated Debentures, 12 5/8%, due November 1, 2000. 145,815 383,910
Subordinated Notes, 10%, due March 15, 2003............ 300,000 300,000
Junior Subordinated Discount Debentures, 14 1/8%,
due November 1, 2004................................. 566,869 506,186
Capital lease obligations, at interest rates
approximating 10.9%.................................. 182,936 184,023
Pollution Control Revenue Refunding Bonds, 7.90%,
due October 1, 2005.................................. 42,000 42,000
Debt of foreign subsidiaries, at rates ranging from
7.00% to 8.36%, due in varying annual installments
through March 2001................................... 47,193 47,106
---------- ----------
3,305,847 3,222,588
Less: Current portion of long-term debt................ 116,203 112,750
---------- ----------
$3,189,644 $3,109,838
========== ==========
- 43 -
The aggregate fair values of the Company's long-term debt and capital
lease obligations approximated $3,152 million and $3,276 million compared to
aggregate carrying values of $3,306 million and $3,223 million at December 31,
1994 and 1993, respectively. The fair values of the Term Loan, Revolving
Credit Facility and 1993 Term Loan are estimated based on secondary market
transactions in such securities. Fair values for the Senior Secured Notes,
the 9 1/4% Notes, the 8 1/4% Notes, the 9% Notes, the 12 5/8% Debentures, the
10% Notes, the 14 1/8% Debentures and the Pollution Control Revenue Refunding
Bonds were estimated based on trading activity in such securities. Of the
capital lease obligations, the fair values of 1991 Series Pass Through
Certificates were estimated based on trading activity in such securities. The
fair values of other capital lease obligations were estimated based on
interest rates implicit in the valuation of the 1991 Series Pass Through
Certificates. The fair value of debt of foreign subsidiaries is deemed to
approximate its carrying amount.
The 14 1/8% Debentures did not accrue interest in cash until November 1,
1994, and were issued at a discount to yield a 14 1/8% effective annual rate.
The 14 1/8% Debentures require payments of interest in cash commencing on
May 1, 1995. Interest incurred in 1994 through October and for the years
ended December 31, 1993 and 1992 related to these debentures was added to the
balance due.
On February 9, 1994, the Company sold $100 million principal amount of
8 1/4% Notes and $650 million principal amount of 9% Notes in a registered
public offering (collectively, the "1994 Notes"). Net proceeds from the sale
of the 1994 Notes were applied to the repurchase of all the remaining 12 3/8%
Notes at the redemption price of 105% of the principal amount thereof, to the
repurchase of $238 million of 12 5/8% Debentures at the redemption price of
105% of the principal amount thereof, to the prepayment of $100 million of the
1988 Term Loan, to the repayment of a portion of the Company's indebtedness
under the 1988 Revolving Credit Facility and to the payment of fees and
expenses.
The 8 1/4% Notes are senior unsecured obligations of the Company, rank
equally in right of payment with the other senior indebtedness of the Company
and are senior to all existing and future subordinated indebtedness of the
Company. The 9% Notes are subordinated in right of payment to all existing
and future senior indebtedness of the Company, and constitute senior
indebtedness with respect to the 10% Notes, the 12 5/8% Debentures and the
14 1/8% Debentures.
In connection with the sale of the 1994 Notes, the Company amended the
Bank Credit Agreement, the 1993 Term Loan Agreement and the Senior Secured
Note Agreement. Among other changes, the amendments reduced the required
ratio of earnings before non-cash charges, interest and taxes to cash interest
for the four fiscal quarters ending March 31, 1994, to 1.40 to 1.00 from 1.50
to 1.00.
The Company incurred an extraordinary loss of $28 million (net of income
taxes of $15 million) in the first quarter of 1994 representing the redemption
premiums on the repurchases of the 12 3/8% Notes and the 12 5/8% Debentures,
and the write-off of deferred loan costs associated with the prepayment of
$100 million of the 1988 Term Loan and the repurchases of the 12 3/8% Notes
and the 12 5/8% Debentures.
- 44 -
On March 22, 1993, the Company sold $450 million principal amount of
9 1/4% Notes and $300 million principal amount of 10% Notes in a registered
public offering. On April 21, 1993, the Company borrowed $100 million
pursuant to the 1993 Term Loan. Proceeds from the sale of the 9 1/4% Notes
and the 10% Notes and from the 1993 Term Loan were applied to the prepayment
of $250 million of the 1988 Term Loan, to the repayment of a portion of the
Company's indebtedness under the 1988 Revolving Credit Facility, to the
repurchase of all the Company's outstanding Junior Subordinated Debentures due
2004 (the "14 5/8% Debentures") and to the payment of fees and expenses. As a
result of the repayment of $250 million of the 1988 Term Loan and the
repurchases of the 14 5/8% Debentures, the Company incurred an extraordinary
loss of $10 million (net of income taxes of $6 million) representing the
write-off of unamortized deferred loan costs.
The 9 1/4% Notes are senior unsecured obligations of the Company, rank
equally in right of payment with the other senior indebtedness of the Company
and are senior to all existing and future subordinated indebtedness of the
Company. The 10% Notes are subordinated in right of payment to all existing
and future senior indebtedness of the Company, including the 9% Notes, rank
equally with the 12 5/8% Debentures and constitute senior indebtedness with
respect to the 14 1/8% Debentures. The 1993 Term Loan constitutes senior
secured indebtedness of the Company.
The Company redeemed $50 million of its 12 3/8% Notes at the redemption
price of 105% of the principal amount thereof on November 1, 1993, the first
date that such notes were redeemable. The redemption was funded principally
from excess funds from the sale of the 9 1/4% Notes and the 10% Notes. In
connection with the redemption, the Company incurred an extraordinary loss of
$2 million (net of income taxes of $1 million), representing the redemption
premium and unamortized deferred loan costs.
Debt of foreign subsidiaries bears interest at floating rates and is
secured by certain assets of Fort Sterling and Stuart Edgar but is nonrecourse
to the Company.
Obligations under the Bank Credit Agreement, the 1993 Term Loan
Agreement, the Senior Secured Notes and debt of foreign subsidiaries bear
interest at floating rates. The Company's policy is to enter into interest
rate cap and swap agreements as a hedge to effectively fix or limit its
exposure to floating interest rates to, at a minimum, comply with the terms of
its senior secured debt agreements. The Company is a party to LIBOR-based
interest rate cap agreements which limit the interest cost to the Company with
respect to $500 million of floating rate obligations to 6% plus the Company's
borrowing margin until June 1, 1996 and to 8% plus the Company's borrowing
margin from June 1, 1996 until June 1, 1999. At current market rates at
December 31, 1994, the fair value of the Company's interest rate cap
agreements is $23 million. The counterparties to the Company's interest rate
cap agreements consist of major financial institutions. While the Company is
exposed to credit risk to the extent of nonperformance by these
counterparties, management monitors the risk of default by the counterparties
and believes that the risk of incurring losses due to nonperformance is
remote.
- 45 -
In addition to the scheduled mandatory annual repayments, the Bank Credit
Agreement provides for mandatory repayments from proceeds of any significant
asset sales (except for proceeds from certain foreign asset sales which are
redeployed outside the U.S.), from proceeds of sale and leaseback
transactions, and annually an amount equal to 50% of excess cash flow for the
prior calendar year, as defined.
Among other restrictions, the Bank Credit Agreement, the 1993 Term Loan
Agreement, the Senior Secured Note Agreement, the debt of foreign subsidiaries
and the Company's indentures: (1) restrict payments of dividends, repayments
of subordinated debt, purchases of the Company's Common Stock, additional
borrowings and acquisition of property, plant and equipment; (2) require that
the ratios of current assets to current liabilities, senior debt to adjusted
net worth plus subordinated debt and earnings before non-cash charges,
interest and taxes to cash interest be maintained at prescribed levels; (3)
restrict the ability of the Company to make fundamental changes and to enter
into new lines of business, the pledging of the Company's assets and
guarantees of indebtedness of others and (4) limit dispositions of assets, the
ability of the Company to enter lease and sale and leaseback transactions, and
investments which might be made by the Company. The Company believes that
such limitations should not impair its plans for continued maintenance and
modernization of facilities or other operating activities.
On October 14, 1994, the Company entered into an amendment of its Bank
Credit Agreement, 1993 Term Loan Agreement and Senior Secured Note Agreement.
Among other things, this amendment adjusted certain financial covenants,
including the reduction of the required ratio of earnings before non-cash
charges, interest and taxes to cash interest to 1.25 to 1.00 from 1.50 to 1.00
and the increase of the maximum ratio of senior debt to adjusted net worth
plus subordinated debt to 0.85 to 1.00 from 0.80 to 1.00 effective for the
rolling four quarters ended December 31, 1994 through December 31, 1995. The
ratios were adjusted to give effect to the Company's higher aggregate cash
interest expense which results from the Company's 14 1/8% Debentures accruing
interest in cash commencing on November 1, 1994, with payments of interest in
cash commencing on May 1, 1995.
At December 31, 1994, receivables totaling $114 million, inventories
totaling $131 million and property, plant and equipment with a net book value
of $1,313 million were pledged as collateral under the terms of the Bank
Credit Agreement, the 1993 Term Loan Agreement, the Senior Secured Note
Agreement, the debt of foreign subsidiaries and under the indentures for sale
and leaseback transactions.
The Company is charged a 0.5% fee with respect to any unused balance
available under its $350 million 1988 Revolving Credit Facility, and a 2% fee
with respect to any letters of credit issued under the 1988 Revolving Credit
Facility. At December 31, 1994, $197 million of borrowings reduced available
capacity under the 1988 Revolving Credit Facility to $153 million.
- 46 -
The aggregate annual maturities of long-term debt and capital lease
obligations at December 31, 1994, are as follows:
Amount
------
(In thousands)
1995........................................ $ 116,203
1996........................................ 331,307
1997........................................ 207,793
1998........................................ 87,804
1999........................................ 81,551
2000 and thereafter......................... 2,481,189
----------
$3,305,847
==========
9. SALE AND LEASEBACK TRANSACTIONS
Buildings and machinery and equipment related to various capital
additions at the Company's tissue mills were sold and leased back from various
financial institutions (the "sale and leaseback transactions") for periods
from 15 to 25 years. The terms of the sale and leaseback transactions contain
restrictions which are less restrictive than the covenants of the Bank Credit
Agreement described in Note 8.
These leases are treated as capital leases in the accompanying
consolidated financial statements. Future minimum lease payments at
December 31, 1994, are as follows:
Year Ending December 31, Amount
------------------------ ------
(In thousands)
1995................................... $ 23,449
1996................................... 24,541
1997................................... 24,541
1998................................... 24,330
1999................................... 24,005
2000 and thereafter.................... 362,839
--------
Total payments......................... 483,705
Less imputed interest at
rates approximating 10.9%............ 300,769
--------
Present value of capital
lease obligations.................... $182,936
========
- 47 -
10. EMPLOYEE POSTRETIREMENT BENEFIT PLANS
As of January 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The cumulative
effect on years prior to 1992 of adopting SFAS No. 106 is stated separately in
the Company's consolidated statement of income for 1992 as a one-time after-
tax charge of $10.6 million. This change in accounting principle, excluding
the cumulative effect, decreased operating income by $1.2 million in 1992.
Net periodic postretirement benefit cost included the following
components:
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
(In thousands)
Service cost...................................... $1,138 $1,140 $ 902
Interest cost..................................... 1,719 1,800 1,366
Other............................................. 85 99 --
------ ------ ------
Net periodic postretirement benefit cost........ $2,942 $3,039 $2,268
====== ====== ======
The following table sets forth the components of the plan's unfunded
accumulated postretirement benefit obligation:
December 31,
----------------
1994 1993
---- ----
(In thousands)
Accumulated postretirement benefit obligation:
Retirees............................................ $ 7,068 $ 7,504
Fully eligible active plan participants............. 3,411 4,401
Other active plan participants...................... 11,505 12,037
------- -------
21,984 23,942
Unrecognized actuarial gains (losses)................. 457 (3,517)
------- -------
Accrued postretirement benefit cost................... $22,441 $20,425
======== ========
The medical trend rate assumed in the determination of the accumulated
postretirement benefit obligation at December 31, 1994 begins at 11.5% in
1995, decreases 1% per year to 6.5% for 2000 and remains at that level
thereafter. Increasing the assumed medical trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by $3.2 million and the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost by $0.5 million. The medical trend rate assumed in the determination of
the accumulated postretirement benefit obligation as of December 31, 1993
began at 12% in 1994, decreasing 1% per year to 6% for 2000 and remained at
that level thereafter.
- 48 -
The discount rate used in determining the accumulated postretirement
benefit obligation was 8% and 7% compounded annually with respect to the 1994
and 1993 valuations, respectively.
11. SHAREHOLDERS' DEFICIT
The Company is authorized to issue up to 99,400,000 shares of $.01 par
value voting Common Stock. At December 31, 1994, 38,107,778 shares were
issued and 38,101,239 shares were outstanding. At December 31, 1993,
38,107,778 shares were issued and 38,107,128 shares were outstanding. In
addition, 600,000 shares of $.01 par value nonvoting Common Stock have been
authorized, of which none were issued or outstanding at both December 31, 1994
and 1993.
Changes in the Company's shareholders' deficit accounts for the years
ended December 31, 1994, 1993 and 1992, are as follows:
Cumulative
Common Translation Retained
Stock Adjustment Deficit
------ ----------- --------
(In millions)
Balance, December 31, 1991................. $601 $ 7 $ (545)
Net loss................................... -- -- (80)
Amortization of the increase in fair
market value of Common Stock with
put right................................ -- -- (1)
Foreign currency translation adjustment.... -- (11) --
---- ---- -------
Balance, December 31, 1992................. 601 (4) (626)
Net loss................................... -- -- (2,052)
Decrease in fair market value of Common
Stock with put right..................... -- -- 2
Foreign currency translation adjustment.... -- (1) --
---- ---- -------
Balance, December 31, 1993................. 601 (5) (2,676)
Net loss................................... -- -- (71)
Foreign currency translation adjustment.... -- 3 --
---- ---- -------
Balance, December 31, 1994................. $601 $ (2) $(2,747)
==== ==== =======
The aggregate par value of the Common Stock reported in the amounts above
at December 31, 1994 was $381,012.
12. COMMON STOCK WITH PUT RIGHT
All Common Stock acquired by management investors, including shares
acquired by the Company's former chairman and chief executive officer, are
collectively referred to as the "Putable Shares." Beginning with the fifth
anniversary of the respective dates of purchase of certain of the Putable
Shares to the date on which 15% or more of the Company's Common Stock has been
sold in one or more public offerings, specified percentages of the shares may
be put to the Company at the option of the holders thereof, with certain
limitations, at their fair market value. Subject to certain exceptions and
prior to the date on which 15% or more of the Company's Common Stock has been
- 49 -
sold in one or more public offerings, management investors who terminate their
employment with the Company shall sell their shares of Common Stock and vested
options to the Company or its designee. All the Putable Shares owned by the
Company's former chairman and chief executive officer became putable to the
Company at the time of his resignation.
During 1993, the Company decreased the estimated fair market valuation of
its Common Stock as a result of the effects of adverse tissue industry
operating conditions on its long-term earnings forecast and, as a result,
reduced the carrying amount of its Common Stock with put right to its original
cost. The effect of the adjustment was to reduce both the Common Stock with
put right and the retained deficit by approximately $1.4 million.
Changes in the Company's Common Stock with put right are as follows:
Year Ended December 31,
--------------------------
1994 1993 1992
---- ---- ----
(In thousands)
Balance, beginning of year............... $11,820 $13,219 $12,963
Amortization of the increase (decrease)
in fair market value and increased
vested portion of Putable Shares......... -- (1,399) 256
Repurchased into Treasury................ (109) -- --
------- ------- -------
Balance, end of year..................... $11,711 $11,820 $13,219
======= ======= =======
13. STOCK OPTIONS
Pursuant to the Management Equity Participation Agreement and the
Management Equity Plan, 5,253,463 shares of Common Stock are reserved for sale
to officers and key employees as stock options as of December 31, 1994. The
exercisability of such options is subject to certain conditions. Such options
must be exercised within ten years of the date of grant. All such options and
shares to be issued under the terms of these plans are restricted as to
transferability. Under certain conditions, the Company has the right or
obligation to redeem shares issued under terms of the options at a price equal
to their fair market value.
- 50 -
Changes in stock options outstanding are summarized as follows:
Exercise
Number Of Price
Options Per Option
--------- ---------------
Balance, December 31, 1991..................... 3,663,803 $15.38 to 18.46
Options Granted.............................. 80,600 18.46
Options Cancelled............................ (6,890) 15.38 to 18.46
--------- ---------------
Balance, December 31, 1992..................... 3,737,513 15.38 to 18.46
Options Granted.............................. 98,800 18.46
Options Cancelled............................ (10,660) 15.38 to 18.46
--------- ---------------
Balance, December 31, 1993..................... 3,825,653 15.38 to 18.46
Options Cancelled............................ (82,888) 15.38 to 18.46
--------- ---------------
Balance, December 31, 1994..................... 3,742,765 $15.38 to 18.46
========= ===============
Exercisable at December 31, 1994............... 3,358,537 $15.38 to 18.46
========= ===============
Shares available for future grant at
December 31, 1994............................ 1,510,698
=========
On January 31, 1995, the Company's shareholders approved the 1995 Stock
Incentive Plan under which a total of 3,359,662 shares of Common Stock are
reserved for awards to officers and key employees as stock options, stock
appreciation rights, restricted stock, performance shares, stock equivalents
and dividend equivalents and approved the Non-Employee Director Plan under
which a total of 80,000 shares of Common Stock are reserved for grant to non-
employee directors. Following adoption of such plans, no additional shares
will be available for future grant under the Management Equity Participation
Agreement or Management Equity Plan. As a result, the total number of shares
available for future grant will be 3,439,662 shares as of January 31, 1995.
Any options to be issued subject to the 1995 Stock Incentive Plan will expire
not later than ten years after the date on which they are granted. The
vesting schedule and exercisability of stock options will generally be based
on length of service or attainment of performance goals. On December 19,
1994, the Company's Board of Directors approved the full vesting and
exercisability of all unvested options outstanding effective just prior to an
initial public offering of Common Stock. If such an offering proceeds, the
number of exercisable options would increase to 3,741,465 as of January 31,
1995.
Until such date on which 15% or more of the Company's Common Stock has
been sold in one or more public offerings, the Company amortizes the excess of
the fair market value of its Common Stock over the strike price of options
granted to employees over the periods the options vest. After such date, no
amortization will be required because the options will not be putable to the
Company. There was no employee stock compensation expense in 1994. Due to
the effects of adverse tissue industry operating conditions on its long-term
earnings forecast as of September 30, 1993, the Company decreased the
estimated fair market valuation of its Common Stock and, as a result, reversed
all previously accrued employee stock compensation expense in 1993. The
reversal of the accrued employee stock compensation expense resulted in a
credit to operations of $7,832,000 for 1993. Employee stock compensation
expense was $1,120,000 for 1992.
- 51 -
14. RELATED PARTY TRANSACTIONS
Morgan Stanley Group Inc. ("Morgan Stanley Group") and an affiliate
acquired a substantial majority equity interest in the Company to effect the
Acquisition. At December 31, 1994, Morgan Stanley Group and its affiliates
controlled 57% (on a fully diluted basis) of the Company's Common Stock.
Pursuant to an agreement terminated effective December 31, 1994, Morgan
Stanley & Co. Incorporated ("MS&Co") provided financial advisory services to
the Company in consideration for which the Company paid MS&Co an annual fee of
$1 million. MS&Co was also entitled to reimbursement for all reasonable
expenses incurred in the performance of the foregoing services. The Company
paid MS&Co $1,023,000, $1,046,000 and $1,096,000 for these and other
miscellaneous services in 1994, 1993 and 1992, respectively. The Company is a
party to several interest rate cap agreements (see Note 8) including one such
agreement with MS&Co which was purchased in 1994 for $2.1 million. In
connection with the sale of the 1994 Notes, MS&Co received approximately $20.4
million in underwriting fees in 1994. In 1993, MS&Co received approximately
$19.5 million related to the underwriting of the issuance of the 1993 Notes.
In 1992, MS&Co received approximately $0.7 million related to the underwriting
of the reissuance of the Company's Pollution Control Revenue Refunding Bonds.
MS&Co served as lead underwriter for the initial offering of the Company's
subordinated debt securities and since the Acquisition has been a market maker
with respect to those securities.
15. COMMITMENTS AND CONTINGENCIES
In 1994, the Company commenced construction of a new coal-fired boiler at
its Savannah mill. Total expenditures for the new boiler are projected to be
$35 million. As of December 31, 1994, expenditures on the project had totaled
$19 million.
The Company is subject to substantial regulation by various federal,
state and local authorities in the U.S. and national and local authorities in
the U.K. concerned with the impact of the environment on human health, the
limitation and control of emissions and discharges to the air and waters, the
quality of ambient air and bodies of water and the handling, use and disposal
of specified substances and solid wastes. Financial responsibility for the
clean-up or other remediation of contaminated property or for natural resource
damages can extend to previously owned or used properties, waterways and
properties owned by third parties as well as to prior owners. The Company is
involved in a voluntary investigation and potential clean-up of the Lower Fox
River in Wisconsin and has been named as a potentially responsible party for
alleged natural resource damages related to the Lower Fox River and Green Bay
system. In addition, the Company makes capital expenditures and incurs
operating expenses for clean-up obligations and other environmental matters
arising in its on-going operations.
Based upon currently available information and analysis, the Company
recorded a $20 million charge in the fourth quarter of 1994 for estimated or
anticipated liabilities and legal and consulting costs relating to
environmental matters arising from past operations. The Company expects these
costs to be incurred over an extended number of years.
The Company and its subsidiaries are parties to other lawsuits and state
and federal administrative proceedings in connection with their businesses.
Although the final results in all such suits and proceedings cannot be
- 52 -
predicted with certainty, the Company currently believes that the ultimate
resolution of all of such lawsuits and proceedings, after taking into account
the liabilities accrued with respect to such matters, will not have a material
adverse effect on the Company's financial condition or on its result of
operations.
16. GEOGRAPHIC INFORMATION
A summary of the Company's operations by geographic area as of
December 31, 1994, 1993 and 1992, and for the years then ended is presented
below:
United United
States Kingdom Consolidated
------ ------- ------------
(In thousands)
1994
Net sales........................ $ 1,143,205 $131,240 $ 1,274,445
Operating income................. 268,620 8,183 276,803
Identifiable operating assets.... 1,517,992 162,906 1,680,898
1993
Net sales........................ $ 1,044,174 $143,213 $ 1,187,387
Operating loss................... (1,715,777) (859) (1,716,636)
Identifiable operating assets.... 1,486,166 163,621 1,649,787
1992
Net sales........................ $ 1,008,129 $143,222 $ 1,151,351
Operating income................. 253,437 17,238 270,675
Identifiable operating assets.... 3,411,833 162,734 3,574,567
Intercompany sales and charges between geographic areas and export sales
are not material.
In 1993, the Company determined that its projected results would not
support the future amortization of the Company's remaining goodwill balance.
Accordingly, the Company wrote off its remaining goodwill balance of $1,980
million in the third quarter of 1993, resulting in charges of $1,968 million
and $12 million to the operating income of the United States and United
Kingdom operations, respectively.
- 53 -
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
A summary of the quarterly results of operations for 1994 and 1993
follows (in millions, except per share data):
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- -----
1994
Net sales................ $ 275 $ 315 $ 340 $ 344 $ 1,274
Gross income............. 87 107 113 100 407
Operating income......... 60 79 85 53 277
Net income (loss) before
extraordinary item..... (15) (2) -- (25) (42)
Extraordinary item-loss
on debt repurchases.... (28) -- -- -- (28)
Net income (loss)........ (43) (2) -- (25) (70)
Earnings (loss) per share:
Net income (loss) before
extraordinary item... (0.40) (0.05) 0.01 (0.65) (1.11)
Extraordinary item-loss
on debt repurchases.. (0.74) -- -- -- (0.74)
Net income (loss)
per share............ (1.14) (0.05) 0.01 (0.65) (1.85)
Dividends per share...... -- -- -- -- --
1993
Net sales................ $ 285 $ 302 $ 309 $ 291 $ 1,187
Gross income............. 96 101 109 97 403
Operating income (loss).. 56 61 (1,905) 71 (1,717)
Net loss before
extraordinary items.... (26) (24) (1,986) (4) (2,040)
Extraordinary items--
losses on debt
repurchases............ (10) -- -- (2) (12)
Net loss................. (36) (24) (1,986) (6) (2,052)
Loss per share:
Net loss before
extraordinary items.. (0.69) (0.62) (52.12) (0.10) (53.54)
Extraordinary items--
losses on debt
repurchases.......... (0.25) -- -- (0.06) (0.31)
Net loss per share..... (0.94) (0.62) (52.12) (0.16) (53.85)
Dividends per share...... -- -- -- -- --
- 54 -
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS
The following table provides certain information about each of the
current directors of the Company. Within 90 days following the Closing Date,
the Company will appoint two independent directors to the Board of Directors
who are not employees of the Company or Morgan Stanley Group and its
affiliates. The Company's Board of Directors is divided into three classes of
directors serving staggered three-year terms. The terms of office of the
directors expire as follows: Ms. Hempel in 1996; Messrs. Riordan and Sica in
1997; and Messrs. DeMeuse, Brennan and Niehaus in 1998.
Present Principal Occupation or Employment;
Name and Position Five-Year Employment History
with the Company Age and other Directorships
----------------- --- -------------------------------------------
Donald H. DeMeuse 58 Chairman of the Board of Directors and
Chairman of the Board Chief Executive Officer since March 1992;
and Chief Executive President and Chief Executive Officer from
Officer July 1990 to March 1992. Prior to March
1992, President for more than five years.
Director of Associated Bank Green Bay.
Kathleen J. Hempel 44 Vice Chairman and Chief Financial Officer
Vice Chairman since March 1992; Senior Executive
Vice President and Chief Financial Officer
prior to that time. Director of Whirlpool
Corporation.
Michael T. Riordan 44 President and Chief Operating Officer since
Director March 1992; Vice President prior to that
time.
Donald Patrick Brennan 54 Managing Director of MS&Co. since prior to
Director 1989 and head of MS&Co.'s Merchant Banking
Division. Chairman and President of
Morgan Stanley Leveraged Equity Fund II, Inc.
("MSLEF II, Inc."), Chairman of Morgan
Stanley Capital Partners III, Inc.
("MSCP III") and Chairman of Morgan
Stanley Venture Partners. Director of
MS&Co., Jefferson Smurfit Corporation,
PSF Finance Holdings, Inc., Stanklav
Holdings, Inc. and Waterford Wedgwood plc.
- 55 -
Present Principal Occupation or Employment;
Name and Position Five-Year Employment History
with the Company Age and other Directorships
----------------- --- -------------------------------------------
Robert H. Niehaus 39 Managing Director of MS&Co. since 1990
Director Principal of MS&Co. prior to that time.
Vice President and Director of MSLEF II,
Inc. and Vice Chairman of MSCP III.
Director of American Italian Pasta
Company, PSF Finance Holdings, Inc.,
Randall's Food Markets, Inc., Silgan
Corporation, Silgan Holdings Inc., Waterford
Wedgwood U.K. plc (Chairman) and Waterford
Crystal Ltd.
Frank V. Sica 44 Managing Director of MS&Co. since prior
Director to 1989. Vice President and Director of
MSLEF II, Inc. since 1989 and Vice Chairman
of MSCP III. Director of ARM Financial
Group, Inc., Emmis Broadcasting
Corporation, Kohl's Corporation, PageMart,
Inc., Southern Pacific Rail Corporation,
and Sullivan Communications, Inc.
EXECUTIVE OFFICERS
The following table provides certain information about each of the current
executive officers of the Company. All executive officers are elected by, and
serve at the discretion of, the Board of Directors. None of the executive
officers of the Company is related by blood, marriage or adoption to any other
executive officer or director of the Company.
Present Principal Occupation or Employment;
Name and Position Five-Year Employment History
with the Company Age and other Directorships
----------------- --- -------------------------------------------
Donald H. DeMeuse 58 See description under "Directors and
Chairman of the Board and Executive Officers of Registrant --
Chief Executive Officer Directors."
Kathleen J. Hempel 44 See description under "Directors and
Vice Chairman and Chief Executive Officers of Registrant --
Financial Officer Directors."
Michael T. Riordan 44 See description under "Directors and
President and Chief Executive Officers of Registrant --
Operating Officer Directors."
Andrew W. Donnelly 52 Executive Vice President for more than
Executive Vice President five years.
John F. Rowley 54 Executive Vice President for more than
Executive Vice President five years.
- 56 -
Present Principal Occupation or Employment;
Name and Position Five-Year Employment History
with the Company Age and other Directorships
----------------- --- -------------------------------------------
George F. Hartmann, Jr. 52 Vice President for more than five years.
Vice President
R. Michael Lempke 42 Vice President since Septmber 1994;
Vice President and Treasurer since November 1989.
Treasurer
James W. Nellen II 47 Vice President and Secretary for more
Vice President and than five years.
Secretary
Daniel J. Platkowski 44 Vice President for more than five years.
Vice President
Timothy G. Reilly 44 Vice President for more than five years.
Vice President
Donald J. Schneider 58 Vice President since July 1989. Director
Vice President of Research and Development prior to that
time.
Charles L. Szews 38 Vice President since September 1994;
Vice President and Controller since November 1989.
Controller
Charles D. Wilson 50 Vice President since June 1994; Director
Vice President of Government Affairs prior to that time.
David K. Wong 45 Vice President since June 1993; Director of
Vice President Personnel from September 1990 until June
1993. Director of Recruiting and Training
prior to that time.
David A. Stevens 46 Assistant Vice President for more than
Assistant Vice President five years.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors currently has three committees: an
Executive Committee, an Audit Committee and a Compensation Committee.
The Executive Committee is authorized to exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Company, except that it does not have the power or authority to
amend the Company's Certificate of Incorporation or By-laws, adopt an
agreement of merger or consolidation, recommend to the shareholders the sale,
lease or exchange of all or substantially all of the Company's property and
assets, recommend to the shareholders the dissolution of the Company, declare
a dividend or authorize the issuance of shares of stock. The Executive
- 57 -
Committee acts as a compensation committee for determining certain aspects of
the compensation of the executive officers of the Company. The
responsibilities of the Compensation Committee include administering the
Company's 1995 Stock Incentive Plan and selecting the officers and key
employees to whom awards will be granted. The Compensation Committee is
comprised of non-management directors. See "--Compensation Committee
Interlocks and Insider Participation."
The responsibilities of the Audit Committee include: recommending to the
Board of Directors the independent public accountants to be selected to
conduct the annual audit of the accounts of the Company; reviewing the
proposed scope of such audit and approving the audit fees to be paid; and
reviewing the adequacy and effectiveness of the internal auditing, accounting
and financial controls of the Company with the independent public accountants
and the Company's financial and accounting staff. The Audit Committee will be
comprised of non-management directors.
- 58 -
ITEM 11. EXECUTIVE COMPENSATION
The following table presents information concerning compensation paid for
services to the Company during fiscal years 1992 through 1994 to the Chief
Executive Officer and the four other most highly compensated executive
officers (the "Named Executive Officers") of the Company.
SUMMARY COMPENSATION TABLE
<TABLE><CAPTION>
Long-Term
Compensation
------------
Annual Compensation Awards
---------------------------------- ------------
Number of
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation(a) Options/SARs Compensation(b)
------------------ ---- ------ ----- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald H. DeMeuse 1994 $750,000 $307,500 $7,802 0 $69,366
Chairman and 1993 653,846 55,250 4,840 0 62,742
Chief Executive 1992 675,000 55,250 3,831 0 57,480
Officer
Kathleen J. Hempel 1994 $480,000 $196,820 1,036 0 $27,311
Vice Chairman and 1993 453,077 38,381 0 0 27,388
Chief Financial 1992 456,923 37,400 0 0 27,222
Officer
Michael T. Riordan 1994 $375,000 $153,750 4,671 0 $21,400
President and 1993 302,885 25,500 0 48,750 18,437
Chief Operating 1992 248,846 20,171 317 0 15,028
Officer
Andrew W. Donnelly 1994 $330,000 $135,300 162 0 $18,603
Executive Vice 1993 350,000 29,750 0 0 20,859
President 1992 342,692 28,050 0 0 20,133
John F. Rowley 1994 $237,855 $ 96,350 338 0 $13,676
Executive Vice 1993 255,000 21,675 0 0 - 15,111
President 1992 244,039 19,975 0 0 14,561
</TABLE>
(a) Consists of amounts reimbursed for the payment of taxes.
(b) Consists of Company contributions to the Company's profit sharing plan
and supplemental retirement plan, including Company contributions to the
Company's supplemental retirement plan which were paid to the participant.
- 59 - <PAGE>
The following table presents information concerning unexercised stock
options for the Named Executive Officers. No stock options were exercised by
the Named Executive Officers during 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
Value of Unexercised
Number of Unexercised Options In-the-money Options Held
Held at December 31, 1994 at December 31, 1994 (a)
----------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ----------- -------------
Donald H. DeMeuse 505,537 37,700 -- --
Kathleen J. Hempel 562,347 13,000 -- --
Michael T. Riordan 119,008 54,600 -- --
Andrew W. Donnelly 141,927 16,900 -- --
John F. Rowley 102,323 15,600 -- --
a) Prior to the Offering, the Common Stock was not registered or publicly
traded and, therefore, a public market price for the Common Stock was not
available. Without the benefit of the Bank Refinancing and the 1995 Debt
Redemptions, the Company believes that none of the exercisable or
unexercisable stock options held at December 31, 1994 were in-the-money as of
such date. See Notes 12 and 13 of the Company's audited consolidated
financial statements.
DIRECTOR'S COMPENSATION
Prior to the completion of the Offering, directors of the Company did not
receive any compensation for service on the Board of Directors. The Company
intends to pay all of its directors who are not officers of the Company an
annual fee (the "Annual Fee") of $30,000 plus $2,000 for attendance at each
meeting, plus $1,000 for attendance at each committee meeting. In addition,
the Company intends to reimburse all of its directors for their travel
expenses in connection with their attendance at board and committee meetings.
The Company intends to pay 50% of the Annual Fee in the form of cash and 50%
of the Annual Fee in the form of shares of Common Stock pursuant to the
Company's 1995 Stock Plan for Non-Employee Directors. The payment of the cash
portion of the Annual Fee may be deferred by any director at such director's
election pursuant to the Company's Deferred Compensation Plan for Non-Employee
Directors until the earliest of (i) the date of termination of such director's
service as a non-employee director, (ii) the date specified by such director
in his deferred election form and (iii) the date of such director's death.
EMPLOYMENT AGREEMENTS
The Named Executive Officers have entered into employment agreements with
the Company (the "Employment Agreements") which took effect in 1993. The
Employment Agreements contain customary employment terms, have an initial term
that expires on December 31, 1997, provide for automatic one-year extensions
(unless notice not to extend is given by either party at least six months
prior to the end of the effective term) and provide for base annual salaries
and annual incentive bonuses. The present base salaries for Mr. DeMeuse,
Ms. Hempel, Mr. Riordan, Mr. Donnelly and Mr. Rowley are $750,000, $480,000,
$375,000, $330,000 and $250,000, respectively. In addition, the Employment
- 60 -
Agreements for Mr. DeMeuse, Ms. Hempel and Mr. Riordan provide for
participation in additional bonus arrangements which may be agreed upon in
good faith from time to time with the Company. The Employment Agreements
provide that certain payments in lieu of salary and bonus are to be made and
certain benefits are to be continued for a stated period following termination
of employment. The time periods for such payments vary depending on the cause
of termination. The amount of the payments to be made to each individual
would vary depending upon such individual's level of compensation and benefits
at the time of termination and whether such employment is terminated prior to
the end of the term by the Company for "cause" or by the employee for "good
reason" (as such terms are defined in the Employment Agreements) or otherwise
during the term of the agreements. In addition, the Employment Agreements for
Mr. DeMeuse, Ms. Hempel and Mr. Riordan include noncompetition and
confidentiality provisions.
MANAGEMENT INCENTIVE PLAN
The Company maintains a Management Incentive Plan which is administered
by the Executive Committee. Participation is based upon individual selection
by the Executive Committee from among the full-time salaried employees who, in
the judgment of the Chief Executive Officer, serve in key executive,
administrative, professional or technical capacities. Presently,
approximately 85 individuals participate in the Management Incentive Plan.
Awards are based upon the extent to which the Company's financial performance
(in terms of net earnings, operating income, earnings per share, cash flow,
absolute and/or relative return on equity or assets, pre-tax profits, earnings
growth, revenue growth, comparison to peer companies, any combination of the
foregoing and/or other appropriate measures in such manner as the Executive
Committee deems appropriate) during the year has met or exceeded certain
performance goals specified by the Executive Committee. Some performance
goals applicable to senior managers may include elements which specify
individual achievement objectives directly related to such individual's areas
of management responsibility. In determining whether performance goals have
been satisfied, the Executive Committee in its discretion may direct that
adjustments be made to the performance goals or actual financial performance
as reported to reflect extraordinary changes that have occurred during the
year. The Executive Committee may alternatively grant a discretionary bonus.
A participant must be employed by the Company on the last day of the year in
order to receive a bonus for such year, except in the case of death,
disability or retirement after age 55, in which case such participant would
receive a pro rata bonus. In the event of termination of a participant's
employment without "cause" (as defined in the Management Incentive Plan)
within two years following a "change in control" (as defined below under "1995
Stock Incentive Plan"), participants will receive a pro rata bonus for such
year calculated as if the applicable performance targets have been attained.
The Board of Directors may terminate or amend the Management Incentive
Plan, in whole or in part, at any time; provided that no such termination or
amendment may impair any rights which may have accrued under such plan.
SUPPLEMENTAL RETIREMENT PLAN
In 1983, the Company adopted a Supplemental Retirement Plan (the
"Supplemental Retirement Plan"). Participation is limited to employees of the
Company who are selected to participate by the Chief Executive Officer.
Presently, nine individuals participate in the Supplemental Retirement Plan.
Benefits under the Supplemental Retirement Plan are specified in agreements
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entered into between the Company and each participant. Any benefit granted in
favor of an employee also serving as a director must be approved by the
Executive Committee. Benefits accrued from the Company are substantially
equal to the additional amount that could have been allocated to each
participant's account under the Company's Profit Sharing Retirement Plan (the
"Profit Sharing Plan") (which is a tax-qualified defined contribution plan
with "401(k)" features) if, in the absence of the Code limitations on
retirement plan contributions, the participant's entire contribution had been
made to the Profit Sharing Plan. Vesting of benefits is determined by
reference to each participant's vested percentage under the Profit Sharing
Plan. Participants' account balances are credited with earnings based upon
the investment performance of the Profit Sharing Plan. Benefits under the
Supplemental Retirement Plan are distributable upon death, disability,
retirement or separation from service and are payable from the general assets
of the Company. The agreement with Mr. DeMeuse provides for an annual cash
payment determined by reference to the difference in the amount of the
Company's contribution to the Profit Sharing Plan allocated to his Profit
Sharing Plan account and the amount which would have been allocated to such
account in the absence of the limitations imposed by the Code.
1995 STOCK INCENTIVE PLAN
The Stock Incentive Plan (the "1995 Plan") is administered by the
Compensation Committee, which is comprised exclusively of non-employee
Directors, each of whom is "disinterested" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The 1995 Plan provides for the granting of incentive and
nonqualified stock options, stock appreciation rights, restricted stock,
performance shares, stock equivalents and dividend equivalents (individually,
an "Award" or collectively, "Awards"). Employees who are eligible to receive
Awards are those officers or other key employees with potential to contribute
to the future success of the Company or its subsidiaries. The Compensation
Committee has discretion to select the employees to whom Awards will be
granted (from among those eligible), to determine the type, size and terms and
conditions applicable to each Award and the authority to interpret, construe
and implement the provisions of the 1995 Plan. The Compensation Committee's
decisions are binding on the Company and employees eligible to participate in
the 1995 Plan and all other persons having any interest in the 1995 Plan. It
is presently anticipated that approximately 130 individuals will initially
participate in the 1995 Plan.
A total of 3,359,662 shares of Common Stock may be subject to Awards
under the 1995 Plan, subject to adjustment in accordance with the terms of the
1995 Plan. Common Stock issued under the 1995 Plan may be either authorized
but unissued shares, treasury shares, or any combination thereof. To the
fullest extent permitted under Rule 16b-3 under the Exchange Act and Section
422 of the Code, any shares of Common Stock subject to an Award which lapses,
expires or is otherwise terminated without the issuance of such shares may
become available for new Awards. The number of dividend equivalents which may
be granted under the 1995 Plan will be determined by the Compensation
Committee in its discretion; provided, however, that in no event will such
number correspond to a greater number of shares than the maximum number of
shares available for issuance under the 1995 Plan.
Set forth below is a description of the types of Awards which may be
granted under the 1995 Plan:
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Stock Options. Options (each, an "Option") to purchase shares of Common
Stock, which may be nonqualified or incentive stock options, may be granted
under the 1995 Plan at an exercise price (the "Option Price") determined by
the Compensation Committee in its discretion, provided that the Option Price
may be no less than the fair market value of the underlying Common Stock on
the date of grant (110% of fair market value in the case of an incentive stock
option granted to a ten percent shareholder).
Options will expire not later than ten years after the date on which they
are granted (five years in the case of an incentive stock option granted to a
ten percent shareholder). Options become exercisable at such times and in
such installments as determined by the Compensation Committee, and such
exercisability will generally be based on (i) length of service or (ii) the
attainment of performance goals established by the Compensation Committee,
provided that no Option may be exercised within the first six months following
the date of grant. The Compensation Committee may also accelerate the period
for the exercise of any or all Options held by an optionee. Payment of the
Option Price must be made in full at the time of exercise in cash, certified
or bank check, note or other instrument acceptable to the Compensation
Committee. As determined by the Compensation Committee, payment in full or in
part may also be made by tendering to the Company shares of Common Stock
having a fair market value equal to the Option Price (or such portion
thereof), by a "cashless exercise" procedure to be approved by the
Compensation Committee or by withholding shares of Common Stock that would
otherwise have been received by the optionee.
Stock Appreciation Rights. A stock appreciation right ("SAR") is an
Award entitling an employee to receive an amount equal to (or subject to
certain limitations, less than, if the Compensation Committee so determines at
the time of grant) the excess of the fair market value of a share of Common
Stock on the date of exercise over the exercise price per share specified for
the SAR, multiplied by the number of shares of Common Stock with respect to
which the SAR was exercised. An SAR granted in connection with an Option will
be exercisable to the extent that the related Option is exercisable. Upon the
exercise of an SAR related to an Option, the Option related thereto will be
cancelled to the extent of the number of shares covered by such exercise, and
such shares will no longer be available for grant under the 1995 Plan. Upon
the exercise of a related Option, the SAR will be cancelled automatically to
the extent of the number of shares covered by the exercise of the Option.
SARs unrelated to an Option will contain such terms and conditions as to
exercisability, vesting and duration as the Compensation Committee may
determine, but such duration will not be greater than ten years. The
Compensation Committee may accelerate the period for the exercise of an SAR
unrelated to an Option. Payment upon exercise of an SAR will be made, at the
election of the Compensation Committee, in cash, in shares of Common Stock or
a combination thereof.
The Compensation Committee may grant limited stock appreciation rights
(an "LSAR") under the 1995 Plan. An LSAR is an SAR which becomes exercisable
only in the event of a "change in control" (as defined below). Any such LSAR
will be settled solely in cash. An LSAR must be exercised within the 30-day
period following a change in control.
Restricted Stock. An Award of restricted stock ("Restricted Stock") is
an Award of Common Stock which is subject to such restrictions as the
Compensation Committee deems appropriate, including forfeiture conditions and
restrictions against transfer for a period specified by the Compensation
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Committee. Restricted Stock Awards may be granted under the 1995 Plan for or
without consideration. Restrictions on Restricted Stock may lapse in
installments based on factors selected by the Compensation Committee. The
Compensation Committee, in its sole discretion, may waive or accelerate the
lapsing of restrictions in whole or in part. Prior to the expiration of the
restricted period, except as otherwise provided by the Compensation Committee,
a grantee who has received a Restricted Stock Award has the rights of a
shareholder of the Company, including the right to vote and to receive cash
dividends on the shares subject to the Award. Stock dividends issued with
respect to shares covered by a Restricted Stock Award will be treated as
additional shares under such Award and will be subject to the same
restrictions and other terms and conditions that apply to the shares with
respect to which such dividends are issued.
Performance Shares. A performance share Award (a "Performance Share") is
an Award of a number of units which represent the right to receive a specified
number of shares of Common Stock upon satisfaction of certain specified
performance criteria, subject to such other terms and conditions as the
Compensation Committee deems appropriate. Performance objectives will be
established before, or as soon as practicable after, the commencement of the
performance period (the "Performance Period") and may be based on net
earnings, operating earnings or income, absolute and/or relative return on
equity or assets, earnings per share, cash flow, pre-tax profits, earnings
growth, revenue growth, comparisons to peer companies, any combination of the
foregoing and/or such other measures, including individual measures of
performance, as the Compensation Committee deems appropriate. Prior to the
end of a Performance Period, the Compensation Committee, in its discretion and
only under conditions which do not affect the deductibility of compensation
attributable to Performance Shares under Section 162(m) of the Code, may
adjust the performance objectives to reflect an event which may materially
affect the performance of the Company, a subsidiary or a division, including,
but not limited to, market conditions or a significant acquisition or
disposition of assets or other property by the Company, a subsidiary or a
division. The extent to which a grantee is entitled to payment in settlement
of a Performance Share Award at the end of the Performance Period will be
determined by the Compensation Committee, in its sole discretion, based on
whether the performance criteria have been met.
Payment in settlement of a Performance Share Award will be made as soon
as practicable following the last day of the Performance Period, or at such
other time as the Compensation Committee may determine, in shares of Common
Stock.
Stock Equivalents. A stock equivalent Award (a "Stock Equivalent") is a
grant of a number of units valued, in whole or in part by reference to, or
otherwise based on, shares of Common Stock. At the discretion of the
Compensation Committee, Stock Equivalent Awards may relate in whole or in part
to the attainment by the grantee of certain specified performance criteria.
The Compensation Committee in its discretion will determine the basis for
the value of units granted under a Stock Equivalent Award at the time of grant
of the Award. In determining unit value, the Committee may use such measures
as fair market value or appreciation in the value of a share of Common Stock
and may specify the date or dates over which the appreciation shall be
measured, in such manner as it deems appropriate.
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Payment in settlement of a Stock Equivalent Award will be made as soon as
practicable after the Award is earned, or at such other time as the
Compensation Committee may determine, in cash, in shares of Common Stock, or
some combination thereof, as determined by the Compensation Committee.
Dividend Equivalents. A dividend equivalent Award (a "Dividend
Equivalent") is an Award which entitles an employee to receive from the
Company cash payments, in the same amount that the holder of record of a share
of Common Stock on the dividend record date would be entitled to receive as
cash dividends on such share of Common Stock.
Grants of Options, SARs, Performance Share Awards and Stock Equivalent
Awards may, in the discretion of the Compensation Committee, earn Dividend
Equivalents. The Compensation Committee will establish such rules and
procedures governing the crediting of Dividend Equivalents, including any
timing and payment contingencies of such Dividend Equivalents, as it deems
appropriate or necessary.
Additional Information. Under the 1995 Plan, if there is any change in
the outstanding shares of Common Stock by reason of any stock dividend,
recapitalization, merger, consolidation, stock split, combination or exchange
of shares or other form of reorganization, or any other change involving the
Common Stock, such proportionate adjustments as may be necessary (in the form
determined by the Compensation Committee) to reflect such change will be made
to prevent dilution or enlargement of the rights with respect to the aggregate
number of shares of Common Stock for which Awards in respect thereof may be
granted under the 1995 Plan, the number of shares of Common Stock covered by
each outstanding Award, and the price per share in respect thereof.
Generally, an individual's rights under the 1995 Plan may not be assigned or
transferred (except in the event of death).
In the event of a change in control and except as the Compensation
Committee (as constituted prior to such change in control) may expressly
provide otherwise: (i) all Stock Options or SARs then outstanding will become
fully exercisable as of the date of the change in control, whether or not then
exercisable; (ii) all restrictions and conditions of all Restricted Stock
Awards then outstanding will lapse as of the date of the change in control;
(iii) all Performance Share Awards will be deemed to have been fully earned as
of the date of the change in control and (iv) all Stock Equivalent Awards will
be deemed to be free of any restrictions or conditions and fully earned as of
the date of the change in control. The above notwithstanding, any Award
granted within six (6) months of a change in control will not be afforded any
such acceleration as to exercise, vesting and payment rights or lapsing as to
conditions or restrictions. For purposes of the 1995 Plan, a "change in
control" shall have occurred when (A) any person (other than (x) the Company,
any subsidiary of the Company, any employee benefit plan of the Company or of
any subsidiary of the Company, or any person or entity organized, appointed or
established by the Company or any subsidiary of the Company for or pursuant to
the terms of any such plans, (y) Morgan Stanley Group, MSLEF II, Fort Howard
Equity Investors, Fort Howard Equity Investors II, or any of their respective
affiliates or (z) any general or limited partner of MSLEF II, Fort Howard
Equity Investors or Fort Howard Equity Investors II), alone or together with
its affiliates and associates (collectively, an "Acquiring Person")), shall
become the beneficial owner of 20% or more of the then outstanding shares of
Common Stock or the combined voting power of the Company's then outstanding
voting securities (except pursuant to an offer for all outstanding shares of
Common Stock at a price and upon such terms and conditions as a majority of
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the Continuing Directors (as defined below) determine to be in the best
interests of the Company and its shareholders (other than an Acquiring Person
on whose behalf the offer is being made)), or (B) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors and any new director (other than a director who is a
representative or nominee of an Acquiring Person) whose election by the Board
of Directors or nomination for election by the Company's shareholders was
approved by a vote of at least a majority of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (collectively,
the "Continuing Directors"), no longer constitute a majority of the Board of
Directors.
The 1995 Plan will remain in effect until terminated by the Board of
Directors and thereafter until all Awards granted thereunder are satisfied by
the issuance of shares of Common Stock or the payment of cash or otherwise
terminated pursuant to the terms of the 1995 Plan or under any Award
agreements. Notwithstanding the foregoing, no Awards may be granted under the
1995 Plan after the tenth anniversary of the effective date of the 1995 Plan.
The Board of Directors may at any time terminate, modify or amend the 1995
Plan; provided, however, that no such amendment, modification or termination
may adversely affect an optionee's or grantee's rights under any Award
theretofore granted under the 1995 Plan, except with the consent of such
optionee or grantee, and no such amendment or modification will be effective
unless and until the same is approved by the shareholders of the Company where
such shareholder approval is required to comply with Rule 16b-3 under the
Exchange Act, or other applicable law, regulation or Nasdaq National Market or
stock exchange rule. Rule 16b-3 currently requires shareholder approval if
the amendment would, among other things, materially increase the benefits
accruing to optionees or grantees under the 1995 Plan.
MANAGEMENT EQUITY PLAN
Effective as of April 29, 1991, the Board of Directors adopted the
Fort Howard Corporation Management Equity Plan (the "Management Equity Plan").
The Management Equity Plan provides for the offer of Common Stock and the
grant of options to purchase Common Stock to executive officers and certain
other key employees of the Company.
Executive officers or other key employees of the Company who hold shares
of Common Stock or options pursuant to the Management Equity Plan ("Equity
Investors") have entered into a Management Equity Plan Agreement with the
Company. Executive officers or other key employees of the Company who have
acquired shares of Common Stock pursuant to the Management Equity Plan have
agreed to become bound by the terms of the Company's Stockholders Agreement.
See "Certain Transactions--Stockholders Agreement."
Options, whether or not vested, may not be transferred, except that
vested options may be transferred in certain limited circumstances. Subject
to certain exceptions, options which have not vested at the time an Equity
Investor's employment is terminated are forfeited to the Company.
In April 1991, certain executive officers and other key employees of the
Company purchased an aggregate of 40,300 shares of Common Stock at $18.46 per
share pursuant to the Management Equity Plan. In addition, options to
purchase a total of 722,150 shares of Common Stock at an exercise price of
$18.46 per share were granted in 1991, 1992 and 1993 pursuant to the
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Management Equity Plan to certain executive officers and other key employees
of the Company. All options outstanding under the Management Equity Plan
became fully vested prior to the consummation of the Offering. Further, the
terms and conditions of options to purchase 100,750 shares of Common Stock
granted in December 1988 at an exercise price of $15.38 per share pursuant to
a predecessor plan are now governed by the Management Equity Plan. The
Company does not intend to sell or grant any additional shares of Common Stock
or options under the Management Equity Plan.
MANAGEMENT EQUITY PARTICIPATION AGREEMENT
Mr. DeMeuse, Ms. Hempel, Mr. Riordan and other current executive officers
and members of the Company's senior management (the "Management Investors")
are parties to an Amended and Restated Management Equity Participation
Agreement, as amended, with the Company, Morgan Stanley Group and MSLEF II
(the "Management Equity Participation Agreement"), pursuant to which the
Management Investors purchased 410,196 shares of Common Stock in 1988 and
31,824 shares of Common Stock in 1990 at $15.38 and $20.77 per share,
respectively. Management Investors who purchased shares of Common Stock
pursuant to the Management Equity Participation Agreement were also granted
stock options to acquire 1,807,338 and 275,990 shares of Common Stock pursuant
to the Management Equity Participation Agreement at exercise prices of $15.38
and $18.46 per share, respectively. All such options became fully vested
prior to the consummation of the Offering. Certain of the Management Investors
have also purchased shares of Common Stock and have been granted options to
acquire additional shares of Common Stock pursuant to the terms of the
Management Equity Plan. See "--Management Equity Plan."
The Management Equity Participation Agreement prohibits, except in
certain limited circumstances with respect to vested options ("Vested
Options"), the transfer of options, whether vested or not vested, held by the
Management Investors.
The Management Equity Participation Agreement also provides that the
Company will indemnify Management Investors for taxes on income which may be
recognized upon the vesting of shares of Common Stock under certain
circumstances. The indemnity is limited to the tax benefit to the Company,
and if the tax benefit has not yet been received by the Company in cash at the
time when the taxes must be paid by a Management Investor, the Company will
make a nonrecourse loan to the Management Investor (secured by Common Stock
and Vested Options) until the time the tax benefit is actually received.
The Management Equity Participation Agreement contains noncompetition
provisions applicable to each Management Investor except Mr. DeMeuse,
Ms. Hempel and Mr. Riordan, whose noncompetition agreements are contained in
their respective Employment Agreements. (Similar noncompetition provisions
are applicable to the Equity Investors under the Management Equity Plan.)
In 1988 and 1990, the Company's former chairman of the board and chief
executive officer (the "former executive") acquired shares of Common Stock and
was granted options to acquire additional shares of Common Stock pursuant to
the Management Equity Participation Agreement. Under the terms of an
agreement entered into with the Company at the time of his resignation in July
1990, as amended, he retained his entire interest in the Company's Common
Stock and all options to acquire additional shares thereof granted to him
pursuant to the Management Equity Participation Agreement were vested. In
addition, all the shares of the Company's Common Stock then owned by him
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became putable to the Company, and he retained certain other put rights
previously granted to him with respect to such options and the shares issuable
upon the exercise thereof. Such put rights are no longer exercisable,
however, the Company has extended the economic benefit of the put right with
respect to the shares of Common Stock to the ten-day period following
expiration of the 180-day lock-up agreement contained in the Stockholders
Agreement in exchange for the former executive's agreement not to exercise his
then existing put right with respect to such shares prior to consummation of
the Offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Committee currently acts as a compensation committee for
determining certain aspects of the compensation of the executive officers of
the Company. The members of the Executive Committee are Donald H. DeMeuse,
the Company's Chairman and Chief Executive Officer, and Donald Patrick
Brennan.
The Executive Committee also administers the Company's Management
Incentive Plan under which annual cash awards are paid to employees serving in
key executive, administrative, professional and technical capacities. Awards
generally are based upon the extent to which the Company's financial
performance during the year has met or exceeded certain performance goals
specified by the Executive Committee.
The members of the Compensation Committee are Donald Patrick Brennan and
Robert H. Niehaus. The compensation Committee administers the Company's 1995
Plan and selects the officers and key employees to whom Awards under the 1995
Plan will be granted.
Salaries and employment contract terms are determined by the entire Board
of Directors for the Chief Executive Officer, by the Executive Committee for
other executive officers who also serve as directors of the Company and by the
Company's Chief Executive Officer for other executive officers of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 17, 1995 by
holders known to the Company to have beneficial ownership of more than five
percent of the Company's Common Stock, by certain other principal holders, by
each of the Company's directors, by the Named Executive Officers, and by all
directors and all executive officers of the Company as a group. Information
with respect to holders having beneficial ownership of more than five percent
of the Company's Common Stock is based on statements filed with the Securities
and Exchange Commission pursuant to Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934 as of March 27, 1995.
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Shares Beneficially Owned
-----------------------------
Number of Percentage
Name Shares of Class
---- --------- ----------
THE MORGAN STANLEY LEVERAGED 20,889,290 (a) 33.1
EQUITY FUND II, L.P.
1221 Avenue of the Americas
New York, New York 10020
Mellon Bank, N.A., as Trustee for 6,715,507 (b) 10.6
FIRST PLAZA GROUP TRUST
1 Mellon Bank Center
Pittsburgh, Pennsylvania 15258
LEEWAY & CO. 3,357,750 5.3
1 Enterprise Drive
North Quincy, Massachusetts 02171
MORGAN STANLEY GROUP INC. 3,036,884 (c) 4.8
1251 Avenue of the Americas
New York, New York 10020
Donald H. DeMeuse 710,449 (d) 1.1
Kathleen J. Hempel 607,691 (e) 1.0
Michael T. Riordan 190,020 (f) *
Donald Patrick Brennan 0 --
Frank V. Sica 0 --
Robert H. Niehaus 0 --
Andrew W. Donnelly 175,077 (g) *
John F. Rowley 128,793 (h) *
Directors and Executive Officers 2,511,100 (i) 3.9
as a Group
*Less than 1%
(a) MSLEF II, Inc. is the sole general partner of MSLEF II and is a wholly
owned subsidiary of Morgan Stanley Group. Includes 1,701,290 shares held
by Fort Howard Equity Investors II and 663,000 shares held by Fort Howard
Equity Investors. Morgan Stanley Equity Investors Inc. is the sole
general partner of both of these partnerships and is a wholly owned
subsidiary of Morgan Stanley Group.
(b) Mellon Bank, N.A., acts as the trustee (the "Trustee") for First Plaza
Group Trust ("First Plaza"), a trust under and for the benefit of certain
employee benefit plans of General Motors Corporation ("GM") and its
subsidiaries. These shares may be deemed to be owned beneficially by
General Motors Investment Management Corporation ("GMIMCo"), a wholly
owned subsidiary of GM. GMIMCo's principal business is providing
investment advice and investment management services with respect to the
assets of certain employee benefit plans of GM and its subsidiaries and
with respect to the assets of certain direct and indirect subsidiaries of
GM and associated entities. GMIMCo is serving as First Plaza's investment
manager with respect to these shares and in that capacity it has the sole
power to direct the Trustee as to the voting and disposition of these
shares. Because of the Trustee's limited role, beneficial ownership of
the shares by the Trustee is disclaimed.
(c) Includes 260,000 shares for which Morgan Stanley Group exercises
exclusive voting rights but as to which it disclaims beneficial
ownership.
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(d) Beneficial ownership includes 543,237 shares which are subject to
acquisition within 60 days by exercise of employee stock options.
(e) Beneficial ownership includes 575,347 shares which are subject to
acquisition within 60 days by exercise of employee stock options.
(f) Beneficial ownership includes 173,608 shares which are subject to
acquisition within 60 days by exercise of employee stock options.
(g) Beneficial ownership includes 158,827 shares which are subject to
acquisition within 60 days by exercise of employee stock options.
(h) Beneficial ownership includes 117,923 shares which are subject to
acquisition within 60 days by exercise of employee stock options.
(i) Beneficial ownership includes 2,104,638 shares which are subject to
acquisition within 60 days by exercise of employee stock options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
The Company, Morgan Stanley Group, MSLEF II, certain other investors and
the Management Investors (each, a "Holder") have entered into a stockholders
agreement (the "Stockholders Agreement"), which contains certain restrictions
with respect to the transferability of Common Stock by certain parties
thereunder, certain registration rights granted by the Company with respect to
such shares and certain arrangements with respect to the nomination of
designees to the Board of Directors.
Pursuant to the terms of the Stockholders Agreement, in the event that
one or more Holders (other than the Management Investors) (each, a
"Controlling Shareholder") sell a majority of the shares of Common Stock
subject to the Stockholders Agreement to a third party, certain other Holders
have the right to elect to sell on the same terms the same percentage of such
other Holder's shares to the third party as the Controlling Shareholder is
selling of its shares of Common Stock. In addition, if a Controlling
Shareholder sells all of its shares of Common Stock to a third party, the
Controlling Shareholder has the right to require that certain remaining
Holders sell all of their shares to the third party on the same terms.
Pursuant to the terms of the Stockholders Agreement, Holders of specified
percentages of Common Stock will be entitled to certain demand registration
rights ("Demand Rights") with respect to shares of Common Stock held by them;
provided, however, that the Company (or purchasers designated by the Company)
shall have the right to purchase at fair market value the shares which are the
subject of Demand Rights in lieu of registering such shares of Common Stock.
In addition to the Demand Rights, Holders are, subject to certain limitations,
entitled to register shares of Common Stock in connection with a registration
statement prepared by the Company to register its equity securities. The
Stockholders Agreement contains customary terms and provisions with respect
to, among other things, registration procedures and certain rights to
indemnification granted by parties thereunder in connection with the
registration of Common Stock subject to such agreement.
Pursuant to the terms of the Stockholders Agreement, MSLEF II and
Fort Howard Equity Investors II each have the right to have a designee
nominated for election to the Company's Board of Directors at any annual
meeting of the Company's shareholders, so long as MSLEF II or Fort Howard
Equity Investors II, as the case may be, does not already have a designee as a
member of the Board of Directors at the time of such annual meeting. In
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addition, in the event of a vacancy on the Board of Directors created by the
resignation, removal or death of a director nominated by MSLEF II or
Fort Howard Equity Investors II, such shareholders have the right to have a
designee nominated for election to fill such vacancy.
Pursuant to the Stockholders Agreement, all Holders are subject to an
agreement, with certain limited exceptions, not to offer, pledge, sell,
contract to sell, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock for a period beginning 7 days before and
ending 180 days after March 9, 1995 in the case of current and former officers
and other key employees of the Company (who beneficially own an aggregate of
791,358 shares of Common Stock), and ending March 9, 1996 in the case of the
remaining Holders (who beneficially own an aggregate of 37,309,881 shares of
Common Stock), without the prior written consent of certain of the
representatives of certain of the Underwriters in the case of Morgan Stanley
Group, MSLEF II, Fort Howard Equity Investors and Fort Howard Equity
Investors II, or of MS&Co, in the case of the remaining Holders.
The Stockholders Agreement also provides that, in connection with any
future underwritten offering of Common Stock by the Company, the Holders will
not, subject to certain limited exceptions, offer, pledge, sell, contract to
sell or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, for a period beginning 7 days before and ending
180 days after the effective date of the related registration statement
without the prior written consent of certain of the representatives of the
underwriters thereof, in the case of Morgan Stanley Group, MSLEF II,
Fort Howard Equity Investors and Fort Howard Equity Investors II, or of MS&Co,
in the case of the remaining Holders.
THE CUP TRANSFER AND CUP SALES
On November 14, 1989, the Company transferred all the capital stock of
Fort Howard Cup to Sweetheart, a new company organized on behalf of MSLEF II,
the Company and certain executive officers of Sweetheart and other investors
in the Cup Transfer. The business transferred to Sweetheart constituted all
the Company's U.S. and Canadian disposable foodservice operations.
As a result of the Cup Transfer, the Company received: (i)
$532.25 million in cash; (ii) 430,172 shares of Sweetheart Class B Common
Stock representing 49.9% of the Sweetheart Common Stock then outstanding, with
a fair value of $87.4 million and (iii) certain other adjustments. The total
value of the cash and other assets received by the Company as a result of the
Cup Transfer was approximately $620 million. The Company has not undertaken
any guarantees of Sweetheart's indebtedness as a result of the Cup Transfer.
On the date of the Cup Transfer, the Sweetheart Class B Common Stock
owned by the Company constituted 49.9% of the shares of Sweetheart Common
Stock then outstanding, and the Sweetheart Class A Common Stock owned by MSLEF
II, Morgan Stanley Group and certain executive officers and key employees of
Sweetheart and other investors constituted 22.4%, 14% and 13.7%, respectively,
of the shares of Sweetheart Common Stock then outstanding.
On December 29, 1989, the Company sold its Pacific Basin cup business for
approximately $10.7 million in cash as part of a program to divest its
remaining international cup operations. The Company sold its European
- 71 -
disposable foodservice operations for a net selling price of approximately
$49 million on December 30, 1991. On August 30, 1993, the Company sold all of
its Sweetheart Class B Common Stock for $5.1 million.
As a result of the completion of the Cup Transfer and the sales of its
remaining international cup operations, the Company has divested all of its
operating interests in those businesses.
OTHER TRANSACTIONS
The Company has entered into an agreement with MS&Co for financial
advisory services in consideration for which the Company pays MS&Co an annual
fee of $1 million. MS&Co is also entitled to reimbursement for all reasonable
expenses incurred in performance of the foregoing services. The Company paid
MS&Co approximately $1.0 million, $1.0 million and $1.1 million for these and
other miscellaneous services in 1994, 1993 and 1992, respectively. This
agreement was terminated on December 31, 1994.
In connection with the sale of the 8 1/4% Notes and the 9% Notes in 1994,
MS&Co received approximately $20.4 million in underwriting fees. In
connection with the sale of the 9 1/4% Notes and the 10% Notes in 1993, MS&Co
received approximately $19.5 million in underwriting fees. In 1992, MS&Co
received approximately $0.7 million in connection with the underwriting of the
reissuance of the Company's Development Authority of Effingham County
Pollution Control Revenue Refunding Bonds, Series 1988.
Based on transactions of similar size and nature, the Company believes
the foregoing fees received by MS&Co are no less favorable to the Company than
would be available from unaffiliated third parties.
MS&Co served as lead underwriter for the initial public offering of the
9 1/4% Notes, the 10% Notes, the 8 1/4% Notes, the 9% Notes, the 12 3/8%
Notes, the 12 5/8% Debentures, the 14 1/8% Debentures and the Pass Through
Certificates and is a market-maker with respect to such securities. In
addition, MS&Co served as the lead underwriter for the initial public offering
of the Company's Common Stock. In connection with the repurchases of certain
of the Company's securities as described in Note 8 to the audited consolidated
financial statements, $52.8 million aggregate principal amount at maturity of
the 14 5/8% Debentures and $132.7 million aggregate principal amount at
maturity of the 14 1/8% Debentures were purchased through MS&Co. In addition,
$46.5 million and $77.5 million aggregate principal amount at maturity of the
14 1/8% Debentures were purchased from Leeway & Co. and First Plaza Group
Trust, respectively, shareholders of the Company. The purchases were made in
negotiated transactions at market prices.
The Company is a party to an interest rate cap agreement with MS&Co that
was purchased in 1994 for $2.1 million.
- 72 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
a. 1. Financial Statements of Fort Howard Corporation
Included in Part II, Item 8:
Report of Independent Public Accountants.
Consolidated Statements of Income for the years ended December 31, 1994,
1993 and 1992.
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
Separate financial statements and supplemental schedules of the Company
and its consolidated subsidiaries are omitted since the Company is
primarily an operating corporation and its consolidated subsidiaries
included in the consolidated financial statements being filed do not
have a minority equity interest or indebtedness to any other person or
to the Company in an amount which exceeds five percent of the total
assets as shown by the consolidated financial statements as filed
herein.
a. 2. Financial Statement Schedules
Report of Indendent Public Accountants
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the audited
consolidated financial statements or notes thereto.
a. 3. Exhibits
Exhibit No. Description
----------- -----------
3.1 Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated By-Laws of the Company.
4.0 Credit Agreement dated as of March 8, 1995 among the
Company, the lenders named therein, and Bankers' Trust Company,
Bank of America National Trust and Savings Association and
Chemical Bank as arrangeers, and Bankers' Trust Company as
administrative agent.
4.1 Receivables Credit Agreement dated as of March 8, 1995 among the
Company, the lenders named therein, and Bankers' Trust Company,
as administrative agent.
- 73 -
4.2 Form of 12 5/8% Subordinated Debenture Indenture dated as of
November 1, 1988 between the Company and United States Trust
Company, Trustee. (Incorporated by reference to Exhibit 4.2 as
filed with the Company's Amendment No. 2 to Form S-1 on
October 25, 1988.)
4.3 Form of 14 1/8% Junior Discount Debenture Indenture dated as of
November 1, 1988 between the Company and Ameritrust Company
National Association, Trustee. (Incorporated by reference to
Exhibit 4.3 as filed with the Company's Amendment No. 2 to
Form S-1 on October 25, 1988.)
4.4 Amended and Restated Credit Agreement dated as of October 24,
1988. (Incorporated by reference to Exhibit 4.5 as filed with
the Company's Amendment No. 2 to Form S-1 on October 25, 1988.)
4.4(A) Amendment No. 1 dated as of February 21, 1989 to the Amended
and Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.E 1 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
4.4(B) Amendment No. 2 dated as of October 20, 1989 to the Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.E 2 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
4.4(C) Amendment No. 3 dated as of November 14, 1989 to the Amended
and Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.E 3 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
4.4(D) Instrument of Designation, Appointment and Acceptance dated as
of June 22, 1988 among the Company, Bankers Trust Company and
Security Pacific National Bank. (Incorporated by reference to
Exhibit 4.7 as filed with the Company's Post-Effective Amendment
No. 2 to Form S-1 on February 8, 1990.)
4.4(E) Amendment No. 4 dated as of November 9, 1990 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.J as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990.)
4.4(F) Amendment No. 5 dated as of December 19, 1990 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.K as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
4.4(G) Amendment No. 6 dated as of September 11, 1991 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.A as filed with the
Company's report on Form 8-K on September 13, 1991.)
- 74 -
4.4(H) Amendment No. 7 dated as of December 2, 1991 to Amended and
Restated Credit Agreement dated as of October 14, 1988, and
Amendment No. 1 dated as of December 2, 1991, to the Note
Purchase Agreement dated as of September 11, 1991.
(Incorporated by reference to Exhibit 4.N as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
4.4(I) Amendment No. 8 dated as of October 7, 1992 to Amended and
Restated Credit Agreement dated as of October 24, 1988, and
Amendment No. 2 dated as of October 7, 1992 to the Note
Purchase Agreement dated as of September 11, 1991.
(Incorporated by reference to Exhibit 4.O as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992.)
4.4(J) Amended and Restated Amendment No. 8 dated as of November 12,
1992 to Amended and Restated Credit Agreement dated as of
October 24, 1988, and Amended and Restated Amendment No. 2 dated
as of November 12, 1992 to the Note Purchase Agreement dated as
of September 11, 1991. (Incorporated by reference to Exhibit
4.P as filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1992.)
4.4(K) Form of Second Amended and Restated Amendment No. 8 dated as of
March 4, 1993 to Amended and Restated Credit Agreement dated as
of October 24, 1988, and Second Amended and Restated Amendment
No. 2 dated as of March 4, 1993 to Note Purchase Agreement dated
as of September 11, 1991. (Incorporated by reference to
Exhibit 4.3(J) as filed with the Company's Amendment No. 2 to
Form S-2 on March 4, 1993.)
4.4(L) Amendment No. 9 dated as of December 31, 1993 to Amended and
Restated Credit Agreement dated as of October 24, 1988, and
Amendment No. 3 dated as of December 31, 1993 to Note Purchase
Agreement dated as of September 11, 1991. (Incorporated by
reference to Exhibit 4.4(L) as filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.)
4.4(M) Amendment No. 10 dated as of October 14, 1994 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.)
4.5 Form of Senior Secured Floating Rate Note Purchase Agreement
dated as of September 11, 1991. (Incorporated by reference to
Exhibit 4.B as filed with the Company's report on Form 8-K on
September 13, 1991.)
4.6 Form of 9 1/4% Senior Note Indenture dated as of March 15, 1993
between the Company and Norwest Bank Wisconsin, N.A., Trustee.
(Incorporated by reference to Exhibit 4.1 as filed with the
Company's Amendment No. 2 to Form S-2 on March 4, 1993.)
- 75 -
4.7 Form of 10% Subordinated Note Indenture dated as of March 15,
1993 between the Company and the United States Trust Company of
New York, Trustee. (Incorporated by reference to Exhibit 4.2 as
filed with the Company's Amendment No. 2 to Form S-2 on March 4,
1993.)
4.8 Form of 9% Senior Subordinated Note Indenture dated as of
February 1, 1994 between the Company and The Bank of New York,
Trustee. (Incorporated by reference to Exhibit 4.2 as filed
with the Company's Form S-2 on December 17, 1993.)
Registrant agrees to provide copies of instruments defining the
rights of security holders, including indentures, upon request
of the Commission.
10.1 Employment Agreements dated October 15, 1993 with the Company's
Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer. (Incorporated by reference to Exhibit No. 10
as filed with the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993.)
10.1(A) Amendments dated January 1, 1995 to Employment Agreements dated
October 15, 1993, with the Company's Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer.
(Incorporated by reference to Exhibit No. 10.6(A) as filed with
the Company's Amendment No. 1 to Form S-1 on February 8, 1995.)
10.2 Employment Agreements dated December 10, 1993 with certain
executive officers of the Company. (Incorporated by reference
to Exhibit 10.13 as filed with the Company's Form S-2 on
December 17, 1993.)
10.2(A) Amendments to Employment Agreements with certain executive
officers of the Company. (Incorporated by reference to Exhibit
No. 10.13(A) as filed with the Company's Amendment No. 1 to
Form S-1 on February 8, 1995.)
10.3 Stockholders Agreement dated as of December 7, 1990.
(Incorporated by reference to Exhibit 10.C as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
10.3(A) Amended and Restated Stockholders Agreement dated as of
March 1, 1995, among the Company, Morgan Stanley Group,
MSLEF II, certain institutional investors and the Management
Investors which amends and restates the Stockholders Agreement
dated as of December 7, 1990, as amended.
10.4 Management Incentive Plan as amended and restated December 10,
1992. (Incorporated by reference to Exhibit 10.C as filed with
the Company's Form 10-K for the year ended December 31, 1992.)
10.4(A) Management Incentive Plan as amended and restated as of
December 19, 1994. (Incorporated by reference to Exhibit
No. 10.2 as filed with the Company's Amendment No. 1 to
Form S-1 on February 8, 1995.)
- 76 -
10.5 Supplemental Retirement Plan. (Incorporated by reference to
Exhibit No. 10.7 as filed with Amendment No. 2 to the Company's
Form S-1 on October 25, 1988.)
10.5(A) Amendment No. 1 to the Supplemental Retirement Plan.
(Incorporated by reference to Exhibit 10.P as filed with the
Company's Annual Report on Form 10-K for the year ended
December 31, 1988.)
10.6 Form of Supplemental Retirement Agreement for the Company's
Chief Executive Officer as Amended. (Incorporated by reference
to Exhibit 10.M as filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 1988.)
10.7 Supplemental Retirement Agreements for certain directors and
officers. (Incorporated by reference to Exhibit 10.T as filed
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1989.)
10.7(A) Form of Amendment No. 1 to Supplemental Retirement Agreements
for certain directors and officers. (Incorporated by reference
to Exhibit 10.U as filed with the Company's Form 10-K for the
year ended December 31, 1990.)
10.8 Amended and Restated Management Equity Participation Agreement
dated as of August 1, 1988. (Incorporated by reference to
Exhibit No. 10.9 as filed with the Company's Amendment No. 2 to
Form S-1 on October 25, 1988.)
10.8(A) Letter Agreement dated June 27, 1990, which modifies Amended and
Restated Management Equity Participation Agreement.
(Incorporated by reference to Exhibit 10.V as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
10.8(B) Letter Agreement dated July 31, 1990, among the Company and the
Principal Management Investors which amends Amended and Restated
Management Equity Participation Agreement. (Incorporated by
reference to Exhibit 10.W as filed with the Company's Form 10-K
for the year ended December 31, 1990.)
10.8(C) Letter Agreement dated July 31, 1990, between the Company and
the Management Investor Committee which amends Amended and
Restated Management Equity Participation Agreement.
(Incorporated by reference to Exhibit 10.X as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
10.8(D) Letter Agreement dated February 7, 1991, between the Company and
the Management Investors Committee which amends the Amended and
Restated Management Equity Participation Agreement.
(Incorporated by reference to Exhibit 10.GG as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
10.8(E) Form of Letter Agreement dated February 7, 1991, among the
Company, the Management Investors Committee and Management
Investors which cancels certain stock options, grants new stock
options and amends the Amended and Restated Management Equity
Participation Agreement. (Incorporated by reference to Exhibit
- 77 -
10.HH as filed with the Company's Form 10-K for the year ended
December 31, 1990.)
10.8(F) Letter Agreement dated March 1, 1995, between the
Company and the Management Investors Committee which amends the
Amended and Restated Management Equity Participation Agreement.
10.9 Management Equity Plan. (Incorporated by reference to
Exhibit 10.H as filed with the Company's Form 10-K for the year
ended December 31, 1991.)
10.9(A) Amendment dated December 28, 1993 to Management Equity Plan.
(Incorporated by reference to Exhibit 10.9(A) as filed with
the Company's Form 10-K for the year ended December 31, 1993.)
10.9(B) Amendment dated March 1, 1995 to the Management Equity Plan.
10.10 Form of Management Equity Plan Agreement. (Incorporated by
reference to Exhibit 10.I as filed with the Company's Form 10-K
for the year ended December 31, 1991.)
10.11 Agreement dated as of July 31, 1990, between the Company and its
former Chief Executive Officer. (Incorporated by reference to
Exhibit 10.Y as filed with the Company's Form 10-K for the year
ended December 31, 1990.)
10.11(A) Modification to Agreement dated December 11, 1990, to
Agreement dated as of July 31, 1990, between the Company
and its former Chief Executive Officer. (Incorporated
by reference to Exhibit 10.Z as filed with the Company's
Form 10-K for the year ended December 31, 1990.)
10.11(B) Letter Agreement dated February 7, 1991, between the Company and
its former Chief Executive Officer which cancels stock options,
grants new stock options and amends the Agreement dated as of
July 31, 1990 among the Company and its former Chief Executive
Officer. (Incorporated by reference to Exhibit 10.II as filed
with the Company's Form 10-K for the year ended December 31,
1990.)
10.11(C) Letter Agreement dated March 9, 1995, among the Company, its
former Chief Executive Officer, his spouse and certain trustees,
as permitted transferees.
10.12 Financial Advisory Agreement dated as of October 25, 1988,
between MS&Co. and the Company. (Incorporated by reference to
Exhibit 10.13 as filed with the Company's Post-Effective
Amendment No. 1 to Form S-1 on April 6, 1989.)
10.13 Participation Agreement dated as of October 20, 1989, among the
Company, Philip Morris Credit Corporation, the Loan Participants
listed therein, the Connecticut National Bank, Owner Trustee,
and Wilmington Trust Company, Indenture Trustee. (Incorporated
by reference to Exhibit 10.15 as filed with the Company's
Post-Effective Amendment No. 2 to Form S-1 on February 8, 1990.)
- 78 -
10.14 Facility Lease Agreement dated as of October 20, 1989, between
the Connecticut National Bank in its capacity as Owner Trustee,
the Lessor and the Company as Lessee. (Incorporated by
reference to Exhibit 10.16 as filed with the Company's
Post-Effective Amendment No. 2 to Form S-1 on February 8, 1990.)
10.15 Power Installation Lease Agreement dated as of October 20, 1989,
between The Connecticut National Bank, not in its individual
capacity but solely as Owner Trustee, and the Company.
(Incorporated by reference to Exhibit 10.HH as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.16 Equipment Lease Agreement dated as of October 20, 1989, between
The Connecticut National Bank, not in its individual capacity
but solely as Owner Trustee, and the Company. (Incorporated by
reference to Exhibit 10.II as filed with the Company's Form 10-K
for the year ended December 31, 1991.)
10.17 Participation Agreement dated as of December 23, 1990, among the
Company, Bell Atlantic Tricon Leasing Corporation, Bankers Trust
Company, The Connecticut National Bank, Owner Trustee, and
Wilmington Trust Company, Indenture Trustee. (Incorporated by
reference to Exhibit 10.BB as filed with the Company's Form 10-K
for the year ended December 31, 1990.)
10.18 Amended and Restated Equipment Lease Agreement [1990] dated as
of December 19, 1991, between The Connecticut National Bank, not
in its individual capacity but solely as Owner Trustee under the
Trust Agreement, as Lessor, and the Company, as Lessee.
(Incorporated by reference to Exhibit 10.W as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.19 Facility Lease Agreement dated as of December 19, 1991, between
The Connecticut National Bank, not in its individual capacity
but solely as Owner Trustee, and the Company. (Incorporated by
reference to Exhibit 10.EE as filed with the Company's Form 10-K
for the year ended December 31, 1991.)
10.20 Equipment Lease Agreement [1991] dated as of December 19, 1991,
between The Connecticut National Bank, not in its individual
capacity but solely as Owner Trustee, and the Company.
(Incorporated by reference to Exhibit 10.FF as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.21 Power Plant Lease Agreement dated as of December 19, 1991,
between The Connecticut National Bank, not in its individual
capacity but solely as Owner Trustee, and the Company.
(Incorporated by reference to Exhibit 10.GG as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.22 Amended and Restated Participation Agreement dated as of
October 21, 1991, among the Company, Bell Atlantic Tricon
Leasing Corporation, Bankers Trust Company, The Connecticut
National Bank, Owner Trustee, and Wilmington Trust Company,
Indenture Trustee and the Form of the First Amendment thereto
dated as of December 13, 1991. (Incorporated by reference to
Exhibit 4.3 as filed with the Company's Amendment No. 3 to
Form S-3 on December 13, 1991).
- 79 -
10.23 Deferred Compensation Plan for Non-Employee Directors.
(Incorporated by reference to Exhibit No. 10.14 as filed with
the Company's Amendment No. 1 to Form S-1 on February 8, 1995).
10.24 1995 Stock Incentive Plan. (Incorporated by reference to
Exhibit No. 10.15 as filed with the Company's Amendment No. 1 to
Form S-1 on February 8, 1995).
10.25 1995 Stock Plan for Non-Employee Directors. (Incorporated by
reference to Exhibit No. 10.16 as filed with the Company's
Amendment No. 1 to Form S-1 on February 8, 1995).
12 Statement of Deficiency of Earnings Available to Cover Fixed
Charges.
21 Subsidiaries of Fort Howard Corporation.
25 Powers of Attorney (included as part of signature page).
b. Reports on Form 8-K
The Company filed a Form 8-K on November 28, 1994, reporting under item
five a proposed offering of Common Stock. The Company filed a Form 8-K
on December 23, 1994, reporting under item five the receipt of a civil
investigative demand from the U.S. Department of Justice, Antitrust
Division.
- 80 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FORT HOWARD CORPORATION
Green Bay, Wisconsin
March 28, 1995 By /s/ Donald H. DeMeuse
----------------------------------
Donald H. DeMeuse, Chairman of the
Board and Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officer of Fort Howard Corporation hereby
constitute and appoint Donald H. DeMeuse, Kathleen J. Hempel and James W.
Nellen II and each of them, with full power to act without the other and with
full power of substitution and resubstitution, our true and lawful attorneys-
in-fact with full power to execute in our name and behalf in the capacities
indicated below any and all amendments to this Annual Report on Form 10-K and
to file the same, with all exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission and hereby ratify and
confirm all that such attorneys-in-fact, or any of them, or their substitutes
shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on behalf of the registrant and in the
capacities on the dates indicated:
/s/ Donald H. DeMeuse Chairman of the Board, March 28, 1995
Donald H. DeMeuse Chief Executive Officer
and Director
/s/ Kathleen J. Hempel Vice Chairman, Chief March 28, 1995
Kathleen J. Hempel Financial Officer and
Director
/s/ Michael T. Riordan President, Chief March 28, 1995
Michael T. Riordan Operating Officer and
Director
/s/ Donald Patrick Brennan Director March 28, 1995
Donald P. Brennan
/s/ Frank V. Sica Director March 28, 1995
Frank V. Sica
/s/ Robert H. Niehaus Director March 28, 1995
Robert H. Niehaus
/s/ Charles L. Szews Vice President and March 28, 1995
Charles L. Szews Controller and Principal
Accounting Officer
- 81 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Fort Howard Corporation included in this
Form 10-K and have issued our report thereon dated January 31, 1995. Our
audits were made for the purpose of forming an opinion on those statements
taken as a whole. Schedule II is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 31, 1995
- 82 -
Schedule II
FORT HOWARD CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
For the Years Ended
December 31,
---------------------------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS: 1994 1993 1992
---- ---- ----
Balance at beginning of year.......... $2,366 $1,376 $1,379
Additions charged to earnings......... (92) 1,633 792
Charges for purpose for which
reserve was created............... (685) (643) (795)
------ ------ ------
Balance at end of year................ $1,589 $2,366 $1,376
====== ====== ======
- 83 -
INDEX TO EXHIBITS
Exhibit No.
-----------
*3.1 Restated Certificate of Incorporation of the Company.
*3.2 Amended and Restated By-Laws of the Company.
*4.0 Credit Agreement dated as of March 8, 1995 among the Company,
the lenders named therein, and Bankers' Trust Company, Bank of
America National Trust and Savings Association and Chemical
Bank as arrangeers, and Bankers' Trust Company as administrative
agent.
*4.1 Receivables Credit Agreement dated as of March 8, 1995 among the
Company, the lenders named therein, and Bankers' Trust Company,
as administrative agent.
4.2 Form of 12 5/8% Subordinated Debenture Indenture dated as of
November 1, 1988 between the Company and United States Trust
Company, Trustee. (Incorporated by reference to Exhibit 4.2 as
filed with the Company's Amendment No. 2 to Form S-1 on
October 25, 1988.)
4.3 Form of 14 1/8% Junior Discount Debenture Indenture dated as of
November 1, 1988 between the Company and Ameritrust Company
National Association, Trustee. (Incorporated by reference to
Exhibit 4.3 as filed with the Company's Amendment No. 2 to
Form S-1 on October 25, 1988.)
4.4 Amended and Restated Credit Agreement dated as of October 24,
1988. (Incorporated by reference to Exhibit 4.5 as filed with
the Company's Amendment No. 2 to Form S-1 on October 25, 1988.)
4.4(A) Amendment No. 1 dated as of February 21, 1989 to the Amended
and Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.E 1 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
4.4(B) Amendment No. 2 dated as of October 20, 1989 to the Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.E 2 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
4.4(C) Amendment No. 3 dated as of November 14, 1989 to the Amended
and Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.E 3 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
- 84 -
4.4(D) Instrument of Designation, Appointment and Acceptance dated as
of June 22, 1988 among the Company, Bankers Trust Company and
Security Pacific National Bank. (Incorporated by reference to
Exhibit 4.7 as filed with the Company's Post-Effective Amendment
No. 2 to Form S-1 on February 8, 1990.)
4.4(E) Amendment No. 4 dated as of November 9, 1990 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.J as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990.)
4.4(F) Amendment No. 5 dated as of December 19, 1990 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.K as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
4.4(G) Amendment No. 6 dated as of September 11, 1991 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4.A as filed with the
Company's report on Form 8-K on September 13, 1991.)
4.4(H) Amendment No. 7 dated as of December 2, 1991 to Amended and
Restated Credit Agreement dated as of October 14, 1988, and
Amendment No. 1 dated as of December 2, 1991, to the Note
Purchase Agreement dated as of September 11, 1991.
(Incorporated by reference to Exhibit 4.N as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
4.4(I) Amendment No. 8 dated as of October 7, 1992 to Amended and
Restated Credit Agreement dated as of October 24, 1988, and
Amendment No. 2 dated as of October 7, 1992 to the Note
Purchase Agreement dated as of September 11, 1991.
(Incorporated by reference to Exhibit 4.O as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992.)
4.4(J) Amended and Restated Amendment No. 8 dated as of November 12,
1992 to Amended and Restated Credit Agreement dated as of
October 24, 1988, and Amended and Restated Amendment No. 2 dated
as of November 12, 1992 to the Note Purchase Agreement dated as
of September 11, 1991. (Incorporated by reference to Exhibit
4.P as filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1992.)
4.4(K) Form of Second Amended and Restated Amendment No. 8 dated as of
March 4, 1993 to Amended and Restated Credit Agreement dated as
of October 24, 1988, and Second Amended and Restated Amendment
No. 2 dated as of March 4, 1993 to Note Purchase Agreement dated
as of September 11, 1991. (Incorporated by reference to
Exhibit 4.3(J) as filed with the Company's Amendment No. 2 to
Form S-2 on March 4, 1993.)
4.4(L) Amendment No. 9 dated as of December 31, 1993 to Amended and
Restated Credit Agreement dated as of October 24, 1988, and
Amendment No. 3 dated as of December 31, 1993 to Note Purchase
Agreement dated as of September 11, 1991. (Incorporated by
- 85 -
reference to Exhibit 4.4(L) as filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.)
4.4(M) Amendment No. 10 dated as of October 14, 1994 to Amended and
Restated Credit Agreement dated as of October 24, 1988.
(Incorporated by reference to Exhibit 4 as filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.)
4.5 Form of Senior Secured Floating Rate Note Purchase Agreement
dated as of September 11, 1991. (Incorporated by reference to
Exhibit 4.B as filed with the Company's report on Form 8-K on
September 13, 1991.)
4.6 Form of 9 1/4% Senior Note Indenture dated as of March 15, 1993
between the Company and Norwest Bank Wisconsin, N.A., Trustee.
(Incorporated by reference to Exhibit 4.1 as filed with the
Company's Amendment No. 2 to Form S-2 on March 4, 1993.)
4.7 Form of 10% Subordinated Note Indenture dated as of March 15,
1993 between the Company and the United States Trust Company of
New York, Trustee. (Incorporated by reference to Exhibit 4.2 as
filed with the Company's Amendment No. 2 to Form S-2 on March 4,
1993.)
4.8 Form of 9% Senior Subordinated Note Indenture dated as of
February 1, 1994 between the Company and The Bank of New York,
Trustee. (Incorporated by reference to Exhibit 4.2 as filed
with the Company's Form S-2 on December 17, 1993.)
Registrant agrees to provide copies of instruments defining the
rights of security holders, including indentures, upon request
of the Commission.
10.1 Employment Agreements dated October 15, 1993 with the Company's
Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer. (Incorporated by reference to Exhibit No. 10
as filed with the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993.)
10.1(A) Amendments dated January 1, 1995 to Employment Agreements dated
October 15, 1993, with the Company's Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer.
(Incorporatd by reference to Exhibit No. 10.6(A) as filed
with the Company's Amendment No. 1 to Form S-1 on February 8,
1995.)
10.2 Employment Agreements dated December 10, 1993 with certain
executive officers of the Company. (Incorporated by reference
to Exhibit 10.13 as filed with the Company's Form S-2 on
December 17, 1993.)
10.2(A) Amendments to Employment Agreements with certain executive
officers of the Company. (Incorporated by reference to Exhibit
No. 10.13(A) as filed with the Company's Amendment No. 1 to
Form S-1 on February 8, 1995.)
- 86 -
10.3 Stockholders Agreement dated as of December 7, 1990.
(Incorporated by reference to Exhibit 10.C as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
*10.3(A) Amended and Restated Stockholders Agreement dated as of
March 1, 1995, among the Company, Morgan Stanley Group,
MSLEF II, certain institutional investors and the Management
Investors which amends and restates the Stockholders Agreement
dated as of December 7, 1990, as amended.
10.4 Management Incentive Plan as amended and restated December 10,
1992. (Incorporated by reference to Exhibit 10.C as filed with
the Company's Form 10-K for the year ended December 31, 1992.)
10.4(A) Management Incentive Plan as amended and restated as of
December 19, 1994. (Incorporated by reference to Exhibit
No. 10.2 as filed with the Company's Amendment No. 1 to
Form S-1 on February 8, 1995.)
10.5 Supplemental Retirement Plan. (Incorporated by reference to
Exhibit No. 10.7 as filed with Amendment No. 2 to the Company's
Form S-1 on October 25, 1988.)
10.5(1) Amendment No. 1 to the Supplemental Retirement Plan.
(Incorporated by reference to Exhibit 10.P as filed with the
Company's Annual Report on Form 10-K for the year ended
December 31, 1988.)
10.6 Form of Supplemental Retirement Agreement for the Company's
Chief Executive Officer as Amended. (Incorporated by reference
to Exhibit 10.M as filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 1988.)
10.7 Supplemental Retirement Agreements for certain directors and
officers. (Incorporated by reference to Exhibit 10.T as filed
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1989.)
10.7(A) Form of Amendment No. 1 to Supplemental Retirement Agreements
for certain directors and officers. (Incorporated by reference
to Exhibit 10.U as filed with the Company's Form 10-K for the
year ended December 31, 1990.)
10.8 Amended and Restated Management Equity Participation Agreement
dated as of August 1, 1988. (Incorporated by reference to
Exhibit No. 10.9 as filed with the Company's Amendment No. 2 to
Form S-1 on October 25, 1988.)
10.8(A) Letter Agreement dated June 27, 1990, which modifies Amended and
Restated Management Equity Participation Agreement.
(Incorporated by reference to Exhibit 10.V as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
10.8(B) Letter Agreement dated July 31, 1990, among the Company and the
Principal Management Investors which amends Amended and Restated
Management Equity Participation Agreement. (Incorporated by
- 87 -
reference to Exhibit 10.W as filed with the Company's Form 10-K
for the year ended December 31, 1990.)
10.8(C) Letter Agreement dated July 31, 1990, between the Company and
the Management Investor Committee which amends Amended and
Restated Management Equity Participation Agreement.
(Incorporated by reference to Exhibit 10.X as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
10.8(D) Letter Agreement dated February 7, 1991, between the Company and
the Management Investors Committee which amends the Amended and
Restated Management Equity Participation Agreement.
(Incorporated by reference to Exhibit 10.GG as filed with the
Company's Form 10-K for the year ended December 31, 1990.)
10.8(E) Form of Letter Agreement dated February 7, 1991, among the
Company, the Management Investors Committee and Management
Investors which cancels certain stock options, grants new stock
options and amends the Amended and Restated Management Equity
Participation Agreement. (Incorporated by reference to Exhibit
10.HH as filed with the Company's Form 10-K for the year ended
December 31, 1990.)
*10.8(F) Letter Agreement dated March 1, 1995, between the Company
and the Management Investors Committee which amends the Amended
and Restated Management Equity Participation Agreement.
10.9 Management Equity Plan. (Incorporated by reference to
Exhibit 10.H as filed with the Company's Form 10-K for the year
ended December 31, 1991.)
10.9(A) Amendment dated December 28, 1993 to Management Equity Plan.
(Incorporated by reference to Exhibit 10.9(A) as filed with the
Company's Form 10-K for the year ended December 31, 1993.)
*10.9(B) Amendment dated March 1, 1995 to the Management Equity Plan.
10.10 Form of Management Equity Plan Agreement. (Incorporated by
reference to Exhibit 10.I as filed with the Company's Form 10-K
for the year ended December 31, 1991.)
10.11 Agreement dated as of July 31, 1990, between the Company and its
former Chief Executive Officer. (Incorporated by reference to
Exhibit 10.Y as filed with the Company's Form 10-K for the year
ended December 31, 1990.)
10.11(A) Modification to Agreement dated December 11, 1990, to
Agreement dated as of July 31, 1990, between the Company
and its former Chief Executive Officer. (Incorporated
by reference to Exhibit 10.Z as filed with the Company's
Form 10-K for the year ended December 31, 1990.)
10.11(B) Letter Agreement dated February 7, 1991, between the Company and
its former Chief Executive Officer which cancels stock options,
grants new stock options and amends the Agreement dated as of
July 31, 1990 among the Company and its former Chief Executive
Officer. (Incorporated by reference to Exhibit 10.II as filed
- 88 -
with the Company's Form 10-K for the year ended December 31,
1990.)
*10.11(C) Letter Agreement dated March 9, 1995, among the Company, its
former Chief Executive Officer, his spouse and certain trustees,
as permitted transferees.
10.12 Financial Advisory Agreement dated as of October 25, 1988,
between MS&Co. and the Company. (Incorporated by reference to
Exhibit 10.13 as filed with the Company's Post-Effective
Amendment No. 1 to Form S-1 on April 6, 1989.)
10.13 Participation Agreement dated as of October 20, 1989, among the
Company, Philip Morris Credit Corporation, the Loan Participants
listed therein, the Connecticut National Bank, Owner Trustee,
and Wilmington Trust Company, Indenture Trustee. (Incorporated
by reference to Exhibit 10.15 as filed with the Company's
Post-Effective Amendment No. 2 to Form S-1 on February 8, 1990.)
10.14 Facility Lease Agreement dated as of October 20, 1989, between
the Connecticut National Bank in its capacity as Owner Trustee,
the Lessor and the Company as Lessee. (Incorporated by
reference to Exhibit 10.16 as filed with the Company's
Post-Effective Amendment No. 2 to Form S-1 on February 8, 1990.)
10.15 Power Installation Lease Agreement dated as of October 20, 1989,
between The Connecticut National Bank, not in its individual
capacity but solely as Owner Trustee, and the Company.
(Incorporated by reference to Exhibit 10.HH as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.16 Equipment Lease Agreement dated as of October 20, 1989, between
The Connecticut National Bank, not in its individual capacity
but solely as Owner Trustee, and the Company. (Incorporated by
reference to Exhibit 10.II as filed with the Company's Form 10-K
for the year ended December 31, 1991.)
10.17 Participation Agreement dated as of December 23, 1990, among the
Company, Bell Atlantic Tricon Leasing Corporation, Bankers Trust
Company, The Connecticut National Bank, Owner Trustee, and
Wilmington Trust Company, Indenture Trustee. (Incorporated by
reference to Exhibit 10.BB as filed with the Company's Form 10-K
for the year ended December 31, 1990.)
10.18 Amended and Restated Equipment Lease Agreement [1990] dated as
of December 19, 1991, between The Connecticut National Bank, not
in its individual capacity but solely as Owner Trustee under the
Trust Agreement, as Lessor, and the Company, as Lessee.
(Incorporated by reference to Exhibit 10.W as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.19 Facility Lease Agreement dated as of December 19, 1991, between
The Connecticut National Bank, not in its individual capacity
but solely as Owner Trustee, and the Company. (Incorporated by
reference to Exhibit 10.EE as filed with the Company's Form 10-K
for the year ended December 31, 1991.)
- 89 -
10.20 Equipment Lease Agreement [1991] dated as of December 19, 1991,
between The Connecticut National Bank, not in its individual
capacity but solely as Owner Trustee, and the Company.
(Incorporated by reference to Exhibit 10.FF as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.21 Power Plant Lease Agreement dated as of December 19, 1991,
between The Connecticut National Bank, not in its individual
capacity but solely as Owner Trustee, and the Company.
(Incorporated by reference to Exhibit 10.GG as filed with the
Company's Form 10-K for the year ended December 31, 1991.)
10.22 Amended and Restated Participation Agreement dated as of
October 21, 1991, among the Company, Bell Atlantic Tricon
Leasing Corporation, Bankers Trust Company, The Connecticut
National Bank, Owner Trustee, and Wilmington Trust Company,
Indenture Trustee and the Form of the First Amendment thereto
dated as of December 13, 1991. (Incorporated by reference to
Exhibit 4.3 as filed with the Company's Amendment No. 3 to
Form S-3 on December 13, 1991).
10.23 Deferred Compensation Plan for Non-Employee Directors.
(Incorporated by reference to Exhibit No. 10.14 as filed with
the Company's Amendment No. 1 to Form S-1 on February 8, 1995).
10.24 1995 Stock Incentive Plan. (Incorporated by reference to
Exhibit No. 10.15 as filed with the Company's Amendment No. 1 to
Form S-1 on February 8, 1995).
10.25 1995 Stock Plan for Non-Employee Directors. (Incorporated by
reference to Exhibit No. 10.16 as filed with the Company's
Amendment No. 1 to Form S-1 on February 8, 1995).
*12 Statement of Deficiency of Earnings Available to Cover Fixed
Charges.
*21 Subsidiaries of Fort Howard Corporation.
*25 Powers of Attorney (included as part of signature page).
*Filed herewith.
- 90 -<PAGE>
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
FORT HOWARD CORPORATION
---------------------------------------
FORT HOWARD CORPORATION, a Delaware corporation, hereby certifies
as follows:
1. The name of the Corporation is Fort Howard Corporation (the
"Corporation"). The date of filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware was October
18, 1967. The original name of the Corporation was Fort Howard Paper Company.
2. This Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation of the Corporation
and was duly adopted in accordance with the provisions of Sections 228, 242
and 245 of the General Corporation Law of the State of Delaware (the "DGCL").
3. The text of the Certificate of Incorporation is hereby
amended and restated in its entirety to read as follows:
ARTICLE I
Name
----
SECTION 1.1. Name. The name of the Corporation is FORT HOWARD
CORPORATION.
ARTICLE II
Registered Office and Registered Agent
--------------------------------------
SECTION 2.1. Office and Agent. The address of the registered
office of the Corporation in the State of Delaware is 32 Loockerman Square
Suite L-100, in the City of Dover, County of Kent, Delaware 19904. The name
of the registered agent of the Corporation at such address is The
Prentice-Hall Corporation System, Inc.
ARTICLE III
Corporate Purposes
------------------
SECTION 3.1. Purpose. The purpose of the Corporation is to
engage in any lawful act or activity for which corporations may be organized
under the DGCL.
ARTICLE IV
Capitalization
--------------
SECTION 4.1. Authorized Capital. Shares. The total number of
shares of all classes of capital stock that the Corporation shall have
authority to issue is 150,000,000 shares, of which (i) 100,000,000 shares
shall be common stock, par value $.01 per share ("Common Stock"), and
(ii) 50,000,000 shares shall be preferred stock, par value $.01 per share
("Preferred Stock").
SECTION 4.2. Common Stock. (a) Voting Rights. Each holder of
Common Stock shall have one vote on each matter submitted to a vote at a
meeting of stockholders for each share of Common Stock held of record by such
holder as of the record date for such meeting.
(b) Dividends and Distributions. Subject to any rights of
holders of any class or series of Preferred Stock, when, as and if dividends
or distributions are declared on outstanding shares of Common Stock, whether
payable in cash, in property or in securities of the Corporation, each holder
of outstanding shares of Common Stock shall be entitled to share ratably in
such dividends and distributions in proportion to the number of shares of
Common Stock held by such holder.
(c) Liquidation. Subject to any rights of holders of any class
or series of Preferred Stock, upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, each holder of
outstanding shares of Common Stock shall be entitled to share ratably in the
assets of the Corporation to be distributed among the holders of shares of
Common Stock in proportion to the number of shares of Common Stock held by
such holder.
(d) No Preemptive Rights. The holders of shares of Common Stock
shall have no preemptive or preferential rights of subscription to any shares
of any class of capital stock of the Corporation or any securities convertible
into or exchangeable for shares of any class of capital stock of the
Corporation.
SECTION 4.3. Preferred Stock. Shares of Preferred Stock of the
Corporation may be issued from time to time in one or more classes or series,
each of which class or series shall have such distinctive designation or title
as shall be fixed by the affirmative vote of a majority of the whole Board of
Directors of the Corporation (the "Board of Directors") prior to the issuance
of any shares thereof. Each such class or series of Preferred Stock shall
have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions, including the
dividend rate, redemption price and liquidation preference, and may be
convertible into, or exchangeable for, at the option of either the holder or
the Corporation or upon the happening of a specified event, shares of any
other class or classes or any other series of the same or any other class or
classes of capital stock, or any debt securities, of the Corporation at such
price or prices or at such rate or rates of exchange and with such adjustments
as shall be stated and expressed in this Restated Certificate of Incorporation
or in any amendment hereto or in such resolution or resolutions providing for
the issuance of such class or series of Preferred Stock as may be adopted from
time to time by the affirmative vote of a majority of the whole Board of
Directors prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in it, all in accordance with the DGCL. The
authority of the Board of Directors with respect to each series shall also
include, but not be limited to, the determination of restrictions, if any, on
the issue or reissue of any additional shares of Preferred Stock.
ARTICLE V
Compromise or Arrangement
-------------------------
SECTION 5.1. Compromise or Arrangement. Whenever a compromise or
arrangement is proposed between the Corporation and its creditors or any class
of them and/or between the Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for the Corporation under the provisions of Section 291 of the DGCL
or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the DGCL, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders, of the Corporation, as the case may
be, to be summoned in such a manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders, of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization,
if sanctioned by the court to which the said application has been made, shall
be binding on all the creditors or the members of the class of creditors,
and/or on all the stockholders or the members of the class of stockholders, of
the Corporation, as the case may be, and also on the Corporation.
ARTICLE VI
Indemnification
---------------
SECTION 6.1. Indemnification. (a) General. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, to the full extent authorized or permitted by law, as now or
hereafter in effect, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, to the full extent authorized or permitted by law, as now or
hereafter in effect, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation;
provided, however, that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(c) Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) above, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Proceedings Initiated by any Person. Notwithstanding
anything to the contrary contained in subsections (a) or (b) above, except for
proceedings to enforce rights to indemnification, the Corporation shall not be
obligated to indemnify any person in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof) was
authorized in advance, or unanimously consented to, by the Board of Directors.
(e) Procedure. Any indemnification under subsections (a) and
(b) above (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsections
(a) and (b) above. Such determination shall be made (i) by a majority vote of
the directors who are not parties to such action, suit or proceeding even
though less than a quorum, or (ii) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or
(iii) by the stockholders.
(f) Advancement of Expenses. Expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation pursuant to this Article VI
or as otherwise authorized by law. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(g) Rights Not Exclusive. The indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
(h) Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of the DGCL.
(i) Definition of "Corporation". For purposes of this Article
VI, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Article VI with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
(j) Certain Other Definitions. For purposes of this Article VI,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves
service by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the Corporation", as referred to in this Article VI.
(k) Continuation of Rights. The indemnification and advancement
of expenses provided by, or granted pursuant to, this Article VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(l) Repeal or Modification. Any repeal or modification of this
Article VI by the stockholders of the Corporation shall not adversely affect
any rights to indemnification and to advancement of expenses that any person
may have at the time of such repeal or modification with respect to any acts
or omissions occurring prior to such repeal or modification.
ARTICLE VII
Liability of a Director
-----------------------
SECTION 7.1. Director Liability. (a) A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived any improper personal benefit.
(b) If the DGCL is amended hereafter to authorize the further
elimination or limitation of the liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest
extent authorized by the DGCL, as so amended, without further action by either
the Board of Directors or the stockholders of the Corporation.
(c) Any repeal or modification of this Article VII shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to or
at the time of such repeal or modification.
ARTICLE VIII
Management of the Affairs of the Corporation
--------------------------------------------
SECTION 8.1. Management of the Affairs of the Corporation. (a)
The business and affairs of the Corporation shall be managed by the Board of
Directors, which may exercise all the powers of the Corporation and do all
such lawful acts and things that are not conferred upon or reserved to the
stockholders by law, by this Restated Certificate of Incorporation or by the
restated by-laws of the Corporation (the "By-Laws").
(b) Election of directors of the Corporation need not be by
written ballot, unless required by the By-Laws.
(c) The following provisions are inserted for the limitation and
regulation of the powers of the Corporation and of its directors and
stockholders:
(1) The By-Laws, or any of them, may be altered, amended or
repealed, or new by-laws may be made, but only to the extent any such
alteration, amendment, repeal or new by-law is not inconsistent with any
provision of this Restated Certificate of Incorporation, either by a
majority of the whole Board of Directors or by the stockholders of the
Corporation upon the affirmative vote of the holders of at least a 80%
of the outstanding capital stock entitled to vote thereon.
(2) The Board of Directors of the Corporation shall consist of
not less than three (3) and not more than fifteen (15) directors, the
exact number of directors to be determined as set forth in, or in the
manner provided in, the By-Laws. The directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. The
term of the initial Class I directors shall terminate on the date of the
1996 annual meeting of stockholders; the term of the initial Class II
directors shall terminate on the date of the 1997 annual meeting of
stockholders; and the term of the initial Class III directors shall
terminate on the date of the 1998 annual meeting of stockholders. At
each annual meeting of stockholders, beginning with the 1996 annual
meeting of stockholders, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term.
If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, but in no case will a
decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the
year in which his term expires and until his successor shall be elected
and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. The term of a
director elected by stockholders to fill a newly created directorship or
other vacancy shall expire at the same time as the terms of the other
directors of the class for which the new directorship is created or in
which the vacancy occurred. Any vacancy on the Board of Directors that
results from an increase in the number of directors and any other
vacancy occurring on the Board of Directors, howsoever resulting, may be
filled only by a majority of the directors then in office, even if less
than a quorum, or by a sole remaining director. Any director so elected
by the Board of Directors to fill a vacancy shall hold office for a term
that shall coincide with the term of the class to which such director
shall have been elected.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Restated
Certificate of Incorporation or the resolution or resolutions adopted by
the Board of Directors pursuant to Section 4.3 hereof applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Section 8.1(c) unless expressly provided by such terms.
(3) Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors of the
Corporation, except as may be otherwise provided in this Restated
Certificate of Incorporation with respect to the right of holders of
Preferred Stock of the Corporation to nominate and elect a specified
number of directors in certain circumstances. Nomination of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders, or at any special meeting of stockholders called for the
purpose of electing directors, (a) by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (b) by any
stockholder of the Corporation (i) who is a stockholder of record on the
date of the giving of the notice provided for in this Section 8.1(c)(3)
and on the record date for the determination of stockholders entitled to
vote at such meeting and (ii) who complies with the notice procedures
set forth in this Section 8.1(c)(3). In addition to any other
applicable requirements, for a nomination to be made by a stockholder,
such stockholder must have given timely notice thereof in proper written
form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices
of the Corporation (a) in the case of an annual meeting, not less than
60 days nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however,
that in the event that the annual meeting is called for a date that is
not within 30 days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the
close of business on the tenth day following the day on which such
notice of the date of the annual meeting is mailed or such public
disclosure of the date of the annual meeting is made, whichever first
occurs, or (b) in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the close of
business on the tenth day following the day on which notice of the date
of the special meeting is mailed or public disclosure of the date of the
special meeting is made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder
proposes to nominate for election as a director, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class or series and
number of shares of capital stock of the Corporation which are owned
beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section
14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as
to the stockholder giving the notice, (i) the name and record address of
such stockholder, (ii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of
record by such stockholder, together with evidence reasonably
satisfactory to the Secretary of such beneficial ownership, (iii) a
description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the
persons named in its notice and (v) any other information relating to
such stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section
14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth
in this Section 8.1(c)(3). If the chairman of the meeting determines
that a nomination was not made in accordance with the foregoing
procedures, the chairman of the meeting shall declare to the meeting
that the nomination was defective and such defective nomination shall be
disregarded.
(4) Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time by the stockholders
of the Corporation, but only for cause and only by the affirmative vote
of the holders of a majority of the outstanding shares of the
Corporation then entitled to vote generally in the election of
directors, considered for purposes of this paragraph as one class.
(5) Any action required or permitted to be taken at any annual
or special meeting of stockholders may be taken only upon the vote of
the stockholders at an annual or special meeting duly announced and
called, as provided in the By-Laws, and may not be taken by a written
consent of the stockholders pursuant to the DGCL.
(6) Special meetings of the stockholders of the Corporation for
any purpose or purposes may be called at any time by a majority of the
members of the Board of Directors or the Chief Executive Officer of the
Corporation. Special meetings of the stockholders of the Corporation
may not be called by any other person or persons.
ARTICLE IX
Amendments
----------
SECTION 9.1. Amendments. Notwithstanding anything contained in
this Restated Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80% of the outstanding shares of capital stock
of the Corporation entitled to vote thereon shall be required to amend,
repeal, or adopt any provision inconsistent with, Section 4.3 of Article IV,
Section 8.1(c) of Article VIII or this Article IX of this Restated Certificate
of Incorporation.
ARTICLE X
Private Property
----------------
SECTION 10.1. Private Property. The private property of the
stockholders of the Corporation shall not be subject to the payment of
corporate debts to any extent whatsoever."
This Restated Certificate of Incorporation shall become effective
at 9:00 a.m. (E.S.T.), March 16, 1995.
IN WITNESS WHEREOF, FORT HOWARD CORPORATION has caused this
certificate to be signed by James W. Nellen II, its Vice President and
Secretary and attested by Cheryl A. Thomson, its Assistant Secretary, this
15th day of March 1995.
FORT HOWARD CORPORATION
By: /s/ James W. Nellen II
-------------------------
Name: James W. Nellen II
ATTEST:
/s/ Cheryl A. Thomson
------------------------
Name: Cheryl A. Thomson
EXHIBIT 3.2
RESTATED
BY-LAWS
OF
FORT HOWARD CORPORATION
ARTICLE I
OFFICES
SECTION 1. Registered Office in Delaware. The address of the
registered office of Fort Howard Corporation (hereinafter called the
"Corporation") in the State of Delaware shall be 32 Lookerman Square Suite L-
100, in the City of Dover, County of Kent, Delaware 19901, and the registered
agent in charge thereof shall be The Prentice-Hall Corporation System, Inc.
SECTION 2. Other Offices. The Corporation may have an office or
offices at any other place or places within or without the State of Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Annual Meeting. The annual meeting of stockholders
for the election of directors and for the transaction of such other business
as may properly come before the meeting shall be held at such place within or
without the State of Delaware, and at such date and hour, as shall be
designated by the Board of Directors of the Corporation (the "Board") and set
forth in the notice or in a duly executed waiver of notice thereof.
SECTION 2. Special Meetings. A special meeting of the
stockholders for any purpose or purposes may be called at any time by a
majority of the members of the Board or the Chief Executive Officer of the
Corporation. A special meeting of stockholders of the Corporation may not be
called by any other person or persons. Any such meeting shall be held at such
place within or without the State of Delaware, and at such date and hour, as
shall be designated in the notice or in a duly executed waiver of notice of
such meeting.
Only such business as is stated in the written notice of a special
meeting may be acted upon thereat.
SECTION 3. Notice of Meetings. Except as otherwise provided by
law, written notice of each annual or special meeting of stockholders stating
the place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is held, shall be given
personally or by first class mail to each stockholder entitled to vote at such
meeting, not less than 10 nor more than 60 calendar days before the date of
the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. If, prior to the time of mailing, the Secretary shall have
received from any stockholder entitled to vote a written request that notices
intended for such stockholder are to be mailed to an address other than the
address that appears on the records of the Corporation, notices intended for
such stockholder shall be mailed to the address designated in such request.
Notice of a special meeting may be given by the person or persons
calling the meeting, or, upon the written request of such person or persons,
by the Secretary of the Corporation on behalf of such person or persons. If
the person or persons calling a special meeting of stockholders give notice
thereof, such person or persons shall forward a copy thereof to the Secretary.
Every request to the Secretary for the giving of notice of a special meeting
of stockholders shall state the purpose or purposes of such meeting.
SECTION 4. Waiver of Notice. Notice of any annual or special
meeting of stockholders need not be given to any stockholder entitled to vote
at such meeting who files a written waiver of notice with the Secretary, duly
executed by the person entitled to notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
meeting of stockholders need be specified in any written waiver of notice.
Attendance of a stockholder at a meeting, in person or by proxy, shall
constitute a waiver of notice of such meeting, except as provided by law.
SECTION 5. Adjournments. When a meeting is adjourned to another
date, hour or place, notice need not be given of the adjourned meeting if the
date, hour and place thereof are announced at the meeting at which the
adjournment is taken. If the adjournment is for more than 30 calendar days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the adjourned meeting. At the adjourned meeting
any business may be transacted which might have been transacted at the
original meeting.
When any meeting is convened the presiding officer, if directed by
the Board, may adjourn the meeting if (a) no quorum is present for the
transaction of business, or (b) the Board determines that adjournment is
necessary or appropriate to enable the stockholders (i) to consider fully
information which the Board determines has not been made sufficiently or
timely available to stockholders or (ii) otherwise to exercise effectively
their voting rights.
SECTION 6. Quorum. Except as otherwise provided by law or the
Restated Certificate of Incorporation of the Corporation (the "Restated
Certificate of Incorporation"), whenever a class of stock of the Corporation
is entitled to vote as a separate class, or whenever classes of stock of the
Corporation are entitled to vote together as a single class, on any matter
brought before any meeting of the stockholders, whether annual or special,
holders of shares entitled to cast a majority of the votes entitled to be cast
by all the holders of the shares of stock of such class voting as a separate
class, or classes voting together as a single class, as the case may be,
outstanding and entitled to vote thereat, present in person or by proxy, shall
constitute a quorum at any such meeting of the stockholders. If, however,
such quorum shall not be present or represented at any such meeting of the
stockholders, the stockholders entitled to vote thereat may adjourn the
meeting from time to time in accordance with Section 5 of this Article II
until a quorum shall be present or represented.
SECTION 7. Voting. Unless otherwise provided in the Restated
Certificate of Incorporation, each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of capital
stock entitled to vote thereat held by such stockholder. Except as otherwise
provided by law or the Restated Certificate of Incorporation or these Restated
By-Laws, when a quorum is present with respect to any matter brought before
any meeting of the stockholders, the vote of the holders of shares entitled to
cast a majority of the votes entitled to be cast by all the holders of the
shares constituting such quorum shall decide any such matter. Votes need not
be by written ballot, unless the Board, in its discretion, or the officer of
the Corporation presiding at a meeting of stockholders, in his discretion,
requires any vote or votes cast at such meeting to be cast by written ballot.
SECTION 8. Proxies. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for
such stockholder by proxy. Such proxy shall be filed with the Secretary
before such meeting of stockholders at such time as the Board may require. No
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
SECTION 9. Advance Notice of Business to Be Transacted at Annual
Meetings. To be properly brought before the annual meeting of stockholders,
business must be either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board (or any duly
authorized committee thereof), (b) otherwise properly brought before the
meeting by or at the direction of the Board (or any duly authorized committee
thereof) or (c) otherwise properly brought before the meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date
of the giving of the notice provided for in this Section 9 and on the record
date for the determination of stockholders entitled to vote at such meeting
and (ii) who complies with the notice procedures set forth in this Section 9.
In addition to any other applicable requirements, including but not limited to
the requirements of Rule 14a-8 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for business to be properly brought before an annual meeting
by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, notice
by the stockholder in order to be timely must be so received not later than
the close of business on the tenth day following the day on which such notice
of the date of the annual meeting is mailed or such public disclosure of the
date of the annual meeting is made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting, (b) the name and record address of such stockholder, (c) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, together with
evidence reasonably satisfactory to the Secretary of such beneficial
ownership, (d) a description of all arrangements or understandings between
such stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (e) a
representation that such stockholder intends to appear in person or by proxy
at the annual meeting to bring such business before the meeting.
Notwithstanding anything in these Restated By-laws to the
contrary, no business shall be conducted at the annual meeting of stockholders
except business brought before such meeting in accordance with the procedures
set forth in this Section 9; provided, however, that, once business has been
properly brought before such meeting in accordance with such procedures,
nothing in this Section 9 shall be deemed to preclude discussion by any
stockholder of any such business. If the chairman of such meeting determines
that business was not properly brought before the meeting in accordance with
the foregoing procedures, the chairman shall declare to the meeting that the
business was not properly brought before the meeting and such business shall
not be transacted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The property, business and affairs of
the Corporation shall be managed by the Board, which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
law or by the Restated Certificate of Incorporation directed or required to be
exercised or done by the stockholders.
SECTION 2. Number and Term of Holding Office. Subject to the
rights, if any, of holders of preferred stock of the Corporation, the number
of directors which shall constitute the whole Board shall consist of not less
than three (3) nor more than fifteen (15) members, the exact number of which
shall be fixed by the Board from time to time. The Board shall, by resolution
passed by a majority of the Board, designate the directors to serve as initial
Class I, Class II and Class III directors upon filing of the Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware. Except as provided in Section 5 of this Article III, directors
shall be elected by a plurality of the votes cast at annual meetings of
stockholders, and each director so elected shall hold office as provided by
Article VIII of the Restated Certificate of Incorporation. None of the
directors need be stockholders of the Corporation.
SECTION 3. Nomination of Directors and Advance Notice Thereof.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors of the Corporation, except as may
be otherwise provided in the Restated Certificate of Incorporation with
respect to the right of holders of preferred stock of the Corporation to
nominate and elect a specified number of directors in certain circumstances.
Nominations of persons for election to the Board may be made at any annual
meeting of stockholders, or at any special meeting of stockholders called for
the purpose of electing directors, (a) by or at the direction of the Board (or
any duly authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of
the notice provided for in this Section 3 and on the record date for the
determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 3. In addition
to any other applicable requirements, for a nomination to be made by a
stockholder, such stockholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than 60 days nor
more than 90 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that the
annual meeting is called for a date that is not within 30 days before or after
such anniversary date, notice by the stockholder in order to be timely must be
so received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting is mailed or
such public disclosure of the date of the annual meeting is made, whichever
first occurs, or (b) in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the close of business on
the tenth day following the day on which notice of the date of the special
meeting is mailed or public disclosure of the date of the special meeting is
made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes
to nominate for election as a director, (i) the name, age, business address
and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by
the person and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the notice, (i)
the name and record address of such stockholder, (ii) the class or series and
number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, together with evidence
reasonably satisfactory to the Secretary of such beneficial ownership, (iii) a
description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy
at the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section l4 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 3. If the chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures, the chairman of the
meeting shall declare to the meeting that the nomination was defective and
such defective nomination shall be disregarded.
SECTION 4. Resignation. Any director may resign at any time by
giving written notice to the Board, the Chief Executive Officer or the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall
not be specified therein, then it shall take effect when accepted by action of
the Board. Except as aforesaid, acceptance of such resignation shall not be
necessary to make it effective.
SECTION 5. Vacancies. Subject to the rights of the holders of
any series of Preferred Stock or any other class of capital stock of the
Corporation (other than the Common Stock) then outstanding, any vacancy in the
Board, arising from death, resignation, removal, an increase in the number of
directors or any other cause, may be filled either by a majority vote of the
remaining directors, although less than a quorum, or by the sole remaining
director. Any director elected to fill a vacancy shall hold office for a term
that shall coincide with the term of the class to which such director shall
have been elected.
SECTION 6. Meetings. (a) Annual Meetings. As soon as
practicable after each annual election of directors, the Board shall meet for
the purpose of organization and the transaction of other business, unless it
shall have transacted all such business by written consent pursuant to Section
7 of this Article III.
(b) Other Meetings. Other meetings of the Board shall be held
at such times as the Board shall from time to time determine or upon call by
the Chief Executive Officer of the Corporation or any two directors.
(c) Notice of Meetings. Regular meetings of the Board may be
held without notice. The Secretary of the Corporation shall give notice to
each director of each special meeting, including the time and place of such
special meeting. Notice of each such meeting shall be given to each director
either by mail, at least two days before the day on which such meeting is to
be held, or by telephone, telegram, facsimile, telex or cable not later than
the day before the day on which such meeting is to be held or on such shorter
notice as the person or persons calling such meeting may deem necessary or
appropriate in the circumstances. Notice of any meeting shall not be required
to be given to any director who shall attend such meeting. A waiver of notice
by the person entitled thereto, whether before or after the time of any such
meeting, shall be deemed equivalent to adequate notice.
(d) Place of Meetings. The Board may hold its meetings at such
place or places within or without the State of Delaware as the Board may from
time to time by resolution determine or as shall be designated in the
respective notices or waivers of notice thereof.
(e) Quorum and Manner of Acting. Except as otherwise provided
by law, the Restated Certificate of Incorporation or these Restated By-Laws, a
majority of the total number of directors then in office shall be necessary at
any meeting of the Board in order to constitute a quorum for the transaction
of business at such meeting, and the affirmative vote of a majority of those
directors present at any such meeting at which a quorum is present shall be
necessary for the passage of any resolution or act of the Board. In the
absence of a quorum for any such meeting, a majority of the directors present
thereat may adjourn such meeting from time to time until a quorum shall be
present thereat. Notice of any adjourned meeting need not be given.
(f) Organization and Order of Business. The Chief Executive
Officer shall act as chairman of each meeting of the Board and preside
thereat, or, in the absence of the Chief Executive Officer at any meeting of
the Board, the Vice Chairman shall act as chairman of such meeting and preside
thereat, or, in the absence of both the Chief Executive Officer and the Vice
Chairman at any meeting of the Board, any other director chosen by a majority
of the directors present thereat shall act as chairman of the meeting and
preside thereat. The Secretary of the Corporation or, in the case of his
absence, any person whom the chairman of the meeting shall appoint, shall act
as secretary of such meeting and keep the minutes thereof.
SECTION 7. Action by Consent. Any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be
taken without a meeting if a written consent thereto is signed by all members
of the Board or such committee, as the case may be, and such written consent
or consents are filed with the minutes of the proceedings of the Board or such
committee.
SECTION 8. Meetings by Conference Telephone, etc. Any one or
more members of the Board, or of any committee thereof, may participate in a
meeting of the Board, or of such committee, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
SECTION 9. Compensation. Each director, in consideration of his
serving as such, shall be entitled to receive from the Corporation such amount
per annum, if any, or such fees, if any, for attendance at meetings of the
Board or of any committee thereof, or both, as the Board shall from time to
time determine. The Board may likewise provide that the Corporation shall
reimburse each director or member of a committee for any expenses incurred by
him on account of his attendance at any such meeting. Nothing contained in
this Section 9 shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES
The Board, by resolution passed by a majority of the whole Board,
may designate members of the Board to constitute one or more committees which
shall in each case consist of such number of directors, not fewer than two,
and, to the extent permitted by law and provided in the resolution
establishing such committee, shall have and exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified members
at any meeting of any such committee. In the absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any absent or
disqualified member. A majority of all the members of any such committee may
fix its rules of procedure, determine its action and fix the time and place,
whether within or without the State of Delaware, of its meetings and specify
what notice thereof, if any, shall be given, unless the Board shall otherwise
by resolution provide. The Board shall have power to change the members of
any such committee at any time, to fill vacancies therein and to discharge any
such committee, either with or without cause, at any time. Any committee, to
the extent allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation. Each
committee shall keep regular minutes and report to the Board when required.
ARTICLE V
OFFICERS
SECTION 1. Executive Officers. The officers of the Corporation
shall be a Chairman of the Board, a Chief Executive Officer, a Vice Chairman,
a President and Chief Operating Officer, one or more Executive Vice Presidents
and one or more Vice Presidents, a Treasurer, a Chief Financial Officer, a
Secretary and a Controller. Each such officer shall be elected or appointed
by the Board at its annual meeting and shall hold office for such term as may
be determined by the Board. Each such officer shall hold office until the
next succeeding annual meeting of the Board and until his successor is elected
or until his earlier death or resignation or removal in the manner hereinafter
provided. Any two or more offices may be held by the same person.
The Board or the Chief Executive Officer may elect or appoint such
other officers of the Corporation (including one or more Assistant Vice
Presidents, Assistant Treasurers and Assistant Secretaries) as it or he deems
necessary who shall have such authority and shall perform such duties as the
Board or he may prescribe. If additional officers are elected or appointed,
each of them shall hold office until his successor is elected or appointed or
until his earlier death or resignation or removal in the manner hereinafter
provided.
SECTION 2. Authority and Duties. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided in these
Restated By-Laws or, to the extent not so provided, by resolution of the
Board.
SECTION 3. Resignation and Removal. (a) Any officer may resign
at any time by giving written notice to the Board, the Chief Executive Officer
or the Secretary of the Corporation, and such resignation shall take effect at
the time specified therein or, if the time when it shall become effective
shall not be specified therein, when accepted by action of the Board. Except
as aforesaid, the acceptance of such resignation shall not be necessary to
make it effective.
(b) All officers and agents elected or appointed by the Board
shall be subject to removal at any time by the Board and all officers and
agents appointed by the Chief Executive Officer shall be subject to removal at
any time by the Chief Executive Officer, in each case, with or without cause.
SECTION 4. Vacancies. Any vacancy in any office may be filled
for the unexpired portion of the term in the same manner as provided for
election and appointment to such office.
SECTION 5. Chairman of the Board. Subject to the provisions of
Section 7 hereof, the Chief Executive Officer shall be the Chairman of the
Board of the Corporation. The Chairman of the Board shall preside at all
meetings of the Board and at all meetings of the stockholders and shall have
and exercise such further powers and duties as may from time to time be
conferred upon or assigned to him by the Board.
SECTION 6. Chief Executive Officer. The Chief Executive Officer
of the Corporation, subject to the direction of the Board, shall have general
charge of the business and affairs of the Corporation, shall have the
direction of all other officers, agents and employees of the Corporation and
may assign such duties to the other officers of the Corporation as he deems
appropriate.
SECTION 7. Vice Chairman. The Vice Chairman, subject to the
direction of the Chairman of the Board, shall assist the Chairman of the Board
in carrying out the orders and resolutions of the Board and shall perform such
other duties as the Chairman of the Board or the Board shall from time to time
assign. At the request of the Chairman of the Board, or in the case of the
absence or inability to act of the Chairman of the Board, the Vice Chairman,
until otherwise determined, and subject to any limitations imposed by the
Board, shall assume the duties of the Chairman of the Board, and when so
acting, but subject to the foregoing, shall have all of the power and be
subject to all the restrictions upon the Chairman of the Board.
SECTION 8. President and Chief Operating Officer. The President
and Chief Operating Officer of the Corporation, subject to the direction of
the Chief Executive Officer, shall have charge of the day-to-day operations of
the Corporation, shall assist the Chief Executive Officer in carrying out the
orders and resolutions of the Board and shall perform such other duties as the
Chief Executive Officer or the Board of Directors shall from time to time
assign. At the request of the Chief Executive Officer, or in case of the
absence or inability to act of the Chief Executive Officer, the President and
Chief Operating Officer, until otherwise determined, and subject to any
limitations imposed by the Board, shall assume the duties of the Chief
Executive Officer and, when so acting, but subject to the foregoing, shall
have all of the powers of, and be subject to all the restrictions upon, the
Chief Executive Officer.
SECTION 9. Executive Vice Presidents and Vice Presidents. Each
Executive Vice President and Vice President of the Corporation shall have such
powers and perform such duties as the Chief Executive Officer or the Board may
from time to time prescribe and shall perform such other duties as may be
prescribed by these By-laws.
SECTION 10. Chief Financial Officer. The Chief Financial Officer
shall, subject to the direction of the Chief Executive Officer, have overall
charge of all of the financial affairs of the Corporation.
SECTION 11. Treasurer. The Treasurer of the Corporation shall
have charge and custody of and be responsible for all funds and securities of
the Corporation.
SECTION 12. Secretary. The Secretary of the Corporation shall
keep the records of all meetings of the stockholders and the Board. He shall
affix the seal of the Corporation to all deeds, contracts, bonds or other
instruments requiring the corporate seal when the same shall have been signed
on behalf of the Corporation by a duly authorized officer and shall be the
custodian of all contracts, deeds, documents and all other indicia of title to
properties owned by the Corporation and of its other corporate records.
SECTION 13. Controller. The Controller of the Corporation shall
have charge and custody of and be responsible for the Corporation's books of
account.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. Execution of Documents. Any officer, employee or
agent of the Corporation designated by the Board (or any duly authorized
committee of the Board to the extent permitted by law) shall have power to
execute and deliver deeds, contracts, mortgages, bonds, debentures, checks,
drafts and other orders for the payment of money and other documents for and
in the name of the Corporation, and the Board (or such a committee) may
authorize any such officer, employee or agent to delegate such power
(including authority to redelegate) by written instrument to other officers,
employees or agents of the Corporation.
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board or the Chief Executive Officer or any other officer
of the Corporation to whom power in that respect shall have been delegated by
the Board shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of
Other Corporations. The Board or the Chief Executive Officer shall designate
the officers of the Corporation who shall have authority from time to time to
appoint an agent or agents of the Corporation to exercise in the name and on
behalf of the Corporation the powers and rights that the Corporation may have
as the holder of stock or other securities in any other corporation, and to
vote or consent in respect of such stock or securities. Such designated
officers may instruct the person or persons so appointed as to the manner of
exercising such powers and rights, and such designated officers may execute or
cause to be executed in the name and on behalf of the Corporation and under
its corporate seal, or otherwise, such written proxies, powers of attorney or
other instruments as they may deem necessary or proper in order that the
Corporation may exercise such powers and rights.
ARTICLE VII
SHARES AND TRANSFER OF SHARES
SECTION 1. Certificates of Stock. Every owner of shares of stock
of the Corporation shall be entitled to have a certificate evidencing the
number of shares of stock of the Corporation owned by him or it and
designating the class of stock to which such shares belong, which shall
otherwise be in such form as the Board shall prescribe. Each such certificate
shall bear the signature (or a facsimile thereof) of the Chief Executive
Officer or the Vice Chairman or the President or an Executive Vice President
or a Vice President and the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation.
SECTION 2. Record. A record shall be kept of the name of the
person, firm or corporation owning the stock represented by each certificate
evidencing stock of the Corporation issued, the number of shares represented
by each such certificate, and the date thereof, and, in the case of
cancellation, the date of cancellation. Except as otherwise expressly
required by law, the person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation.
SECTION 3. Transfer of Stock. (a) The transfer of shares of
stock and the certificates evidencing such shares of stock of the Corporation
shall be governed by Article 8 of Subtitle I of Title 6 of the Delaware Code
(the Uniform Commercial Code), as amended from time to time.
(b) Registration of transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation upon request of
the registered holder thereof, or of his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the
Corporation, and upon the surrender of the certificate or certificates
evidencing such shares properly endorsed or accompanied by a stock power duly
executed.
SECTION 4. Addresses of Stockholders. Each stockholder shall
designate to the Secretary of the Corporation an address at which notices of
meetings and all other corporate notices may be served or mailed to him, and,
if any stockholder shall fail to so designate such an address, corporate
notices may be served upon him by mail directed to him at his post office
address, if any, as the same appears on the share record books of the
Corporation or at his last known post office address.
SECTION 5. Lost, Destroyed or Mutilated Certificates. A holder of
any shares of stock of the Corporation shall promptly notify the Corporation
of any loss, destruction or mutilation of any certificate or certificates
evidencing all or any such shares of stock. The Board may, in its discretion,
cause the Corporation to issue a new certificate in place of any certificate
theretofore issued by it and alleged to have been mutilated, lost, stolen or
destroyed, upon the surrender of the mutilated certificate or, in the case of
loss, theft or destruction of the certificate, upon satisfactory proof of such
loss, theft or destruction, and the Board may, in its discretion, require the
owner of the lost, stolen or destroyed certificate or his legal representative
to give the Corporation a bond sufficient to indemnify the Corporation against
any claim made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of such new certificate.
SECTION 6. Facsimile Signatures. Any or all of the signatures on
a certificate evidencing shares of stock of the Corporation may be facsimiles.
SECTION 7. Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with the Restated
Certificate of Incorporation or these Restated By-Laws, concerning the issue,
transfer and registration of certificates evidencing stock of the Corporation.
It may appoint, or authorize any principal officer or officers to appoint, one
or more transfer agents and one or more registrars, and may require all
certificates of stock to bear the signature or signatures (or a facsimile or
facsimiles thereof) of any of them. The Board may at any time terminate the
employment of any transfer agent or any registrar of transfers. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall cease to be such officer,
transfer agent or registrar, whether because of death, resignation, removal or
otherwise, before such certificate or certificates shall have been delivered
by the Corporation, such certificate or certificates may nevertheless be
adopted by the Corporation and be issued and delivered as though the person or
persons who signed or whose facsimile signature has been placed upon such
certificate or certificates had not ceased to be such officer, transfer agent
or registrar.
SECTION 8. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of, or to vote at, any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance,
a record date, which shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
such action. A determination of stockholders entitled to notice of, or to
vote at, any meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
SECTION 9. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its
records as the owner of shares of stock to receive dividends and to vote as
such owner, shall be entitled to hold liable for calls and assessments a
person registered on its records as the owner of shares of stock, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares of stock on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
SECTION 10. Stockholder Agreements. Shares of stock of the
Corporation may be subject to one or more agreements abridging, limiting or
restricting the rights of any one or more stockholders to sell, assign,
transfer, mortgage, pledge or hypothecate any or all of the stock of the
Corporation held by them, or providing for preemptive rights, or may be
subject to one or more agreements providing a purchase option with respect to
any shares of stock of the Corporation. If such agreements exist, all
certificates evidencing shares of stock subject to such abridgements,
limitations, restrictions or options shall have reference thereto endorsed on
such certificate and such stock shall not thereafter be transferred on the
books of the Corporation except in accordance with the terms and conditions of
such agreement or agreements. Copies of such agreement or agreements shall be
maintained at the offices of the Corporation.
ARTICLE VIII
BOOKS AND RECORDS
The books and records of the Corporation may be kept at such place
or places within or without the State of Delaware as the Board may from time
to time determine.
ARTICLE IX
SEAL
The Board shall provide a corporate seal which shall bear the full
name of the Corporation.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be
subject to change from time to time, by the Board.
ARTICLE XI
INDEMNIFICATION
SECTION 1. General. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, to the
full extent authorized or permitted by law, as now or hereafter in effect,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, to the full extent authorized or permitted by law, as now or
hereafter in effect, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation;
provided, however, that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
SECTION 3. Successful Defense. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in sections 1 and 2 above, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
SECTION 4. Proceedings Initiated by any Person. Notwithstanding
anything to the contrary contained in sections 1 or 2 above, except for
proceedings to enforce rights to indemnification, the Corporation shall not be
obligated to indemnify any person in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof) was
authorized in advance, or unanimously consented to, by the Board of Directors.
SECTION 5. Procedure. Any indemnification under sections 1 and 2
above (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in sections 1
and 2 above. Such determination shall be made (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding even though
less than a quorum, or (ii) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or
(iii) by the stockholders.
SECTION 6. Advancement of Expenses. Expenses (including
attorneys' fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation pursuant to this
Article XI or as otherwise authorized by law. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board of Directors deems
appropriate.
SECTION 7. Rights Not Exclusive. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of this Article XI shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may
be entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
SECTION 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of the DGCL.
SECTION 9. Definition of "Corporation". For purposes of this
Article XI, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Article XI with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
SECTION 10. Certain Other Definitions. For purposes of this
Article XI, references to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to any employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves service by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the Corporation", as referred to in this Article XI.
SECTION 11. Continuation of Rights. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article XI
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 12. Repeal or Modification. Any repeal or modification
of this Article XI by the stockholders of the Corporation shall not adversely
affect any rights to indemnification and to advancement of expenses that any
person may have at the time of such repeal or modification with respect to any
acts or omissions occurring prior to such repeal or modification.
ARTICLE XII
AMENDMENTS
These Restated By-Laws, or any of them, may be altered, amended or
repealed, or new by-laws may be made, but only to the extent any such
alteration, amendment, repeal or new by-law is not inconsistent with any
provision of the Restated Certificate of Incorporation, either by a majority
of the whole Board or by the stockholders of the Corporation upon the
affirmative vote of the holders of 80% of the outstanding shares of capital
stock of the Corporation entitled to vote thereon.
EXHIBIT 4.0
$1,440,000,000
CREDIT AGREEMENT
Dated as of
March 8, 1995,
among
FORT HOWARD CORPORATION,
THE LENDERS IDENTIFIED HEREIN
and
BANKERS TRUST COMPANY,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and
CHEMICAL BANK,
as Arrangers,
and
BANKERS TRUST COMPANY,
as Administrative Agent
FORT HOWARD CORPORATION
CREDIT AGREEMENT
dated as of March 8, 1995
TABLE OF CONTENTS
Heading Page
INTRODUCTION................................ 1
RECITALS.................................... 1
ARTICLE I DEFINITIONS................................. 2
Section 1.1 Certain Defined Terms....................... 2
Section 1.2 Accounting Terms............................ 61
Section 1.3 Other Definitional Provisions;
Anniversaries............................ 61
Section 1.4 Adjustment for Special Reserve.............. 61
Section 1.5 Currency Equivalent Generally............... 61
ARTICLE II COMMITMENTS AND LOANS; NOTES................ 62
Section 2.1 Term Loans and Term Notes................... 62
2.1.1 Term Loan Commitments....................... 63
2.1.2 Notice of Borrowing......................... 63
2.1.3 Disbursement of Funds....................... 64
2.1.4 Term Notes.................................. 65
2.1.5 Scheduled Payments of Term Loans............ 65
Section 2.2 Letters of Credit........................... 65
2.2.1 Letters of Credit........................... 65
2.2.2 Request for Issuance........................ 67
2.2.3 Determination of Fronting Bank.............. 68
2.2.4 Payment of Amounts Drawn Under Letters
of Credit................................ 69
2.2.5 Payment by the Lenders...................... 70
2.2.6 Compensation................................ 71
2.2.7 Obligations Absolute........................ 73
2.2.8 Additional Payments......................... 73
2.2.9 Indemnification; Nature of Fronting
Bank's Duties............................ 75
2.2.10 Computation of Interest..................... 76
-i-
Heading Page
Section 2.3 Revolving Loans and Revolving Notes......... 77
2.3.1 Revolving Loan Commitments.................. 77
2.3.2 Notice of Borrowing......................... 78
2.3.3 Disbursement of Funds....................... 79
2.3.4 Revolving Notes............................. 80
Section 2.4 Total Loan Commitments; Limitations on
Outstanding Loan Amounts................. 80
Section 2.5 Interest on the Loans....................... 80
2.5.1 Rate of Interest............................ 80
2.5.2 Interest Periods............................ 83
2.5.3 Interest Payments........................... 85
2.5.4 Conversion or Continuation.................. 85
2.5.5 Post-Maturity Interest...................... 86
2.5.6 Computation of Interest..................... 87
Section 2.6 Commissions................................. 87
2.6.1 Commitment Commissions...................... 87
2.6.2 Bankers and Arrangers Commissions........... 87
2.6.3 No Refund of Fees........................... 87
Section 2.7 Prepayments and Payments; Reductions in
Commitments.............................. 88
2.7.1 Voluntary Prepayments....................... 88
2.7.2 Mandatory Prepayments....................... 88
2.7.3 Company's Mandatory Prepayment
Obligation; Application of
Prepayments.............................. 91
2.7.4 Manner and Time of Payment.................. 94
2.7.5 Apportionment of Payments................... 94
2.7.6 Payments on Non-Business Days............... 95
2.7.7 Payment Accounts; Notation of Payment...... 95
2.7.8 Voluntary Reductions of Swing Line
Commitment and Revolving Loan
Commitments.............................. 96
2.7.9 Mandatory Reductions of Revolvin Loan
Commitments and Swing Line Commitment.... 96
Section 2.8 Use of Proceeds............................. 97
2.8.1 Term Loans.................................. 97
2.8.2 Revolving Loans............................. 97
2.8.3 Swing Line Loans............................ 97
2.8.4 Margin Regulations.......................... 98
Section 2.9 Special Provisions Governing Adjusted
LIBOR Loans.............................. 98
2.9.1 Determination of Interest Rate.............. 98
2.9.2 Increased Costs............................. 98
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Heading Page
2.9.3 Required Termination and Prepayment......... 100
2.9.4 Options of Company.......................... 100
2.9.5 Compensation................................ 101
2.9.6 Quotation of LIBOR.......................... 101
2.9.7 Taxes....................................... 102
2.9.8 Booking of Adjusted LIBOR Loans............. 106
2.9.9 Assumptions Concerning Funding of
Adjusted LIBOR Loans..................... 106
2.9.10 Adjusted LIBOR Loans After an Event of
Default.................................. 106
2.9.11 Affected Lender's Obligation to
Mitigate................................. 107
Section 2.10 Capital Requirements........................ 107
Section 2.11 Replacement Rights of Company............... 108
Section 2.12 Swing Line Loans and Swing Line Notes....... 108
2.12.1 Swing Line Loans............................ 108
2.12.2 Notice of Borrowing......................... 109
2.12.3 Disbursement of Funds....................... 110
2.12.4 Swing Line Note............................. 110
2.12.5 Purchase of Swing Line Loans................ 110
ARTICLE III CONDITIONS TO LOANS AND LETTERS OF
CREDIT................................... 111
Section 3.1 Conditions to Loans Made on the Closing
Date.................................... 111
3.1.1 ........................................... 111
3.1.2 ........................................... 111
3.1.3 ........................................... 112
3.1.4 ........................................... 113
3.1.5 ........................................... 115
3.1.6 ........................................... 116
3.1.7 ........................................... 116
3.1.8 ........................................... 116
3.1.9 ........................................... 117
3.1.10 ........................................... 117
3.1.11 ........................................... 117
3.1.12 ........................................... 117
3.1.13 ........................................... 117
Section 3.2 Conditions to Loans........................ 118
3.2.1 ........................................... 118
3.2.2 ........................................... 118
3.2.3 ........................................... 119
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Heading Page
Section 3.3 Conditions to Tranche A Term Loans and
Certain Revolving Loans on the
Deferred Funding Date................... 119
3.3.1 ........................................... 120
3.3.2 ........................................... 120
3.3.3 ........................................... 120
Section 3.4 Conditions to Initial Revolving Loans
and Swing Line Loans.................... 120
3.4.1 ........................................... 120
3.4.2 ........................................... 120
3.4.3 ........................................... 120
Section 3.5 Conditions to All Letters of Credit........ 120
3.5.1 ........................................... 121
3.5.2 ........................................... 121
3.5.3 ........................................... 121
ARTICLE IV REPRESENTATIONS AND WARRANTIES............ 121
Section 4.1 Organization, Powers, Good Standing,
Business and Subsidiaries............... 121
4.1.1 Organization and Powers.................... 121
4.1.2 Good Standing.............................. 122
4.1.3 Conduct of Business........................ 122
4.1.4 Subsidiaries............................... 122
Section 4.2 Authorization of Borrowing, etc............ 122
4.2.1 Authorization of Borrowing................. 122
4.2.2 No Conflict................................ 122
4.2.3 Governmental Consents...................... 123
4.2.4 Binding Obligation......................... 123
4.2.5 Valid Issuance of Common Stock............. 124
Section 4.3 Financial Condition........................ 124
Section 4.4 No Adverse Material Change; No Stock
Payments................................ 124
Section 4.5 Title to Properties; Liens................. 124
Section 4.6 Litigation; Adverse Facts.................. 125
Section 4.7 Payment of Taxes........................... 126
Section 4.8 Performance of Agreements.................. 126
Section 4.9 Governmental Regulation.................... 126
Section 4.10 Securities Activities...................... 126
Section 4.11 Employee Benefit Plans..................... 127
4.11.1 ........................................... 127
4.11.2 ........................................... 127
4.11.3 ........................................... 127
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Heading Page
4.11.4 ........................................... 127
4.11.5 ........................................... 127
4.11.6 ........................................... 127
Section 4.12 Certain Fees............................... 127
Section 4.13 Disclosure................................. 128
Section 4.14 Patents, Trademarks, etc................... 129
Section 4.15 Environmental Protection................... 130
4.15.1 ........................................... 130
4.15.2 ........................................... 130
4.15.3 ........................................... 130
4.15.4 ........................................... 130
Section 4.16 Security Interests......................... 131
Section 4.17 IDA and Certain Documents.................. 131
Section 4.18 Solvency................................... 132
4.18.1 ........................................... 132
4.18.2 ........................................... 132
ARTICLE V AFFIRMATIVE COVENANTS..................... 132
Section 5.1 Financial Statements and Other Reports.... 133
Section 5.2 Corporate Existence, etc................... 139
Section 5.3 Payment of Taxes and Claims; Tax
Consolidation........................... 139
5.3.1 ........................................... 139
5.3.2 ........................................... 139
Section 5.4 Maintenance of Properties; Insurance....... 140
Section 5.5 Inspection................................. 140
Section 5.6 No Further Negative Pledges................ 141
Section 5.7 Compliance with Laws, etc.................. 141
Section 5.8 Interest Rate Agreements................... 142
Section 5.9 Lender Meeting............................. 142
Section 5.10 Security Interests......................... 142
5.10.1 ........................................... 142
5.10.2 ........................................... 142
Section 5.11 Future Guarantor Subsidiaries and
Additional Pledge Agreements; Certain
Future Acquisitions of Material
Assets.................................. 143
5.11.1 ........................................... 143
5.11.2 Grant of Security Interest in Material
Assets.................................. 143
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Heading Page
5.11.3 Limitations on Pledging of Shares and
other Assets of Certain Foreign
Subsidiaries and Delivery of Certain
Guarantees............................. 145
5.11.4 .......................................... 146
5.11.5 .......................................... 146
5.11.6 .......................................... 147
5.11.7 .......................................... 147
Section 5.12 Expansion Projects........................ 147
5.12.1 Mill Expansion Transactions............... 147
5.12.2 Greenfield Expansion Projects............. 152
Section 5.13 Certain Dispositions of Collateral........ 153
Section 5.14 Georgia Mill Lease and Mortgage........... 155
5.14.1 .......................................... 155
5.14.2 .......................................... 156
5.14.3 .......................................... 156
5.14.4 .......................................... 157
Section 5.15 Transfer of Permits and Licenses.......... 157
Section 5.16 Recapitalization.......................... 157
Section 5.17 Green Bay Sludge Boiler................... 157
5.17.1 .......................................... 157
5.17.2 .......................................... 157
ARTICLE VI NEGATIVE COVENANTS........................ 158
Section 6.1 Indebtedness.............................. 158
Section 6.2 Liens..................................... 161
Section 6.3 Investments; Joint Ventures............... 164
Section 6.4 Contingent Obligations.................... 168
Section 6.5 Restricted Junior Payments................ 170
Section 6.6 Financial Covenants....................... 171
6.6.1 Interest Coverage Ratio................... 171
6.6.2 Maximum Leverage Ratio.................... 172
Section 6.7 Restriction on Fundamental Changes........ 172
6.7.1 .......................................... 172
6.7.2 .......................................... 172
6.7.3 .......................................... 174
6.7.4 .......................................... 174
6.7.5 .......................................... 174
6.7.6 .......................................... 174
6.7.7 .......................................... 174
Section 6.8 ERISA..................................... 174
6.8.1 .......................................... 175
6.8.2 .......................................... 175
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Heading Page
6.8.3 ......................................... 175
6.8.4 ......................................... 175
Section 6.9 Restriction on Leases.................... 175
Section 6.10 Sales and Leasebacks..................... 176
Section 6.11 Sale or Discount of Receivables;
Receivables Transactions.............. 176
6.11.1 ......................................... 176
6.11.2 ......................................... 177
6.11.3 ......................................... 177
Section 6.12 Transactions with Shareholders and
Affiliates............................ 177
Section 6.13 Disposal of Subsidiary Stock............. 177
6.13.1 ......................................... 178
6.13.2 ......................................... 178
Section 6.14 Limitation on Capital Expenditur......... 178
6.14.1 ......................................... 178
6.14.2 ......................................... 178
6.14.3 ......................................... 178
6.14.4 ......................................... 179
6.14.5 ......................................... 180
6.14.6 ......................................... 180
Section 6.15 Conduct of Business...................... 180
Section 6.16 Amendments or Waivers of Certain
Documents; Prepayments of
Indebtedness.......................... 181
6.16.1 ......................................... 181
6.16.2 ......................................... 181
6.16.3 ......................................... 181
6.16.4 ......................................... 182
6.16.5 ......................................... 182
6.16.6 ......................................... 182
6.16.7 ......................................... 183
6.16.8 ......................................... 183
Section 6.17 Payment of Cash Interest on
Subordinated Debt..................... 183
ARTICLE VII EVENTS OF DEFAULT........................ 184
Section 7.1 Failure To Make Payments When Due........ 184
Section 7.2 Default in Other Agreements.............. 184
Section 7.3 Breach of Certain Covenants.............. 185
Section 7.4 Breach of Warranty....................... 185
Section 7.5 Other Defaults Under Agreement or Loan
Document.............................. 185
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Heading Page
Section 7.6 Involuntary Bankruptcy; Appointment of
Receiver, etc........................... 185
7.6.1 ........................................... 185
7.6.2 ........................................... 185
Section 7.7 Voluntary Bankruptcy; Appointment of
Receiver, etc........................... 186
Section 7.8 Judgments and Attachments.................. 186
Section 7.9 Dissolution................................ 187
Section 7.10 Unfunded ERISA Liabilities................. 187
7.10.1 ........................................... 187
7.10.2 ........................................... 187
7.10.3 ........................................... 187
7.10.4 ........................................... 187
7.10.5 ........................................... 187
Section 7.11 Withdrawal Liability Under
Multiemployer Plan...................... 187
Section 7.12 Invalidity of Guarantees................... 188
Section 7.13 Failure of Security........................ 188
Section 7.14 Change in Control.......................... 188
ARTICLE VIII THE ADMINISTRATIVE AGENT.................. 190
Section 8.1 Appointment............................... 190
Section 8.2 Powers; General Immunity.................. 190
8.2.1 Duties Specified.......................... 190
8.2.2 No Responsibility for Certain Matters..... 191
8.2.3 Exculpatory Provisions.................... 191
8.2.4 Administrative Agent Entitled to Act as
Lender................................. 192
Section 8.3 Representations and Warranties; No
Responsibility for Appraisal of
Creditworthiness....................... 192
Section 8.4 Right to Indemnity........................ 193
Section 8.5 Registered Holder of Note Treated as
Owner.................................. 193
Section 8.6 Resignation by Administrative Agent....... 193
8.6.1 .......................................... 193
8.6.2 .......................................... 193
8.6.3 .......................................... 194
8.6.4 .......................................... 194
Section 8.7 Guarantor Subsidiary Guarantee and
Collateral Documents................... 194
Section 8.8 Successor Administrative Agent............ 194
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Heading Page
ARTICLE IX MISCELLANEOUS............................ 194
Section 9.1 Successors and Assigns; Participations.... 195
9.1.1 .......................................... 195
9.1.2 .......................................... 195
9.1.3 .......................................... 197
9.1.4 .......................................... 198
9.1.5 .......................................... 199
Section 9.2 Expenses.................................. 200
Section 9.3 Indemnity................................. 200
Section 9.4 Set Off................................... 201
Section 9.5 Ratable Sharing........................... 202
9.5.1 .......................................... 202
9.5.2 .......................................... 203
Section 9.6 Amendments and Waivers.................... 203
Section 9.7 Independence of Covenants................. 205
Section 9.8 Change in Accounting Principles; Fiscal
Year or Tax Laws....................... 205
Section 9.9 Notices................................... 206
Section 9.10 Survival of Warranties and Certain
Agreements............................. 206
Section 9.11 Failure or Indulgence Not Waiver;
Remedies Cumulative.................... 206
Section 9.12 Severability.............................. 207
Section 9.13 Obligations Several; Independent Nature
of the Lenders' Rights................. 207
Section 9.14 Headings.................................. 207
Section 9.15 Applicable Law............................ 207
Section 9.16 Consent to Jurisdiction and Service of
Process................................ 207
Section 9.17 Confidentiality........................... 208
Section 9.18 Counterparts; Effectiveness............... 209
Section 9.19 Determinations Pursuant to Collateral
Documents.............................. 209
Section 9.20 Certain Obligations of Company............ 209
Section 9.21 Waiver of Jury Trial...................... 209
Section 9.22 Defaulting Lenders........................ 210
9.22.1 .......................................... 210
9.22.2 .......................................... 210
9.22.3 .......................................... 211
Section 9.23 Lenders' ERISA Matters.................... 211
9.23.1 Lenders' Representations and Warranties... 211
9.23.2 General Account Assets.................... 212
9.23.3 Representations of Transferees............ 212
9.23.4 Additional ERISA Representations.......... 213
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SIGNATURE PAGES.................................................. 214
SCHEDULES
A LOAN PARTIES AND SUBSIDIARIES
B LENDERS' COMMITMENTS, PRO RATA SHARES AND FUNDING PERCENTAGES
C EXISTING INDEBTEDNESS
D EXISTING LIENS
E EXISTING INVESTMENTS
F CREDIT FACILITIES TO BE TERMINATED ON THE CLOSING DATE
G CONTINGENT OBLIGATIONS
H LEASEHOLD MORTGAGEE PROVISIONS
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF TRANCHE A TERM NOTE
IV FORM OF REVOLVING NOTE
V FORM OF TRANCHE B TERM NOTE
VI FORM OF COMPLIANCE CERTIFICATE
VII FORM OF SWING LINE NOTE
VIII FORM OF OPINION OF SHEARMAN & STERLING, COUNSEL TO FORT
HOWARD
IX-A FORM OF OPINION OF JAMES W. NELLEN, II, ESQ., COUNSEL TO FORT
HOWARD
IX-B FORMS OF OPINION OF LOCAL COUNSEL TO FORT HOWARD (REAL
PROPERTY)
IX-C FORMS OF OPINION OF LOCAL COUNSEL TO FORT HOWARD (PERSONAL
PROPERTY)
IX-D FORM OF OPINION OF MICHAEL, BEST & FRIEDRICH (INTELLECTUAL
PROPERTY)
X FORM OF OPINION OF CAHILL GORDON & REINDEL
XI FORM OF OFFICER'S CLOSING CERTIFICATE
XII FORM OF IDA ESTOPPEL
XIII FORM OF GUARANTOR SUBSIDIARY GUARANTEE
XIV-A FORM OF COMPANY RECEIVABLE/INVENTORY PLEDGE AGREEMENT
XIV-B FORM OF GUARANTOR SUBSIDIARY RECEIVABLE/INVENTORY PLEDGE
AGREEMENT
XV FORM OF COMPANY STOCK PLEDGE AGREEMENT
XVI FORM OF SPECIAL FUNDING PROCEDURES LETTER
XVII FORM OF INTELLECTUAL PROPERTY PLEDGE AGREEMENT
XVIII FORM OF REGISTERED TRANSFER SUPPLEMENT
XIX-A(i) FORM OF MORTGAGE - WISCONSIN
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XIX-A(ii) FORM OF MILL MORTGAGE - WISCONSIN
XIX-B(i) FORM OF MILL MORTGAGE - OKLAHOMA
XIX-B(ii) FORM OF MORTGAGE - OKLAHOMA
XIX-C(i) FORM OF GEORGIA MILL DEED TO SECURE DEBT
XIX-C(ii) FORM OF GEORGIA DEED TO SECURE DEBT
XX FORM OF LETTER ESCROW AND SECURITY AGREEMENT
XXI FORM OF OFFICER'S FUNDING DATE CERTIFICATE
XXII FORM OF OFFICER'S SECTION 5.1(iv) CERTIFICATE
XXIII FORM OF OFFICER'S SECTION 5.1(xiv) CERTIFICATE
XXIV FORM OF EXPANSION INTERCREDITOR AGREEMENT
XXV NONDISTURBANCE, CURE RIGHTS AND PURCHASE
OPTION AGREEMENT, DATED AS OF OCTOBER 20, 1989
XXVI CURE RIGHTS AND PURCHASE OPTION AGREEMENT,
DATED AS OF OCTOBER 20, 1989
XXVII RECEIVABLES TERM SHEET
XXVIII FORM OF STATUS CERTIFICATE
XXIX FORM OF COLLATERAL TRUST AGREEMENT
XXX FAIR VALUE DETERMINATION PROCEDURES
-xi-
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of March 8, 1995, by and among FORT
HOWARD CORPORATION, a Delaware corporation (the "Company"), THE PARTIES
IDENTIFIED AS LENDERS ON THE SIGNATURE PAGES HEREOF (each, together with
its successors and assigns, a "Lender"), BANKERS TRUST COMPANY ("Bankers"),
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BOA") and CHEMICAL
BANK, as Arrangers (each (exclusive of any assignee or successor), an
"Arranger"), and BANKERS TRUST COMPANY, as administrative agent for the
Lenders (in such capacity and together with its successors in such
capacity, the "Administrative Agent").
R E C I T A L S :
A. The parties hereto desire to provide for, among other
things, (i) the Company to borrow on a term basis Tranche A Term Loans (as
hereinafter defined; other capitalized terms used in these Recitals having
the meanings set forth in Section 1.1 hereof) in an aggregate principal
amount not to exceed $810,000,000, (ii) the Company to borrow on a term
basis Tranche B Term Loans in an aggregate principal amount not to exceed
$330,000,000, (iii) the Company to borrow on a revolving basis Swing Line
Loans in an aggregate principal amount at any time outstanding not to
exceed $25,000,000, (iv) one or more Fronting Banks to issue letters of
credit, on the terms and subject to the conditions set forth in this
Agreement, in an aggregate face amount at any time outstanding not in
excess of $50,000,000 and (v) the Company to borrow on a revolving basis,
at any time and from time to time prior to the Revolving Credit Maturity
Date Revolving Loans, in an aggregate principal amount at any time
outstanding not to exceed $300,000,000 minus the sum of the aggregate
principal amount of the Swing Line Loans outstanding at such time and the
Letters of Credit Usage at such time.
B. The Lenders desire that the Obligations be secured by
(i) a security interest in certain Inventory and a junior security interest
in certain Receivables in each case owned by the Company and certain of its
Subsidiaries, (ii) a security interest in certain Intellectual Property
owned by the Company, (iii) a security interest in stock of certain
Subsidiaries of the Company, and (iv) a Mortgage of each of the Existing
Mills and certain other property.
C. From time to time hereafter, one or more of the Lenders
and the Company may be parties to a Qualified Interest
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Rate Agreement or a Qualified Currency Agreement and the parties hereto
intend that the obligations of the Company pursuant thereto (to the extent
not in excess of $200,000,000) be secured on an equal and ratable basis
with the Obligations.
A G R E E M E N T :
The Company, the Lenders, the Administrative Agent and the
Arrangers agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. The following terms used
in this Agreement shall have the following meanings:
"ABR Borrowing" means a Borrowing comprised of ABR Loans.
"ABR Loan" means any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Borrowing" means a Borrowing comprised of ABR
Revolving Loans.
"ABR Revolving Loan" means any Revolving Loan bearing interest
at a rate determined by reference to the Alternate Base Rate in accordance
with the provisions of subsection 2.5.1.
"ABR Spread" means (A) with respect to Tranche A Term Loans and
Revolving Loans, the percent per annum from time to time in effect pursuant
to paragraph (d) of subsection 2.5.1, and (B) with respect to Tranche B
Term Loans, 2% per annum.
"ABR Term Borrowing" means a Borrowing comprised of ABR Term
Loans.
"ABR Term Loan" means any Term Loan bearing interest at a rate
determined by reference to ABR in accordance with the provisions of
subsection 2.5.1.
"Accepting Tranche B Lenders" has the meaning assigned to that
term in paragraph (c) of subsection 2.7.3.
-3-
"A Credit Exposure Amount" has the meaning assigned to that
term in the definition of "Credit Exposure Amount."
"Additional Collateral Documents" has the meaning assigned to
that term in paragraph (a) of subsection 5.11.2.
"Additional Georgia Mortgage" has the meaning assigned to that
term in subsection 5.14.1.
"Adjusted Consolidated Net Income" means, for any period,
Consolidated Net Income during such period, plus (minus) the amount of
depreciation, depletion, amortization of intangibles, deferred taxes,
accreted and zero coupon bond interest and other non-cash expenses
(income), losses (gains) or charges (credits) that, pursuant to GAAP, were
deducted (added) in determining such Consolidated Net Income.
"Adjusted LIBOR" means, for any Interest Rate Determination
Date, the rate per annum (rounded upward to the next higher one hundredth
of one percent) obtained by dividing (A) LIBOR for such Interest Rate
Determination Date by (B) a percentage equal to 100% minus the stated
maximum rate, as of such Interest Rate Determination Date, of all reserves
required to be maintained against "Eurocurrency Liabilities" as specified
in Regulation D (or against any other category of liabilities specified in
Regulation D which includes deposits by reference to which the interest
rate on Adjusted LIBOR Loans is determined or any category of extensions of
credit or other assets specified in Regulation D which includes loans by a
non-United States office of any Lender to United States residents).
"Adjusted LIBOR Borrowing" means a Borrowing comprised of
Adjusted LIBOR Loans.
"Adjusted LIBOR Loan" means any Adjusted LIBOR Term Loan or
Adjusted LIBOR Revolving Loan.
"Adjusted LIBOR Loans" means Loans bearing interest at rates
determined by reference to Adjusted LIBOR as provided in subsection 2.5.1.
"Adjusted LIBOR Revolving Borrowing" means a Borrowing
comprised of Adjusted LIBOR Revolving Loans.
"Adjusted LIBOR Revolving Loan" means any Revolving Loan
bearing interest at a rate determined by reference to Adjusted LIBOR in
accordance with the provisions of subsection 2.5.1.
-4-
"Adjusted LIBOR Term Borrowing" means a Borrowing comprised of
Adjusted LIBOR Term Loans.
"Adjusted LIBOR Term Loan" means any Term Loan bearing interest
at a rate determined by reference to Adjusted LIBOR in accordance with the
provisions of subsection 2.5.1.
"Adjusted Revolving Loan Commitments" means at any time the
aggregate of the Revolving Loan Commitments of all Lenders less the sum of
the Defaulting Lender Deduction Amounts of all Defaulting Lenders.
"Adjusted Revolving Loan Percentage" means (A) at a time when
no Lender Default exists, for each Lender its percentage determined by
dividing such Lender's Revolving Loan Commitment at such time by the
aggregate amount of all Revolving Loan Commitments at such time and (B) at
a time when a Lender Default exists (1) for each Lender that is a
Defaulting Lender, zero and (2) for each Lender that is a Non-Defaulting
Lender, the percentage determined by dividing such Lender's Revolving Loan
Commitment at such time by the aggregate Revolving Loan Commitments of all
Lenders that are not Defaulting Lenders at such time, it being understood
that all references herein to Revolving Loan Commitments at a time when the
Total Revolving Loan Commitment has been terminated shall be references to
the Revolving Loan Commitments in effect immediately prior to such
termination; provided, that (x) no Lender's Adjusted Revolving Loan
Percentage shall change upon the occurrence of a Lender Default from that
in effect immediately prior to such Lender Default if, after giving effect
to such Lender Default, and any repayment of Revolving Loans and Swing Line
Loans at such time pursuant to paragraph (c) of subsection 2.7.2 or
otherwise, the Total Utilization of Revolving Loan Commitments exceeds the
Adjusted Revolving Loan Commitments (after giving effect to such Lender
Default), and (y) the changes to the Adjusted Revolving Loan Percentage
that would have become effective upon the occurrence of a Lender Default
but that did not become effective as a result of the preceding subclause
(x) shall become effective on the first date after the occurrence of the
relevant Lender Default on which the Total Utilization of Revolving Loan
Commitments is equal to or less than the Adjusted Revolving Loan
Commitments (after giving effect to such Lender Default).
"Adjusted Working Capital" means, at any time, Consolidated
Current Assets minus Consolidated Current Liabilities at such time.
-5-
"Administrative Agent" has the meaning assigned to that term in
the introduction to this Agreement.
"Affected Lender" means any Lender affected by any of the
events described in subsection 2.9.2 or subsection 2.9.3.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled
by" and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or otherwise. No Lender or parent or
Subsidiary of any Lender shall be treated as an Affiliate of the Company
solely by virtue of its being a Lender or a parent or Subsidiary of a
Lender.
"Agreement" means this credit agreement, as from time to time
in effect.
"ALTA Survey" means a survey of any Real Property (and all
improvements thereon): (A) prepared by a surveyor or engineer licensed to
perform surveys in the state where such Real Property is located, (B) dated
(or redated) not earlier than six months prior to the date of delivery
thereof (unless there shall have occurred within six months prior to such
date of delivery any exterior construction on the site of such Real
Property, in which event such survey shall be dated (or redated) after the
completion of such construction or if such construction shall not have been
completed as of such date of delivery, not earlier than 20 days prior to
such date of delivery, (C) certified by such surveyor (in a manner
reasonably acceptable to the Requisite Lenders) to the Administrative
Agent, as agent for the Lenders, and (D) complying in all respects with the
minimum detail requirements of the American Land Title Association as such
requirements are in effect on the later of the date of preparation of such
survey or the date such survey is redated.
"Alternate Base Rate" or "ABR" means, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (A) the Prime Rate in effect on such day, (B) the Base CD Rate
in effect on such day plus 1% and (C) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof, the term "Base CD
Rate" means, the sum of (A) the product of (1) the Three-Month
-6-
Secondary CD Rate multiplied by (2) Statutory Reserves and (B) the
Assessment Rate. The term "Three-Month Secondary CD Rate" means, for any
day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board through the
public information telephone line of the Federal Reserve Bank of New York
(which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following
such day) or, if such rate shall not be so reported on such day or such
next preceding Business Day, the average of the secondary market quotations
for three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 a.m., New York City time, on such
day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City
negotiable certificate of deposit dealers of recognized standing selected
by it. The term "Federal Funds Effective Rate" means, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by the Federal funds broker,
as published on the next succeeding Business Day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base
CD Rate or the Federal Funds Effective Rate or both for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate
Base Rate shall be determined without regard to clause (B) or (C), or both,
of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate shall be effective on
the effective date of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Alternative Existing Mill Expansion Conditions" has the
meaning assigned to that term in subsection 5.12.1.
"Annual Prepayment" has the meaning assigned to that term in
paragraph (b) of subsection 2.7.2.
-7-
"Annual Voluntary Prepayment Adjustment Amount" means (A) in
each fiscal year of the Company in which Excess Cash Flow is a positive
amount or zero, zero and (B) in each fiscal year in which Excess Cash Flow
is less than zero, the lesser of (1) the amount of voluntary prepayments
which constitute Discretionary Voluntary Prepayments of Term Loans pursuant
to Section 2.7.1 in respect of such fiscal year and (2) the amount of
additional Net Cash Provided From Operations which would have been required
in respect of such fiscal year to result in Excess Cash Flow for such
fiscal year being zero.
"Applicable Category" means, at any date of determination
thereof, the category in the table appearing in paragraph (d) of subsection
2.5.1 having the lowest spreads and which, as of the last day of the fiscal
quarter of the Company immediately preceding such date of determination, is
applicable to the Company based upon both Ratio 1 and Ratio 2 for the
period of four consecutive fiscal quarters of the Company ending on such
last day.
"A/R Eligible Receivables" means those Receivables of the
Company pledged under the 1995 A/R Bridge.
"Arranger" has the meaning assigned to that term in the
introduction to this Agreement.
"Assessment Rate" means for any date the annual rate most
recently estimated by Bankers as the then-current net annual assessment
rate that will be employed in determining amounts payable by Bankers to the
Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in Dollars at
Bankers' domestic offices.
"Asset Sale" means the sale, transfer or other disposition
after the Closing Date (in a single transaction or a series of related
transactions) by the Company or any of its Subsidiaries to any Person
(other than the Company or any of its Subsidiaries) of (A) any of the stock
of any of the Company's Subsidiaries, (B) substantially all of the assets
of any geographic or other division or line of business of the Company or
any of its Subsidiaries, or (C) any Real Property or a portion of any Real
Property or any other asset or assets (including, without limitation, any
assets which do not constitute substantially all of the assets of any
geographic or other division or line of business but excluding any assets
manufactured, constructed or otherwise produced or purchased for sale to
others in the ordinary course of business) of the Company or any of its
Subsidiaries having a Fair Value in
-8-
excess of $2,000,000 (it being understood that if the Fair Value thereof
exceeds $2,000,000, the entire amount and not just the portion in excess of
$2,000,000 shall be subject to paragraph (a) of subsection 2.7.2); provided
that any asset sale described in clause (C) above shall not be deemed to be
an "Asset Sale" unless and until the aggregate amount of the Fair Values of
the proceeds of all such sales after the Closing Date by the Company and
its Subsidiaries occurring in any fiscal year of the Company equals or
exceeds $10,000,000 (it being understood that any such amounts less than
$10,000,000 in any fiscal year of the Company shall not be included in the
calculation of "Asset Sales" in any subsequent fiscal year of the Company);
and provided, further, that "Asset Sales" shall not include (1) sales of
Cash and Cash Equivalents in the ordinary course of business, (2) sales or
other transfers of Program Receivables pursuant to a Receivables
Transaction or so long as the 1995 A/R Bridge shall be in effect, any other
transaction to the extent that net proceeds of such transaction are
required to be applied as a prepayment under the 1995 A/R Bridge, (3) sales
of assets effected pursuant to a Sale/Leaseback Transaction that is subject
to the provisions of Section 5.12, and (4) dispositions of plants or
facilities of the Company, or of a Subsidiary of the Company, located
outside the United States of America, its territories and its possessions,
but only to the extent that the Company or a Subsidiary of the Company
prior to, simultaneously with or within six months following each such
disposition, uses or irrevocably commits to use the proceeds of such
disposition to build or purchase another facility in the same jurisdiction
or to invest in other assets located outside the United States of America,
its territories and its possessions; and provided, further, that (i) the
greater of the aggregate book value or Fair Value of all assets subject to
dispositions referred to in clause (4) in the proviso above during the term
of this Agreement shall not exceed $30,000,000 and (ii) the Administrative
Agent shall have been provided with (a) upon the Company's determination to
make any disposition referred to in clause (4) in the proviso above, a
certificate of the chief financial officer of the Company describing in
reasonable detail such disposition, the anticipated proceeds of such
disposition, the anticipated use of such proceeds and a description of the
facility to be so built or acquired or the investment in such other assets
to be made, and (b) if there is any material change in the matters set
forth in such certificate, a certificate of the chief financial officer of
the Company describing such material change(s), to be delivered upon
receipt of the proceeds of such disposition.
-9-
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination thereof, the quotient
obtained by dividing (A) the sum of the products of (1) the number of years
from such date to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund requirements) of
such Indebtedness multiplied by (2) the amount of each such principal
payment by (B) the sum of all such principal payments.
"Bankers" means Bankers Trust Company, in its individual
capacity.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as now and hereafter in effect, or any successor
statute.
"Base Annual Capex Amount" has the meaning assigned to that
term in subsection 6.14.3.
"B Credit Exposure Amount" has the meaning assigned to that
term in the definition of "Credit Exposure Amount."
"Benefited Subsidiary" means, with respect to any Letter of
Credit, the Person for whose benefit such Letter of Credit was issued,
which shall be either the Company or one of its Subsidiaries, as specified
by the Company in the request for issuance of such Letter of Credit made
pursuant to paragraph (a) of subsection 2.2.1.
"Borrowing" means the borrowing of any Loan or group of Loans
occurring on the same date and having the same maturity and bearing
interest computed on the same basis.
"Business Day" means (A) for all purposes other than as covered
by clause (B) below, any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in such State are authorized or required
by law or other governmental action to close and (B) with respect to all
notices, determinations, fundings and payments in connection with LIBOR,
any day which is a Business Day described in clause (A) and which is also a
day for trading by and between banks in Dollar deposits in the applicable
London interbank market.
"Capex Carryover Amount" has the meaning assigned to that term
in subsection 6.14.5.
-10-
"Capital Expenditures" means, in respect of any Person,
(A) expenditures (whether paid in cash or accrued as a liability and
including, without limitation, interest which is required to be capitalized
under GAAP) by such Person which, in conformity with GAAP, are required to
be included in "additions to property, plant or equipment" or similar items
reflected in a statement of changes in financial position of such Person
and (B) to the extent not included in clause (A) above, any Indebtedness
(whether or not recourse to such Person and whether or not assumed or
guaranteed by such Person) secured by any asset acquired by such Person
pursuant to any expenditure of the type described in clause (A) above, or
owing by any entity acquired by such Person pursuant to any expenditure of
the type described in clause (A) above (it being understood that each item
covered in this clause (B) shall be deemed incurred as of the date of the
applicable acquisition); provided that any Indebtedness referred to in this
clause (B) owing by an entity acquired by such Person that is not a Wholly
Owned Subsidiary of such Person shall only be included in an amount equal
to the product of (1) such Person's direct or indirect percentage of equity
ownership in such entity at the time such Indebtedness is incurred or
deemed incurred and (2) the amount of such Indebtedness.
"Capital Lease", as applied to any Person, means any lease of
any property (whether real, personal or mixed) by such Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means (A) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year from the
date of acquisition thereof, (B) marketable direct obligations issued by
any state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof maturing within one
year from the date of acquisition thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., (C) commercial paper
maturing no more than one year from the date of creation thereof and, at
the time of acquisition, having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc.,
(D) certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof
-11-
issued by any Lender or by any commercial bank organized under the laws of
the United States of America or any state thereof or the District of
Columbia having combined capital and surplus of not less than $250,000,000,
(E) Eurodollar time deposits having a maturity of less than one year
purchased from any Lender directly (whether such deposit is with such
Lender or any other Lender hereunder) and (F) repurchase agreements and
reverse repurchase agreements with any Lender or any primary dealer of
United States government securities relating to marketable direct
obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the
date of acquisition thereof; provided that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Institutions
Examination Council Supervisory Policy--Repurchase Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985 (the "Supervisory Policy")
and, in the case of a repurchase agreement with a primary dealer, the
Company or a Subsidiary of the Company shall take possession of the
obligations subject to such arrangement.
"Cash Proceeds" means, with respect to any Asset Sale, cash
payments (including any cash received by way of deferred payment pursuant
to a note receivable or otherwise (other than the portion of such deferred
payment constituting interest which shall be deemed not to constitute Cash
Proceeds), but only as and when so received) received from such Asset Sale.
"CG&R" means Cahill Gordon & Reindel, as counsel for the
Lenders in connection with this Agreement and the transactions contemplated
hereby, and any successor counsel thereto.
A "Change in Control" shall be deemed to have occurred if
(A) any person or group (within the meaning of Rule 13d-5 of the Securities
and Exchange Act of 1934, as in effect on the date hereof) other than
(1) The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"), Morgan
Stanley Group Inc. ("MS Group"), Fort Howard Equity Investors L.P., Fort
Howard Equity Investors II, L.P. and their respective general or limited
partners and/or Affiliates or (2) any employee benefit plan of the Company
or of any of its Affiliates shall become the beneficial owner of shares
representing 25% or more of any outstanding class of capital stock having
ordinary voting power in the election of directors of the Company or
(B) there shall occur during any period after the Closing Date a change in
the
-12-
Board of Directors of the Company pursuant to which the individuals who
constituted the Board of Directors of the Company at the beginning of such
period (together with any other director whose election by the Board of
Directors of the Company (or whose nomination by the Board of Directors for
election by the stockholders of the Company) was approved by a vote of at
least a majority of the directors then in office who either were directors
at the beginning of such period or whose election was previously so
approved or by a duly authorized committee of the Board of Directors (which
committee was designated by at least a majority of directors then in office
who either were directors at the beginning of such period or whose election
was previously so approved)) cease to constitute 75% of the Directors of
the Company at the end of such period.
"Closing Date" means the date of the initial funding of the
Term Loans.
"Closing Date Excess Equity Proceeds Amount" means the amount
of net cash proceeds derived from the Common Stock Offering in excess of
the difference between (A) $300,000,000 and (B) the amount of Transaction
Costs reasonably estimated by the Company to be attributable to the
issuance of common stock in the Common Stock Offering assuming it provides
gross proceeds to the Company equal to $300,000,000.
"Closing Date Tranche A Funding Amount" means that portion of
the aggregate amount of the Tranche A Commitments that is equal to the
difference between (A) the sum of the principal amount of all loans
outstanding as of the Closing Date pursuant to the Existing Credit
Facilities, together with all interest accrued thereon and other amounts
then due and payable pursuant to the Existing Credit Facilities, plus the
principal amount of all Senior Secured Notes outstanding as of the Closing
Date, together with all interest accrued thereon and other amounts then due
in respect thereof, plus the amount reasonably estimated by the Company to
be due and payable on and as of the Closing Date in respect of Transaction
Costs and (B) the gross proceeds received by the Company on the Closing
Date from the issuance of Common Stock in the Common Stock Offering, plus
the aggregate principal amount of the Tranche B Term Loans made on the
Closing Date.
"Collateral" means, as of any date of determination, the
Inventory and Receivables (other than any Program Receivables), the
Intellectual Property, the Real Properties, the interest of the Company in
and to the Project Agreement, the Escrow Agreement, the Georgia Mill Lease,
the capital stock of or other evidence of the ownership interest in each
-13-
Receivables Subsidiary (except as otherwise provided in the definition of
Receivables Subsidiary), the capital stock of or other evidence of the
ownership interest in each Subsidiary, but only to the extent such capital
stock or other evidence has been pledged to the Administrative Agent on or
prior to such date pursuant to the provisions of Section 5.11, and all the
other property described in the Collateral Documents (including, without
limitation, all Material Assets which shall have on or prior to such date
become Collateral pursuant to Section 5.11).
"Collateral Documents" means the Mortgages, the Collateral
Trust Agreement, the Pledge Agreements and all other instruments or
documents delivered by the Company or any Subsidiary thereof in order to
grant Liens on any Collateral (including, without limitation, any
Additional Collateral Document delivered pursuant to Section 5.11), as
amended, supplemented or otherwise modified from time to time in accordance
herewith and therewith.
"Collateral Trust Agreement" means the Collateral Trust
Agreement, substantially in the form annexed as Exhibit XXIX between the
Company and the Collateral Trustee, as amended, supplemented or otherwise
modified from time to time in accordance herewith and therewith.
"Collateral Trustee" means the Administrative Agent or such
other Person that is the collateral trustee pursuant to the Collateral
Trust Agreement.
"Commercial Letter of Credit" means any letter of credit or
similar instrument issued for the account of the Company for the purpose of
providing the primary payment mechanism in connection with the purchase of
any materials, goods or services by the Company or any of its Subsidiaries
in the ordinary course of business of the Company or such Subsidiary.
"Commitment Fee Letters" means, collectively, the fee letter
agreement dated January 31, 1995 among the Company and the Arrangers and
the three supplementary fee letter agreements of the Company dated
January 31, 1995, in each case as such agreements are in effect on the
Closing Date and as thereafter amended, supplemented or otherwise modified
from time to time.
"Commitment Percentage" means (A) during the one year period
following the Closing Date, .50% and (B) at all times after the first
anniversary of the Closing Date, (1) .50%, when the LIBOR Spread is 1.50%
or greater, (2) .375%, when the LIBOR
-14-
Spread is 1.25% or 1.00%, (3) .25%, when the LIBOR Spread is .75% and
(4) .1875%, when the LIBOR Spread is .625%.
"Commitments" means the commitments of the Lenders as set forth
in subsections 2.1.1, 2.2.1, 2.3.1 and 2.12.1.
"Commodities Agreement" means any forward contract, option,
futures contract, futures option, or similar agreement or arrangement
entered into by the Company designed to protect the Company or any of its
Subsidiaries from fluctuations in the price of commodities.
"Common Stock" means the common stock of the Company, par value
$.01 per share.
"Common Stock Offering" means the initial public offering by
the Company on the Closing Date of shares of newly issued Common Stock, on
the terms and subject to the conditions described in the Prospectus
(including, without limitation, any shares sold pursuant to any over-
allotment option granted in connection therewith).
"Company" has the meaning assigned to that term in the
introduction to this Agreement.
"Company Stock Pledge Agreement" means the Company Stock Pledge
Agreement, in substantially the form annexed hereto as Exhibit XV, made by
the Company, HAC Holding Corp., Harmon Assoc. Corp., and Fort Howard
Holding, on the Closing Date, as it may be amended, supplemented or
otherwise modified from time to time in accordance herewith and therewith.
"Company's Portion of Excess Cash Flow" means, at any date of
determination thereof, the cumulative amount of Excess Cash Flow for each
full fiscal year of the Company (other than a fiscal year for which Excess
Cash Flow shall be less than zero) commencing on or after January 1, 1995,
and ending prior to such date of determination that was not or is not
required to be applied to the prepayment of Loans or the reduction of
Commitments, in each case as described in paragraph (b) of subsection 2.7.2
or subsection 2.7.9.
"Compliance Certificate" means a certificate substantially in
the form annexed hereto as Exhibit VI delivered to the Lenders by the
Company pursuant to clause (B) of subparagraph (iv) of Section 5.1.
"Consolidated Capital Expenditures" means, for any period, the
sum of (A) the aggregate of all Capital
-15-
Expenditures by the Company and its Subsidiaries during such period, plus
(B) to the extent not covered by clause (A) hereof, the aggregate of all
expenditures by the Company and its Subsidiaries to acquire by purchase or
otherwise any business, property or fixed assets of, or stock or other
evidence of beneficial ownership of or interest in, any Person, including,
without limitation, the amount of any Indebtedness of any such acquired
Person existing at the date of or by reason of such purchase or
acquisition, whether or not such Indebtedness is assumed or guaranteed by
the Company or any Subsidiary of the Company (other than any such
expenditures of the type permitted under clause (x) or clause (xi) of
Section 6.3), it being understood that each item covered by this clause (B)
shall be deemed incurred as of the date of the applicable acquisition;
provided that any Indebtedness referred to in this clause (B) of any
acquired Person that is not a Wholly-Owned Subsidiary of the Company shall
only be included in an amount equal to the product of (1) the Company's
direct or indirect percentage of equity ownership in such acquired Person
at the time such Indebtedness is incurred or deemed incurred and (2) the
amount of such Indebtedness.
"Consolidated Current Assets" means, at any time, the
consolidated current assets (other than Cash and Cash Equivalents) of the
Company and its Subsidiaries (whether or not consolidated with the Company
pursuant to GAAP for financial reporting purposes and including, without
limitation, all Receivables Subsidiaries) at such time.
"Consolidated Current Liabilities" means, at any time, the
consolidated current liabilities of the Company and its Subsidiaries
(whether or not consolidated with the Company pursuant to GAAP for
financial reporting purposes and including, without limitation, all
Receivables Subsidiaries) at such time, but excluding the current portion
of any long-term Indebtedness which would otherwise be included therein and
any Indebtedness with a maturity which may, by the terms of the instrument
evidencing or governing such Indebtedness, be extended, renewed or
reborrowed (whether conditionally or unconditionally) by the Company or any
of its Subsidiaries to a date that is later than one year after such time.
"Consolidated Domestic Capital Expenditures" means, for any
period, the sum of (A) the aggregate of all Capital Expenditures by the
Company and its Domestic Subsidiaries during such period, plus (B) to the
extent not covered by clause (A) hereof, the aggregate of all expenditures
by the Company and its Domestic Subsidiaries to acquire by purchase or
otherwise the business, property or fixed assets of, or stock
-16-
or other evidence of beneficial ownership of, any Person, including,
without limitation, the amount of any Indebtedness of any such acquired
Person, whether or not such Indebtedness is assumed or guaranteed by the
Company or any Subsidiary of the Company (other than any such expenditures
of the type permitted under clause (x) or clause (xi) of Section 6.3), it
being understood that each item covered by this clause (B) shall be deemed
incurred as of the date of the applicable acquisition; provided that any
Indebtedness referred to in this clause (B) of any acquired Person that is
not a Wholly Owned Subsidiary of the Company shall only be included in an
amount equal to the product of (1) the Company's direct or indirect
percentage of equity ownership in such acquired Person at the time such
Indebtedness is incurred or deemed incurred and (2) the amount of such
Indebtedness.
"Consolidated EBITDA" means, without duplication, for any
period, the total of the amounts for such period of (A) Consolidated Net
Income, plus (B) provision for taxes based on income, plus (C) total
interest expense (including that attributable to Capital Leases and
including, without limitation, to the extent not otherwise included in this
clause (C), all interest expense or expenses in the nature of interest
expense incurred by any Receivables Subsidiary), plus (D) depreciation
expense, plus (E) amortization expense, plus (F) other non-cash items
reducing or deducted in calculating Consolidated Net Income, minus (G)
other non-cash items increasing Consolidated Net Income, minus (H) charges
against the Special Reserve, all as determined on a consolidated basis for
the Company and its Subsidiaries for such period taken as a single
accounting period determined (other than in the case of clause (H)) in
conformity with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, (A) total interest expense for such period (including that
attributable to Capital Leases) of the Company and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of the
Company and its Subsidiaries including, without limitation, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing (and excluding
capitalized interest, to the extent such capitalized interest constitutes a
Capital Expenditure or a Consolidated Domestic Capital Expenditure) and
(B) net costs under Interest Rate Agreements for such period, and (C) to
the extent not otherwise included above, all interest expense or expenses
in the nature of interest expense incurred by any Receivables Subsidiary
but excluding, however, in the case of clause (A), interest expense not
payable in cash (including amortization of
-17-
discount), any amounts referred to in Section 2.6 payable to the
Administrative Agent and the Lenders on or before the Closing Date and
Transaction Costs relating to the Recapitalization, all as determined on a
consolidated basis for the Company and its Subsidiaries in conformity with
GAAP.
"Consolidated Net Income" for any period, means the net income
(or loss) of the Company and its Subsidiaries (whether or not consolidated
with the Company pursuant to GAAP for financial reporting purposes and
including, without limitation, all Receivables Subsidiaries) on a
consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP; provided that there shall be excluded
(A) the income (or loss) of any Person (other than a Subsidiary of the
Company) in which any other Person (other than the Company or any of its
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any of its
Subsidiaries by such Person during such period, (B) the income (or loss) of
any Person accrued prior to the date it becomes a Subsidiary of the Company
or is merged into or consolidated with any of the Company's Subsidiaries or
that Person's assets are acquired by the Company or any of its
Subsidiaries, (C) the income of any Subsidiary of the Company to the extent
that the declaration or payment of dividends or similar distributions by
that 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
Subsidiary, and (D) any after-tax cash gains or losses attributable to
Asset Sales.
"Consolidated Rental Payments" means, for any period, the
aggregate amount of all amounts paid or payable or accrued or accruable
during such period under all Capital Leases and Operating Leases of the
Company and its Subsidiaries (net of sublease income), all as determined on
a consolidated basis for the Company and its Subsidiaries in conformity
with GAAP.
"Construction Cost" means, in respect of the cost of any assets
purchased or constructed in connection with any Expansion Project, the
total cost of all labor and materials and professional and permitting fees
to acquire and construct such assets, including, without limitation, all
capitalized interest in respect thereof and other items which, in
accordance with GAAP, would be required to be reflected in the financial
statements of the Company as additions to plant, property and equipment.
-18-
"Contingent Obligation", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person
(A) with respect to any indebtedness, lease, dividend, letter of credit or
other obligation of another if the primary purpose or intent thereof by the
Person incurring the Contingent Obligation is to provide assurance to the
obligee of such obligation of another that such obligation of another will
be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such obligation will be protected (in
whole or in part) against loss in respect thereof, (B) under any letter of
credit issued for the account of that Person or for which that Person is
otherwise liable for reimbursement thereof, or (C) under Commodities
Agreements, Currency Agreements or Interest Rate Agreements. Contingent
Obligations shall include, without limitation, (A) the direct or indirect
guarantee, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of another, and (B) any
liability of such Person for the obligations of another through any
agreement (contingent or otherwise) (1) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise),
(2) to maintain the solvency or any balance sheet item, level of income or
financial condition of another, or (3) to make take-or-pay or similar
payments if required regardless of non-performance by any other party or
parties to an agreement, if in the case of any such agreement the primary
purpose or intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to in the case of a
Contingent Obligation described in clause (A) in the first sentence of this
definition, the amount of the obligation so guaranteed or otherwise
supported, in the case of a Contingent Obligation described in clause (B)
in the first sentence of this definition, the amount available to be drawn
under the relevant letter of credit and in the case of a Contingent
Obligation described in clause (C) in the first sentence of this
definition, the relevant Termination Value.
"Contractual Obligation", as applied to any Person, means any
provision of any security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of
its properties is bound or to which it or any of its properties is subject.
-19-
"Controlled Foreign Corporation" means any direct or indirect
Subsidiary of the Company which is a controlled foreign corporation, as
defined in section 957(a) (or successor provision) of the Internal Revenue
Code.
"Corresponding Debt Instrument" means, (A) in respect of any
Secured Expansion Financing, the Loan Documents, as the same may be
amended, supplemented or otherwise modified from time to time, (B) in
respect of any Sale/Leaseback Financing, the leases, indentures and related
instruments (as in effect on the Closing Date) comprising (1) the Sale/
Leaseback Transaction of the Company's "Phase III" expansion at its
Savannah, Georgia, Mill or (2) the Sale/Leaseback Transaction of the
Company's "Phase IV" expansion at its Savannah, Georgia, Mill, (C) in
respect of any Unsecured Expansion Financing that constitutes Subordinated
Debt, the instruments (as in effect on the Closing Date) evidencing or
governing the Subordinated Notes and (D) in respect of any Unsecured
Expansion Financing that is not Subordinated Indebtedness, the instruments
(as in effect on the Closing Date) evidencing or governing the Senior
Unsecured Notes.
"Credit Exposure Amount" of any Lender means, as of any date of
determination, an amount equal to the sum of (A) the aggregate amount of
such Lender's unused Term Loan Commitments, if any, then in effect (it
being understood that the amount of such unused Term Loan Commitment of a
Defaulting Lender shall be deemed to be zero), increased by the aggregate
principal amount of such Lender's Term Loans then outstanding, plus (B) the
principal amount of Revolving Loans of such Lender, increased by the then
unutilized portion of such Lender's Revolving Loan Commitment in effect on
such date, reduced by such Lender's Defaulting Lender Deduction Amount, if
any, then in effect. The "A Credit Exposure Amount" of any Lender means
the "Credit Exposure Amount" of such Lender adjusted so that each of such
Lender's Tranche B Commitment and Tranche B Term Loans are deemed to equal
zero. The "B Credit Exposure Amount" of any Lender means the "Credit
Exposure Amount" of such Lender adjusted so that each of such Lender's
Tranche A Commitment, Tranche A Term Loans and Revolving Loan Commitment
are deemed to equal zero.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement entered
into by the Company designed to protect the Company or any of its
Subsidiaries against fluctuations in currency values.
-20-
"Defaulting Lender" means any Lender as to which a Lender
Default has occurred.
"Defaulting Lender Deduction Amount" means, as to each
Defaulting Lender at any date, the sum of (A) the aggregate amount of
participations of such Lender in respect of drawn but unreimbursed Letters
of Credit and all undrawn Letters of Credit as of such date, plus (B) any
amount owing by such Defaulting Lender to Bankers pursuant to subsection
2.12.5 as of such date, plus (C) the unutilized portion of the Revolving
Loan Commitment of such Lender as of such date.
"Deferred Funding Date" means a Business Day selected by the
Company and identified in a Notice of Borrowing delivered in accordance
with subsection 2.1.2 for the funding by the Lenders having Tranche A
Commitments of the Deferred Tranche A Funding Amount, which Business Day
shall not be later than 45 days after the Closing Date.
"Deferred Tranche A Funding Amount" means the difference, if
any, between the aggregate amount of the Tranche A Commitments and the
Closing Date Tranche A Funding Amount.
"Deposit Account" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or
like organization, other than an account evidenced by a negotiable
certificate of deposit.
"Destruction" has the meaning assigned to that term in the
Mortgages.
"Discretionary Equity Proceeds Balance" means, as at any date
of determination thereof, the sum (which shall not be less than zero) of
the Closing Date Excess Equity Proceeds Amount, plus the aggregate amount
of net cash proceeds received by the Company or any of its Subsidiaries
after the Closing Date and on or prior to such date of determination of all
Equity Offerings after the Closing Date, minus the sum of (1) the aggregate
of all such amounts applied by the Company, on or prior to such date of
determination, (A) as a voluntary prepayment pursuant to subsection 2.7.1
which constitutes a Discretionary Voluntary Prepayment, (B) to the making
of Consolidated Domestic Capital Expenditures pursuant to the provisions of
subsection 6.14.5, (C) to the making of Investments pursuant to the
provisions of clause (C) of subparagraph (x) of Section 6.3 or clause (B)
of subparagraph (xvi) of Section 6.3 and (D) to the making of Restricted
Junior Payments pursuant to the provisions of clause (G) of Section 6.5 and
(2) the sum of the Discretionary Equity Proceeds
-21-
Deduction Amounts in respect of each fiscal year of the Company (commencing
with fiscal year 1995) which has ended prior to the March 31st immediately
preceding such date of determination.
"Discretionary Equity Proceeds Deduction Amount" means, in
respect of each fiscal year of the Company, the
portion of the Discretionary Equity/Cash Flow Proceeds Deduction Amount (as
defined below) in respect of such fiscal year that the Company shall have
elected to allocate (in accordance with the following sentence) to the
Discretionary Equity Proceeds Balance in respect of such fiscal year. For
purposes of this definition and the definition of "Discretionary Excess
Cash Flow Deduction Amount", the Company shall allocate the Discretionary
Equity/Cash Flow Proceeds Deduction Amount in respect of any fiscal year to
the Discretionary Equity Proceeds Balance or the Discretionary Excess Cash
Flow Balance in respect of such fiscal year, or to both, as the Company
shall elect in its sole discretion; provided that, all such Discretionary
Equity/Cash Flow Proceeds Deduction Amounts shall be allocated as aforesaid
and no such allocation shall reduce such Discretionary Equity Proceeds
Balance or such Discretionary Excess Cash Flow Balance below zero. As used
herein, "Discretionary Equity/Cash Flow Proceeds Deduction Amount" means,
in respect of any fiscal year, the lesser of (i) the Annual Voluntary
Prepayment Adjustment Amount in respect of such fiscal year and (ii) the
sum of the Discretionary Equity Proceeds Balance and the Discretionary
Excess Cash Flow Balance, in each case under this clause (ii), as of the
March 31st immediately following the end of such fiscal year.
"Discretionary Excess Cash Flow Balance" means, as at any date
of determination thereof, the sum (which shall not be less than zero) of
the aggregate amount of the Company's Portion of Excess Cash Flow for all
fiscal years of the Company (commencing with fiscal year 1995) which have
ended prior to the March 31st immediately preceding such date of
determination, minus the sum of (1) the aggregate of all such amounts
applied by the Company on or prior to such date of determination (A) as a
voluntary prepayment pursuant to subsection 2.7.1 which constitutes a
Discretionary Voluntary Prepayment, (B) to the making of Consolidated
Domestic Capital Expenditures pursuant to the provisions of subsection
6.14.5, (C) to the making of Investments pursuant to the provisions of
clause (C) of subparagraph (x) of Section 6.3 or clause (B) of subparagraph
(xvi) of Section 6.3 and (D) to the making of Restricted Junior Payments
pursuant to the provisions of clause (C) of Section 6.5, clause (H) of
Section 6.5 and (2) the sum of the Discretionary Excess Cash Flow Deduction
Amounts in
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respect of each fiscal year of the Company (commencing with fiscal year
1995) which has ended prior to the March 31st immediately preceding such
date of determination.
"Discretionary Excess Cash Flow Deduction Amount" means, in
respect of each fiscal year of the Company, the portion of the
Discretionary Equity/Cash Flow Proceeds Deduction Amount (as defined in the
definition of "Discretionary Equity Proceeds Deduction Amount") in respect
of such fiscal year that the Company shall have elected to allocate (in
accordance with the second sentence of the definition of "Discretionary
Equity Proceeds Deduction Amount") to the Discretionary Excess Cash Flow
Balance in respect of such fiscal year.
"Discretionary Voluntary Prepayment" means a prepayment made by
the Company pursuant to subsection 2.7.1 which is elected by the Company to
be charged against the Discretionary Excess Cash Flow Balance or the
Discretionary Equity Proceeds Balance.
"Dollars" or the sign "$" means the lawful money of the United
States of America.
"Domestic Capex Maximum" has the meaning assigned to such term
in subsection 6.14.4.
"Domestic Subsidiary" means, at any date of determination, any
Subsidiary of the Company other than a Foreign Subsidiary.
"8-1/4% Unsecured Notes" means the Company's 8-1/4% Senior
Notes due February 1, 2002, issued and outstanding pursuant to a certain
indenture, dated as of February 1, 1994 between the Company and Norwest
Bank Wisconsin, N.A., as Trustee, as in effect on the Closing Date and as
thereafter amended, supplemented or otherwise modified from time to time in
accordance herewith or therewith.
"Environmental Laws" means federal, state, local and foreign
law or regulations, codes, orders, decrees, judgments, permits,
authorizations, agreements, or injunctions issued, promulgated, approved or
entered thereunder relating to pollution or protection of the environment,
including, without limitation, laws relating to occupational safety and
health and other laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment (including,
without limitation, ambient air,
-23-
surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes.
"Equity Offering" means any issuance or sale by the Company or
any Subsidiary of the Company whether pursuant to a registered public
offering, private placement or otherwise of any shares of capital stock or
other equity securities of the Company or any Subsidiary of the Company, or
any obligations convertible into or exchangeable for, or giving any Person
a right, option or warrant to acquire, such securities or such convertible
or exchangeable obligations, other than issuances or sales of Common Stock
pursuant to the Common Stock Offering and other than issuances and sales of
shares of capital stock or other equity securities of a Subsidiary of the
Company to the Company or a Subsidiary of the Company.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA Affiliate", as applied to any Person, means any trade or
business (whether or not incorporated) which is under common control with
that Person within the meaning of Section 4001(b) of ERISA and the
regulations promulgated thereunder or that would be treated as a single
employer with that Person (A) under Section 414(b) or (c) of the Internal
Revenue Code or (B) solely for purposes of any section or sections of the
Internal Revenue Code or ERISA to which such section or sections apply,
under Section 414(m) or (o) of the Internal Revenue Code.
"Escrow Agreement" has the meaning assigned to that term in the
Georgia Mill Mortgage.
"Escrow Letter and Security Agreement" means a letter agreement
of the Company substantially in the form of Exhibit XX annexed hereto.
"Estimated Net Cash Proceeds" means, with respect to any Asset
Sale, an amount equal to 90% of the amount estimated in good faith by the
Company to be the Net Cash Proceeds of Sale of such Asset Sale.
"Event of Default" means each of the events set forth in
ARTICLE VII.
-24-
"Excess Cash Flow" means, in respect of any fiscal year of the
Company and its Subsidiaries, (A) the Net Cash Provided From Operations in
respect of such fiscal year, reduced by (B) the sum, without duplication,
of each of the following amounts paid during such fiscal year (but only to
the extent that the Company shall not have elected to charge the payment of
such amounts against the Discretionary Equity Proceeds Balance or the
Discretionary Excess Cash Flow Balance): (1) the amount of Scheduled Term
Loans Principal Payments paid by the Company, plus (2) payments by the
Company or any of its Subsidiaries with respect to the principal portion of
Indebtedness constituting Capital Leases, plus (3) mandatory prepayments of
Loans pursuant to clause (c) of subsection 2.7.2 (but only to the extent by
the terms of this Agreement, as in effect on the date of determination of
such Excess Cash Flow, such prepaid amount could not be reborrowed) or
clause (d) of subsection 2.7.2, plus (4) voluntary prepayments of Term
Loans in accordance with subsection 2.7.1, plus (5) scheduled, mandatory or
voluntary payments or prepayments by the Company or any of its Subsidiaries
of the principal of any Indebtedness permitted to be incurred or
outstanding pursuant to any provision of this Agreement (other than (w)
Intercompany Indebtedness, (x) Loans, (y) amounts which, by the terms of
the instruments evidencing or governing such Indebtedness, may be
reborrowed and (z) Indebtedness of the type specified in clause (D) of the
definition of Indebtedness), plus (6) payments by the Company or any of its
Subsidiaries which constitute Consolidated Domestic Capital Expenditures,
plus (7) payments by the Company or any of its Subsidiaries which
constitute Consolidated Capital Expenditures (other than Consolidated
Domestic Capital Expenditures) but only to the extent not financed with the
proceeds of Indebtedness (excluding Intercompany Indebtedness) incurred by
a Foreign Subsidiary, plus, (8) Restricted Junior Payments made pursuant to
clause (A), (B) or (D)(2) of Section 6.5, plus (9) Investments of Cash and
Cash Equivalents pursuant to (a) clause (vi) of Section 6.3 or pursuant to
clause (x)(A) or (x)(B) of Section 6.3 (but only to the extent that the
Person in which such Investment is made does not constitute a Subsidiary of
the Company and does not become a Subsidiary of the Company by virtue of
such Investment) or (b) clause (xvi)(A) of Section 6.3 (but only to the
extent that each such Investment is of a type and relates to a Person such
that it would be permitted to be deducted from Net Cash Provided From
Operations pursuant to clause (9)(a) above, without giving effect (for
purposes of this clause (b)) to the limitations set forth in clause (vi),
(x)(A) or (x)(B) of Section 6.3, as applicable).
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Excluded New Indebtedness" means Refinancing Senior Unsecured
Debt, Refinancing Foreign Debt, Indebtedness constituting Permitted
Expansion Construction Financing and Indebtedness incurred pursuant to
clause (i), (iii), (vi), (viii), (ix), (xiii) or (xiv) of Section 6.1.
"Existing Credit Facilities" means the 1988 Credit Agreement
and the 1992 Credit Agreement, together with, in each case, all notes,
mortgages, security instruments and other ancillary or related
documentation.
"Existing Indebtedness" means Indebtedness of the Company and
its Subsidiaries listed on Schedule C annexed hereto.
"Existing Mill" and "Existing Mills" mean, respectively,
(A)(1) the Mill leased by the Company in Effingham County, Georgia, (2) the
Company's Muskogee, Oklahoma Mill and (3) the Company's Green Bay,
Wisconsin Mill, in each case as more particularly described in the Mill
Mortgage applicable thereto, including, in each case, all leasehold
estates, real estate and improvements thereon, and all equipment used in
the operations thereof owned by the Company or a Subsidiary of the Company
and (B) any one of such Mills.
"Existing Mill Expansion Conditions" has the meaning assigned
to that term in subsection 5.12.1.
"Existing Mill Expansion Documents" means, with respect to any
Existing Mill Expansion Transaction, an Expansion Easement, an Expansion
Lease, a Recognition Instrument or Expansion Intercreditor Agreement and
such other instruments in form and substance reasonably satisfactory to the
Requisite Lenders as may reasonably be required to consummate such Existing
Mill Expansion Transaction.
"Existing Mill Expansion Easement" means an instrument in form
and substance reasonably satisfactory to the Requisite Lenders pursuant to
which an Existing Mill Expansion Lessor is granted an easement (or, in the
case of an Existing Mill Expansion Transaction involving Land subject to
the Georgia Mill Lease, a sublease) to construct and maintain upon any Land
any Existing Mill Expansion Equipment, which instrument shall provide for
(A) rights of access to and egress from such Existing Mill Expansion
Equipment and (B) rights to utility lines and structures necessary for the
use and
-26-
enjoyment of such Existing Mill Expansion Equipment; provided that no
Existing Mill Expansion Easement shall provide rights which conflict in any
material respect with the rights of the Company in and to a Mill or which
impair in any material respect the value, legality or utility of such Mill
(determined without regard to the installation or construction of any
Existing Mill Expansion Equipment).
"Existing Mill Expansion Equipment" means those structures,
equipment, facilities, apparatus and other property which are not necessary
for the proper and efficient operation of a Mill (as constituted on the
Closing Date or, in the case of a Mill acquired or constructed after the
Closing Date, as constituted on the date such Mill becomes Collateral) or
for the compliance by any such Mill (as constituted on the Closing Date or,
in the case of a Mill acquired or constructed after the Closing Date, as
constituted on the date such Mill becomes Collateral) with any applicable
law, code or ordinance, including, without limitation, any Environmental
Law, all of which property, structures, equipment, facilities and apparatus
shall be subject to the provisions of Article 4 of the applicable Mill
Mortgage.
"Existing Mill Expansion Lease" means (A) any lease, sublease,
license or similar instrument pursuant to which the Company is granted the
use and enjoyment of Existing Mill Expansion Equipment and (B) any and all
rights of reversion relating to Existing Mill Expansion Equipment and any
purchase options or similar rights to acquire such Existing Mill Expansion
Equipment.
"Existing Mill Expansion Lessor" means the Person named as
lessor, licensor or grantor in any Existing Mill Expansion Lease.
"Existing Mill Expansion Transaction" has the meaning assigned
to that term in paragraph (a) of subsection 5.12.1.
"Existing Subordinated Debt" means the 12-5/8% Subordinated
Debentures and the 14-1/8% Discount Debentures, together with, in each
case, all obligations of the Company set forth in the indentures relating
thereto.
"Expansion Intercreditor Agreement" has the meaning assigned to
that term in subsection 5.12.1.
"Expansion Lease" means any Preexisting Expansion Lease or any
Existing Mill Expansion Lease.
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"Expansion Project" means the acquisition or construction of
Existing Mill Expansion Equipment or a Greenfield Expansion Project;
provided that neither (A) the Green Bay Sludge Boiler nor (B) the Savannah
Boiler shall constitute an Expansion Project.
"Facing Fee" has the meaning assigned to that term in paragraph
(c) of subsection 2.2.6.
"Fair Value" means, with respect to any asset or property
(including intangibles or instruments), the fair market value thereof as
determined by the Board of Directors of the Company or a committee thereof
(or, if authorized to do so by the Board of Directors of the Company or a
committee thereof, by the Chief Financial Officer or the Chief Accounting
Officer of the Company) in each case pursuant to standards, assumptions and
procedures set forth in Exhibit XXX annexed hereto.
"First Tier Foreign Subsidiary" means, at any date of
determination, a Foreign Subsidiary of the Company (A)(i) which is
organized under the laws of a jurisdiction other than the United States or
any State thereof and (ii) as to which the Company and/or one or more
Subsidiaries organized under the laws of the United States of America or
any State thereof hold directly shares of stock or other equity interests
having more than 50% of the total voting power of shares of the capital
stock or other equity interests therein (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or
trustees thereof or (B) which is organized under the laws of the United
States of America or any State therein and which does not have any
Subsidiaries that are Foreign Subsidiaries.
"Foreign Subsidiary" means each of the following: (A) each
Subsidiary or Joint Venture of the Company identified as such on Schedule A
annexed hereto, (B) each Subsidiary or Joint Venture of the Company which
is organized under the laws of a jurisdiction other than the United States
of America or any State thereof and (C) each Subsidiary or Joint Venture of
the Company which is organized under the laws of the United States of
America or any State thereof more than 80% of the sales, earnings or assets
(determined on a consolidated basis) of which are located or derived from
operations in territories of the United States of America and jurisdictions
outside the United States of America.
-28-
"Fort Howard Holding" means Fort Howard Holding, Inc., a
Delaware corporation and a Wholly Owned Subsidiary of the Company.
"Fort Sterling" means Fort Sterling Limited, an English limited
liability company and a Foreign Subsidiary of the Company.
"14-1/8% Discount Debentures" means the Company's 14-1/8%
Junior Subordinated Discount Debentures due November 1, 2004, issued and
outstanding pursuant to a certain indenture, dated as of November 1, 1988
between the Company and Society National Bank, as in effect on the Closing
Date and as thereafter amended, supplemented or otherwise modified from
time to time in accordance herewith or therewith.
"Fronting Bank" means, as the context may require, (A) (1)
Bankers, with respect to Letters of Credit issued by Bankers, and (2) with
respect to each Letter of Credit issued by an Arranger other than Bankers,
the issuer thereof, or (B) collectively, all of the foregoing.
"Funded Debt", as applied to any Person, means all Indebtedness
of that Person which by its terms or by the terms of any instrument or
agreement relating thereto matures more than one year from, or is directly
renewable or extendable at the option of the debtor to a date more than one
year from (including an option of the debtor under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of one year or more from) the date of the creation thereof.
"Funding Date" means the date of the borrowing of one or more
Loans, including, without limitation, the Closing Date and the Deferred
Funding Date.
"GAAP" means generally accepted accounting principles 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 may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as
of the date of determination; provided that compliance by the Company with
the financial covenants set forth in Section 6.6 shall be calculated in
accordance with GAAP as in effect on the Closing Date.
-29-
"General Account Assets" means the assets allocated to the
general account of an insurance company subject to state regulation.
"Georgia Mill Lease" has the meaning assigned to that term in
the Georgia Mill Mortgage.
"Georgia Mill Mortgage" means the Mill Mortgage to be executed
and delivered by the Company in respect of the Georgia Mill Lease and other
property relating to the Company's Effingham County, Georgia Mill as it may
be amended, supplemented or otherwise modified from time to time.
"Government Acts" has the meaning assigned to that term in
paragraph (a) of subsection 2.2.9.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Green Bay Dry Form Machine" means the third air-laid (dry
form) paper machine installed at the Company's Green Bay, Wisconsin Mill,
together with related ancillary improvements or equipment.
"Green Bay Sludge Boiler" means the industrial boiler installed
in the vicinity or as a part of the Company's Green Bay, Wisconsin Mill
following the date of this Agreement which is designed to burn, among other
things, sludge generated by the Company's wastepaper recycling operations.
"Greenfield Expansion Assets" means those parcels of land,
leasehold estates, easements or other realty interests in the United States
and those structures, equipment, facilities, apparatus and other property
acquired or constructed by the Company in connection with the consummation
of any Greenfield Expansion Project.
"Greenfield Expansion Financing Conditions" has the meaning
assigned to that term in subsection 5.12.2.
"Greenfield Expansion Lease" means (A) any lease, sublease,
license or similar instrument pursuant to which the Company or any Domestic
Subsidiary of the Company is granted the use and enjoyment of Greenfield
Expansion Assets and (B) any and all rights of reversion relating to
Greenfield Expansion Assets and any purchase options or similar rights to
acquire such Greenfield Expansion Equipment.
-30-
"Greenfield Expansion Project" means the acquisition or
construction by the Company or any Domestic Subsidiary of the Company of
any assets consisting of land or interests (including, without limitation,
easement or leasehold interests) in land in the United States or
improvements not, at the time of acquisition or construction thereof,
adjacent, contiguous to or located on any land comprising a portion of any
Mill (including any facility in the general area of a Mill that is used in
connection with such Mill) existing at the Closing Date, which land or
improvements are intended to be utilized by the Company or any Domestic
Subsidiary of the Company, upon the completion and placing into service
thereof, as a Mill.
"Guarantor Subsidiary" means each of HAC Holding Corp. and
Harmon Assoc., Corp. and, after any Material Subsidiary has executed a
counterpart of the Guarantor Subsidiary Guarantee pursuant to
subsection 5.11.1, such Material Subsidiary.
"Guarantor Subsidiary Guarantee" means the guarantee agreement
executed and delivered by each Guarantor Subsidiary pursuant to
subparagraph (v) of subsection 3.1.2 or subsection 5.11.1, which shall be
substantially in the form of Exhibit XIII annexed hereto, with appropriate
modifications as consented to by the Requisite Lenders, as such guarantee
agreement may hereafter be amended, supplemented or otherwise modified from
time to time.
"HAC Holding Corp." means HAC Holding Corp., a Delaware
corporation and a Wholly Owned Subsidiary of the Company.
"Harmon Assoc. Corp." means Harmon Assoc. Corp., a New York
corporation and a Wholly Owned Subsidiary of the Company.
"IDA" means the Effingham County Industrial Development
Authority and its successors and assigns.
"IDA Estoppel" means a certificate substantially in the form of
Exhibit XII annexed hereto executed by an officer of the IDA certifying as
to certain matters relating to the Georgia Mill Lease.
"Improvements" has the meaning assigned to that term in the
Mortgages.
-31-
"Indebtedness", as applied to any Person, means (A) all
indebtedness for borrowed money, (B) that portion of obligations with
respect to Capital Leases which is properly classified as a liability on a
balance sheet in conformity with GAAP, (C) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money, (D) any obligation owed for all or any part
of the deferred purchase price of property or services which purchase price
is (1) due more than six months after the date of placing such property in
service or taking delivery and title thereto or the completion of such
services in respect thereof, or (2) evidenced by a note or similar written
instrument and (E) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to
the credit of that Person.
"Indemnities" has the meaning assigned to that term in Section
9.3.
"Information Package" means, collectively, the Memorandum dated
January 1995 delivered by the Administrative Agent to the Lenders, the
Registration Statement and any supplementary letter delivered by the
Company to the Administrative Agent, in each case as it may be supplemented
on or prior to the date of the signing of this Agreement.
"Initial Cash Proceeds Payment" has the meaning assigned to
that term in paragraph (a) of subsection 2.7.2.
"Initial Major Expansion Project" means the first Expansion
Project to be commenced by the Company or any of its Subsidiaries after the
Closing Date that involves or will involve Capital Expenditures by the
Company and its Subsidiaries in respect thereof in an aggregate amount
estimated by the Company in its reasonable judgment to be $100,000,000 or
more to complete and put in service.
"Intellectual Property" has the meaning assigned to that term
in the Intellectual Property Pledge Agreement.
"Intellectual Property Pledge Agreement" means the Intellectual
Property Pledge Agreement substantially in the form of Exhibit XVII annexed
hereto executed and delivered by the Company, as the same may be amended,
supplemented or otherwise modified from time to time.
-32-
"Intercompany Indebtedness" means any Indebtedness of the
Company or any Subsidiary of the Company which, in the case of the Company,
is owing to any Subsidiary or which, in the case of any such Subsidiary, is
owing to the Company or any other Subsidiary of the Company.
"Interest Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Consolidated Interest Expense for
such period.
"Interest Payment Date" means, with respect to any Adjusted
LIBOR Loan, the last day of each Interest Period applicable to such Loan;
provided that in the case of each Interest Period of six or more months,
"Interest Payment Date" shall also include each Interest Period Anniversary
Date for such Interest Period.
"Interest Period" means any interest period applicable to a
Loan as determined pursuant to subsection 2.5.2.
"Interest Period Anniversary Date" means, for each Interest
Period which is six or more months, each three-month anniversary of the
commencement of such Interest Period.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement or arrangement entered into by the Company designed
to protect the Company or any of its Subsidiaries against fluctuations in
interest rates.
"Interest Rate Determination Date" means, for each Interest
Period, the second Business Day prior to the first day of the related
Interest Period for an Adjusted LIBOR Loan.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time hereafter and any successor statute.
"Inventory" means, inclusively, all inventory of the Company
and each Guarantor Subsidiary, wherever located in the United States of
America, its territories or possessions, and whether now existing or
hereafter acquired, including, without limitation, all raw materials, work
in process, supplies, returned goods, finished goods, samples, and
consigned goods to the extent of the consignee's interest therein.
"Investment", as applied to any Person (the "Investor"), means
any direct or indirect purchase or other
-33-
acquisition by the Investor of, or a beneficial interest in, stock or other
Securities of any other Person other than (A) in the case of each Investor
that is a Foreign Subsidiary, a direct or indirect Subsidiary of such
Foreign Subsidiary and (B) in the case of each Investor that is the Company
or a Domestic Subsidiary, a Subsidiary that is not a Foreign Subsidiary or
a Receivables Subsidiary, or any direct or indirect loan, advance (other
than advances to employees for moving and travel expenses, drawing accounts
and similar expenditures in the ordinary course of business) or capital
contribution by the Investor to any other Person other than (A) in the case
of each Investor that is a Foreign Subsidiary, a direct or indirect
Subsidiary of such Foreign Subsidiary and (B) in the case of each Investor
that is the Company or a Domestic Subsidiary, a Subsidiary that is not a
Foreign Subsidiary or a Receivables Subsidiary, including all indebtedness
and accounts receivable owing to the Investor from such other Person which
are not current assets or did not arise from sales to such other Person in
the ordinary course of the Investor's business (other than Royalty or
Management Fees). The amount of any Investment shall be the original cost
of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment. A Contingent Obligation of
the Company or any of its Subsidiaries in respect of the obligations of a
Foreign Subsidiary shall constitute an Investment in such Foreign
Subsidiary to the extent of such Contingent Obligation. The amount of such
Investment shall be equal to the amount of the Contingent Obligation as
determined by the last sentence of the definition of Contingent Obligation.
Any renewals, extensions or replacements of an existing Contingent
Obligation or other Indebtedness which constitutes an Investment hereunder
shall not constitute a new Investment at the time of such renewal,
extension or replacement except to the extent such renewal, extension or
replacement increases the amount of such Contingent Obligation or other
Indebtedness and then only to the extent of such increase.
"Investment Grade Ratings" has the meaning assigned to that
term in subsection 2.5.1.
"Investor" has the meaning assigned to that term in the
definition of Investment.
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that, as to any such arrangement in corporate form, such
corporation shall not, as to any Person of
-34-
which such corporation is a Subsidiary, be considered to be a Joint Venture
to which such Person is a party.
"Land" has the meaning assigned to that term in the Mortgages.
"Landfill Area" has the meaning assigned to that term in the
form of Mortgage attached hereto as Exhibit XIX-A(i).
"Lender" has the meaning assigned to that term in the
introduction to this Agreement and includes Bankers, BOA and Chemical Bank,
in their individual capacities.
"Lender Default" means (A) the refusal (which has not been
retracted) of a Lender to make available its portion of any Borrowing or to
fund its portion of any drawing under a Letter of Credit or to pay any
amount owing to Bankers pursuant to subsection 2.12.5 or (B) a Lender
having refused to comply, or having notified in writing (which notification
has not been retracted) the Administrative Agent that it does not intend to
comply, with its obligations under Section 2.1, 2.2, 2.3 or 2.12.
"Letter of Credit" means (A) a Standby Letter of Credit or (B)
a Commercial Letter of Credit, in each case, issued or to be issued by a
Fronting Bank for the account of the Company pursuant to Section 2.2.
"Letters of Credit Usage" means, as at any date of
determination, the sum of (A) the maximum aggregate amount which is, or,
with respect to any Letter of Credit that by its terms provides for
increases over time in the maximum amount available to be drawn thereunder,
may become at any given time, available under all Letters of Credit then
outstanding plus (B) the aggregate amount of all drawings under Letters of
Credit honored by one or more Fronting Banks and not theretofore reimbursed
by the Company or any Benefited Subsidiary; provided that the Letters of
Credit Usage of a Fronting Bank shall be deemed to be only such portion of
the Letters of Credit Usage of such Fronting Bank which the Lenders have
not bought by participation pursuant to paragraph (b) of subsection 2.2.1.
"Leverage Ratio" means, for any period, the ratio of the
principal amount of Senior Secured Indebtedness outstanding at the last day
of such period to Consolidated EBITDA for such period.
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"Leveraged Swap" means any Commodities Agreement, Currency
Agreement or Interest Rate Agreement pursuant to which any party shall be
entitled to receive from the counterparty thereto, in respect of each
notional Dollar or other applicable unit that is the subject thereof, any
payment or credit in excess of the amount necessary to compensate such
party for the actual and direct cost or deemed cost to such party of any
fluctuation in interest rates or currency exchange rates in respect of such
Dollar or other unit of currency or market costs or prices in respect of
each such unit.
"LIBOR" means, in respect of any Adjusted LIBOR Borrowing for
any Interest Period, the rate per annum at which dollar deposits
approximately equal in principal amount to the Administrative Agent's
portion of such Adjusted LIBOR Borrowing and for a maturity comparable to
such Interest Period are offered to the Administrative Agent in immediately
available funds in the London interbank market at approximately 11:00 a.m.
(London time) on the Interest Rate Determination Date for such Interest
Period.
"LIBOR Spread" means (A) with respect to Tranche A Term Loans
and Revolving Loans, the percent per annum from time to time in effect
pursuant to paragraph (d) of subsection 2.5.1, and (B) with respect to
Tranche B Term Loans, 3% per annum.
"Lien" means any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement or any lease in the nature thereof).
"Loan" or "Loans" means one or more of the Revolving Loans, the
Swing Line Loans or the Term Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Guarantor
Subsidiary Guarantees and the Collateral Documents.
"Loan Parties" means the Company, Fort Howard Holding, HAC
Holding Corp., Harmon Assoc. Corp. and the Guarantor Subsidiaries.
"Lower Tier Foreign Subsidiary" means, as at any date of
determination, a Foreign Subsidiary of the Company other than (A) a First
Tier Foreign Subsidiary or (B) any other Foreign Subsidiary which is
organized under the laws of the United States of America or any State
thereof.
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"Management Agreements" means (A) the Management Equity
Participation Agreements between the Company and certain officers and
directors and holders of stock (or options on stock), (B) the Fort Howard
Corporation Management Equity Plan (the "Plan") effective as of April 29,
1991, and the Agreements (as defined in the Plan) related thereto, (C) the
Fort Howard Corporation 1995 Stock Incentive Plan (the "1995 Plan")
effective as of January 15, 1995, and the Award Agreements (as defined in
the 1995 Plan) related thereto, and (D) any equity-based plan (a "Broad-
Based Plan") adopted by the Company for its employees generally (provided
that any such Broad-Based Plan may not cause the Company to exceed (i) the
limitation on Investments set forth in subparagraph (xiv) of Section 6.3 or
(ii) the limitation on repurchases or redemptions of Common Stock set forth
in subclause (D)(2) of Section 6.5), as such Management Equity
Participation Agreements, the Plan, the Agreements, the 1995 Plan and the
Award Agreements and any Broad-Based Plan are in effect on the date of this
Agreement (or the date of adoption in the case of any Broad-Based Plan) and
as they may have been and hereafter may be amended, supplemented or
otherwise modified from time to time in accordance herewith and therewith.
"Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System of the
United States as in effect from time to time.
"Material Asset" means (A) any asset or group of related assets
(other than equity interests or other securities in Foreign Subsidiaries)
acquired (whether by purchase, lease, grant of contract rights or
otherwise) after the Closing Date or constructed (whether contemporaneously
or pursuant to a series of related transactions) after the Closing Date by
the Company or any Domestic Subsidiary of the Company having a Fair Value
(for any such asset, individually or, for any such group in the aggregate)
at the date of its acquisition or construction (or, in the case of related
acquisitions or constructions, as of the date of the last of such
acquisitions or constructions) in excess of $15,000,000 other than
(1) assets acquired or constructed as part of any Greenfield Expansion
Project or (2) any Existing Mill Expansion Transaction and (B) the equity
interests or other securities owned by the Company or any Domestic
Subsidiary of the Company in any Foreign Subsidiary of the Company in
respect of which the total of the Fair Values of all Investments (measured
as of the date of each Investment) of the Company and its Domestic
Subsidiaries after the Closing Date exceeds at any time the Dollar
equivalent of $10,000,000 (it being understood that any
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Investment by the Company or any Domestic Subsidiary of the Company in a
Subsidiary of a First Tier Foreign Subsidiary shall be deemed to be an
Investment in an equal amount in such First Tier Foreign Subsidiary);
provided that the term "Material Asset" shall not include acquisitions of
inventory, Receivables and other assets (including Cash and Cash
Equivalents) in the ordinary course of business (other than any such assets
of the character described in clause (A) of the definition of "Capital
Expenditures").
"Material Subsidiary" means each Subsidiary of the Company or
its successors now existing or hereafter acquired or formed by the Company
or such successors (other than any Receivables Subsidiary) which (A) for
the most recent fiscal year of the Company or such successors accounted for
more than 10% of the consolidated revenues of the Company or such
successors, or (B) as at the end of such fiscal year, was the owner of more
than 10% of the consolidated assets of the Company or such successors as
shown on the consolidated financial statements of the Company or such
successors, as the case may be, for such fiscal year.
"Mill" means any Existing Mill or any completed and operational
facility (other than a warehouse) located in the United States acquired or
constructed by the Company or any Subsidiary of the Company after the
Closing Date (whether pursuant to a Greenfield Expansion Project or
otherwise) for the purpose of expanding the Company's capacity to produce
and/or convert tissue or paper products.
"Mill Lot" has the meaning assigned to that term in
subsection 5.14.1.
"Mill Mortgage" means any Mortgage affecting a Mill.
"Moody's" means Moody's Investors Service, Inc., together with
any successor thereto that issues ratings of corporate securities.
"Mortgage" and "Mortgages" mean each of the mortgage
instruments required to be delivered by the Company under this Agreement
with respect to Real Properties (including, without limitation, any such
instrument required to be delivered pursuant to Section 5.11), which shall
be substantially in the form of Exhibit XIX-A(i) or (ii), XIX-B(i) or (ii)
or XIX-C(i) or (ii), as applicable in each case, and containing such
schedules and including such additional provisions and other deviations
from each such Exhibit as shall not be inconsistent with the provisions of
subsection 3.1.4 or shall be necessary
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to conform such Exhibit to applicable law and which shall be dated the date
of delivery thereof and made by the Company for the benefit of the
Administrative Agent, as agent for the Lenders, as mortgagee or grantee,
assignee and secured party, as the same may be amended, supplemented or
otherwise modified from time to time in accordance herewith and therewith.
"Mortgaged Property" means those items of property from time to
time subject to any Mortgage.
"MS Group" means Morgan Stanley Group Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of the
Company or any ERISA Affiliate of the Company.
"Muskogee/Oklahoma Mortgage Recording Taxes" means any mortgage
recording taxes arising from the recording of the Mortgage relating to the
Mill located in Muskogee, Oklahoma.
"Net Cash Proceeds of Sale" means cash payments (including any
cash received by way of deferred payment pursuant to a note receivable or
otherwise (other than the portion of such deferred payment constituting
interest, which shall be deemed not to constitute Net Cash Proceeds of
Sale), but only as and when so received) received from an Asset Sale, net
of costs of sale (including payment of the outstanding principal amount of,
premium or penalty, if any, and interest on any Indebtedness other than
Loans or other Obligations required to be repaid under the terms thereof as
a result of such Asset Sale) and taxes paid or payable by the Company or
any of its Subsidiaries as a result thereof or directly as a result of
distributions by the Company or any of its Subsidiaries of such payments.
"Net Cash Provided From Operations" means, in respect of any
period, the Adjusted Consolidated Net Income for such period, minus (plus)
the increase (decrease), if any, in Adjusted Working Capital from the
opening of business on the first day to the close of business on the last
day of such period.
"9% Senior Subordinated Notes" means the Company's 9% Senior
Subordinated Notes due February 1, 2006, issued and outstanding pursuant to
a certain indenture, as amended, dated as of February 1, 1994 between the
Company and The Bank of New York, as Trustee, as in effect on the Closing
Date and as thereafter amended, supplemented or otherwise modified from
time to time in accordance herewith and therewith.
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"9-1/4% Unsecured Notes" means the Company's 9-1/4% Senior
Notes due March 15, 2001, issued and outstanding pursuant to a certain
indenture, dated as of March 15, 1993 between the Company and Norwest Bank
Wisconsin, N.A., as Trustee, as in effect on the Closing Date and as
thereafter amended, supplemented or otherwise modified from time to time in
accordance herewith and therewith.
"1988 Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of October 24, 1988, among FH Acquisition Corp.
and the lenders party thereto and Bankers Trust Company, Bank of America
National Trust and Savings Association, The Bank of Nova Scotia, Chemical
Bank, The Industrial Bank of Japan, Limited, New York Branch and Wells
Fargo, N.A., as lead managers and Bankers Trust Company, as agent, as
amended to the Closing Date.
"1988 Revenue Bond Indenture" means the indenture pursuant to
which the 1988 Revenue Bonds were issued.
"1988 Revenue Bonds" means the Development Authority of
Effingham County Pollution Control Revenue Bonds (Fort Howard Corporation
Project) Series 1988, issued by the Development Authority of Effingham
County to refund the 1985 Revenue Bonds.
"1995 A/R Bridge" means the $60,000,000 receivables facility
provided pursuant to the Receivables Credit Agreement.
"1992 Credit Agreement" means that certain Credit Agreement,
dated as of March 22, 1993, among Fort Howard Corporation, the lenders
party thereto and Bankers Trust Company, as agent, as amended to the
Closing Date.
"Non-Defaulting Lender" means and includes each Lender other
than a Defaulting Lender.
"Non-U.S. Person" has the meaning assigned to that term in
paragraph (e) of subsection 2.9.7.
"Notes" means one or more of the Term Notes, the Swing Line
Notes, the Revolving Notes or any combination thereof.
"Notice of Borrowing" means a notice substantially in the form
of Exhibit I annexed hereto with respect to a proposed Borrowing.
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"Notice of Conversion/Continuation" means a notice
substantially in the form of Exhibit II annexed hereto with respect to a
proposed conversion or continuation.
"Obligations" means all obligations of every nature of the
Company, each of the Guarantor Subsidiaries and the Subsidiaries of the
Company and such Guarantor Subsidiaries from time to time owed to the
Administrative Agent or the Lenders or any of them under the Loan
Documents.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its Chairman of the
Board (if an officer) or its President or one of its Vice Presidents and by
its Chief Financial Officer or its Treasurer; provided that every Officers'
Certificate with respect to the compliance with a condition precedent to
the making of any Loans hereunder shall include (A) a statement that the
officer or officers making or giving such Officers' Certificate have read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (B) a statement that, in the opinion of the
signer or signers, he or they have made or have caused to be made such
examination or investigation as is necessary to enable him or them to
express an informed opinion as to whether or not such condition has been
complied with, and (C) a statement as to whether, in the opinion of the
signer or signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any property (whether real, personal or mixed) under
which that Person is a lessee and which is not a Capital Lease.
"Other Taxes" has the meaning assigned to that term in
paragraph (b) of subsection 2.9.7.
"Participants" has the meaning assigned to that term in
subsection 9.1.2.
"Pension Plan" means any employee plan which is subject to the
provisions of Title IV of ERISA and which is maintained for employees of
the Company or any ERISA Affiliate of the Company, other than a
Multiemployer Plan.
"Permitted After Acquired Collateral Liens" means, in respect
of any Material Asset, (A) Liens of the type described in clause (i) or
(vi) of the definition of Permitted Encumbrances, (B) Preexisting Assumed
Liens and (C) Liens
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which, pursuant to the provisions of the applicable form of Additional
Collateral Document to be used to encumber such Material Asset, are or may
be superior to the Lien created by such Additional Collateral Document.
"Permitted Encumbrances" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not at the time required by
Section 5.3;
(ii) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other liens imposed by law
incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall
have been made therefor;
(iii) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory
obligations, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(iv) Any attachment or judgment Lien not in excess of
$20,000,000 (exclusive of any amount adequately covered by insurance
as to which the insurance company has acknowledged coverage) and any
other attachment or judgment lien unless the judgment it secures
shall, within 60 days after the entry thereof, not have been
discharged or execution thereof stayed pending appeal, or shall not
have been discharged within 60 days after the expiration of any such
stay;
(v) Leases or subleases granted to others not interfering in
any material respect with the business of the Company or any of its
Subsidiaries;
(vi) Easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
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(vii) Any interest or title of a lessor under any lease
permitted by Section 6.9;
(viii) Liens arising from UCC financing statements regarding
leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection
with the importation of goods;
(x) Liens securing surety bonds in an amount not to exceed
individually or in the aggregate $5,000,000 at any time outstanding;
and
(xi) Liens securing appeal bonds, which Liens do not cover
assets having a value in excess of $20,000,000 individually or in the
aggregate at any time and which assets are valued at the greater of
(A) fair market value and (B) book value.
"Permitted Expansion Construction Financing" means a
conventional short term construction loan facility in respect of the
construction of the Initial Major Expansion Project or any Greenfield
Expansion Project which (A) is secured only by the applicable assets
constituting the Initial Major Expansion Project or the applicable
Greenfield Expansion Assets, (B) provides for interest at market rates for
such type of financing as of the date of incurrence thereof, (C) matures
not later than one year after the applicable assets constituting all or a
substantial part of the Initial Major Expansion Project or the applicable
Greenfield Expansion Assets are first placed in service, (D) provides for
disbursements as construction progresses and (E) in the case of any such
facility that is utilized in connection with the Initial Major Expansion
Project, meets the requirements of paragraphs (c) and (d) of subsection
5.12.1 (assuming such subsection were applicable to the Initial Major
Expansion Project).
"Permitted Expansion Financing" means (A) in respect of any
Existing Mill Expansion Transaction, (1) a Sale/Leaseback Financing, (2) a
Secured Expansion Financing or (3) an Unsecured Expansion Financing, in
each case, consummated in accordance with the provisions of subsection
5.12.1 and (B) in respect of any Greenfield Expansion Transaction, (1) a
Sale/Leaseback Financing, (2) a Secured Expansion Financing or (3) an
Unsecured Expansion Financing, in each case consummated in accordance with
the provisions of subsection 5.12.2.
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"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Plan" shall mean an employee benefit plan (as defined in
Section 3(3) of ERISA) which is subject to Section 406 of ERISA and a plan
(as defined in Section 4975 of the Code) which is subject to Section 4975
of the Code.
"Pledge Agreements" means the Intellectual Property Pledge
Agreement, the Receivable/Inventory Pledge Agreements and the Stock Pledge
Agreements.
"Potential Event of Default" means a condition or event which,
after notice or lapse of time or both, would constitute an Event of Default
if that condition or event were not cured or waived within any applicable
grace or cure period.
"Preexisting Assumed Lien" means any Lien securing Indebtedness
(A) of any Person that becomes a Foreign Subsidiary (or a Subsidiary of
such Person) at the time such Person becomes a Foreign Subsidiary, which
Indebtedness was not incurred in connection with the acquisition of such
Person or an interest therein by the Company or any Subsidiary of the
Company and which Indebtedness and Lien are not prohibited under Section
6.1 or Section 6.2 hereof, or (B) incurred by the Company or a Subsidiary
of the Company specifically to finance the acquisition of assets (which
acquisition is not prohibited hereunder) and which Indebtedness and Lien
are (1) as of the date of such acquisition, held by the seller of such
assets, (2) not prohibited under the provisions of Section 6.1 or 6.2 of
this Agreement and (3) evidenced by an instrument or instruments which (i)
neither prohibit or restrict the granting of a junior Lien on the
encumbered assets in favor of the Lenders nor limit any rights or remedies
of the Lenders in respect of any such junior Lien and (ii) contain a
warranty by the applicable seller that, as of the date of such acquisition,
such seller has no present intention or plan to transfer for value or
pledge such Indebtedness and Lien to any other Person.
"Preexisting Expansion Lease" means any of (A) the documents
entitled Facility Lease Agreement and Facilities Agreement, each dated as
of October 20, 1989, by and between the Company and The Connecticut
National Bank, as owner trustee, (B) the documents entitled Power
Installation Lease and Power Installation Facilities Agreement, each dated
as of
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October 20, 1989, by and between the Company and The Connecticut National
Bank, as owner trustee, (C) the document entitled Equipment Lease
Agreement, dated as of October 20, 1989, by and between the Company and The
Connecticut National Bank, as owner trustee, (D) the document entitled Dry
Former Lease Agreement, dated as of October 20, 1989, by and between the
Company and The Connecticut National Bank, as owner trustee, (E) the
document entitled Equipment Lease Agreement, dated as of October 20, 1989,
by and between the Company and The Connecticut National Bank, as owner
trustee, (F) the documents entitled Facility Lease Agreement, Facility Site
Lease and Easement Agreement and Facilities Agreement, each dated as of
December 19, 1991, by and between the Company and The Connecticut National
Bank, as owner trustee, (G) the documents entitled Power Plant Lease
Agreement, Power Plant Site Lease and Easement Agreement and Power Plant
Facilities Agreement, each dated as of December 19, 1991, by and between
the Company and The Connecticut National Bank, as owner trustee, (H) the
document entitled Amended and Restated Equipment Lease Agreement [1990],
dated as of December 19, 1991, by and between the Company and The
Connecticut National Bank, as owner trustee, (I) the document entitled
Equipment Lease Agreement [1991], dated as of December 19, 1991, by and
between the Company and The Connecticut National Bank, as owner trustee,
(J) the document entitled Amended and Restated Participation Agreement,
dated as of October 21, 1991, as amended by the First Amendment thereto, in
each case by and among the Company, as lessee, Bell Atlantic TriCon Leasing
Corporation, as owner participant, the initial loan participant described
therein, Wilmington Trust Company, as pass through trustee and loan
participant, The Connecticut National Bank, as owner trustee, and
Wilmington Trust Company, as indenture trustee, (K) the document entitled
Pass Through Trust Agreement, dated as of October 21, 1991, as amended by
the Amended and Restated Pass Through Trust Agreement, dated as of
December 13, 1991, in each case by and between the Company and Wilmington
Trust Company, as pass through trustee, and (L) the document entitled
Amended and Restated Tax Indemnification Agreement, dated as of
December 19, 1991, by and between the Company and Bell Atlantic TriCon
Leasing Corporation, as owner participant).
"Prime Rate" means the rate which Bankers announces from time
to time as its prime lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. Bankers may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
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"Prior Liens" means, in respect of the Collateral described in
any Collateral Document, the Liens described in the schedules annexed to
such Collateral Document (if any) and any other Liens which, pursuant to
the provisions of such Collateral Document, are or may be superior to the
Lien of such Collateral Document.
"Proceeds Adjustment" has the meaning assigned to that term in
paragraph (a) of subsection 2.7.2.
"Proceeds Payment Date" has the meaning assigned to that term
in paragraph (a) of subsection 2.7.2.
"Program Receivables" means all trade receivables and other
rights to payment (whether constituting accounts, chattel paper,
instruments, general intangibles or otherwise and including the right to
payment of interest or finance charges) and related contract and other
rights and property (including all general intangibles, collections and
other proceeds relating thereto, all security therefor (and the property
subject thereto), all guarantees and other agreements or arrangements of
whatsoever character from time to time supporting such right to payment,
and all other rights, title and interest of a Seller or a Receivables
Subsidiary in goods relating to a sale which gave rise to such right to
payment) sold or contributed by the Company to a Receivables Subsidiary to
consummate a Receivables Transaction pursuant to the Receivables Program
Documents.
"Project Agreement" has the meaning assigned to that term in
the Georgia Mill Mortgage.
"Projections" has the meaning assigned to such term in
subsection 3.1.13.
"Prospectus" means the prospectus of the Company dated February
8, 1995, relating to the Common Stock Offering, as amended and supplemented
on or prior to the date of the signing of this Agreement.
"Purchasing Lenders" has the meaning assigned to that term in
subsection 9.1.3.
"Qualified Currency Agreement" means a Currency Agreement
(other than a Leveraged Swap) which meets the requirements set forth in the
Collateral Documents for the obligations of the Company therewith to be
secured by the Collateral.
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"Qualified Interest Rate Agreement" means an Interest Rate
Agreement (other than a Leveraged Swap) which meets the requirements set
forth in the Collateral Documents for the obligations of the Company
thereunder to be secured by the Collateral.
"Ratio 1" means, for each period of four consecutive fiscal
quarters of the Company (treated as a single accounting period), the
Interest Coverage Ratio for such period.
"Ratio 2" means, for each period of four consecutive fiscal
quarters of the Company (treated as a single accounting period), the
Leverage Ratio, as of the last day of such period.
"Real Properties" means, whether now owned or leased or
hereafter acquired or leased, the Mills and each parcel of realty
constituting a Material Asset.
"Recapitalization" means, collectively, (A) the Common Stock
Offering, (B) the repayment in full of all loans outstanding, and other
amounts due, under the Existing Credit Facilities and the Senior Secured
Notes, (C) the redemption and retirement of the Existing Subordinated Debt,
(D) the execution and delivery of the documents evidencing the 1995 A/R
Bridge and (E) the execution and delivery of this Agreement and the Loan
Documents and the consummation of the transactions contemplated hereunder
and thereunder.
"Receivable/Inventory Pledge Agreements" means each of (A) the
Company Receivable/Inventory Pledge Agreement substantially in the form of
Exhibit XIV-A annexed hereto, executed and delivered by the Company,
(B) the Receivable/Inventory Pledge Agreement, substantially in the form of
Exhibit XIV-B annexed hereto, executed and delivered by the Guarantor
Subsidiaries as of the Closing Date and (C) any other Receivable/Inventory
Pledge Agreement entered into pursuant to Section 5.11 hereof, as each such
agreement may be amended, supplemented or otherwise modified from time to
time in accordance herewith and therewith.
"Receivables" means, with respect to the Company and each
Guarantor Subsidiary, all of such Person's rights to payment for goods sold
or leased or services performed by such Person or any other party for or to
any Person (other than a Foreign Subsidiary of the Company that is a
Controlled Foreign Corporation), whether now in existence or arising from
time to time hereafter, including, without limitation, rights evidenced by
an account, note, contract, security agreement, chattel paper, or other
evidence of indebtedness or security, together
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with (1) all security pledged, assigned, hypothecated or granted to or held
by such Person to secure the foregoing, (2) general intangibles arising out
of such Person's rights in any goods, the sale of which gave rise thereto,
(3) all guarantees, endorsements and indemnifications on, or of, any of the
foregoing, (4) all powers of attorney for the execution of any evidence of
indebtedness or security or other writing in connection therewith, and
(5) all evidences of the filing of financing statements and other
statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured
parties, and certificates from filing or other registration officers.
"Receivables Credit Agreement" means that certain Receivables
Credit Agreement, dated as of the date hereof, by and among the Company and
the Arrangers, as in effect from time to time.
"Receivables Program" means a receivables securitization
program to be instituted and conducted by the Company and other Sellers (as
defined in the Receivables Term Sheet) after the Closing Date in accordance
with the provisions of Section 6.11 and the Receivables Term Sheet.
"Receivables Program Documents" means the documents giving
effect to the Receivables Program, as such documents may be amended,
modified or supplemented from time to time in accordance herewith and
therewith.
"Receivables Subsidiary" means any Subsidiary (regardless of
the form thereof) of the Company which has been formed for the specific
purpose of effecting a Receivables Transaction, all of the stock or other
equity interests in which have been pledged to the Administrative Agent
pursuant to an instrument in form and substance reasonably satisfactory to
the Administrative Agent and which (A) is a Wholly Owned Subsidiary, (B)
contains provisions in its charter or other governing documents which
satisfy the requirements set forth in the Receivables Term Sheet as
applicable to such Subsidiary, (C) does not engage in any business or have
any assets or liabilities other than those directly related to the
Receivables Program and (D) is not and will not at any time be a Benefited
Subsidiary; provided that if a Subsidiary of a Receivables Subsidiary is
formed for the specific purpose of effecting a Receivables Transaction, the
stock or equity interests of such second Receivables Subsidiary (1) need
not be wholly-owned to the extent contemplated by the Receivables Term
Sheet and (2) need not be pledged to the Administrative Agent and equity
interests in such Subsidiary (other than the residuary interest) may be
sold to investors in respect of such
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Receivables Transaction but such Subsidiary shall otherwise constitute a
Receivables Subsidiary.
"Receivables Term Sheet" means the term sheet annexed hereto as
Exhibit XXVII.
"Receivables Transaction" means any transaction (other than the
1995 A/R Bridge) meeting the requirements of Section 6.11 and the
Receivables Term Sheet.
"Recognition Instrument" means, with respect to any Existing
Mill Expansion Lease (A) relating to Land or Improvements subject to the
Georgia Mill Lease, an instrument in form and substance reasonably
satisfactory to the Requisite Lenders, pursuant to which the Administrative
Agent agrees that if the Administrative Agent or any purchaser in
foreclosure shall succeed to the Company's interest in such Mill, the
Existing Mill Expansion Lease described in such instrument shall remain in
full force and effect so long as no default shall occur and continue
thereunder (it being understood that an instrument in form and substance
substantially similar to that certain Nondisturbance, Cure Rights and
Purchase Option Agreement, dated as of October 20, 1989, a copy of which is
attached hereto as Exhibit XXV, in respect of an Existing Mill Expansion
Transaction relating to Land and Improvements located in Effingham County,
Georgia (with such changes as shall be reasonably satisfactory to the
Administrative Agent), shall qualify as an instrument reasonably
satisfactory to Requisite Lenders) and (B) relating to Land or Improvements
other than any subject to the Georgia Mill Lease, an instrument, in form
and substance reasonably satisfactory to the Requisite Lenders,
subordinating the Lien of the Mill Mortgage relating thereto to the
interest of an Existing Mill Expansion Lessor under an Existing Mill
Expansion Easement (it being understood that an instrument in form and
substance substantially similar to that certain Cure Rights and Purchase
Option Agreement, dated as of October 20, 1989, a copy of which is attached
hereto as Exhibit XXVI, in respect of an Existing Mill Expansion
Transaction relating to Land and Improvements located in Brown County,
Wisconsin (with such changes as shall be reasonably satisfactory to the
Administrative Agent) shall qualify as an instrument reasonably
satisfactory to the Requisite Lenders).
"Refinancing Foreign Debt" means any Indebtedness of a Foreign
Subsidiary of the Company, incurred in accordance with the provisions of
subparagraph (iv) of Section 6.1, all the net cash proceeds of which are
used to refinance the Indebtedness identified on Schedule C annexed hereto
as
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"Foreign Indebtedness" or any previously incurred Refinancing Foreign Debt
of such Subsidiary.
"Refinancing Senior Unsecured Debt" or "Refinancing Senior
Unsecured Indebtedness" means any unsecured Indebtedness of the Company,
incurred in accordance with the provisions of subparagraph (ii) of
Section 6.1, all of the net cash proceeds of which are used to refinance
Senior Unsecured Notes or any previously incurred Refinancing Senior
Unsecured Debt.
"Register" has the meaning assigned to that term in subsection
9.1.5.
"Registered Transfer Supplement" has the meaning assigned to
that term in subsection 9.1.3.
"Registration Statement" means the Registration Statement No.
33-56573, filed by the Company on February 8, 1995 with the Securities and
Exchange Commission in connection with the Common Stock Offering, as it may
be amended or supplemented on or prior to the date of the signing of this
Agreement.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System of the United States as in effect from time to
time.
"Release" has the meaning assigned to that term in Sec-
tion 5.13.
"Release Condition" has the meaning assigned to that term in
Section 5.13.
"Release Notice" has the meaning assigned to that term in Sec-
tion 5.13.
"Release Transaction" has the meaning assigned to that term in
Section 5.13.
"Replaced Lender" has the meaning assigned to that term in
subsection 9.22.1.
"Replacement Lender" has the meaning assigned to that term in
subsection 9.22.1.
"Required A Lenders" means, as of any date of determination,
one or more Tranche A Lenders having an aggregate A Credit Exposure
Percentage as of such date greater than 50%. As used herein, the "A Credit
Exposure Percentage"
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of one or more Lenders as of any date is a fraction, expressed as a
percentage, of which (A) the numerator is the A Credit Exposure Amounts of
such Lenders as of such date and (B) the denominator is the Total A Credit
Exposure Amount as of such date.
"Required B Lenders" means, as of any date of determination,
one or more Tranche B Lenders having an aggregate B Credit Exposure
Percentage as of such date greater than 50%. As used herein, the "B Credit
Exposure Percentage" of one or more Lenders as of any date is a fraction,
expressed as a percentage, the numerator of which is the B Credit Exposure
Amounts of such Lenders as of such date and the denominator is the Total B
Credit Exposure Amount as of such date.
"Requisite Lenders" means, as of any date of determination, one
or more Lenders having an aggregate Credit Exposure Percentage as of such
date greater than 50%. As used herein, the "Credit Exposure Percentage" of
one or more Lenders as of any date is a fraction, expressed as a
percentage, of which (A) the numerator is the Credit Exposure Amounts of
such Lenders as of such date and (B) the denominator is the Total Credit
Exposure Amount as of such date.
"Restoration" has the meaning assigned to that term in the
Mortgages.
"Restricted Junior Payment" means (A) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of the Company, now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock to the holders of that
class, (B) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares
of any class of stock of the Company now or hereafter outstanding,
(C) whether in cash or additional securities, any payment or prepayment of
principal of, premium, if any, or interest on, or any redemption, purchase,
retirement, defeasance, sinking fund or similar payment with respect to,
any Subordinated Indebtedness and (D) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights
to acquire shares of any class of stock of the Company (other than Common
Stock of the Company or options or rights to acquire Common Stock of the
Company) now or hereafter outstanding.
"Revolving Credit Maturity Date" means the date which is the
seventh anniversary of the Closing Date.
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"Revolving Loan Commitment" means the aggregate amount of the
commitment (whether used or unused) of a Lender to make Revolving Loans and
issue or purchase participations in Letters of Credit and make or purchase
participations in Swing Line Loans, which may be reduced from time to time
pursuant to the provisions of this Agreement or by virtue of assignments
effected pursuant to a Registered Transfer Supplement. As of the Closing
Date, the Revolving Loan Commitment of each Lender is the amount set forth
opposite such Lender's name in Schedule B annexed hereto under the heading
"Revolving Loan Commitment."
"Revolving Loan Deduction Amount" means, as of any date of
determination thereof, the aggregate amount of Indebtedness then
outstanding which constitutes Permitted Expansion Construction Financing.
"Revolving Loans" means the Loans made by the Lenders to the
Company pursuant to subsection 2.3.1.
"Revolving Notes" means the promissory notes of the Company
issued in registered form pursuant to subsection 2.3.4 or issued as
replacement notes in connection with an assignment made pursuant to this
Agreement and, in each case, substantially in the form of Exhibit IV
annexed hereto, as the same may be modified, endorsed or amended from time
to time.
"Royalty or Management Fees" means those amounts owed or owing
from time to time by a Foreign Subsidiary of the Company to the Company or
any of its Domestic Subsidiaries pursuant to agreements which provide for
the provision of management or technical services or advice or the
licensing of patents, trademarks, trade secrets, know-how or proprietary
information; provided that such amounts for any period in respect of the
services or advice so provided or such licenses, as the case may be shall
not exceed the fees that would be charged by an unaffiliated third party
for such services, advice or licenses.
"Sale/Leaseback Financing" means a Sale/Leaseback Transaction
involving Existing Mill Expansion Equipment or Greenfield Expansion Assets;
provided that the principal amount of Indebtedness incurred by the Company
or any Subsidiary of the Company in connection with such transaction is (A)
not less than 50% of the Construction Cost to the Company or such
Subsidiary to acquire or construct such Existing Mill Expansion Equipment
or the assets constituting such Greenfield Expansion Project, as
applicable, (B) not more than 100% of the Construction Cost to the Company
or such Subsidiary to acquire
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or construct such Existing Mill Expansion Equipment or the assets
constituting such Greenfield Expansion Project, as applicable, and
(C) contains no representation and warranty, covenant or event of default
that (i) is in addition to the representations and warranties, covenants
and events of default that are currently set forth in one or more of the
Corresponding Debt Instruments or (ii) is more burdensome (to the Company)
than the most burdensome (to the Company) corresponding representation and
warranty, covenant or event of default set forth in any of the
Corresponding Debt Instruments.
"Sale/Leaseback Transaction" means an arrangement with any
bank, insurance company or other lender or investor or to which any such
lender or investor is a party, providing for the leasing by the Company or
a Subsidiary of the Company of any property, whether now owned or hereafter
acquired, which has been or is to be sold or transferred by the Company or
any Subsidiary of the Company to such lender or investor.
"Savannah Boiler" means the next industrial boiler installed at
the Company's Effingham County, Georgia Mill following the date of this
Agreement.
"Savannah Project" means the acquisition and construction of
the next tissue paper manufacturing machine to be constructed or acquired
after the Closing Date at the Company's Effingham County, Georgia Mill,
together with related manufacturing, converting and ancillary equipment,
improvements and facilities.
"Scheduled Term Loans Principal Payment" means, with respect to
the principal payments on Term Loans pursuant to subsection 2.1.5, for each
six-month period following the Closing Date set forth below, the
correlative amount set forth opposite thereto (as such amount may from time
to time be reduced by virtue of prepayments made under this Agreement):
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6-Month Tranche A Tranche B
Period Term Loans Term Loans
1st $ -0- $ -0-
2nd -0- -0-
3rd 42,000,000 2,000,000
4th 42,000,000 2,000,000
5th 55,000,000 2,000,000
6th 55,000,000 2,000,000
7th 67,500,000 2,000,000
8th 67,500,000 2,000,000
9th 67,500,000 2,000,000
10th 67,500,000 2,000,000
11th 80,000,000 2,000,000
12th 80,000,000 2,000,000
13th 93,000,000 45,000,000
14th 93,000,000 45,000,000
15th -0- 110,000,000
16th -0- 110,000,000
"Second Expansion Project" has the meaning assigned to that
term in subsection 6.14.4.
"Secured Expansion Financing" means the incurrence by the
Company or any Domestic Subsidiary of the Company of Indebtedness which is
secured by assets comprising Existing Mill Expansion Equipment or
Greenfield Expansion Assets and which (A) is in an amount not less than 50%
of the Construction Cost to the Company or such Domestic Subsidiary to
acquire or construct the applicable Existing Mill Expansion Equipment or
Greenfield Expansion Assets and not more than 100% of the Construction Cost
to the Company or such Domestic Subsidiary to acquire or construct the
applicable Existing Mill Expansion Equipment or Greenfield Expansion
Assets, (B) has a final scheduled maturity date that is subsequent to the
date on which the final Scheduled Term Loans Principal Payment in respect
of Tranche B Term Loans is due hereunder, (C) has an Average Life to Stated
Maturity that is greater than the remaining Average Life to Stated Maturity
of the Tranche B Term Loans on the date such Indebtedness is incurred,
(D) is nonrecourse to the Company or any Subsidiary of the Company or any
assets of the Company or any Subsidiary of the Company except the assets
comprising such Existing Mill Expansion Equipment or Greenfield Expansion
Assets, as the case may be, and (E) contains no representation and
warranty, covenant or event of default that (i) is in addition to the
representations and warranties, covenants and events of default that are
currently set forth in one or more of the Corresponding Debt Instruments in
respect thereof or (ii) is more burdensome (to the Company) than the
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most burdensome (to the Company) corresponding representation and warranty,
covenant or event of default set forth in any of the Corresponding Debt
Instruments in respect thereof.
"Securities" means any stock, shares, voting trust
certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or in general any instruments commonly known as "securities"
or any certificates of interest, shares or participations in temporary or
interim certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"Seller" has the meaning assigned to that term in the
Receivables Term Sheet.
"Senior Note Purchase Agreement" means that certain Note
Purchase Agreement, dated as of September 11, 1991, as amended, by and
among the Company and the other persons listed on the signature pages
thereto, relating to the Senior Secured Notes.
"Senior Secured Indebtedness" means the following obligations
of the Company and/or any of its Subsidiaries: (A) the amount of any
Indebtedness incurred by the Company or any Subsidiary of the Company
(including, without limitation, any Receivables Subsidiary) in connection
with the 1995 A/R Bridge or any Receivables Transaction, (B) Indebtedness
of the type described in clause (B) of the definition of Indebtedness, (C)
the Indebtedness described in subparagraph (vii) and subparagraph (x) of
Section 6.1, (D) any other Indebtedness of the Company or any Subsidiary of
the Company that is not Subordinated Indebtedness and is secured by any
Lien on any property of the Company or any Subsidiary of the Company and
(E) the full amount of the obligations of the Company or any Subsidiary of
the Company under any Letter of Credit issued for the account of the
Company or any Subsidiary of the Company that are secured by a Lien on any
property of the Company or any Subsidiary of the Company. In calculating
the amount of Senior Secured Indebtedness, there shall be excluded in the
case of any revolving loan facility or Letter of Credit commitment issued
in favor of the Company or any Subsidiary of the Company, the then
unutilized portion of such facility or commitment and, except as specified
in clause (E) of the preceding sentence, any Contingent Obligation.
-55-
"Senior Secured Notes" means the Series A Senior Secured
Floating Rate Notes due 1997, the Series B Senior Secured Floating Rate
Notes due 1998, the Series C-1 Senior Secured Floating Rate Notes due 1999,
the Series C-2 Senior Secured Floating Rate Notes due 1999 and the Series D
Senior Secured Floating Rate Notes due 2000, each as issued, and as amended
from time to time, pursuant to the Senior Note Purchase Agreement.
"Senior Unsecured Notes" means the 9-1/4% Unsecured Notes and
the 8-1/4% Unsecured Notes.
"Sensitive Information" has the meaning assigned to that term
in Section 5.5.
"Severed Parcel" has the meaning assigned to that term in
subsection 5.14.1.
"SIL Company" means SIL Company, a California corporation that
is Wholly Owned by Fort Howard Holding and which owns indirectly 100% of
the outstanding equity securities of Fort Sterling.
"Sludge Boiler Land" has the meaning assigned to that term in
subsection 5.17.1.
"S&P" means Standard & Poor's Corporation, together with any
successor that issues ratings of corporate securities.
"Special Funding Procedures Letter" means a letter agreement
among the Company, the Administrative Agent and each Lender, substantially
in the form of Exhibit XVI annexed hereto with appropriate insertions,
pursuant to which special procedures are established with respect to the
Loans to be made on the Closing Date.
"Special Reserve" means the special reserve, in the amount of
$20,000,000, established as of December 31, 1994 by the Company in respect
of certain environmental matters.
"Standby Letter of Credit" means any standby letter of credit
or similar instrument issued for the purpose of supporting (A) workers'
compensation liabilities of the Company or any of its Subsidiaries, (B) the
obligations of third party insurers of the Company or any of its
Subsidiaries arising by virtue of the laws of any jurisdiction requiring
third party insurers to obtain such letters of credit, (C) Indebtedness of
the Company or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (D) obligations
-56-
with respect to Capital or Operating Leases of the Company or any of its
Subsidiaries, or (E) performance, payment, deposit or surety obligations of
the Company or any of its Subsidiaries if required by law or governmental
rule or regulation or in accordance with custom and practice in the
industry.
"Statutory Reserves" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is
the number one minus the aggregate of the maximum applicable reserve
percentages, including, without limitation, any marginal, special,
emergency or supplemental reserves (expressed as a decimal) established by
the Board of Governors of the Federal Reserve System of the United States
and any other banking authority to which the Administrative Agent is
subject, with respect to the Base CD Rate (as such term is used in the
definition of the term "Alternate Base Rate") for new negotiable
nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Sterling International Limited" means Sterling International
Limited, an English limited liability company and a Foreign Subsidiary of
the Company.
"Stock Pledge Agreement" means the Company Stock Pledge
Agreement or any Stock Pledge Agreement entered into pursuant to subsection
5.11.1 hereof.
"Stockholders Agreement" means one or more Stockholders
Agreements substantially in the form delivered to the Lenders (draft dated
as of 2/15/95), as the same may be amended, supplemented or otherwise
modified from time to time in accordance herewith or therewith.
"Subordinated Indebtedness" means the Indebtedness of the
Company subordinated in right of payment to the Obligations, including,
without limitation, the Subordinated Notes and the Existing Subordinated
Debt.
"Subordinated Notes" means the 9% Senior Subordinated Notes and
the 10% Subordinated Notes.
"Subsidiary" of any Person means any corporation, association
or other Person of which more than 50% of the total voting power of shares
of stock or other equity interests therein entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or
-57-
trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof. Unless otherwise indicated, "Subsidiary"
means a Subsidiary of the Company.
"Swing Line Borrowing" means a Borrowing comprised of Swing
Line Loans.
"Swing Line Commitment" has the meaning assigned to that term
in paragraph (a) of subsection 2.12.1.
"Swing Line Loans" means the Loans made by Bankers to the
Company pursuant to subsection 2.12.1.
"Swing Line Note" means the promissory note of the Company
issued in registered form pursuant to subsection 2.12.4 and in
substantially the form of Exhibit VI annexed hereto, as the same may be
modified, endorsed or amended from time to time in accordance herewith or
therewith.
"Taking" has the meaning assigned to that term in the
Mortgages.
"Taxes" has the meaning assigned to that term in paragraph (a)
of subsection 2.9.7.
"10% Subordinated Notes" means the Company's 10% Subordinated
Notes due March 15, 2003, issued pursuant to a certain indenture dated as
of March 15, 1993 between the Company and United States Trust Company of
New York, as Trustee, as such notes and indenture shall be in effect on the
Closing Date and as thereafter amended, supplemented or otherwise modified
from time to time in accordance herewith or therewith.
"Term Borrowing" means a Borrowing comprised of Tranche A Term
Loans or Tranche B Term Loans.
"Term Loan Commitment" or "Term Loan Commitments" means the
commitment or commitments of a Lender or the Lenders to make Term Loans as
set forth in subsection 2.1.1.
"Term Loans" means the Tranche A Term Loans and Tranche B Term
Loans.
"Term Notes" means the promissory notes of the Company issued
in registered form in respect of Tranche A Term Loans or Tranche B Term
Loans pursuant to subsection 2.1.4 or
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issued as replacement notes in connection with an assignment made pursuant
to this Agreement and, in each case, substantially in the form of
Exhibit III or Exhibit V annexed hereto, as the same may be modified,
endorsed or amended from time to time in accordance herewith or therewith.
"Termination Event" means (A) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation or any successor thereof under such
regulations), or (B) the withdrawal of the Company or any of its ERISA
Affiliates from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (C)
the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041
of ERISA, or (D) the filing by the Pension Benefit Guaranty Corporation (or
any successor thereof) of a notice of its intent to terminate a Pension
Plan, or (E) the receipt by the Company or any ERISA Affiliate of notice of
the termination or reorganization of any Multiemployer Plan or (F) the
occurrence of any other event or condition that might constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; provided that, for the purposes of Section
4.11 only, the termination of any Pension Plan or termination or
reorganization of any Multiemployer Plan and any action taken with respect
to any such termination or reorganization shall not be a Termination Event
if the Company and its ERISA Affiliates shall not incur net liabilities
aggregating more than $25,000,000 (such liabilities to include, without
limitation, any liability to the Pension Benefit Guaranty Corporation (or
any successor thereof), or to any other party under ERISA or the Internal
Revenue Code) resulting from all such terminations or reorganizations.
"Termination Value" of an Interest Rate Agreement or Currency
Agreement at any time means the amount that would be payable by the Company
to the counterparty thereto if such agreement was terminated at such time
because of default of the Company thereunder.
"Title Company" means First American Title Insurance Company of
New York or such other title insurance or abstract company as shall be
designated by the Requisite Lenders.
"Total Credit Exposure Amount" means, as of any date of
determination, an amount equal to the sum of the Credit Exposure Amounts of
all Lenders as of such date.
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"Total A Credit Exposure Amount" means, as of any date of
determination, an amount equal to the sum of the A Credit Exposure Amounts
of all Lenders as of such date.
"Total B Credit Exposure Amount" means, as of any date of
determination, an amount equal to the sum of the B Credit Exposure Amounts
of all Lenders as of such date.
"Total Loan Commitment" and "Total Loan Commitments" have the
meanings assigned to those terms in Section 2.4.
"Total Revolving Loan Commitment" means, at any time, an amount
equal to the maximum aggregate amount of the Adjusted Revolving Loan
Commitments of all Lenders then in effect less the then effective Revolving
Loan Deduction Amount.
"Total Utilization of Revolving Loan Commitments" means, at any
date of determination, the sum of (A) the aggregate principal amount of all
outstanding Revolving Loans and Swing Line Loans plus (B) the Letters of
Credit Usage.
"Tranche" means the distinction among the Tranche A Term Loans,
the Tranche B Term Loans and the Revolving Loans.
"Tranche A Commitment" means, with respect to each Lender, the
aggregate amount of the commitment of such Lender to make Tranche A Term
Loans hereunder pursuant to subsection 2.1.1, which may be reduced from
time to time pursuant to the provisions of this Agreement or by virtue of
assignments effected pursuant to a Registered Transfer Supplement. As of
the Closing Date, the Tranche A Commitment of each Lender is the amount set
forth opposite such Lender's name in Schedule B annexed hereto under the
heading "Tranche A Commitment".
"Tranche A Funding Percentage" means, with respect to each
Lender having a Tranche A Commitment, the percentage designated as such
Lender's Tranche A Funding Percentage on Schedule B annexed hereto under
the heading "Tranche A Funding Percentage".
"Tranche A Lenders" means the Lenders having outstanding
Tranche A Term Loans.
"Tranche A Term Borrowing" means a Borrowing comprised of
Tranche A Term Loans.
"Tranche A Term Loans" means the term loans made by the Lenders
to the Company pursuant to subsection 2.1.1. Each
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Tranche A Term Loan shall be either an Adjusted LIBOR Term Loan or an ABR
Term Loan.
"Tranche A Term Maturity Date" has the meaning assigned to that
term in subsection 2.1.5.
"Tranche A Term Notes" means the promissory notes of the
Company issued in respect of Tranche A Term Loans pursuant to
subsection 2.1.4 or issued as replacement notes in connection with an
assignment made pursuant to this Agreement and substantially in the form of
Exhibit III annexed hereto, as the same may be modified, endorsed or
amended from time to time in accordance herewith or therewith.
"Tranche B Commitment" means, with respect to each Lender, the
aggregate amount of the commitment of such Lender to make Tranche B Term
Loans hereunder pursuant to subsection 2.1.1, which may be reduced from
time to time pursuant to the provisions of this Agreement or by virtue of
assignments effected pursuant to a Registered Transfer Supplement. As of
the Closing Date, the Tranche B Commitment of each Lender is the amount set
forth opposite such Lender's name in Schedule B annexed hereto under the
heading "Tranche B Commitment".
"Tranche B Escrow Account" has the meaning assigned to that
term in paragraph (c) of subsection 2.7.3.
"Tranche B Funding Percentage" means, with respect to each
Lender having a Tranche B Commitment, the percentage designated as such
Lender's Tranche B Funding Percentage on Schedule B annexed hereto under
the heading "Tranche B Funding Percentage".
"Tranche B Lender" means each Lender having outstanding a
Tranche B Term Loan.
"Tranche B Mandatory Prepayment Date" has the meaning assigned
to that term in paragraph (c) of subsection 2.7.3.
"Tranche B Term Maturity Date" has the meaning assigned to that
term in subsection 2.1.5.
"Tranche B Prepayment Amount" has the meaning assigned to that
term in paragraph (c) of subsection 2.7.3.
"Tranche B Prepayment Option Notice" has the meaning assigned
to that term in paragraph (c) of subsection 2.7.3.
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"Tranche B Term Borrowing" means a Borrowing comprised of
Tranche B Term Loans.
"Tranche B Term Loans" means the term loans made by the Lenders
to the Company pursuant to subsection 2.1.1.
"Tranche B Term Notes" means the promissory notes of the
Company issued in respect of Tranche B Term Loans pursuant to
subsection 2.1.4 or issued as replacement notes in connection with an
assignment made pursuant to this Agreement and substantially in the form of
Exhibit V annexed hereto, as the same may be modified, endorsed or amended
from time to time in accordance herewith or therewith.
"Transaction Costs" means the fees, costs and expenses payable
by the Company pursuant hereto and other fees, costs and expenses payable
by the Company or a Subsidiary thereof in connection with the
Recapitalization (other than interest expense).
"Transferee" has the meaning assigned to that term in
subsection 9.1.4.
"12-5/8% Subordinated Debentures" means the Company's 12-5/8%
Subordinated Debentures due November 1, 2000, issued and outstanding
pursuant to a certain indenture, dated as of November 1, 1988 between the
Company and United States Trust Company of New York, as Trustee, as in
effect on the Closing Date and as thereafter amended, supplemented or
otherwise modified from time to time in accordance herewith or therewith.
"UCC" means the Uniform Commercial Code, as in effect in the
applicable jurisdiction.
"Unsecured Expansion Financing" means, in respect of any
Existing Mill Expansion Equipment or Greenfield Expansion Assets, the
incurrence by the Company or any Subsidiary of the Company of Indebtedness
which is not secured by a Lien on any property or assets of the Company or
any Subsidiary of the Company, which Indebtedness (A) is in an amount that
does not exceed 100% of the Construction Cost to the Company or such
Subsidiary to acquire or construct such Existing Mill Expansion Equipment
or Greenfield Expansion Assets, (B) provides for interest at rates which do
not exceed the market rates in respect of similar types of financing
prevailing at the time such Indebtedness is incurred, (C) has a final
scheduled maturity date that is subsequent to the date on which the final
Scheduled Term Loans Principal Payment in respect of Tranche B Term Loans
is due hereunder, (D) has an Average Life to Stated
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Maturity that is greater than the remaining Average Life to Stated Maturity
of the Tranche B Term Loans on the date such Indebtedness is incurred,
(E) contains no representation and warranty, covenant or event of default
that (i) is in addition to the representations and warranties, covenants
and events of default that are currently set forth in one or more of the
Corresponding Debt Instruments applicable thereto or (ii) is more
burdensome (to the Company) than the most burdensome (to the Company)
corresponding representation and warranty, covenant or event of default set
forth in any of the Corresponding Debt Instruments applicable thereto and
(F) if such Indebtedness is Subordinated Indebtedness, contains
subordination provisions no less favorable to the Lenders than the least
favorable subordination provisions (to the Lenders) in the Existing
Subordinated Debt.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
all of the shares of capital stock of which (except directors' qualifying
shares) are at the time directly or indirectly owned by such Person.
Section 1.2 Accounting Terms. For the purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
Section 1.3 Other Definitional Provisions; Anniversaries.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in Section 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. For purposes of this Agreement, a monthly anniversary of the
Closing Date shall occur on the same day of the applicable month as the day
of the month on which the Closing Date occurred; provided that if the
applicable month has no such day (i.e., 29, 30 or 31), the monthly
anniversary shall be deemed to occur on the last day of the applicable
month.
Section 1.4 Adjustment for Special Reserve. For purposes of
calculating the Leverage Ratio in respect of periods which include fiscal
quarters ending on or prior to December 31, 1994, Consolidated EBITDA shall
be determined without taking into account the establishment of the Special
Reserve.
Section 1.5 Currency Equivalent Generally. For all purposes
of this Agreement, (A) the equivalent in Dollars of
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any amount in any other currency shall be determined at the rate of
exchange quoted by the Administrative Agent in New York City at 9:00 A.M.
(New York City time) on the date of determination to prime banks in New
York City for the spot purchase in the New York foreign exchange market of
such amount of such other currency with Dollars and (B) the equivalent in
any currency (other than Dollars) of any amount in Dollars shall be
determined at the rate of exchange quoted by the Administrative Agent in
New York City at 9:00 A.M. (New York City time) on the date of
determination to prime banks in New York City for the spot purchase in the
New York foreign exchange market of such amount of Dollars with such other
currency. In determining compliance with the covenants and other terms of
this Agreement that require amounts of another currency to be converted
into Dollars or amounts of Dollars to be converted into another currency,
as the case may be, such amounts shall be converted pursuant to the first
sentence of this Section 1.5 on the date that (A) Indebtedness is incurred,
(B) an Investment is made, (C) a transfer of assets occurs or (D) any other
relevant transaction occurs, as the case may be.
ARTICLE II
COMMITMENTS AND LOANS; NOTES
Section 2.1 Term Loans and Term Notes.
2.1.1. Term Loan Commitments. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of the Loan Parties set forth herein and in each of the other
Loan Documents, (A) on the Closing Date, (1) each Lender having a Tranche A
Commitment hereby severally agrees to lend the Company an aggregate amount
not exceeding its Tranche A Funding Percentage of the Closing Date
Tranche A Funding Amount and (2) each Lender having a Tranche B Commitment
hereby severally agrees to lend the Company an aggregate amount not
exceeding its Tranche B Funding Percentage of the aggregate Tranche B
Commitments and (B) on the Deferred Funding Date, each Lender having a
Tranche A Commitment severally agrees to lend the Company an aggregate
amount not exceeding its Tranche A Funding Percentage of the Deferred
Tranche A Funding Amount. The aggregate amount of the Tranche A
Commitments is $810,000,000. Each Lender's Tranche A Commitment shall
expire on the Deferred Funding Date (immediately following any funding made
on such date) but, in any event, not later than 5:00 P.M. (New York time)
on the date 45 days after the Closing Date; provided that the Tranche A
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Commitment of any Lender that is a Defaulting Lender by reason of the
failure to advance its Tranche A Funding Percentage of the Deferred
Tranche A Funding Amount on the Deferred Funding Date shall not so
terminate until such Lender (or its assignee) shall have so funded such
Tranche A Funding Percentage. The aggregate amount of the Tranche B
Commitments is $330,000,000. Each Lender's Tranche B Commitment shall
expire on the Closing Date (immediately following the funding of the
Tranche B Term Loans). All Tranche A Term Loans under this Agreement shall
be made by the Lenders having a Tranche A Commitment simultaneously and
proportionately to their Tranche A Funding Percentages and all Tranche B
Term Loans under this Agreement shall be made by the Lenders having a
Tranche B Commitment simultaneously and proportionately to their Tranche B
Funding Percentages, it being understood that no Lender shall be
responsible for any default by any other Lender in such other Lender's
obligation to make a Term Loan hereunder nor shall the Tranche A Commitment
or Tranche B Commitment, as the case may be, of any Lender be increased or
decreased as a result of the default by any other Lender in such other
Lender's obligation to make a Term Loan hereunder. Term Loans made on any
Funding Date shall be made in an aggregate minimum amount of $5,000,000 and
integral multiples of $1,000,000 in excess of that amount.
2.1.2. Notice of Borrowing. The Company shall deliver to the
Administrative Agent a Notice of Borrowing substantially in the form of
Exhibit I annexed hereto in respect of the Borrowings to be made on the
Closing Date or the Deferred Funding Date as follows: (A) to the extent
such Borrowings will consist of an Adjusted LIBOR Term Borrowing, such
Notice of Borrowing shall be received by the Administrative Agent no later
than 11:00 a.m. (New York time), at least three Business Days in advance of
the Closing Date or the Deferred Funding Date, as the case may be, and
(B) to the extent such Borrowings will consist of an ABR Term Borrowing,
such Notice of Borrowing shall be received by the Administrative Agent no
later than 11:00 a.m. (New York time), at least one Business Day in advance
of the Closing Date or the Deferred Funding Date, as the case may be;
provided that the Notice of Borrowing delivered by the Company in respect
of the Tranche A Term Loans to be borrowed on the Deferred Funding Date
shall in any event be delivered to the Administrative Agent at least three
days prior to the Deferred Funding Date. Each such Notice of Borrowing
shall be irrevocable and shall specify (A) the date on which Term Loans are
to be made (which shall be a Business Day), (B) whether such Term Loans are
Tranche A Term Loans or Tranche B Terms Loans and the total amount of such
Term Loans, (C) in the case of Borrowings to be made on the Closing Date, a
computation, in reasonable detail,
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of the Closing Date Tranche A Funding Amount, and (D) whether the Term
Loans will be based on Adjusted LIBOR or ABR; and provided, further, in the
case of any such Loans borrowed on or prior to the 90th day following the
Closing Date, such Loans may consist only of Adjusted LIBOR Loans having a
one month Interest Period or ABR Loans.
2.1.3. Disbursement of Funds. (a) Promptly after receipt of
a Notice of Borrowing pursuant to subsection 2.l.2, the Administrative
Agent shall notify each applicable Lender of the proposed Borrowing.
Arrangements may be made satisfactory to the Company, the Administrative
Agent and each Lender whereby an amount up to the aggregate amount of Term
Loans to be borrowed on the Closing Date may be placed in escrow to
facilitate the making of such Loans on the Closing Date; provided that in
any event each Lender shall have made arrangements satisfactory to the
Company, the Administrative Agent and such Lender (pursuant to the Special
Funding Procedures Letter or otherwise) whereby the funds for the Term
Loans to be made on the Closing Date shall be made available by the Lenders
to the Administrative Agent, as escrow agent under the Special Funding
Procedures Letter, not later than 1:00 P.M. (New York time) on the Closing
Date. It is understood and agreed that the Term Loans to be made on the
Closing Date shall not be considered to have been made for any purposes of
this Agreement, and the Company shall have no interest in such funds, until
the escrow agent delivers such funds to the Administrative Agent pursuant
to paragraph 4 of the Special Funding Procedures Letter. Upon satisfaction
or waiver of the conditions precedent specified in Sections 3.2 and 3.3,
and, in the case of Term Loans made on the Closing Date, Section 3.1, the
Administrative Agent shall make the proceeds of the Term Loans available to
the Company on the relevant Funding Date by causing an amount of same day
funds equal to the proceeds of all such Loans received by the
Administrative Agent at its office located at One Bankers Trust Plaza, New
York, New York to be credited to the account of the Company at such office
of the Administrative Agent. The parties hereto acknowledge and agree that
all Term Loans will be borrowed in New York, New York, and that no Term
Loans will be made other than in New York, New York.
(b) Unless the Administrative Agent shall have been notified
by any Lender prior to the date of borrowing of Term Loans that such Lender
does not intend to make available to the Administrative Agent the amount of
funds necessary to satisfy such Lender's obligations under subsection 2.1.1
on such date, the Administrative Agent may assume that such Lender has made
such amount available to the Administrative Agent on such date
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and the Administrative Agent in its sole discretion may, but shall not be
obligated to, make available to the Company a corresponding amount on such
date. If such corresponding amount is not in fact made available to the
Administrative Agent by such Lender, the Administrative Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest thereon, for each day from the date of borrowing of
Term Loans until the date such amount is paid to the Administrative Agent,
at the customary rate set by the Administrative Agent for the correction of
errors among banks for three Business Days and thereafter at ABR. If such
Lender does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent shall
promptly notify the Company and the Company shall immediately pay such
corresponding amount to the Administrative Agent. Nothing in this
subsection 2.l.3 shall be deemed to relieve any Lender from its obligation
to fulfill its Tranche A Commitment and/or Tranche B Commitment, as the
case may be, hereunder or to prejudice any rights which the Company may
have against any Lender as a result of any default by such Lender
hereunder.
2.1.4. Term Notes. The Company shall execute and deliver to
each Lender, as applicable (or to the Administrative Agent for that
Lender), a Tranche A Term Note substantially in the form of Exhibit III or
a Tranche B Term Note substantially in the form of Exhibit V, each as
annexed hereto, to evidence such Lender's Term Loan(s), in the principal
amount of such Lender's Tranche A Commitment and/or Tranche B Commitment,
as the case may be, with other appropriate insertions.
2.1.5. Scheduled Payments of Term Loans. For each six-month
period after the Closing Date, the Company shall make a principal payment
in respect of Tranche A Term Loans and Tranche B Term Loans in the amount
of the Scheduled Term Loans Principal Payment applicable to such Term Loans
for such period. Each Scheduled Term Loans Principal Payment shall be due
and payable on the last Business Day of the relevant six-month period
identified in the definition of Scheduled Term Loans Principal Payment,
except that the principal payment for the 16th such six-month period shall
be made on December 31, 2002 (the "Tranche B Term Maturity Date"). Any
payment or prepayment of the Term Loans may not be reborrowed. The
Tranche A Term Loans and all other amounts owed hereunder with respect to
Tranche A Term Loans shall be paid in full no later than the date which is
the seventh anniversary of the Closing Date (such seventh anniversary, the
"Tranche A Term Maturity Date"). The Tranche B Term Loans and all other
amounts owed
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hereunder with respect to the Tranche B Term Loans shall be paid in full no
later than the Tranche B Term Maturity Date.
Section 2.2 Letters of Credit.
2.2.1. Letters of Credit. (a) In addition to requesting that
the Lenders make Revolving Loans pursuant to Section 2.3, the Company may
request, in accordance with the provisions of this subsection 2.2.1, that
on and after the Closing Date and prior to the date that is thirty Business
Days preceding the Revolving Credit Maturity Date one or more Fronting
Banks issue, subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of the Loan Parties set
forth herein and in each of the other Loan Documents, Letters of Credit for
the Company's account; provided that (A) the Company shall not request that
any Fronting Bank issue any Letter of Credit if, after giving effect to
such issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Total Revolving Loan Commitment then in effect, (B) in no event
shall any Fronting Bank issue (1) any Letter of Credit having an expiration
date later than the Revolving Credit Maturity Date or (2) subject to the
foregoing subclause (1), any Commercial Letter of Credit having an
expiration date more than 270 days after its date of issuance or less than
thirty Business Days prior to the Revolving Credit Maturity Date, or having
terms under which the latest possible payments of obligations arising
thereunder could mature on or later than the Revolving Credit Maturity
Date, or any Standby Letter of Credit having an expiration date more than
one year after its date of issuance, provided that, subject to the
foregoing subclause (1), this subclause (2) shall not prevent any Fronting
Bank from agreeing that a Standby Letter of Credit will automatically be
renewed annually for a period not to exceed one year if such Fronting Bank
does not cancel such renewal, and (C) the Company shall not request that
any Fronting Bank issue any Letter of Credit if, after giving effect to
such issuance, the Letters of Credit Usage in respect of Letters of Credit
would exceed $50,000,000. The issuance of any Letter of Credit in
accordance with the provisions of this subsection 2.2.1 shall be given
effect in the calculation of the Total Utilization of Revolving Loan
Commitments and shall require the satisfaction of each condition set forth
in Sections 3.2 and 3.5.
(b) Immediately upon the issuance of each Letter of Credit,
each Lender having an Adjusted Revolving Loan Percentage greater than zero
shall be deemed to, and hereby agrees to, irrevocably purchase from the
Fronting Bank a participation in such Letter of Credit and all drawings
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thereunder in an amount equal to such Lender's Adjusted Revolving Loan
Percentage of the maximum amount which is or at any time may become
available to be drawn thereunder. Upon any change in the Revolving Loan
Commitments or Adjusted Revolving Loan Percentages of the Lenders pursuant
to Section 9.22 or 9.1 or as a result of the occurrence of a Lender Default
or the cure by any Defaulting Lender of a Lender Default, with respect to
all outstanding Letters of Credit and all then unreimbursed drawings under
any Letters of Credit, there shall be an automatic adjustment to the
participations pursuant to this subsection 2.2.1 to reflect the new
Adjusted Revolving Loan Percentages of the Lenders; provided that no such
adjustment shall relieve any Defaulting Lender of its obligations under
this Agreement to the Company or, in the circumstances contemplated in the
proviso to the definition of Adjusted Revolving Loan Percentage, to the
other Lenders and the Fronting Bank or Fronting Banks.
(c) Each Letter of Credit may provide that the applicable
Fronting Bank may (but shall not be required to) pay the beneficiary
thereof, upon the occurrence of an Event of Default or, if payment is not
then due to the beneficiary, provide for the deposit of funds in an account
to secure payment to the beneficiary and that any funds so deposited shall
be paid to the beneficiary of the Letter of Credit if conditions to such
payment are satisfied or returned to the Administrative Agent for ratable
distribution to the Lenders (or, if all Obligations then due shall have
been indefeasibly paid in full, to the Company) if no payment to the
beneficiary has been made and the final date available for drawings under
such Letter of Credit has passed. Each payment or deposit of funds by a
Fronting Bank as provided in this paragraph shall be treated for all
purposes of this Agreement as a drawing duly honored by such Fronting Bank
under the related Letter of Credit.
2.2.2. Request for Issuance. Whenever the Company desires the
issuance of a Letter of Credit, it shall deliver to the Administrative
Agent a written notice no later than 1:00 P.M. (New York time) at least ten
Business Days (in the case of Standby Letters of Credit), or five Business
Days (in the case of Commercial Letters of Credit), or, in each such case,
such shorter period as may be agreed to by any Fronting Bank in any
particular instance, in advance of the proposed date of issuance. Such
notice shall specify (A) the proposed date of issuance (which shall be a
business day under the laws of the jurisdiction of the applicable Fronting
Bank), (B) the face amount and type of the Letter of Credit requested,
(C) the expiration date of the Letter of Credit requested, (D) the name
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and address of the beneficiary thereof and (E) the Benefited Subsidiary or
Benefited Subsidiaries, if any, with respect to such Letter of Credit and
the amount inuring to the benefit of each such Benefited Subsidiary. As
soon as practicable after delivery of such notice, the Fronting Bank for
such Letter of Credit shall be determined as provided in subsection 2.2.3.
Prior to the date of issuance of any Letter of Credit, the Company shall
specify a precise description of the form of such Letter of Credit and
documents and the verbatim text of any certificate to be presented by the
beneficiary of such Letter of Credit which, if presented by such
beneficiary prior to the expiration date of such Letter of Credit, would
require the applicable Fronting Bank to make payment under such Letter of
Credit; provided that the Fronting Bank, in its sole reasonable judgment,
may prior to the date of issuance require changes in the form of such
Letter of Credit and any such documents and certificates; and provided,
further, that no Letter of Credit shall require payment against a
conforming draft to be made thereunder on the same business day (under the
laws of the jurisdiction of the Fronting Bank) that such draft is presented
if such presentation is made after 1:00 p.m. (in the time zone of the
jurisdiction of the Fronting Bank) on such business day. Promptly after
receipt of a request for issuance of a Letter of Credit and the
determination of the Fronting Bank therefor, the Administrative Agent shall
notify each Lender having a Revolving Loan Commitment of the proposed
issuance, the identity of the Fronting Bank and the amount of each such
other Lender's respective participation therein, determined in accordance
with subsection 2.2.1.
2.2.3. Determination of Fronting Bank. (a) Upon receipt by
the Administrative Agent of a notice from the Company pursuant to
subsection 2.2.2 requesting the issuance of a Letter of Credit, in the
event Bankers elects to issue such Letter of Credit, the Administrative
Agent shall so notify the Company and Bankers shall be the Fronting Bank
with respect thereto. In the event that Bankers, in its sole discretion,
elects not to issue such Letter of Credit, Bankers shall promptly so notify
the Company and the Company may request any other Arranger to issue such
Letter of Credit. Each such Arranger so requested to issue such Letter of
Credit shall promptly notify the Company and the Administrative Agent
whether or not, in its sole discretion, it has elected to issue such Letter
of Credit, and any such Arranger which so elects to issue such Letter of
Credit shall be the Fronting Bank with respect thereto. In the event that
all Arrangers shall have declined to issue such Letter of Credit,
notwithstanding the prior election of each Arranger not to issue such
Letter of Credit, each Arranger shall be obligated to issue a Letter of
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Credit in a maximum aggregate amount available for drawing equal to such
Arranger's proportionate share (based upon the relative Adjusted Revolving
Loan Percentages of the Arrangers) of the Letter of Credit requested by the
Company and each Arranger shall be a Fronting Bank with respect to the
Letter of Credit issued by it.
(b) Each Fronting Bank which elects to issue a Letter of
Credit shall promptly give written notice to the Administrative Agent and
each other Lender having an Adjusted Revolving Loan Percentage greater than
zero of the information required under clauses (A) through (E) of the
second sentence of subsection 2.2.2 relating to such Letter of Credit and
shall deliver a copy of such Letter of Credit, and any amendment thereto,
to the Administrative Agent.
2.2.4. Payment of Amounts Drawn Under Letters of Credit. (a)
In determining whether to pay under any Letter of Credit, the Fronting Bank
with respect thereto shall be responsible only to determine that the
documents and certificates required to be delivered under such Letter of
Credit have been delivered and that they substantially comply on their face
with the requirements of such Letter of Credit.
(b) In the event of any drawing under any Letter of Credit by
the beneficiary thereof, the Fronting Bank shall notify the Company and the
Administrative Agent on or before 11:00 a.m. (New York time) on the
Business Day on which such Fronting Bank intends to honor such drawing, and
if notified on or before such time, the Company shall reimburse such
Fronting Bank on the day on which such drawing is honored in an amount in
same day funds equal to the amount of such drawing; provided that, if the
Fronting Bank notifies the Company and the Administrative Agent after 11:00
a.m. (New York time) on the Business Day on which such Fronting Bank
intends to honor such drawing, the Company shall reimburse such Fronting
Bank on the Business Day immediately following the day on which it receives
notice that such drawing was honored in an amount in same day funds equal
to the amount of such drawing plus accrued interest on such amount at,
notwithstanding the provisions of subparagraph (a)(ii) of subsection 2.2.6,
the rate payable under this Agreement for ABR Loans; and provided, further,
that, anything contained in this Agreement to the contrary notwithstanding,
(A) unless the Company shall have notified the Administrative Agent and
such Fronting Bank prior to the time such reimbursement is due, as provided
above, that the Company intends to reimburse such Fronting Bank for the
amount of such drawing with funds other than the proceeds of Revolving
Loans or unless the Company shall have previously given to the
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Administrative Agent a timely Notice of Borrowing for Revolving Loans that
are Adjusted LIBOR Loans in an amount at least equal to the amount of such
drawing, the Company shall be deemed to have timely given a Notice of
Borrowing to the Administrative Agent requesting the Lenders having
Revolving Loan Commitments to make Revolving Loans which are ABR Loans on
the date on which the Company is obligated to reimburse the Fronting Bank
in an amount equal to the amount of such drawing, and (B) subject to
satisfaction or waiver of the conditions specified in Section 3.2, such
Lenders shall, on the date on which the Company is obligated to reimburse
the applicable Fronting Bank, make Revolving Loans which are Adjusted LIBOR
Loans or ABR Loans, as the case may be, in the amount of such drawing, the
proceeds of which shall be applied directly by the Administrative Agent to
reimburse such Fronting Bank for the amount of such drawing; and provided,
further, that if, for any reason, proceeds of Revolving Loans are not
received by such Fronting Bank on such date in an amount equal to the
amount of such drawing the Company shall reimburse such Fronting Bank, on
the business day (under the laws of the jurisdiction of such Fronting Bank)
immediately following the date of such drawing, in an amount in same day
funds equal to the excess of the amount of such drawing over the amount of
such Revolving Loans, if any, which are so received, plus accrued interest
on such amount at the rate set forth in subparagraph (a)(ii) of subsection
2.2.6; and provided, further, that, if proceeds of any Revolving Loan are
not received by the Fronting Bank as a result of the failure of a Lender to
fund such Revolving Loan when required to do so by the terms of this
Agreement, then the accrued interest on the amount so reimbursed shall be
at the rate set forth in subsection 2.5.1 which would have applied to such
Revolving Loan.
(c) The Fronting Bank shall, to the fullest extent permitted
by applicable law, apply all reimbursement funds received by it from the
Company pursuant to subsection 2.2.4(b) in the following order of priority:
first, to the Fronting Bank for any amount then due and payable to such
Fronting Bank in connection with such Letter of Credit, second, to all
other Lenders (other than Defaulting Lenders) ratably (according to the
respective amounts paid by such other Lenders in connection with such
Letter of Credit pursuant to subsection 2.2.5) for any amounts then due and
payable to such other Lenders in connection with such Letter of Credit, and
third, to all Defaulting Lenders ratably (according to the respective
amounts paid by such Lenders in connection with such Letter of Credit
pursuant to Section 2.2.5) for any amounts then due and payable to such
Lenders in connection with such Letter of Credit.
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2.2.5. Payment by the Lenders. In the event that the Company
shall fail to reimburse a Fronting Bank as provided in subsection 2.2.4 in
an amount equal to the amount of any drawing honored by such Fronting Bank
under a Letter of Credit issued by it, such Fronting Bank shall promptly
notify each Lender of the unreimbursed amount of such drawing, plus accrued
interest thereon, and of such Lender's respective participation therein.
Each Lender shall make available to such Fronting Bank an amount equal to
its respective participation in same day funds, at the office of such
Fronting Bank specified in such notice, not later than 1:00 P.M. (New York
time) on the business day (under the laws of the jurisdiction of such
Fronting Bank) after the date notified by such Fronting Bank. In the event
that any Lender fails to make available to such Fronting Bank the amount of
such Lender's participation in such Letter of Credit as provided in this
subsection 2.2.5, such Fronting Bank shall be entitled to recover such
amount on demand from such Lender together with interest at the customary
rate set by the Administrative Agent for the correction of errors among
banks for three Business Days and thereafter at ABR. Nothing in this
subsection 2.2.5 shall be deemed to prejudice the right of any Lender to
recover from such Fronting Bank any amounts made available by such Lender
to such Fronting Bank pursuant to this subsection 2.2.5 in the event that
it is determined by a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Fronting Bank in respect of which
payment was made by such Lender constituted gross negligence or willful
misconduct on the part of such Fronting Bank. Each Fronting Bank shall
distribute to each other Lender which has paid all amounts payable by it
under this subsection 2.2.5 with respect to any Letter of Credit issued by
such Fronting Bank such other Lender's Adjusted Revolving Loan Percentage
of all payments received by such Fronting Bank from the Company in
reimbursement of drawings honored by such Fronting Bank under such Letter
of Credit when such payments are received.
2.2.6. Compensation. (a) The Company agrees to pay the
following amounts to each Fronting Bank with respect to each Letter of
Credit issued by it:
(i) with respect to the issuance, amendment or transfer of
each Letter of Credit and each drawing made thereunder, documentary
and processing charges in accordance with such Fronting Bank's
standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or drawing, as the case may be; and
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(ii) except as otherwise provided in subsection 2.2.4, with
respect to drawings made under any Letter of Credit, interest,
payable on demand, on the amount paid by such Fronting Bank in
respect of each such drawing from the date of the drawing through the
date such amount is reimbursed by the Company (including any such
reimbursement out of the proceeds of Revolving Loans or Swing Line
Loans, as the case may be, pursuant to subsection 2.2.4) at a rate
which is at all times equal to 2.0% per annum in excess of the rate
of interest otherwise payable under this Agreement for ABR Loans.
(b) The Company agrees to pay to the Administrative Agent for
distribution to each Lender having a Revolving Loan Commitment in respect
of all Letters of Credit outstanding such Lender's Adjusted Revolving Loan
Percentage of a commission on the maximum amount available from time to
time to be drawn under such outstanding Letters of Credit at a rate per
annum equal to the LIBOR Spread then applicable to Adjusted LIBOR Revolving
Loans, payable in arrears on and through the last day of each fiscal
quarter of the Company (or the first date on which the Revolving Loan
Commitment shall have expired or been terminated and there shall be no
outstanding Letters of Credit, if earlier) and calculated on the basis of a
360-day year and the actual number of days elapsed.
(c) The Company agrees to pay to each Fronting Bank in respect
of all Letters of Credit outstanding issued by such Fronting Bank a facing
fee (the "Facing Fee") equal to .25% per annum of the maximum amount
available from time to time to be drawn under such outstanding Letters of
Credit, payable in arrears on and through the last day of each fiscal
quarter of the Company (or the first date on which the Revolving Loan
Commitments shall have expired or been terminated and there shall be no
outstanding Letters of Credit, if earlier) and calculated on the basis of a
360-day year and the actual number of days elapsed, provided that in no
event shall the annual Facing Fee with respect to each Letter of Credit be
less than $500, it being agreed that, on the date of issuance of any Letter
of Credit and on each anniversary thereof prior to the expiration or
termination of such Letter of Credit, if $500 will exceed the amount of
Facing Fees that will accrue with respect to such Letter of Credit for the
immediately succeeding 12-month period, the full $500 shall be payable on
the date of issuance of such Letter of Credit and on each such anniversary
thereof prior to the expiration or termination of such Letter of Credit.
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(d) Promptly upon receipt by the Administrative Agent or any
Fronting Bank of any amount described in subparagraph (a)(ii) or
paragraph (b) of this subsection 2.2.6, the Administrative Agent on behalf
of such Fronting Bank, or such Fronting Bank, as applicable, shall
distribute to each Lender its Adjusted Revolving Loan Percentage of such
amount. Amounts payable under subparagraph (a)(i) and paragraph (c) of
this subsection 2.2.6 shall be paid directly to the applicable Fronting
Bank.
(e) Once paid, any commissions or fees described in this
subsection shall not be refundable or creditable in any circumstances.
2.2.7. Obligations Absolute. The obligation of the Company to
reimburse each Fronting Bank for drawings made under the Letters of Credit
issued by it and the obligations of the Lenders under subsection 2.2.5
shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances
including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other
right which the Company or any Affiliate of the Company may have at
any time against a beneficiary or any transferee of any Letter of
Credit (or any persons or entities for whom any such beneficiary or
transferee may be acting), such Fronting Bank, any Lender or any
other Person, whether in connection with this Agreement, the 1988
Credit Agreement, the transactions contemplated herein or therein or
any unrelated transaction (including any underlying transaction
between the Company or one of its Subsidiaries and the beneficiary
for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect other than solely
as the result of gross negligence or willful misconduct of the
applicable Fronting Bank;
(iv) payment by such Fronting Bank under any Letter of Credit
against presentation of a demand, draft or certificate or other
document which does not comply with
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the terms of such Letter of Credit other than if said payment is
solely the result of the gross negligence or willful misconduct of
such Fronting Bank;
(v) any other circumstance or happening whatsoever, which is
similar to any of the foregoing;
(vi) the fact that an Event of Default or a Potential Event of
Default shall have occurred and is continuing; or
(vii) any Lender Default.
2.2.8. Additional Payments. Without duplication of payments
under subsection 2.9.7, if by reason of (A) after the date of this
Agreement any change in applicable law, regulation, rule, decree or
regulatory requirement or any change in the interpretation or application
by any judicial or regulatory authority of any applicable law, regulation,
rule, decree or regulatory requirement or (B) compliance by any Fronting
Bank or any Lender with any direction, request or requirement (whether or
not having the force of law) of any governmental or monetary authority
including, without limitation, Regulation D:
(i) such Fronting Bank or any Lender shall be subject to any
tax, levy, charge or withholding of any nature or to any variation
thereof or to any penalty with respect to the maintenance or
fulfillment of its obligations in respect of Letters of Credit or
participations therein under this Section 2.2 (except for changes in
the rate of tax on the overall net income of such Fronting Bank or
Lender or its applicable lending office imposed by the jurisdiction
in which such Fronting Bank's or Lender's principal executive office
or applicable lending office is located), whether directly or by such
tax, levy, charge or withholding being imposed on payments in respect
of Letters of Credit or participations therein made to such Fronting
Bank or any Lender;
(ii) any reserve, deposit or similar requirement is or shall
be applicable, imposed or modified in respect of any Letter of Credit
issued by such Fronting Bank or participations therein purchased by
any Lender; or
(iii) there shall be imposed on such Fronting Bank or any
Lender any other condition regarding this Section 2.2, any Letter of
Credit or any participation therein;
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and the result of any of the foregoing is directly or indirectly to
increase the cost to such Fronting Bank or any Lender of issuing, making or
maintaining any Letter of Credit or of purchasing or maintaining any
participation between a Lender and the Fronting Bank in any Letter of
Credit, or to reduce the amount receivable in respect thereof by such
Fronting Bank or any Lender, then and in any such case such Fronting Bank
or such Lender may, from time to time after obtaining actual knowledge that
the additional cost was incurred or the amount received was reduced, notify
the Company and the Company shall, within 5 days of receipt of the request
therefor, pay such amounts as such Fronting Bank or such Lender may specify
to be necessary to compensate such Fronting Bank or such Lender for such
additional cost or reduced receipt, together with interest on such amount
from the date demanded until payment in full thereof at a rate per annum
equal at all times to the rate applicable to ABR Loans; provided that the
Company shall have no obligation to such Fronting Bank or such Lender under
this subsection 2.2.8 if (A) such Fronting Bank or such Lender shall not
have notified the Company within six months following the later of (1) the
date of the occurrence of the event which forms the basis for such request
and (2) the date such Fronting Bank or such Lender shall have become aware
of such event or (B) the obligation to pay additional amounts on account of
taxes, levies, charges or withholdings would not have arisen but for
(1) the failure of such Fronting Bank or such Lender to provide any
applicable forms or other documents requested by the Company which such
Fronting Bank or Lender is otherwise required to provide under this
Agreement that would establish the entitlement of such Fronting Bank or
such Lender to a reduced rate of, or an exemption from, such tax, levy,
charge, withholding or similar item or (2) any representation or warranty
made by such Fronting Bank or such Lender with respect to an exemption
(partial or complete) from taxes, levies, charges or withholdings proving
to have been incorrect, false or misleading in any material respect when so
made. The determination by such Fronting Bank or any Lender, as the case
may be, of any amount due pursuant to this subsection 2.2.8 as set forth in
a certificate setting forth the calculation thereof in reasonable detail,
shall, in the absence of manifest error, be final and conclusive and
binding on all of the parties hereto.
2.2.9. Indemnification; Nature of Fronting Bank's Duties. (a)
In addition to amounts payable as elsewhere provided in this Section 2.2,
without duplication, the Company hereby agrees to protect, indemnify, pay
and save each Fronting Bank, upon its demand and as incurred, harmless from
and against any and all claims, demands, liabilities, damages,
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losses, costs, charges and expenses (including reasonable attorneys' fees
and reasonable allocated costs of internal counsel) which such Fronting
Bank may incur or be subject to as a consequence, direct or indirect, of
(A) the issuance of the Letters of Credit, other than such claims, demands,
liabilities, damages, losses, costs, changes and expenses as result from
the gross negligence or willful misconduct of such Fronting Bank or (B) the
failure of such Fronting Bank to honor a drawing under any Letter of Credit
as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or governmental authority
or court (all such acts or omissions, "Government Acts").
(b) As between the Company, on the one hand, and each Fronting
Bank, on the other hand, the Company assumes all risks of the acts and
omissions of, or misuse of the Letters of Credit issued by such Fronting
Bank by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, such Fronting Bank
shall not be responsible: (A) for the form, validity, sufficiency,
accuracy, genuineness or legal effects of any document submitted by any
party in connection with the application for and issuance of such Letters
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged, (B) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason, (C) for failure of the
beneficiary of any such Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit, (D) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, telephone, facsimile or
otherwise, whether or not they be in cipher, (E) for errors in
interpretation of technical terms, (F) for any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any such Letter of Credit or of the proceeds thereof, (G) for
the misapplication by the beneficiary of any such Letter of Credit of the
proceeds of any drawing under such Letter of Credit and (H) for any
consequences arising from causes beyond the control of such Fronting Bank,
including, without limitation, any Government Acts. None of the above
shall affect, impair, or prevent the vesting of any of such Fronting Bank's
rights or powers hereunder.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth,
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any action taken or omitted by any Fronting Bank under or in connection
with the Letters of Credit issued by it or the related certificates, if
taken or omitted in good faith, shall not put such Fronting Bank under any
resulting liability to the Company.
(d) Notwithstanding anything to the contrary contained in this
subsection 2.2.9, the Company shall not have any obligation to indemnify
any Fronting Bank in respect of any liability incurred by such Fronting
Bank which (A) results from the gross negligence or willful misconduct of
such Fronting Bank or (B) arises out of the wrongful dishonor by such
Fronting Bank of proper demand for payment made under any Letter of Credit
issued by it.
2.2.10. Computation of Interest. Interest payable pursuant to
this Section 2.2 shall be computed on the basis of a 360-day year (except
for interest payable in respect of ABR Loans based on the Prime Rate, which
shall be computed on the basis of a 365/66 day year) and the actual number
of days elapsed in the period during which it accrues.
Section 2.3 Revolving Loans and Revolving Notes.
2.3.1. (a) Revolving Loan Commitments. Subject to the terms
and conditions of this Agreement and in reliance upon the representations
and warranties of the Loan Parties set forth herein and in each of the
other Loan Documents, each Lender having a Revolving Loan Commitment hereby
severally agrees to lend to the Company, from time to time during the
period from and including the Closing Date to but excluding the Revolving
Credit Maturity Date, its Adjusted Revolving Loan Percentage of Revolving
Loans which may from time to time be borrowed by the Company hereunder to
be used for the purposes identified in subsection 2.8.2. Each Lender's
Revolving Loan Commitment shall expire on the Revolving Credit Maturity
Date and all Revolving Loans and all other amounts owed hereunder with
respect to the Revolving Loans shall be paid in full no later than the
Revolving Credit Maturity Date. In no event shall the aggregate principal
amount of the Revolving Loans from and Letters of Credit Usage of any
Lender outstanding at any time exceed its Revolving Loan Commitment then in
effect less such Lender's Adjusted Revolving Loan Percentage of the
Revolving Loan Deduction Amount and such Lender's Adjusted Revolving Loan
Percentage of the amount of any Swing Line Loans then outstanding, and in
no event shall the Total Utilization of Revolving Loan Commitments exceed
the Total Revolving Loan Commitment.
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(b) Subject to subsection 2.9.4, all Revolving Loans under
this Agreement shall be made by the Lenders simultaneously and
proportionately to their Adjusted Revolving Loan Percentages, it being
understood that no Lender shall be responsible for any default by any other
Lender in such other Lender's obligation to make Revolving Loans hereunder
nor shall the amount of the Revolving Loan Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in
such other Lender's obligation to make Revolving Loans hereunder. Amounts
borrowed by the Company under this subsection 2.3.1 may, subject to the
limitations set forth in subsection 2.7.1, be repaid and, subject to the
other limitations set forth in this Agreement, to but excluding the
Revolving Credit Maturity Date, be reborrowed. Revolving Loans made on any
Funding Date shall, except as provided in Section 2.9 and subsection
2.11.1, be made in an aggregate minimum amount of $10,000,000 and integral
multiples of $1,000,000 in excess of that amount or, if less, the
unutilized amount of the Total Revolving Loan Commitment.
2.3.2. Notice of Borrowing. (a) Whenever the Company desires
to borrow under this Section 2.3, it shall deliver to the Administrative
Agent a Notice of Borrowing substantially in the form of Exhibit I annexed
hereto (A) to the extent such Borrowings will consist of ABR Revolving
Borrowings, no later than 2:00 P.M. (New York time) at least one Business
Day in advance of the proposed Funding Date or (B) to the extent such
Borrowings consist of Adjusted LIBOR Revolving Borrowings, no later than
2:00 P.M. (New York time) at least three Business Days in advance of the
proposed Funding Date. The Notice of Borrowing shall specify (A) the
proposed Funding Date (which shall be a Business Day), (B) the amount of
the proposed Revolving Loans, (C) whether such Revolving Loans are
initially to consist of ABR Loans or Adjusted LIBOR Loans or a combination
thereof, and (D) if such Revolving Loans, or any portion thereof, are
initially to be Adjusted LIBOR Loans, the amount thereof and the initial
Interest Periods therefor; provided that the minimum amount of Adjusted
LIBOR Loans with a particular Interest Period included as a portion of any
such combination, if any, shall be $25,000,000 and integral multiples of
$1,000,000 in excess of that amount; and provided, further, in the case of
any such Loans borrowed on or prior to the 90th day following the Closing
Date, such Loans may consist only of Adjusted LIBOR Loans having a one
month Interest Period or ABR Loans. Revolving Loans may be continued as or
converted into ABR Loans or Adjusted LIBOR Loans in the manner provided in
subsection 2.5.4. In lieu of delivering the above-described Notice of
Borrowing, the Company may give the Administrative Agent telephonic notice
by the required time of any proposed
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borrowing under this Section 2.3; provided that such notice shall be
promptly confirmed in writing by delivery of a Notice of Borrowing to the
Administrative Agent on or prior to the Funding Date of the requested
Revolving Loans.
(b) Neither the Administrative Agent nor any Lender shall
incur any liability to the Company in acting upon any telephonic notice
referred to above which the Administrative Agent believes in good faith to
have been given by a duly authorized officer or other person authorized to
borrow on behalf of the Company or for otherwise acting in good faith under
this subsection 2.3.2 and, upon the making of Revolving Loans by the
Lenders in accordance with this Agreement pursuant to any telephonic
notice, the Company shall have borrowed Revolving Loans hereunder.
(c) Except as provided in subsection 2.9.4, a Notice of
Borrowing for an Adjusted LIBOR Loan (or telephonic notice in lieu thereof)
shall be irrevocable on and after the related Interest Rate Determination
Date, and the Company shall be bound to make a Borrowing in accordance
therewith.
2.3.3. Disbursement of Funds. (a) Promptly after receipt of
a Notice of Borrowing pursuant to subsection 2.3.2 (or telephonic notice in
lieu thereof), the Administrative Agent shall notify each Lender having an
Adjusted Revolving Loan Percentage greater than zero of the proposed
Borrowing. Each such Lender shall make the amount of its Revolving Loan
available to the Administrative Agent, in same day funds, at the office of
the Administrative Agent located at One Bankers Trust Plaza, New York, New
York not later than 12:00 Noon (New York time) on the applicable Funding
Date. Upon satisfaction or waiver of the conditions precedent specified in
Sections 3.1, 3.2 and 3.4, the Administrative Agent shall make the proceeds
of such Loans available to the Company on the applicable Funding Date by
causing an amount of same day funds equal to the proceeds of all such Loans
received by the Administrative Agent at its office located at One Bankers
Trust Plaza, New York, New York, to be credited to the account of the
Company at such office of the Administrative Agent. The parties hereto
acknowledge and agree that all Revolving Loans will be borrowed in New
York, New York, and that no Revolving Loans will be made other than in New
York, New York.
(b) Unless the Administrative Agent shall have been notified
by any Lender having a Revolving Loan Commitment prior to any Funding Date
in respect of any Revolving Loans that such Lender does not intend to make
available to the Administrative Agent such Lender's Revolving Loan on such
Funding Date, the
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Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent on such Funding Date and the
Administrative Agent in its sole discretion may, but shall not be obligated
to, make available to the Company a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to the
Administrative Agent by such Lender, the Administrative Agent shall be
entitled to recover such corresponding amount on demand from such Lender,
together with interest thereon, for each day from such Funding Date until
the date such amount is paid to the Administrative Agent at the customary
rate set by the Administrative Agent for the correction of errors among
banks for three Business Days and thereafter at ABR. If such Lender does
not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the Company
and the Company shall immediately pay such corresponding amount to the
Administrative Agent. Nothing in this subsection 2.3.3 shall be deemed to
relieve any Lender having a Revolving Loan Commitment from its obligation
to fulfill its Revolving Loan Commitment hereunder or to prejudice any
rights which the Company may have against any such Lender as a result of
any default by such Lender hereunder.
2.3.4. Revolving Notes. The Company shall execute and deliver
to each Lender having a Revolving Loan Commitment (or to the Administrative
Agent for such Lender) a Revolving Note substantially in the form of
Exhibit IV annexed hereto to evidence such Lender's Revolving Loans, in the
principal amount of such Lender's Revolving Loan Commitment.
Section 2.4 Total Loan Commitments; Limitations on Outstanding
Loan Amounts. The aggregate amount of the Tranche A Commitment, the
Tranche B Commitment and the Revolving Loan Commitment of each Lender
hereunder, as in effect at any time, is called its "Total Loan Commitment";
and the aggregate amount of the Tranche A Commitments, Tranche B
Commitments and Adjusted Revolving Loan Commitments of all the Lenders
hereunder as in effect at any time is herein called the "Total Loan
Commitments" at such time. The Total Loan Commitment as of the Closing
Date is $1,440,000,000. Anything contained in this Agreement to the
contrary notwithstanding, (A) in no event shall the sum of (1) the
aggregate principal amount of all Loans made by a Lender and (2) the amount
of Letters of Credit Usage of such Lender outstanding at any time exceed
its Total Loan Commitment less such Lender's Adjusted Revolving Loan
Percentage of the Revolving Loan Deduction Amount and such Lender's
Adjusted Revolving Loan Percentage of the amount of any Swing Line Loans
then outstanding, and (B) in
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no event shall the sum of (1) the aggregate principal amount of all Loans
made by all the Lenders and (2) the amount of Letters of Credit Usage of
all the Lenders outstanding exceed the Total Loan Commitments less the
Revolving Loan Deduction Amount and the amount of any portion of the
Deferred Tranche A Funding Amount that was not funded on the Deferred
Funding Date (because of a Lender Default).
Section 2.5 Interest on the Loans.
2.5.1. Rate of Interest. (a) The Loans shall bear interest
on the unpaid principal amount thereof from the date made through maturity
(whether by acceleration or otherwise) at a rate determined by reference to
ABR or Adjusted LIBOR. The applicable basis for determining the rate of
interest with respect to Term Loans and Revolving Loans shall be selected
by the Company at the time a Notice of Borrowing is given pursuant to sub-
section 2.1.2 or 2.3.2. If on any day a Term Loan or Revolving Loan is
outstanding with respect to which notice has not been delivered to the
Administrative Agent in accordance with the terms of this Agreement
specifying the basis for determining the rate of interest, then for that
day that Term Loan or Revolving Loan shall bear interest determined by
reference to ABR.
(b) Loans comprising each ABR Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of
365 or 366 days, as the case may be, when ABR is determined by reference to
the Prime Rate and over a year of 360 days at all other times) at a rate
per annum equal to ABR (as ABR changes from time to time) plus the ABR
Spread in effect at such time with respect to such Loans. Swing Line Loans
shall bear interest at the rate applicable to ABR Revolving Loans.
(c) Loans comprising each Adjusted LIBOR Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed over a
year of 360 days) at a rate per annum equal to Adjusted LIBOR for the
Interest Period in effect for such Borrowing plus the LIBOR Spread in
effect at such time with respect to such Loans.
(d) The ABR Spread and LIBOR Spread per annum in respect of
Tranche A Term Loans and Revolving Loans (but not Tranche B Term Loans)
shall initially be as specified in "Category 1" in the table set forth
below and shall be subject to adjustment from time to time after the
Closing Date as provided in this paragraph. If, as of the last day of any
fiscal quarter of the Company, the results of Ratio 1 and
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Ratio 2, as set forth in a Compliance Certificate delivered pursuant to
subparagraph (iv) of Section 5.1, are such as to cause to be applicable any
Applicable Category other than the Category in the table below which was
applicable on the date of delivery of such Compliance Certificate, the ABR
Spread and the LIBOR Spread shall automatically be adjusted (effective as
of the times set forth in the next succeeding sentence) to equal the
amounts set forth as ABR Spread and LIBOR Spread, respectively, in such new
Applicable Category and the spreads set forth in such new Applicable
Category shall continue to be the ABR Spread and the LIBOR Spread until
such time as there shall be delivered a Compliance Certificate indicating
results of Ratio 1 and Ratio 2 which cause to be applicable a different
Applicable Category. Each adjustment of the ABR Spread and the LIBOR
Spread pursuant to this paragraph (d) shall take effect (A) in the case of
the ABR Spread, with respect to all ABR Loans outstanding on and after the
date that is five Business Days following the date of delivery to the
Administrative Agent of a Compliance Certificate pursuant to subparagraph
(iv) of Section 5.1 relating to the immediately preceding fiscal quarter
and (B) in the case of the LIBOR Spread, with respect to all Interest
Periods commencing on and after the date that is five Business Days
following the date of delivery to the Administrative Agent of such
Compliance Certificate.
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Interest Rate Step-Downs for
Tranche A Loans and Revolving Loans
Category 1 ABR Spread LIBOR Spread
When none of the Categories
below is applicable 1.50% 2.50%
Category 2
Ratio 1: 2.00 to 1 or higher 1.25% 2.25%
Ratio 2: 3.00 to 1 or lower
Category 3
Ratio 1: 2.25 to 1 or higher 1.00% 2.00%
Ratio 2: 2.75 to 1 or lower
Category 4
Ratio 1: 2.50 to 1 or higher 0.75% 1.75%
Ratio 2: 2.50 to 1 or lower
Category 5
Ratio 1: 2.75 to 1 or higher 0.50% 1.50%
Ratio 2: 2.25 to 1 or lower
Category 6
Ratio 1: 3.00 to 1 or higher 0.25% 1.25%
Ratio 2: 2.00 to 1 or lower
Category 7
Ratio 1: 3.25 to 1 or higher 0.00% 1.00%
Ratio 2: 1.50 to 1 or lower
Notwithstanding the foregoing provisions of this paragraph (d), (i) there
shall not be any adjustment to the ABR Spread or the LIBOR Spread, as
provided above, until the first anniversary of the Closing Date (except if
an Event of Default shall have occurred and is continuing) and (ii) at any
time during which the Company has failed to deliver a Compliance
Certificate described in subparagraph (iv) of Section 5.1 with respect to a
fiscal quarter in accordance with the provisions thereof, or at any time
that an Event of Default shall have occurred and shall be continuing, as of
the date such Compliance Certificate is
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due or as of the date such Event of Default shall have occurred, as the
case may be, the ABR Spread shall be reset, if necessary, to be 1-1/2% and
the LIBOR Spread shall be reset, if necessary, to be 2-1/2% until such time
as the Company shall deliver such certificate in accordance with the
provisions of subparagraph (iv) of Section 5.1 or such Event of Default
shall be cured or waived or shall otherwise no longer be continuing.
(e) Notwithstanding the foregoing and except where an Event of
Default shall have occurred and be continuing, if any senior unsecured debt
obligations of the Company receive a rating from S&P of at least BBB-, or
from Moody's of at least Baa3, from the date that is the fifth Business Day
of the fiscal quarter of the Company following the fiscal quarter
containing the first date that either such rating is announced and for so
long as such rating shall remain in effect the LIBOR Spread and the ABR
Spread, respectively, with respect to Tranche A Term Loans and Revolving
Loans (but not Tranche B Term Loans) shall be 0.75% and 0.00% and if any
senior unsecured debt obligations of the Company receive ratings from both
S&P and Moody's of at least BBB- and Baa3, respectively (such ratings, the
"Investment Grade Ratings"), from the date that is the fifth Business Day
of the fiscal quarter of the Company following the fiscal quarter
containing the first date that both the Investment Grade Ratings shall be
effective and for so long as both such ratings shall remain in effect the
LIBOR Spread and the ABR Spread, respectively, shall be 0.625% and 0.00%.
(f) The applicable ABR Spread or LIBOR Spread for each
Interest Period or day within an Interest Period, as the case may be, shall
be determined by the Administrative Agent, and such determination shall be
presumptively correct absent manifest error.
2.5.2. Interest Periods. In connection with each Adjusted
LIBOR Loan, the Company shall elect an interest period (each an "Interest
Period") to be applicable to such Loan, which Interest Period shall be
either a one, two, three or six month period or, if permitted under sub-
paragraph (viii) of this subsection 2.5.2, a twelve-month period; provided
that:
(i) subject to subparagraph (vi) below, the Interest Period
for any Adjusted LIBOR Loan shall commence on the date of such Loan
and each Interest Period occurring thereafter in respect of such
Adjusted LIBOR Loan shall commence on the day on which the next
preceding Interest Period applicable thereto expires;
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(ii) if an Interest Period would otherwise expire on a day
which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(iii) if an Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that if such Business Day
occurs in a different month, such Interest Period shall expire on the
Business Day next preceding such day;
(iv) no Interest Period with respect to any Revolving Loan,
any Tranche A Term Loan or any Tranche B Term Loan shall extend
beyond the Revolving Credit Maturity Date, the Tranche A Term
Maturity Date or the Tranche B Term Maturity Date, respectively;
(v) no Interest Period may extend beyond a date on which the
Company is required to make a scheduled payment of principal of such
Loan;
(vi) the initial Interest Period for a Loan which is converted
pursuant to subsection 2.9.4 shall commence on the date of such
conversion and shall expire on the date on which the Interest Periods
for the Loans of the other Lenders which were not converted expire;
(vii) there shall be no more than 20 Interest Periods relating
to Loans outstanding at any time (it being understood that Interest
Periods for Adjusted LIBOR Loans that are part of the same Tranche
and which are scheduled to end on the same date shall constitute one
Interest Period for purposes of this clause vii); and
(viii) no Tranche B Term Loan may have an Interest Period longer
than six months; and no Tranche A Term Loan or Revolving Loan may
have an Interest Period of twelve months unless the Administrative
Agent, after consultation with the Lenders, has determined in good
faith based on prevailing conditions in the London interbank market
on any date of determination that U.S. dollar deposits are generally
offered by the Lenders to first class banks in the London interbank
market for a comparable maturity.
2.5.3. Interest Payments. Subject to subsection 2.5.5,
interest shall be payable on the Loans as follows:
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(i) interest on each ABR Loan shall be payable in arrears on
and to each September 30, December 30, March 30 and June 30 of each
year, commencing on the first of such dates to occur after the
Closing Date, upon any prepayment of any such Loan (to the extent
accrued on the principal amount being prepaid) and at maturity of
such ABR Loan; and
(ii) interest on each Adjusted LIBOR Loan shall be payable in
arrears on and to each Interest Payment Date applicable to that Loan,
upon any prepayment of that Loan (to the extent accrued on the
principal amount being prepaid) and at maturity of such Adjusted
LIBOR Loan.
2.5.4. Conversion or Continuation. (a) Subject to the
provisions of Section 2.9, the Company shall have the option (A) to convert
at any time all or any part of its outstanding ABR Loans equal to
$10,000,000 principal amount and integral multiples of $1,000,000 in excess
of that amount to Adjusted LIBOR Loans; provided that, after giving effect
to each such conversion, there shall not exist any Adjusted LIBOR Loan with
a particular Interest Period that has a principal amount less than
$25,000,000 (it being understood that Interest Periods for Adjusted Libor
Loans that are part of the same Tranche and which are scheduled to end on
the same date shall constitute one Interest Period for this purpose) or
(B) upon the expiration of any Interest Period applicable to an Adjusted
LIBOR Loan, (1) to continue all or any portion of such Loan equal to
$25,000,000 principal amount and integral multiples of $1,000,000 in excess
of that amount as an Adjusted LIBOR Loan and the succeeding Interest
Period(s) of such continued Loan shall commence on the last day of the
Interest Period of the Loan to be continued or (2) to convert such Adjusted
LIBOR Loan to an ABR Loan; provided that no outstanding Loan may be
continued as, or be converted into, an Adjusted LIBOR Loan when any Event
of Default or Potential Event of Default has occurred and is continuing.
(b) The Company shall deliver a Notice of Conversion/
Continuation substantially in the form of Exhibit II annexed hereto to the
Administrative Agent no later than 1:00 P.M. (New York time) at least three
Business Days in advance of the proposed conversion/continuation date. A
Notice of Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business Day), (B) the
amount of the Loan to be converted/continued and whether such Loan is a
Tranche A Term Loan, a Tranche B Term Loan or a Revolving Loan, (C) the
nature of the proposed conversion/continuation and (D) the requested
Interest Period.
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In lieu of delivering the above-described Notice of Conversion/
Continuation, the Company may give the Administrative Agent telephonic
notice by the required time of any proposed conversion/continuation under
this subsection 2.5.4; provided that such notice shall be promptly
confirmed in writing by delivery of a Notice of Conversion/Continuation to
the Administrative Agent on or before the proposed conversion/continuation
date. If the Company has failed timely to deliver a Notice of Conversion/
Continuation or give such telephonic notice with respect to an Adjusted
LIBOR Loan, the Company shall be deemed to have delivered to the
Administrative Agent a Notice of Conversion/Continuation to convert such
Adjusted LIBOR Loan into an ABR Loan.
(c) Neither the Administrative Agent nor any Lender shall
incur liability to the Company in acting upon any telephonic notice
referred to above which the Administrative Agent believes in good faith to
have been given by a duly authorized officer or other person authorized to
act on behalf of the Company or for otherwise acting in good faith under
this subsection 2.5.4 and upon conversion/continuation by the
Administrative Agent in accordance with this Agreement pursuant to any
telephonic notice, the Company shall have continued or converted, as the
case may be, Loans hereunder.
(d) Except as provided in subsection 2.9.4, a Notice of
Conversion/Continuation for conversion to, or continuation of, an Adjusted
LIBOR Loan (or telephonic notice in lieu thereof) shall be irrevocable on
and after the related Interest Rate Determination Date, and the Company
shall be bound to convert or continue in accordance therewith.
2.5.5. Post-Maturity Interest. Any principal payments on the
Loans not paid when due and, to the extent permitted by applicable law, any
interest payment on the Loans not paid when due, in each case whether at
stated maturity, by notice of prepayment, by acceleration or otherwise,
shall thereafter bear interest payable upon demand at a rate which is 2.00%
per annum in excess of the rate of interest otherwise payable under this
Agreement for ABR Loans.
2.5.6. Computation of Interest. Interest on the Loans shall
be computed on the basis of a 360-day year (except for interest payable in
respect of ABR Loans based on the Prime Rate, which shall be computed on
the basis of a 365/66 day year) and the actual number of days elapsed in
the period during which it accrues. In computing interest on any Loan, the
date of the making of the Loan or the first day of an Interest Period, as
the case may be, shall be included and the
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date of payment or, in the case of Adjusted LIBOR Loans, the Interest
Payment Date, as the case may be, shall be excluded; provided that if a
Loan is repaid on the same day on which it is made, one day's interest
shall be paid on such Loan.
Section 2.6 Commissions.
2.6.1. Commitment Commissions. The Company agrees to pay to
the Administrative Agent for distribution to each Non-Defaulting Lender
having a Revolving Loan Commitment and/or a Tranche A Commitment commitment
commissions with respect to the unused portion of the Adjusted Revolving
Loan Commitments and/or the Tranche A Commitments for the period from and
including the Closing Date to and excluding the date such Commitments
expire or terminate, at an annual rate equal to the Commitment Percentage
applicable from time to time. Such annual rate shall be applied on a daily
basis to the aggregate of the daily unused portion of the Adjusted
Revolving Loan Commitments and the Tranche A Commitments from time to time.
Such commitment commissions shall be payable in arrears on September 30,
December 30, March 30 and June 30 of each year, commencing on the first
such date to occur after the Closing Date, and the date such Commitments
expire or terminate, calculated, in all cases, on the basis of a 360-day
year and the actual number of days elapsed. Letters of Credit Usage and
Swing Line Loans shall constitute usage of the Revolving Loan Commitments
for all purposes of this Agreement.
2.6.2. Bankers and Arrangers Commissions. The Company agrees
to pay to Bankers and the other Arrangers the commissions and other amounts
at such times or upon the happening of such events as are set forth in the
Commitment Fee Letters. Nothing herein set forth shall limit the rights of
Bankers or the other Arrangers to receive the fees and other amounts
payable under the Commitment Fee Letters.
2.6.3. No Refund of Fees. Once paid, all fees and commissions
payable pursuant to this Section 2.6 shall not be refundable under any
circumstances.
Section 2.7 Prepayments and Payments;
Reductions in Commitments.
2.7.1. Voluntary Prepayments. The Company may, upon not less
than two Business Days' (same Business Day's in the case of Swing Line
Loans) prior written or telephonic notice confirmed in writing to the
Administrative Agent (which notice the Administrative Agent will promptly
transmit by telegram, telex or telephone to each Lender), at any time and
from time
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to time, prepay Term Loans, Revolving Loans or Swing Line Loans in whole or
in part at any time, without penalty or premium, in an aggregate minimum
amount of (A) in the case of any Loan other than Swing Line Loans,
$5,000,000 and integral multiples of $1,000,000 in excess of that amount or
(B) in the case of Swing Line Loans, $100,000 and integral multiples of
$100,000 in excess of such amount or, if less, the outstanding principal
amount thereof. Voluntary prepayments of Term Loans made by the Company
out of (A) the Company's Portion of Excess Cash Flow or (B) the net cash
proceeds of any Equity Offering shall be allocated between (x) the then
outstanding Tranche A Term Loans and (y) the then outstanding Tranche B
Term Loans in a manner determined at the discretion of the Company. In the
case of such prepayments elected by the Company to be applied to (A) the
Tranche A Term Loans, all such prepayments shall be applied to such
Scheduled Term Loans Principal Payments as shall be elected by the Company
and (B) the Tranche B Term Loans, all such prepayments shall be applied pro
rata to all then remaining Scheduled Term Loans Principal Payments in
respect of Tranche B Term Loans. All other voluntary prepayments of Term
Loans shall be applied in the amounts and manner applicable to mandatory
prepayments as set forth in paragraph (b) of subsection 2.7.3. At the
Company's election in connection with any prepayment pursuant to this
subsection 2.7.1, amounts prepaid in respect of Revolving Loans shall not
be applied to any Revolving Loan of a Defaulting Lender until all Revolving
Loans of all Non-Defaulting Lenders have been paid in full. Notice of
prepayment having been given as aforesaid, the principal amount of the
Loans specified in such notice shall become due and payable on the
prepayment date. Amounts of Term Loans that are so prepaid may not be
reborrowed.
2.7.2. Mandatory Prepayments. Subject to the provisions of
the last sentence of this subsection 2.7.2, the Company shall upon the
occurrences set forth below make prepayments of Loans in the amounts and
manner set forth below.
(a) Prepayments from Asset Sales. Upon the later of (A) the
first date on which, in accordance with the definition of "Asset
Sale," any sale, transfer or other disposition of assets or
properties becomes an "Asset Sale" and (B) the date of the initial
receipt by the Company or any Subsidiary of the Company of Cash
Proceeds of such Asset Sale (such later date being a "Proceeds
Payment Date"), the Company shall prepay the Loans in an amount equal
to the lesser of (x) the Net Cash Proceeds of Sale then received in
respect of such Asset Sale and (y) Estimated Net Cash Proceeds of
such Asset Sale (such
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lesser amount being the "Initial Cash Proceeds Payment"). On or
before the sixtieth day after the Proceeds Payment Date with respect
to an Asset Sale, and at or before the end of each thirty-day period
thereafter, the Company shall prepay the Loans in an amount equal to
the excess ("Proceeds Adjustment"), if any, of (A) Net Cash Proceeds
of Sale of such Asset Sale theretofore received over (B) the amount
previously paid with respect to such Asset Sale hereunder; provided
that the Company shall not be required to apply any Initial Cash
Proceeds Payment or Proceeds Adjustments of an Asset Sale to the
prepayment of the Loans to the extent that the assets transferred
pursuant to such Asset Sale are located in a jurisdiction outside the
United States, the laws of such jurisdiction prohibit the transfer of
the proceeds of such Asset Sale to the United States, such proceeds
have not been transferred to the United States and the Company is
using its reasonable best efforts to transfer such funds on a basis
that complies with applicable law (and has informed the
Administrative Agent in writing of such efforts). Concurrently with
the making of any prepayment pursuant to this paragraph (a) of
subsection 2.7.2, the Company shall deliver to the Administrative
Agent an Officers' Certificate demonstrating the derivation of Net
Cash Proceeds of Sale from the gross sales price of the related Asset
Sale.
(b) Prepayments Due to Excess Cash Flow. On or before the
last day of March in each year, commencing March 31, 1996 and ending
on but including March 31, 2002, the Company shall make a mandatory
prepayment (each such prepayment, an "Annual Prepayment") in an
amount equal to 50% of Excess Cash Flow for the twelve-month period
commencing on January 1 (the first such period to commence January 1,
1995) and ending on December 31 immediately preceding such March 31.
Concurrently with the making of any prepayment pursuant to this
paragraph (b) of subsection 2.7.2, the Company shall deliver to the
Administrative Agent an Officers' Certificate demonstrating the
derivation of Excess Cash Flow.
(c) Prepayments Due to Other Reductions of Revolving Loan
Commitments. The Company shall make prepayments of Swing Line Loans
and Revolving Loans, and the Company shall cash collateralize
(pursuant to customary documentation and arrangements determined in
the reasonable discretion of the Administrative Agent) Letters of
Credit then outstanding, to the extent necessary so that the Total
Utilization of Revolving Loan Commitments
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at any time does not exceed the aggregate amount of the Revolving
Loan Commitments of all Lenders reduced by the sum of (A) the
Revolving Loan Deduction Amount then in effect, plus (B) the
aggregate of amounts described in clauses (A) and (B) of the
definition of Defaulting Lender Deduction Amount in respect of all
Lenders that are Defaulting Lenders.
(d) Prepayments Due to Casualty or Condemnation. In the event
there shall occur any Taking or Destruction of any Real Property and,
pursuant to the provisions of the applicable Mortgage, amounts
payable with respect thereto are to be applied to the Obligations in
accordance with the terms of such Mortgage, the Company shall prepay
Loans in such amount.
(e) Prepayments from Proceeds of Sale/Leaseback Transactions.
On each date on which the Company or any Subsidiary of the Company
receives any net cash proceeds of a Sale/Leaseback Transaction that
is subject to the provisions of Section 5.12, the Company shall
prepay Loans in the amount rounded to the nearest thousand Dollars of
such net cash proceeds (reduced by the actual expenditures of the
Company or any Subsidiary for customary and reasonable transaction
costs incurred in connection therewith).
(f) Prepayments from Proceeds of Receivables Transactions. On
the first date (on or immediately following the termination of the
1995 A/R Bridge) on which the Company or any Subsidiary of the
Company (other than a Receivables Subsidiary) receives proceeds from
the initial funding of a Receivables Program, the Company shall
prepay Loans in the amount of such proceeds (reduced by the actual
expenditures of the Company or any Subsidiary for customary and
reasonable transaction costs incurred in connection therewith);
provided that no such prepayment shall be due under this subparagraph
(f) in respect of any Receivables Transaction to the extent that the
net proceeds thereof are used to pay amounts owing pursuant to the
1995 A/R Bridge or to refinance any other Receivables Transaction.
(g) Prepayments with Proceeds of Indebtedness. In the event
that the Company or any Subsidiary of the Company shall incur any
Indebtedness after the date hereof (including, without limitation,
all Indebtedness constituting Permitted Expansion Financings but
excluding (A) Indebtedness the proceeds of which are required to be
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used to prepay Loans pursuant to the provisions of paragraphs (e) or
(f) above and (B) Excluded New Indebtedness), the Company shall, on
the date of receipt of the net cash proceeds of such Indebtedness,
prepay Loans in an amount equal to such net cash proceeds. The
provisions of this Section shall not in any manner affect or limit
the obligations of the Company pursuant to Section 6.1 hereof nor be
construed as a consent by the Lenders to any noncompliance with such
Section.
Notwithstanding the foregoing provisions of this subsection 2.7.2, the
Company shall not be required to make any mandatory prepayments (other than
by reason of paragraph (c) above) under this Section 2.7.2 so long as there
shall be in effect in respect of the senior unsecured debt obligations of
the Company the Investment Grade Ratings.
2.7.3. Company's Mandatory Prepayment Obligation; Application
of Prepayments. (a) All prepayments shall include payment of accrued
interest on the principal amount so prepaid and shall be applied to payment
of accrued and unpaid interest on the principal amount being prepaid before
application to principal. Subject to compliance with subsection 2.7.3(b),
when Term Loans, Swing Line Loans and Revolving Loans are being prepaid
separately, any mandatory prepayment shall be applied first to ABR Loans to
the full extent thereof before application to Adjusted LIBOR Loans as
determined by the Administrative Agent; provided that in lieu of
application of any such prepayment to Adjusted LIBOR Loans prior to the
expiration of the Interest Period with respect thereto, the Company may
execute an Escrow Letter and Security Agreement substantially in the form
of Exhibit XX annexed hereto with respect to the principal and interest due
in respect of such prepayment and deposit with the Administrative Agent
funds equal to such amount for application to Loans in accordance with the
terms of the Escrow Letter and Security Agreement.
(b) Mandatory prepayments made by the Company pursuant to
subsection 2.7.2 above shall be applied first to the prepayment of Term
Loans then to the prepayment of Swing Line Loans and then to the prepayment
of Revolving Loans; provided that all prepayments that are to be applied to
Revolving Loans shall be applied first, to all Lenders (other than
Defaulting Lenders) ratably (according to the respective amounts of
Revolving Loans then held by such Lenders) for the amounts then due and
payable to such Lenders in connection with such prepayment and, second, to
all Defaulting Lenders ratably (according to the respective amounts of
Revolving Loans then held by such Defaulting Lenders) for any amount then
due and
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payable to such Lenders in connection with such prepayment. Except as
otherwise provided in paragraph (c) below, all prepayments of Term Loans
shall be allocated pro rata between (A) the then outstanding Tranche A Term
Loans and (B) the then outstanding Tranche B Term Loans, with the amount so
allocated in clause (A) above to be applied, first, in direct order of
maturity until such application results in the prepayment in whole of all
Scheduled Term Loans Principal Payments scheduled to become due in respect
of Tranche A Term Loans in the twelve-month period immediately following
such date of prepayment, and then pro rata to the remaining such Scheduled
Term Loans Principal Payments, and with the amount so allocated in clause
(B) above to be applied pro rata against the remaining Scheduled Term Loans
Principal Payments due in respect of Tranche B Term Loans under Section
2.1.
(c) Notwithstanding the provisions of paragraph (b) above,
with respect to the amount of any mandatory prepayment described therein
that is allocated to the then outstanding Tranche B Term Loans (such
amount, the "Tranche B Prepayment Amount"), the Company may, in lieu of
applying such amount to the prepayment of Tranche B Term Loans as provided
in such paragraph, at least one Business Day prior to the date specified
therein for such prepayment, (A) deposit in the Tranche B Escrow Account
the Tranche B Prepayment Amount and (B) provide to each Tranche B Lender a
notice (each, a "Tranche B Prepayment Option Notice") as described below.
Each Tranche B Prepayment Option Notice shall be in writing, shall refer to
this subsection 2.7.3 and shall (1) set forth the Tranche B Prepayment
Amount and the portion thereof that the applicable Tranche B Lender will be
entitled to receive if it accepts such mandatory prepayment in accordance
with this paragraph, (2) offer to prepay on a specified date (each such
date, a "Tranche B Mandatory Prepayment Date"), which shall be not less
than 20 days or more than 25 days after the date of the Tranche B
Prepayment Option Notice, the Tranche B Term Loans of such Tranche B Lender
by an amount equal to the portion of the Tranche B Prepayment Amount
indicated in such Tranche B Lender's Tranche B Prepayment Option Notice as
being applicable to such Tranche B Lender, (3) request such Tranche B
Lender to notify the Company and the Administrative Agent in writing, no
later than the fifth day prior to the Tranche B Mandatory Prepayment Date,
of such Tranche B Lender's acceptance or rejection (in each case, in whole
and not in part) of such offer of prepayment and (4) inform such Tranche B
Lender that failure by such Tranche B Lender to accept such offer in
writing on or before the fifth day prior to the Tranche B Mandatory
Prepayment Date shall be deemed an acceptance of such prepayment offer.
Each Tranche B Prepayment
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Option Notice shall be given by telecopy, confirmed by hand delivery,
overnight courier service or registered or certified mail, in each case
addressed as provided in Section 9.9. On the Tranche B Mandatory
Prepayment Date, the Administrative Agent shall withdraw from the Tranche B
Escrow Account the aggregate amount necessary to prepay that portion of the
Tranche B Prepayment Amount in respect of which Tranche B Lenders have
accepted prepayment as described above (such Tranche B Lenders, the
"Accepting Tranche B Lenders"), and shall apply such amount on behalf of
the Company pro rata (based on the respective principal amounts thereof)
against the remaining installments of principal due in respect of the
Tranche B Term Loans of the Accepting Tranche B Lenders under subsection
2.1.5. The amount remaining in the Tranche B Escrow Account after the
payment described in the immediately preceding sentence (exclusive of any
interest or profits credited to the Tranche B Escrow Account) shall be
allocated pro rata (based on the respective principal amounts thereof)
between (x) the then outstanding Tranche A Term Loans and (y) the then
outstanding Tranche B Term Loans of the Accepting Tranche B Lenders, and
applied against the remaining Scheduled Term Loans Principal Payments due
(i) in respect of Tranche A Term Loans, in the manner specified in clause
(A) of paragraph 2.7.3(b) above and (ii) in respect of the Tranche B Term
Loans of the Accepting Tranche B Lenders, on a pro rata basis (based on the
respective principal amounts thereof). The term "Tranche B Escrow Account"
means an account established by the Company with the Administrative Agent
and over which the Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal for application in
accordance with this paragraph. The Administrative Agent will, at the
request of the Company, invest amounts on deposit in the Tranche B Escrow
Account in Cash Equivalents that mature prior to the Tranche B Mandatory
Prepayment Date; provided that (X) the Administrative Agent shall not be
required to make any investment that, in its sole judgment, would require
or cause the Administrative Agent to be in, or would result in any,
violation of any law, statute, rule or regulation and (Y) the
Administrative Agent shall have no obligation to invest amounts on deposit
in the Tranche B Escrow Account if a Potential Event of Default or Event of
Default shall have occurred and be continuing. The Company shall indemnify
the Administrative Agent for any losses relating to the investments so that
the amount available to prepay the Tranche B Term Loans of the Accepting
Tranche B Lenders on the Tranche B Mandatory Prepayment Date is not less
than the amount that would have been available had no investments been made
pursuant to this paragraph. Other than any interest earned on such
investments, the Tranche B Escrow Account shall not bear interest.
Interest
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or profits, if any, on such investments shall be paid to the Company at the
latest date of and after giving effect to the disbursements contemplated in
clauses (x) and (y) above. If the maturity of the Loans has been
accelerated pursuant to ARTICLE VII, the Administrative Agent may, in its
sole discretion, apply all amounts on deposit in the Tranche B Escrow
Account to satisfy any of the Obligations. The Company hereby grants to
the Administrative Agent, for its benefit and the benefit of any Fronting
Bank, the Swing Line Lender and the Lenders, a security interest in the
Tranche B Escrow Account to secure the Obligations.
2.7.4. Manner and Time of Payment. All payments of principal,
interest and fees hereunder and under the Notes by the Company shall be
made without defense, setoff or counterclaim and in same day funds and
delivered to the Administrative Agent not later than 12:00 Noon (New York
time) on the date due at its office located at One Bankers Trust Plaza, New
York, New York for the account of the applicable Lenders; funds received by
the Administrative Agent after that time shall be deemed to have been paid
by the Company on the next succeeding Business Day. The Company hereby
authorizes the Administrative Agent to charge its account with Bankers in
order to cause timely payment to be made to the Administrative Agent of all
principal, interest and fees due hereunder (subject to sufficient funds
being available in its account for such purpose).
2.7.5. Apportionment of Payments. Aggregate principal and
interest payments in respect of Loans and payments in respect of Letters of
Credit and commitment commissions shall be apportioned among all
outstanding Loans and Letters of Credit to which such payments relate,
proportionately to the applicable Lenders' respective interests in such
Loans and Letters of Credit, except that in the case of Swing Line Loans,
payments will only be made to Bankers and except that the rights of
Defaulting Lenders to receive pro rata payments in respect of principal
amounts of Revolving Loans and reimbursements of drawings under Letters of
Credit (together with accrued interest in respect of each thereof) shall be
limited as set forth in Section 2.7.3(b). The Administrative Agent shall
promptly distribute to each Lender at its primary address set forth below
its name on the appropriate signature page hereof, or at such other address
as any Lender may request, its share of all such payments received by the
Administrative Agent and the commitment commissions and Letter of Credit
commissions, if any, payable to such Lender when received by the
Administrative Agent.
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2.7.6. Payments on Non-Business Days. Whenever any payment to
be made hereunder or under the Notes shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder or under the Notes or of
the commitment and other commissions or fees hereunder, as the case may be;
provided that in the event that the day on which payment relating to an
Adjusted LIBOR Loan is due is not a Business Day but is a day of the month
after which no further Business Day occurs in that month, then the due date
thereof shall be the next preceding Business Day.
2.7.7. Payment Accounts; Notation of Payment. (a) Each
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness to such Lender resulting from each
Loan, from time to time, including the amounts of principal and interest
payable and paid such Lender from time to time under this Agreement.
(b) The Administrative Agent shall maintain accounts in which
it will record (A) the amount of each Loan made hereunder, whether such
Loans consist of ABR Loans or Adjusted LIBOR Loans, and the Interest Period
applicable thereto, (B) the amount of any principal or interest due and
payable or to become due and payable from the Company to each Lender
hereunder and (C) the amount of any sum received by the Administrative
Agent hereunder from the Company and each Lender's share thereof.
(c) The entries made in the accounts maintained pursuant to
paragraphs (a) and (b) of this subsection 2.7.7 shall, to the extent
permitted by applicable law, be prima facie evidence of the existence and
amounts of the obligations therein recorded; provided that the failure of
any Lender or the Administrative Agent to maintain such accounts or any
error therein shall not in any manner affect the obligations of the Company
to repay the Loans in accordance with their terms.
(d) Each Lender agrees that before disposing of any Note held
by it, or any part thereof (other than by granting participations therein),
such Lender will make a notation thereon of all Loans and principal
payments previously made thereon and of the date to which interest thereon
has been paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under any such Note shall not limit
or otherwise affect the obligation of the
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Company hereunder or under such Note with respect to any Loan and payments
of principal or interest on any such Note.
2.7.8. Voluntary Reductions of Swing Line Commitment and
Revolving Loan Commitments. (a) The Company shall have the right, at any
time after the Closing Date and from time to time, to terminate in whole or
permanently reduce in part, without premium or penalty, the Swing Line
Commitment or the Total Revolving Loan Commitment. No such reduction of
the Total Revolving Loan Commitment shall reduce the amount of the Total
Revolving Loan Commitment to an aggregate amount less than an amount equal
to the Total Utilization of Revolving Loan Commitments then in effect.
(b) The Company shall give not less than three Business Days'
prior written notice to the Administrative Agent designating the date
(which shall be a Business Day) of such termination or reduction, the
amount of any partial reduction and, promptly after receipt of a notice of
such termination or partial reduction, the Administrative Agent shall
notify each Lender of the proposed termination or partial reduction. Such
termination or partial reduction of the Swing Line Commitment or the Total
Revolving Loan Commitment shall be effective on the date specified in the
notice delivered by the Company and shall reduce the Revolving Loan
Commitment of each Lender having an Adjusted Revolving Loan Percentage
greater than zero proportionately to its Adjusted Revolving Loan Percentage
and the Swing Line Commitment of Bankers by 100% of such reduction. Any
such partial reduction of the Swing Line Commitment or the Total Revolving
Loan Commitment shall be in an aggregate minimum amount of $5,000,000, and
integral multiples of $1,000,000 in excess of that amount.
2.7.9. Mandatory Reductions of Revolving Loan Commitments and
Swing Line Commitment. In the event and on each occasion that a prepayment
of Term Loans would be required under subsection 2.7.2 in a principal
amount greater than the principal amount of Term Loans then outstanding,
then the Total Revolving Loan Commitment shall be automatically and
permanently reduced at the time and in the amount of the difference between
(A) the prepayment that would have been required and (B) the principal
amount of Term Loans then outstanding; provided that the Total Revolving
Loan Commitment shall not be reduced at any time to an amount less than the
Total Utilization of Revolving Loan Commitments.
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Section 2.8 Use of Proceeds.
2.8.1. Term Loans. The proceeds of the portion of the
Tranche A Term Loans made by the Lenders to the Company on the Closing Date
(in the amount of the Closing Date Tranche A Funding Amount), together with
the entire amount of the proceeds of the Tranche B Term Loans made by the
Lenders to the Company on the Closing Date and the net cash proceeds of the
Common Stock Offering, shall be applied by the Company on the Closing Date
to (A) the payment of Transaction Costs, (B) the repayment in full of the
principal of all loans outstanding and all other amounts due, if any, under
the Existing Credit Facilities and (C) after the payment or repayment in
full of all amounts referred to in clause (B) above, the prepayment in
full, in accordance with their terms, of 100% of the outstanding Senior
Secured Notes, including, without limitation, the payment of accrued and
unpaid interest thereon, and all other amounts, if any, then due and
payable with respect thereto. The proceeds of the remaining portion of the
Tranche A Term Loans (in the amount equal to the Deferred Tranche A Funding
Amount) made by the Lenders to the Company on the Deferred Funding Date
shall be applied, together with the proceeds of the loans made pursuant to
the 1995 A/R Bridge, as soon as reasonably practicable, to (A) redeem in
full, in accordance with its terms, 100% of the outstanding principal
amount of the Existing Subordinated Debt and pay accrued interest and
premiums, if any, with respect thereto and (B) pay the fees and expenses
payable in connection with the redemption pursuant to clause (A) of this
sentence above.
2.8.2. Revolving Loans. The proceeds of the Revolving Loans
from and after the Closing Date may be applied by the Company (A) to
refinance Indebtedness constituting Permitted Expansion Construction
Financing, (B) for the purposes applicable to the proceeds of Term Loans,
as specified in the second sentence of subsection 2.8.1, (C) for the
purpose specified in clause (B) of subsection 6.16.8, (D) for working
capital and (E) for other general corporate purposes (including, without
limitation, all purposes which would cause a decrease in the Discretionary
Excess Equity Proceeds Balance or the Discretionary Excess Cash Flow
Balance).
2.8.3. Swing Line Loans. The proceeds of up to an aggregate
of $25,000,000 principal amount at any time outstanding of Swing Line Loans
made by Bankers to the Company from and after the Closing Date may be
applied by the Company for working capital and other general corporate
purposes.
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2.8.4. Margin Regulations. No portion of the proceeds of any
borrowing under this Agreement shall be used by the Company in any manner
which might cause the borrowing or the application of such proceeds to
violate Regulation G, Regulation U, Regulation T, or Regulation X of the
Board of Governors of the Federal Reserve System or any other regulation of
the Board or to violate the Exchange Act, in each case as in effect on the
date or dates of such borrowing and such use of proceeds.
Section 2.9 Special Provisions Governing Adjusted LIBOR
Loans. Notwithstanding other provisions of this Agreement, the following
provisions shall govern with respect to Adjusted LIBOR Loans as to the
matters covered:
2.9.1. Determination of Interest Rate. As soon as practicable
after 11:00 a.m. (New York time) on an Interest Rate Determination Date,
the Administrative Agent shall determine (which determination shall, absent
manifest error, be final, conclusive and binding upon all parties) the
interest rate which shall apply to the Adjusted LIBOR Loans for which an
interest rate is then being determined for the applicable Interest Period
and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to the Company and to each Lender having an interest
in or bound hereunder to make any of such Adjusted LIBOR Loans.
2.9.2. Increased Costs. Without duplication of payments under
subsection 2.9.7, if, by reason of (A) after the date of this Agreement,
the introduction of or any change in or in the interpretation of any law or
regulation, or (B) the compliance with any guideline or request after the
date of this Agreement from any central bank or other governmental
authority or quasi-governmental authority exercising control over banks or
financial institutions generally (whether or not having the force of law):
(i) any Lender (or its applicable lending office) shall be
subject to any tax, duty or other charge with respect to its Adjusted
LIBOR Loans or its obligation to make Adjusted LIBOR Loans, or shall
change the basis of taxation of payments to any Lender of the
principal of or interest on its Adjusted LIBOR Loans or its
obligation to make Adjusted LIBOR Loans (except for changes in the
rate of tax on the overall net income of such Lender or its
applicable lending office imposed by the jurisdiction in which such
Lender's principal executive office or applicable lending office is
located); or
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(ii) any reserve (including, without limitation, any imposed
by the Board of Governors of the Federal Reserve System to the extent
not already contemplated in the definition of Adjusted LIBOR Rate),
special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender's
applicable lending office shall be imposed or deemed applicable or
any other condition affecting its Adjusted LIBOR Loans or its
obligation to make Adjusted LIBOR Loans shall be imposed on any
Lender or its applicable lending office or the London interbank
market;
and as a result thereof there shall be any increase in the cost to such
Lender of agreeing to make or making, funding or maintaining Adjusted LIBOR
Loans (except to the extent already included in the determination of the
applicable Adjusted LIBOR), or there shall be a reduction in the amount
received or receivable by such Lender or its applicable lending office,
then the Company shall from time to time, upon written notice from and
demand by such Lender (with a copy of such notice and demand to the
Administrative Agent), pay to the Administrative Agent for the account of
such Lender, within five Business Days after the date specified in such
notice and demand, additional amounts sufficient to indemnify such Lender
against such increased cost or such reduction; provided that the Company
shall have no obligation to any Lender under this subsection 2.9.2 if
(A) such Lender shall not have delivered such written notice to the Company
within six months following the later of (1) the date of the occurrence of
the event which forms the basis for such notice and (2) the date such
Lender shall have become aware of such event or (B) the obligation to pay
increased costs or indemnify against such reduction on account of taxes,
duties or other charges would not have arisen but for (1) the failure of
such Lender to provide any applicable forms or other documents requested by
the Company which such Lender was otherwise required to provide under this
Agreement, that would establish the entitlement of such Lender to a reduced
rate of, or an exemption from, any tax, levy, charge, withholding or
similar item with respect to its Adjusted LIBOR Loans or (2) any
representation or warranty made by such Lender in connection with its
Adjusted Libor Loans regarding an exemption (partial or complete) from
taxes, levies, charges or withholdings proving to have been incorrect,
false or misleading in any material respect when so made. A certificate as
to the amount of such increased cost, submitted to the Company and the
Administrative Agent by such Lender, shall, except for manifest error, be
final, conclusive and binding for all purposes.
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2.9.3. Required Termination and Prepayment. In the event that
on any date any Lender shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties)
that the making or continuation of its Adjusted LIBOR Loans has become
unlawful by compliance by such Lender in good faith with any law,
governmental rule, regulation or order (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful),
then, and in any such event, such Lender shall be an Affected Lender and it
shall promptly give notice (by telephone confirmed in writing) to the
Company and the Administrative Agent (which notice the Administrative Agent
shall promptly transmit to each Lender) of that determination. Subject to
the prior withdrawal of a Notice of Borrowing or a Notice of Conversion/
Continuation or prepayment of the Adjusted LIBOR Loans of an Affected
Lender as contemplated by subsection 2.9.5, the obligation of an Affected
Lender to make or maintain its Adjusted LIBOR Loans during any such period
shall be terminated at the earlier of the termination of the Interest
Period then in effect or when required by law and the Company shall no
later than the termination of the Interest Period in effect at the time any
such determination pursuant to this subsection 2.9.3 is made or earlier,
when required by law, repay its Adjusted LIBOR Loans of such Affected
Lender, together with all interest accrued thereon and such Adjusted LIBOR
Loans shall be reborrowed as an ABR Loan.
2.9.4. Options of Company. Without prejudice to the Company's
rights set forth in Section 2.11 and without limiting any accrued
obligations of the Company under subsection 2.9.2, if the Company is
required to pay an Affected Lender additional moneys under
subsection 2.9.2, the Company may, in lieu of the prepayment of Loans of an
Affected Lender as required under subsection 2.9.3, exercise any one of the
following options:
(i) Upon written notice to the Administrative Agent and each
Lender, the Company may terminate the obligations of the Lenders to
make or maintain Loans as, and to convert Loans into, Adjusted LIBOR
Loans and in such event, the Company shall, prior to the time any
payment pursuant to subsection 2.9.3 is required to be made or, if
the provisions of subsection 2.9.2 are applicable, at the end of the
then current Interest Period, convert all of the Adjusted LIBOR Loans
into ABR Loans in the manner contemplated by subsection 2.5.4 but
without satisfying the advance notice requirements therein; or
(ii) The Company may give notice (by telephone confirmed in
writing) to the Affected Lender and the
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Administrative Agent (who shall promptly give similar notice to each
Lender) and require the Affected Lender to make the Adjusted LIBOR
Loan then being requested as an ABR Loan or to continue to maintain
its outstanding ABR Loan then the subject of a Notice of Conversion/
Continuation as an ABR Loan or to convert its Adjusted LIBOR Loans
then outstanding that are so affected into ABR Loans at the end of
the then current Interest Period (or at such earlier time as
prepayment is otherwise required to be made pursuant to subsection
2.9.3) in the manner contemplated by subsection 2.5.4 but without
satisfying the advance notice requirements therein, such notice to
pertain only to the Loans of the Affected Lender and to have no
effect on the obligations of the other Lenders to make or maintain
Adjusted LIBOR Loans or to convert ABR Loans into Adjusted LIBOR
Loans.
2.9.5. Compensation. The Company shall compensate each
Lender, upon written request by such Lender (which request shall set forth
in reasonable detail the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation,
any interest paid by such Lender to lenders of funds borrowed by it to make
or carry its Adjusted LIBOR Loans and any loss sustained by such Lender in
connection with the re-employment of such funds), which such Lender may
sustain with respect to the Company's Adjusted LIBOR Loans: (A) if for any
reason (other than a default or error by such Lender) a Borrowing of any
Adjusted LIBOR Loan does not occur on a date specified therefor in a Notice
of Borrowing or a Notice of Conversion/Continuation or a telephonic request
for borrowing or conversion/continuation or a successive Interest Period
does not commence after notice therefor is given pursuant to subsection
2.5.4, (B) if any payment or prepayment of any of such Lender's Adjusted
LIBOR Loans occurs on a date which is not the last day of the Interest
Period applicable to that Loan, (C) if any prepayment of any such Lender's
Adjusted LIBOR Loans is not made on any date specified in a notice of
prepayment given by the Company or (D) as a consequence of any other
default by the Company to repay such Lender's Adjusted LIBOR Loans when
required by the terms of this Agreement; provided that the Company shall
have no obligation to any Lender under this subsection 2.9.5 if such Lender
shall not have delivered such written notice to the Company within six
months following the later of (1) the date of the occurrence of the event
which forms the basis for such notice and (2) the date such Lender shall
have become aware of such event.
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2.9.6. Quotation of LIBOR. Anything herein to the contrary
notwithstanding, if on any Interest Rate Determination Date LIBOR is not
available for any reason, the Administrative Agent shall give the Company
and each Lender prompt notice thereof and the Loans requested shall be made
as ABR Loans.
2.9.7. Taxes.
(a) No Withholding. Except as otherwise provided herein, any
and all payments by the Loan Parties under the Loan Documents shall be made
free and clear of and without deduction for any and all current or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on or measured by
the overall net income and franchise or similar taxes of the Administrative
Agent, the Fronting Banks or any Lender (or any Purchasing Lender or
Replacement Lender) imposed by the United States or any jurisdiction under
the laws of which the Administrative Agent, the Fronting Bank or any such
Lender (or Purchasing Lender or Replacement Lender) is organized or has its
principal office or lending office or any political subdivision in which
the applicable Administrative Agent, Fronting Bank, Lender, Replacement
Lender or Purchasing Lender is engaged in business or any taxing authority
thereof or therein (all such nonexcluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities, "Taxes"). If any Taxes
are required to be deducted from or in respect of any sum payable hereunder
to any Lender (or any Purchasing Lender or Replacement Lender), the
Administrative Agent or Fronting Bank, then, subject to paragraph (e) of
this subsection 2.9.7, (A) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this
subsection 2.9.7) such Lender (or Purchasing Lender or Replacement Lender),
the Administrative Agent or the Fronting Bank (as the case may be) shall
receive an amount equal to the sum it would have received had no such
deductions been made, (B) the Company shall make such deductions and (C)
the Company shall pay the full amount deducted to the relevant taxing
authority or other Governmental Authority in accordance with applicable
law; provided that no Purchasing Lender or Replacement Lender shall be
entitled to receive any greater payment under this paragraph (a) or
paragraph (c) of subsection 2.9.7 than such transferring Lender would have
been entitled to receive with respect to the rights assigned or otherwise
transferred unless in the case of a Purchasing Lender or a Replacement
Lender (1) such assignment or transfer shall have been made at a time when
the circumstances (including changes in applicable law) giving rise to such
greater payment
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did not exist or had not yet occurred or (2) such assignment or transfer
shall have been at the request of or approved by the Company.
(b) Documentary and Similar Taxes. Except as otherwise
provided in this clause (b), the Company agrees to pay any current or
future stamp, intangible or documentary taxes or any other excise or
property taxes, charges or similar levies (including, without limitation,
mortgage recording taxes and similar fees) that arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement, any Registered Transfer Supplement entered
into at the request of the Company or any other Loan Document, but
excluding any current or future stamp, intangible or documentary taxes or
any other excise or property taxes, charges or similar levies (including,
without limitation, mortgage recording taxes and similar fees) that arise
as a result of sales, assignments or other transfers of rights hereunder to
any Transferee pursuant to Section 9.1 (including participations) or to any
Replacement Lender pursuant to Section 9.22 and any Muskogee/Oklahoma
Mortgage Recording Tax (all such non-excluded taxes, charges and levies are
hereinafter referred to as, collectively, "Other Taxes").
(c) Indemnity. Except as otherwise provided in this
subsection 2.9.7, the Company will indemnify each Lender (or Purchasing
Lender or Replacement Lender), the Administrative Agent and each Fronting
Bank for the full amount of Taxes and Other Taxes (including any Taxes or
Other Taxes on amounts payable under this subsection 2.9.7) paid by such
Lender (or Purchasing Lender or Replacement Lender), the Administrative
Agent or a Fronting Bank, as the case may be, and any liability (including
penalties, interest and reasonable expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted by the relevant taxing authority or other Governmental
Authority. Such indemnification shall be made within 30 days after the
date any Lender (or Purchasing Lender or Replacement Lender), the
Administrative Agent or a Fronting Bank, as the case may be, makes written
demand therefor. With respect to any Taxes which are paid by the Company
in accordance with this subsection 2.9.7, each Lender (or Purchasing Lender
or Replacement Lender) or Administrative Agent or Fronting Bank receiving
the benefits of such payment of Taxes hereby agrees to pay the Company any
amount refunded to such party which it determines in its sole discretion to
be a refund in respect of such Taxes, provided that the Company, upon the
request of such Lender (or Purchasing Lender or Replacement Lender), the
Administrative Agent or such Fronting Bank, agrees to return
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such refund (plus penalties, interest or other charges) to such Lender (or
Purchasing Lender or Replacement Lender), the Administrative Agent or such
Fronting Bank in the event the relevant taxing authority or other
Governmental Authority determines that such Lender (or Purchasing Lender or
Replacement Lender), the Administrative Agent or such Fronting Bank was not
entitled to receive such refund.
(d) Receipts. Within 30 days after the date of any payment of
Taxes or Other Taxes withheld by the Company in respect of any payment to
any Lender (or Purchasing Lender or Replacement Lender), the Administrative
Agent or any Fronting Bank, the Company will furnish to the Administrative
Agent, at its address referred to in Section 9.9, the original or a
certified copy of a receipt (if available) evidencing payment thereof or
other evidence reasonably satisfactory to such Lender (or Purchasing Lender
or Replacement Lender), the Administrative Agent or such Fronting Bank, as
the case may be.
(e) Non-U.S. Lenders. Each of the Administrative Agent, any
Fronting Bank and any Lender (or Purchasing Lender or Replacement Lender)
that is not incorporated or otherwise formed under the laws of the United
States of America or a state thereof (a "Non-U.S. Person") agrees that it
shall, on or prior to the Closing Date, or, if later, the date it becomes a
Lender (or Purchasing Lender or Replacement Lender), the Administrative
Agent or a Fronting Bank hereunder, deliver to the Company and the
Administrative Agent (A) two duly completed copies of United States
Internal Revenue Service Forms 1001 or 4224, or (B) in the case of Lenders
(or Purchasing Lender or Replacement Lender) exempt from United States
Federal withholding tax pursuant to Section 871(h) or 881(c) of the
Internal Revenue Code, two United States Internal Revenue Service Forms W-8
and a certificate, substantially in the form of Exhibit XXVIII annexed
hereto (such certificate, a "Status Certificate"), representing that such
Non-U.S. Person is not a bank described in Section 881(c) of the Internal
Revenue Code, or any successor applicable form of any thereof, certifying
in each case that such Lender (or Purchasing Lender or Replacement Lender),
the Administrative Agent or the Fronting Bank is entitled to receive
payments hereunder payable to it without deduction or withholding of any
United States Federal income taxes, or subject to a reduced rate thereof.
Each of the Administrative Agent, the Fronting Bank or any Lender (or
Purchasing Lender or Replacement Lender) that delivers to the Company and
the Administrative Agent any such form or certification further undertakes
to deliver to the Company and the Administrative Agent further copies of
any such form or certification or other manner of certification reasonably
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satisfactory to the Company on or before the date that any such form or
certification expires or becomes obsolete or of the occurrence of any event
requiring a change in the most recent form or certification previously
delivered by it to the Company or the Administrative Agent, and such
extensions or renewals thereof as may reasonably be requested by the
Company or the Administrative Agent, certifying that the Administrative
Agent, Fronting Bank or such Lender (or Purchasing Lender or Replacement
Lender), as the case may be, is entitled to receive payments hereunder
without deduction or withholding of any United States Federal income taxes,
or subject to a reduced rate thereof. If at any time on or after the date
of this Agreement there has occurred, on or prior to the date on which any
delivery of any such form or certification would otherwise be required, any
change in law, rule, regulation, treaty, convention or directive, or any
change in the interpretation or application of any thereof, that renders
all such forms or certification previously delivered inapplicable or which
would prevent the Administrative Agent, Fronting Bank or such Lender (or
Purchasing Lender or Replacement Lender), as the case may be, from duly
completing and delivering any such form or certificate with respect to it,
the Administrative Agent, Fronting Bank or such Lender (or Purchasing
Lender or Replacement Lender), as the case may be, shall advise the Company
that under applicable law it shall be subject to withholding of United
States Federal income tax at the full statutory rate, a reduced rate of
withholding or without deduction or withholding. A Non-U.S. Person shall
be required to furnish any such form or certification only if it is
entitled to claim an exemption from or a reduced rate of withholding. Each
of the Administrative Agent, the Fronting Bank and any Lender that is a
U.S. or Non-U.S. Person and that is a party hereto as of the Closing Date
hereby represents and warrants that, as of the Closing Date, payments made
to it hereunder are exempt from withholding of United States Federal income
taxes (A) because the Administrative Agent, the Fronting Bank or such
Lender is organized or otherwise formed under the laws of the United States
or any state thereof; (B) because such payments are effectively connected
with a United States trade or business conducted by such Non-U.S. Person;
(C) pursuant to the terms of an income tax treaty between the United States
and such Non-U.S. Person's country of residence; or (D) because such
payments are portfolio interest exempt pursuant to Section 871(h) or 881(c)
of the Internal Revenue Code. Notwithstanding any provision of
paragraph (a), (b) or (c) of this subsection 2.9.7 to the contrary, the
Company shall not have any obligation to pay any Taxes or Other Taxes or to
indemnify any Lender (or Purchasing Lender or Replacement Lender), the
Administrative Agent or the Fronting Bank for such
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Taxes or Other Taxes pursuant to this subsection 2.9.7 to the extent that
such Taxes or Other Taxes result from (A) the failure of any Lender (or
Purchasing Lender or Replacement Lender), the Administrative Agent or the
Fronting Bank to comply with its obligations pursuant to this paragraph (e)
or (B) any representation or warranty made in this paragraph (e), or made
on any form or certification (or successor applicable form or
certification) delivered pursuant to this paragraph (e) by the Lender (or
Purchasing Lender or Replacement Lender), the Administrative Agent or the
Fronting Bank incurring such Taxes or Other Taxes proving to have been
incorrect, false or misleading in any material respect when so made or
deemed to be made. Unless the Company and the Administrative Agent have
received forms or other documents reasonably satisfactory to them
indicating that payments hereunder are not subject to United States
withholding tax, the Company or the Administrative Agent will withhold at
the applicable statutory or treaty rate.
2.9.8. Booking of Adjusted LIBOR Loans. Any Lender may make,
carry or transfer Adjusted LIBOR Loans at, to, or for the account of, any
of its branch offices or the office of an Affiliate of such Lender.
Notwithstanding the foregoing, each Lender shall, to the extent requested
to do so by the Company, use commercially reasonable efforts consistent
with its internal policies and customary business practices to exercise the
right set forth in the preceding sentence so as to avoid or minimize Taxes
or Other Taxes in respect of Adjusted LIBOR Loans to the extent the
exercise of such right would not otherwise adversely affect such Lender.
2.9.9. Assumptions Concerning Funding of Adjusted LIBOR Loans.
Calculation of all amounts payable to a Lender under this Section 2.9 shall
be made as though such Lender had actually funded its relevant Adjusted
LIBOR Loan through the purchase of a Eurodollar deposit bearing interest at
LIBOR applicable to such Adjusted LIBOR Loan in an amount equal to the
amount of the Adjusted LIBOR Loan and having a maturity comparable to the
relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of such Lender to a domestic office of such
Lender in the United States of America; provided that each Lender may fund
each of its Adjusted LIBOR Loans in any manner it sees fit and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 2.9.
2.9.10. Adjusted LIBOR Loans After an Event of Default.
Unless the Lenders shall otherwise agree, after the occurrence of and
during the continuance of a Potential Event
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of Default or Event of Default, the Company may not elect to have a Loan be
made or maintained as, or converted to, an Adjusted LIBOR Loan after the
expiration of any Interest Period then in effect for such Loan.
2.9.11. Affected Lender's Obligation to Mitigate. Each Lender
agrees that, as promptly as practicable after it becomes aware of the
occurrence of an event or the existence of a condition that would cause it
to be an Affected Lender under subsection 2.2.8, 2.9.2 or 2.9.3 or to be
entitled to payments pursuant to paragraph (a), (b) or (c) of subsection
2.9.7, it will so advise the Company and, if requested to do so by the
Company, it will, to the extent not inconsistent with such Lender's
internal policies and customary business practices, use commercially
reasonable efforts to make, fund or maintain the affected Adjusted LIBOR
Loans of such Lender through another lending office of such Lender if as a
result thereof the additional moneys which would otherwise be required to
be paid in respect of such Loans pursuant to subsection 2.9.2 or such
paragraphs of subsection 2.9.7 would be materially reduced or the
illegality or other adverse circumstances which would otherwise require
prepayment of such Loans pursuant to subsection 2.9.3 would cease to exist,
and if, as determined by such Lender, in its sole discretion, the making,
funding or maintaining of such Loans through such other lending office
would not otherwise adversely affect such Loans or such Lender. The
Company hereby agrees to pay all reasonable expenses incurred by any Lender
in utilizing another lending office of such Lender pursuant to this
subsection 2.9.11.
Section 2.10 Capital Requirements. If, while any of the
Commitments or Loans or Letters of Credit are outstanding, any Fronting
Bank or Lender determines that the adoption after the date of this
Agreement of any applicable law, rule or regulation regarding capital
adequacy or capital maintenance or any change therein, or any change after
the date of this Agreement in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by such
Fronting Bank or Lender, as the case may be, with any request or directive
after the date of this Agreement regarding capital adequacy or capital
maintenance (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on such Fronting Bank's or Lender's capital, as the case
may be, as a consequence of its Commitments, Letters of Credit, Loans or
participation in Letters of Credit to a level below that which such
Fronting Bank or Lender, as the case may be, could have achieved but for
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such adoption, change or compliance (taking into consideration such
Fronting Bank's or Lender's policies with respect to capital adequacy) by
an amount deemed by such Fronting Bank or Lender, as the case may be, to be
material, then from time to time, within 15 days after written demand by
such Fronting Bank or Lender, the Company shall pay to such Fronting Bank
or Lender such additional amount or amounts as will compensate it for such
reduction; provided that the Company shall have no obligation to any
Fronting Bank or Lender under this Section 2.10 if such Fronting Bank or
Lender shall not have delivered such written demand to the Company within
six months following the later of (1) the date of the occurrence of the
event which forms the basis for such demand and (2) the date such Lender
shall have become aware of such event.
Section 2.11 Replacement Rights of Company. In the event that
any Lender shall have delivered a notice or certificate or written demand
pursuant to subsection 2.2.8, subsection 2.9.2, subsection 2.9.3, or
Section 2.10, or one or more Loan Parties shall be required to make
additional payments to or on behalf of or to otherwise indemnify any
Lender, Replacement Lender or Purchasing Lender, for its own account or for
the account of any Participant, under paragraph (a), (b) or (c) of
subsection 2.9.7, so long as no Event of Default shall have occurred and be
continuing, the Company shall have the right, but not the obligation, at
its own expense (including with respect to the processing and recordation
fee referred to in subsection 9.1.3), upon notice to such Lender and the
Administrative Agent, to replace such Lender with an assignee (in
accordance with and subject to the restrictions contained in subsection
9.1.3) approved by the Administrative Agent (which approval shall not be
unreasonably withheld), and such Lender hereby agrees to transfer and
assign without recourse (in accordance with and subject to the restrictions
contained in subsection 9.1.3) all its interests, rights and obligations
under this Agreement to such assignee; provided that no Lender shall be
obligated to make any such assignment unless (A) such assignment shall not
conflict with any law or any rule, regulation or order of any Governmental
Authority, (B) such assignee shall pay to the affected Lender in
immediately available funds on the date of such assignment the principal of
the Loans made by such Lender hereunder and (C) the Company shall pay to
the Affected Lender in immediately available funds on the date of such
assignment the interest accrued to the date of payment on the Loans made by
such Lender hereunder and all other amounts accrued for such Lender's
account or owed to it hereunder. The provisions of this Section 2.11 shall
not be construed to limit or otherwise affect the rights of the
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Company in respect of Defaulting Lenders pursuant to the provisions of
Section 9.22.
Section 2.12 Swing Line Loans and Swing Line Notes.
2.12.1. Swing Line Loans. (a) Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of the Loan Parties set forth herein and in each of the other
Loan Documents, Bankers hereby agrees to lend to the Company from time to
time from and after the Closing Date through but excluding the Revolving
Credit Maturity Date its Swing Line Commitment (as defined below) to be
used for the purposes identified in subsection 2.8.3, notwithstanding the
fact that such Swing Line Loans, when aggregated with Bankers' outstanding
Revolving Loans, may exceed Bankers' Revolving Loan Commitment. Bankers'
agreement to make Swing Line Loans to the Company pursuant to this
subsection 2.12.1 is herein called the "Swing Line Commitment." The
initial amount of Bankers' Swing Line Commitment is $25,000,000. In no
event shall the aggregate principal amount of Swing Line Loans outstanding
at any time exceed the Swing Line Commitment. The Swing Line Commitment is
subject to reduction as set forth in subsections 2.7.8 and 2.7.9. The
Swing Line Commitment shall expire on and the Swing Line Loans shall be
paid in full no later than the Revolving Credit Maturity Date.
(b) Amounts borrowed by the Company under this subsection
2.12.1 may, subject to the limitations set forth in subsection 2.7.1, be
repaid and, subject to the other limitations set forth in this Agreement,
to but excluding the Revolving Credit Maturity Date, be reborrowed. All
Swing Line Loans shall be made as ABR Loans and shall not be entitled to be
converted into Adjusted LIBOR Loans. Swing Line Loans made on any Funding
Date shall be in an aggregate minimum amount of $100,000 and integral
multiples of that amount.
2.12.2. Notice of Borrowing. (a) Subject to subsection
2.12.1, whenever the Company desires to borrow under this Section 2.12, it
shall deliver to Bankers, a Notice of Borrowing (which may be telephonic
confirmed promptly in writing) no later than 1:00 p.m. (New York time) on
the proposed Funding Date. The Notice of Borrowing shall specify (A) the
proposed Funding Date (which shall be a Business Day), (B) the amount of
the proposed Swing Line Loan and (C) that such Swing Line Loan shall be an
ABR Loan.
(b) Neither the Administrative Agent nor Bankers shall incur
any liability to the Company in acting upon any
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telephonic notice referred to above which the Administrative Agent or
Bankers believes in good faith to have been given by a duly authorized
officer or other Person authorized to borrow on behalf of the Company or
for otherwise acting in good faith under this subsection 2.12.2 and, upon
funding of Swing Line Loans by Bankers in accordance with this Agreement
pursuant to any telephonic notice, the Company shall have borrowed Swing
Line Loans hereunder.
2.12.3. Disbursement of Funds. Promptly after receipt of a
Notice of Borrowing pursuant to subsection 2.12.2 (or telephonic notice in
lieu thereof), Bankers shall make the amount of its Swing Line Loan
available, in same day funds, at its office located at One Bankers Trust
Plaza, New York, New York not later than 2:00 p.m. (New York time) on the
Funding Date. Upon satisfaction or waiver (in accordance with Section 9.6)
of all applicable conditions precedent to the borrowing of such Swing Line
Loan, Bankers shall make the proceeds of such Loans available to the
Company on such Funding Date by causing an amount of same day funds equal
to the proceeds of such Swing Line Loan received by the Administrative
Agent to be credited to the account of the Company at such office of the
Administrative Agent.
2.12.4. Swing Line Note. The Company shall execute and
deliver to Bankers on the Funding Date a Swing Line Note substantially in
the form of Exhibit VII annexed hereto to evidence Bankers' Swing Line
Loans, in the principal amount of $25,000,000.
2.12.5. Purchase of Swing Line Loans. Bankers may by written
or telecopy notice given to each Lender not later than 10:00 a.m., New York
City time, on any Business Day require the Lenders to purchase all or any
portion of the Swing Line Loans outstanding. Such notice shall specify the
aggregate amount of Swing Line Loans to be purchased and such Lender's pro
rata percentage (based on such Lender's Adjusted Revolving Loan Percentage)
of such Swing Line Loan or Swing Line Loans. Each Lender having an
Adjusted Revolving Loan Percentage greater than zero shall pay to Bankers,
not later than 2:00 p.m., New York City time, on the date of such notice,
such Lender's pro rata percentage (determined as aforesaid) of the
principal amount of such Swing Line Loan or Swing Line Loans. The
purchase of such participations shall not affect the character of the
applicable Swing Line Loans as Swing Line Loans or the Company's rights or
obligations with respect thereto (including, without limitation, the
Company's prepayment rights with respect thereto). Each Lender agrees that
(A) its obligation to purchase any such participation and
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to pay the purchase price in respect thereof is absolute and unconditional
and shall not be affected by any event or circumstance whatsoever,
including, without limitation, the occurrence of any Potential Event of
Default or Event of Default hereunder or any Lender Default by such Lender
or any other Lender or the failure of any condition precedent set forth in
ARTICLE III to be satisfied, and (B) each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.
ARTICLE III
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The effectiveness of this Agreement and the obligations of the
Lenders to make Loans and to issue Letters of Credit hereunder are subject
to the satisfaction of all of the following conditions:
Section 3.1 Conditions to Loans Made on the Closing Date. The
obligations of the Lenders to make all Loans hereunder, in addition to the
conditions precedent specified in Section 3.2, are subject to prior or
concurrent satisfaction of the following conditions on the Closing Date:
3.1.1. The Company shall have delivered, or caused to be
delivered, to the Administrative Agent for the Lenders with sufficient
copies, where appropriate, for each Lender and CG&R:
(i) Certified copies of the Certificate of Incorporation of
the Company, together with a good standing certificate from the
Secretary of State of its jurisdiction of incorporation, each to be
dated a recent date prior to the Closing Date;
(ii) Copies of the By-laws of the Company, certified as of the
Closing Date by its corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of the Company
approving and authorizing such documents and actions as are
contemplated hereby in form and substance satisfactory to the
Administrative Agent and the Requisite Lenders, certified by its
corporate secretary or an assistant secretary as being in full force
and effect without modification or amendment;
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(iv) Signature and incumbency certificates of officers of the
Company executing instruments, documents or agreements required to be
executed in connection with this Agreement; and
(v) Executed copies of the Collateral Documents.
3.1.2. Each Subsidiary that as of the Closing Date is a
Material Subsidiary or a Guarantor Subsidiary shall have delivered, or
caused to be delivered, to the Administrative Agent for the Lenders with
sufficient copies, where appropriate, for each Lender and CG&R:
(i) Certified copies of the Certificate of Incorporation of
such Subsidiary, together with a certificate from the secretary or
assistant secretary of such Subsidiary, each to be dated a recent
date prior to the Closing Date;
(ii) Copies of the By-laws of such Subsidiary, certified as of
the Closing Date by the corporate secretary or an assistant secretary
of such Subsidiary;
(iii) Resolutions of the Board of Directors of such Subsidiary
approving and authorizing such documents and actions as are
contemplated hereby in form and substance satisfactory to the
Administrative Agent and the Requisite Lenders, certified by its
corporate secretary or an assistant secretary as being in full force
and effect without modification or amendment;
(iv) Signature and incumbency certificates of the officers of
each Subsidiary executing the Guarantor Subsidiary Guarantee, the
Collateral Documents to which such Guarantor Subsidiary is party, and
the other instruments, documents and agreements required to be
executed in connection therewith;
(v) Executed copies of the Guarantor Subsidiary Guarantee and
the Collateral Documents to which each Guarantor Subsidiary is party;
and
(vi) Executed copies of any other instruments, documents and
certificates required to be executed in connection with the execution
of the Guarantor Subsidiary Guarantee and the other Collateral
Documents to which such Subsidiary is party.
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3.1.3. The Company shall have taken or caused to be taken such
actions in such a manner so that the Administrative Agent, on behalf of the
Lenders, has, immediately following the Closing Date, a valid and perfected
Lien on the entire Collateral, which Lien shall be a first priority Lien
subject only to Prior Liens. Such actions shall include, without
limitation: (A) the delivery of the Pledge Agreements, (B) the delivery
pursuant to the applicable Pledge Agreement of UCC financing statements
(which shall name the Administrative Agent as secured party, in form and
substance satisfactory to the Administrative Agent) granting a security
interest in all Receivables, Inventory and Intellectual Property or
evidence satisfactory to the Administrative Agent of filing of UCC
financing statements in each office where filing is necessary or
appropriate and (C) appropriate documents, including the applicable filings
with the United States Patent and Trademark Office and United States
Copyright Office, with respect to the Intellectual Property.
3.1.4. The Company shall have caused to be delivered to the
Administrative Agent, on behalf of the Lenders, the following documents and
instruments:
(i) A Mortgage encumbering each Real Property, duly executed
and acknowledged and otherwise in form for recording in the recording
office of each political subdivision where such Real Property is
situated, together with such certificates, affidavits, questionnaires
or returns as shall be required in connection with the recording or
filing thereof and such UCC-1 financing statements and other similar
statements as are contemplated in respect of such Mortgage,
accompanied by the local counsel opinion set forth as Exhibit IX-B,
in the applicable form, which Mortgage and financing statements and
other instruments shall be effective to create a Lien on such Real
Property securing the Obligations subject to no Liens other than
Prior Liens;
(ii) With respect to each Real Property, such consents,
approvals, amendments, supplements, estoppels, tenant subordination
agreements or other instruments as shall reasonably be deemed
necessary by the Administrative Agent and the Requisite Lenders in
order for the owner or holder of the fee or leasehold interest to
grant or continue the Lien contemplated by the Mortgage with respect
to such Real Property;
(iii) With respect to each Mortgage, a policy of title
insurance (or a commitment, dated and recertified as of
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the Closing Date, to issue such a policy) insuring (or committing to
insure) the Lien of such Mortgage as a valid first mortgage Lien on
the Real Property described therein in an amount not less than the
fair market value thereof or, in lieu thereof with respect to any
group of Mortgages, a policy or policies (or commitment) providing
such insurance (or commitment or commitments to provide such
insurance) on a "tie-in" or "cluster" basis (i.e., policies or
commitments which insure against (or commit to insure against) losses
regardless of location or allocated value of the insured property up
to a stated maximum coverage amount) in an amount acceptable to the
Administrative Agent, each of which policy or policies (or
commitment) shall (A) be issued by the Title Company, (B) include
such reinsurance arrangements (with provisions for direct access) as
shall be reasonably acceptable to the Administrative Agent and the
Requisite Lenders, (C) have been supplemented by such endorsements,
or, where such endorsements are not available at commercially
reasonable premium costs, opinion letters of special counsel,
architects or other professionals, which counsel, architects or other
professionals shall be reasonably acceptable to the Administrative
Agent and the Requisite Lenders, as shall be requested by the
Administrative Agent and the Requisite Lenders (including, without
limitation, endorsements or opinion letters on matters relating to
usury, zoning, contiguity, revolving credit, last dollar, first loss,
doing business, and so-called comprehensive coverage over covenants
and restrictions) and (D) contain only such exceptions to title as
shall constitute Prior Liens or are otherwise agreed to by the
Administrative Agent and the Requisite Lenders prior to the Closing
Date with respect to such Real Property;
(iv) With respect to each Real Property located in Oklahoma
and Wisconsin, an ALTA Survey thereof, and, with respect to Real
Property located in Georgia, a perimeter survey thereof which
identifies to the reasonable satisfaction of the Administrative Agent
any and all encroachments and any and all utility and access
easements, and other encumbrances, crossing or otherwise intersecting
with the surveyed perimeter or affecting any of the improvements
comprising a portion of such Real Property;
(v) With respect to each Real Property, policies or
certificates of insurance as required by the Mortgage relating
thereto, which policies or certificates shall
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bear mortgagee endorsements of the character required by such
Mortgage;
(vi) With respect to each Real Property, UCC, judgment and tax
lien searches confirming that the personal property comprising a part
of such Real Property is subject to no Liens except Prior Liens and
the Liens agreed to by the Administrative Agent and the Requisite
Lenders prior to the Closing Date with respect to such Real Property;
(vii) With respect to each Real Property, such affidavits,
certificates and instruments of indemnification as shall reasonably
be required to induce the Title Company to issue the endorsements
contemplated in subparagraph (iii) above;
(viii) With respect to each Real Property, copies of all Leases
(as defined in the Mortgages), all of which Leases shall, to the
extent not previously approved in writing by the Administrative Agent
and the Requisite Lenders, be reasonably satisfactory to the
Administrative Agent and the Requisite Lenders;
(ix) With respect to each Real Property, confirmation that
there has been issued and is in effect a valid and proper certificate
of occupancy or local equivalent, if required by the local codes or
ordinances, for the use then being made of such Real Property and
that there is not outstanding any citation, violation or similar
notice indicating that such Real Property contains conditions which
are not in material compliance with local codes or ordinances
relating to building or fire safety or structural soundness (other
than any conditions which are being corrected in a timely manner and
other than any provisions of such codes or ordinances the validity or
applicability of which is being contested in good faith by
appropriate proceedings diligently prosecuted and as to which
enforcement proceedings have not been instituted or, if instituted,
have been stayed);
(x) A certificate of an officer of the Company certifying
that, as of the date of delivery of such certificate, there has not
occurred any material Taking or Destruction of any Real Property or,
to the knowledge of such officer, any material adverse change in
respect of any matter described in the Facilities Environmental
Report, dated October 26, 1994, prepared by the Company and
previously provided to the Lenders; and
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(xi) The IDA Estoppel.
3.1.5. The Company shall have caused to be delivered to each
Lender an Officer's Certificate (substantially in the form of Exhibit XI
annexed hereto) and an opinion satisfactory in all respects to the
Requisite Lenders from an independent valuation firm satisfactory to the
Requisite Lenders, in each case to the effect that, after giving effect to
the Recapitalization, the Company will not be insolvent, will not be
rendered insolvent by the indebtedness incurred in connection therewith,
will not be left with unreasonably small capital with which to engage in
its business and will not have incurred debts beyond its ability to pay
such debts as they mature.
3.1.6. The Administrative Agent and CG&R shall have received
copies of one or more favorable written opinions of Shearman & Sterling,
counsel for the Company, substantially in the form of Exhibit VIII annexed
hereto, dated as of the Closing Date, and pertaining to such other matters
as the Administrative Agent may reasonably request. The Administrative
Agent and the Lenders shall have received copies of a written opinion of
CG&R substantially in the form of Exhibit X.
3.1.7. The Administrative Agent and CG&R shall have received
copies of one or more favorable written opinions of (A) James W. Nellen,
II, Esq., Vice President and General Counsel for the Company substantially
in the form of Exhibit IX-A annexed hereto, and Liebmann, Conway,
Olejniczak & Jerry, Hunter, MacLean, Exley & Dunn, and Conner & Winters,
special local counsel for the Company in Wisconsin, Georgia and Oklahoma,
respectively, in the form of Exhibit IX-B annexed hereto, (B) opinions of
counsel in each jurisdiction where there exists any inventory or accounts
receivable to be subjected to the Lien of a Collateral Document which has a
value in excess of $20,000,000 with respect to the perfection of the
security interests contemplated by the Collateral Documents and certain
related matters, in each case in substantially the form of Exhibit IX-C
annexed hereto, and (C) an opinion of Michael, Best & Friedrich with
respect to the perfection of security interests in the Intellectual
Property contemplated by the Intellectual Property Pledge Agreement,
substantially in the form of Exhibit IX-D annexed hereto, all of which
opinions shall be dated as of the Closing Date, and cover such other
matters as the Administrative Agent may reasonably request.
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3.1.8. The Company shall have (A) consummated the Common Stock
Offering, in accordance with applicable law and on terms satisfactory in
all respects to the Requisite Lenders, and received not less than
$300,000,000 in aggregate gross cash proceeds from the Common Stock
Offering, (B) paid any and all amounts owing in respect of the Senior
Secured Notes and the Existing Credit Facilities and terminated all
commitments under the Existing Credit Facilities, (C) paid any and all
amounts owing on or prior to the Closing Date pursuant to the Commitment
Fee Letters and (D) paid all Transaction Costs in respect of the
Recapitalization that are due as of the Closing Date or made arrangements
to do so acceptable to the Requisite Lenders.
3.1.9. The Company shall have entered into the 1995 A/R
Bridge, on terms satisfactory in all respects to the Requisite Lenders.
3.1.10. There shall be no governmental or judicial action,
actual or threatened, that is likely to restrain, prevent or impose
burdensome conditions on the transactions contemplated hereby.
3.1.11. The Lenders shall have received satisfactory pro forma
consolidated balance sheets of the Company and its Subsidiaries after
giving effect to the Recapitalization and the Requisite Lenders shall be
reasonably satisfied that such balance sheets are not inconsistent in any
material respect with the Projections.
3.1.12. Except as has been disclosed in the Information
Package delivered to the Lenders prior to the Closing Date, there shall not
have occurred any material adverse change with respect to the condition
(financial or otherwise), operations, business, assets, liabilities or
prospects of the Company and its Subsidiaries, taken as a whole, since
September 30, 1994.
3.1.13. As of the Closing Date, (A) all information and data
(other than the Projections) concerning the Company and its Subsidiaries or
the transactions contemplated hereby that are contained in the Information
Package will not (to the best of the Company's knowledge with respect to
information made available by any of the Company's authorized
representatives), taken as a whole, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements contained therein, in light of the circumstances under which
such statements are made, not misleading and (B) all financial projections
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concerning the Company and its Subsidiaries (collectively, the
"Projections") that have been prepared by the Company or any of the
Company's authorized representatives and made available to the Lenders have
been prepared in good faith and are based upon reasonable assumptions (it
being understood that nothing contained herein shall constitute a
representation that the results forecasted in any Projections will in fact
be achieved).
The acceptance of the proceeds of the Loans and disbursements
made on the Closing Date shall constitute a representation and warranty to
the Administrative Agent and each of the Lenders that all of the applicable
conditions specified above exist as of that time, except for such
conditions that have been duly waived in writing hereunder by the
beneficiaries thereof.
Section 3.2 Conditions to Loans. The obligations of the
Lenders to make all Loans (other than any Tranche A Term Loans and any
Revolving Loans made on the Deferred Funding Date for the purposes
contemplated in subsection 2.8.1) are subject to the prior or concurrent
satisfaction or waiver of the following further conditions precedent:
3.2.1. The Administrative Agent shall have received, in
accordance with the provisions of subsection 2.1.2, 2.3.2 or 2.12.2, as the
case may be, before any Funding Date, an originally executed Notice of
Borrowing signed by the chief executive officer, the chief financial
officer or the treasurer of the Company requesting a Loan or by any
executive officer of the Company designated by any of the above-described
officers on behalf of the Company in writing delivered to the
Administrative Agent.
3.2.2. As of such Funding Date:
(i) The representations and warranties contained herein shall
be true, correct and complete in all material respects on and as of
such Funding Date to the same extent as though made on and as of that
date except that the representations and warranties need not be true
and correct to the extent that changes in the facts and conditions on
which such representations and warranties are based are required or
permitted under this Agreement and except to the extent such
representations and warranties specifically relate to an earlier
date, in which case such representations and warranties were true,
correct and complete in all material respects on and as of such
earlier date;
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(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such
Notice of Borrowing which would constitute (A) an Event of Default or
(B) a Potential Event of Default;
(iii) Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement provides shall be performed by it on or before such Funding
Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender
from making such Loan;
(v) The making of the Loans and disbursements requested on
such Funding Date shall not violate Regulation G, T, X or U of the
Federal Reserve Board; and
(vi) Except as has been disclosed in the Information Package,
there shall not be pending or, to the best knowledge of the Company,
threatened, any action, suit, proceeding, governmental investigation
or arbitration against or affecting any Loan Party or any of its
Subsidiaries, or any property of any Loan Party or any of its
Subsidiaries which has not been disclosed by the Company in writing
pursuant to Section 4.6 or subparagraph (ix) of Section 5.1 prior to
the making of the last preceding Loan (or in the case of the initial
Loans, prior to the execution of this Agreement), and there shall
have occurred no development not so disclosed in any such action,
suit, proceeding, governmental investigation or arbitration so
disclosed, which, in either event, in the opinion of the Requisite
Lenders, would reasonably be expected to materially and adversely
affect the business, operations, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries, in each
case, taken as a whole, or to impair the ability or obligation of any
Loan Party to perform or of the Lenders to enforce the Obligations.
No injunction or other restraining order shall have been issued and
no hearing to cause an injunction or other restraining order to be
issued shall be pending or noticed with respect to any action, suit
or proceeding seeking to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, this
Agreement or the making of Loans or the issuance of Letters of Credit
hereunder.
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3.2.3. On such Funding Date, the Administrative Agent shall
have received an Officers' Certificate from the Company, dated such Funding
Date and substantially in the form of Exhibit XXI, with such changes as are
acceptable to the Administrative Agent, to the effect that the conditions
set forth in subsection 3.2.2 are satisfied on and as of that Funding Date.
Section 3.3 Conditions to Tranche A Term Loans and Certain
Revolving Loans on the Deferred Funding Date. The obligations of the
Lenders to make Tranche A Term Loans and Revolving Loans on the Deferred
Funding Date for the purposes contemplated in subsection 2.8.1 are subject
only to prior or concurrent satisfaction of the following conditions (in
addition to satisfaction of the conditions set forth in Section 3.1 unless
such conditions have been waived in accordance with Section 9.6):
3.3.1. The Company shall have made all necessary arrangements,
given all necessary notices and taken all other necessary action to redeem
all the outstanding Existing Subordinated Debt and pay all other amounts
and Transaction Costs owing in connection with such redemption, in
accordance with the terms of the indentures governing the Existing
Subordinated Debt.
3.3.2. There shall not have occurred and be continuing any
Event of Default or Potential Default pursuant to Section 7.1, 7.6, 7.7,
7.9, 7.13 or 7.14.
3.3.3. The Company shall have (A) received not less than
$60,000,000 in aggregate gross cash proceeds from the 1995 A/R Bridge and
(B) paid all Transaction Costs in respect of the 1995 A/R Bridge that are
due as of the Deferred Funding Date or made arrangements to do so
acceptable to the Administrative Agent.
Section 3.4 Conditions to Initial Revolving Loans and Swing
Line Loans. The obligations of the Lenders to make the initial Revolving
Loans and Swing Line Loans are, in addition to the conditions precedent
specified in Sections 3.1 and 3.2, subject to prior or concurrent
satisfaction of the following conditions:
3.4.1. On or before the Funding Date of the initial Revolving
Loan, the Company shall deliver to each Lender having a Revolving Loan
Commitment (or to the Administrative Agent for such the Lenders) the
Revolving Notes executed by it in accordance with subsection 2.3.4
substantially in the form of
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Exhibit IV annexed hereto, drawn to the order of each such Lender and with
appropriate insertions.
3.4.2. On or before the Funding Date of the initial Swing Line
Loan, the Company shall deliver to Bankers the Swing Line Note executed by
it in accordance with subsection 2.12.4 substantially in the form of
Exhibit VII annexed hereto, drawn to the order of Bankers and with
appropriate insertions.
3.4.3. The conditions precedent specified in Section 3.1 shall
have been satisfied or waived in accordance with Section 9.6.
Section 3.5 Conditions to All Letters of Credit. The
obligation of each Fronting Bank to issue any Letter of Credit hereunder is
subject to the prior or concurrent satisfaction of all of the following
conditions:
3.5.1. On or before the date of issuance of the initial Letter
of Credit, each of the conditions set forth in Sections 3.1 and 3.4 shall
have been satisfied or waived in accordance with Section 9.6.
3.5.2. On or before the date of issuance of a Letter of
Credit, the Administrative Agent shall have received in accordance with the
provisions of subsection 2.2.2, a notice requesting the issuance of such
Letter of Credit, all other information specified in subsection 2.2.2, and
such other documents as the Fronting Bank may reasonably require in
connection with the issuance of such Letter of Credit.
3.5.3. On the date of issuance of such Letter of Credit, all
conditions precedent described in subsections 3.2.2 and 3.2.3 shall be
satisfied to the same extent as though the issuance of such Letter of
Credit were the making of a Loan and the date of issuance of such Letter of
Credit were a Funding Date; provided that the Officers' Certificate
required to be delivered pursuant to subsection 3.2.3 shall be delivered to
the Fronting Bank as well as to the Administrative Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and
to make the Loans and the disbursements pursuant
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to the Assignment Agreement and to issue Letters of Credit, the Company
represents and warrants to each Lender as follows:
Section 4.1 Organization, Powers, Good
Standing, Business and Subsidiaries.
4.1.1. Organization and Powers. Each of the Loan Parties is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation (which jurisdiction as of the
date of this Agreement is set forth on Schedule A annexed hereto). Each of
the Loan Parties has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into each Loan Document to which it is a
party and to carry out the transactions contemplated hereby and thereby,
and in the case of the Company, to issue the Notes and the Common Stock.
4.1.2. Good Standing. Each of the Loan Parties is in good
standing wherever necessary to carry on its present business and
operations, except in jurisdictions in which the failure to be in good
standing has not had and will not have a material adverse effect on the
conduct of the business of the Company and its Subsidiaries, taken as a
whole.
4.1.3. Conduct of Business. On the date of this Agreement,
the Company and its Subsidiaries are engaged only in the businesses
described in the Prospectus.
4.1.4. Subsidiaries. All of the Subsidiaries (other than
inactive Subsidiaries or Foreign Subsidiaries having no significant assets
or activities) of each of the Loan Parties, as of the date of this
Agreement, are identified on Schedule A annexed hereto. The capital stock
of each of the Subsidiaries identified on Schedule A is duly authorized,
validly issued, fully paid and nonassessable. The capital stock of each
Person identified on Schedule A is not Margin Stock. Each of the
Subsidiaries of each Loan Party is validly existing and in good standing
under the laws of its respective jurisdiction of incorporation and has full
corporate power and authority to own its assets and properties and to
operate its business as presently owned and conducted except where failure
to be in good standing or a lack of corporate power and authority has not
had and will not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole. Schedule A correctly sets forth as of the
date of this Agreement the ownership interest of each of the Loan Parties
in each of its Subsidiaries identified therein.
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Section 4.2 Authorization of Borrowing, etc.
4.2.1. Authorization of Borrowing. The execution, delivery
and performance of the Loan Documents and the issuance, delivery and
payment of the Notes and the reimbursement of Fronting Banks of payments
made under the Letters of Credit and the grant and continuation of the
security interests in the Collateral pursuant to the Collateral Documents
have been duly authorized by all necessary corporate action by each Loan
Party.
4.2.2. No Conflict. The execution, delivery and performance
by each Loan Party of each Loan Document to which it is respectively a
party and the issuance, delivery and performance of the Notes, the
consummation of the Common Stock Offering and the issuance of Common Stock
and the other transactions comprising the Recapitalization and the
reimbursement of Fronting Banks of payments made under Letters of Credit
and the grant and continuation of the security interests in the Collateral
pursuant to the Collateral Documents do not and will not (A) violate (1)
any provision of law applicable to any Loan Party, (2) the Certificates of
Incorporation or Bylaws of any Loan Party, or (3) any order, judgment or
decree of any court or other agency of government binding on any Loan
Party, (B) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation
of any Loan Party, (C) result in or require the creation or imposition of
any Lien upon any of its properties or assets (other than Liens in favor of
the Lenders) or (D) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of any Loan Party,
except for such violations, conflicts, breaches, Liens and defaults which
would not have, and such approvals the absence of which would not have, a
material adverse effect on the Company and its Subsidiaries, taken as a
whole.
4.2.3. Governmental Consents. The execution, delivery and
performance by each Loan Party of the Loan Documents to which it is a party
and application of the proceeds of the Loans, the issuance, delivery and
performance of the Notes, the reimbursement of Fronting Banks of payments
made under Letters of Credit, the consummation of the Common Stock
Offering, the issuance of Common Stock, and the grant and continuation of
the security interests in the Collateral pursuant to the Collateral
Documents do not and will not require any registration with, authorization,
order, consent or approval of, or notice to, or other action to, with or
by, any federal, state or other governmental authority or regulatory
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body except such registration, consent, approval or notice as has been
made, obtained or given and is in full force and effect and except for the
filings to perfect security interests granted pursuant to Collateral
Documents, and other filings, authorizations, notices, orders, consents and
approvals the absence of which would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole or on the legality,
validity or enforceability of any Loan Document.
4.2.4. Binding Obligation. This Agreement is, and the other
Loan Documents and the Notes, when executed and delivered will be, the
legally valid and binding obligations of the Loan Parties party thereto,
enforceable against the applicable Loan Parties in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability.
4.2.5. Valid Issuance of Common Stock. The Common Stock
issued in the Common Stock Offering has been duly and validly issued, fully
paid and nonassessable. Such Common Stock has been registered or qualified
under applicable federal and state securities laws.
Section 4.3 Financial Condition. The Company has delivered to
the Lenders true and complete copies of the Company's financial statements
for the fiscal year of the Company ending December 31, 1994. Except as set
forth in the Information Package, all such financial statements and all
financial statements set forth in the Prospectus fairly present the con-
solidated financial position of the Company and its Subsidiaries as at the
respective dates thereof and the consolidated results of operations and
cash flows of the Company and its Subsidiaries for each of the periods
covered thereby, subject to changes resulting from audit and normal year-
end adjustments. Neither the Company nor any of its Subsidiaries has as of
the Closing Date any material Contingent Obligation, material contingent
liability or material liability for taxes, long-term lease or unusual
forward or long-term commitment which is not reflected in the foregoing
financial statements, or the notes thereto.
Section 4.4 No Adverse Material Change; No Stock Payments.
Except as has been disclosed in the Information Package, since December 31,
1994, there has been no change in the business, operations, properties,
assets or condition (financial or otherwise) of the Company and its
Subsidiaries, which has been, either in any case or in the aggregate,
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materially adverse to the business, operations, property, assets or
conditions (financial or otherwise) of the Company and its Subsidiaries,
taken as a whole.
Section 4.5 Title to Properties; Liens. Each Loan Party and
each Subsidiary thereof has good, sufficient and legal title to and
beneficial ownership of all its respective properties and assets (other
than the Collateral) reflected in the most recent consolidated balance
sheet referred to in Section 4.3 or in the most recent financial statements
delivered pursuant to Section 5.1 of this Agreement, except for assets
acquired or disposed of in the ordinary course of business since the date
of such consolidated balance sheet and except for sales and other
dispositions permitted hereunder and except for such defects that in the
aggregate do not materially adversely affect the business, operations,
properties, assets or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole. Except for the Liens created by the
Collateral Documents and other Liens permitted by this Agreement, all such
properties and assets are free and clear of Liens. The Company or another
Loan Party has title to all the Collateral and title to each item of
Collateral is subject to no Liens other than Liens which would be permitted
pursuant to any Collateral Documents; provided that (A) no such Lien (other
than Prior Liens) shall be superior to the Lien of such applicable
Collateral Document and (B) except as otherwise provided in the form of
Mortgage annexed hereto as Exhibit XIX-A(i), no warranty is made by the
Company with respect to the Company's state of title to any Land within the
Landfill Area (as defined in such form of Mortgage). The Company holds all
material licenses, certificates of occupancy or operation and similar
material certificates and clearances of municipal and other authorities
necessary to own and operate its properties in the manner and for the
purposes currently operated by the Company. Each Mill is suitable for its
intended purposes and is served by such utilities as are necessary for the
proper and efficient operation thereof. Each of the Recognition
Instruments in existence as of the Closing Date is in full force and effect
and the Administrative Agent and (assuming the Collateral Trustee, Lenders
and the Administrative Agent shall have executed and delivered the
assumption instrument contemplated in Section 4.2.2 of each such
Recognition Instrument) the Collateral Trustee is entitled, in respect of
the Collateral Documents, to exercise all the rights and receive all the
benefits contemplated in each such Recognition Instrument to be exercisable
by or available to the "Collateral Trustee" thereunder.
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Section 4.6 Litigation; Adverse Facts. Except as has been
disclosed in the Information Package, there is no action, suit, proceeding,
governmental investigation of which the Company has knowledge or
arbitration (whether or not purportedly on behalf of any Loan Party or any
respective Subsidiary thereof) at law or in equity or before or by any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, pending or,
to the knowledge of the Company, threatened against or affecting any Loan
Party or any of its respective Subsidiaries or any property of any Loan
Party or any Subsidiary thereof which would reasonably be expected to
result in any material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole, or that would impair the ability of any
Loan Party to perform any of the Obligations.
Section 4.7 Payment of Taxes. Except to the extent permitted
by Section 5.3, all material tax returns and reports of each Loan Party and
each Subsidiary thereof required to be filed by any of them have been
filed, and all taxes, assessments, fees and other governmental charges upon
such Persons and upon their respective properties, assets, income and
franchises which are due and payable have been paid. The Company does not
know of any proposed tax assessment against any such Person that would be
material to the condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, which is not being actively contested in
good faith by such Person to the extent affected thereby in good faith and
by appropriate proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required in conformity with
GAAP shall have been made or provided therefor.
Section 4.8 Performance of Agreements. None of the Loan
Parties or any Subsidiary of a Loan Party is in default in the performance,
observance or fulfillment of any of the material obligations, covenants or
conditions contained in any Contractual Obligation of any such Person, and
no condition exists which, with the giving of notice or the lapse of time
or both, would constitute such a default, except where the consequences,
direct or indirect, of such default or defaults, if any, would not have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Company and its Subsidiaries,
taken as a whole. Schedules C and F annexed hereto correctly identify all
credit facilities of the Company and its Subsidiaries as of December 31,
1994 in excess of $1,000,000.
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Section 4.9 Governmental Regulation. None of the Loan Parties
or any Subsidiary of a Loan Party (A) is subject to regulation under the
Public Utility Holding Company Act of 1935 or to any federal or state
statute or regulation limiting its ability to incur Indebtedness for money
borrowed as contemplated hereby or by any other Loan Document or (B) is an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended.
Section 4.10 Securities Activities. None of the Loan Parties
or any Subsidiary of a Loan Party is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose
of purchasing or carrying any Margin Stock.
Section 4.11 Employee Benefit Plans.
4.11.1. Each of the Loan Parties and each of its ERISA
Affiliates is and each Pension Plan is in compliance in all material
respects with all applicable provisions of ERISA and the Internal Revenue
Code and the regulations and published interpretations thereunder with
respect to all Pension Plans and Multiemployer Plans.
4.11.2. Except for (A) the standard termination in accordance
with Section 4041(b) of ERISA of the Lily-Tulip, Inc. Salary Retirement
Plan and (B) the occurrence of the Reportable Event described in Regulation
29 C.F.R. Section 2615.23(a)(1)(ii) with respect to the Fort Howard Cup
Corporation Bargaining Unit Pension Plan upon the transfer of all the
issued and outstanding shares of capital stock of Sweetheart Cup Company,
Inc., no Termination Event has occurred or is reasonably expected to occur
with respect to any Pension Plan and no Termination Event that is described
in clause (E) of the definition of "Termination Event" has occurred.
4.11.3. The sum of the amount of unfunded benefit liabilities
under all Pension Plans (excluding each Pension Plan with an amount of
unfunded benefit liabilities of zero or less) is not more than $35,000,000.
4.11.4. No Loan Party or any of its ERISA Affiliates has
incurred or reasonably expects to incur any withdrawal liability under
Title IV of ERISA to any Multiemployer Plan individually or in the
aggregate in excess of $25,000,000.
4.11.5. No Loan Party or any of its ERISA Affiliates has
incurred any accumulated funding deficiency (whether or not
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waived) with respect to any Pension Plan individually or in the aggregate
in excess of $15,000,000.
4.11.6. No Loan Party or any of its ERISA Affiliates has or
reasonably expects to become subject to a lien in favor of any Pension Plan
under Section 302(f) of ERISA individually or in the aggregate in excess of
$15,000,000.
As used in this Section 4.11, the term "amount of unfunded
benefit liabilities" has the meaning specified in Section 4001(a)(18) of
ERISA, and the term "accumulated funding deficiency" has the meaning
specified in Section 302 of ERISA and Section 412 of the Internal Revenue
Code.
Section 4.12 Certain Fees. Other than as disclosed in the
Information Package by the Company, no broker's or finder's fee or
commission will be payable with respect to the offer, issue and sale, of
the Notes and the Company hereby indemnifies the Lenders against and agrees
that it will hold the Lenders harmless from any claim, demand or liability
for broker's or finder's fees alleged to have been incurred in connection
with any such offer, issue and sale or any of the other transactions
contemplated hereby and any expenses, including reasonable legal fees,
arising in connection with any such claim, demand or liability. Except as
so disclosed, no other similar fees or commissions will be payable by any
Loan Party or any of its Subsidiaries for any other services rendered to
the Company or any of its Subsidiaries ancillary to the transactions
contemplated hereby.
Section 4.13 Disclosure. Except as disclosed in the
Information Package, taken as a whole, the representations and warranties
of the Loan Parties contained in this Agreement and any other document,
certificate or written statement furnished to the Lenders by or on behalf
of any Loan Party for use in connection with the transactions contemplated
by this Agreement (including, without limitation, the Information Package
but excluding the Projections (as to which the Company makes the
representations and warranties set forth below)) do not contain any untrue
statement of a material fact or omit to state a material fact (known to any
such person in the case of any document not furnished by it) necessary in
order to make the statements contained herein or therein not misleading.
Any reaffirmation of the foregoing sentence is subject to any change in the
facts and conditions on which such representations and warranties are
based, which changes are required, contemplated or permitted under this
Agreement and subject to further disclosure contemplated by Section 5.1 and
subparagraph (vi) of subsection 3.2.2; provided that in all
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cases, taken as a whole, representations and warranties of any Loan Party
contained in this Agreement and any other document, certificate or written
statement furnished to the Lenders by or on behalf of any Loan Party for
use in connection with the transactions contemplated by this Agreement did
not contain at the time made any untrue statement of a material fact or
omit at the time made to state a material fact (known to any Loan Party in
the case of any document not furnished by it) necessary in order to make
the statement contained herein or therein not misleading. The Projections
are based upon good faith estimates and assumptions believed by the Loan
Parties to be reasonable at the time made, it being recognized by the
Lenders that projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by the
Projections may differ from the projected results. Except as disclosed in
the Information Package, there is no fact known to any Loan Party (other
than matters of a general economic nature) which materially and adversely
affects the business, operations, property, assets or condition (financial
or otherwise) of any Loan Party and its respective Subsidiaries, taken as a
whole, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Lenders for use in connection
with the transactions contemplated hereby.
Section 4.14 Patents, Trademarks, etc. Each of the Loan
Parties and its Subsidiaries owns, or is licensed to use, all patents,
trademarks, trade names, copyrights, technology, know-how and processes,
service marks and rights with respect to the foregoing used in or necessary
for the conduct of their respective businesses as currently conducted which
are material to the condition (financial or otherwise), business or
operations of the Company and its Subsidiaries, taken as a whole. To the
Company's knowledge, the use of such patents, trademarks, trade names,
copyrights, technology, know-how, processes and rights with respect to the
foregoing by the Loan Parties and their respective Subsidiaries does not
infringe on the rights of any Person, subject to such claims and
infringements as do not, in the aggregate, give rise to any liability on
the part of any Loan Party and its Subsidiaries which is material to the
Company and its Subsidiaries, taken as a whole. The consummation of the
transactions contemplated by this Agreement (including the transactions
contemplated by the Intellectual Property Pledge Agreement) does not
require any consent to be obtained with respect to such patents,
trademarks, trade names, copyrights, technology, know-how or processes, or
the license to use any of such patents, trademarks, trade names,
copyrights, technology, know-how, processes or rights with respect thereto,
which if not obtained
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will in any material manner or to any material extent impair the ownership
of (or the license to use, as the case may be) any of such patents,
trademarks, trade names, copyrights, technology, know-how or processes by
each Loan Party and its Subsidiaries to an extent which in the aggregate
would have a material adverse effect on the condition (financial or
otherwise), business or operations of the Company and its Subsidiaries,
taken as a whole. To the best knowledge of the Company, the rights of each
Loan Party and its Subsidiaries so to sell, franchise or license under such
brand names then being used may be transferred in connection with any sale
of assets or stock of the related business by any Loan Party or any of its
Subsidiaries with only such exceptions as are not material to the Company
and its Subsidiaries, taken as a whole.
Section 4.15 Environmental Protection.
4.15.1. Each of the Loan Parties and their respective Subsidi-
aries has either (A) obtained all material permits, licenses and other
authorizations which are required with respect to the operation of its
business under any Environmental Law or (B) submitted a timely application
in respect of such permits, licenses or other authorizations (the
submission of which, by itself or in conjunction with other appropriate
action by such Loan Party or its Subsidiaries, is sufficient under
applicable law to allow such Loan Party or any of its Subsidiaries to
continue its business or operations pending a determination with respect to
such application) and received at least oral confirmation from the relevant
government authority that such permits, licenses or other authorizations
will be issued or reserved, as appropriate under current operating
conditions.
4.15.2. Each of the Loan Parties and their respective
Subsidiaries is in material compliance with all terms and conditions of the
required material permits, licenses and authorizations, and is also in
material compliance with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules
and timetables contained in any applicable Environmental Laws.
4.15.3. Except as disclosed in the Information Package, there
is no material civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding, notice of
demand letter pending or, to the knowledge of the Company, threatened
against any Loan Party or any of their respective Subsidiaries under the
Environmental Laws.
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4.15.4. Except as disclosed in the Information Package, there
are no material past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans which may materially
interfere with or prevent material compliance with the Environmental Laws,
or which may give rise to any material common law or legal liability,
including, without limitation, liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
or similar state, local or foreign laws, or otherwise form the basis of any
material claim, action, demand, suit, proceeding, hearing or notice of
violation, study or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into
the environment, of any pollutant, contaminant, chemical or industrial,
toxic or hazardous substance or waste which would have a material adverse
effect on the business, operations, condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole.
Section 4.16 Security Interests. On and as of the Closing
Date, each of the Collateral Documents creates, as security for the
obligations purported to be secured thereby, a valid and enforceable
perfected security interest in and Lien on all of the Collateral, which
Lien shall be a first priority Lien subject only to Prior Liens. No
filings or recordings are required in order to perfect the Liens created
under the Collateral Documents except for filings or recordings which on or
before the date of execution and delivery of such Collateral Document will
have been made; provided that with respect to any Real Property, no failure
to record any Mortgage relating thereto shall be deemed a breach of this
Section if the Title Company has issued or committed to issue in respect of
such Real Property an endorsement or endorsements complying with the
provisions of subparagraph (iii) of subsection 3.1.4.
Section 4.17 IDA and Certain Documents. Each of the Georgia
Mill Lease, the Escrow Agreement and the Project Agreement is the valid and
binding obligation of IDA, enforceable against IDA in accordance with its
terms. Except as has been disclosed in writing to the Lenders, none of the
Georgia Mill Lease, the Escrow Agreement or the Project Agreement has been
modified, amended, supplemented or terminated. To the knowledge of the
Company (after due inquiry), IDA is not in default under (and no condition
exists which with notice or the lapse of time or both would constitute a
default by IDA under) any of the Georgia Mill Lease, the Escrow Agreement
or the Project Agreement. To the knowledge of
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the Company (after due inquiry), IDA's interest in each of the Georgia Mill
Lease, the Escrow Agreement and the Project Agreement has not been
assigned, pledged, mortgaged, hypothecated or otherwise encumbered or
transferred to any party. Neither the execution and delivery by the
Company of the Mortgages nor consummation of the transactions contemplated
therein will conflict or be inconsistent with or result in any breach of
any of the terms, covenants or provisions of or constitute a default under
the Georgia Mill Lease, the Escrow Agreement or the Project Agreement. As
of the time of the execution of the Escrow Agreement and the concurrent
deposit of the limited warranty deed and bill of sale therein described
from IDA to the Company with the Escrow Agent (as defined in the Escrow
Agreement), all equitable interest in the Project (as defined in the
Project Agreement) was irrevocably vested in the Company, and, as a result
thereof, IDA's estate in the Project is limited to legal title.
Section 4.18 Solvency.
4.18.1. Immediately after the consummation of the transactions
to occur on the Closing Date and immediately following the making of each
Loan made on the Closing Date and after giving effect to the application of
the proceeds of such Loans, (A) the fair value of the assets of the Company
and its Subsidiaries on a consolidated basis, at a fair valuation, will
exceed the debts and liabilities, subordinated, contingent or otherwise, of
the Company and its Subsidiaries on a consolidated basis, (B) the fair
saleable value of the property of the Company and its Subsidiaries on a
consolidated basis will be greater than the amount that will be required to
pay the probable liability of the Company and its Subsidiaries on a
consolidated basis on their debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become
absolute and matured, (C) the Company and its Subsidiaries on a
consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, and (D) the Company and its Subsidiaries on a
consolidated basis will not have unreasonably small capital with which to
conduct the businesses in which they are engaged as such businesses are now
conducted and are proposed to be conducted following the Closing Date.
4.18.2. The Company does not intend to, or to permit any of
its Subsidiaries to, and does not believe that it or any of its
Subsidiaries will, incur debts beyond the Company's or such Subsidiary's
ability to pay such debts as they mature, taking into account the timing of
and amounts of cash to be
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received by the Company or such Subsidiary and the timing of the amounts of
cash to be payable on or in respect of the Company's Indebtedness or the
Indebtedness of such Subsidiary.
ARTICLE V
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any of the
Commitments hereunder shall be in effect and until payment in full of all
of the Loans and Notes and the cancellation or expiration of all Letters of
Credit issued hereunder and the reimbursement in full of all amounts drawn
thereunder unless the Requisite Lenders shall otherwise agree in writing,
the Company shall perform all covenants in this ARTICLE V:
Section 5.1 Financial Statements and Other Reports. The
Company will maintain, and cause each of its Subsidiaries to maintain, a
system of accounting established and administered in accordance with sound
business practices to permit preparation of consolidated financial
statements in conformity with GAAP. The Company will deliver to the
Lenders:
(i) As soon as practicable and in any event within 30 days
after the end of each month ending after the Closing Date in each of
the Company's fiscal years, other than months which are the last
month in a fiscal quarter, (A) the consolidated balance sheet of the
Company and its consolidated Subsidiaries, as at the end of such
month, and (B) the related consolidated statements of earnings and
retained earnings and cash flow statements of the Company and its
consolidated Subsidiaries for such month and for the period from the
beginning of the then current fiscal year to the end of such month;
(ii) As soon as practicable and in any event within 45 days
after the end of each fiscal quarter ending during or after 1995,
other than quarters which are the last quarter in a fiscal year,
(A) the consolidated balance sheet of the Company and its
consolidated Subsidiaries, as at the end of such period and (B) the
related consolidated statements of earnings and retained earnings and
cash flow statements of the Company and its consolidated Subsidiaries
for such fiscal quarter and for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter, all
prepared in accordance
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with Rule 10-01 of Regulation S-X of the General Rules and
Regulations Under the Securities Act of 1933, or any successor rule
that sets forth the manner in which interim financial statements
shall be prepared, it being understood that the foregoing shall
include (1) a statement of profit and loss to the gross margin,
including specified cost components and (2) statements of capital
expenditures setting forth in comparative form, the corresponding
periods of the previous fiscal year, the corresponding figures from
the consolidated plan for the then current fiscal year delivered
pursuant to subparagraph (xii) of this Section 5.1, all in reasonable
detail and certified by the chief financial officer of the Company
that, in the case of such consolidated financial statements, they
fairly present the financial condition of the Company and its
consolidated Subsidiaries as at the dates indicated and the results
of their operations and cash flows for the periods indicated, subject
to changes resulting from audit and normal year-end adjustment and,
insofar as relates to divisions, based on the Company's normal
accounting procedures applied on a consistent basis;
(iii) As soon as practicable and in any event within 90 days
after the end of each fiscal year of the Company (commencing with
fiscal year 1995) (A) (1) the consolidated balance sheet of the
Company and its consolidated Subsidiaries as at the end of such year
and (2) the related consolidated statements of earnings and retained
earnings and cash flow statements of the Company and its consolidated
Subsidiaries for such fiscal year, it being understood that the
foregoing shall include (x) a statement of profit and loss to the
gross margin, including specified cost components and (y) statements
of capital expenditures setting forth in comparative form the
corresponding figures for the previous year, the corresponding
figures from the consolidated plan for the current fiscal year
delivered pursuant to subparagraph (xii) of this Section 5.1, all in
reasonable detail, and (B) in the case of such consolidated financial
statements, accompanied by a report thereon of Arthur Andersen & Co.
or such other independent certified public accountants of recognized
national standing selected by the Company which report shall be
unqualified as to going concern and scope of audit and shall state
that such consolidated financial statements present fairly the
financial position of the Company and its consolidated Subsidiaries
as at the dates indicated and the results of their operations and
cash flows for the periods indicated
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in conformity with GAAP applied on a basis consistent with prior
years (except for such changes as are concurred in by such
accountants) and that the examination by such accountants in
connection with such consolidated financial statements has been made
in accordance with generally accepted auditing standards;
(iv) Together with each delivery of financial statements of
the Company and its Subsidiaries pursuant to subparagraphs (ii) and
(iii) of this Section 5.1, (A) an Officers' Certificate of the
Company substantially in the form of Exhibit XXII annexed hereto
stating that the signers have reviewed or caused to be reviewed under
their supervision the terms of this Agreement, the Notes, the Letters
of Credit and the other Loan Documents and have made, or caused to be
made under their supervision, a review in reasonable detail of the
transactions and condition of the Company and its Subsidiaries during
the accounting period covered by such financial statements and that
such review has not disclosed the existence during or at the end of
such accounting period, and that the signers do not have knowledge of
the existence as at the date of the Officers' Certificate, of any
condition or event which constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or
exists, specifying the nature and period of existence thereof and
what action the Company has taken, is taking and proposes to take
with respect thereto and (B) a Compliance Certificate substantially
in the form of Exhibit VI annexed hereto demonstrating in reasonable
detail compliance (as determined in accordance with GAAP) during and
at the end of such accounting periods with the restrictions contained
in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.9, 6.10 and 6.14 and
a computation as of the last day of the applicable fiscal quarter of
the Company of Ratio 1, Ratio 2 and the Applicable Category in
respect of the period succeeding such quarter and the then unutilized
amounts of the Discretionary Excess Cash Flow Balance and the
Discretionary Equity Proceeds Balance and a computation of Excess
Cash Flow in respect of the most recently ended fiscal year and, in
addition, a written statement of the chief accounting officer or
chief financial officer of the Company describing in reasonable
detail the differences between the financial information contained in
such financial statements and the information contained in the
Compliance Certificate relating to the Company's compliance with
Sections 6.6, 6.9 and 6.14;
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(v) Together with each delivery of consolidated financial
statements of the Company and its consolidated Subsidiaries pursuant
to subparagraph (iii) of this Section 5.1, a written statement by the
independent public accountants giving the report thereon (A) stating
that their audit examination has included a review of the terms of
this Agreement and the other Loan Documents as they relate to
accounting matters, (B) stating whether, in connection with their
audit examination, any condition or event which constitutes an Event
of Default or Potential Event of Default has come to their attention,
and if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that
such accountants shall not be liable to any Lender by reason of any
failure to obtain knowledge of any such Event of Default or Potential
Event of Default that would not be disclosed in the ordinary course
of their audit examination and (C) stating that based on their audit
examination nothing has come to their attention which causes them to
believe that the information contained in either or both of the
certificates delivered therewith pursuant to subparagraph (iv) of
this Section 5.1 is not correct or that the matters set forth in the
Compliance Certificate delivered therewith pursuant to clause (B) of
such subparagraph (iv) of this Section 5.1 for the applicable fiscal
year are not stated in accordance with the terms of this Agreement;
(vi) Promptly upon receipt thereof, copies of all reports
submitted to the Company or any Subsidiary thereof by independent
public accountants in connection with each annual, interim or special
audit of the financial statements of the Company or any Subsidiary
thereof made by such accountants, including, without limitation, any
comment letter submitted by such accountants to management in
connection with their annual audit;
(vii) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or
made available generally by the Company or by any Subsidiary thereof
to its respective security holders (other than the Company or any
Subsidiary thereof), of all regular and periodic reports and all
registration statements and prospectuses, if any, filed by the
Company or any Subsidiary thereof with any securities exchange or
with the Securities and Exchange Commission and of all press releases
and other statements made available generally by the Company or any
such Subsidiary
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to the public concerning material developments in the business of the
Company or any Subsidiary thereof;
(viii) Promptly upon any officer of the Company obtaining
knowledge (A) of any condition or event which constitutes an Event of
Default or Potential Event of Default, or becoming aware that any
Lender has given any notice or taken any other action with respect to
a claimed Event of Default or Potential Event of Default under this
Agreement, (B) that any Person has given any notice to the Company or
any Subsidiary of the Company or taken any other action with respect
to a claimed default or event or condition of the type referred to in
Section 7.2, (C) of any condition or event which would be required to
be disclosed in a current report filed by the Company with the
Securities and Exchange Commission on Form 8-K (Items 1, 2 and 4 of
such Form as in effect on the date hereof) if the Company were
required to file such reports under the Exchange Act or (D) of a
material adverse change in the business, operations, properties,
assets or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, an Officers' Certificate specifying
the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person
and the nature of such claimed default, Event of Default, Potential
Event of Default, event or condition, and what action the Company has
taken, is taking and proposes to take with respect thereto;
(ix) Promptly upon any officer of the Company obtaining
knowledge of (A) the institution of, or non-frivolous threat of, any
action, suit, proceeding, governmental investigation or arbitration
against or affecting the Company or any of its Subsidiaries or any
property of the Company or any of its Subsidiaries not previously
disclosed by the Company to the Lenders, or (B) any material
development in any such action, suit, proceeding, governmental
investigation or arbitration, which, in either case, if adversely
determined, would materially and adversely affect the business,
operations, properties, assets or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole, the Company
shall promptly give notice thereof to the Lenders and provide such
other information as may be reasonably available to it (without
waiver of any applicable evidentiary privilege) to enable the Lenders
and CG&R to evaluate such matters;
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(x) Promptly upon any officer of the Company becoming aware
of the occurrence of any (A) Termination Event, (B) "prohibited
transaction", within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code, or (C) filing by the Company or
any of its ERISA Affiliates of an application for a waiver of an
accumulated funding deficiency, in connection with any Pension Plan
or any trust created thereunder, a written notice specifying the
nature thereof, what action the Company or its ERISA Affiliates have
taken, are taking or propose to take with respect thereto, and, when
known, any action taken or threatened by the Internal Revenue
Service, Department of Labor or the Pension Benefit Guaranty
Corporation with respect thereto;
(xi) With reasonable promptness copies of (A) all notices
received by the Company or any of its ERISA Affiliates of the Pension
Benefit Guaranty Corporation's intent to terminate any Pension Plan
or to have a trustee appointed to administer any Pension Plan, (B)
each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by the Company or any of its ERISA Affiliates with
the Internal Revenue Service with respect to each Pension Plan and
(C) all notices received by the Company or any of its ERISA
Affiliates from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant to Section 4202
of ERISA;
(xii) As soon as practicable and in any event by the sixtieth
day of each fiscal year of the Company, a consolidated plan, prepared
in accordance with the Company's normal accounting procedures applied
on a consistent basis, for such fiscal year of the Company,
including, without limitation, (A) a forecasted consolidated balance
sheet and a consolidated statement of changes in financial position
of the Company for such fiscal year, including a forecasted statement
of profit and loss to the gross margin and forecasted statements of
working capital and capital expenditures and (B) the amount of total
forecasted capital expenditures and forecasted consolidated selling,
general and administrative expenses for such fiscal year;
(xiii) As soon as practicable and in any event by the last day
of each fiscal year of the Company, a report in form and substance
reasonably satisfactory to the Administrative Agent and the Requisite
Lenders outlining all material insurance coverage maintained as of
the date
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of such report by the Company and its Subsidiaries and all material
insurance coverage planned to be maintained by such Persons in the
subsequent fiscal year;
(xiv) Together with each delivery of financial statements of
the Company and its Subsidiaries pursuant to subparagraph (ii) of
this Section 5.1, an Officers' Certificate of the Company
substantially in the form of Exhibit XXIII annexed hereto stating
that the signers made, or caused to be made under their supervision,
a review of the terms of, and the records relating to, all of the
Intercompany Indebtedness of the Company and its Subsidiaries and
stating the amount of all outstanding Intercompany Indebtedness,
including all Intercompany Indebtedness of all Subsidiaries to other
Subsidiaries and the Company and all Intercompany Indebtedness of all
Consolidated Subsidiaries to other Consolidated Subsidiaries and the
Company as of the date of such financial statements; and
(xv) With reasonable promptness, such other information and
data (other than Sensitive Information), with respect to the Company
or any of its Subsidiaries as from time to time may be reasonably
requested by the Administrative Agent or any Lender.
Notwithstanding anything to the contrary set forth above, the Company's
failure to comply with subparagraphs (viii) and (ix) of this Section 5.1
(other than clause (A) of subparagraph (viii) of this Section 5.1, except
to the extent that materiality is relevant to the existence or
non-existence of an Event of Default or a Potential Event of Default) based
on a good-faith determination by an officer of the Company that such
condition, event or development is not material shall not be the basis for
an Event of Default.
Section 5.2 Corporate Existence, etc. The Company will at
all times preserve and keep in full force and effect its corporate
existence and rights and franchises material to its business and those of
each of its Subsidiaries; provided that the corporate existence of any such
Subsidiary may be terminated if such termination is in the best interest of
its parent and would not have a material adverse effect on the ability of
the Loan Parties to perform their obligations under the Loan Documents; and
provided, further, that neither the Company nor any of its Subsidiaries
shall be required to preserve any right or franchise if the Board of
Directors of the Company or such Subsidiary shall have determined that the
preservation thereof is no longer desirable in the conduct of
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the business of the Company or such Subsidiary, as the case may be.
Section 5.3 Payment of Taxes and
Claims; Tax Consolidation.
5.3.1. The Company will, and will cause each of its
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon them or any of their properties or assets or in respect of any
of their franchises, business, income or property before any material
penalty accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have
become due and payable and which by law have or may become a material Lien
upon any of their material properties or assets, prior to the time when any
material penalty or fine shall be incurred with respect thereto; provided
that no such charge or claim need be paid if being contested in good faith
by appropriate proceedings promptly instituted and diligently conducted and
if such reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor.
5.3.2. The Company will not, and will not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income
tax return with any Person (other than any of their respective Subsidiaries
or such other Person as may be reasonably acceptable to the Requisite
Lenders).
Section 5.4 Maintenance of Properties; Insurance. The Company
will maintain or cause to be maintained in good repair, working order and
condition (ordinary wear and tear excepted) all material properties used in
the business of the Company and its Subsidiaries and from time to time will
make or cause to be made all appropriate repairs, renewals and replacements
thereof and will maintain and renew as necessary all material licenses,
permits and other material clearances necessary to use and occupy the
material properties of the Company and its Subsidiaries. The Company will
maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business and the
properties and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by corporations of established reputation
engaged in the same or similar businesses and similarly situated, of such
types and in such amounts as are customarily carried under similar
circumstances by such other corporations to the extent that such types and
such amounts of insurance are available at commercially reasonable rates.
The Company will maintain such
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insurance as may be required to comply with any Mortgage and each Pledge
Agreement, and shall otherwise comply with all provisions of the Collateral
Documents relating to insurance. The Company will furnish to each Lender,
upon reasonable request, information as to the insurance carried, and will
not cancel any such insurance without the consent of the Requisite Lenders.
Section 5.5 Inspection. The Company shall permit any
authorized representatives designated by any Lender to visit and inspect
any of the properties of the Company or any of its Subsidiaries, including
its and their financial and accounting records, and, subject to
Section 9.17, to make copies and take extracts therefrom, and to discuss
its and their affairs, finances and accounts with its and their officers
and independent public accountants, all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be
reasonably requested; provided that in light of (A) the highly proprietary
nature of the following information, (B) its historically demonstrated and
ongoing value and importance in the Company's operating performance and
(C) the substantial risk to the value of the Company's business if such
information were not maintained on a strictly confidential basis, in no
event shall the Company be required to disclose to any Person any
information with regard to the Company's dry form technology or de-inking
technology, any formulas, recipes, process flow diagrams, equipment
specifications, equipment purchase costs or manufacturing and process costs
related thereto (the "Sensitive Information").
Section 5.6 No Further Negative Pledges. Except as provided
in this Section 5.6, neither the Company nor any of its Subsidiaries shall
enter into any agreement prohibiting the creation or assumption of any Lien
upon its properties or assets, whether now owned or hereafter acquired.
The foregoing provisions of this Section 5.6 shall not be deemed violated
by the following: (A) any Contractual Obligation restricting Liens on
assets owned by a Foreign Subsidiary or on the shares of stock of any
Foreign Subsidiary (other than any such shares that constitute Collateral
and other than the shares of stock of Sterling International (U.K.) Limited
and Sterling International Limited) or on the shares of stock of SIL
Company (other than any such shares that constitute Collateral), (B) the
provisions of (1) Section 3.08 of the indenture governing the 9 1/4%
Unsecured Notes, as in effect on the Closing Date, (2) Section 3.08 of the
indenture governing the 8 1/4% Unsecured Notes, as in effect on the Closing
Date, or (3) any similar provision of any instrument comprising the
Refinancing Senior Unsecured Debt that is no less favorable to
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the Company and the Lenders than the provisions of each such Section 3.08
referred to above, (C) the provisions of Section 3.08 of the indenture
governing the 9% Senior Subordinated Notes, as in effect on the Closing
Date, or the provisions of Section 3.08 of the indenture governing the 10%
Subordinated Notes, as in effect on the Closing Date, (D) the provisions of
any Capital Leases that restrict the imposition of Liens on the assets
specifically demised pursuant thereto, (E) any agreement entered into by
the Receivables Subsidiary in connection with a Receivables Transaction
that prohibits or restricts the creation or assumption of any Liens upon
the assets or properties of such Receivables Subsidiary, (F) the provisions
of Section 5.6 of the Receivables Credit Agreement, as in effect on the
date hereof, or (G) the provisions of any other instrument governing
Indebtedness of the Company or any Domestic Subsidiary of the Company
permitted under Section 6.1, which Indebtedness is secured by a Lien
permitted under Section 6.2, to the extent such provisions operate to
restrict the ability of the Company or any of its Subsidiaries to grant
Liens on the specific assets securing such Indebtedness.
Section 5.7 Compliance with Laws, etc. The Company and its
Subsidiaries shall comply with the requirements of all applicable laws,
including Environmental Laws, rules, regulations and orders of any
Governmental Authority, noncompliance with which would materially adversely
affect the business, properties, assets, operations or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole.
Section 5.8 Interest Rate Agreements. On or prior to the 90th
day following the Closing Date, the Company will enter into or obtain, and
thereafter maintain in full force and effect, Interest Rate Agreements
(other than Leveraged Swaps) as shall result in effectively fixing, for a
period of not less than three years from the Closing Date, the interest
rate per annum to the Company of Adjusted LIBOR Loans having a principal
amount of not less than $500 million to an amount that does not exceed the
sum, from time to time, of 10% per annum plus the LIBOR Spread.
Section 5.9 Lender Meeting. The Company will participate in a
meeting of Lenders once during each fiscal year to be held at a location
and a time selected by the Company.
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Section 5.10 Security Interests.
5.10.1. The Company shall and shall cause each of the other
Loan Parties to perform any and all acts and execute any and all documents
(including, without limitation, the execution, amendment or supplementation
of any financing statement, continuation statement or other statement) for
filing under the provisions of the UCC and the rules and regulations
thereunder, or any other statute, rule or regulation of any applicable
federal, state or local jurisdiction, including, without limitation, any
filings in local real estate land record offices and the United States
Patent and Trademark Office, or the United States Copyright Office, which
are necessary or advisable, from time to time, in order to grant, continue
and maintain in favor of the Collateral Trustee for the benefit of the
Lenders a valid and perfected Lien on the Collateral, which Lien is a first
priority Lien subject only to Prior Liens.
5.10.2. The Company shall and shall cause each of the other
Loan Parties to undertake to deliver or cause to be delivered to the
Administrative Agent from time to time such other documentation, consents,
authorizations, approvals and orders in form and substance satisfactory to
the Collateral Trustee as the Collateral Trustee shall deem reasonably
necessary or advisable to perfect or maintain the Liens for the benefit of
the Lenders, including assets which are required to or do become Collateral
after the Closing Date.
Section 5.11 Future Guarantor Subsidiaries and
Additional Pledge Agreements; Certain
Future Acquisitions of Material Assets.
5.11.1. Promptly upon any Person or Subsidiary (in each case,
other than a Lower Tier Foreign Subsidiary that constitutes a Controlled
Foreign Corporation) becoming a direct or indirect Material Subsidiary of
the Company, such Person or Subsidiary shall execute a Guarantor Subsidiary
Guarantee guaranteeing all of the obligations owing to Lenders hereunder,
to the fullest extent permitted by applicable law, substantially in the
form of Exhibit XIII annexed hereto and shall, if it has not previously
done so, enter into a Receivable/Inventory Pledge Agreement, to the fullest
extent permitted by applicable law, substantially in the form of
Exhibit XIV-B annexed hereto, with such changes therein (whether before or
after the execution and delivery thereof) as are otherwise permitted by the
Requisite Lenders. In addition, any Subsidiary of the Company (other than
a Lower Tier Foreign Subsidiary that constitutes a Controlled Foreign
Corporation)
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that meets the above criteria but cannot execute any such Pledge Agreement
because of applicable law or whose Guarantor Subsidiary Guarantee or Pledge
Agreement is limited because of applicable law, shall promptly upon any
change of law reducing or removing such prohibition or limitation enter
into a Guarantor Subsidiary Guarantee or such Pledge Agreement or shall
promptly amend such instrument in a manner satisfactory to the
Administrative Agent to reduce or remove such prohibition or limitation
consistent with such law as so changed. In addition, the Company shall, if
such Subsidiary is directly owned by the Company, or shall cause its
relevant directly or indirectly owned Subsidiaries to, if such Subsidiary
is not directly owned by the Company, complete and provide to the
Administrative Agent a form of the Company Stock Pledge Agreement,
substantially in the form of Exhibit XV annexed hereto with respect to such
Subsidiary, which shall be effective to create, in favor of the Lenders and
the Administrative Agent, a perfected, first priority Lien on all the
capital stock or other equity interest in such Subsidiary.
5.11.2. Grant of Security Interest in Material Assets.
Promptly upon (A) the acquisition by the Company or any Domestic Subsidiary
of the Company of any Material Assets (as defined in clause (A) of the
definition of Material Asset) not acquired in connection with or as part of
an Expansion Project or (B) the capital stock or other equity interests in
any First Tier Foreign Subsidiary of the Company becoming Material Assets
pursuant to the provisions of clause (B) of the definition of Material
Asset:
(a) the Company and the Collateral Trustee will enter into
such amendments or supplements to the Collateral Documents, or
additional Collateral Documents, in each case in recordable form (if
involving real estate) and in substantially the forms attached hereto
as Exhibits XIV-A and XIV-B (to the extent the Material Assets
consist of personal property) and Exhibits XIX-A(i) and (ii) through
XIX-C(i) and (ii) (to the extent the Material Assets consist of real
property) with, in each case, such changes thereto as are
necessitated by local law or other applicable circumstances (the
"Additional Collateral Documents") and as are necessary in order to
grant to the Collateral Trustee for the benefit of the Lenders a
valid first priority Lien and security interest in such Material
Assets subject only to Permitted After Acquired Collateral Liens; and
(b) the Company will also deliver to the Collateral Trustee
the following:
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(i) to the extent the Material Assets consist of real
property, an ALTA Survey and a policy of title insurance
insuring that the Lien of the Additional Collateral Documents
constitutes a valid and perfected first priority Lien on such
real property in an aggregate amount equal to the fair value of
the real property, together with an Officers' Certificate
stating that any specific exceptions to such title insurance
are Permitted After Acquired Collateral Liens and containing,
or accompanied by, to the extent applicable, such endorsements
and other assurances of the type included in or accompanying
the title insurance policy required to be delivered to the
Collateral Trustee pursuant to subsection 3.1.4;
(ii) to the extent the Material Assets consist of
personal property, UCC financing statements and all such other
filings, notices or other instruments as shall be deemed
necessary (in the reasonable judgment of the Collateral
Trustee) to perfect such Lien of the Additional Collateral
Documents in respect of such Material Assets and, if such
Material Assets shall be of a character such that possession
thereof is required to perfect such Lien, such Material Assets
shall have been delivered to the Collateral Trustee;
(iii) evidence of payment or a closing statement
indicating payment of all filing fees, recording charges,
transfer taxes and other costs and expenses, including, without
limitation, reasonable legal fees and disbursements of counsel
for the Collateral Trustee (and any local counsel), that may be
incurred to validly and effectively subject such Material
Assets to the Lien of any applicable Additional Collateral
Document and perfect such Lien; and
(iv) an opinion of counsel to the Company (which shall
contain such limitations and exceptions as are customary for
such opinions) to the effect that the Collateral Trustee has a
valid and perfected Lien in respect of such Material Assets and
that any applicable Additional Collateral Document is
enforceable in accordance with its terms.
5.11.3. Limitations on Pledging of Shares and other Assets of
Certain Foreign Subsidiaries and Delivery of Certain Guarantees. (a)
Notwithstanding the provisions of subsections
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5.11.1 and 5.11.2 above, so long as Section 956 (or a successor provision)
of the Internal Revenue Code shall remain in effect and shall operate with
respect to the Company and its Domestic Subsidiaries to (1) cause
restrictive covenants coupled with a pledge of shares possessing 66 2/3% or
more of the voting power of all classes of capital stock or other equity
interests entitled to vote of any First Tier Foreign Subsidiary that
constitutes a Controlled Foreign Corporation (the stock or other equity
interests of which would otherwise be required to be pledged to the Lenders
pursuant to subsection 5.11.1 or 5.11.2) or (2) cause, in the case of a
First Tier Foreign Subsidiary that is a Material Subsidiary, the granting
by such First Tier Foreign Subsidiary of any security interest pursuant to
a Receivable/Inventory Pledge Agreement or of any rights pursuant to a
Guarantor Subsidiary Guarantee to trigger an inclusion in the income of the
Company or a Domestic Subsidiary pursuant to Section 951 (or a successor
provision) of the Internal Revenue Code, the Company and its Subsidiaries
shall not be required to cause such First Tier Foreign Subsidiary to
execute and deliver such Guarantor Subsidiary Guarantee or such
Receivable/Inventory Pledge Agreement and the Company and its Domestic
Subsidiaries shall only be required to pledge, or to cause to be pledged,
to the Lenders pursuant to subsection 5.11.1 or 5.11.2 shares representing
the lesser of (i) the percentage held by the Company and its Domestic
Subsidiaries and (ii) 65% of the voting power of all shares entitled to
vote of such First Tier Foreign Subsidiary.
(b) Upon any change in law or other applicable circumstances
the effect of which is to permit a pledge of shares in a Foreign Subsidiary
in addition to those contemplated to be pledged pursuant to paragraph (a)
of this subsection 5.11.3 or (if such Foreign Subsidiary shall be a
Material Subsidiary) the execution and delivery by such a Foreign
Subsidiary of a Guarantor Subsidiary Guarantee or the granting by such
Foreign Subsidiary of a security interest pursuant to a
Receivable/Inventory Pledge Agreement without triggering an inclusion in
the income of the Company or any Domestic Subsidiary of the Company
pursuant to Section 951 (or a successor provision) of the Internal Revenue
Code, the Company shall, and shall cause all applicable Subsidiaries of the
Company to, (A) execute and deliver all such instruments, share
certificates, financing statements, amendments or other documents as shall
be reasonably requested by the Collateral Trustee to pledge all such
additional shares to the Lenders as contemplated in subsections 5.11.1 and
5.11.2 and, (B) if such Foreign Subsidiary shall be a Material Subsidiary,
to cause such Foreign Subsidiary to execute and deliver to the
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Administrative Agent a Guarantor Subsidiary Guarantee and/or a
Receivables/Inventory Pledge Agreement.
5.11.4. At all times from and after the Closing Date, the
Company shall cause each First Tier Foreign Subsidiary of the Company
either (A) not to own any equity interests or other Investments in any
Lower Tier Foreign Subsidiary or (B) not to engage in any business or
activity other than the ownership of equity interests and/or other
Investments in one or more Lower Tier Foreign Subsidiaries and not to incur
any liabilities of any kind other than the granting of a guarantee and of a
pledge of any such equity interests in Lower Tier Foreign Subsidiaries in
favor of one or more financial institutions or other lending institutions
to support or secure Indebtedness incurred by such Lower Tier Foreign
Subsidiaries in compliance with the provisions of Section 6.1, each such
guarantee and pledge to be without recourse to such First Tier Foreign
Subsidiary, the Company or the Domestic Subsidiaries (except as permitted
by Section 6.4). The provisions of the preceding sentence of this
subsection 5.11.4 shall not apply to SIL Company or any direct or indirect
Wholly Owned Subsidiary of SIL Company.
5.11.5. The provisions of subsections 5.11.1, 5.11.2 and
5.11.3 shall not be applicable to the capital stock or other equity
securities in SIL Company, Fort Howard Holding or the capital stock or
other equity securities in Sterling International Limited, Sterling
International (U.K.) Limited or Sterling International Preference Limited
(collectively, the "UK Holding Companies") and their direct and indirect
Wholly Owned Subsidiaries and none of Fort Howard Holding, SIL Company, the
UK Holding Companies and their direct and indirect Wholly Owned
Subsidiaries shall be required to execute and deliver a Guarantor
Subsidiary Guarantee or a Receivable/Inventory Pledge Agreement or, except
as otherwise provided below with respect to equity securities of SIL
Company, to otherwise pledge their assets or to guarantee the Obligations
to the Lenders or the Administrative Agent hereunder. None of Fort Howard
Holding, SIL Company or the UK Holding Companies shall enter into any new
line of business or incur any new obligations in respect of its existing
business after the date hereof (other than in the ordinary course of its
existing business). The Company shall not create, or permit the creation
of, any new Subsidiaries to own or hold any Investment, direct or indirect,
in Fort Sterling. Notwithstanding the provisions of the first sentence of
this subsection 5.11.5, the Company shall at all times cause to be
maintained, pursuant to the Collateral Documents, in favor of the
Collateral Trustee for the benefit of the Lenders, a first
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priority security interest in the equity securities of SIL Company
representing 65% of the voting power of all equity securities entitled to
vote of SIL Company.
5.11.6. Notwithstanding the provisions of subsection 5.11.2,
the Company shall not be required to cause to be granted in favor of the
Collateral Trustee and the Lenders any Lien in respect of a Material Asset
if such Material Asset is encumbered by a Preexisting Assumed Lien the
granting instrument in respect of which prohibits the granting to the
Collateral Trustee and the Lenders of any Lien in respect of such Material
Asset; provided that, at the earlier of (A) such time as the Indebtedness
secured by such Pre-existing Assumed Lien shall be retired and (B) the
scheduled maturity date of such Indebtedness (exclusive of any extensions
of maturity effected in connection with the acquisition of such Material
Asset or thereafter), the Company shall promptly comply with the provisions
of subsection 5.11.2 in respect thereof to the extent such compliance would
not otherwise be in violation of subsection 5.11.3 or 5.11.5.
5.11.7. Notwithstanding the foregoing, the provisions of this
Section 5.11 shall not apply to any Receivables Subsidiary.
Section 5.12 Expansion Projects.
5.12.1. Mill Expansion Transactions. (a) Upon compliance
with the provisions of this subsection 5.12.1, the Company may enter into a
Permitted Expansion Financing with respect to the construction or
installation of Existing Mill Expansion Equipment at a Mill (whether or not
an Existing Mill) that has been encumbered by the Collateral Documents
(each, an "Existing Mill Expansion Transaction"). Not later than 10 days
after any Existing Mill Expansion Equipment is first placed into service by
the Company, the Company shall deliver to the Administrative Agent an
Officers' Certificate (i) identifying such Existing Mill Expansion
Equipment, (ii) stating the date such Existing Mill Expansion Equipment was
placed in service and (iii) stating whether the Company expects to enter
into a Permitted Expansion Financing within 12 months after the date such
Existing Mill Expansion Equipment was first placed in service. If the
Company fails to deliver such Officer's Certificate to the Administrative
Agent within the time period specified above or the Company states in such
Officer's Certificate that it does not intend to enter into a Permitted
Expansion Financing within 12 months of the date on which the applicable
Existing Mill Expansion Equipment was first placed in service, such
Existing Mill Expansion Equipment shall become
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subject to the Lien of the Collateral Documents and the Company shall
promptly deliver to the Administrative Agent such instruments as the
Administrative Agent or the Requisite Lenders may reasonably require to
confirm that the Lien of the applicable Mortgage or other Collateral
Document has attached thereto, including, without limitation, amendments to
the applicable Mortgage or other Collateral Documents. If at any time
within such 12-month period the Company determines to pursue an Unsecured
Expansion Financing, the Company shall so notify the Administrative Agent
in writing and the applicable Existing Mill Expansion Equipment shall
become subject to the Lien of the Collateral Documents to the extent it is
not already so subject and the Company shall deliver such instruments and
take such other actions as are contemplated in the immediately preceding
sentence. If the Company elects to enter into a Secured Expansion
Financing or a Sale/Leaseback Financing in respect of such Existing Mill
Expansion Equipment, the Company shall comply with the provisions of
paragraphs (b) and (c) of subsection 5.12.1, as applicable.
(b) If the Company elects to enter into a Permitted Expansion
Financing which constitutes a Sale/Leaseback Financing, the Company may
grant an Existing Mill Expansion Easement in respect of any Existing Mill
Expansion Equipment and enter into an Existing Mill Expansion Lease with
respect thereto upon the satisfaction of all the Existing Mill Expansion
Conditions and delivery to the Administrative Agent of an Officers'
Certificate confirming such satisfaction, which Officers' Certificate shall
be accompanied by the Existing Mill Expansion Documents, each fully
executed and acknowledged by the Company and all parties thereto other than
the Administrative Agent and in form for execution by the Administrative
Agent. The Administrative Agent shall execute, acknowledge (if applicable)
and deliver to the Company a Recognition Instrument and any other Existing
Mill Expansion Documents to which the Administrative Agent is, or is to be,
a party following receipt thereof by the Administrative Agent and the
satisfaction of the Existing Mill Expansion Conditions. The Administrative
Agent's obligation to deliver any Existing Mill Expansion Documents and the
Company's rights to enter into such Sale/Leaseback Financing shall be
subject to the following conditions (collectively, the "Existing Mill
Expansion Conditions"):
(i) no Event of Default or Potential Event of Default shall
have occurred and be continuing as at the date of delivery of such
Existing Mill Expansion Documents;
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(ii) following the delivery of the applicable Recognition
Instrument, the affected Mill (exclusive of the property subject to
any Existing Mill Expansion Easement) shall have sufficient utility
services and sufficient access to public roads, rail spurs, harbors,
canals, terminals and other transportation structures for the
continued use of such Mill for the production of tissue and paper
products in substantially the manner carried on by the Company prior
to such delivery;
(iii) the Existing Mill Expansion Documents shall not create
any Lien on property other than Existing Mill Expansion Equipment and
the Land described in any related Existing Mill Expansion Easement;
(iv) following commencement of construction relating to any
Existing Mill Expansion Equipment and after completion thereof, the
affected Mill shall comply in all material respects with applicable
Environmental Laws and laws, rules, regulations and ordinances
relating to zoning, land use and building and workplace safety;
(v) following the delivery of a Recognition Instrument and
the completion of construction or installation of any Existing Mill
Expansion Equipment, the value of the affected Mill (exclusive of the
value of the Existing Mill Expansion Equipment) shall not be less
than the value of such Mill prior to such delivery and construction
or installation;
(vi) the applicable Existing Mill Expansion Lease shall
provide to the Administrative Agent in substance all the material
rights contemplated by Schedule H annexed to this Agreement (it being
understood that in the event that the Recognition Instrument is
substantially in the form of (A) that certain Nondisturbance, Cure
Rights and Purchase Option Agreement, dated as of October 20, 1989,
in respect of any Existing Mill Expansion Transaction relating to
Land and Improvements located in Effingham County, Georgia (with such
changes as shall be reasonably satisfactory to the Administrative
Agent), or (B) that certain Cure Rights and Purchase Option Agreement
dated as of October 20, 1989, in respect of any Existing Mill
Expansion Transaction relating to Land and Improvements located in
Brown County, Wisconsin (with such changes as shall be reasonably
satisfactory to the Administrative Agent), the provisions of this
subparagraph (vi) shall be deemed satisfied);
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(vii) to the extent that the Title Company shall be authorized
by law to do so, the Title Company shall have committed to issue an
endorsement to the title insurance policy in favor of the
Administrative Agent relating to the affected Mill confirming that
the Lien of the applicable Mortgage has attached to the tenant's
interest under the applicable Existing Mill Expansion Lease and that
the priority of such Lien with respect to such interest is subject to
no Liens other than Prior Liens;
(viii) unless such Existing Mill Expansion Equipment is located
within existing Improvements, the Company shall have delivered to the
Administrative Agent an ALTA Survey showing the location of the
Existing Mill Expansion Equipment and/or, if applicable, the
perimeter of the land affected (or to be affected) by the Existing
Mill Expansion Easement relating to such Existing Mill Expansion
Equipment; and
(ix) such Sale/Leaseback Financing shall comply with the
provisions of Sections 6.10 and 6.14.
(c) If the Company elects to finance an Existing Mill
Expansion Transaction with any Secured Expansion Financing, the Company's
rights to enter into such transaction shall be subject to the following
conditions (collectively, the "Alternative Existing Mill Expansion
Conditions"):
(i) the conditions set forth under subparagraphs (i), (iv)
and (viii) of paragraph (b) of this subsection 5.12.1 shall be
satisfied;
(ii) the conditions set forth under subparagraphs (iii) and
(v) of paragraph (b) of this subsection 5.12.1 shall be satisfied
except that for purposes of satisfaction of such conditions, the term
"Expansion Intercreditor Agreement" shall be substituted for the term
"Recognition Instrument" as used therein;
(iii) the lender in respect of such Permitted Expansion
Financing shall have executed and delivered to the Administrative
Agent an intercreditor agreement in substantially the form of
Exhibit XXIV hereto (each, an "Expansion Intercreditor Agreement");
and
(iv) the asset or assets subject to the Lien of such lender in
connection with such financing shall be of such a nature that it or
they at all times will be capable of being removed from the Mill at
which such asset or assets
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is or are located without causing any material damage to or any
diminution (other than a de minimis diminution) in value of any
property comprising such Mill and without interfering with or
impairing, in any material manner or for any material period, the
operations of the Company at such Mill or causing such Mill or any
portion thereof to fail to comply with any Environmental Law or any
other law, rule, regulation or policy of any Governmental Authority.
(d) In connection with the construction or installation of any
Existing Mill Expansion Equipment or the execution of any Existing Mill
Expansion Documents, the Company shall (A) execute, deliver and record, and
obtain from any Expansion Lessor, if applicable, such instruments as the
Administrative Agent or the Requisite Lenders may reasonably require,
including, without limitation, amendments to the Collateral Documents and
this Agreement and (B) deliver to the Administrative Agent such evidence of
the satisfaction of the Existing Mill Expansion Conditions or Alternative
Existing Mill Expansion Conditions as the Administrative Agent or the
Requisite Lenders may reasonably require. Any and all construction and
construction activities performed in connection with any Existing Mill
Expansion Equipment shall be performed in compliance with the provisions of
any applicable Mortgage and shall conform in all material respects with the
provisions of applicable laws, rules, regulations and policies of all
Governmental Authorities having jurisdiction and no Existing Mill Expansion
Equipment may be operated or occupied unless, if applicable, a proper
certificate of occupancy (or local equivalent) and, if applicable, all
other required permits, licenses and clearances from all Governmental
Authorities having jurisdiction shall have first been obtained and be in
effect.
5.12.2. Greenfield Expansion Projects. (a) Upon compliance
with the provisions of this subsection 5.12.2, the Company may enter into a
Permitted Expansion Financing with respect to a Greenfield Expansion
Project. Not later than 10 days after any Mill constituting Greenfield
Expansion Assets is first placed into service by the Company, the Company
shall deliver to the Administrative Agent an Officer's Certificate (i)
identifying such Greenfield Expansion Assets, (ii) stating the date such
Greenfield Expansion Assets were first placed in service and (iii) stating
whether the Company expects to enter into a Permitted Expansion Financing
with respect to such Greenfield Expansion Assets within 12 months of the
date on which such Greenfield Expansion Assets were first placed in
service. If the Company fails to deliver such Officer's
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Certificate within the time period specified above or the Company states in
such Officer's Certificate that it does not intend to enter into such a
Permitted Expansion Financing within 12 months of the date on which such
Greenfield Expansion Assets were first placed in service, the Company shall
promptly grant to the Administrative Agent for the benefit of the Lenders a
first priority Lien (subject only to Permitted Encumbrances) on all assets
and property acquired by the Company in connection with such Greenfield
Expansion Assets by executing amendments or supplements to the Collateral
Documents or by executing Additional Collateral Documents of the character
contemplated to be delivered pursuant to paragraph (a) of subsection 5.11.2
in connection with the acquisition by the Company of Material Assets. If
at any time within such 12-month period the Company determines to pursue an
Unsecured Expansion Financing, the Company shall so notify the
Administrative Agent in writing and the applicable Greenfield Expansion
Assets shall become subject to the Lien of the Collateral Documents and the
Company shall deliver such instruments and take such other actions as are
contemplated in the immediately preceding sentence. In addition to such
amendments or Additional Collateral Documents, the Company shall deliver to
the Administrative Agent each of the documents and instruments enumerated
in subsection 5.11.2(b) with respect to the acquisition of Material Assets
except that for purposes of this requirement the term "Greenfield Expansion
Assets" shall be substituted for the term "Material Asset" as used therein.
The Company's rights to enter into any Permitted Expansion Financing in
respect of Greenfield Expansion Assets shall be subject to the following
conditions (collectively, the "Greenfield Expansion Financing Conditions"):
(i) no Event of Default or Potential Event of Default shall
have occurred and be continuing as of the date the Company proposes
to enter into such Permitted Expansion Financing;
(ii) no Lien shall be created in connection with such
Permitted Expansion Financing on any asset other than the Greenfield
Expansion Assets acquired or constructed in connection with such
Greenfield Expansion Project and the land or leasehold estate related
thereto; and
(iii) if such Permitted Expansion Financing is a Sale/Leaseback
Financing, such Sale/Leaseback Financing shall comply with the
provisions of Sections 6.10 and 6.14.
(b) Any and all construction and construction activities
performed in connection with any Greenfield
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Expansion Project shall conform in all material respects to the provisions
of applicable law and no Greenfield Expansion Assets may be operated or
occupied unless, if applicable, a proper certificate of occupancy or local
equivalent) and, if applicable, all other required permits, licenses and
clearance from governmental authorities shall have first been obtained.
Section 5.13 Certain Dispositions of Collateral. The Company
shall not, and shall not permit any of its Subsidiaries to, sell, lease,
assign, transfer or otherwise dispose of any interest in any Real Property
or any equipment or other tangible Collateral subject to a Mortgage or
transfer or contribute any such Collateral to a Foreign Subsidiary pursuant
to clause (xi) of Section 6.3 (each, a "Release Transaction") except in
compliance with this Section 5.13, Section 6.7 or the Collateral Documents.
Upon such compliance, the Company shall be entitled to receive from the
Administrative Agent an instrument (each, a "Release") releasing the Lien
of any applicable Collateral Document with respect to such Collateral. The
Company shall exercise its rights under this Section 5.13 by delivery to
the Administrative Agent of a notice (each, a "Release Notice"), which
shall refer to this subsection, describe with particularity the items of
property proposed to be covered by the Release and be accompanied by a
counterpart of the Release fully executed and acknowledged by all parties
thereto other than the Administrative Agent and in form for execution by
the Administrative Agent, and an Officers' Certificate certifying as to the
satisfaction of the Release Conditions. The Administrative Agent shall
execute, acknowledge (if applicable) and deliver to the Company such
counterpart within 10 days after receipt by the Administrative Agent of a
Release Notice and the satisfaction of the Release Conditions. The
Administrative Agent's obligation to deliver any Release and the Company's
rights to transfer any Collateral to a Foreign Subsidiary pursuant to the
provisions of subparagraph (xi) of Section 6.3 or to enter into any sale,
lease, assignment, transfer or other disposition of any Collateral pursuant
to the provisions of this Section shall be subject to the following
conditions (collectively, "Release Conditions"):
(i) no Event of Default or Potential Event of Default shall
have occurred and be continuing as of the proposed effective date of
such Release;
(ii) if such Release relates to only a portion of a discrete
parcel of Real Property or a portion of any property comprising a
Mill, following such sale, transfer or other disposition and release
of the Lien of any
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applicable Mortgage with respect thereto, the affected Real Property
shall have sufficient utility services and sufficient access to
public roads, rail spurs, harbors, canals, terminals and other
transportation structures for the continued use of such Real Property
for its use in substantially the manner carried on by the Company
prior to such Release;
(iii) if such Release relates to only a portion of a discrete
parcel of Real Property or a portion of any property comprising a
Mill, following such sale, transfer or other dispositions the
affected Real Property or Mill shall comply in all material respects
with applicable Environmental Laws and laws, rules, regulations and
ordinances relating to zoning, land use and building and workplace
safety;
(iv) if such Release relates to only a portion of a discrete
parcel of Real Property or a portion of any property comprising a
Mill, following such sale, transfer or other disposition, the value
of the affected Real Property or Mill (exclusive of the value of the
released Collateral) shall not be less than the value of such Real
Property or Mill prior to such Release and the transfer of such
Collateral shall not impair the utility or legality of the affected
Mill in any respect;
(v) if such Release relates to only a portion of a discrete
parcel of Real Property or a portion of any property comprising a
Mill, the Title Company shall have committed to issue an endorsement
to the title insurance policy in favor of the Administrative Agent
for the benefit of the Lenders relating to the affected Real Property
confirming that after such release the Lien of the applicable
Mortgage continues unimpaired as a first priority Lien upon the
remaining Mortgaged Property subject only to Prior Liens; and
(vi) if such Release relates to a Real Property, the Company
shall have delivered to the Administrative Agent for the benefit of
the Lenders an ALTA Survey showing the property proposed to be
released.
In connection with any Release Transaction, the Company shall (A) execute,
deliver, record and obtain such instruments as the Administrative Agent or
the Requisite Lenders may reasonably require, including, without
limitation, amendments to the Collateral Documents and this Agreement and
(B) deliver to the Administrative Agent such evidence of the satisfaction
of the
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Release Conditions as the Administrative Agent or the Requisite Lenders may
reasonably require. The Company shall reimburse the Administrative Agent
and Lenders upon demand for all costs or expenses incurred by each thereof
in connection with any action contemplated by this Section 5.13. The
provisions of this Section shall not be construed to prohibit the Company
from leasing non-essential, non-manufacturing facilities located on any
Real Property subject to a Mortgage so long as the rights granted to any
lessee under such lease do not materially interfere with the operations of
the Company at such Real Property as presently conducted and so long as the
granting of such lease would not constitute a breach of any provision of
such Mortgage.
Section 5.14 Georgia Mill Lease and Mortgage.
5.14.1. Upon any expiration, termination or surrender (whether
pursuant to actions taken by the Administrative Agent under the provisions
of Article 2 of the Georgia Mill Mortgage or otherwise) of the Georgia Mill
Lease, the Company shall take all actions and execute and file all
instruments necessary to cause to be approved by all authorities having
jurisdiction and recorded as soon as reasonably possible following any such
expiration, termination or surrender a plat of subdivision (in form
reasonably acceptable to Requisite Lenders) relating to the Land affected
by the Georgia Mill Mortgage, which plat shall reflect as a single
subdivided parcel ("Mill Lot") the Land underlying all Improvements
constituting the Effingham County Mill and all additional Land required to
meet local zoning and setback rules and laws and Environmental Laws as they
relate to such Improvements and the severance from the Mill Lot of all
other portions of the Land subject to the Georgia Mill Mortgage
(collectively, "Severed Parcel"), including, without limitation, those
portions used for sludge disposal and landfill purposes. Upon such
approval and recordation, the Company shall (A) execute, deliver and record
(and pay all expenses and taxes imposed in connection therewith and the
reasonable attorneys' fees of the Administrative Agent's attorneys) a
Mortgage ("Additional Georgia Mortgage") in the form of Exhibit XIX-C(ii)
on the Severed Parcel and (B) deliver to the Administrative Agent on behalf
of the Lenders a title insurance commitment or policy, in form and
substance reasonably satisfactory to Requisite Lenders, in respect of the
Additional Georgia Mortgage and such other assurances (including, without
limitation, counsel opinions) as shall be reasonably requested by the
Administrative Agent to confirm that the Additional Georgia Mortgage
creates in favor of the Administrative Agent on behalf of the Lenders a
valid and
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enforceable Lien on the Severed Parcel with a priority that is equal to the
priority of the Georgia Mill Mortgage on the Severed Parcel. Upon
compliance by the Company with its obligations set forth in the immediately
preceding sentence, the Administrative Agent shall execute and record at
the Company's expense (including, without limitation, payment by the
Company of all applicable taxes and recording fees and the reasonable
attorneys' fees of the Administrative Agent's attorneys) a partial release
of the Lien of the Georgia Mill Mortgage from all Land comprising the
Severed Parcel.
5.14.2. Notwithstanding the provisions of subsection 5.14.1,
following any such expiration, termination or surrender of the Georgia Mill
Lease and upon compliance by the Company with the provisions of Section
5.13 of this Agreement, the Administrative Agent shall deliver to the
Company, without consideration or prepayment of any kind (other than the
Administrative Agent's expenses incurred in connection therewith,
including, without limitation, attorneys' fees), a partial release from the
Lien of the Additional Georgia Mortgage of any parcel of Land encumbered
thereby which (A) does not comprise any portion of the landfill or sludge
operation serving or anticipated to serve the Effingham County Mill and
(B) is not necessary for the proper and efficient operation of the
Effingham County Mill or the landfill property related thereto or the
compliance with zoning and setback rules and laws and Environmental Laws as
they relate to any Improvements comprising such Effingham County Mill or to
such landfill.
5.14.3. Upon failure by the Company to perform any obligation
set forth in this Section 5.14, the Administrative Agent may perform such
obligation on behalf of the Company, and the Administrative Agent shall be
deemed to be the attorney-in-fact of the Company for such purpose.
5.14.4. The Company shall only be required to comply with the
provisions of this Section 5.14 as and to the extent it is permitted to do
so under the laws of the State of Georgia.
Section 5.15 Transfer of Permits and Licenses. In addition
to, and not in limitation of any right granted to the Administrative Agent
under any Mortgage or obligation of the Company thereunder, the Company
shall, and shall cause its Subsidiaries to, upon the foreclosure of any
Mill that benefits from a permit or license required for the operation
thereof, use its and their reasonable best efforts to cause the transfer
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of such permit or license to the entity then operating or which is to
operate such foreclosed Mill.
Section 5.16 Recapitalization. The Company shall take all
reasonable actions to cause to be consummated as soon as practicable
following the Closing Date the redemption and retirement of the Existing
Subordinated Debt and the other transactions and payments required to
complete the Recapitalization.
Section 5.17 Green Bay Sludge Boiler.
5.17.1. Upon the commencement of construction of the Green Bay
Sludge Boiler on land not then encumbered by a Mill Mortgage ("Sludge
Boiler Land"), the Company shall take all actions and execute and file all
instruments reasonably requested by the Administrative Agent to cause to be
granted to the Lenders a mortgage lien on the Sludge Boiler Land having a
priority and being on terms that are substantially similar to those
applicable to the Mill Mortgage which encumbers the Company's Green Bay
Wisconsin Mill. If any such mortgage is granted by the Company, the
Company shall deliver to the Administrative Agent on behalf of the Lenders
a title insurance commitment or policy, in form and substance reasonably
satisfactory to the Administrative Agent, in respect of such mortgage and
such other assurances (including, without limitation, counsel opinions) as
shall be reasonably requested by the Administrative Agent to confirm that
such mortgage creates in favor of the Administrative Agent on behalf of the
Lenders a valid and enforceable Lien on the Sludge Boiler Land having a
priority as set forth above.
5.17.2. Upon failure by the Company to perform any obligation
set forth in this Section 5.17, the Administrative Agent may perform such
obligation on behalf of the Company, and the Administrative Agent shall be
deemed to be the attorney-in-fact of the Company for such purpose.
ARTICLE VI
NEGATIVE COVENANTS
The Company covenants and agrees that, so long as any of the
Commitments shall be in effect and until payment in full of all of the
Loans and the Notes and the cancellation or expiration of all Letters of
Credit issued hereunder and the reimbursement in full of all amounts drawn
thereunder, unless
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the Requisite Lenders shall otherwise give prior written consent, the
Company will perform all covenants in this ARTICLE VI.
Section 6.1 Indebtedness. The Company and its Subsidiaries
shall not directly or indirectly create, incur, assume, guaranty, or
otherwise become or remain directly or indirectly liable with respect to,
any Indebtedness, except:
(i) The Company and its Subsidiaries may become and remain
liable with respect to the Obligations;
(ii) The Company may become and remain liable with respect to
the Indebtedness evidenced by the Refinancing Senior Unsecured Debt;
provided that the principal amount of such Indebtedness shall not
exceed, in the case of a refinancing of the 9-1/4% Unsecured Notes,
the 8-1/4% Unsecured Notes or any Refinancing Senior Unsecured Debt,
the then outstanding principal amount thereof; and provided, further,
that such Indebtedness (A) provides for interest at rates which do
not exceed the market rates for similar types of Indebtedness
prevailing at the time such Indebtedness is incurred, (B) has a final
scheduled maturity date that is subsequent to the date on which the
final Scheduled Term Loans Principal Payment in respect of Tranche B
Loans is due hereunder, (C) has an Average Life to Stated Maturity
greater than the remaining Average Life to Stated Maturity of the
Tranche B Term Loans on the date such Indebtedness is incurred, (D)
contains no representation and warranty, covenant or event of default
that (1) is in addition to the representations and warranties,
covenants and events of default that are currently set forth in the
instruments (as in effect on the Closing Date) evidencing or
governing the 9-1/4% Unsecured Notes or the 8-1/4% Unsecured Notes,
as the case may be, or (2) is more burdensome (to the Company) than
the most burdensome (to the Company) corresponding representation and
warranty, covenant or event of default set forth in the instruments
(as in effect on the Closing Date) evidencing or governing the 9-l/4%
Unsecured Notes or the 8-l/4% Unsecured Notes, as the case may be and
(E) if the Refinancing Senior Unsecured Debt is Subordinated
Indebtedness, contains subordination provisions no less favorable to
the Lenders than the least favorable subordination provisions (to the
Lenders) in the Existing Subordinated Debt;
(iii) The Company and its Subsidiaries may remain and may
become and remain liable with respect to Intercompany
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Indebtedness (including, without limitation, Intercompany
Indebtedness to a Receivables Subsidiary); provided that (A) all such
Intercompany Indebtedness (other than Intercompany Indebtedness to a
Receivables Subsidiary) shall be evidenced by promissory notes, which
may be master promissory notes governing all advances made by the
maker of such note to the payee of such note and (B) any Intercompany
Indebtedness owed by the Company to any Subsidiary shall be
subordinated pursuant to the terms of the promissory note or notes
evidencing such Intercompany Indebtedness in right of payment, from
and after such time as the Loans shall have become due and payable
(whether at date of maturity, by acceleration or otherwise), to the
payment in full of the Obligations; and provided, further, that the
aggregate amount of Intercompany Indebtedness of all Foreign
Subsidiaries owing to the Company and the Subsidiaries of the Company
(other than any Foreign Subsidiaries) shall not exceed the amounts
permitted pursuant to the provisions of Section 6.3 (other than
Intercompany Indebtedness owing as a result of or incurred to finance
payment of Royalty or Management Fees that are payable by Foreign
Subsidiaries to the Company and the Subsidiaries of the Company);
(iv) The Company and its Subsidiaries may remain liable with
respect to Existing Indebtedness which is described on Schedule C
annexed hereto and may become and remain liable in respect of the
Refinancing Foreign Debt;
(v) The Company and its Subsidiaries (other than any Foreign
Subsidiary) may become and remain liable (A) with respect to
Indebtedness in respect of Capital Leases if such Capital Leases
would be permitted by Section 6.9 and (B) with respect to other
Indebtedness secured by Liens permitted by Section 6.2;
(vi) The Company and its Subsidiaries (other than any Foreign
Subsidiary) may become and remain liable with respect to Contingent
Obligations permitted by Section 6.4 and, upon any obligations
actually arising pursuant thereto, with respect to the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(vii) The Company and its Subsidiaries (other than any Foreign
Subsidiary) may become and remain liable with respect to Indebtedness
incurred in connection with Sale/Leaseback Transactions permitted by
Section 6.10 (other than any such Sale/Leaseback Transaction that is
subject to the provisions of Section 5.12) so long as, if
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such Sale/Leaseback involves an Asset Sale, the Net Cash Proceeds of
Sale received by the Company and its Subsidiaries in connection
therewith are used as provided in such subsection;
(viii) The Company may become and remain liable with respect to
Indebtedness of the Company incurred pursuant to the Management
Agreements;
(ix) Any Foreign Subsidiary of the Company may become and
remain liable with respect to Indebtedness for money borrowed to the
extent that the Dollar equivalent of the aggregate Indebtedness of
such Foreign Subsidiary outstanding pursuant to this
subparagraph (ix) does not exceed, at any time, an amount equal to
150% of the aggregate amount of (A)(i) each investment made by the
Company (whether in the form of equity contributions, Intercompany
Indebtedness, contribution of a Contingent Obligation or otherwise)
and the amount of each equity investment of all other investors in
such Foreign Subsidiary since the Closing Date (all such investments
being valued as at the time of investment) and (ii) the Fair Value
(as of the Closing Date) of all equity Investments in such Foreign
Subsidiary made by all such other investors prior to the Closing Date
reduced by (B) the excess, if any, of (1) the aggregate Fair Value of
all assets (determined, in each case, as at the time of transfer
thereof) transferred by such Foreign Subsidiary (whether by dividend,
loan, contribution or otherwise (other than obligations of any
Subsidiary of the Company)) since the Closing Date (other than
interest on Intercompany Indebtedness in amounts and at rates not in
excess of those payable in transactions between unaffiliated parties
and payments of, or payments of principal of indebtedness related to,
Royalty or Management Fees) to any investor in such Foreign
Subsidiary over (2) the net income of such Foreign Subsidiary since
the later of the Closing Date and the first date of such Investment
by the Company or any Subsidiary of the Company; provided that,
except as otherwise permitted in Section 6.4, neither the Company nor
any of its Domestic Subsidiaries shall have personal liability for
repayment of such Indebtedness;
(x) The Company may become and remain liable with respect to
Indebtedness for money borrowed constituting Permitted Expansion
Construction Financing to the extent that the aggregate Indebtedness
outstanding pursuant to this subparagraph (x) does not exceed, at any
time, the
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difference between the Adjusted Revolving Loan Commitments
(determined without regard to any deduction of the Revolving Loan
Deduction Amount) and the then outstanding amount of Revolving Loans
and Letters of Credit Usage;
(xi) The Sellers and one or more Receivables Subsidiaries may
become and remain liable for Indebtedness (in addition to permitted
Intercompany Indebtedness) in an aggregate amount not exceeding at
any one time
$100,000,000 in connection with a Receivables Program; provided that
such Indebtedness shall not (A) include any obligations other than
obligations directly related to the Receivables Program or (B) be, as
to principal and interest only (i.e., excluding liabilities for
claims arising from (1) breach of customary representations and
warranties, (2) customary indemnities and covenants, (3) dilution
obligations and (4) breach of any customary servicing obligations),
enforceable against the Company or any Subsidiary of the Company or
any of its or their assets (other than assets of the applicable
Receivables Subsidiary);
(xii) The Company may become and remain liable with respect to
Indebtedness constituting Permitted Expansion Financings;
(xiii) The Company may become and remain liable for Indebtedness
in an aggregate amount not exceeding $60,000,000 under the 1995 A/R
Bridge; and
(xiv) In addition to the Indebtedness permitted by
subparagraphs (i) through (xiii) of this Section 6.1, the Company and
its Subsidiaries may become and remain liable with respect to
Indebtedness not exceeding $25,000,000 in the aggregate at any time
outstanding.
Section 6.2 Liens. The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume
or suffer or permit to exist any Lien (A) upon or with respect to any
property of the Company or any of its Subsidiaries that is or should
(pursuant to the terms hereof) be subject to the Lien of any Collateral
Document or (B) upon any shares of stock of Fort Howard Holding, Sterling
International (U.K.) Limited and Sterling International Limited, except, in
the case of clause (A), for Liens which would be permitted pursuant to any
applicable Collateral Documents and, in the case of clause (B), Permitted
Encumbrances; provided that, in the case of clause (A), no such Lien (other
than Prior Liens) shall be superior to the Lien of
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such applicable Collateral Document. With respect to all assets of the
Company and its Subsidiaries other than (1) shares of stock of SIL Company
and (2) assets described in clauses (A) and (B) above, the Company will
not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or permit to exist any Lien on or with
respect to such property or asset, whether now owned or hereafter acquired,
or any income or profits therefrom, except:
(i) Permitted Encumbrances;
(ii) Liens described on Schedule D annexed hereto;
(iii) Liens affecting assets, comprised of Existing Mill
Expansion Equipment or Greenfield Expansion Assets, securing
reimbursement obligations of the Company and its Subsidiaries with
respect to letters of credit permitted by subparagraph (vii) of
Section 6.4, in each case which Liens do not encumber Collateral
pledged pursuant to any Collateral Document and which are granted
pursuant to documents relating to such letters of credit;
(iv) Liens encumbering customary initial deposits and margin
deposits, and other Liens incurred in the ordinary course of business
(other than any Lien imposed by ERISA) and which are either within
the general parameters customary in the industry (as concurred in by
the Administrative Agent) or are otherwise approved by the Requisite
Lenders securing obligations under Commodities Agreements entered
into by the Company or any of its Subsidiaries;
(v) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Subsidiaries incurred in
the ordinary course of business or as a result of this Agreement or
the incurrence, guaranteeing or granting of security interests in
respect of Obligations incurred pursuant to this Agreement or the
other Loan Documents;
(vi) Liens securing Indebtedness permitted under subparagraph
(v) (clause A) or (vii) of Section 6.1, incurred in connection with
Capital Leases or Sale/Leaseback Transactions permitted by Section
6.9 or 6.10 so long as such Liens do not extend to assets other than
the assets subject to such Capital Lease or Sale/Leaseback
Transaction and do not secure any
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Indebtedness other than Indebtedness directly incurred to finance
such Capital Lease or Sale/Leaseback Transaction;
(vii) Liens securing Indebtedness of (or of the Wholly Owned
Subsidiaries of) a Foreign Subsidiary of the Company permitted under
Section 6.1 so long as such Liens do not extend to assets other than
assets owned by such Foreign Subsidiary or its Wholly Owned
Subsidiaries and do not secure any Indebtedness other than
Indebtedness of (or of the Wholly Owned Subsidiaries of) such Foreign
Subsidiary; provided that no such Liens (other than Liens
constituting Preexisting Assumed Liens) may encumber any common stock
or other equity interest in any First Tier Foreign Subsidiary;
(viii) Liens granted on Program Receivables pursuant to a
Receivables Program, including, without limitation, proceeds thereof
in any form and bank accounts in which any such proceeds are
deposited; provided that, except as specifically provided otherwise
in this clause (viii), no such Lien may extend to any assets of the
Company or any Subsidiary of the Company that is not a Receivables
Subsidiary;
(ix) Liens (which may be pari passu with the Liens securing
the Obligations) granted in favor of a Lender to secure the
obligations of the Company pursuant to any Qualified Interest Rate
Agreement or Qualified Currency Agreement;
(x) Liens securing Indebtedness constituting Permitted
Expansion Construction Financing and incurred in accordance with the
provisions of subparagraph (x) of Section 6.1; provided that no such
Lien may extend to any assets of the Company other than the assets
contemplated in the definition of Permitted Expansion Construction
Financing;
(xi) Liens affecting assets, comprised of Existing Mill
Expansion Equipment or Greenfield Expansion Assets, securing
Indebtedness constituting Permitted Expansion Financings (other than
any such Indebtedness constituting Unsecured Expansion Financings);
(xii) Liens granted by the Company on A/R Eligible Receivables;
and
(xiii) In addition to Liens permitted by subparagraphs (i)
through (xii) above, the Company and its Subsidiaries
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may at any time have Liens securing the payment of Indebtedness with
respect to property or assets with an aggregate Fair Value of not
more than $25,000,000 (as measured from the Closing Date).
Nothing in this Section 6.2 shall prohibit (A) the sale, assignment,
transfer, conveyance or other disposition of any Margin Stock owned by the
Company or any of its Subsidiaries at its fair value or (B) the creation,
incurrence, assumption or existence of any Lien on or with respect to any
Margin Stock.
Section 6.3 Investments; Joint Ventures. The Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly
make or own any Investment in any Person or enter into any Joint Venture,
except:
(i) The Company and its Subsidiaries may make and own
Investments in Cash and Cash Equivalents;
(ii) The Company may acquire and own Common Stock to the
extent permitted under Section 6.5;
(iii) The Company and its Subsidiaries may continue to own
Investments in existence on the date hereof, and which are
specifically described in Schedule E annexed hereto;
(iv) The Company and its Subsidiaries may make intercompany
loans to the Company or any Domestic Subsidiary of the Company to the
extent permitted under Section 6.1;
(v) The Company and its Subsidiaries may continue to own
Investments in respect of Joint Ventures in existence on the date
hereof, and which are specifically described in Schedule E annexed
hereto;
(vi) The Company and its Subsidiaries may make and own
Investments in Joint Ventures operating in the United States after
the date hereof; provided that the aggregate amount of such
Investments made after the date hereof shall not exceed $25,000,000;
(vii) The Company and its Subsidiaries may acquire and retain
ownership of Investments as part of the consideration received by
them from Asset Sales not prohibited by Section 6.7; provided that
(A) no such Investment may be held or transferred to a Foreign
Subsidiary of the Company unless (i) the asset which was the subject
of such Asset Sale was owned by a Foreign
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Subsidiary of the Company or (ii) such transfer is not prohibited
pursuant to the provisions of clause (x) of this Section 6.3, (B) no
more than 25% of the consideration received by the Company and its
Subsidiaries in respect of any Asset Sale for which the total
consideration to be so received is in excess of $5,000,000 shall be
represented by evidences of Indebtedness, (C) each promissory note
evidencing such Indebtedness will be secured by a perfected security
interest, subject to no prior Lien securing such Indebtedness, in all
of the assets sold or otherwise disposed of in such Asset Sale in
favor of the seller thereof and (D) the aggregate Fair Value of all
such Investments shall not at any time exceed $30,000,000; and
provided, further, that for purposes of compliance with this
subparagraph (vii) of Section 6.3, Asset Sales involving the
simultaneous receipt of notes and sale of such notes to a third party
shall be excluded if such sale is permitted by Section 6.11;
(viii) The Company or any Subsidiary of the Company may make and
own Investments received in connection with the bankruptcy or
reorganization of any of its suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, its
customers and suppliers arising in the ordinary course of business;
(ix) The Company or any Subsidiary of the Company may make and
own Investments arising in connection with Commodities Agreements
entered into in the ordinary course of its business;
(x) The Company and its Domestic Subsidiaries may make and
own Investments in Foreign Subsidiaries; provided that the aggregate
amount of the Fair Values of all assets (including, but not limited
to, Cash, Cash Equivalents, capital and other assets) transferred by
the Company and its Domestic Subsidiaries (such Fair Value to be
measured in each case as of the actual date of transfer) to, and the
maximum amount of all Contingent Obligations incurred for the benefit
of, one or more Foreign Subsidiaries by way of capital contribution,
loan, guarantee or otherwise shall not exceed at any time (A) the
aggregate Fair Value of all assets (including, but not limited to,
Cash, Cash Equivalents, capital and other assets) transferred after
the Closing Date by all Foreign Subsidiaries in the aggregate to the
Company and its Domestic Subsidiaries (such Fair Value to be measured
in each case as of the actual date of transfer) by way of capital
contribution, loan, dividend, distribution or otherwise (other than
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obligations of any Subsidiary of the Company) and all net reductions
in Investments constituting Contingent Obligations (effected as a
result of the retirement after the Closing Date by the applicable
Foreign Subsidiary of Indebtedness guaranteed by the Company or any
Domestic Subsidiary of the Company), plus (B) (i) during the period
commencing on the Closing Date and ending on June 30, 1996,
$40,000,000, and (ii) during all periods after June 30, 1996,
$40,000,000 until such time as the Company shall have achieved an
Interest Coverage Ratio of 1.9 or more, after which time such amount
shall be increased to $100,000,000, plus (C) the aggregate of all
amounts of the unutilized Discretionary Excess Equity Proceeds
Balance and the unutilized Discretionary Excess Cash Flow Balance
which the Company has from time to time elected to apply to the
making of Investments pursuant to this subparagraph (x) (provided
that the total of all amounts of the unutilized Discretionary Equity
Proceeds Balance which the Company may elect to apply pursuant to
this clause (C) shall not exceed, at any time, an amount equal to 50%
of the sum of the Closing Date Excess Equity Proceeds Amount and the
aggregate amount, as of such time, of all net cash proceeds received
by the Company or any of its Subsidiaries after the Closing Date from
all Equity Offerings after the Closing Date (exclusive of any shares
sold pursuant to an overallotment option in respect of the Common
Stock Offering) plus (D) the aggregate amount of Royalty and
Management Fees on a consolidated basis previously paid after the
Closing Date by Foreign Subsidiaries to the Company and its
Subsidiaries; and provided, further, that nothing set forth in this
subparagraph (x) shall be construed to permit the transfer to any
Foreign Subsidiary of any asset which constitutes Collateral;
(xi) The Company and its Domestic Subsidiaries may make and
own Investments in any Foreign Subsidiary consisting of the transfer
of tangible assets to such Foreign Subsidiary; provided that (A) the
aggregate book value of all such tangible assets so transferred after
the Closing Date pursuant to this subparagraph (xi) (determined, in
each case, as of the date of transfer) after the Closing Date shall
not exceed $10,000,000, (B) the aggregate Fair Value (as so
determined) of all such tangible assets so transferred after the
Closing Date pursuant to this subparagraph (xi) shall not exceed
$25,000,000, and (C) if any such assets shall constitute, at the time
of such transfer, Collateral, the Company
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shall have complied with the provisions of Section 5.13 concerning
releases of Collateral;
(xii) The Company and its Subsidiaries may make and own
Investments in equity securities (other than equity securities of the
Company or any of its Subsidiaries) listed on the New York Stock
Exchange ("NYSE"); provided that the aggregate value, as determined
by the closing price on the NYSE for such equity securities on the
Business Day prior to making the Investment, of such equity
securities shall not at any time exceed $2,000,000;
(xiii) The Company or any Subsidiary may continue to own
Investments in, and may make and own Investments in, Consolidated
Capital Expenditures permitted to be made or owned by the Company or
such Subsidiary under Section 6.14 and may make Investments as a
direct consequence of the discharge of Contingent Obligations
permitted under Section 6.4;
(xiv) The Company may make Investments constituting recourse
and non-recourse loans to management and other employees of the
Company to purchase Common Stock and to pay taxes in respect of such
purchases as permitted by the Management Agreements in an aggregate
principal amount not to exceed $10,000,000 (plus accrued and unpaid
interest thereon) at any time outstanding;
(xv) The Company and its Subsidiaries may make and own
Investments in Receivables Subsidiaries in accordance with the
provisions of Section 6.11; and
(xvi) In addition to Investments permitted by
subparagraphs (i) through (xv) of this Section 6.3, the Company and
its Subsidiaries may after the Closing Date make and own Investments
(other than Investments in Foreign Subsidiaries or other Persons,
properties or operations that are not organized or located in the
United States of America (exclusive of its territories and
possessions)) (A) with an aggregate Fair Value (determined, in each
case, at the time such Investment is made) of not more than
$25,000,000 outstanding at any time, and (B) (without limiting the
rights of the Company under clause (A) hereof) in an aggregate amount
(determined, in each case, at the time such Investment is made)
outstanding at any time not exceeding the aggregate of all amounts of
the unutilized Discretionary Excess Equity Proceeds Balance and the
unutilized Discretionary Excess Cash Flow Balance which the Company
has from time
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to time elected to apply to the making of Investments pursuant to
this subparagraph (xvi); provided that, except as set forth in
subparagraph (xii) of this Section 6.3, neither the Company nor any
of its Subsidiaries may make or own Investments in any Margin Stock
other than Common Stock.
Section 6.4 Contingent Obligations. The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create
or become or be liable with respect to any Contingent Obligation except:
(i) Guarantees resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(ii) Obligations under the Guarantor Subsidiary Guarantees;
(iii) Guarantees of Interest Rate Agreements and Currency
Agreements entered into by the Company which are permitted by
subparagraphs (v) and (vi) of this Section 6.4;
(iv) The Company and any other Seller and one or more
Receivables Subsidiaries may become and remain liable for Contingent
Obligations (other than, in the case of the Company and its
Subsidiaries that are not Receivables Subsidiaries, Contingent
Obligations for payment of the principal or interest as such in
respect of Indebtedness of a Receivables Subsidiary) directly related
to or comprising a portion of any Receivables Transaction;
(v) Interest Rate Agreements and Currency Agreements (other
than Leveraged Swaps) entered into by the Company and any Lender;
(vi) Commodities Agreements and Currency Agreements (other
than Leveraged Swaps) entered into by the Company or any Subsidiary
of the Company and any financial institution in the ordinary course
of business or in connection with Asset Sales;
(vii) Contingent reimbursement obligations not exceeding
$10,000,000 in the aggregate outstanding at one time under letters of
credit (including any such letters of credit in existence as of the
date hereof) other than Letters of Credit under this Agreement;
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(viii) Contingent Obligations in existence on the date hereof
described in Schedule G and extensions and renewals thereof so long
as the amount of any such Contingent Obligations so extended or
renewed is not increased thereby from the amount thereof at the time
extended or renewed;
(ix) Contingent Obligations in respect of any obligation
(other than any obligation with respect to Indebtedness) of (A) the
Company or one of its Domestic Subsidiaries and (B) Foreign
Subsidiaries to the extent, in the case of clause (A) and (B), such
Contingent Obligation is an Investment permitted under Section 6.3;
(x) Contingent Obligations represented by performance bonds
and similar obligations relating to the sale of the Company's or its
Subsidiaries' products incurred in the ordinary course of business
(exclusive of obligations for payment of borrowed money) not to
exceed $10,000,000 at any time;
(xi) Contingent Obligations represented by surety bonds and
similar obligations incurred in the ordinary course of business
(exclusive of obligations for payment of borrowed money) not to
exceed $15,000,000 at any time;
(xii) Contingent Obligations pursuant to the Management
Agreements;
(xiii) Contingent Obligations in respect of Indebtedness of (A)
the Company or a Domestic Subsidiary of the Company and (B) Foreign
Subsidiaries to the extent such Contingent Obligations are
Investments permitted under Section 6.3; and
(xiv) In addition to the Contingent Obligations permitted by
subparagraphs (i) through (xiii) of this Section 6.4, the Company and
its Subsidiaries may become and remain liable with respect to other
Contingent Obligations except Contingent Obligations which constitute
Investments in Foreign Subsidiaries pursuant to Section 6.3 or which
are for the benefit of any Foreign Subsidiary of the Company;
provided that the maximum aggregate liability of the Company and its
Subsidiaries in respect of all Contingent Obligations incurred
pursuant to this subparagraph (xiv) shall not at any time exceed
$25,000,000.
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Section 6.5 Restricted Junior Payments. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly,
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment except that (A) during each of the first two twelve-month periods
starting on the Closing Date, the Company may declare and pay cash
dividends to holders of its Common Stock in an amount up to $3,000,000 for
each such period, (B) during any twelve-month period commencing on or after
the second anniversary of the Closing Date, the Company may declare and pay
cash dividends to holders of its Common Stock in an annual amount not to
exceed 6% of the sum of (1) $300,000,000 less the amount of all Transaction
Costs reasonably determined by the Company to be attributable to the first
$300,000,000 of gross proceeds of the Common Stock Offering and (2) the
aggregate net cash proceeds of all issuances of Common Stock of the Company
occurring after the Closing Date (excluding the Common Stock Offering and
any Common Stock sold pursuant to an overallotment option in connection
with the Common Stock Offering); provided that no dividend in excess of
$3,000,000 that is proposed to be declared or paid pursuant to this clause
(B) may be declared or paid unless at the date of declaration and the date
of payment thereof the unutilized portion of the Revolving Loan Commitment
shall equal or exceed $100,000,000, (C) the Company may, commencing on
March 31, 1996 and on each March 31 thereafter, declare and pay cash
dividends to holders of its Common Stock in an amount not to exceed the
then unutilized portion of the Discretionary Excess Cash Flow Balance,
(D) the Company may (1) repurchase or redeem the Senior Unsecured Notes, in
each case on the terms provided in the indentures governing the Senior
Unsecured Notes (each as in effect on the date hereof), with the proceeds
of Refinancing Senior Unsecured Indebtedness incurred in compliance with
the provisions of Section 6.1, (2) repurchase or redeem its Common Stock
pursuant to the Management Agreements and the Stockholders Agreements (each
as in effect on the date hereof or, in the case of the Broad-Based Plan,
the date of adoption thereof) to the extent that the aggregate amount of
such repurchases and redemptions does not exceed $35,000,000 in the
aggregate (as measured from the Closing Date) and (3) make purchases of
Common Stock owned by MS Group for immediate resale to Persons other than
the Company or a Subsidiary of the Company, (E) the Company may issue
Indebtedness permitted under subparagraph (viii) of Section 6.1, (F) the
Company may make Investments under subparagraph (xiv) of Section 6.3,
(G) the Company may make, from time to time, Restricted Junior Payments of
the character contemplated in clauses (A) and (D)(1) above and, following
the retirement of all the Senior Unsecured Notes, the Company may
repurchase or redeem Subordinated Indebtedness in an aggregate
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amount not exceeding, at any time, the aggregate of all amounts of the
unutilized Discretionary Excess Equity Proceeds Balance which the Company
has from time to time elected to apply to the making of Restricted Junior
Payments pursuant to this clause (G); provided that if and for so long as
the Company shall have achieved the Investment Grade Ratings in respect of
the senior unsecured debt obligations of the Company, the Company shall not
be required, as a condition to any exercise of its rights under this clause
(G) with respect to redemptions and repurchases of Subordinated
Indebtedness, to first refinance, repurchase or retire all Senior Unsecured
Notes and all Refinancing Senior Unsecured Notes, (H) the Company may, from
time to time, make Restricted Junior Payments of the character contemplated
in clauses (A) and (D)(1) above, and the Company may repurchase or redeem
Subordinated Indebtedness in an aggregate amount not exceeding at any time,
the aggregate of all amounts of the unutilized Discretionary Excess Cash
Flow Balance which the Company has from time to time elected to apply to
the making of Restricted Junior Payments pursuant to this clause (H) and
(I) the Company may redeem the 12 5/8% Subordinated Debentures and the
14 1/8% Discount Debentures as contemplated by the Recapitalization.
Notwithstanding the foregoing, the Company may not declare or pay any
dividends or redeem or repurchase any Securities or issue any Indebtedness
or make any Investments referred to above (1) except to the extent
permitted by applicable law or (2) if, at the time of such declaration or
payment or redemption, repurchase, issuance or investment and immediately
after giving effect thereto, no Potential Event of Default or Event of
Default shall have occurred and be continuing.
Section 6.6 Financial Covenants.
6.6.1. Interest Coverage Ratio. The Company will not permit
the Interest Coverage Ratio to be less than (A) for the first and second
full fiscal quarters (taken as one accounting period) beginning after the
Closing Date, 1.25, (B) for the first, second, and third full fiscal
quarters (taken as one accounting period) beginning after the Closing Date,
1.25, and (C) for any period of four consecutive full fiscal quarters (in
each case taken as one accounting period) beginning after the Closing Date
and ended during a period set forth below, the ratio set forth opposite
such period:
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Period Ratio
12/31/95 - 12/30/96 1.40x
12/31/96 - 12/30/97 1.50x
12/31/97 - 12/30/98 1.60x
12/31/98 - 12/30/99 1.75x
12/31/99 - 12/30/00 1.85x
12/31/00 and thereafter 2.00x
6.6.2. Maximum Leverage Ratio. The Company will not permit
the Leverage Ratio as of the end of any fiscal quarter set forth during any
period below to be more than the ratio set forth opposite such period:
Period Ratio
09/30/95 - 12/30/95 4.25x
12/31/95 - 03/30/96 4.00x
03/31/96 - 06/29/96 3.90x
06/30/96 - 09/29/96 3.80x
09/30/96 - 12/30/96 3.70x
12/31/96 - 03/30/97 3.45x
03/31/97 - 06/29/97 3.30x
06/30/97 - 09/29/97 3.20x
09/30/97 - 12/30/97 3.10x
12/31/97 - 12/30/98 3.00x
12/31/98 - 12/30/99 2.75x
12/31/99 - 12/30/00 2.50x
12/31/00 and thereafter 2.00x
Section 6.7 Restriction on Fundamental Changes. Subject to
Section 5.2, neither the Company nor any of its Subsidiaries will enter
into any transaction of merger or consolidate, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey,
sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or fixed
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all the business, property or fixed assets
of, or stock or other evidence of beneficial ownership of, any Person,
except:
6.7.1. The Company and the other Sellers, on the one hand, and
any Receivables Subsidiary, on the other hand, may enter into and perform
one or more Receivables Transactions;
6.7.2. Any Subsidiary of the Company (other than a Receivables
Subsidiary) may be merged or consolidated with or
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into the Company or any Wholly Owned Subsidiary of the Company (other than
a Foreign Subsidiary or a Receivables Subsidiary), or be liquidated, wound
up or dissolved, or all or substantially all of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed of,
in one transaction or a series of transactions, to the Company or any
Wholly Owned Subsidiary of the Company (other than a Foreign Subsidiary or
a Receivables Subsidiary); provided that (A) any Foreign Subsidiary of the
Company (other than a Foreign Subsidiary that is a Material Subsidiary) may
be merged or consolidated with or into any other Foreign Subsidiary, or be
liquidated, wound up or dissolved, or (B) all or substantially all of the
business, property or assets of any Foreign Subsidiary (other than a
Foreign Subsidiary that is a Material Subsidiary) may be conveyed, sold,
leased, or transferred or otherwise disposed of, in one transaction or a
series of transactions to another Foreign Subsidiary (other than to a
Foreign Subsidiary that is also a Material Subsidiary) or (C) any of the
foregoing transactions may occur between two Foreign Subsidiaries that are
Material Subsidiaries; and provided, further, that, in the case of such a
merger or consolidation of a Subsidiary and the Company, the Company shall
be the continuing or surviving corporation, or, in the case of a merger or
consolidation of a Subsidiary and a Wholly Owned Subsidiary, the Wholly
Owned Subsidiary shall be the continuing or surviving corporation, or, in
the case of a merger or consolidation of two Wholly Owned Subsidiaries,
either of such Subsidiaries shall be the surviving or continuing
corporation; and provided, further, that, in the case of such a merger or
consolidation or disposition of a majority of the stock of a Guarantor
Subsidiary or of substantially all of the business, property or assets of a
Guarantor Subsidiary (A) the continuing, surviving or transferee
corporation shall expressly assume the obligations of such Guarantor
Subsidiary under the relevant Guarantor Subsidiary Guarantee and (B) in the
case of a merger or consolidation, the net worth of the continuing or
surviving corporation (calculated without giving effect to any increase in
the amount of Intercompany Indebtedness for which the continuing or
surviving corporation is liable as compared to the amount of Intercompany
Indebtedness for which such Guarantor Subsidiary was liable immediately
prior to such merger or consolidation) shall not be less than the net worth
of such Guarantor Subsidiary immediately prior to such merger or
consolidation; and provided, further, that, subject to the terms of the
applicable Collateral Document, in the case of such a merger or
consolidation or disposition of a majority of the stock of a Subsidiary or
of all or substantially all of the business, property or assets of such a
Subsidiary of the
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Company, the stock of which is pledged to secure the Obligations, the stock
of the continuing, surviving or transferee corporation shall, at the time
of consummation of such merger, consolidation or transfer, be pledged to
secure the Obligations;
6.7.3. The Company or any of its Subsidiaries may convey,
sell, transfer or otherwise dispose of any Margin Stock, whether now owned
or hereafter acquired; provided that such disposition is for Fair Value;
6.7.4. The Company and its Subsidiaries may sell or dispose of
in the ordinary course of business (A) property which is obsolete or no
longer useful in any of its businesses or is of de minimis value (as
determined, in the case of any such property the Fair Value of which is in
excess of $10,000,000, in good faith by the Board of Directors of the
Company or any Subsidiary selling such property, as the case may be),
(B) Cash and Cash Equivalents, (C) other Investments described in
subparagraphs (viii), (ix) and (xii) of Section 6.3; provided that any such
sale or other disposition is made for at least the Fair Value of such
assets and (D) Receivables subject to the requirements of Section 6.11;
6.7.5. Subject to Sections 5.2 and 6.7 so long as no Event of
Default has occurred and is continuing or shall be caused thereby, the
Company and its Subsidiaries may sell or otherwise dispose of any of their
respective assets outside the ordinary course of business; provided that
(A) any such sale or other disposition is made for at least the Fair Value
of such assets, (B) any sale or other disposition of more than $250,000,000
in Fair Value of stock or other assets in any one transaction or a related
series of transactions shall be subject to the prior written consent of
Requisite Lenders unless such sale or other disposition is of Margin Stock,
(C) in the case of a Sale/Leaseback Transaction or a Secured Expansion
Financing, such sale or other disposition of tangible Collateral shall be
subject to the requirements of Sections 5.12 and 5.13, respectively, and
(D) in the case of any Receivables shall be subject to the requirements of
Section 6.11;
6.7.6. The Company and its Subsidiaries may sell, resell or
otherwise dispose of real or personal property held for sale or resale in
the ordinary course of business; and
6.7.7. The Company and its Subsidiaries may make Investments
otherwise permitted pursuant to Section 6.3 and
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Capital Expenditures otherwise permitted pursuant to Section 6.14.
Section 6.8 ERISA. The Company will not, and will not permit
any of its ERISA Affiliates to:
6.8.1. engage in any transaction in connection with which the
Company or any of its ERISA Affiliates could be subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Internal Revenue Code in either case in an aggregate
amount in excess of $1,000,000;
6.8.2. fail to make full payment when due of all amounts
which, under the provisions of any Pension Plan, or under ERISA or the
Internal Revenue Code, the Company or any of its ERISA Affiliates is
required to pay as contributions thereto; or permit to exist any
accumulated funding deficiencies for which a waiver from the Internal
Revenue Service has not been obtained with respect to all Pension Plans in
an aggregate amount greater than $5,000,000;
6.8.3. permit the sum of the amount of unfunded benefit
liabilities under all Pension Plans (excluding each Pension Plan with an
amount of unfunded benefit liabilities of zero or less) to exceed
$25,000,000; or
6.8.4. fail to make any payments in an amount individually or
in the aggregate greater than $1,000,000 to any Multiemployer Plan that the
Company or any of its ERISA Affiliates may be required to make under such
Multiemployer Plan, any agreement relating to such Multiemployer Plan, or
any law pertaining thereto.
As used in this Section 6.8, the term "accumulated funding
deficiency" has the meaning specified in Section 302 of ERISA and Section
412 of the Internal Revenue Code, and the term "amount of unfunded benefit
liabilities" has the meaning specified in Section 4001(a)(18) of ERISA.
Section 6.9 Restriction on Leases. The Company will not, and
will not permit any of its Subsidiaries to, become or remain liable in any
way, whether directly or by assignment or as a guarantor or other surety,
for the obligations as or of the lessee under any lease (other than
intercompany leases between and among the Company and its Domestic
Subsidiaries (other than a Receivables Subsidiary)), whether an Operating
Lease or a Capital Lease, unless, immediately after giving effect to the
incurrence of liability with respect to such
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lease, the Consolidated Rental Payments at the time in effect during the
then current fiscal year of the Company shall not exceed the applicable
amount set forth below:
Fiscal Year Amount
1995 $ 50,000,000
1996 $ 55,000,000
1997 $ 60,000,000
1998 $ 65,000,000
1999 $ 70,000,000
2000 $ 75,000,000
2001 $ 80,000,000
2002 $ 85,000,000
Notwithstanding the foregoing, if the Company or any of its Subsidiaries
shall have sold any Subsidiary or any line of business to any Person (other
than the Company or any Subsidiary), each of the above amounts with respect
to any period from or after the date of such sale shall be reduced by an
amount equal to the reasonable good faith estimates by the Company (using
such methods as the Administrative Agent may reasonably approve) of
Consolidated Rental Payments of such Subsidiary or such line of business
for such periods.
Section 6.10 Sales and Leasebacks. The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, become
or remain liable as lessee or as guarantor or other surety with respect to
any lease, whether an Operating Lease or a Capital Lease, of any property
(whether real or personal or mixed), whether now owned or hereafter
acquired in a Sale/Leaseback Transaction; provided that the Company or any
of its Subsidiaries may enter into Sale/Leaseback Transactions otherwise
prohibited under this Section 6.10 if (A) the assets to be subject to such
Sale/Leaseback Transaction are acquired, constructed or placed in service
after the Closing Date, (B) the provisions of Section 6.9 would not be
breached thereby, (C) in the case of assets located at any Mill subject to
a Mill Mortgage, the Company has complied with the applicable provisions of
Section 5.12 of this Agreement, and (D) if such Sale/Leaseback involves an
Asset Sale the Net Cash Proceeds of Sale of such Sale/Leaseback Transaction
are applied as required by Section 2.7.2(a).
Section 6.11 Sale or Discount of Receivables;
Receivables Transactions.
6.11.1. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, sell with
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or without recourse, or discount or otherwise sell for less than the face
value thereof, notes or accounts receivable except notes issued in favor of
the Company or any of its Subsidiaries in connection with sales or other
dispositions of assets (other than inventory) so long as the Company or
such Subsidiary, as the case may be, receives the Fair Value of such notes
and such notes are sold without recourse.
6.11.2. Notwithstanding the foregoing, the Company and its
Subsidiaries shall be entitled to enter into and perform (and sell and
transfer notes or accounts receivables in accordance with) (i) the 1995 A/R
Bridge and (ii) Receivables Transactions pursuant to a Receivables Program
to be established and administered substantially in accordance with, and to
have the characteristics set forth in, the Receivables Term Sheet and to
make contributions to any Receivables Subsidiary from time to time;
provided that, for purposes of this Agreement only one Receivables Program
may be in effect at any time.
6.11.3. So long as any Receivables Program shall remain in
effect, the Company shall cause the Administrative Agent and the Lenders to
have a valid and perfected first Lien on the equity securities of each
Receivables Subsidiary (except to the extent otherwise provided in the
proviso to the definition of Receivables Subsidiary).
Section 6.12 Transactions with Shareholders and Affiliates.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of
any property or the rendering of any service) with any holder of 5% or more
of any class of equity securities of the Company or with any Affiliate of
the Company or of any such holder, on terms that are less favorable to the
Company or such Subsidiary, as the case may be, than those which might be
obtained at the time from Persons who are not such a holder or Affiliate;
provided that the foregoing restriction shall not apply to (A) any
transaction between the Company and any of its Wholly Owned Subsidiaries or
between any of its Wholly Owned Subsidiaries, (B) customary fees paid to
members of the Board of Directors of the Company and its Subsidiaries,
(C) the payment of fees to MS group or its Affiliates from time to time for
financial, consulting and underwriting services, such fees not to exceed
the then usual and customary fees of MS Group or its Affiliates for similar
services, (D) transactions contemplated by the Management Agreements and
the Stockholders Agreement, (E) transactions permitted by Section 6.5 and
(F) any transaction necessary to
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consummate a Receivables Transaction pursuant to the Receivables Term
Sheet.
Section 6.13 Disposal of Subsidiary Stock. Except as
permitted by Section 5.6, 5.11, 6.2 or 6.7 and as provided in the
Collateral Documents and except with respect to Margin Stock, the Company
will not:
6.13.1. directly or indirectly sell, assign, pledge or
otherwise encumber or dispose of any shares of capital stock or other
equity securities of (or warrants, rights or options to acquire shares or
other equity securities of) any of its Subsidiaries, except to qualify
directors if required by applicable law; or
6.13.2. permit any of its Subsidiaries directly or indirectly
to sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity securities or convertible debt securities of
(or warrants, rights or options to acquire shares or other equity
securities or convertible debt securities of) such Subsidiary, except to
the Company, another Wholly Owned Subsidiary of the Company or to qualify
directors if required by applicable law, except for equity interests in any
Subsidiary of a Receivables Subsidiary as contemplated by the Receivables
Program.
Nothing in this Section 6.13 shall prohibit the sale,
assignment, transfer, conveyance or other disposition of any Margin Stock
owned by the Company or any of its Subsidiaries or the creation,
incurrence, assumption or existence of any Lien on or with respect to any
Margin Stock.
Section 6.14 Limitation on Capital Expenditures.
6.14.1. The Company will not, and will not permit any of its
Subsidiaries to, incur Capital Expenditures, except as specifically
permitted in the following subsections of this Section 6.14.
6.14.2. Any one or more of the Foreign Subsidiaries of the
Company may incur Capital Expenditures in such amounts and for such
purposes as shall be determined by the Company or any such Foreign
Subsidiary in its discretion; provided, however, that the Company and its
Subsidiaries shall comply and have complied in all respects with the
provisions of subsections (x) and (xi) of Section 6.3 in respect thereof to
the extent applicable to such Capital Expenditures.
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6.14.3. During each fiscal year of the Company ending on or
after December 31, 1995, the Company and its Domestic Subsidiaries may
incur on or after January 1, 1995, in respect of (A) the Green Bay Sludge
Boiler, (B) the Savannah Boiler and (C) other matters not constituting
Expansion Projects, Consolidated Domestic Capital Expenditures in an
aggregate amount not in excess of $75,000,000 (the "Base Annual Capex
Amount").
6.14.4. Without limiting the rights of the Company and its
Domestic Subsidiaries to incur Consolidated Domestic Capital Expenditures
in accordance with subsection 6.14.3 above, the Company and its Domestic
Subsidiaries may incur Consolidated Domestic Capital Expenditures in
respect of Expansion Projects (other than the Green Bay Sludge Boiler and
the Savannah Boiler) on the following terms and subject to each of the
following conditions:
(i) the aggregate amount (the "Domestic Capex Maximum") of
Consolidated Domestic Capital Expenditures in the aggregate which may
be incurred in respect of all such Expansion Projects shall not at
any time exceed the sum of (a) $250,000,000 plus (b) the total amount
of net cash proceeds received by the Company or any of its
Subsidiaries after the Closing Date and prior to such time in respect
of Permitted Expansion Financings (other than any Permitted Expansion
Financings relating solely to the Green Bay Sludge Boiler or the
Savannah Boiler);
(ii) except for Capital Expenditures incurred in connection
with the Initial Major Expansion Project or the Green Bay Dry Form
Machine, neither the Company nor any of its Domestic Subsidiaries
shall be permitted to incur, or become bound by any Contractual
Obligation to incur, Consolidated Domestic Capital Expenditures in
respect of any single such Expansion Project (the first of such
Expansion Projects, the "Second Expansion Project") in excess of
$30,000,000, unless the Company shall have, in respect of any period
of four full consecutive fiscal quarters of the Company commencing
after the Closing Date and ending with the quarter immediately
preceding the quarter in which such amount in excess of $30,000,000
is first committed to be spent by the Company, achieved an Interest
Coverage Ratio of 1.9 or greater, (it being understood that, if such
Interest Coverage Ratio shall have been so achieved, the Company
shall not be required to maintain such Interest Coverage Ratio as a
condition to incurring further expenditures in respect of the Second
Expansion Project); and
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(iii) except for Capital Expenditures incurred in connection
with the Initial Major Expansion Project or the Second Expansion
Project (to the extent permitted under clause (ii) above), neither
the Company nor any of its Domestic Subsidiaries shall be permitted
to incur, or become bound by any Contractual Obligation to incur,
Consolidated Domestic Capital Expenditures in respect of any single
Expansion Project in excess of $30,000,000 unless the Company shall
have, in respect of any period of four consecutive fiscal quarters of
the Company commencing on or after the Closing Date and ending after
the quarter immediately preceding the quarter in which such amount in
excess of $30,000,000 is first spent or committed to be spent by the
Company in respect of such Expansion Project, achieved an Interest
Coverage Ratio of 2.15 or greater (it being understood that, if such
Interest Coverage Ratio shall have been so achieved, the Company
shall not be required to maintain such Interest Coverage Ratio as a
condition to incurring further expenditures in respect of such
Expansion Project).
6.14.5. The Company may elect by written notice to the Lenders
to apply to the making of Consolidated Domestic Capital Expenditures, in
addition to the Base Annual Capex Amount and the Domestic Capex Maximum
permitted under subsection 6.14.3 and 6.14.4, as applicable, (A) portions
of the then unutilized Discretionary Excess Equity Proceeds Balance and the
then unutilized Discretionary Excess Cash Flow Balance and (B) 100% of the
unused amount (the "Capex Carryover Amount") of Consolidated Domestic
Capital Expenditures, if any, in respect of prior fiscal years (beginning
with fiscal year 1995) permitted under subsection 6.14.3.
6.14.6. For purposes of this Section 6.14 only, "Capital
Expenditures" shall exclude expenditures of insurance proceeds received
upon destruction of property to the extent such proceeds are used to effect
restoration, replacement or repair of such property.
Section 6.15 Conduct of Business. The Company will not, and
will not permit any of its Subsidiaries (other than any Receivables
Subsidiary) to, engage in any business other than (A) the business it and
its Subsidiaries are engaged in on the date hereof as described in the
Prospectus and similar or related businesses, (B) such other businesses as
are engaged in by it and its Subsidiaries on the date hereof as shall not
be of a nature which are material to it and its Subsidiaries and (C) such
other lines of business as may be consented to by the Requisite Lenders
(such consent not to be unreasonably
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withheld). The Company will not permit the Receivables Subsidiaries to
engage in any business other than as contemplated by the Receivables
Program.
Section 6.16 Amendments or Waivers of Certain
Documents; Prepayments of Indebtedness.
6.16.1. Neither the Company nor any of its Subsidiaries will
agree to any (A) amendment to provisions of the Management Agreements
imposing any additional obligation on the Company with respect to the
acquisition by the Company or any of its Subsidiaries of any capital stock
of the Company to the extent the aggregate amount of all such additional
obligations would cause the Company to exceed the limitation on repurchases
or redemptions of its Common Stock set forth in subclause (D)(2) of Section
6.5 (it being understood that any and all such additional obligations will
be taken into account in determining whether such limitation has been
exceeded), or (B) amendment to provisions of the Stockholders' Agreement
which is materially adverse to the interests of the Lenders.
6.16.2. Neither the Company nor any of its Subsidiaries will
(A) amend or otherwise change the terms of the Subordinated Notes or the
indentures relating thereto, the Existing Subordinated Debt or the
indentures relating thereto, the Senior Unsecured Notes or the indentures
related thereto, any Refinancing Senior Unsecured Debt, any Permitted
Expansion Financing, any Expansion Lease, the documents evidencing the 1995
A/R Bridge, the 1988 Revenue Bonds or the 1988 Revenue Bond Indenture, if
the effect of such amendment or change is to increase the interest rate on
such Indebtedness or the rental amounts due thereunder, as the case may be,
change the dates upon which payments of rent, principal or interest are due
thereon, change any event of default or condition to an event of default
with respect to such Indebtedness or Expansion Lease, grant any security
interest in favor of such Indebtedness, change the redemption provisions
thereof, change the subordination provisions thereof, cause such
Indebtedness or Expansion Lease to be guaranteed by any Subsidiary of the
Company or which, together with all other amendments or changes made,
increase materially the obligations of the obligor or confer additional
rights on the holder of such Indebtedness or Expansion Lease which would be
adverse to the Company or the Lenders or (B) except as otherwise expressly
permitted in this Agreement, defease, or make any payments the effect of
which is to defease, any such Indebtedness in whole or in part (whether
pursuant to the defeasance provisions of such Indebtedness or otherwise).
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6.16.3. Except for the making of Restricted Junior Payments
expressly permitted under Section 6.5, the Company will not make any
payment or prepayment of principal of, or interest on, or premium (if any)
on, any of the Subordinated Notes except, in each case, for (A) regularly
scheduled payments of principal, if any, and interest in accordance with
the terms of the instruments evidencing or governing such Indebtedness and
(B) payment of principal on the scheduled final maturity date of such
Indebtedness in accordance with the terms of the governing instruments with
respect thereto and (C) any mandatory payment or prepayment required to be
made as a result of acceleration pursuant to the terms of the instruments
governing such Indebtedness as in effect on the date hereof.
6.16.4. Neither the Company nor any of its Subsidiaries will
make any payment or prepayment of principal of, or interest on, or premium
(if any) on, the Senior Unsecured Notes or the Refinancing Senior Unsecured
Debt, except, in each case, for (A) a refinancing of the Senior Unsecured
Notes with the proceeds of Refinancing Senior Unsecured Debt permitted
under Section 6.5, (B) regularly scheduled payments of interest in
accordance with the terms of the applicable Senior Unsecured Notes
Indenture or the instruments governing the Refinancing Senior Unsecured
Debt, as the case may be, (C) payment of principal on the scheduled final
maturity date of the Senior Unsecured Notes or the Refinancing Senior
Unsecured Debt, in each case, in accordance with the terms of the
applicable loan agreement, indenture or other governing instruments and
(D) any mandatory payment or prepayment required to be made as a result of
acceleration pursuant to the terms of the applicable Senior Unsecured Notes
Indenture or the instruments governing the Refinancing Senior Unsecured
Debt, as the case may be, in each case as in effect on the date hereof.
6.16.5. Neither the Company nor any of its Subsidiaries will
voluntarily terminate any Expansion Lease or otherwise optionally make,
either directly or indirectly, any payment to acquire or otherwise
reacquire any assets leased by the Company under any Expansion Lease or any
interest therein (including, without limitation, any beneficial interest
therein) or any Indebtedness secured thereby, or make any optional
prepayment of any rental obligation under any Expansion Lease to any other
party to any Expansion Lease.
6.16.6. Neither the Company nor any of its Subsidiaries will
make any payment or prepayment of principal of, or interest on, or premium
(if any) on, any Indebtedness
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constituting Permitted Expansion Financing except for (A) regularly
scheduled payments of principal, if any, and interest in accordance with
the terms of the instruments governing such Indebtedness, (B) payment of
principal on the scheduled final maturity date of such Indebtedness in
accordance with the terms of the instruments governing such Indebtedness
and (C) any mandatory payment or prepayment required to be made as a result
of acceleration pursuant to the terms of the instruments governing such
Indebtedness.
6.16.7. Neither the Company nor any of its Subsidiaries will
(A) make any payment or prepayment of principal of, or interest on, any
Indebtedness incurred in connection with a Receivables Transaction except
for (1) regularly scheduled payments of interest thereon and payment of all
principal thereof at the maturity thereof or (2) mandatory or optional
prepayments (including prepayments related to a decline in the balance of
Program Receivables) or prepayments required to be made as a result of
acceleration or mandatory prepayment events which are in the nature of
acceleration; provided that no such mandatory or optional prepayment (other
than prepayments required to be made as a result of acceleration or events
in the nature of acceleration) may be made unless (i) there is no reduction
in the commitment amount or other availability under the Receivables
Program for the Company to obtain funds secured directly or indirectly by
Program Receivables and (ii) the Company intends to reborrow or refund with
new Indebtedness the amount so prepaid, or (B) make or permit any amendment
to the documentation governing any Receivables Transaction which would
cause such documentation (after giving effect thereto) not to comply with
the requirements herein set forth with respect to Receivables Subsidiaries
and Receivables Transactions.
6.16.8. Neither the Company nor any of its Subsidiaries will
make any payment or prepayment of principal of, or interest on, or premium
(if any) on the 1995 A/R Bridge, except, in each case, for (A) a payment of
principal at the final maturity or the refinancing of the 1995 A/R Bridge
with the net cash proceeds of the sale of A/R Eligible Receivables, (B) a
payment of principal at the final maturity or the refinancing of the 1995
A/R Bridge to be funded, at the option of the Company, with the proceeds of
Revolving Loans; provided that the amount of such Revolving Loans shall not
exceed the lesser of $15,000,000 and the difference between the then
outstanding principal amount of the 1995 A/R Bridge and the net cash
proceeds of a Receivables Transaction utilized to refinance the 1995 A/R
Bridge; (C) regularly scheduled payments of interest in accordance with the
terms of the 1995 A/R Bridge
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and (D) any mandatory payment or prepayment required to be made as a result
of acceleration or otherwise pursuant to the terms of the 1995 A/R Bridge
as in effect on the date hereof.
Section 6.17 Payment of Cash Interest on Subordinated Debt.
Except with the consent of the Requisite Lenders, the Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, pay any
interest in cash on Subordinated Debt where the Company has the option to
pay such interest in securities or to accrue the interest payable with
respect to such Subordinated Debt.
ARTICLE VII
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur and be continuing:
Section 7.1 Failure To Make Payments When Due. Failure to pay
any installment of principal of any Loan when due, whether at stated
maturity, by acceleration, by notice of prepayment or otherwise or failure
to pay for 5 days after the day when due any interest on any Loan or any
other amount due under this Agreement; or
Section 7.2 Default in Other Agreements. Failure of the
Company or any of its Subsidiaries to pay when due (A) any principal or
interest on any Indebtedness (other than Indebtedness referred to in
Section 7.1 or Indebtedness of any Receivables Subsidiary) in an individual
principal amount of $15,000,000 or more or items of Indebtedness with an
aggregate principal amount of $30,000,000 or more or (B) any Contingent
Obligation in an individual amount of $15,000,000 or more or Contingent
Obligations with an aggregate amount of $30,000,000 or more, in each case
at the stated maturity thereof or beyond the end of any period after which
the obligee thereunder is permitted to accelerate payment thereunder, or
breach or default of the Company or any of its Subsidiaries (other than any
Receivables Subsidiary) with respect to any other material term of any loan
agreement, mortgage, indenture or other agreement relating to any
Indebtedness in an individual principal amount of $15,000,000 or more or
items of Indebtedness with an aggregate principal amount of $30,000,000 or
more or any Contingent Obligation in an individual amount of $15,000,000 or
more or Contingent Obligations with an aggregate amount of $30,000,000 or
more; if the effect of such failure,
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default or breach is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation (or a trustee on behalf of such
holder or holders) then to cause, that Indebtedness or Contingent
Obligation to become or be declared due prior to its stated maturity (or
the stated maturity of any underlying obligation, as the case may be); or
Section 7.3 Breach of Certain Covenants. Failure of the
Company to perform or comply with any term or condition contained in
Section 2.8, 5.2, 5.6 or 5.15, ARTICLE VI or Section 9.6 of this Agreement;
or
Section 7.4 Breach of Warranty. Any representation or
warranty made by any Loan Party in any Loan Document or in any statement or
certificate at any time given by such Person in writing pursuant hereto or
thereto or in connection herewith or therewith shall be false in any
material respect on the date as of which made; or
Section 7.5 Other Defaults Under Agreement or Loan Documents.
Any Loan Party shall default in the performance of or compliance with any
term contained in this Agreement or other Loan Documents other than those
referred to above in Sections 7.1, 7.3 or 7.4 and such default shall not
have been remedied or waived within 30 days after receipt of notice from
the Administrative Agent or any Lender of such default; or
Section 7.6 Involuntary Bankruptcy;
Appointment of Receiver, etc.
7.6.1. A court having jurisdiction in the premises shall enter
a decree or order for relief in respect of the Company, or any of its
Subsidiaries which, as of the date of entry of such decree or order, would
constitute a Material Subsidiary (whether or not, as of such date, such
Subsidiary is or has been deemed to be, or not to be, a Material Subsidiary
under any other applicable provision of this Agreement) in an involuntary
case under the Bankruptcy Code or any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, which decree or order is not
stayed; or any other similar relief shall be granted under any applicable
federal or state law; or
7.6.2. An involuntary case is commenced against the Company or
any of its Subsidiaries which, as of the date of such commencement, would
constitute a Material Subsidiary (whether or not, as of such date, such
Subsidiary is or has been deemed to be, or not to be, a Material Subsidiary
under any other applicable provision of this Agreement) under any
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applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Company or any of
such Subsidiaries, or over all or a substantial part of the property of the
Company or any of such Subsidiaries, shall have been entered; or an interim
receiver, trustee or other custodian of the Company or any of such
Subsidiaries for all or a substantial part of the property of the Company
or any of such Subsidiaries is involuntarily appointed; or a warrant of
attachment, execution or similar process is issued against any substantial
part of the property of the Company or any of such Subsidiaries, and the
continuance of any such events in this subsection 7.6.2 for 60 days unless
dismissed, bonded or discharged; or
Section 7.7 Voluntary Bankruptcy; Appointment of Receiver,
etc. The Company or any of its Subsidiaries which, as of the date of entry
of such decree or order, would constitute a Material Subsidiary (whether or
not, as of such date, such Subsidiary is or has been deemed to be, or not
to be, a Material Subsidiary under any other applicable provision of this
Agreement) shall have a decree or an order for relief entered with respect
to it or commence a voluntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of a decree or an order for relief in
an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of
or taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; the making by the Company or any of such
Subsidiaries of any general assignment for the benefit of creditors; or the
inability or failure of the Company or any of such Subsidiaries generally
to pay its debts as such debts become due; or the Board of Directors of the
Company or any of such Subsidiaries (or any committee thereof) adopts any
resolution or otherwise authorizes action to approve any of the foregoing;
or
Section 7.8 Judgments and Attachments. Any money judgment,
writ or warrant of attachment, or similar process involving (A) in any
individual case an amount in excess of $10,000,000 or (B) in the aggregate
at any time an amount in excess of $20,000,000 (in either case not
adequately covered by insurance as to which the insurance company has
acknowledged coverage) shall be entered or filed against the Company or any
of its Subsidiaries which, as of the date of such entry or filing, would
constitute a Material Subsidiary (whether or not,
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as of such date, such Subsidiary is or has been deemed to be, or not to be,
a Material Subsidiary under any other applicable provision of this
Agreement) or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 30 days or in any event
later than five days prior to the date of any proposed sale thereunder; or
Section 7.9 Dissolution. Any order, judgment or decree shall
be entered against the Company or any of its Subsidiaries which, as of the
date of such entry, would constitute a Material Subsidiary (whether or not,
as of such date, such Subsidiary is or has been deemed to be, or not to be,
a Material Subsidiary under any other applicable provision of this
Agreement) decreeing the dissolution or split up of the Company or such
Subsidiary and such order shall remain undischarged or unstayed for a
period in excess of 30 days; or
Section 7.10 Unfunded ERISA Liabilities.
7.10.1. Any Pension Plan maintained by the Company or any of
its ERISA Affiliates shall be terminated within the meaning of Title IV of
ERISA; or
7.10.2. A trustee shall be appointed by an appropriate United
States district court to administer any Pension Plan; or
7.10.3. The Pension Benefit Guaranty Corporation (or any
successor thereto) shall institute proceedings to terminate any Pension
Plan or to appoint a trustee to administer any Pension Plan; or
7.10.4. The Company or any of its respective ERISA Affiliates
shall withdraw (under Section 4063 of ERISA) from a Pension Plan; or
7.10.5. The Termination Event that is described in clause (E)
of the definition of "Termination Event" shall have occurred and be
continuing;
if as of the date thereof or any subsequent date, the sum of each of the
Company's and its ERISA Affiliates' various liabilities (such liabilities
to include, without limitation, any liability to the Pension Benefit
Guaranty Corporation (or any successor thereto) or to any other party under
ERISA or the Internal Revenue Code and to be calculated after giving effect
to the tax consequences thereof) resulting from all such events listed in
subsections 7.10.1 through 7.10.5 above exceeds $25,000,000; or
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Section 7.11 Withdrawal Liability Under Multiemployer Plan.
The Company or any of its ERISA Affiliates as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability requiring annual payments in an amount
individually or in the aggregate exceeding $1,500,000 in any one year;
unless (A) prior to the time any payment of such withdrawal liability is
due in accordance with Section 4219(c)(2) of ERISA, the plan sponsor agrees
in writing that the correct amount of the annual payment is less than
$1,500,000, or (B) prior to the time any payment of such withdrawal
liability is due in accordance with Section 4219(c)(2) of ERISA, a court of
competent jurisdiction has enjoined and continues to enjoin the collection
of such payment, or (C) Section 4219 of ERISA has been amended to provide
that notification that such withdrawing employer has incurred a withdrawal
liability would not, in the ordinary course or with the lapse of time,
require the payment; provided that, in the event of such an amendment, an
Event of Default shall be deemed to occur when any payment of such
withdrawal liability becomes due or would, in the ordinary course or with
the lapse of time, become due; or
Section 7.12 Invalidity of Guarantees. Any Guarantor
Subsidiary Guarantee for any reason, other than the satisfaction in full of
all Obligations and termination of this Agreement, ceases to be in full
force and effect or is declared to be null and void, or any Guarantor
Subsidiary denies or disaffirms any of its obligations under the Guarantor
Subsidiary Guarantee to which it is party or gives notice to such effect;
or
Section 7.13 Failure of Security. Any Pledge Agreement,
Mortgage or any other Collateral Document shall, at any time, cease to be
in full force and effect or shall be declared null and void, or the
legality, validity or enforceability thereof shall be contested by any Loan
Party or the Administrative Agent, as agent for the Lenders, shall not have
or shall cease to have valid and perfected (to the extent required by the
Collateral Documents) Lien in the Collateral with a fair market value or
book value (whichever is greater) of more than $20,000,000 in the aggregate
of the priority contemplated by the applicable Collateral Document in each
case for any reason other than the failure of the Administrative Agent to
take any action within its control, or any Loan Party shall fail to perform
or observe in any material respect any Collateral Document; or
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Section 7.14 Change in Control. If there shall occur any
Change in Control;
THEN (A) upon the occurrence of and during the continuance of
any Event of Default described in the foregoing Section 7.6 or 7.7 (other
than the last clause of Section 7.7), each of (1) the unpaid principal
amount of and accrued interest on the Loans, (2) an amount equal to the
maximum amount which may at any time be drawn under all Letters of Credit
then outstanding (whether or not any beneficiary under any Letter of Credit
shall have presented, or shall be entitled at such time to present, the
drafts of other documents required to draw under such Letter of Credit) and
(3) all other amounts comprising the Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Company and the obligation of each Lender to make any Loan and the
obligation of any Fronting Bank to issue any Letter of Credit hereunder
shall thereupon terminate, and (B) upon the occurrence of and during the
continuance of any other Event of Default, the Requisite Lenders may, by
written notice to the Company, declare all of the Loans and an amount equal
to the amounts described in subclause (2) and subclause (3) above to be,
and the same shall forthwith become, due and payable, together with accrued
interest thereon and the obligation of each Lender to make any Loan and the
obligation of any Fronting Bank to issue any Letter of Credit hereunder
shall thereupon terminate; provided that the foregoing shall not affect in
any way the obligations of Lenders to purchase from any Fronting Bank
participations in the unreimbursed amount of any drawings under any Letters
of Credit as provided in subsection 2.2.5. Whether or not any Loans or
other Obligations shall have been accelerated or become due as set forth
above, upon the occurrence and during the continuance of any Event of
Default, the Administrative Agent or any Lender may exercise any remedy
available under the Loan Documents or applicable law in respect thereof
(including, without limitation, foreclosure of the Liens in respect of the
Collateral). If at any time within 60 days after acceleration of the
maturity of any Loan, the Company shall pay all arrears of interest and all
payments on account of the principal which shall have become due otherwise
than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this
Agreement or the Notes) and all Events of Default and Potential Events of
Default (other than non-payment of principal of and accrued interest on the
Loans and the Notes, and payments of amounts referred to in subclause (2)
above, in each case due and payable solely by virtue of acceleration) shall
be remedied or
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waived pursuant to Section 9.6, then the Requisite Lenders by written
notice to the Company may rescind and annul the acceleration and its
consequences, but such action shall not affect any subsequent Event of
Default or Potential Event of Default or impair any right consequent
thereon.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Section 8.1 Appointment. Bankers is hereby appointed the
Administrative Agent hereunder by each Lender, and each Lender hereby
authorizes the Administrative Agent to act hereunder and under the other
instruments and agreements referred to herein as its agent hereunder and
thereunder. Bankers is hereby authorized, as the Administrative Agent to
execute consents to service of process and such other documents on behalf
of Lenders, as may be required by law or as may be necessary or desirable.
Bankers agrees to act as such upon the express conditions contained in this
ARTICLE VIII and in the Collateral Documents. The provisions of this
ARTICLE VIII, except as provided in subsections 8.6.2 and 8.6.3 and
Section 8.7 where the consent of the Company is required, are solely for
the benefit of the Administrative Agent, and the Company shall not have any
rights as a third party beneficiary of any of the provisions hereof except
for those contained in subsections 8.6.2 and 8.6.3 and Section 8.7 where
the consent of the Company is required. In performing its functions and
duties under this Agreement, the Administrative Agent shall act solely as
agent of the Lenders and does not assume and shall not be deemed to have
assumed any obligation towards or relationship of agency or trust with or
for the Company.
Section 8.2 Powers; General Immunity.
8.2.1. Duties Specified. Each Lender irrevocably authorizes
the Administrative Agent to take such action on such Lender's behalf and to
exercise such powers hereunder and under the other instruments and
agreements referred to herein as are specifically delegated to the
Administrative Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. The Administrative Agent
shall have only those duties and responsibilities which are expressly
specified in this Agreement and the Collateral Documents and it may perform
such duties by or through its agents or employees. The duties of the
Administrative Agent shall be mechanical and administrative in nature; and
the Administrative Agent shall
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not have by reason of this Agreement a fiduciary relationship in respect of
any Lender. Nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon the Administrative Agent any
obligations in respect of this Agreement or the other instruments and
agreements referred to herein except as expressly set forth herein or
therein.
8.2.2. No Responsibility for Certain Matters. The
Administrative Agent shall not be responsible to any Lender for the
execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement, the Collateral Documents
or the Notes issued hereunder, or for the issuance of Letters of Credit and
such Lender's purchase of participations therein, if any, or for the
perfection or priority of any Lien created or purported to be created by
any Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statement
or in any financial or other statements, instruments, reports, certificates
or any other documents in connection herewith or therewith furnished or
made by the Administrative Agent to Lenders or by or on behalf of the
Company or any of its Subsidiaries to the Administrative Agent or any
Lender, or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or
agreements contained herein or therein or as to the use of the proceeds of
the Loans or of the existence or possible existence of any Event of Default
or Potential Event of Default.
8.2.3. Exculpatory Provisions. Neither the Administrative
Agent nor any of its officers, directors, employees or agents shall be
liable to the Lenders for any action taken or omitted hereunder or in
connection herewith (including, without limitation, any act or omission
under the Collateral Documents) unless caused by its or their gross
negligence or willful misconduct. If the Administrative Agent shall
request instructions from the Lenders with respect to any act or action
(including the failure to take an action) in connection with this Agreement
or the other instruments and agreements referred to herein, the
Administrative Agent shall be entitled to refrain from such act or taking
such action unless and until the Administrative Agent shall have received
instructions from the Requisite Lenders. Without prejudice to the
generality of the foregoing, (A) the Administrative Agent shall be entitled
to rely, and shall be fully protected in relying, upon any communication,
instrument or document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons, and shall be
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entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for the Company), accountants,
experts and other professional advisors selected by it and (B) no Lender
shall have any right of action whatsoever against the Administrative Agent
as a result of the Administrative Agent acting or (where so instructed)
refraining from acting under this Agreement or the other instruments and
agreements referred to herein in accordance with the instructions of the
Requisite Lenders. The Administrative Agent shall be entitled to refrain
from exercising any power, discretion or authority vested in it under this
Agreement or the other instruments and agreements referred to herein unless
and until it has obtained the instructions of the Requisite Lenders.
8.2.4. Administrative Agent Entitled to Act as Lender. The
agency hereby created shall in no way impair or affect any of the rights
and powers of, or impose any duties or obligations upon, the Administrative
Agent in its individual capacity as a Lender hereunder. With respect to
its participation in the Loans or any Letter of Credit, the Administrative
Agent shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not performing the duties and
functions delegated to it hereunder, and the term "Lender" or "Lenders" or
any similar term shall, unless the context clearly otherwise indicates,
include the Administrative Agent in its individual capacity. The
Administrative Agent and its Affiliates may accept deposits from, lend
money to and generally engage in any kind of banking, trust, financial
advisory or other business with the Company or any Subsidiary or Affiliate
of the Company as if it were not performing the duties specified herein,
and may accept fees and other consideration from the Company or any such
Subsidiary or Affiliate for services in connection with this Agreement and
otherwise without having to account for the same to the Lenders.
Section 8.3 Representations and Warranties; No Responsibility
for Appraisal of Creditworthiness. Each Lender represents and warrants
that it has made its own independent investigation of the financial
condition and affairs of the Company and its Subsidiaries in connection
with the making of the Loans and other disbursements on the Closing Date
and thereafter and the issuance of Letters of Credit hereunder and has made
and shall continue to make its own appraisal of the creditworthiness of
each of them. The Administrative Agent shall not have any duty or
responsibility either initially or on a continuing basis to make any such
investigation or any such appraisal on behalf of the Lenders or to provide
any
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Lender with any credit or other information with respect thereto whether
coming into its possession before the making of the Loans and other
disbursements on the Closing Date and thereafter or the issuance of any
Letter of Credit or any time or times thereafter, and the Administrative
Agent shall have no responsibility with respect to the accuracy of or the
completeness of the information provided to Lenders.
Section 8.4 Right to Indemnity. Each Lender severally agrees
to indemnify the Administrative Agent, on its demand and as incurred
proportionately to its respective Indemnity Amount (as defined below), to
the extent the Administrative Agent shall not have been reimbursed by the
Company, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including,
without limitation, counsel fees and disbursements) or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Administrative Agent in performing its duties hereunder or in
any way relating to or arising out of this Agreement or any other Loan
Document; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that result from the Administrative
Agent's gross negligence or willful misconduct. If any indemnity furnished
to the Administrative Agent for any purpose shall, in the opinion of the
Administrative Agent be insufficient or become impaired, the Administrative
Agent may call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is furnished.
For purposes of this Section 8.4, "Indemnity Amount" means in respect of
any Lender the sum of all Loans held by such Lender plus such Lender's
share of the Letters of Credit Usage plus such Lender's unutilized
Commitments then in effect.
Section 8.5 Registered Holder of Note Treated as Owner. The
Administrative Agent may deem and treat the registered holder of any Note
as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been registered
with the Administrative Agent. Any request, authority or consent of any
person or entity who at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and
binding on any subsequent holder, transferee or assignee of that Note or of
any Note or Notes issued in exchange therefor.
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Section 8.6 Resignation by Administrative Agent.
8.6.1. The Administrative Agent may resign from the
performance of all its functions and duties hereunder at any time by giving
15 Business Days' prior written notice to the Company and the Lenders.
Such resignation shall take effect upon the acceptance by a successor
Administrative Agent of appointment pursuant to subsections 8.6.2 and 8.6.3
below or as otherwise provided below.
8.6.2. Upon any such notice of resignation, the Requisite
Lenders shall appoint a successor Administrative Agent acceptable to the
Company in its reasonable discretion and which shall be an incorporated
bank or trust company.
8.6.3. If a successor Administrative Agent shall not have been
so appointed within such 15 Business Day period, the resigning
Administrative Agent with the consent of the Company, shall then appoint a
successor Administrative Agent who shall serve as the Administrative Agent
until such time, if any, as the Requisite Lenders appoint a successor
Administrative Agent as provided above.
8.6.4. If no successor Administrative Agent has been appointed
pursuant to subsection 8.6.2 or 8.6.3 by the 20th Business Day after the
date such notice of resignation was given by the resigning Administrative
Agent, the Administrative Agent's resignation shall become effective and
Requisite Lenders shall thereafter perform all the duties of the
Administrative Agent hereunder until such time, if any, as the Requisite
Lenders appoint a successor Administrative Agent as provided above.
Section 8.7 Guarantor Subsidiary Guarantee and Collateral
Documents. Each Lender hereby authorizes the Administrative Agent to act
as Collateral Trustee on behalf of and for the benefit of such Lender.
Each Lender hereby authorizes (A) the Collateral Trustee to enter into the
Collateral Documents and to take all action contemplated by the Collateral
Documents and (B) the Administrative Agent to enter into the Guarantor
Subsidiary Guarantee; provided that the Collateral Trustee shall not enter
into or consent to any amendment, modification, termination or waiver of
any provision contained in the Collateral Documents without the prior
consent of the Requisite Lenders. Each Lender agrees that no Lender shall
have any right individually to seek or to enforce the Guarantor Subsidiary
Guarantee or to realize upon the security granted by any Collateral
Document, it being understood and agreed that such rights and remedies may
be exercised by the
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Administrative Agent for the benefit of the Lenders upon the terms of the
Guarantor Subsidiary Guarantee and by the Collateral Trustee upon the terms
of the Collateral Documents.
Section 8.8 Successor Administrative Agent. Upon the
acceptance of any appointment as the Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Administrative Agent, and
the retiring or removed Administrative Agent shall be discharged from its
duties and obligations as the Administrative Agent under this Agreement.
After any retiring or removed Administrative Agent's resignation or removal
hereunder as the Administrative Agent the provisions of this ARTICLE VIII
shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was the Administrative Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Successors and Assigns; Participations.
9.1.1. This Agreement shall be binding upon and inure to the
benefit of the Company, the Lenders, the Administrative Agent and all
future registered holders of the Notes and their respective successors and
registered assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Lender.
9.1.2. Any Lender may at any time sell to one or more banks or
other entities ("Participants") participating interests in its Revolving
Loan Commitment and Revolving Loans, Term Loan Commitments, Tranche A Term
Loans, Tranche B Term Loans, any Letter of Credit or participation therein
or any other right of such Lender hereunder or thereunder; provided that no
sale of participating interests in any Letter of Credit or participations
therein may be made separately from the sale of a corresponding interest in
the Revolving Loan Commitment and the Revolving Loans of the Lender
effecting such sale. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under
this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
registered holder of any such Note and such
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interest in such Letter of Credit for all purposes under this Agreement,
and the Company and the Administrative Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. The Company agrees that if amounts
outstanding under this Agreement, the Notes or the Letters of Credit are
due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall,
to the extent permitted by applicable law, be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Agreement and any Note or Letter of Credit to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement or any Note or Letter of Credit; provided that such
right of setoff shall be subject to the obligation of such Participant to
share with the Lenders, and the Lenders agree to share with such
Participant, as provided in Sections 9.4 and 9.5 hereof. The Company also
agrees that each Participant shall be entitled to the benefits, subject to
any limitations set forth therein, of Sections 2.2, 2.9 and 2.10 hereof
with respect to its participation in the Adjusted LIBOR Loans and ABR Loans
outstanding from time to time; provided that no Participant shall be
entitled to receive any greater payment under any of such Sections than the
relevant Lender would have been entitled to receive with respect to the
relevant Loans, unless such participation is made with the Company's prior
written consent. Each Lender agrees that any agreement between such Lender
and any such Participant in respect of such participating interest shall
refer to this Agreement and shall not restrict such Lender's right to agree
to any amendment, supplement or modification to this Agreement or any of
the Loan Documents except (A) to extend the final maturity of any Loan or
Note, or any installment thereof, or of any Letter of Credit (unless such
Letter of Credit is not extended beyond the Revolving Credit Maturity
Date), in which such Participant is participating, or reduce the rate or
extend the time of payment of interest or fees thereon (except in
connection with a waiver of applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or increase the
amount of the Participant's participation over the amount thereof then in
effect (it being understood that waivers or modifications of conditions
precedent, covenants, Events of Default or of a mandatory reduction in
Total Loan Commitments shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan shall be
permitted without the consent of any Participant if such Participant's
participation is not increased as a result thereof), or (B) to consent to
the assignment or transfer by
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the Company of any of its rights and obligations under this Agreement.
Each Lender agrees to use commercially reasonable efforts to include and
require in each participation agreement delivered by it pursuant to this
subsection 9.1.2 to a Participant that is not a commercial bank a specific
acknowledgement by such Participant (and by each other Person that may
obtain, directly or indirectly from such Participant, an interest in any
one or more Commitments and Loans) of the representations, warranties,
covenants and agreements deemed to be made by such Participant pursuant to
the provisions of Section 9.23; provided that no Lender shall have any
liability hereunder in respect of any act or omission of, or state of facts
or circumstances relating to, any Person to whom the holder of any such
participating interest may grant or sell sub-participating interests.
9.1.3. (a) Any Lender may (A) without the consent of any
Person, at any time, assign to any Lender or any Affiliate thereof and
(B) with the prior written consent of the Company (which consent shall not
be unreasonably withheld or delayed) to one or more additional banks or
financial institutions (all such Affiliates, Lenders and additional banks
or financial institutions being, "Purchasing Lenders"), all or any part of
its Credit Exposure pursuant to a Registered Transfer Supplement,
substantially in the form of Exhibit XVIII annexed hereto (any such
Registered Transfer Supplement, a "Registered Transfer Supplement"),
executed by such Purchasing Lender, such transferor Lender and the
Administrative Agent and in compliance with subsection 9.1.5; provided that
(1) each such assignment pursuant to clause (B) above shall be limited to
an amount equal to the lesser of (x) such Lender's Credit Exposure Amount
then in effect and (y) a minimum amount of $5,000,000 and integral
multiples of $1,000,000 above such amount, (2) such transferor Lender and
Purchasing Lender deliver to the Administrative Agent the tax documentation
required by paragraph (e) of subsection 2.9.7, if applicable, (3) in the
case of assignments of Revolving Loan Commitments or Revolving Loans, such
transferor Lender obtains, additionally, the consent of each Lender then
constituting a Fronting Bank, (4) no such consent of the Company will be
required if a Potential Event of Default or an Event of Default shall have
occurred and be continuing and (5) the Company shall be entitled to
withhold its consent to any such proposed assignment for any reason or no
reason if (x) immediately after giving effect thereto, the Purchasing
Lender would be an Affected Lender or the Company or other Loan Parties
would be required to make payments pursuant to or on behalf of such
Purchasing Lender pursuant to subsection 2.9.7 and (y) the transferor
Lender was not an Affected Lender as to which the
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Company has declined or failed to exercise its rights pursuant to Section
2.11 and was not, at the time of such assignment, entitled to receive any
payments pursuant to paragraph (a), (b) or (c) of subsection 2.9.7.
Subject to compliance with the foregoing sentence, upon (A) such execution
of such Registered Transfer Supplement, (B) delivery of an executed copy
thereof to the Company, (C) payment by such Purchasing Lender to such
transferor Lender of an amount equal to the purchase price agreed between
such transferor Lender and such Purchasing Lender, (D) the receipt of a
processing and recording fee of $2,500 by the Administrative Agent and
(E) recordation of assignment in the Register pursuant to subsection 9.1.5,
such Purchasing Lender shall for all purposes be a Lender party to this
Agreement and shall have all the rights (including, without limitation, the
benefits of Section 2.10) and obligations of a Lender under this Agreement
to the same extent as if it were an original party hereto with the
Tranche A Funding Percentage, Tranche B Funding Percentage, Revolving Loan
Commitment, Adjusted Revolving Loan Percentage, Credit Exposure Amount, A
Credit Exposure Amount and B Credit Exposure Amount set forth in such
Registered Transfer Supplement, and no further consent or action by the
Company, the Lenders or the Administrative Agent shall be required. Such
Registered Transfer Supplement shall be deemed to amend this Agreement to
the extent, and only to the extent, necessary to reflect the addition of
such Purchasing Lender and the resulting adjustment of the Tranche A
Funding Percentages, Tranche B Funding Percentages, Revolving Loan
Commitments, Adjusted Revolving Loan Percentages, Credit Exposure Amounts,
A Credit Exposure Amounts and B Credit Exposure Amounts arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the
Commitments, the Notes and the Letters of Credit. Upon the consummation of
any transfer to a Purchasing Lender pursuant to this subsection 9.1.3, the
transferor Lender, the Administrative Agent and the Company shall make
appropriate arrangements as required under subsection 9.1.5 so that a
replacement Note is issued to such transferor Lender and a new Note or, as
appropriate, a replacement Note, issued to such Purchasing Lender, in each
case in principal amounts reflecting their Tranche A Funding Percentages,
Tranche B Funding Percentages, Revolving Loan Commitments, Adjusted
Revolving Loan Percentages, Credit Exposure Amounts, A Credit Exposure
Amounts and B Credit Exposure Amounts or, as appropriate, their outstanding
Loans, as adjusted pursuant to such Registered Transfer Supplement.
(b) In addition to the assignments permitted under paragraph
(a) of subsection 9.1.3 above, any Lender may at any
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time assign all or any portion of its rights under this Agreement to a
Federal Reserve Bank without the prior written consent of the Company, the
Administrative Agent, any Fronting Bank or Bankers; provided that no such
assignment shall release a Lender from any of its obligations hereunder or
substitute any such Federal Reserve Bank for such Lender as a party or
entitle such Federal Reserve Bank to require such Lender to take or omit to
take any action hereunder.
9.1.4. The Company authorizes each Lender to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any prospective
Transferee any and all financial information in such Lender's possession
concerning the Company and any Subsidiary of the Company which has been
delivered to such Lender by or on behalf of the Company pursuant to this
Agreement or any other Loan Document or which has been delivered to such
Lender by the Company in connection with such Lender's credit evaluation of
the Company and its Subsidiaries prior to entering into this Agreement;
provided that if such information is confidential information as
contemplated by Section 9.17 hereof, such Lender may so disclose such
information only if such Transferee or prospective Transferee previously
agrees to be bound by the terms of Section 9.17.
9.1.5. (a) The Company and other Loan Parties hereby
designate the Administrative Agent to serve as the Company's agent, solely
for purposes of this subsection 9.1.5, to maintain a register (the
"Register") on which the Administrative Agent will record the Commitments
from time to time of each Lender, the Loans made by each Lender and each
repayment in respect of the principal amount of the Loans of each Lender
and to retain a copy of each Registered Transfer Supplement delivered to
the Administrative Agent pursuant to this subsection. Failure to make any
such recordation, or any error in such recordation shall not affect the
Company's oblligations in respect of such Loans. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Company, the other Loan Parties, the Administrative Agent, the Fronting
Banks and the Lenders shall treat each Person in whose name a Loan and the
Note evidencing the same is registered as the owner thereof for all
purposes of this Agreement, notwithstanding notice or any provision herein
to the contrary. With respect to any Lender, the assignment or other
transfer of the Commitments of such Lender and the rights to the principal
of, and interest on, any Loan made and Note issued pursuant to this
Agreement shall not be effective until such assignment or other transfer is
recorded on the Register and, except to the extent provided in this
subsection 9.1.5,
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otherwise complies with subsection 9.1.3, and prior to such recordation all
amounts owing to the transferor Lender with respect to such Commitments,
Loans and Notes shall remain owing to the transferor Lender. The
registration of assignment or other transfer of all or part of any
Commitments, Loans and Notes for a Lender shall be recorded by the
Administrative Agent on the Register only upon the acceptance by Agent of a
properly executed and delivered Registered Transfer Supplement
substantially in the form of Exhibit XVIII annexed hereto. Coincident with
the delivery of such Registered Transfer Supplement to the Administrative
Agent for acceptance and registration of assignment or sale of all or part
of a Loan, or as soon thereafter as practicable, the assigning or
transferor Lender shall surrender the Note evidencing such Loan, and
thereupon one or more new Notes in the same aggregate principal amount
shall be issued to the assigning or transferor Lender and/or the new
Lender. The Company agrees to indemnify the Administrative Agent from and
against any and all losses, claims, damages and liabilities or whatsoever
nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this subsection 9.1.5
(other than losses, claims, damages and liabilities arising from acts or
omissions that represent gross negligence or willful misconduct on the part
of the Administrative Agent). The Register shall be available at the
offices where kept by the Administrative Agent for inspection by the
Company and any Lender at any reasonable time upon reasonable prior notice
to the Administrative Agent.
(b) The Company may not replace any Lender pursuant to
Section 2.11 or Section 9.22, unless, with respect to any Notes held by
such Lender, the requirements of subsection 9.1.5(a) have been satisfied.
Section 9.2 Expenses. Whether or not the transactions
contemplated hereby shall be consummated, the Company agrees to promptly
pay (A) all the actual and reasonable costs and expenses of preparation of
the Loan Documents and all the costs of furnishing all opinions by counsel
for the Company and the other Loan Parties (including, without limitation,
any
opinions requested by Requisite Lenders as provided in ARTICLE III hereof
as to any legal matters arising hereunder), (B) the reasonable fees,
expenses and disbursements of CG&R in connection with the negotiation,
preparation, execution and administration of the Loan Documents and the
Loans hereunder, and any amendments and waivers hereto or thereto, (C) all
the actual costs and expenses of creating, perfecting, continuing and
maintaining Liens in favor of Lenders pursuant to any Loan
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Document, including filing and recording fees and expenses (other than
Muskogee/Oklahoma Mortgage Recording Taxes, which shall be paid by Bankers,
for the account of the Lenders), title insurance, fees and expenses of
counsel for providing such opinions as Requisite Lenders may reasonably
request as provided therein and reasonable fees and expenses of CG&R, and
(D) after the occurrence of an Event of Default, all costs and expenses
(including, without limitation, reasonable attorneys fees, including
allocated costs of internal counsel) incurred by the Lenders and/or the
Administrative Agent in enforcing any Obligations of or in collecting any
payments due from the Company hereunder or under the Notes or any of the
other Loan Documents by reason of such Event of Default or in connection
with any refinancing or restructuring of the credit arrangements provided
under this Agreement, including, without limitation, in the nature of a
"work-out" or of any insolvency or bankruptcy proceedings.
Section 9.3 Indemnity. In addition to the payment of expenses
pursuant to Section 9.2, whether or not the transactions contemplated
hereby shall be consummated, the Company agrees to indemnify, pay and hold
the Administrative Agent, and each Person who is or was a Lender and any
holder of any of the Notes, and the officers, directors, employees, agents,
and affiliates of such Person and such holders (collectively called the
"Indemnitees"), upon their demand and as incurred, harmless from and
against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto), which may be imposed on, incurred by,
or asserted against such Indemnitee, in any manner relating to or arising
out of this Agreement, the other Loan Documents, the Lenders' agreement to
make the Loans or other disbursements on the Closing Date or thereafter or
issue the Letters of Credit or the use or intended use of the proceeds of
any of the Loans or disbursements hereunder or use or intended use of the
Letters of Credit (the "indemnified liabilities"); provided that the
Company shall have no obligation to an Indemnitee hereunder with respect to
indemnified liabilities that result from the gross negligence or willful
misconduct of that Indemnitee or from claims, litigation, investigations or
proceedings made or initiated by, as the case may be, one Indemnitee
against any other Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding
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sentence may be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or
any of them except to the extent set forth in the proviso to the next
preceding sentence.
Section 9.4 Set Off. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any
such rights, upon the occurrence of any Event of Default, each Lender is
hereby authorized by the Company at any time or from time to time, without
notice to the Company, or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, without limitation, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other Indebtedness at any time held or
owing by that Lender to or for the credit or the account of the Company
against and on account of the obligations and liabilities of the Company to
such Lender or that subsequent holder under this Agreement and the Notes
and the Letters of Credit, including, without limitation, all claims of any
nature or description arising out of or connected with this Agreement or
the Notes, irrespective of whether or not (A) such Lender shall have made
any demand hereunder or (B) such Lender shall have declared the principal
or the interest on the Loans and Notes, any obligation of the Company with
respect to the Letters of Credit and other amounts due hereunder to be due
and payable as permitted by ARTICLE VII and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
Section 9.5 Ratable Sharing.
9.5.1. Each Lender and each subsequent holder by acceptance of
a Note agree among themselves that (A) with respect to all amounts received
by them which are applicable to the payment of principal of or interest on
the Notes and amounts payable in respect of Letters of Credit and
commitment commissions with respect to the Commitments, equitable
adjustment will be made so that, in effect, all such amounts will be shared
among the Lenders proportionately to their respective interests in the
Notes, the Tranche A Term Loans, the Revolving Loans or the Tranche B Term
Loans, as the same may appear, whether received by voluntary payment, by
the exercise of the right of set-off or banker's lien, by counterclaim or
cross action or by the enforcement of any or all of the Notes, (B) if any
of them shall exercise any right
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of counterclaim, set-off, banker's lien or similar right with respect to
amounts owed by the Company hereunder or under the Notes relating to any
facility hereunder or in respect of the Letters of Credit, such Lender or
holder, as the case may be, shall apportion the amount recovered as a
result of the exercise of such right pro rata in accordance with all
amounts outstanding at such time owed by the Company in respect of such
facility, and (C) if any of them shall thereby through the exercise of any
right of counterclaim, set-off, banker's lien or otherwise or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy
Code, receive payment or reduction of a proportion of the aggregate amount
of principal and interest due with respect to the Notes held by the Lender
relating to any facility hereunder, the amount of any Letter of Credit or
any participation therein or any amount payable hereunder, as the case may
be, which is greater than the proportion received by any other holder of
the Notes relating to the same facility in respect to such aggregate amount
of principal and interest due with respect to such Notes held by it, the
amount of any Letter of Credit or any participation therein or any amount
payable hereunder, such Lender or such holder of such Notes receiving such
proportionately greater payments shall (1) notify each other applicable
Lender and the Administrative Agent of such receipt and (2) enter into
arrangements as directed by the Administrative Agent relating to the Notes
relating to such facility held by the other holders and to Letters of
Credit issued by other Lenders so that all such recoveries of principal and
interest with respect to such Notes and reimbursement of amounts drawn
under or payable with respect to Letters of Credit, if applicable, shall be
proportionate to their respective interests in such facility or the Letters
of Credit, as the case may be; provided that, if all or part of such
proportionately greater payment received by such holder is thereafter
recovered from such holder, all such arrangements shall be rescinded and
the purchase prices paid in respect of such arrangements shall be returned
to that holder to the extent of such recovery, but without interest. The
Company expressly consents to the foregoing arrangement and agrees that any
holder of an interest in any such Note or Letter of Credit, as the case may
be, purchased pursuant to such arrangements and any other subsequent holder
of an interest in any Note otherwise acquired may to the extent permitted
by applicable law, exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by the Company to
such holder as fully as if that holder were a holder of such a Note in the
amount of the interest held by such holder. Any amounts required to be
shared or used to purchase an interest pursuant to this subsection 9.5.1
(in each case, in connection with Revolving
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Loans, Swing Line Loans and Letters of Credit) shall be applied first, to
all Lenders (other than Defaulting Lenders), ratably in respect of all such
amounts then due and payable to each such lender and second, to the
Defaulting Lenders, ratably for any amount due and payable to such Lenders.
9.5.2. Notwithstanding anything to the contrary contained
herein, the provisions of the preceding subsection 9.5.1 shall be subject
to the express provisions of this Agreement which require, or permit,
differing payments to be made to Non-Defaulting Lenders as opposed to
Defaulting Lenders.
Section 9.6 Amendments and Waivers. Neither this Agreement
nor any other Loan Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Company and the Requisite Lenders;
provided that no such change, waiver, discharge or termination shall,
without the consent of each Lender affected thereby, (A) extend the Tranche
A Term Maturity Date, the Tranche B Term Maturity Date or the Revolving
Credit Maturity Date (it being understood that any waiver of the
application of any prepayment of or collateralization for or the method of
application of any prepayment to the amortization of the Loans or other
Obligations shall not constitute any such extension), or reduce the rate or
extend the time of payment of interest, commissions or fees (other than as
a result of waiving the applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or increase the
Commitment of any Lender over the amount thereof then in effect (it being
understood that a waiver of any Potential Event of Default or Event of
Default or of a mandatory reduction in the Total Commitments or a waiver of
the type contemplated in the second next preceding parenthetical shall not
constitute a change in the terms of any Commitment of any Lender), (B)
release or permit the release of all or substantially all of the Collateral
or release any Guarantor Subsidiary from its Guarantor Subsidiary Guarantee
(in each case except as expressly provided in the Loan Documents),
(C) amend, modify or waive any provision of this Section, (D) reduce the
percentage specified in, or otherwise modify, the definition of Requisite
Lenders, Credit Exposure Amount, A Credit Exposure Amount, B Credit
Exposure Amount, Tranche A Funding Percentage, Tranche B Funding Percentage
or Adjusted Revolving Loan Percentage, (E) consent to the assignment or
transfer by the Company of any of its rights and obligations under this
Agreement or (F) amend, modify or waive the provisions of the proviso to
paragraph (a) of subsection 2.2.1; and provided, further, that
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no such change, waiver, discharge or termination shall amend, modify or
waive any of the terms contained in subsection 2.1.5 or Section 2.7 or the
definition of Scheduled Term Loans Principal Payment (x) without the
consent of the Required A Lenders (to the extent that, in any such case,
such amendment, modification or waiver would reduce, or change the time of
payment of, any amounts received by Lenders owning Tranche A Term Loans) or
(y) without the consent of the Required B Lenders (to the extent that, in
any case, such amendment, modification or waiver would reduce, or change
the time of payment of, any amount received by Lenders owning Tranche B
Term Loans); and provided, further, that no such change, waiver, discharge
or termination shall, without the prior written consent of (x) the
Required B Lenders, effect (i) any increase in the total outstanding amount
of the Tranch B Term Loans or the maximum aggregate amount of the Tranche B
Commitments of all Lenders or (ii) any subordination in right of payment
with respect to the principal or interest or other Obligations in respect
of the Tranche B Term Loans or any subordination in the rights of Lenders
holding Tranche B Term Loans to receive proceeds of Collateral pursuant to
the Collateral Trust Agreement on a ratable basis with all other Secured
Parties (as defined in the Collateral Trust Agreement) and (y) the Required
A Lenders, effect any subordination in right of payment with respect to any
Obligations (other than principal and interest and other Obligations in
respect of the Tranche B Term Loans) or any subordination in the rights of
Lenders holding Obligations (other than principal and interest and other
Obligations in respect of the Tranche B Term Loans) to receive proceeds of
Collateral pursuant to the Collateral Trust Agreement on a ratable basis
with all other Secured Parties. Any amendment, modification, termination
or waiver of any of the provisions contained in ARTICLE III shall be
effective only if evidenced by a writing signed by or on behalf of the
Administrative Agent and the Requisite Lenders. No amendment,
modification, termination or waiver of any provision of ARTICLE VIII hereof
shall be effective without the written concurrence of the Administrative
Agent. The Administrative Agent may, but shall have no obligation to, with
the concurrence of any Lender, execute amendments, modifications, waivers
or consents on behalf of such Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Company in any case
shall entitle the Company to any further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this Section 9.6 shall be binding upon
each holder of the Notes at the time
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outstanding, each future holder of the Notes, and, if signed by the
Company, on the Company.
Section 9.7 Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular action
or condition is prohibited by any of such covenants, the fact that it would
be permitted by an exception to, or be otherwise outside the limitation of,
another covenant shall not avoid the occurrence of an Event of Default or
Potential Event of Default if such action is taken or condition exists.
Section 9.8 Change in Accounting Principles; Fiscal Year or
Tax Laws. If (A) any change in the accounting principles under GAAP used
in preparation of the financial statements referred to in Section 4.3
hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants
(or successors thereto or agencies with similar functions) result in a
change in the method of calculation of financial covenants, standards or
terms found in ARTICLES I, V and VI hereof, or (B) there is a material
change in federal tax laws which materially affects the Company's ability
to comply with the financial covenants, standards or terms found in
ARTICLE I, V or VI hereof, the parties hereto agree to enter into
negotiations in order to amend such provisions so as to equitably reflect
such changes with the desired result that the criteria for evaluating the
Company's financial condition shall be the same after such changes as if
such changes had not been made; provided that, unless and until an
agreement is reached following such negotiations, such provisions shall
remain unchanged and in full force and effect.
Section 9.9 Notices. Unless otherwise provided herein, any
notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telecopied, telexed or
sent by United States mail and shall be deemed to have been given (A) when
delivered in person or a legible copy is received by telecopy or telex or
(B) four Business Days after deposit in the United States mail, registered
or certified, with postage prepaid and properly addressed; provided that
notices to the Administrative Agent shall not be effective until received
by the Administrative Agent. For the purposes hereof, the address of each
of the parties hereto (until notice of a change thereof is delivered as
provided in this Section 9.9) shall be set forth under such party's name on
the signature pages hereto.
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Section 9.10 Survival of Warranties and Certain Agreements.
Notwithstanding anything in this Agreement or implied by law to the
contrary and without limiting any survival provision set forth in any
Collateral Document, the agreements of the Company set forth in subsections
2.2.8, 2.2.9, 2.8.4, 2.9.2, 2.9.5, 2.9.7 and 2.9.9 and Sections 9.2 and 9.3
and the agreements of Lenders set forth in subsections 2.9.7, 2.9.8,
2.9.11, 8.2.3 and 9.1.2 (last sentence only) and Sections 8.4, 9.4 and 9.5
shall survive the payment of the Loans and the Notes, the cancellation or
expiration of the Letters of Credit and the reimbursement of any amount
drawn thereunder and the termination of this Agreement.
Section 9.11 Failure or Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of any Lender or any holder of
any Note in the exercise of any power, right or privilege under any Loan
Document shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under any Loan Document are cumulative to and
not exclusive of, any rights or remedies otherwise available.
Section 9.12 Severability. In case any provision in or
obligation under this Agreement or the Notes shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not, to the extent
permitted by law, in any way be affected or impaired thereby.
Section 9.13 Obligations Several; Independent Nature of the
Lenders' Rights. The obligation of each Lender hereunder is several, and
no Lender shall be responsible for the obligation or commitment of any
other Lender hereunder. Nothing contained in this Agreement and no action
taken by Lenders pursuant hereto shall be deemed to constitute Lenders to
be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall be
a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall
not be necessary for any other Lender to be joined as an additional party
in any proceeding for such purpose. Notwithstanding the foregoing, each
Lender agrees that no Lender shall have any right individually to realize
upon the security granted by the
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Collateral Documents, it being understood and agreed that such rights and
remedies may only be exercised by the Administrative Agent for the benefit
of the Lenders.
Section 9.14 Headings. Section and subsection headings in
this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or be
given any substantive effect.
Section 9.15 Applicable Law. THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR
RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY
CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION
NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE
UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
Section 9.16 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE COMPANY WITH RESPECT TO THIS
AGREEMENT, ANY NOTE OR ANY LETTER OF CREDIT MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY ACCEPTS (TO THE
MAXIMUM EXTENT PERMITTED BY LAW) FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT SUBJECT TO RIGHT OF
APPEAL. THE COMPANY DESIGNATES AND APPOINTS THE PRENTICE HALL CORPORATION
SYSTEM, INC., 500 CENTRAL AVENUE, ALBANY, NEW YORK 12206 AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY IRREVOCABLY AGREEING IN
WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY THE COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO THE COMPANY AT ITS ADDRESS PROVIDED IN THE APPLICABLE
SIGNATURE PAGE HERETO, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE
LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE
OF PROCESS. IF ANY AGENT APPOINTED BY THE COMPANY REFUSES TO ACCEPT
SERVICE, THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER
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PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY LENDER TO BRING
PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
Section 9.17 Confidentiality. Subject to Section 9.1, the
Lenders shall hold all non-public information obtained pursuant to the
requirements of this Agreement which has been identified as such by the
Company in accordance with their customary procedures for handling
confidential information of this nature and in accordance with safe and
sound commercial practices and in any event, subject to Section 9.1, may
make disclosure reasonably required by any bona fide prospective or current
transferee or Participant in connection with any Note or participation
therein or in any Obligation or as required or requested by any
governmental agency or representative thereof or pursuant to legal process;
provided that, unless specifically prohibited by applicable law or court
order, each Lender shall notify the Company of any request by any
governmental agency or representative thereof (other than any such request
in connection with an examination of the financial condition of such Lender
by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information so that either or both
of them may seek an appropriate protective order; and provided, further,
that in no event shall any Lender be obligated or required to return any
materials furnished by the Company or any of its Subsidiaries.
Section 9.18 Counterparts; Effectiveness. This Agreement and
any amendments, waivers, consents or supplements may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
an original, but all such counterparts together shall constitute but one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto, and
written or telephonic notification of such execution and authorization of
delivery thereof has been received by the Company and the Administrative
Agent and all applicable conditions to such effectiveness have been
satisfied.
Section 9.19 Determinations Pursuant to Collateral Documents.
In each circumstance where, under any provision of a Collateral Document,
the Collateral Trustee shall have the right to grant or withhold any
consent, exercise any remedy, make any determination or direct any action
under such Collateral Document, the Collateral Trustee shall act in respect
of such consent, exercise of remedies, determination or
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action, as the case may be, only with the consent of or at the direction of
the Requisite Lenders; provided that no consent of any party shall be
required with respect to any consent, determination or other matter that
is, in the reasonable judgment of the Collateral Trustee, ministerial or
administrative in nature. In each circumstance where any consent of or
direction from the Requisite Lenders is required, the Collateral Trustee
shall send to the Lenders a notice setting forth a description in
reasonable detail of the matter as to which consent or direction is
requested and the Collateral Trustee's proposed course of action with
respect thereto. In the event the Collateral Trustee shall not have
received a response from any Lender within ten Business Days after the
giving of such notice, such Lender shall be deemed to have agreed to the
course of action proposed by the Collateral Trustee. Each Lender hereby
authorizes the Collateral Trustee to execute and deliver one or more
intercreditor agreements of the character contemplated in the Receivables
Term Sheet.
Section 9.20 Certain Obligations of Company. Nothing in this
Agreement shall be construed to limit any obligation of the Company set
forth in any Collateral Document.
Section 9.21 Waiver of Jury Trial. Each of the Company and
the Lenders hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or related to any of the Loan Documents or the
actions of the Administrative Agent, any Arranger and any Lender in the
negotiation, administration, performance or enforcement hereof and thereof.
Section 9.22 Defaulting Lenders.
9.22.1. If any Lender becomes a Defaulting Lender, the Company
shall have the right to replace such Lender (the "Replaced Lender"), in
accordance with the requirements of Section 9.1, if no Event of Default or
Potential Event of Default will exist after giving effect to such
replacement, with one or more other Lenders or Purchasing Lenders, none of
whom shall constitute a Defaulting Lender at the time of such replacement
(collectively, the "Replacement Lender"), reasonably acceptable to the
Administrative Agent; provided that (A) at the time of any replacement
pursuant to this Section 9.22, the Replacement Lender shall execute and
deliver one or more Registered Transfer Supplements pursuant to Section 9.1
(and with the fee payable pursuant to said Section 9.1 to be paid by the
Replacement Lender) pursuant to which the Replacement Lender shall acquire
all of the
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Commitments and outstanding Loans of, and participations in Letters of
Credit by, the Replaced Lenders and, in connection therewith, shall pay to
(1) the Replaced Lender in respect thereof an amount equal to the sum of
(x) an amount equal to the principal of, and all accrued interest on, all
outstanding Loans of the Replaced Lender, (y) an amount equal to all
unreimbursed drawings that have been funded by (and not reimbursed to) such
Replaced Lender, together with all then unpaid interest with respect
thereto at such time and (z) an amount equal to all accrued, but
theretofore unpaid, fees owing to the Replaced Lender pursuant to
Section 2.6 and subsection 2.2.6, (2) the Fronting Bank an amount equal to
such Replaced Lender's Adjusted Revolving Loan Percentage of any then
unreimbursed drawings under Letters of Credit to the extent such amount was
not theretofore funded by such Replaced Lender and (3) Bankers an amount
equal to such Replaced Lender's Adjusted Revolving Loan Percentage of any
Swing Line Loans as to which Bankers has exercised the option set forth in
subsection 2.12.5 to the extent such amount was not theretofore funded by
such Replaced Lender, and (B) all obligations of the Company owing to the
Replaced Lender (other than those specifically described in clause (A)
above in respect of which the transfer purchase price has been, or is
concurrently being, paid) shall be paid in full to such Replaced Lender
concurrently with such replacement.
9.22.2. Upon the execution of the respective Registered
Transfer Supplements, the payment of amounts referred to in clauses (A) and
(B) of subsection 9.22.1 and, if so requested by the Replacement Lender,
delivery to the Replacement Lender of the appropriate Note or Notes
executed by the Company, (A) the Replacement Lender shall become a Lender
hereunder and the Replaced Lender shall cease to constitute a Lender
hereunder, except with respect to indemnification provisions under this
Agreement, which shall survive as to such Replaced Lender, and (B) the
Adjusted Revolving Loan Percentages of the Lenders shall be automatically
adjusted at such time to give effect to such replacement (and to give
effect to the replacement of a Defaulting Lender with one or more Non-
Defaulting Lenders).
9.22.3. Nothing herein shall relieve any Defaulting Lender of
its liability to the Company for all damages suffered by the Company as a
result of the Lender Default of such Defaulting Lender.
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Section 9.23 Lenders' ERISA Matters.
9.23.1. Lenders' Representations and Warranties. Except as
otherwise provided in subsection 9.23.2, each Lender and each Transferee,
solely with respect to itself, severally represents and warrants that one
or more of the following is true with respect to all of the funds used to
make or purchase any interest in any Loan (or one or more of the following
is true with respect to each portion of the funds used to make or purchase
such interest in such Loan if such funds are from more than one source):
(i) no part of the funds to be used by it constitutes
under the Internal Revenue Code or ERISA the assets of any Plan; or
(ii) (A) the funds to be used by it constitute, under the
Internal Revenue Code or ERISA, the assets of an insurance company
pooled separate account, as such term is used in Prohibited
Transaction Class Exemption 90-1 issued by the U.S. Department of
Labor, or a "collective investment fund," as defined in Section IV of
Prohibited Transaction Class Exemption 91-38 issued by the U.S.
Department of Labor, in which a Plan has an interest, and (B) such
Loan or interest therein is, and the subsequent holding of the Note
or any agreement related thereto shall at all times thereafter be,
entitled to full relief under Prohibited Transaction Class Exemption
90-1 or 91-38, as applicable; or
(iii) (A) the funds to be used by it for any Loan or
interest therein which constitute, under the Internal Revenue Code or
ERISA, the assets of any Plan are invested in an investment fund
which is managed by a "Qualified Professional Asset Manager" as such
term is defined in Prohibited Transaction Class Exemption 84-14
issued by the U.S. Department of Labor, and (B) such Loan or interest
therein is and the subsequent holding of the Note or any agreement
related thereto shall at all times thereafter be, exempt under
Prohibited Transaction Class Exemption 84-14 to the fullest extent
provided therein; or
(iv) the assets to be used by it constitute the assets of an
investment company registered under the Investment Company Act of
1940.
9.23.2. General Account Assets. A Lender or Transferee which
is an insurance company subject to state regulation that is making or
purchasing an interest in a Loan
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with General Account Assets represents with respect to the portion of its
assets constituting General Account Assets, in lieu of making a
representation under subsection 9.23.1 with respect thereto, that one of
the following is true:
(i) no part of the General Account Assets used to make or
purchase such interest in a Loan will be from assets allocated to a
segment of its general account in which one or more Plans has any
interest, other than an interest which will not result in the Note
relating thereto being deemed to be the assets of any such Plan; or
(ii) such Lender or Transferee is an "insurance company"
and such General Account Assets are assets of an "insurance company
general account" as defined in Section V of Proposed Class Exemption
for Certain Transactions Involving Insurance Company General Accounts
issued by the U.S. Department of Labor, 59 Federal Register 43134,
August 22, 1994 (Application No. D-9662) ("Proposed Prohibited
Transaction Exemption D-9662") and such Loan or interest therein is,
and shall at all times thereafter satisfy the requirements to be and
shall be exempt under the Proposed Prohibited Transaction Exemption
D-9662 to the fullest extent provided therein (assuming for this
purpose that the Proposed Prohibited Transaction Exemption D-9662 was
granted as a final prohibited transaction exemption by the U.S.
Department of Labor on the date and in the form it was proposed).
9.23.3. Representations of Transferees. Each Person that
becomes a Transferee hereunder shall be deemed to make, effective upon the
acceptance of any assignment of an interest hereunder or the entering into
of any participation agreement contemplated in subsection 9.1.2, the
representations and warranties set forth in subsection 9.23.1 or, with
respect to General Account Assets used to acquire its interest or
participation, subsection 9.23.2. Such deemed representation shall be
effective against, and binding on, such Transferee to the same extent as if
such Transferee had executed an original counterpart of this Agreement.
9.23.4. Additional ERISA Representations. Each Lender that
now or hereafter makes or maintains any Loan with any assets of any Plan
(i) represents and warrants that it has evaluated for itself the merits of
making or maintaining such Loan; has not solicited and has not received
from the Company, MS Group or any of their Affiliates, any evaluation or
other investment advice on any basis in respect of the advisability of
making or maintaining such Loan; and is not relying and has
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not relied on the Company, MS Group or any of their Affiliates for any
investment advice with respect to making or maintaining such Loan in any
manner that would cause the Company, MS Group or any of their Affiliates to
become a "party in interest" (within the meaning of ERISA) or a
"disqualified person" (within the meaning of the Internal Revenue Code) in
connection with making or maintaining such Loan and (ii) acknowledges and
confirms that none of the Company, MS Group or any of their Affiliates is
acting as a "fiduciary" (within the meaning of ERISA, the Internal Revenue
Code or any other applicable law or any rulings or regulations thereunder)
for such Lender in connection with making or maintaining such Loan.
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WITNESS the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
BORROWER:
FORT HOWARD CORPORATION
By: /s/ R. Michael Lempke
Print Name: R. Michael Lempke
Title: Vice President and
Treasurer
Notice Address:
Fort Howard Corporation
1919 South Broadway
Green Bay, Wisconsin 54304
Attention:
Telephone:
Telecopier:
BANKERS TRUST COMPANY,
Individually, and as Arranger
and Administrative Agent
By: /s/ Mary Kay Coyle
Print Name: Mary Kay Coyle
Title: Vice President
Notice Address:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Telecopier: (212) 250-7218
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
Individually, and as Arranger
By: /s/ Barry R. Dunn
Print Name: Barry R. Dunn
Title: Vice President
Notice Address:
Bank of America National Trust
and Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry Dunn
Telephone: (312) 828-3023
Telecopier: (312) 828-3864
CHEMICAL BANK,
Individually, and as Arranger
By: /s/ C. C. Wardell
Print Name: C. C. Wardell
Title: Managing Director
CHRISTIANA BANK OG KREDITKASSE,
Lender
By: /s/ Carl P. Svendsen
Print Name: Carl P. Svendsen
Title: First Vice President
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
Lender
By: /s/ Brian O'Leary, Sean Mounier
Print Name: Brian O'Leary, Sean Mounier
Title: Vice President, First Vice
President
CREDIT SUISSE,
Lender
By: /s/ Charles R. Shaw
Print Name: Charles R. Shaw
Title: Member of Senior Management
By: /s/ Lynn Allegaert
Print Name: Lynn Allegaert
Title: Member of Senior Management
CRESCENT/MACH 1 PARTNERS, L.P.
By its attorney-in fact
CRESCENT CAPITAL CORPORATION
By: /s/ J. Driscoll
Print Name: J. Driscoll
Title: Vice President
THE DAI-ICHI KANGYO BANK,
LTD., Chicago Branch,
Lender
By: /s/ Masami Tsuboi
Print Name: Masami Tsuboi
Title: Vice President
DRESDNER BANK AG,
Chicago & Grand Cayman Branches,
Lender
By: /s/ John H. Schaus
Print Name: John H. Schaus
Title: First Vice President
By: /s/ E. Ronald Holder
Print Name: E. Ronald Holder
Title: Senior Vice President
THE FIRST NATIONAL BANK OF
CHICAGO,
Lender
By: /s/ Jerry Kane
Print Name: Jerry Kane
Title: Senior Vice President
FIRSTRUST BANK,
Lender
By: /s/ Edward D'Ancona
Print Name: Edward D'Ancona
Title: Vice President
THE HOKKAIDO TAKUSHOKU BANK, LTD.,
Lender
By: /s/ Kathleen M. Sweeney
Print Name: Kathleen M. Sweeney
Title: Senior Vice President and
Manager
THE LONG TERM CREDIT BANK OF
JAPAN, LTD.,
Lender
By: Richard E. Stahl
Print Name: Richard E. Stahl
Title: Senior Vice President and
Joint General Manager
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ R. Douglas Henderson
Print Name: R. Douglas Henderson
Title: Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO,
INC.
By: /s/ R. Douglas Henderson
Print Name: R. Douglas Henderson
Title: Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO
II, INC.
By: /s/ R. Douglas Henderson
Print Name: R. Douglas Henderson
Title: Authorized Signatory
SENIOR STRATEGIC INCOME FUND,
INC.
By: /s/ R. Douglas Henderson
Print Name: R. Douglas Henderson
Title: Authorized Signatory
THE MITSUBISHI BANK, LTD.
Lender
By: /s/ Hiroaki Fuchida
Print Name: Hiroaki Fuchida
Title: Vice President, Manager
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
Lender
By: /s/ David Common
Print Name: David Common
Title: Vice President
NATIONSBANK, N.A. (CAROLINAS),
Lender
By: /s/ Michael O. Lincoln
Print Name: Michael O. Lincoln
Title: Senior Vice President
THE NIPPON CREDIT BANK, LTD.,
Lender
By: /s/ Yasuhide Yahiro
Print Name: Yasuhide Yahiro
Title: Assistant Vice President
ORIX USA CORPORATION
Lender
By: /s/ Masaaki Tashiro
Print Name: Masaaki Tashiro
Title: Deputy President
PILGRIM PRIME RATE TRUST,
Lender
By: /s/ Michael D. Hatley
Print Name: Michael D. Hatley
Title: Assistant Portfolio Manager
PRIME INCOME TRUST,
Lender
By: /s/ Rajesh K. Gupta
Print Name: Rajesh K. Gupta
Title: Senior Vice President
SENIOR DEBT PORTFOLIO,
By: Boston Management and
Research, as Investment
Advisor
By: /s/ Barbara Campbell
Print Name: Barbara Campbell
Title: Assistant Treasurer
SOCIETE GENERALE,
Lender
By: /s/ Seth F. Asofsky
Print Name: Seth F. Asofsky
Title: Vice President
TORONTO-DOMINION BANK,
Lender
By: /s/ Kimberly Burleson
Print Name: Kimberly Burleson
Title: Mgr. or Admin.
UNION BANK OF FINLAND, LTD.,
Grand Cayman Branch
Lender
By: /s/ Pentti Mansukoski
Print Name: Pentti Mansukoski
Title: Senior Vice President
By: /s/ Eric I. Mann
Print Name: Eric I. Mann
Title: Vice President
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST,
Lender
By: /s/ Jeffrey W. Maillet
Print Name: Jeffrey W. Maillet
Title: Vice President and
Portfolio Manager
WELLS FARGO BANK,
Lender
By: /s/ Kathleen J. Harrison
Print Name: Kathleen J. Harrison
Title: Vice President
EXHIBIT 4.1
$60,000,000
RECEIVABLES CREDIT AGREEMENT
Dated as of
March 8, 1995,
among
FORT HOWARD CORPORATION
and
BANKERS TRUST COMPANY,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and
CHEMICAL BANK,
as Lenders,
and
BANKERS TRUST COMPANY,
as Administrative Agent
FORT HOWARD CORPORATION
RECEIVABLES CREDIT AGREEMENT
dated as of March 8, 1995
TABLE OF CONTENTS
Heading Page
INTRODUCTION................................ 1
RECITALS.................................... 1
ARTICLE I DEFINITIONS................................. 1
Section 1.1 Certain Defined Terms....................... 1
Section 1.2 Accounting Terms............................ 37
Section 1.3 Other Definitional Provisions;
Anniversaries............................ 37
Section 1.4 Adjustment for Special Reserve.............. 37
Section 1.5 Currency Equivalent Generally............... 37
ARTICLE II COMMITMENTS AND LOANS; NOTES............... 38
Section 2.1 Loans and Notes............................. 38
2.1.1 Loan Commitments............................ 38
2.1.2 Notice of Borrowing......................... 38
2.1.3 Disbursement of Funds....................... 39
2.1.4 Notes....................................... 40
2.1.5 Maturity Date............................... 40
Section 2.2 Total Loan Commitment;
Limitations on Outstanding
Loan Amounts.............................. 40
Section 2.3 Interest on the Loans....................... 40
2.3.1 Rate of Interest............................ 40
2.3.2 Interest Periods............................ 43
2.3.3 Interest Payments........................... 44
2.3.4 Conversion or Continuation.................. 45
2.3.5 Post-Maturity Interest...................... 46
2.3.6 Computation of Interest..................... 46
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Heading Page
Section 2.4 Commissions................................. 46
2.4.1 Commitment Commissions...................... 46
2.4.2 Bankers and Lenders' Commissions............ 47
2.4.3 No Refund of Fees........................... 47
Section 2.5 Prepayments and Payments.................... 47
2.5.1 Voluntary Prepayments....................... 47
2.5.2 Mandatory Prepayments....................... 47
2.5.3 Company's Mandatory Prepayment
Obligation; Application of
Prepayments.............................. 48
2.5.4 Manner and Time of Payment.................. 48
2.5.5 Apportionment of Payments................... 48
2.5.6 Payments on Non-Business Days............... 49
2.5.7 Payment Accounts; Notation of
Payment.................................. 49
Section 2.6 Use of Proceeds............................. 50
2.6.1 The Loans................................... 50
2.6.2 Margin Regulations.......................... 50
Section 2.7 Special Provisions Governing
Adjusted LIBOR Loans..................... 50
2.7.1 Determination of Interest Rate.............. 50
2.7.2 Increased Costs............................. 50
2.7.3 Required Termination and
Prepayment............................... 52
2.7.4 Options of Company.......................... 52
2.7.5 Compensation................................ 53
2.7.6 Quotation of LIBOR.......................... 54
2.7.7 Taxes....................................... 54
2.7.8 Booking of Adjusted LIBOR Loans............. 58
2.7.9 Assumptions Concerning Funding of
Adjusted LIBOR Loans..................... 58
2.7.10 Adjusted LIBOR Loans After an
Event of Default......................... 58
2.7.11 Affected Lender's Obligation to
Mitigate................................. 59
Section 2.8 Capital Requirements........................ 59
Section 2.9 Replacement Rights of Company............... 60
ARTICLE III CONDITIONS TO LOANS......................... 60
Section 3.1 Conditions to Effectiveness of
Agreement................................ 61
Section 3.2 Conditions to the Loans..................... 64
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Heading Page
ARTICLE IV REPRESENTATIONS AND WARRANTIES............. 65
Section 4.1 Organization, Powers, Good
Standing, Business and
Subsidiaries............................. 65
4.1.1 Organization and Powers..................... 65
4.1.2 Good Standing............................... 65
4.1.3 Conduct of Business......................... 66
4.1.4 Subsidiaries................................ 66
Section 4.2 Authorization of Borrowing, etc............. 66
4.2.1 Authorization of Borrowing.................. 66
4.2.2 No Conflict................................. 66
4.2.3 Governmental Consents....................... 67
4.2.4 Binding Obligation.......................... 67
4.2.5 Valid Issuance of Common Stock.............. 67
Section 4.3 Financial Condition......................... 67
Section 4.4 No Adverse Material Change; No
Stock Payments........................... 68
Section 4.5 Title to Properties; Liens.................. 68
Section 4.6 Litigation; Adverse Facts................... 69
Section 4.7 Payment of Taxes............................ 69
Section 4.8 Performance of Agreements................... 69
Section 4.9 Governmental Regulation..................... 70
Section 4.10 Securities Activities....................... 70
Section 4.11 Employee Benefit Plans...................... 70
Section 4.12 Certain Fees................................ 71
Section 4.13 Disclosure.................................. 71
Section 4.14 Patents, Trademarks, etc.................... 72
Section 4.15 Environmental Protection.................... 73
Section 4.16 Security Interests.......................... 74
Section 4.17 Solvency.................................... 74
ARTICLE V AFFIRMATIVE COVENANTS....................... 75
Section 5.1 Financial Statements and Other
Reports.................................. 75
Section 5.2 Corporate Existence, etc.................... 82
Section 5.3 Payment of Taxes and Claims; Tax
Consolidation............................ 82
Section 5.4 Maintenance of Properties;
Insurance................................ 83
Section 5.5 Inspection.................................. 83
Section 5.6 No Further Negative Pledges................. 84
Section 5.7 Compliance with Laws, etc................... 84
Section 5.8 Lender Meeting.............................. 85
-iii-
Heading Page
Section 5.9 Security Interests.......................... 85
Section 5.10 Certain Dispositions of
Collateral............................... 85
Section 5.11 Recapitalization............................ 86
Section 5.12 Collateral Reporting........................ 86
Section 5.13 Cash Collateral............................. 87
ARTICLE VI NEGATIVE COVENANTS.......................... 88
Section 6.1 Indebtedness................................ 88
Section 6.2 Liens....................................... 91
Section 6.3 Investments; Joint Ventures................. 93
Section 6.4 Contingent Obligations...................... 97
Section 6.5 Restricted Junior Payments.................. 98
Section 6.6 Financial Covenants......................... 100
6.6.1 Interest Coverage Ratio..................... 100
6.6.2 Maximum Leverage Ratio...................... 100
Section 6.7 Restriction on Fundamental
Changes.................................. 101
Section 6.8 ERISA....................................... 103
Section 6.9 Restriction on Leases....................... 103
Section 6.10 Sales and Leasebacks........................ 104
Section 6.11 Sale or Discount of Receivables............. 104
Section 6.12 Transactions with Shareholders
and Affiliates........................... 105
Section 6.13 Disposal of Subsidiary Stock................ 105
Section 6.14 Limitation on Capital
Expenditures............................. 106
Section 6.15 Conduct of Business......................... 108
Section 6.16 Amendments or Waivers of Certain
Documents; Prepayments of
Indebtedness............................. 108
Section 6.17 Payment of Cash Interest on
Subordinated Debt........................ 110
ARTICLE VII EVENTS OF DEFAULT........................... 111
Section 7.1 Failure To Make Payments When Due........... 111
Section 7.2 Default in Other Agreements................. 111
Section 7.3 Breach of Certain Covenants................. 111
Section 7.4 Breach of Warranty.......................... 112
Section 7.5 Other Defaults Under Agreement or
Loan Documents........................... 112
-iv-
Heading Page
Section 7.6 Involuntary Bankruptcy;
Appointment of Receiver, etc............. 112
Section 7.7 Voluntary Bankruptcy; Appointment
of Receiver, etc......................... 113
Section 7.8 Judgments and Attachments................... 113
Section 7.9 Dissolution................................. 114
Section 7.10 Unfunded ERISA Liabilities.................. 114
Section 7.11 Withdrawal Liability Under
Multiemployer Plan....................... 114
Section 7.12 Failure of Security......................... 115
Section 7.13 Change in Control........................... 115
ARTICLE VIII THE ADMINISTRATIVE AGENT.................... 116
Section 8.1 Appointment................................. 116
Section 8.2 Powers; General Immunity.................... 117
8.2.1 Duties Specified............................ 117
8.2.2 No Responsibility for Certain
Matters.................................. 117
8.2.3 Exculpatory Provisions...................... 118
8.2.4 Administrative Agent Entitled to
Act as Lender............................ 118
Section 8.3 Representations and Warranties;
No Responsibility for Appraisal
of Creditworthiness...................... 119
Section 8.4 Right to Indemnity.......................... 119
Section 8.5 Registered Holder of Note Treated
as Owner................................. 120
Section 8.6 Resignation by Administrative
Agent.................................... 120
Section 8.7 Collateral Documents........................ 120
Section 8.8 Successor Administrative Agent.............. 121
ARTICLE IX MISCELLANEOUS............................... 121
Section 9.1 Successors and Assigns;
Participations........................... 121
Section 9.2 Expenses.................................... 126
Section 9.3 Indemnity................................... 127
Section 9.4 Set Off..................................... 127
Section 9.5 Ratable Sharing............................. 128
Section 9.6 Amendments and Waivers...................... 129
Section 9.7 Independence of Covenants................... 130
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Heading Page
Section 9.8 Change in Accounting Principles;
Fiscal Year or Tax Laws.................. 130
Section 9.9 Notices..................................... 131
Section 9.10 Survival of Warranties and
Certain Agreements....................... 131
Section 9.11 Failure or Indulgence Not Waiver;
Remedies Cumulative...................... 131
Section 9.12 Severability................................ 132
Section 9.13 Obligations Several; Independent
Nature of the Lenders' Rights............ 132
Section 9.14 Headings.................................... 132
Section 9.15 Applicable Law.............................. 132
Section 9.16 Consent to Jurisdiction and
Service of Process....................... 132
Section 9.17 Confidentiality............................. 133
Section 9.18 Counterparts; Effectiveness................. 133
Section 9.19 Determinations Pursuant to
Collateral Documents..................... 134
Section 9.20 Certain Obligations of Company.............. 134
Section 9.21 Waiver of Jury Trial........................ 134
Section 9.22 Lenders' ERISA Matters...................... 134
9.22.1 Lenders' Representations and
Warranties............................... 134
9.22.2 General Account Assets...................... 135
9.22.3 Representations of Transferees.............. 136
9.22.4 Additional ERISA Representations............ 136
SIGNATURE PAGES ............................................ 138
SCHEDULES
A SUBSIDIARIES
B LENDERS' COMMITMENTS
C EXISTING INDEBTEDNESS
D EXISTING LIENS
E EXISTING INVESTMENTS
F CREDIT FACILITIES TO BE TERMINATED ON THE CLOSING
DATE
G CONTINGENT OBLIGATIONS
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTE
IV FORM OF COMPLIANCE CERTIFICATE
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V FORM OF OPINION OF SHEARMAN & STERLING, COUNSEL TO
FORT HOWARD
VI FORM OF OPINION OF JAMES W. NELLEN, II, ESQ.,
COUNSEL TO FORT HOWARD
VII FORM OF OPINION OF LOCAL COUNSEL TO FORT HOWARD
VIII FORM OF OFFICER'S CLOSING CERTIFICATE
IX FORM OF COMPANY RECEIVABLES PLEDGE AGREEMENT
X FORM OF REGISTERED TRANSFER SUPPLEMENT
XI FORM OF LETTER ESCROW AND SECURITY AGREEMENT
XII FORM OF OFFICER'S FUNDING DATE CERTIFICATE
XIII FORM OF OFFICER'S SECTION 5.1(iv) CERTIFICATE
XIV FORM OF OFFICER'S SECTION 5.1(xiv) CERTIFICATE
XV FORM OF STATUS CERTIFICATE
XVI FORM OF BORROWING BASE CERTIFICATE
XVII FORM OF CASH COLLATERAL AGREEMENT
XVIII FAIR VALUE DETERMINATION PROCEDURES
-vii-
RECEIVABLES CREDIT AGREEMENT
RECEIVABLES CREDIT AGREEMENT, dated as of March 8,
1995, by and among FORT HOWARD CORPORATION, a Delaware
corporation (the "Company"), BANKERS TRUST COMPANY ("Bankers"),
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BOA")
and CHEMICAL BANK, as lenders (each, together with its
successors and assigns, a "Lender"), and BANKERS TRUST COMPANY,
as administrative agent for the Lenders (in such capacity and
together with its successors in such capacity, the
"Administrative Agent").
R E C I T A L S:
A. The parties hereto desire to provide for, among
other things, the Company to borrow on a term basis the Loans
(as hereinafter defined) in an aggregate principal amount not
to exceed $60,000,000.
B. The Lenders desire that the Obligations (as
hereinafter defined) be secured by a security interest in
certain Receivables (as hereinafter defined) owned by the
Company.
A G R E E M E N T:
The Company, the Lenders and the Administrative Agent
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. The following
terms used in this Agreement shall have the following meanings:
"ABR Loan" means any Loan bearing interest at a rate
determined by reference to ABR in accordance with the
provisions of subsection 2.3.1.
"ABR Spread" means the percent per annum from time to
time in effect pursuant to paragraph (d) of subsection 2.3.1.
"Adjusted Consolidated Net Income" means, for any
period, Consolidated Net Income during such period, plus
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(minus) the amount of depreciation, depletion, amortization of
intangibles, deferred taxes, accreted and zero coupon bond
interest and other non-cash expenses (income), losses (gains)
or charges (credits) that, pursuant to GAAP, were deducted
(added) in determining such Consolidated Net Income.
"Adjusted LIBOR" means, for any Interest Rate
Determination Date, the rate per annum (rounded upward to the
next higher one hundredth of one percent) obtained by dividing
(A) LIBOR for such Interest Rate Determination Date by (B) a
percentage equal to 100% minus the stated maximum rate, as of
such Interest Rate Determination Date, of all reserves required
to be maintained against "Eurocurrency Liabilities" as
specified in Regulation D (or against any other category of
liabilities specified in Regulation D which includes deposits
by reference to which the interest rate on Adjusted LIBOR Loans
is determined or any category of extensions of credit or other
assets specified in Regulation D which includes loans by a non-
United States office of any Lender to United States residents).
"Adjusted LIBOR Borrowing" means a Borrowing
comprised of Adjusted LIBOR Loans.
"Adjusted LIBOR Loan" means any Loan bearing interest
at a rate determined by reference to Adjusted LIBOR in
accordance with the provisions of subsection 2.3.1.
"Administrative Agent" has the meaning assigned to
that term in the introduction to this Agreement.
"Affected Lender" means any Lender affected by any of
the events described in subsection 2.7.2 or subsection 2.7.3.
"Affiliate", as applied to any Person, means any
other Person directly or indirectly controlling, controlled by,
or under common control with such Person. For the purposes of
this definition, "control" (including with correlative
meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or
otherwise. No Lender or parent or Subsidiary of any Lender
shall be treated as an Affiliate of the Company solely by
virtue of its being a Lender or a parent or Subsidiary of a
Lender.
-3-
"Agreement" means this receivables credit agreement
as from time to time in effect.
"Alternate Base Rate" or "ABR" means, for any day, a
rate per annum (rounded upwards, if necessary, to the next 1/16
of 1%) equal to the greatest of (A) the Prime Rate in effect on
such day, (B) the Base CD Rate in effect on such day plus 1%
and (C) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. For purposes hereof, the term "Base CD Rate"
means the sum of (A) the product of (1) the Three-Month
Secondary CD Rate multiplied by (2) Statutory Reserves and
(B) the Assessment Rate. The term "Three-Month Secondary CD
Rate" means, for any day, the secondary market rate for three-
month certificates of deposit reported as being in effect on
such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public
information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day) or, if such rate
shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations
for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m.,
New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected
by it. The term "Federal Funds Effective Rate" means, for any
day, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by the Federal funds broker, as published on the next
succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by
it. If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Base CD Rate
or the Federal Funds Effective Rate or both for any reason,
including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms
thereof, the Alternate Base Rate shall be determined without
regard to clause (B) or (C), or both, of the first sentence of
this definition, as appropriate, until the circumstances giving
rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the
-4-
Three-Month Secondary CD Rate or the Federal Funds Effective
Rate shall be effective on the effective date of such change in
the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"Applicable Category" means, at any date of
determination thereof, the category in the table appearing in
paragraph (d) of subsection 2.3.1 having the lowest spreads and
which, as of the last day of the fiscal quarter of the Company
immediately preceding such date of determination, is applicable
to the Company based upon both Ratio 1 and Ratio 2 for the
period of four consecutive fiscal quarters of the Company
ending on such last day.
"Arrangers" has the meaning assigned to such term in
the Senior Credit Agreement as in effect on the date hereof.
"Assessment Rate" means for any date the annual rate
most recently estimated by Bankers as the then-current net
annual assessment rate that will be employed in determining
amounts payable by Bankers to the Federal Deposit Insurance
Corporation (or any successor) for insurance by such
Corporation (or such successor) of time deposits made in
Dollars at Bankers' domestic offices.
"Asset Sale" has the meaning assigned to such term in
the Senior Credit as in effect on the date hereof.
"Average Life to Stated Maturity" means, with respect
to any Indebtedness, as at any date of determination thereof,
the quotient obtained by dividing (A) the sum of the products
of (1) the number of years from such date to the date or dates
of each successive scheduled principal payment (including,
without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (2) the amount of each such
principal payment by (B) the sum of all such principal
payments.
"Bankers" means Bankers Trust Company, in its
individual capacity.
"Bankruptcy Code" means Title 11 of the United States
Code entitled "Bankruptcy", as now and hereafter in effect, or
any successor statute.
"Base Annual Capex Amount" has the meaning assigned
to that term in subsection 6.14.3.
-5-
"Board" means the Board of Governors of the Federal
Reserve System of the United States.
"Borrowing" means the borrowing of Loans hereunder.
"Borrowing Base" means, as at any time, an amount
equal to (i) the aggregate amount of Eligible Receivables (as
reflected in the most recent Borrowing Base Certificate
delivered to the Administrative Agent, pursuant to
Section 5.12, prior to such time), minus (ii) 25% of such
aggregate amount, minus (iii) the Permitted Lien Deduction
Amount, minus (iv) the Additional Reserve, if any, as at such
time. As used herein, "Additional Reserve" means, as at any
time, an amount that, (x) on the basis of any increase (as
compared to the historical levels as of the Closing Date)
(other than a de minimis increase) in the aggregate amounts or
ratios of defaulting or delinquent Receivables, dilutions or
liabilities of the Company to its customers that may be
asserted against the Receivables or any other change (other
than a de minimis change) in the characteristics of Receivables
or Eligible Receivables or the speed of collections or similar
applicable circumstances deemed relevant by the Administrative
Agent in its reasonable judgment, the Administrative Agent has
determined (after giving effect to the deduction referred to in
clause (ii) above, the deductions referred to in the definition
of "Eligible Receivable" and the amount then on deposit,
pursuant to Section 5.13, in the Cash Collateral Account) is
required to be deducted from the Borrowing Base as at such time
in order to insure that the collections received from time to
time shall suffice for the payment hereunder in a timely
fashion of the principal of and interest on the Loans and all
other amounts then or within the following month due hereunder.
"Borrowing Base Certificate" means the certificates
of the Company concerning the Company's Borrowing Base, which
certificate shall be substantially in the form of Exhibit XVI
annexed hereto, with such changes and schedules attached
thereto as the Administrative Agent may from time to time
reasonably require.
"Business Day" means (A) for all purposes other than
as covered by clause (B) below, any day excluding Saturday,
Sunday and any day which is a legal holiday under the laws of
the State of New York or is a day on which banking institutions
located in such State are authorized or required by law or
other governmental action to close and (B) with respect to all
notices, determinations, fundings and payments in connection
with LIBOR, any day which is a Business Day described in
-6-
clause (A) and which is also a day for trading by and between
banks in Dollar deposits in the applicable London interbank
market.
"Capex Carryover Amount" has the meaning assigned to
that term in subsection 6.14.5.
"Capital Expenditures" means, in respect of any
Person, (A) expenditures (whether paid in cash or accrued as a
liability and including, without limitation, interest which is
required to be capitalized under GAAP) by such Person which, in
conformity with GAAP, are required to be included in "additions
to property, plant or equipment" or similar items reflected in
a statement of changes in financial position of such Person and
(B) to the extent not included in clause (A) above, any
Indebtedness (whether or not recourse to such Person and
whether or not assumed or guaranteed by such Person) secured by
any asset acquired by such Person pursuant to any expenditure
of the type described in clause (A) above, or owing by any
entity acquired by such Person pursuant to any expenditure of
the type described in clause (A) above (it being understood
that each item covered in this clause (B) shall be deemed
incurred as of the date of the applicable acquisition);
provided that any Indebtedness referred to in this clause (B)
owing by an entity acquired by such Person that is not a Wholly
Owned Subsidiary of such Person shall only be included in an
amount equal to the product of (1) such Person's direct or
indirect percentage of equity ownership in such entity at the
time such Indebtedness is incurred or deemed incurred and
(2) the amount of such Indebtedness.
"Capital Lease", as applied to any Person, means any
lease of any property (whether real, personal or mixed) by such
Person as lessee which, in conformity with GAAP, is accounted
for as a capital lease on the balance sheet of such Person.
"Cash" means money, currency or a credit balance in a
Deposit Account.
"Cash Collateral Account" means that certain cash
collateral account of the Company established and maintained
pursuant to the Cash Collateral Agreement.
"Cash Collateral Agreement" means the Cash Collateral
Agreement substantially in the form of Exhibit XVII annexed
hereto, executed and delivered by the Company, as such
agreement may be amended, supplemented or otherwise modified
from time to time in accordance herewith or therewith.
-7-
"Cash Equivalents" means (A) marketable direct
obligations issued or unconditionally guaranteed by the United
States Government or issued by any agency thereof and backed by
the full faith and credit of the United States of America, in
each case maturing within one year from the date of acquisition
thereof, (B) marketable direct obligations issued by any state
of the United States of America or any political subdivision of
any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at
the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., (C) commercial paper maturing no more than one
year from the date of creation thereof and, at the time of
acquisition, having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service,
Inc., (D) certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition thereof
issued by any Lender or by any commercial bank organized under
the laws of the United States of America or any state thereof
or the District of Columbia having combined capital and surplus
of not less than $250,000,000, (E) Eurodollar time deposits
having a maturity of less than one year purchased from any
Lender directly (whether such deposit is with such Lender or
any other Lender hereunder) and (F) repurchase agreements and
reverse repurchase agreements with any Lender or any primary
dealer of United States government securities relating to
marketable direct obligations issued or unconditionally
guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the
date of acquisition thereof; provided that the terms of such
agreements comply with the guidelines set forth in the Federal
Financial Institutions Examination Council Supervisory
Policy--Repurchase Agreements of Depository Institutions With
Securities Dealers and Others, as adopted by the Comptroller of
the Currency on October 31, 1985 (the "Supervisory Policy")
and, in the case of a repurchase agreement with a primary
dealer, the Company shall take possession of the obligations
subject to such arrangement.
"Cash Release Request" has the meaning assigned to
that term in Section 5.13 of this Agreement.
"CG&R" means Cahill Gordon & Reindel, as counsel for
the Lenders in connection with this Agreement and the
transactions contemplated hereby, and any successor counsel
thereto.
-8-
A "Change in Control" shall be deemed to have
occurred if (A) any person or group (within the meaning of Rule
13d-5 of the Securities and Exchange Act of 1934, as in effect
on the date hereof) other than (1) The Morgan Stanley Leveraged
Equity Fund II, L.P. ("MSLEF II"), MS Group, Fort Howard Equity
Investors L.P., Fort Howard Equity Investors II, L.P. and their
respective general or limited partners and/or Affiliates or
(2) any employee benefit plan of the Company or of any of its
Affiliates shall become the beneficial owner of shares
representing 25% or more of any outstanding class of capital
stock having ordinary voting power in the election of directors
of the Company or (B) there shall occur during any period after
the Closing Date a change in the Board of Directors of the
Company pursuant to which the individuals who constituted the
Board of Directors of the Company at the beginning of such
period (together with any other director whose election by the
Board of Directors of the Company (or whose nomination by the
Board of Directors for election by the stockholders of the
Company) was approved by a vote of at least a majority of the
directors then in office who either were directors at the
beginning of such period or whose election was previously so
approved or by a duly authorized committee of the Board of
Directors (which committee was designated by at least a
majority of directors then in office who either were directors
at the beginning of such period or whose election was
previously so approved) cease to constitute 75% of the
directors of the Company at the end of such period.
"Closing Date" means the "Closing Date" as such term
is defined in the Senior Credit Agreement as in effect on the
date hereof.
"Closing Date Excess Equity Proceeds Amount" means
the amount of net cash proceeds derived from the Common Stock
Offering in excess of the difference between (A) $300,000,000
and (B) the amount of Transaction Costs reasonably estimated by
the Company to be attributable to the issuance of common stock
in the Common Stock Offering assuming it provides gross
proceeds to the Company equal to $300,000,000.
"Collateral" means, as of any date of determination,
the Receivables and all other property encumbered by the
Collateral Documents.
"Collateral Agent" means the Administrative Agent or
such other Person that is the collateral agent pursuant to the
Collateral Documents.
-9-
"Collateral Documents" means the Pledge Agreements
and all other instruments or documents delivered by the Company
in order to grant Liens on any Collateral, as amended,
supplemented or otherwise modified from time to time in
accordance herewith and therewith.
"Collections" means all Cash, funds, checks, notes,
instruments and any other form of remittance tendered by
account debtors in payment of Receivables.
"Commitment" means, with respect to each Lender, the
commitment of such Lender to make the Loans hereunder in a
maximum aggregate amount set forth opposite such Lender's name
in Schedule B annexed hereto under the heading "Commitments" as
such maximum amount may be reduced pursuant to subsection 9.1.3
by such Lender entering into a Registered Transfer Supplement.
"Commitment Fee Letter" means the fee letter
agreement dated January 31, 1995 among the Company and the
Arrangers, as such agreement is in effect on the Closing Date
and as thereafter amended, supplemented or otherwise modified
from time to time.
"Commodities Agreement" means any forward contract,
option, futures contract, futures option, or similar agreement
or arrangement entered into by the Company designed to protect
the Company or any of its Subsidiaries from fluctuations in the
price of commodities.
"Common Stock" means the common stock of the Company,
par value $.01 per share.
"Common Stock Offering" means the initial public
offering by the Company on the Closing Date of shares of newly
issued Common Stock, on the terms and subject to the conditions
described in the Prospectus (including, without limitation, any
shares sold pursuant to any over-allotment option granted in
connection therewith).
"Company" has the meaning assigned to that term in
the introduction to this Agreement.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit IV annexed hereto
delivered to the Lenders by the Company pursuant to clause (B)
of subparagraph (iv) of Section 5.1.
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"Consolidated Domestic Capital Expenditures" means,
for any period, the sum of (A) the aggregate of all Capital
Expenditures by the Company and its Domestic Subsidiaries
during such period, plus (B) to the extent not covered by
clause (A) hereof, the aggregate of all expenditures by the
Company and its Domestic Subsidiaries to acquire by purchase or
otherwise the business, property or fixed assets of, or stock
or other evidence of beneficial ownership of, any Person,
including, without limitation, the amount of any Indebtedness
of any such acquired Person, whether or not such Indebtedness
is assumed or guaranteed by the Company or any Subsidiary of
the Company (other than any such expenditures of the type
permitted under clause (ix) or clause (x) of Section 6.3), it
being understood that each item covered by this clause (B)
shall be deemed incurred as of the date of the applicable
acquisition; provided that any Indebtedness referred to in this
clause (B) of any acquired Person that is not a Wholly Owned
Subsidiary of the Company shall only be included in an amount
equal to the product of (1) the Company's direct or indirect
percentage of equity ownership in such acquired Person at the
time such Indebtedness is incurred or deemed incurred and
(2) the amount of such Indebtedness.
"Consolidated EBITDA" means, without duplication, for
any period, the total of the amounts for such period of
(A) Consolidated Net Income, plus (B) provision for taxes based
on income, plus (C) total interest expense (including that
attributable to Capital Leases), plus (D) depreciation expense,
plus (E) amortization expense, plus (F) other non-cash items
reducing or deducted in calculating Consolidated Net Income,
minus (G) other non-cash items increasing Consolidated Net
Income, minus (H) charges against the Special Reserve, all as
determined on a consolidated basis for the Company and its
Subsidiaries for such period taken as a single accounting
period determined (other than in the case of clause H) in
conformity with GAAP.
"Consolidated Interest Expense" means, for any
period, without duplication, (A) total interest expense for
such period (including that attributable to Capital Leases) of
the Company and its Subsidiaries on a consolidated basis with
respect to all outstanding Indebtedness of the Company and its
Subsidiaries including, without limitation, all commissions,
discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing (and
excluding capitalized interest, to the extent such capitalized
interest constitutes a Capital Expenditure or a Consolidated
Domestic Capital Expenditure), and (B) net costs under Interest
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Rate Agreements for such period, but excluding, however, in the
case of clause (A), interest expense not payable in cash
(including amortization of discount), any amounts referred to
in Section 2.4 payable to the Administrative Agent and the
Lenders on or before the Closing Date and Transaction Costs
relating to the Recapitalization, all as determined on a
consolidated basis for the Company and its Subsidiaries in
conformity with GAAP.
"Consolidated Net Income" for any period, means the
net income (or loss) of the Company and its Subsidiaries
(whether or not consolidated with the Company pursuant to GAAP
for financial reporting purposes) on a consolidated basis for
such period taken as a single accounting period determined in
conformity with GAAP; provided that there shall be excluded
(A) the income (or loss) of any Person (other than a Subsidiary
of the Company) in which any other Person (other than the
Company or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other
distributions actually paid to the Company or any of its
Subsidiaries by such Person during such period, (B) the income
(or loss) of any Person accrued prior to the date it becomes a
Subsidiary of the Company or is merged into or consolidated
with any of the Company's Subsidiaries or that Person's assets
are acquired by the Company or any of its Subsidiaries, (C) the
income of any Subsidiary of the Company to the extent that the
declaration or payment of dividends or similar distributions by
that 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 Subsidiary, and (D)
any after-tax cash gains or losses attributable to Asset Sales.
"Consolidated Rental Payments" means, for any period,
the aggregate amount of all amounts paid or payable or accrued
or accruable during such period under all Capital Leases and
Operating Leases of the Company and its Subsidiaries (net of
sublease income), all as determined on a consolidated basis for
the Company and its Subsidiaries in conformity with GAAP.
"Contingent Obligation", as applied to any Person,
means any direct or indirect liability, contingent or
otherwise, of that Person (A) with respect to any indebtedness,
lease, dividend, letter of credit or other obligation of
another if the primary purpose or intent thereof by the Person
incurring the Contingent Obligation is to provide assurance to
the obligee of such obligation of another that such obligation
of another will be paid or discharged, or that any agreements
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relating thereto will be complied with, or that the holders of
such obligation will be protected (in whole or in part) against
loss in respect thereof, (B) under any letter of credit issued
for the account of that Person or for which that Person is
otherwise liable for reimbursement thereof, or (C) under
Commodities Agreements, Currency Agreements or Interest Rate
Agreements. Contingent Obligations shall include, without
limitation, (A) the direct or indirect guarantee, endorsement
(otherwise than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of another,
and (B) any liability of such Person for the obligations of
another through any agreement (contingent or otherwise) (1) to
purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise),
(2) to maintain the solvency or any balance sheet item, level
of income or financial condition of another, or (3) to make
take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement,
if in the case of any such agreement the primary purpose or
intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to in the
case of a Contingent Obligation described in clause (A) in the
first sentence of this definition, the amount of the obligation
so guaranteed or otherwise supported, in the case of a
Contingent Obligation described in clause (B) in the first
sentence of this definition, the amount available to be drawn
under the relevant letter of credit and in the case of a
Contingent Obligation described in clause (C) in the first
sentence of this definition, the relevant Termination Value.
"Contractual Obligation", as applied to any Person,
means any provision of any security issued by that Person or of
any material indenture, mortgage, deed of trust, contract,
undertaking, agreement or other instrument to which that Person
is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Controlled Foreign Corporation" means any direct or
indirect Subsidiary of the Company which is a controlled
foreign corporation, as defined in section 957(a) (or successor
provision) of the Internal Revenue Code.
"Currency Agreement" means any foreign exchange
contract, currency swap agreement or other similar agreement or
arrangement entered into by the Company designed to protect the
-13-
Company or any of its Subsidiaries against fluctuations in
currency values.
"Deficiency Amount" has the meaning assigned to that
term in Section 5.13.
"Deficiency Notice" has the meaning assigned to that
term in Section 5.13.
"Deposit Account" means a demand, time, savings,
passbook or like account with a bank, savings and loan
association, credit union or like organization, other than an
account evidenced by a negotiable certificate of deposit.
"Discretionary Excess Cash Flow Deduction Amount" has
the meaning assigned to such term in the Senior Credit
Agreement as in effect on the date hereof.
"Discretionary Excess Cash Flow Balance" has the
meaning assigned to such term in the Senior Credit Agreement as
in effect on the date hereof.
"Discretionary Equity Proceeds Balance" has the
meaning assigned to such term in the Senior Credit Agreement as
in effect on the date hereof.
"Discretionary Voluntary Prepayment" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Dollars" or the sign "$" means the lawful money of
the United States of America.
"Domestic Capex Maximum" has the meaning assigned to
that term in subsection 6.14.4.
"Domestic Subsidiary" means, at any date of
determination, any Subsidiary of the Company other than a
Foreign Subsidiary.
"8-1/4% Unsecured Notes" means the Company's 8-1/4%
Senior Notes due February 1, 2002, issued and outstanding
pursuant to a certain indenture, dated as of February 1, 1994
between the Company and Norwest Bank Wisconsin, N.A., as
Trustee, as in effect on the Closing Date and as thereafter
amended, supplemented or otherwise modified from time to time
in accordance herewith or therewith.
-14-
"Eligible Receivables" means each Receivable of the
Company except a Receivable:
(i) to which the Company does not have sole legal
and beneficial ownership;
(ii) which arises out of a sale made by the Company
to a Subsidiary;
(iii) (a) which is unpaid more than 90 days from the
date of invoice or (b) which has been written off the
books of the Company or has been otherwise designated by
the Company as uncollectible;
(iv) which is from an account debtor or an Affiliate
of such account debtor that has a Receivable excluded
under clause (iii) above and fifty percent (50%) or more
of all Receivables from such account debtor and such of
its Affiliates are ineligible under clause (iii);
(v) as to which the account debtor for such
Receivable is a creditor of the Company, has or has
asserted a right of setoff, has disputed its liability or
made any claim with respect to the Receivable or any other
Receivable which has not been resolved, in which case such
Receivable shall be deemed not to be an Eligible
Receivable but only to the extent of the amount owed by
the Company to the account debtor, the amount of such
actual or asserted right of setoff, or the amount of such
dispute or claim, as the case may be;
(vi) as to which the account debtor is (or its assets
are) the subject of an Insolvency Event;
(vii) which is not payable in Dollars or as to which
the account debtor for the Receivable is either not
organized under the laws of the United States of America
or any State thereof or is located outside or has its
principal place of business or substantially all of its
assets outside the continental United States, except to
the extent such Receivable is supported by an irrevocable
letter of credit reasonably satisfactory to the
Administrative Agent (as to form, substance and issuer)
and in the possession of the Administrative Agent;
(viii) as to which the sale to the account debtor is on
a bill-and-hold, guaranteed sale, sale-and-return,
ship-and-return, sale on approval or consignment or other
-15-
similar basis or made pursuant to any other written
agreement providing for repurchase or return of any
merchandise which has been claimed to be defective or
otherwise unsatisfactory, other than sales made in the
ordinary course of the Company's business containing
customary terms for the return of defective or
non-conforming goods;
(ix) the account debtor is the United States of
America or any department, agency or instrumentality
thereof, unless the Company duly assigns its rights to
payment of such Receivable to the Administrative Agent
pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. {{ 3727 et seq.), which assignment and
related documents and filings shall be in form and
substance reasonably satisfactory to the Administrative
Agent;
(x) which does not comply with all requirements of
law, including, without limitation, the Federal Consumer
Credit Protection Act, the Federal Truth in Lending Act
and Regulation Z of the Board of Governors of the Federal
Reserve System;
(xi) as to which there shall have attached any Lien
(whether or not such Lien may be permitted to exist under
the provisions of the Company Receivables Pledge
Agreement) other than the Lien granted pursuant to the
Company Receivables Pledge Agreement; or
(xii) (a) as to which either the perfection,
enforceability or validity of the Administrative Agent's
security interest or the Lenders' right or ability to
receive direct payments is governed by any federal or
state statutory requirement other than those of (x) the
statute referred to in clause (ix) above or (y) the UCC,
or (b) which is not subject to a valid and perfected Lien
in favor of the Administrative Agent for the benefit of
the Lenders having the priority required by Section 4(a)
of the Receivables Pledge Agreement.
"Environmental Laws" means federal, state, local and
foreign law or regulations, codes, orders, decrees, judgments,
permits, authorizations, agreements, or injunctions issued,
promulgated, approved or entered thereunder relating to
pollution or protection of the environment, including, without
limitation, laws relating to occupational safety and health and
other laws relating to emissions, discharges, releases or
-16-
threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata)
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"Equity Offering" means any issuance or sale by the
Company or any Subsidiary of the Company whether pursuant to a
registered public offering, private placement or otherwise of
any shares of capital stock or other equity securities of the
Company or any Subsidiary of the Company, or any obligations
convertible into or exchangeable for, or giving any Person a
right, option or warrant to acquire, such securities or such
convertible or exchangeable obligations, other than issuances
or sales of Common Stock pursuant to the Common Stock Offering
and other than issuances and sales of shares of capital stock
or other equity securities of a Subsidiary of the Company to
the Company or a Subsidiary of the Company.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time and any successor
statute.
"ERISA Affiliate", as applied to any Person, means
any trade or business (whether or not incorporated) which is
under common control with that Person within the meaning of
Section 4001(b) of ERISA and the regulations promulgated
thereunder or that would be treated as a single employer with
that Person (A) under Section 414(b) or (c) of the Internal
Revenue Code or (B) solely for purposes of any section or
sections of the Internal Revenue Code or ERISA to which such
section or sections apply, under Section 414(m) or (o) of the
Internal Revenue Code.
"Event of Default" means each of the events set forth
in ARTICLE VII.
"Excess Cash Flow" has the meaning assigned to such
term in the Senior Credit Agreement as in effect on the date
hereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor statute.
-17-
"Existing Credit Facilities" means the 1988 Credit
Agreement and the 1992 Credit Agreement, together with, in each
case, all notes, mortgages, security instruments and other
ancillary or related documentation.
"Existing Indebtedness" means Indebtedness of the
Company and its Subsidiaries listed on Schedule C annexed
hereto.
"Existing Mill Expansion Equipment" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Existing Subordinated Debt" means the 12-5/8%
Subordinated Debentures and the 14-1/8% Discount Debentures,
together with, in each case, all obligations of the Company set
forth in the indentures relating thereto.
"Expansion Lease" has the meaning assigned to such
term in the Senior Credit Agreement as in effect on the date
hereof.
"Expansion Project" has the meaning assigned to such
term in the Senior Credit Agreement as in effect on the date
hereof.
"Fair Value" means, with respect to any asset or
property (including intangibles or instruments), the fair
market value thereof as determined by the Board of Directors of
the Company or a committee thereof (or, if authorized to do so
by the Board of Directors of the Company or a committee
thereof, by the Chief Financial Officer or the Chief Accounting
Officer of the Company) in each case pursuant to standards,
assumptions and procedures set forth in Exhibit XVIII annexed
hereto.
"First Tier Foreign Subsidiary" means, at any date of
determination, a Foreign Subsidiary of the Company (A)(i) which
is organized under the laws of a jurisdiction other than the
United States or any State thereof and (ii) as to which the
Company and/or one or more Subsidiaries organized under the
laws of the United States of America or any State thereof hold
directly shares of stock or other equity interests having more
than 50% of the total voting power of shares of the capital
stock or other equity interests therein (without regard to the
occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof or (B) which is
organized under the laws of the United States of America or any
-18-
State therein and which does not have any Subsidiaries that are
Foreign Subsidiaries.
"Foreign Subsidiary" means each of the following:
(A) each Subsidiary or Joint Venture of the Company identified
as such on Schedule A annexed hereto, (B) each Subsidiary or
Joint Venture of the Company which is organized under the laws
of a jurisdiction other than the United States of America or
any State thereof and (C) each Subsidiary or Joint Venture of
the Company which is organized under the laws of the United
States of America or any State thereof more than 80% of the
sales, earnings or assets (determined on a consolidated basis)
of which are located or derived from operations in territories
of the United States of America and jurisdictions outside the
United States of America.
"Fort Howard Holding" means Fort Howard Holding,
Inc., a Delaware corporation and a Wholly Owned Subsidiary of
the Company.
"Fort Sterling" means Fort Sterling Limited, an
English limited liability company and a Foreign Subsidiary of
the Company.
"14-1/8% Discount Debentures" means the Company's
14-1/8% Junior Subordinated Discount Debentures due November 1,
2004, issued and outstanding pursuant to a certain indenture,
dated as of November 1, 1988 between the Company and Society
National Bank, as in effect on the Closing Date and as
thereafter amended, supplemented or otherwise modified from
time to time in accordance herewith or therewith.
"Funding Date" means a Business Day selected by the
Company and identified in a Notice of Borrowing delivered in
accordance with subsection 2.1.2 for the funding by the Lenders
of the Loans, which Business Day shall not be later than 45
days after the Closing Date.
"GAAP" means generally accepted accounting principles
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 may be approved by a significant segment of the
accounting profession, which are applicable to the
circumstances as of the date of determination; provided that
compliance by the Company with the financial covenants set
-19-
forth in Section 6.6 shall be calculated in accordance with
GAAP as in effect on the Closing Date.
"General Account Assets" means the assets allocated
to the general account of an insurance company subject to state
regulation.
"Governmental Authority" means any Federal, state,
local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Green Bay Dry Form Machine" means the third air-laid
(dry form) paper machine installed at the Company's Green Bay,
Wisconsin Mill, together with related ancillary improvements or
equipment.
"Green Bay Sludge Boiler" means the industrial boiler
installed in the vicinity or as a part of the Company's Green
Bay, Wisconsin Mill following the date of this Agreement which
is designed to burn, among other things, sludge generated by
the Company's wastepaper recycling operations.
"Greenfield Expansion Assets" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Guarantor Subsidiary" has the meaning assigned to
such term in the Senior Credit Agreement as in effect on the
date hereof.
"Guarantor Subsidiary Guarantee" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Indebtedness", as applied to any Person, means
(A) all indebtedness for borrowed money, (B) that portion of
obligations with respect to Capital Leases which is properly
classified as a liability on a balance sheet in conformity with
GAAP, (C) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations
for borrowed money, (D) any obligation owed for all or any part
of the deferred purchase price of property or services which
purchase price is (1) due more than six months after the date
of placing such property in service or taking delivery and
title thereto or the completion of such services in respect
thereof, or (2) evidenced by a note or similar written
instrument and (E) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of
-20-
whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that
Person.
"Indemnitees" has the meaning assigned to that term
in Section 9.3.
"Information Package" means, collectively, the
Memorandum dated January 1995 delivered by the Administrative
Agent to the Lenders, the Registration Statement and any
supplementary letter delivered by the Company to the
Administrative Agent, in each case as it may be supplemented to
the date of the signing of this Agreement.
"Initial Major Expansion Project" means the first
Expansion Project to be commenced by the Company or any of its
Subsidiaries after the Closing Date that involves or will
involve Capital Expenditures by the Company and its
Subsidiaries in respect thereof in an aggregate amount
estimated by the Company in its reasonable judgment to be
$100,000,000 or more to complete and put in service.
"Insolvency Event" means, with respect to any Person,
the occurrence of any of the following: (a) a voluntary or
involuntary petition for bankruptcy or other relief involving
that Person, its assets or its liabilities under the Bankruptcy
Code or any similar statute, (b) an assignment of its assets
for the benefit of creditors, (c) its failure, suspension of
business operations, or insolvency, (d) appointment of a
receiver or trustee for it or a substantial portion of its
assets, or (e) general failure to pay its debts as they become
due.
"Intercompany Indebtedness" means any Indebtedness of
the Company or any Subsidiary of the Company which, in the case
of the Company, is owing to any Subsidiary or which, in the
case of any such Subsidiary, is owing to the Company or any
other Subsidiary of the Company.
"Interest Coverage Ratio" means, for any period, the
ratio of Consolidated EBITDA for such period to Consolidated
Interest Expense for such period.
"Interest Payment Date" means, with respect to a
Loan, if it is an Adjusted LIBOR Loan, the last day of each
Interest Period applicable to such Loan; provided that in the
case of each Interest Period of six or more months, "Interest
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Payment Date" shall also include each Interest Period
Anniversary Date for such Interest Period.
"Interest Period" means any interest period
applicable to a Loan as determined pursuant to subsection
2.3.2.
"Interest Period Anniversary Date" means, for each
Interest Period which is six or more months, each three-month
anniversary of the commencement of such Interest Period.
"Interest Rate Agreement" means any interest rate
swap agreement, interest rate cap agreement, interest rate
collar agreement or other similar agreement or arrangement
entered into by the Company designed to protect the Company or
any of its Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means, for each
Interest Period, the second Business Day prior to the first day
of the related Interest Period for an Adjusted LIBOR Loan.
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended from time to time hereafter and any
successor statute.
"Investment", as applied to any Person (the
"Investor"), means any direct or indirect purchase or other
acquisition by the Investor of, or a beneficial interest in,
stock or other Securities of any other Person other than (A) in
the case of each Investor that is a Foreign Subsidiary, a
direct or indirect Subsidiary of such Foreign Subsidiary and
(B) in the case of each Investor that is the Company or a
Domestic Subsidiary, a Subsidiary that is not a Foreign
Subsidiary, or any direct or indirect loan, advance (other than
advances to employees for moving and travel expenses, drawing
accounts and similar expenditures in the ordinary course of
business) or capital contribution by the Investor to any other
Person other than (A) in the case of each Investor that is a
Foreign Subsidiary, a direct or indirect Subsidiary of such
Foreign Subsidiary and (B) in the case of each Investor that is
the Company or a Domestic Subsidiary, a Subsidiary that is not
a Foreign Subsidiary, including all indebtedness and accounts
receivable owing to the Investor from such other Person which
are not current assets or did not arise from sales to such
other Person in the ordinary course of the Investor's business
(other than Royalty or Management Fees). The amount of any
Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for
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increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment. A Contingent
Obligation of the Company or any of its Subsidiaries in respect
of the obligations of a Foreign Subsidiary shall constitute an
Investment in such Foreign Subsidiary to the extent of such
Contingent Obligation. The amount of such Investment shall be
equal to the amount of the Contingent Obligation as determined
by the last sentence of the definition of Contingent
Obligation. Any renewals, extensions or replacements of an
existing Contingent Obligation or other Indebtedness which
constitutes an Investment hereunder shall not constitute a new
Investment at the time of such renewal, extension or
replacement except to the extent such renewal, extension or
replacement increases the amount of such Contingent Obligation
and then only to the extent of such increase.
"Investment Grade Ratings" has the meaning assigned
to that term in subsection 2.3.1.
"Investor" has the meaning assigned to that term in
the definition of Investment.
"Joint Venture" means a joint venture, partnership or
other similar arrangement, whether in corporate, partnership or
other legal form; provided that, as to any such arrangement in
corporate form, such corporation shall not, as to any Person of
which such corporation is a Subsidiary, be considered to be a
Joint Venture to which such Person is a party.
"Lender" has the meaning assigned to that term in the
introduction to this Agreement and includes Bankers, BOA and
Chemical Bank, in their individual capacities.
"Letter of Credit" has the meaning assigned to such
term in the Senior Credit Agreement as in effect on the date
hereof.
"Leverage Ratio" means, for any period, the ratio of
the principal amount of Senior Secured Indebtedness outstanding
at the last day of such period to Consolidated EBITDA for such
period.
"Leveraged Swap" means any Commodities Agreement,
Currency Agreement or Interest Rate Agreement pursuant to which
any party shall be entitled to receive from the counterparty
thereto, in respect of each notional Dollar or other applicable
unit that is the subject thereof, any payment or credit in
excess of the amount necessary to compensate such party for the
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actual and direct cost or deemed cost to such party of any
fluctuation in interest rates or currency exchange rates in
respect of such Dollar or other unit of currency or market
costs or prices in respect of each such unit.
"LIBOR" means, in respect of any Adjusted LIBOR
Borrowing for any Interest Period, the rate per annum at which
dollar deposits approximately equal in principal amount to the
Administrative Agent's portion of such Adjusted LIBOR Borrowing
and for a maturity comparable to such Interest Period are
offered to the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00
a.m. (London time) on the Interest Rate Determination Date for
such Interest Period.
"LIBOR Spread" means the percent per annum from time
to time in effect pursuant to paragraph (d) of subsection
2.3.1.
"Lien" means any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" or "Loans" means the loans made by the Lenders
to the Company pursuant to Section 2.1.1. Each Loan shall be
either an Adjusted LIBOR Loan or an ABR Loan.
"Loan Documents" means this Agreement, the Notes and
the Collateral Documents.
"Management Agreements" means (A) the Management
Equity Participation Agreements between the Company and certain
officers and directors and holders of stock (or options on
stock), (B) the Fort Howard Corporation Management Equity Plan
(the "Plan") effective as of April 29, 1991, and the Agreements
(as defined in the Plan) related thereto, (C) the Fort Howard
Corporation 1995 Stock Incentive Plan (the "1995 Plan")
effective as of January 15, 1995, and the Award Agreements (as
defined in the 1995 Plan) related thereto, and (D) any equity-
based plan (a "Broad-Based Plan") adopted by the Company for
its employees generally (provided that any such Broad-Based
Plan may not cause the Company to exceed (i) the limitation on
Investments set forth in subparagraph (xiii) of Section 6.3 or
(ii) the limitation on repurchases or redemptions of Common
Stock set forth in subclause (D)(2) of Section 6.5), as such
Management Equity Participation Agreements, the Plan, the
Agreements, the 1995 Plan and the Award Agreements and any
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Broad-Based Plan are in effect on the date of this Agreement
(or the date of adoption in the case of any Broad-Based Plan)
and as they may have been and hereafter may be amended,
supplemented or otherwise modified from time to time in
accordance herewith and therewith.
"Margin Stock" has the meaning assigned to that term
in Regulation U of the Board of Governors of the Federal
Reserve System of the United States as in effect from time to
time.
"Material Subsidiary" means each Subsidiary of the
Company or its successors now existing or hereafter acquired or
formed by the Company or such successors which (A) for the most
recent fiscal year of the Company or such successors accounted
for more than 10% of the consolidated revenues of the Company
or such successors, or (B) as at the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of
the Company or such successors as shown on the consolidated
financial statements of the Company or such successors, as the
case may be, for such fiscal year.
"Maturity Date" means the seventh anniversary of the
Closing Date.
"Moody's" means Moody's Investors Service, Inc.,
together with any successor thereto that issues ratings of
corporate securities.
"MS Group" means Morgan Stanley Group Inc.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is maintained for
employees of the Company or any ERISA Affiliate of the Company.
"9% Senior Subordinated Notes" means the Company's 9%
Senior Subordinated Notes due February 1, 2006, issued and
outstanding pursuant to a certain indenture, as amended, dated
as of February 1, 1994 between the Company and The Bank of New
York, as Trustee, as in effect on the Closing Date and as
thereafter amended, supplemented or otherwise modified from
time to time in accordance herewith and therewith.
"9-1/4% Unsecured Notes" means the Company's 9-1/4%
Senior Notes due March 15, 2001, issued and outstanding
pursuant to a certain indenture, dated as of March 15, 1993
between the Company and Norwest Bank Wisconsin, N.A., as
Trustee, as in effect on the Closing Date and as thereafter
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amended, supplemented or otherwise modified from time to time
in accordance herewith or therewith.
"1988 Credit Agreement" means that certain Amended
and Restated Credit Agreement, dated as of October 24, 1988,
among FH Acquisition Corp. and the lenders party thereto and
Bankers Trust Company, Bank of America National Trust and
Savings Association, The Bank of Nova Scotia, Chemical Bank,
The Industrial Bank of Japan, Limited, New York Branch and
Wells Fargo, N.A., as lead managers and Bankers Trust Company,
as agent, as amended to the Closing Date.
"1988 Revenue Bond Indenture" means the indenture
pursuant to which the 1988 Revenue Bonds were issued.
"1988 Revenue Bonds" means the Development Authority
of Effingham County Pollution Control Revenue Bonds (Fort
Howard Corporation Project) Series 1988, issued by the
Development Authority of Effingham County to refund the 1985
Revenue Bonds.
"1992 Credit Agreement" means that certain Credit
Agreement, dated as of March 22, 1993, among Fort Howard
Corporation, the lenders party thereto and Bankers Trust
Company, as agent, as amended to the Closing Date.
"Non-U.S. Person" has the meaning assigned to that
term in paragraph (e) of subsection 2.7.7.
"Notes" means one or more of the promissory notes of
the Company issued in registered form in respect of the Loans
pursuant to subsection 2.1.4 or issued in registered form as
replacement notes in connection with an assignment made
pursuant to this Agreement and, in each case, substantially in
the form of Exhibit III annexed hereto, as the same may be
modified, endorsed or amended from time to time.
"Notice of Borrowing" means a notice substantially in
the form of Exhibit I annexed hereto with respect to the
proposed Borrowing.
"Notice of Conversion/Continuation" means a notice
substantially in the form of Exhibit II annexed hereto with
respect to a proposed conversion or continuation.
"Obligations" means all obligations of every nature
of the Company from time to time owed to the Administrative
Agent or the Lenders or any of them under the Loan Documents.
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"Officers' Certificate" means, as applied to any
corporation, a certificate executed on behalf of such
corporation by its Chairman of the Board (if an officer) or its
President or one of its Vice Presidents and by its Chief
Financial Officer or its Treasurer; provided that every
Officers' Certificate with respect to the compliance with a
condition precedent to the making of the Loans hereunder shall
include (A) a statement that the officer or officers making or
giving such Officers' Certificate have read such condition and
any definitions or other provisions contained in this Agreement
relating thereto, (B) a statement that, in the opinion of the
signer or signers, he or they have made or have caused to be
made such examination or investigation as is necessary to
enable him or them to express an informed opinion as to whether
or not such condition has been complied with, and (C) a
statement as to whether, in the opinion of the signer or
signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person,
any lease (including, without limitation, leases which may be
terminated by the lessee at any time) of any property (whether
real, personal or mixed) under which that Person is a lessee
and which is not a Capital Lease.
"Other Taxes" has the meaning assigned to that term
in paragraph (b) of subsection 2.7.7.
"Participants" has the meaning assigned to that term
in subsection 9.1.2.
"Pension Plan" means any employee plan which is
subject to the provisions of Title IV of ERISA and which is
maintained for employees of the Company or any ERISA Affiliate
of the Company, other than a Multiemployer Plan.
"Permitted Encumbrances" means the following types of
Liens:
(i) Liens for taxes, assessments or governmental
charges or claims the payment of which is not at the time
required by Section 5.3;
(ii) Statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other
liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in
good faith, if such reserve or other appropriate
-27-
provision, if any, as shall be required by GAAP shall have
been made therefor;
(iii) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security,
or to secure the performance of tenders, statutory
obligations, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of
borrowed money);
(iv) Any attachment or judgment Lien not in excess of
$20,000,000 (exclusive of any amount adequately covered by
insurance as to which the insurance company has
acknowledged coverage) and any other attachment or
judgment lien unless the judgment it secures shall, within
60 days after the entry thereof, not have been discharged
or execution thereof stayed pending appeal, or shall not
have been discharged within 60 days after the expiration
of any such stay;
(v) Leases or subleases granted to others not
interfering in any material respect with the business of
the Company or any of its Subsidiaries;
(vi) Easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar
charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of the
Company or any of its Subsidiaries;
(vii) Any interest or title of a lessor under any
lease permitted by Section 6.9;
(viii) Liens arising from UCC financing statements
regarding leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment
of customs duties in connection with the importation of
goods;
(x) Liens securing surety bonds in an amount not to
exceed individually or in the aggregate $5,000,000 at any
time outstanding; and
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(xi) Liens securing appeal bonds, which Liens do not
cover assets having a value in excess of $20,000,000
individually or in the aggregate at any time and which
assets are valued at the greater of (A) fair market value
and (B) book value.
"Permitted Expansion Construction Financing" has the
meaning assigned to such term in the Senior Credit Agreement as
in effect on the date hereof.
"Permitted Expansion Financing" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Permitted Lien Deduction Amount" means, at any time,
the aggregate amount of Liens (other than the Lien of the Cash
Collateral Agreement) that are permitted to encumber the Cash
Collateral Account pursuant to Section 8 of the Cash Collateral
Agreement (but only to the extent such Liens do not also
encumber the Receivables).
"Person" means and includes natural persons,
corporations, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or
other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"Plan" shall mean an employee benefit plan (as
defined in Section 3(3) of ERISA) which is subject to
Section 406 of ERISA and a plan (as defined in Section 4975 of
the Internal Revenue Code) which is subject to Section 4975 of
the Internal Revenue Code.
"Pledge Agreements" means the Receivables Pledge
Agreement and the Cash Collateral Agreement.
"Potential Event of Default" means a condition or
event which, after notice or lapse of time or both, would
constitute an Event of Default if that condition or event were
not cured or waived within any applicable grace or cure period.
"Preexisting Assumed Lien" means any Lien securing
Indebtedness (A) of any Person that becomes a Foreign
Subsidiary (or a Subsidiary of such Person) at the time such
Person becomes a Foreign Subsidiary, which Indebtedness was not
incurred in connection with the acquisition of such Person or
an interest therein by the Company or any Subsidiary of the
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Company and which Indebtedness and Lien are not prohibited
under Section 6.1 or Section 6.2 hereof, or (B) incurred by the
Company or a Subsidiary of the Company specifically to finance
the acquisition of assets (which acquisition is not prohibited
hereunder) and which Indebtedness and Lien are (1) as of the
date of such acquisition, held by the seller of such assets,
(2) not prohibited under the provisions of Section 6.1 or 6.2
of this Agreement and (3) evidenced by an instrument or
instruments which (i) neither prohibit or restrict the granting
of a junior Lien on the encumbered assets in favor of the
Lenders nor limit any rights or remedies of the Lenders in
respect of any such junior Lien and (ii) contain a warranty by
the applicable seller that, as of the date of such acquisition,
such seller has no present intention or plan to transfer for
value or pledge such Indebtedness and Lien to any other Person.
"Prime Rate" means the rate which Bankers announces
from time to time as its prime lending rate, as in effect from
time to time. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged
to any customer. Bankers may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"Prior Liens" means, in respect of the Collateral
described in any Collateral Document, the Liens described in
the schedules annexed to such Collateral Document (if any) and
any other Liens which, pursuant to the provisions of such
Collateral Document, are or may be superior to the Lien of such
Collateral Document.
"Projections" has the meaning assigned to such term
in subsection 3.1.11.
"Proportionate Share" of a Lender means a fraction,
expressed as a decimal, obtained by dividing its Commitment by
the Total Loan Commitment.
"Prospectus" means the prospectus of the Company
dated February 8, 1995, relating to the Common Stock Offering,
as amended and supplemented on or prior to the date of the
signing of this Agreement.
"Purchasing Lenders" has the meaning assigned to that
term in subsection 9.1.3.
"Qualified Currency Agreement" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
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"Qualified Interest Rate Agreement" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Ratio 1" means, for each period of four consecutive
fiscal quarters of the Company (treated as a single accounting
period), the Interest Coverage Ratio for such period.
"Ratio 2" means, for each period of four consecutive
fiscal quarters of the Company (treated as a single accounting
period), the Leverage Ratio, as of the last day of such period.
"Recapitalization" means, collectively, (A) the
Common Stock Offering, (B) the repayment in full of all loans
outstanding, and other amounts due, under the Existing Credit
Facilities and the Senior Secured Notes, (C) the redemption and
retirement of the Existing Subordinated Debt, (D) the execution
and delivery of the Senior Credit Agreement and any additional
documentation required pursuant to the Senior Credit Agreement
and the consummation of the transactions contemplated
thereunder and (E) the execution and delivery of this Agreement
and the Loan Documents and the consummation of the transactions
contemplated hereunder and thereunder.
"Receivables" means all of the Company's rights to
payment for goods sold or leased or services performed by the
Company for or to any Person (other than a Foreign Subsidiary
of the Company that is a Controlled Foreign Corporation),
whether now in existence or arising from time to time
hereafter, including, without limitation, rights evidenced by
an account, note, contract, security agreement, chattel paper,
or other evidence of indebtedness or security, together with
(1) all security pledged, assigned, hypothecated or granted to
or held by the Company to secure the foregoing, (2) general
intangibles arising out of the Company's rights in any goods,
the sale of which gave rise thereto, (3) all guarantees,
endorsements and indemnifications on, or of, any of the
foregoing, (4) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in
connection therewith, and (5) all evidences of the filing of
financing statements and other statements and the registration
of other instruments in connection therewith and amendments
thereto, notices to other creditors or secured parties, and
certificates from filing or other registration officers.
"Receivables Pledge Agreement" means the Company
Receivables Pledge Agreement substantially in the form of
Exhibit IX annexed hereto executed and delivered by the
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Company, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance herewith and
therewith.
"Receivables Transaction" has the meaning assigned to
such term in the Senior Credit Agreement as in effect on the
date hereof.
"Refinancing Foreign Debt" means any Indebtedness of
a Foreign Subsidiary of the Company, incurred in accordance
with the provisions of subparagraph (iv) of Section 6.1, all
the net cash proceeds of which are used to refinance the
Indebtedness identified on Schedule C annexed hereto as
"Foreign Indebtedness" or any previously incurred Refinancing
Foreign Debt of such Subsidiary.
"Refinancing Senior Unsecured Debt" or "Refinancing
Senior Unsecured Indebtedness" means any unsecured Indebtedness
of the Company, incurred in accordance with the provisions of
subparagraph (ii) of Section 6.1, all of the net cash proceeds
of which are used to refinance Senior Unsecured Notes or any
previously incurred Refinancing Senior Unsecured Debt.
"Register" has the meaning assigned to that term in
subsection 9.1.5.
"Registered Transfer Supplement" has the meaning
assigned to that term in subsection 9.1.3.
"Registration Statement" means the Registration
Statement No. 33-56573, filed by the Company on February 8,
1995 with the Securities and Exchange Commission in connection
with the Common Stock Offering, as it may be amended or
supplemented on or prior to the date of the signing of this
Agreement.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System of the United States as
in effect from time to time.
"Release" has the meaning assigned to that term in
Section 5.10.
"Release Condition" has the meaning assigned to that
term in Section 5.10.
"Release Notice" has the meaning assigned to that
term in Section 5.10.
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"Release Transaction" has the meaning assigned to
that term in Section 5.10.
"Requisite Lenders" means, as of any date of
determination, one or more Lenders having an aggregate Credit
Exposure Percentage as of such date greater than 50%. As used
herein, the "Credit Exposure Percentage" of one or more Lenders
as of any date is a fraction, expressed as a percentage, of
which (A) the numerator is the Commitment of such Lender as of
such date and (B) the denominator is the Total Loan Commitment
as of such date.
"Restricted Junior Payment" means (A) any dividend or
other distribution, direct or indirect, on account of any
shares of any class of stock of the Company, now or hereafter
outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class, (B) any
redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of
any shares of any class of stock of the Company now or
hereafter outstanding, (C) whether in cash or additional
securities, any payment or prepayment of principal of, premium,
if any, or interest on, or any redemption, purchase,
retirement, defeasance, sinking fund or similar payment with
respect to, any Subordinated Indebtedness and (D) any payment
made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any
class of stock of the Company (other than Common Stock of the
Company or options or rights to acquire Common Stock of the
Company) now or hereafter outstanding.
"Revolving Loan Commitment" shall have the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Royalty or Management Fees" means those amounts owed
or owing from time to time by a Foreign Subsidiary of the
Company to the Company or any of its Domestic Subsidiaries
pursuant to agreements which provide for the provision of
management or technical services or advice or the licensing of
patents, trademarks, trade secrets, know-how or proprietary
information; provided that such amounts for any period in
respect of the services or advice so provided or such licenses,
as the case may be shall not exceed the fees that would be
charged by an unaffiliated third party for such services,
advice or licenses.
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"Sale/Leaseback Transaction" means an arrangement
with any bank, insurance company or other lender or investor or
to which any such lender or investor is a party, providing for
the leasing by the Company or a Subsidiary of the Company of
any property, whether now owned or hereafter acquired, which
has been or is to be sold or transferred by the Company or any
Subsidiary of the Company to such lender or investor.
"Savannah Boiler" means the next industrial boiler
installed at the Company's Effingham County, Georgia Mill
following the date of this Agreement.
"Savannah Project" means the acquisition and
construction of the next tissue paper manufacturing machine to
be constructed or acquired after the Closing Date at the
Company's Effingham County, Georgia Mill, together with related
manufacturing, converting and ancillary equipment, improvements
and facilities.
"Scheduled Term Loans Principal Payment" has the
meaning assigned to such term in the Senior Credit Agreement as
in effect on the date hereof.
"Second Expansion Project" has the meaning assigned
to that term in subsection 6.14.4.
"Securities" means any stock, shares, voting trust
certificates, bonds, debentures, options, warrants, notes, or
other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates
of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right
to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, and any successor statute.
"Senior Credit Agreement" means that certain Credit
Agreement, dated as of the date hereof, among the Company, the
lenders identified therein and Bankers, BOA and Chemical Bank,
as arrangers and Bankers as administrative agent.
"Senior Lenders" means the lenders from time to time
party to the Senior Credit Agreement.
"Senior Loans" means the loans made by the lenders to
the Company pursuant to the Senior Credit Agreement.
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"Senior Note Purchase Agreement" means that certain
Note Purchase Agreement, dated as of September 11, 1991, as
amended, by and among the Company and the other Persons listed
on the signature pages thereto, relating to the Senior Secured
Notes.
"Senior Secured Indebtedness" means the following
obligations of the Company and/or any of its Subsidiaries:
(A) Indebtedness of the type described in clause (B) of the
definition of Indebtedness, (B) the Indebtedness described in
subparagraph (vii) and subparagraph (x) of Section 6.1, (C) any
other Indebtedness of the Company or any Subsidiary of the
Company that is not Subordinated Indebtedness and is secured by
any Lien on any property of the Company or any Subsidiary of
the Company and (D) the full amount of the obligations of the
Company or any Subsidiary of the Company under any letter of
credit issued for the account of the Company or any Subsidiary
of the Company that are secured by a Lien on any property of
the Company or any Subsidiary of the Company. In calculating
the amount of Senior Secured Indebtedness, there shall be
excluded in the case of any revolving loan facility or letter
of credit commitment issued in favor of the Company or any
Subsidiary of the Company, the then unutilized portion of such
facility or commitment and, except as specified in clause (D)
of the preceding sentence, any Contingent Obligation.
"Senior Secured Notes" means the Series A Senior
Secured Floating Rate Notes due 1997, the Series B Senior
Secured Floating Rate Notes due 1998, the Series C-1 Senior
Secured Floating Rate Notes due 1999, the Series C-2 Senior
Secured Floating Rate Notes due 1999 and the Series D Senior
Secured Floating Rate Notes due 2000, each as issued, and as
amended from time to time, pursuant to the Senior Note Purchase
Agreement.
"Senior Unsecured Notes" means the 9-1/4% Unsecured
Notes and the 8-1/4% Unsecured Notes.
"Sensitive Information" has the meaning assigned to
that term in Section 5.5.
"SIL Company" means SIL Company, a California
corporation that is wholly owned by Fort Howard Holding and
which owns indirectly 100% of the outstanding equity securities
of Fort Sterling.
"S&P" means Standard & Poor's Corporation, together
with any successor that issues ratings of corporate securities.
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"Special Reserve" means the special reserve in the
amount of $20,000,000 established as of December 31, 1994 by
the Company in respect of certain environmental matters.
"Status Certificate" has the meaning assigned to that
term in paragraph (e) of subsection 2.7.7.
"Stockholders Agreement" means one or more
Stockholders Agreements substantially in the form delivered to
the Lenders (draft of 2/15/95), as the same may be amended,
supplemented or otherwise modified from time to time in
accordance herewith or therewith.
"Subordinated Indebtedness" means the Indebtedness of
the Company subordinated in right of payment to the
Obligations, including, without limitation, the Subordinated
Notes and the Existing Subordinated Debt.
"Subordinated Notes" means the 9% Senior Subordinated
Notes and the 10% Subordinated Notes.
"Subsidiary" of any Person means any corporation,
association or other Person of which more than 50% of the total
voting power of shares of stock or other equity interests
therein entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof. Unless
otherwise indicated, "Subsidiary" means a Subsidiary of the
Company.
"Taxes" has the meaning assigned to that term in
paragraph (a) of subsection 2.7.7.
"10% Subordinated Notes" means the Company's 10%
Subordinated Notes due March 15, 2003, issued pursuant to a
certain indenture dated as of March 15, 1993 between the
Company and United States Trust Company of New York, as
Trustee, as such notes and indenture shall be in effect on the
Closing Date and as thereafter amended, supplemented or
otherwise modified from time to time in accordance herewith or
therewith.
"Termination Event" means (A) a "Reportable Event"
described in Section 4043 of ERISA and the regulations issued
thereunder (other than a "Reportable Event" not subject to the
provision for 30-day notice to the Pension Benefit Guaranty
-36-
Corporation or any successor thereof under such regulations),
or (B) the withdrawal of the Company or any of its ERISA
Affiliates from a Pension Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA, or (C) the filing of a notice of intent to terminate
a Pension Plan or the treatment of a Pension Plan amendment as
a termination under Section 4041 of ERISA, or (D) the filing by
the Pension Benefit Guaranty Corporation (or any successor
thereof) of a notice of its intent to terminate a Pension Plan,
or (E) the receipt by the Company or any ERISA Affiliate of
notice of the termination or reorganization of any
Multiemployer Plan or (F) the occurrence of any other event or
condition that might constitute grounds under ERISA for the
termination of, or the appointment of a trustee to administer,
any Pension Plan; provided that, for the purposes of
Section 4.11 only, the termination of any Pension Plan or
termination or reorganization of any Multiemployer Plan and any
action taken with respect to any such termination or
reorganization shall not be a Termination Event if the Company
and its ERISA Affiliates shall not incur net liabilities
aggregating more than $25,000,000 (such liabilities to include,
without limitation, any liability to the Pension Benefit
Guaranty Corporation (or any successor thereof), or to any
other party under ERISA or the Internal Revenue Code) resulting
from all such terminations or reorganizations.
"Termination Value" of an Interest Rate Agreement or
Currency Agreement at any time means the amount that would be
payable by the Company to the counterparty thereto if such
agreement was terminated at such time because of default of the
Company thereunder.
"Total Loan Commitment" has the meaning assigned to
that term in Section 2.2.
"Tranche B Term Loans" has the meaning assigned to
such term in the Senior Credit Agreement as in effect on the
date hereof.
"Transaction Costs" means the fees, costs and
expenses payable by the Company pursuant hereto and other fees,
costs and expenses payable by the Company or a Subsidiary
thereof in connection with the Recapitalization (other than
interest expense).
"Transferee" has the meaning assigned to that term in
subsection 9.1.4.
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"12-5/8% Subordinated Debentures" means the Company's
12-5/8% Subordinated Debentures due November 1, 2000, issued
and outstanding pursuant to a certain indenture, dated as of
November 1, 1988 between the Company and United States Trust
Company of New York, as Trustee, as in effect on the Closing
Date and as thereafter amended, supplemented or otherwise
modified from time to time in accordance herewith or therewith.
"UCC" means the Uniform Commercial Code, as in effect
in the applicable jurisdiction.
"Unsecured Expansion Financings" has the meaning
assigned to such term in the Senior Credit Agreement as in
effect on the date hereof.
"Wholly Owned Subsidiary" of any Person means any
Subsidiary all of the shares of capital stock of which (except
directors' qualifying shares) are at the time directly or
indirectly owned by such Person.
Section 1.2 Accounting Terms. For the purposes of
this Agreement, all accounting terms not otherwise defined
herein shall have the meanings assigned to them in conformity
with GAAP.
Section 1.3 Other Definitional Provisions;
Anniversaries. References to "Sections" and "subsections"
shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided. Any of the
terms defined in Section 1.1 may, unless the context otherwise
requires, be used in the singular or the plural depending on
the reference. For purposes of this Agreement, a monthly
anniversary of the Closing Date shall occur on the same day of
the applicable month as the day of the month on which the
Closing Date occurred; provided that if the applicable month
has no such day (i.e., 29, 30 or 31), the monthly anniversary
shall be deemed to occur on the last day of the applicable
month.
Section 1.4 Adjustment for Special Reserve. For
purposes of calculating the Leverage Ratio in respect of
periods which include fiscal quarters ending on or prior to
December 31, 1994, Consolidated EBITDA shall be determined
without taking into account the establishment of the Special
Reserve.
Section 1.5 Currency Equivalent Generally. For all
purposes of this Agreement, (A) the equivalent in Dollars of
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any amount in any other currency shall be determined at the
rate of exchange quoted by the Administrative Agent in New York
City at 9:00 A.M. (New York City time) on the date of
determination to prime banks in New York City for the spot
purchase in the New York foreign exchange market of such amount
of such other currency with Dollars and (B) the equivalent in
any currency (other than Dollars) of any amount in Dollars
shall be determined at the rate of exchange quoted by the
Administrative Agent in New York City at 9:00 A.M. (New York
City time) on the date of determination to prime banks in New
York City for the spot purchase in the New York foreign
exchange market of such amount of Dollars with such other
currency. In determining compliance with the covenants and
other terms of this Agreement that require amounts of another
currency to be converted into Dollars or amounts of Dollars to
be converted into another currency, as the case may be, such
amounts shall be converted pursuant to the first sentence of
this Section 1.5 on the date that (A) Indebtedness is incurred,
(B) an Investment is made, (C) a transfer of assets occurs or
(D) any other relevant transaction occurs, as the case may be.
ARTICLE II
COMMITMENTS AND LOANS; NOTES
Section 2.1 Loans and Notes.
2.1.1. Loan Commitments. Subject to the terms and
conditions of this Agreement and in reliance upon the
representations and warranties of the Company set forth herein
and in each of the other Loan Documents, on the Funding Date,
each Lender having a Commitment hereby severally agrees to lend
the Company an aggregate amount not exceeding its Commitment.
The aggregate amount of the Commitments is $60,000,000. Each
Lender's Commitment shall expire on the Funding Date if the
Loans are borrowed on the Funding Date but, in any event, not
later than 5:00 P.M. (New York time) on the date 45 days after
the Closing Date. The Loans under this Agreement shall be made
by the Lenders simultaneously and proportionately to their
Commitments, it being understood that no Lender shall be
responsible for any default by any other Lender in such other
Lender's obligation to make the Loans hereunder nor shall the
Commitment of any Lender be increased or decreased as a result
of the default by any other Lender in such other Lender's
obligation to make the Loans hereunder. The Loans made on the
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Funding Date shall be made in an aggregate amount of
$60,000,000.
2.1.2. Notice of Borrowing. The Company shall
deliver to the Administrative Agent a Notice of Borrowing
substantially in the form of Exhibit I annexed hereto in
respect of the Borrowing to be made on the Funding Date. Such
Notice of Borrowing shall be irrevocable and shall specify (A)
the date on which the Loans are to be made (which shall be the
same Business Day for all Loans made hereunder) and (B) whether
such Loans will be based on Adjusted LIBOR or ABR. In the
event that such Borrowing shall consist, in whole or in part,
of Adjusted LIBOR Loans, such Notice of Borrowing shall be
received by the Administrative Agent no later than 2:00 p.m.
(New York time), at least three Business Days in advance of the
Funding Date. In the event that such Borrowing shall consist
solely of ABR Loans, such Notice of Borrowing shall be received
by the Administrative Agent no later than 11:00 a.m. (New York
time), at least one Business Day in advance of the Funding
Date.
2.1.3. Disbursement of Funds. (a) Promptly after
receipt of the Notice of Borrowing pursuant to subsection
2.l.2, the Administrative Agent shall notify each Lender of the
proposed Borrowing. Arrangements may be made satisfactory to
the Company, the Administrative Agent and each Lender whereby
an amount equal to the aggregate amount of the Loans to be
borrowed on the Funding Date may be placed in escrow to
facilitate the making of the Loans on the Funding Date;
provided that in any event each Lender shall have made
arrangements satisfactory to the Company, the Administrative
Agent and such Lender whereby the funds for the Loans made on
the Funding Date shall be made available by the Lenders to the
Administrative Agent, not later than 1:00 P.M. (New York time)
on the Funding Date. Upon satisfaction or waiver of the
conditions precedent specified in Section 3.2, the
Administrative Agent shall make the proceeds of the Loans
available to the Company on the Funding Date by causing an
amount of same day funds equal to the proceeds of all such
Loans received by the Administrative Agent at its office
located at One Bankers Trust Plaza, New York, New York to be
credited to the account of the Company at such office of the
Administrative Agent. The parties hereto acknowledge and agree
that the Loans will be borrowed in New York, New York.
(b) Unless the Administrative Agent shall have been
notified by any Lender prior to the Funding Date that such
Lender does not intend to make available to the Administrative
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Agent the amount of funds necessary to satisfy such Lender's
obligations under subsection 2.1.1 on the Funding Date, the
Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on the Funding
Date and the Administrative Agent in its sole discretion may,
but shall not be obligated to, make available to the Company a
corresponding amount on the Funding Date. If such
corresponding amount is not in fact made available to the
Administrative Agent by such Lender, the Administrative Agent
shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for
each day from the date of borrowing of the Loans until the date
such amount is paid to the Administrative Agent, at the
customary rate set by the Administrative Agent for the
correction of errors among banks for three Business Days and
thereafter at ABR. If such Lender does not pay such
corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify
the Company and the Company shall immediately pay such
corresponding amount to the Administrative Agent. Nothing in
this subsection 2.l.3 shall be deemed to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to
prejudice any rights which the Company may have against any
Lender as a result of any default by such Lender hereunder.
2.1.4. Notes. As of the Funding Date, the Company
will have executed and delivered to each Lender, as applicable
(or to the Administrative Agent for that Lender), a Note
substantially in the form of Exhibit III annexed hereto, to
evidence such Lender's Loans, in the principal amount of such
Lender's Commitment, with other appropriate insertions.
2.1.5. Maturity Date. Any prepayment of the Loans
may not be reborrowed. The Loans and all other amounts owed
hereunder with respect to the Loans shall be paid in full no
later than the Maturity Date.
Section 2.2 Total Loan Commitment; Limitations on
Outstanding Loan Amounts. The aggregate amount of the
Commitments of all the Lenders hereunder as in effect at any
time is herein called the "Total Loan Commitment" at such time.
The Total Loan Commitment as of the Closing Date is
$60,000,000. Anything contained in this Agreement to the
contrary notwithstanding, in no event shall the aggregate
principal amount of the Loans made by a Lender exceed such
Lender's Proportionate Share of the Total Loan Commitment.
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Section 2.3 Interest on the Loans.
2.3.1. Rate of Interest. (a) The Loans shall bear
interest on the unpaid principal amount thereof from the date
made through maturity (whether by acceleration or otherwise) at
a rate determined by reference to ABR or Adjusted LIBOR. The
applicable basis for determining the rate of interest with
respect to the Loans shall be selected by the Company at the
time the Notice of Borrowing is given pursuant to sub-
section 2.1.2. If on any day a Loan is outstanding in respect
of which notice has not been delivered to the Administrative
Agent in accordance with the terms of this Agreement specifying
the basis for determining the rate of interest, then for that
day such Loan shall bear interest determined by reference to
ABR.
(b) If a Loan is an ABR Loan, such Loan shall bear
interest (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be,
when ABR is determined by reference to the Prime Rate and over
a year of 360 days at all other times) at a rate per annum
equal to ABR (as ABR changes from time to time) plus the ABR
Spread in effect at such time with respect to such Loan.
(c) If a Loan is an Adjusted LIBOR Loan, such Loan
shall bear interest (computed on the basis of the actual number
of days elapsed over a year of 360 days) at a rate per annum
equal to Adjusted LIBOR for the Interest Period in effect for
such Loan plus the LIBOR Spread in effect at such time with
respect to such Loan.
(d) The ABR Spread and LIBOR Spread per annum in
respect of the Loans shall initially be as specified in
"Category 1" in the table set forth below and shall be subject
to adjustment from time to time after the Funding Date as
provided in this paragraph. If, as of the last day of any
fiscal quarter of the Company, the results of Ratio 1 and
Ratio 2, as set forth in a Compliance Certificate delivered
pursuant to subparagraph (iv) of Section 5.1, are such as to
cause to be applicable any Applicable Category other than the
category in the table below which was applicable on the date of
delivery of such Compliance Certificate, the ABR Spread and the
LIBOR Spread shall automatically be adjusted (effective as of
the times set forth in the next succeeding sentence) to equal
the amounts set forth as ABR Spread and LIBOR Spread,
respectively, in such new Applicable Category and the spreads
set forth in such new Applicable Category shall continue to be
the ABR Spread and the LIBOR Spread until such time as there
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shall be delivered a Compliance Certificate indicating results
of Ratio 1 and Ratio 2 which cause to be applicable a different
Applicable Category. Each adjustment of the ABR Spread and the
LIBOR Spread pursuant to this paragraph (d) shall take effect
(A) in the case of the ABR Spread, with respect to all ABR
Loans outstanding on and after the date that is five Business
Days following the date of delivery to the Administrative Agent
of a Compliance Certificate pursuant to subparagraph (iv) of
Section 5.1 relating to the immediately preceding fiscal
quarter and (B) in the case of the LIBOR Spread, with respect
to all Interest Periods commencing on and after the date that
is five Business Days following the date of delivery to the
Administrative Agent of such Compliance Certificate.
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Interest Rate Step-Downs
Category 1 ABR Spread LIBOR Spread
When none of the Categories
below is applicable 1.50% 2.50%
Category 2
Ratio 1: 2.00 to 1 or higher 1.25% 2.25%
Ratio 2: 3.00 to 1 or lower
Category 3
Ratio 1: 2.25 to 1 or higher 1.00% 2.00%
Ratio 2: 2.75 to 1 or lower
Category 4
Ratio 1: 2.50 to 1 or higher 0.75% 1.75%
Ratio 2: 2.50 to 1 or lower
Category 5
Ratio 1: 2.75 to 1 or higher 0.50% 1.50%
Ratio 2: 2.25 to 1 or lower
Category 6
Ratio 1: 3.00 to 1 or higher 0.25% 1.25%
Ratio 2: 2.00 to 1 or lower
Category 7
Ratio 1: 3.25 to 1 or higher 0.00% 1.00%
Ratio 2: 1.50 to 1 or lower
Notwithstanding the foregoing provisions of this paragraph (d),
(i) there shall not be any adjustment to the ABR Spread or the
LIBOR Spread, as provided above, until the first anniversary of
the Closing Date (except if an Event of Default shall have
occurred and be continuing) and (ii) at any time during which
the Company has failed to deliver a Compliance Certificate
described in subparagraph (iv) of Section 5.1 with respect to a
fiscal quarter in accordance with the provisions thereof, or at
any time that an Event of Default shall have occurred and shall
be continuing, as of the date such Compliance Certificate is
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due or as of the date such Event of Default shall have
occurred, as the case may be, the ABR Spread shall be reset, if
necessary, to be 1-1/2% and the LIBOR Spread shall be reset, if
necessary, to be 2-1/2% until such time as the Company shall
deliver such certificate in accordance with the provisions of
subparagraph (iv) of Section 5.1 or such Event of Default shall
be cured or waived or shall otherwise no longer be continuing.
(e) Notwithstanding the foregoing and except where
an Event of Default shall have occurred and is continuing, if
any senior unsecured debt obligations of the Company receive a
rating from S&P of at least BBB-, or from Moody's of at least
Baa3, from the date that is the fifth Business Day of the
fiscal quarter of the Company following the fiscal quarter
containing the first date that either such rating is announced
and for so long as such rating shall remain in effect the LIBOR
Spread and the ABR Spread, respectively, with respect to the
Loans shall be 0.75% and 0.00% and if any senior unsecured debt
obligations of the Company receive ratings from both S&P and
Moody's of at least BBB- and Baa3, respectively (such ratings,
the "Investment Grade Ratings"), from the date that is the
fifth Business Day of the fiscal quarter of the Company
following the fiscal quarter containing the first date that
both the Investment Grade Ratings shall be effective and for so
long as both such ratings shall remain in effect the LIBOR
Spread and the ABR Spread, respectively, shall be 0.625% and
0.00%.
(f) The applicable ABR Spread or LIBOR Spread for
each Interest Period or day within an Interest Period, as the
case may be, shall be determined by the Administrative Agent,
and such determination shall be presumptively correct absent
manifest error.
2.3.2. Interest Periods. In connection with each
Adjusted LIBOR Loan, the Company shall elect an interest period
(each an "Interest Period") to be applicable to such Loan,
which Interest Period shall be either a one, two, three or six
month period or, if permitted under subparagraph (vii) of this
subsection 2.3.2, a twelve-month period; provided that:
(i) subject to subparagraph (v) below, the Interest
Period for an Adjusted LIBOR Loan shall commence on the
date of such Loan and each Interest Period occurring
thereafter in respect of such Adjusted LIBOR Loan shall
commence on the day on which the next preceding Interest
Period applicable thereto expires;
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(ii) if an Interest Period would otherwise expire on
a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next
preceding Business Day;
(iii) if an Interest Period would otherwise expire on
a day which is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day; provided
that if such Business Day occurs in a different month,
such Interest Period shall expire on the Business Day next
preceding such day;
(iv) no Interest Period shall extend beyond the
Maturity Date;
(v) the initial Interest Period for a Loan which is
converted pursuant to subsection 2.7.4 shall commence on
the date of such conversion and shall expire on the date
on which the Interest Periods for the Loans of the other
the Lenders which were not converted expire;
(vi) there shall be no more than 6 Interest Periods
relating to Loans outstanding at any time (it being
understood that Interest Periods for Adjusted LIBOR Loans
which are scheduled to end on the same date shall
constitute one Interest Period for purposes of this clause
(vi)); and
(vii) no Loan may have an Interest Period of twelve
months unless the Administrative Agent, after consultation
with the Lenders, has determined in good faith based on
prevailing conditions in the London interbank market on
any date of determination that U.S. dollar deposits are
generally offered by the Lenders to first class banks in
the London interbank market for a comparable maturity.
2.3.3. Interest Payments. Subject to subsection
2.3.5, interest shall be payable on the Loans as follows:
(i) interest on each ABR Loan shall be payable in
arrears on and to each September 30, December 30, March 30
and June 30 of each year, commencing on the first of such
dates to occur after the Funding Date, upon any prepayment
of any such Loan (to the extent accrued on the principal
amount being prepaid) and at maturity of such ABR Loan;
and
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(ii) interest on each Adjusted LIBOR Loan shall be
payable in arrears on and to each Interest Payment Date
applicable to that Loan, upon any prepayment of that Loan
(to the extent accrued on the principal amount being
prepaid) and at maturity of such Adjusted LIBOR Loan.
2.3.4. Conversion or Continuation. (a) Subject to
the provisions of Section 2.7, the Company shall have the
option (A) to convert at any time all or any part of an
outstanding ABR Loan equal to $10,000,000 principal amount and
integral multiples of $1,000,000 in excess of that amount to an
Adjusted LIBOR Loan; provided that, after giving effect to each
such conversion, there shall not exist any Adjusted LIBOR Loan
with a particular Interest Period that has a principal amount
less than $25,000,000 (it being understood that Interest
Periods for Adjusted LIBOR Loans which are scheduled to end on
the same date shall constitute one Interest Period for this
purpose) or (B) upon the expiration of any Interest Period
applicable to an Adjusted LIBOR Loan, (1) to continue all or
any portion of such Loan equal to $25,000,000 principal amount
and integral multiples of $1,000,000 in excess of that amount
as an Adjusted LIBOR Loan and the succeeding Interest Period(s)
of such continued Loan shall commence on the last day of the
Interest Period of the Loan to be continued or (2) to convert
such Adjusted LIBOR Loan to an ABR Loan; provided that no
outstanding Loan may be continued as, or be converted into, an
Adjusted LIBOR Loan when any Event of Default or Potential
Event of Default has occurred and is continuing.
(b) The Company shall deliver a Notice of Convers-
ion/Continuation substantially in the form of Exhibit II
annexed hereto to the Administrative Agent no later than
1:00 P.M. (New York time) at least three Business Days in
advance of the proposed conversion/continuation date. A Notice
of Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business Day),
(B) the amount of the Loan to be converted/continued, (C) the
nature of the proposed conversion/continuation and (D) the
requested Interest Period. In lieu of delivering the above-
described Notice of Conversion/Continuation, the Company may
give the Administrative Agent telephonic notice by the required
time of any proposed conversion/continuation under this
subsection 2.3.4; provided that such notice shall be promptly
confirmed in writing by delivery of a Notice of Conversion/
Continuation to the Administrative Agent on or before the
proposed conversion/continuation date. If the Company has
failed timely to deliver a Notice of Conversion/Continuation or
give such telephonic notice with respect to an Adjusted LIBOR
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Loan, the Company shall be deemed to have delivered to the
Administrative Agent a Notice of Conversion/Continuation to
convert such Adjusted LIBOR Loan into an ABR Loan.
(c) Neither the Administrative Agent nor any Lender
shall incur liability to the Company in acting upon any
telephonic notice referred to above which the Administrative
Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf
of the Company or for otherwise acting in good faith under this
subsection 2.3.4 and upon conversion/continuation by the
Administrative Agent in accordance with this Agreement pursuant
to any telephonic notice, the Company shall have continued or
converted, as the case may be, Loans hereunder.
(d) Except as provided in subsection 2.7.4, a Notice
of Conversion/Continuation for conversion to, or continuation
of, an Adjusted LIBOR Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest
Rate Determination Date, and the Company shall be bound to
convert or continue in accordance therewith.
2.3.5. Post-Maturity Interest. To the extent
permitted by applicable law, any interest payment on the Loans
not paid when due, whether at stated maturity, by notice of
prepayment, by acceleration or otherwise, shall thereafter bear
interest payable upon demand at a rate which is 2.00% per annum
in excess of the rate of interest otherwise payable under this
Agreement for ABR Loans.
2.3.6. Computation of Interest. Interest on the
Loans shall be computed on the basis of a 360-day year (except
for interest payable in respect of an ABR Loan based on the
Prime Rate, which shall be computed on the basis of a 365/66
day year) and the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan,
the date of the making of the Loan or the first day of an
Interest Period, as the case may be, shall be included and the
date of payment or, in the case of an Adjusted LIBOR Loan, the
Interest Payment Date, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it
is made, one day's interest shall be paid on such Loan.
Section 2.4 Commissions.
2.4.1. Commitment Commissions. The Company agrees
to pay to the Administrative Agent for distribution to each
Lender commitment commissions with respect to the Total Loan
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Commitment for the period from and including the Closing Date
to and excluding the Funding Date, at an annual rate equal to
0.50%, such annual rate shall be applied on a daily basis to
$60,000,000 from the Closing Date to the Funding Date. Such
commitment commissions shall be payable in arrears on September
30, December 30, March 30 and June 30 of each year, commencing
on the first such date to occur after the Closing Date, and the
date such commitments expire or terminate, calculated, in all
cases, on the basis of a 360 day year and the actual number of
days elapsed.
2.4.2. Bankers and Lenders' Commissions. The
Company agrees to pay to Bankers and the other Lenders the
commissions and other amounts at such times or upon the
happening of such events as are set forth in the Commitment Fee
Letter. Nothing herein set forth shall limit the rights of
Bankers or the other Lenders to receive the fees and other
amounts payable under the Commitment Fee Letter.
2.4.3. No Refund of Fees. Once paid, all fees and
commissions payable pursuant to this Section 2.4 shall not be
refundable under any circumstances.
Section 2.5 Prepayments and Payments.
2.5.1. Voluntary Prepayments. The Company may, upon
not less than two Business Days' prior written or telephonic
notice confirmed in writing to the Administrative Agent (which
notice the Administrative Agent will promptly transmit by
telegram, telex or telephone to each Lender), at any time and
from time to time, prepay the Loans, in whole or in part at any
time, without penalty or premium, in an aggregate minimum
amount of $5,000,000 and integral multiples of $1,000,000 in
excess of that amount or, if less, the outstanding principal
amount thereof. All voluntary prepayments of the Loans shall
be applied in the amounts and manner applicable to mandatory
prepayments as set forth in subsection 2.5.3. Notice of
prepayment having been given as aforesaid, the principal amount
of the Loans specified in such notice shall become due and
payable on the prepayment date. Amounts of the Loans that are
so prepaid may not be reborrowed.
2.5.2. Mandatory Prepayments. The Company shall,
upon the occurrences set forth below, make prepayments of the
Loans in the amounts and manner set forth below.
(a) Prepayments from Sales of Collateral. Upon any
sale, transfer or other disposition of any Collateral, in
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accordance with the provisions of Section 5.10, the
Company shall prepay the Loans in an amount equal to the
proceeds received by the Company in respect of such sale,
transfer or other disposition net of costs of sale and
taxes paid or payable by the Company as a result thereof.
(b) Prepayments from Proceeds of Receivables
Transactions. On the first date on which the Company or
any Subsidiary of the Company receives proceeds of a
Receivables Transaction, the Company shall prepay the
Loans in full.
2.5.3. Company's Mandatory Prepayment Obligation;
Application of Prepayments. All prepayments shall include
payment of accrued interest on the principal amount so prepaid
and shall be applied to payment of accrued and unpaid interest
on the principal amount being prepaid before application to
principal. Any mandatory prepayment shall be applied first to
ABR Loans to the full extent thereof before application to
Adjusted LIBOR Loans as determined by the Administrative Agent;
provided that in lieu of application of any such prepayment to
Adjusted LIBOR Loans prior to the expiration of the Interest
Period with respect thereto, the Company may execute an Escrow
Letter substantially in the form of Exhibit XI annexed hereto
with respect to the principal and interest due in respect of
such prepayment and deposit with the Administrative Agent funds
equal to such amount for application to the Loans in accordance
with the terms of the Escrow Letter.
2.5.4. Manner and Time of Payment. All payments of
principal, interest and fees hereunder and under the Notes by
the Company shall be made without defense, setoff or
counterclaim and in same day funds and delivered to the
Administrative Agent not later than 12:00 Noon (New York time)
on the date due at its office located at One Bankers Trust
Plaza, New York, New York for the account of the applicable
Lenders; funds received by the Administrative Agent after that
time shall be deemed to have been paid by the Company on the
next succeeding Business Day. The Company hereby authorizes
the Administrative Agent to charge its account with Bankers in
order to cause timely payment to be made to the Administrative
Agent of all principal, interest and fees due hereunder
(subject to sufficient funds being available in its account for
such purpose).
2.5.5. Apportionment of Payments. Aggregate
principal and interest payments in respect of the Loans shall
be apportioned according to the applicable Lenders' respective
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Commitments. The Administrative Agent shall promptly
distribute to each Lender at its primary address set forth
below its name on the appropriate signature page hereof, or at
such other address as any Lender may request, its share of all
such payments received by the Administrative Agent, if any,
payable to such Lender when received by the Administrative
Agent.
2.5.6. Payments on Non-Business Days. Whenever any
payment to be made hereunder or under the Notes shall be stated
to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the
payment of interest hereunder or under the Notes or of the
commissions or fees hereunder, as the case may be; provided
that in the event that the day on which payment relating to an
Adjusted LIBOR Loan is due is not a Business Day but is a day
of the month after which no further Business Day occurs in that
month, then the due date thereof shall be the next preceding
Business Day.
2.5.7. Payment Accounts; Notation of Payment. (a)
Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness to
such Lender resulting from the Loans, from time to time,
including the amounts of principal and interest payable and
paid such Lender from time to time under this Agreement.
(b) The Administrative Agent shall maintain accounts
in which it will record (A) the amount of the Loans made
hereunder, whether the Loans consist of ABR Loans or Adjusted
LIBOR Loans, and the Interest Period applicable thereto,
(B) the amount of any principal or interest due and payable or
to become due and payable from the Company to each Lender
hereunder and (C) the amount of any sum received by the
Administrative Agent hereunder from the Company and each
Lender's share thereof.
(c) The entries made in the accounts maintained
pursuant to paragraphs (a) and (b) of this subsection 2.5.7
shall, to the extent permitted by applicable law, be
prima facie evidence of the existence and amounts of the
obligations therein recorded; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the
obligations of the Company to repay the Loans in accordance
with their terms.
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(d) Each Lender agrees that before disposing of any
Note held by it, or any part thereof (other than by granting
participations therein), such Lender will make a notation
thereon of all Loans and principal payments previously made
thereon and of the date to which interest thereon has been
paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under any such Note
shall not limit or otherwise affect the obligation of the
Company hereunder or under such Note with respect to the Loan
and payments of principal or interest on any such Note.
Section 2.6 Use of Proceeds.
2.6.1. The Loans. The proceeds of the Loans made by
the Lenders to the Company on the Funding Date shall be
applied, as soon as reasonably practicable, to (A) redeem in
full, in accordance with its terms, 100% of the outstanding
principal amount of the Existing Subordinated Debt and pay
accrued interest and premium, if any, with respect thereto and
(B) pay the fees and expenses payable in connection with the
redemption pursuant to clause (A) of this sentence above.
2.6.2. Margin Regulations. No portion of the
proceeds of the Loans shall be used by the Company in any
manner which might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation
T, or Regulation X of the Board of Governors of the Federal
Reserve System or any other regulation of the Board or to
violate the Exchange Act, in each case as in effect on the date
of such borrowing and such use of proceeds.
Section 2.7 Special Provisions Governing Adjusted
LIBOR Loans. Notwithstanding other provisions of this
Agreement, the following provisions shall govern with respect
to Adjusted LIBOR Loans as to the matters covered:
2.7.1. Determination of Interest Rate. As soon as
practicable after 11:00 a.m. (New York time) on an Interest
Rate Determination Date, the Administrative Agent shall
determine (which determination shall, absent manifest error, be
final, conclusive and binding upon all parties) the interest
rate which shall apply to the Adjusted LIBOR Loans for which an
interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to the Company
and to each Lender.
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2.7.2. Increased Costs. Without duplication of
payments under subsection 2.7.7, if, by reason of (A) after the
date of this Agreement, the introduction of or any change in or
in the interpretation of any law or regulation, or (B) the
compliance with any guideline or request after the date of
execution of this Agreement from any central bank or other
governmental authority or quasi-governmental authority
exercising control over banks or financial institutions
generally (whether or not having the force of law):
(i) any Lender (or its applicable lending office)
shall be subject to any tax, duty or other charge with
respect to its Adjusted LIBOR Loans or its obligation to
make Adjusted LIBOR Loans, or shall change the basis of
taxation of payments to any Lender of the principal of or
interest on its Adjusted LIBOR Loans or its obligation to
make Adjusted LIBOR Loans (except for changes in the rate
of tax on the overall net income of such Lender or its
applicable lending office imposed by the jurisdiction in
which such Lender's principal executive office or
applicable lending office is located); or
(ii) any reserve (including, without limitation, any
imposed by the Board of Governors of the Federal Reserve
System to the extent not already contemplated in the
definition of Adjusted LIBOR), special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender's applicable
lending office shall be imposed or deemed applicable or
any other condition affecting its Adjusted LIBOR Loans or
its obligation to make Adjusted LIBOR Loans shall be
imposed on any Lender or its applicable lending office or
the London interbank market;
and as a result thereof there shall be any increase in the cost
to such Lender of agreeing to make or making, funding or
maintaining Adjusted LIBOR Loans (except to the extent already
included in the determination of the applicable Adjusted
LIBOR), or there shall be a reduction in the amount received or
receivable by such Lender or its applicable lending office,
then the Company shall from time to time, upon written notice
from and demand by such Lender (with a copy of such notice and
demand to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender, within five Business Days
after the date specified in such notice and demand, additional
amounts sufficient to indemnify such Lender against such
increased cost or such reduction; provided that the Company
shall have no obligation to any Lender under this subsection
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2.7.2 if (A) such Lender shall not have delivered such written
notice to the Company within six months following the later of
(1) the date of the occurrence of the event which forms the
basis for such notice and (2) the date such Lender shall have
become aware of such event or (B) the obligation to pay
increased costs or indemnify against such reduction on account
of taxes, duties or other charges would not have arisen but for
(1) the failure of such Lender to provide any applicable forms
or other documents requested by the Company which such Lender
was otherwise required to provide under this Agreement, that
would establish the entitlement of such Lender to a reduced
rate of, or an exemption from, any tax, levy, charge,
withholding or similar item with respect to its Adjusted LIBOR
Loans or (2) any representation and warranty made by such
Lender in connection with its Adjusted Libor Loans regarding an
exemption (partial or complete) from taxes, levies, charges or
withholdings proving to have been incorrect, false or
misleading in any material respect when so made. A certificate
as to the amount of such increased cost, submitted to the
Company and the Administrative Agent by such Lender, shall,
except for manifest error, be final, conclusive and binding for
all purposes.
2.7.3. Required Termination and Prepayment. In the
event that on any date any Lender shall have reasonably
determined (which determination shall be final and conclusive
and binding upon all parties) that the making or continuation
of its Adjusted LIBOR Loans has become unlawful by compliance
by such Lender in good faith with any law, governmental rule,
regulation or order (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful),
then, and in any such event, such Lender shall be an Affected
Lender and it shall promptly give notice (by telephone
confirmed in writing) to the Company and the Administrative
Agent (which notice the Administrative Agent shall promptly
transmit to each Lender) of that determination. Subject to the
prior withdrawal of a Notice of Conversion/Continuation or
prepayment of the Adjusted LIBOR Loans of an Affected Lender as
contemplated by subsection 2.7.5, the obligation of an Affected
Lender to make or maintain its Adjusted LIBOR Loans during any
such period shall be terminated at the earlier of the
termination of the Interest Period then in effect or when
required by law and the Company shall no later than the
termination of the Interest Period in effect at the time any
such determination pursuant to this subsection 2.7.3 is made or
earlier, when required by law, repay its Adjusted LIBOR Loans
of such Affected Lender, together with all interest accrued
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thereon and such Adjusted LIBOR Loans shall be reborrowed as an
ABR Loan.
2.7.4. Options of Company. Without prejudice to the
Company's rights set forth in Section 2.9 and without limiting
any accrued obligations of the Company under subsection 2.7.2,
if the Company is required to pay an Affected Lender additional
moneys under subsection 2.7.2, the Company may in lieu of the
prepayment of Loans of an Affected Lender as required under
subsection 2.7.3, exercise any one of the following options:
(i) Upon written notice to the Administrative Agent
and each Lender, the Company may terminate the obligations
of the Lenders to make or maintain Loans as, and to
convert Loans into, an Adjusted LIBOR Loan and in such
event, the Company shall, prior to the time any payment
pursuant to subsection 2.7.3 is required to be made or, if
the provisions of subsection 2.7.2 are applicable, at the
end of the then current Interest Period, convert all of
the Adjusted LIBOR Loans into ABR Loans in the manner
contemplated by subsection 2.3.4 but without satisfying
the advance notice requirements therein; or
(ii) The Company may give notice (by telephone
confirmed in writing) to the Affected Lender and the
Administrative Agent (who shall promptly give similar
notice to each Lender) and require the Affected Lender to
make the Adjusted LIBOR Loan then being requested as an
ABR Loan or to continue to maintain its outstanding ABR
Loan then the subject of a Notice of Conversion/
Continuation as an ABR Loan or to convert its Adjusted
LIBOR Loans then outstanding that are so affected into ABR
Loans at the end of the then current Interest Period (or
at such earlier time as prepayment is otherwise required
to be made pursuant to subsection 2.7.3) in the manner
contemplated by subsection 2.3.4 but without satisfying
the advance notice requirements therein, such notice to
pertain only to the Loans of the Affected Lender and to
have no effect on the obligations of the other Lenders to
make or maintain Adjusted LIBOR Loans or to convert ABR
Loans into Adjusted LIBOR Loans.
2.7.5. Compensation. The Company shall compensate
each Lender, upon written request by such Lender (which request
shall set forth in reasonable detail the basis for requesting
such amounts), for all reasonable losses, expenses and
liabilities (including, without limitation, any interest paid
by such Lender to lenders of funds borrowed by it to make or
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carry its Adjusted LIBOR Loans and any loss sustained by such
Lender in connection with the re-employment of such funds),
which such Lender may sustain with respect to the Company's
Adjusted LIBOR Loans: (A) if for any reason (other than a
default or error by such Lender) the Borrowing of any Adjusted
LIBOR Loan does not occur on a date specified therefor in the
Notice of Borrowing or a Notice of Conversion/Continuation or a
telephonic request for borrowing or conversion/continuation or
a successive Interest Period does not commence after notice
therefor is given pursuant to subsection 2.3.4, (B) if any
payment or prepayment of any of such Lender's Adjusted LIBOR
Loans occurs on a date which is not the last day of the
Interest Period applicable to that Loan, (C) if any prepayment
of any such Lender's Adjusted LIBOR Loans is not made on any
date specified in a notice of prepayment given by the Company
or (D) as a consequence of any other default by the Company to
repay such Lender's Adjusted LIBOR Loans when required by the
terms of this Agreement; provided that the Company shall have
no obligation to any Lender under this subsection 2.7.5 if such
Lender shall not have delivered such written notice to the
Company within six months following the later of (1) the date
of the occurrence of the event which forms the basis for such
notice and (2) the date such Lender shall have become aware of
such event.
2.7.6. Quotation of LIBOR. Anything herein to the
contrary notwithstanding, if on any Interest Rate Determination
Date LIBOR is not available for any reason, the Administrative
Agent shall give the Company and each Lender prompt notice
thereof and the Loans requested shall be made as ABR Loans.
2.7.7. Taxes.
(a) No Withholding. Except as otherwise provided
herein, any and all payments by the Company, under the Loan
Documents shall be made free and clear of and without deduction
for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on or measured by the
overall net income and franchise or similar taxes of the
Administrative Agent, or any Lender (or any Purchasing Lender)
imposed by the United States or any jurisdiction under the laws
of which the Administrative Agent or any such Lender (or
Purchasing Lender) is organized or has its principal office or
lending office or any political subdivision in which the
applicable Administrative Agent, Lender or Purchasing Lender is
engaged in business or any taxing authority thereof or therein
(all such nonexcluded taxes, levies, imposts, deductions,
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charges, withholdings and liabilities, "Taxes"). If any Taxes
are required to be deducted from or in respect of any sum
payable hereunder to any Lender (or any Purchasing Lender) or
the Administrative Agent, then, subject to paragraph (e) of
this subsection 2.7.7, (A) the sum payable shall be increased
by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this subsection 2.7.7) such Lender (or Purchasing
Lender) or the Administrative Agent (as the case may be) shall
receive an amount equal to the sum it would have received had
no such deductions been made, (B) the Company shall make such
deductions and (C) the Company shall pay the full amount
deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law; provided that no
Purchasing Lender shall be entitled to receive any greater
payment under this paragraph (a) or paragraph (c) of
subsection 2.7.7 than such transferring Lender would have been
entitled to receive with respect to the rights assigned,
participated or otherwise transferred unless in the case of a
Purchasing Lender (1) such assignment or transfer shall have
been made at a time when the circumstances (including changes
in applicable law) giving rise to such greater payment did not
exist or had not yet occurred or (2) such assignment or
transfer shall have been at the request of or approved by the
Company.
(b) Documentary and Similar Taxes. Except as
otherwise provided in this clause (b), the Company agrees to
pay any current or future stamp, intangible or documentary
taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with
respect to, this Agreement, any Registered Transfer Supplement
entered into at the request of the Company or any other Loan
Document, but excluding any current or future stamp, intangible
or documentary taxes or any other excise or property taxes,
charges or similar levies that arise as a result of sales,
assignments or other transfers of rights hereunder to any
Transferee pursuant to Section 9.1 (including participations)
(all such non-excluded taxes, charges and levies are
hereinafter referred to as, collectively, "Other Taxes").
(c) Indemnity. Except as otherwise provided in this
subsection 2.7.7, the Company will indemnify each Lender (or
Purchasing Lender) and the Administrative Agent for the full
amount of Taxes and Other Taxes (including any Taxes or Other
Taxes on amounts payable under this subsection 2.7.7) paid by
such Lender (or Purchasing Lender) or the Administrative Agent,
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as the case may be, and any liability (including penalties,
interest and reasonable expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted by the relevant taxing authority
or other Governmental Authority. Such indemnification shall be
made within 30 days after the date any Lender (or Purchasing
Lender) or the Administrative Agent, as the case may be, makes
written demand therefor. With respect to any Taxes which are
paid by the Company in accordance with this subsection 2.7.7,
each Lender (or Purchasing Lender) or Administrative Agent
receiving the benefits of such payment of Taxes hereby agrees
to pay the Company any amount refunded to such party which it
determines in its sole discretion to be a refund in respect of
such Taxes; provided that the Company, upon the request of such
Lender (or Purchasing Lender) or the Administrative Agent,
agrees to return such refund (plus penalties, interest or other
charges) to such Lender (or Purchasing Lender) or the
Administrative Agent in the event the relevant taxing authority
or other Governmental Authority determines that such Lender (or
Purchasing Lender) or the Administrative Agent was not entitled
to receive such refund.
(d) Receipts. Within 30 days after the date of any
payment of Taxes or Other Taxes withheld by the Company in
respect of any payment to any Lender (or Purchasing Lender) or
the Administrative Agent, the Company will furnish to the
Administrative Agent, at its address referred to in Section
9.9, the original or a certified copy of a receipt (if
available) evidencing payment thereof or other evidence
reasonably satisfactory to such Lender (or Purchasing Lender)
or the Administrative Agent, as the case may be.
(e) Non-U.S. Lenders. Each of the Administrative
Agent and any Lender (or Purchasing Lender) that is not
incorporated or otherwise formed under the laws of the United
States of America or a state thereof (a "Non-U.S. Person")
agrees that it shall, on or prior to the Closing Date, or, if
later, the date it becomes a Lender (or Purchasing Lender) or
the Administrative Agent hereunder, deliver to the Company and
the Administrative Agent (A) two duly completed copies of
United States Internal Revenue Service Forms 1001 or 4224, or
(B) in the case of Lenders (or Purchasing Lenders) exempt from
United States Federal withholding tax pursuant to Section
871(h) or 881(c) of the Internal Revenue Code, two United
States Internal Revenue Service Forms W-8 and a certificate,
substantially in the form of Exhibit XV annexed hereto (such
certificate, a "Status Certificate"), representing that such
Non-U.S. Person is not a bank described in Section 881(c) of
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the Internal Revenue Code, or any successor applicable form of
any thereof, certifying in each case that such Lender (or
Purchasing Lender) or the Administrative Agent is entitled to
receive payments hereunder payable to it without deduction or
withholding of any United States Federal income taxes, or
subject to a reduced rate thereof. Each of the Administrative
Agent or any Lender (or Purchasing Lender) that delivers to the
Company and the Administrative Agent any such form or
certification further undertakes to deliver to the Company and
the Administrative Agent further copies of any such form or
certification or other manner of certification reasonably
satisfactory to the Company on or before the date that any such
form or certification expires or becomes obsolete or of the
occurrence of any event requiring a change in the most recent
form or certification previously delivered by it to the Company
or the Administrative Agent, and such extensions or renewals
thereof as may reasonably be requested by the Company or the
Administrative Agent, certifying that the Administrative Agent
or such Lender (or Purchasing Lender), as the case may be, is
entitled to receive payments hereunder without deduction or
withholding of any United States Federal income taxes, or
subject to a reduced rate thereof. If at any time on or after
the date of this Agreement there has occurred, on or prior to
the date on which any delivery of any such form or
certification would otherwise be required, any change in law,
rule, regulation, treaty, convention or directive, or any
change in the interpretation or application of any thereof,
that renders all such forms or certification previously
delivered inapplicable or which would prevent the
Administrative Agent or such Lender (or Purchasing Lender), as
the case may be, from duly completing and delivering any such
form or certificate with respect to it, the Administrative
Agent or such Lender (or Purchasing Lender), as the case may
be, shall advise the Company that under applicable law it shall
be subject to withholding of United States Federal income tax
at the full statutory rate, a reduced rate of withholding or
without deduction or withholding. A Non-U.S. Person shall be
required to furnish any such form or certification only if it
is entitled to claim an exemption from or a reduced rate of
withholding. Each of the Administrative Agent and any Lender
that is a U.S. or Non-U.S. Person and that is a party hereto as
of the Closing Date hereby represents and warrants that, as of
the Closing Date, payments made to it hereunder are exempt from
withholding of United States Federal income taxes (A) because
the Administrative Agent or such Lender is organized or
otherwise formed under the laws of the United States or any
state thereof; (B) because such payments are effectively
connected with a United States trade or business conducted by
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such Non-U.S. Person; (C) pursuant to the terms of an income
tax treaty between the United States and such Non-U.S. Person's
country of residence; or (D) because such payments are
portfolio interest exempt pursuant to Section 871(h) or 881(c)
of the Internal Revenue Code. Notwithstanding any provision of
paragraph (a), (b) or (c) of this subsection 2.7.7 to the
contrary, the Company shall not have any obligation to pay any
Taxes or Other Taxes or to indemnify any Lender (or Purchasing
Lender) or the Administrative Agent for such Taxes or Other
Taxes pursuant to this subsection 2.7.7 to the extent that such
Taxes or Other Taxes result from (A) the failure of any Lender
(or Purchasing Lender) or the Administrative Agent to comply
with its obligations pursuant to this paragraph (e) or (B) any
representation or warranty made in this paragraph (e), or made
on any form or certification (or successor applicable form or
certification) delivered pursuant to this paragraph (e) by the
Lender (or Purchasing Lender) or the Administrative Agent
incurring such Taxes or Other Taxes proving to have been
incorrect, false or misleading in any material respect when so
made or deemed to be made. Unless the Company and the
Administrative Agent have received forms or other documents
reasonably satisfactory to them indicating that payments
hereunder are not subject to United States withholding tax, the
Company or the Administrative Agent will withhold at the
applicable statutory or treaty rate.
2.7.8. Booking of Adjusted LIBOR Loans. Any Lender
may make, carry or transfer Adjusted LIBOR Loans at, to, or for
the account of, any of its branch offices or the office of an
Affiliate of such Lender. Notwithstanding the foregoing, each
Lender shall, to the extent requested to do so by the Company,
use commercially reasonable efforts consistent with its
internal policies and customary business practices to exercise
the right set forth in the preceding sentence so as to avoid or
minimize Taxes or Other Taxes in respect of Adjusted LIBOR
Loans to the extent the exercise of such right would not
otherwise adversely affect such Lender.
2.7.9. Assumptions Concerning Funding of Adjusted
LIBOR Loans. Calculation of all amounts payable to a Lender
under this Section 2.7 shall be made as though such Lender had
actually funded its relevant Adjusted LIBOR Loan through the
purchase of a Eurodollar deposit bearing interest at LIBOR
applicable to such Adjusted LIBOR Loan in an amount equal to
the amount of the Adjusted LIBOR Loan and having a maturity
comparable to the relevant Interest Period and through the
transfer of such Eurodollar deposit from an offshore office of
such Lender to a domestic office of such Lender in the United
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States of America; provided that each Lender may fund each of
its Adjusted LIBOR Loans in any manner it sees fit and the
foregoing assumption shall be utilized only for the calculation
of amounts payable under this Section 2.7.
2.7.10. Adjusted LIBOR Loans After an Event of
Default. Unless the Lenders shall otherwise agree, after the
occurrence of and during the continuance of a Potential Event
of Default or Event of Default, the Company may not elect to
have Loans be made or maintained as, or converted to, an
Adjusted LIBOR Loan after the expiration of any Interest Period
then in effect for such Loan.
2.7.11. Affected Lender's Obligation to Mitigate.
Each Lender agrees that, as promptly as practicable after it
becomes aware of the occurrence of an event or the existence of
a condition that would cause it to be an Affected Lender under
subsection 2.7.2 or 2.7.3 or to be entitled to payments
pursuant to paragraphs (a), (b) or (c) of subsection 2.7.7, it
will so advise the Company and, if requested to do so by the
Company, it will, to the extent not inconsistent with such
Lender's internal policies and customary business practices,
use commercially reasonable efforts to make, fund or maintain
the affected Adjusted LIBOR Loans of such Lender through
another lending office of such Lender if as a result thereof
the additional moneys which would otherwise be required to be
paid in respect of such Loans pursuant to subsection 2.7.2 or
such paragraphs of subsection 2.7.7 would be materially reduced
or the illegality or other adverse circumstances which would
otherwise require prepayment of such Loans pursuant to
subsection 2.7.3 would cease to exist, and if, as determined by
such Lender, in its sole discretion, the making, funding or
maintaining of such Loans through such other lending office
would not otherwise adversely affect such Loans or the Lender.
The Company hereby agrees to pay all reasonable expenses
incurred by any Lender in utilizing another lending office of
such Lender pursuant to this subsection 2.7.11.
Section 2.8 Capital Requirements. If, while any of
the Commitments or the Loans are outstanding, any Lender
determines that the adoption after the date of this Agreement
of any applicable law, rule or regulation regarding capital
adequacy or capital maintenance or any change therein, or any
change after the date of this Agreement in the interpretation
or administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such
Lender with any request or directive after the date of this
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Agreement regarding capital adequacy or capital maintenance
(whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect
of reducing the rate of return on such Lender's capital as a
consequence of its Commitment or Loans to a level below that
which such Lender could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed
by such Lender to be material, then from time to time, within
15 days after written demand by such Lender, the Company shall
pay to such Lender such additional amount or amounts as will
compensate it for such reduction; provided that the Company
shall have no obligation to any Lender under this Section 2.8
if such Lender shall not have delivered such written demand to
the Company within six months following the later of (1) the
date of the occurrence of the event which forms the basis for
such demand and (2) the date such Lender shall have become
aware of such event.
Section 2.9 Replacement Rights of Company. In the
event that any Lender shall have delivered a notice or
certificate or written demand pursuant to subsection 2.7.2,
subsection 2.7.3, or Section 2.8, or the Company shall be
required to make additional payments to or on behalf of or to
otherwise indemnify any Lender or Purchasing Lender, for its
own account or for the account of any Participant, under
paragraph (a), (b) or (c) of subsection 2.7.7, so long as no
Event of Default shall have occurred and be continuing, the
Company shall have the right, but not the obligation, at its
own expense (including with respect to the processing and
recordation fee referred to in subsection 9.1.3), upon notice
to such Lender and the Administrative Agent, to replace such
Lender with an assignee (in accordance with and subject to the
restrictions contained in subsection 9.1.3) approved by the
Administrative Agent (which approval shall not be unreasonably
withheld), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the
restrictions contained in subsection 9.1.3) all its interests,
rights and obligations under this Agreement to such assignee;
provided that no Lender shall be obligated to make any such
assignment unless (A) such assignment shall not conflict with
any law or any rule, regulation or order of any Governmental
Authority, (B) such assignee shall pay to the affected Lender
in immediately available funds on the date of such assignment
the principal of the Loan made by such Lender hereunder and
(C) the Company shall pay to the Affected Lender in immediately
available funds on the date of such assignment the interest
accrued to the date of payment on the Loan made by such Lender
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hereunder and all other amounts accrued for such Lender's
account or owed to it hereunder.
ARTICLE III
CONDITIONS TO LOANS
The obligations of the Lenders to make the Loans
hereunder are subject to the satisfaction of all of the
following conditions:
Section 3.1 Conditions to Effectiveness of
Agreement. The effectiveness of this Agreement is subject to
prior or concurrent satisfaction of the following conditions on
the Closing Date:
3.1.1. The Company shall have delivered, or caused
to be delivered, to the Administrative Agent for the Lenders
with sufficient copies, where appropriate, for each Lender and
CG&R:
(i) Certified copies of the Certificate of
Incorporation of the Company, together with a good
standing certificate from the Secretary of State of its
jurisdiction of incorporation, each to be dated a recent
date prior to the Closing Date;
(ii) Copies of the By-laws of the Company, certified
as of the Closing Date by its corporate secretary or an
assistant secretary;
(iii) Resolutions of the Board of Directors of the
Company approving and authorizing such documents and
actions as are contemplated hereby in form and substance
satisfactory to the Administrative Agent and the Requisite
Lenders, certified by its corporate secretary or an
assistant secretary as being in full force and effect
without modification or amendment;
(iv) Signature and incumbency certificates of
officers of the Company executing instruments, documents
or agreements required to be executed in connection with
this Agreement; and
(v) Executed copies of each of the Collateral
Documents.
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3.1.2. The Company shall have taken or caused to be
taken such actions in such a manner so that, effective
immediately upon the funding of the Loans, the Collateral
Agent, on behalf of the Lenders, will have a valid and
perfected Lien on the entire Collateral, which Lien shall be a
first priority Lien subject only to Prior Liens. Such actions
shall include, without limitation: (A) the delivery of the
Pledge Agreements and (B) the delivery pursuant to the
applicable Pledge Agreement of UCC financing statements (which
shall name the Administrative Agent as secured party, in form
and substance satisfactory to the Administrative Agent)
granting a security interest in all Collateral or evidence
satisfactory to the Administrative Agent of filing of UCC
financing statements in each office where filing is necessary
or appropriate.
3.1.3. The Company shall have caused to be delivered
to each Lender an Officer's Certificate substantially in the
form of Exhibit VIII annexed hereto and an opinion satisfactory
in all respects to the Requisite Lenders from an independent
valuation firm satisfactory to the Requisite Lenders, in each
case to the effect that, after giving effect to the
Recapitalization, the Company will not be insolvent, will not
be rendered insolvent by the indebtedness incurred in
connection therewith, will not be left with unreasonably small
capital with which to engage in its business and will not have
incurred debts beyond its ability to pay such debts as they
mature.
3.1.4. The Administrative Agent and CG&R shall have
received copies of one or more favorable written opinions of
Shearman & Sterling, counsel for the Company, substantially in
the form of Exhibit V annexed hereto, dated as of the Closing
Date, and pertaining to such other matters as the
Administrative Agent may reasonably request.
3.1.5. The Administrative Agent and CG&R shall have
received copies of one or more favorable written opinions of
(A) James W. Nellen, II, Esq., Vice President and General
Counsel for the Company, substantially in the form of Exhibit
VI annexed hereto and (B) counsel in each jurisdiction where
there exists any accounts receivable to be subjected to the
Lien of a Collateral Document with respect to the perfection of
the security interests contemplated by the Collateral Documents
and certain related matters, in each case in substantially the
form of Exhibit VII annexed hereto.
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3.1.6. The Company shall have (A) consummated the
Common Stock Offering, in accordance with applicable law and on
terms satisfactory in all respects to the Requisite Lenders,
and received not less than $300,000,000 in aggregate gross cash
proceeds from the Common Stock Offering, (B) paid any and all
amounts owing in respect of the Senior Secured Notes and the
Existing Credit Facilities and terminated all commitments under
the Existing Credit Facilities, (C) paid any and all amounts
owing on or prior to the Closing Date pursuant to the
Commitment Fee Letter and (D) paid all Transaction Costs in
respect of the Recapitalization that are due as of the Closing
Date or made arrangements to do so acceptable to the Requisite
Lenders.
3.1.7. The Company shall have entered into the
Senior Credit Agreement, on terms satisfactory in all respects
to the Requisite Lenders and shall have borrowed thereunder the
loans contemplated to be borrowed on the Closing Date.
3.1.8. There shall be no governmental or judicial
action, actual or threatened, that is likely to restrain,
prevent or impose burdensome conditions on the transactions
contemplated hereby.
3.1.9. The Lenders shall have received satisfactory
pro forma consolidated balance sheets of the Company and its
Subsidiaries after giving effect to the Recapitalization and
the Requisite Lenders shall be reasonably satisfied that such
balance sheets are not inconsistent in any material respect
with the Projections.
3.1.10. Except as has been disclosed in the
Information Package, there shall not have occurred any material
adverse change with respect to the condition (financial or
otherwise), operations, business, assets, liabilities or
prospects of the Company and its Subsidiaries, taken as a
whole, since December 31, 1994.
3.1.11. As of the Closing Date, (A) all information
and data (other than the Projections) concerning the Company
and its Subsidiaries or the transactions contemplated hereby
that are contained in the Information Package will not (to the
best of the Company's knowledge with respect to information
made available by any of the Company's authorized
representatives), taken as a whole, contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in
light of the circumstances under which such statements are
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made, not misleading and (B) all financial projections
concerning the Company and its Subsidiaries (collectively, the
"Projections") that have been prepared by the Company or any of
the Company's authorized representatives and made available to
the Lenders have been prepared in good faith and are based upon
reasonable assumptions (it being understood that nothing
contained herein shall constitute a representation that the
results forecasted in any Projections will in fact be
achieved).
3.1.12. (A) The Company shall have delivered a
Borrowing Base Certificate to the Agent (with sufficient copies
for each of the Lenders and the Administrative Agent) duly
completed. Such Borrowing Base Certificate shall be made as of
March 6, 1995. Such Borrowing Base Certificate shall also
contain (1) a detailed schedule showing the aging of
Receivables as of the date of the Borrowing Base Certificate
and (2) a summary schedule showing the aging of Receivables as
of the Friday of the week immediately preceding the Closing
Date, in each case, in a form reasonably satisfactory to the
Administrative Agent.
(B) As of the date of the Borrowing Base Certificate
referred to in clause (A), and after giving effect to the
transactions to occur on the Closing Date, the Administrative
Agent shall be satisfied, in its sole discretion, that the
Company would have the availability to incur Loans under this
Agreement in the aggregate amount of $60,000,000.
The execution and delivery of this Agreement on the
Closing Date shall constitute a representation and warranty to
the Administrative Agent and each of the Lenders that all of
the applicable conditions specified above exist as of that
time, except for such conditions that have been duly waived in
writing hereunder by the beneficiaries thereof.
Section 3.2 Conditions to the Loans. The
obligations of the Lenders to make the Loans on the Funding
Date for the purposes contemplated in subsection 2.6.1 are
subject to the prior or concurrent satisfaction or waiver of
the following further conditions precedent (in addition to
satisfaction of the conditions set forth in Section 3.1 unless
such conditions have been waived in accordance with Section
9.6):
3.2.1. The Administrative Agent shall have received,
in accordance with the provisions of subsection 2.1.2, before
the Funding Date, an originally executed Notice of Borrowing
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signed by the chief executive officer, the chief financial
officer or the treasurer of the Company requesting the Loans or
by any executive officer of the Company designated by any of
the above-described officers on behalf of the Company in
writing delivered to the Administrative Agent.
3.2.2. As of the Funding Date:
(i) The Company shall have made all necessary
arrangements, given all necessary notices and taken all
other necessary action to redeem all the outstanding
Existing Subordinated Debt and pay all other amounts and
Transaction Costs owing in connection with such
redemption, in accordance with the terms of the indentures
governing the Existing Subordinated Debt.
(ii) There shall not have occurred and be continuing
any Event of Default or Potential Event of Default
pursuant to Section 7.1, 7.6, 7.7, 7.9, 7.12 or 7.13.
3.2.3. The Company shall have delivered a Borrowing
Base Certificate to the Administrative Agent (with sufficient
copies for each of the Lenders) duly completed. Such Borrowing
Base Certificate shall be made as of the last day of the month
immediately preceding the Funding Date; provided that if the
Funding Date is within ten (10) days of such month end, the
Borrowing Base Certificate shall be made as of the second
preceding month end. The Borrowing Base Certificate shall also
contain (1) a detailed schedule showing the aging of
Receivables as of the date of the Borrowing Base Certificate
and (2) a summary schedule showing the aging of Receivables as
of the Friday of the week immediately preceding the Funding
Date, in each case, in a form reasonably satisfactory to the
Administrative Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this
Agreement and to make the Loans, the Company represents and
warrants to each Lender as follows:
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Section 4.1 Organization, Powers, Good Standing,
Business and Subsidiaries.__________
4.1.1. Organization and Powers. The Company is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation
(which jurisdiction as of the date of this Agreement is set
forth on Schedule A annexed hereto). The Company has all
requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and
proposed to be conducted, to enter into each Loan Document and
to carry out the transactions contemplated hereby and thereby,
and in the case of the Company, to issue the Notes and the
Common Stock.
4.1.2. Good Standing. The Company is in good
standing wherever necessary to carry on its present business
and operations, except in jurisdictions in which the failure to
be in good standing has not had and will not have a material
adverse effect on the conduct of the business of the Company
and its Subsidiaries, taken as a whole.
4.1.3. Conduct of Business. On the date of this
Agreement, the Company and its Subsidiaries are engaged only in
the businesses described in the Prospectus.
4.1.4. Subsidiaries. All of the Subsidiaries (other
than inactive Subsidiaries or Foreign Subsidiaries having no
significant assets or activities) of the Company and its
Subsidiaries, as of the date of this Agreement, are identified
on Schedule A annexed hereto. The capital stock of each of the
Subsidiaries identified on Schedule A is duly authorized,
validly issued, fully paid and nonassessable. The capital
stock of each Person identified on Schedule A is not Margin
Stock. Each of the Subsidiaries of the Company is validly
existing and in good standing under the laws of its respective
jurisdiction of incorporation and has full corporate power and
authority to own its assets and properties and to operate its
business as presently owned and conducted except where failure
to be in good standing or a lack of corporate power and
authority has not had and will not have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
Schedule A correctly sets forth as of the date of this
Agreement the ownership interest of the Company and each of its
Subsidiaries in their respective Subsidiaries identified
therein.
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Section 4.2 Authorization of Borrowing, etc.
4.2.1. Authorization of Borrowing. The execution,
delivery and performance of the Loan Documents and the
issuance, delivery and payment of the Notes and the grant and
continuation of the security interests in the Collateral
pursuant to the Collateral Documents have been duly authorized
by all necessary corporate action by the Company.
4.2.2. No Conflict. The execution, delivery and
performance by the Company of each Loan Document and the
issuance, delivery and performance of the Notes, the
consummation of the Common Stock Offering and the issuance of
Common Stock and the other transactions comprising the
Recapitalization and the grant and continuation of the security
interests in the Collateral pursuant to the Collateral
Documents do not and will not (A) violate (1) any provision of
law applicable to the Company, (2) the Certificates of
Incorporation or Bylaws of the Company, or (3) any order,
judgment or decree of any court or other agency of government
binding on the Company, (B) conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a
default under any Contractual Obligation of the Company,
(C) result in or require the creation or imposition of any Lien
upon any of its properties or assets (other than Liens in favor
of the Lenders) or (D) require any approval of stockholders or
any approval or consent of any Person under any Contractual
Obligation of the Company, except for such violations,
conflicts, breaches, Liens and defaults which would not have,
and such approvals the absence of which would not have, a
material adverse effect on the Company and its Subsidiaries,
taken as a whole.
4.2.3. Governmental Consents. The execution,
delivery and performance by the Company of the Loan Documents
to which it is a party and application of the proceeds of the
Loans, the issuance, delivery and performance of the Notes, the
consummation of the Common Stock Offering, the issuance of
Common Stock, and the grant and continuation of the security
interests in the Collateral pursuant to the Collateral
Documents do not and will not require any registration with,
authorization, order, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other
governmental authority or regulatory body except such
registration, consent, approval or notice as has been made,
obtained or given and is in full force and effect and except
for the filings to perfect security interests granted pursuant
to Collateral Documents, and other filings, authorizations,
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notices, orders, consents and approvals the absence of which
would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole or on the legality, validity or
enforceability of any Loan Document.
4.2.4. Binding Obligation. This Agreement is, and
the other Loan Documents and the Notes, when executed and
delivered will be, the legally valid and binding obligations of
the Company, enforceable against the Company in accordance with
their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
4.2.5. Valid Issuance of Common Stock. The Common
Stock issued in the Common Stock Offering has been duly and
validly issued, fully paid and nonassessable. Such Common
Stock has been registered or qualified under applicable federal
and state securities laws.
Section 4.3 Financial Condition. The Company has
delivered to the Lenders true and complete copies of the
Company's financial statements for the fiscal year of the
Company ending December 31, 1994. Except as set forth in the
Information Package, all such financial statements and all
financial statements set forth in the Prospectus fairly present
the consolidated financial position of the Company and its Sub-
sidiaries as at the respective dates thereof and the
consolidated results of operations and cash flows of the
Company and its Subsidiaries for each of the periods covered
thereby, subject to changes resulting from audit and normal
year-end adjustments. Neither the Company nor any of its
Subsidiaries has as of the Closing Date any material Contingent
Obligation, material contingent liability or material liability
for taxes, long-term lease or unusual forward or long-term
commitment which is not reflected in the foregoing financial
statements, or the notes thereto.
Section 4.4 No Adverse Material Change; No Stock
Payments. Except as has been disclosed in the Information
Package, since December 31, 1994, there has been no change in
the business, operations, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries,
which has been, either in any case or in the aggregate,
materially adverse to the business, operations, property,
assets or conditions (financial or otherwise) of the Company
and its Subsidiaries, taken as a whole.
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Section 4.5 Title to Properties; Liens. The Company
has good, sufficient and legal title to and beneficial
ownership of all its properties and assets (other than the
Collateral) reflected in the most recent consolidated balance
sheet referred to in Section 4.3 or in the most recent
financial statements delivered pursuant to Section 5.1 of this
Agreement, except for assets acquired or disposed of in the
ordinary course of business since the date of such consolidated
balance sheet and except for sales and other dispositions
permitted hereunder and except for such defects that in the
aggregate do not materially adversely affect the business,
operations, properties, assets or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a
whole. Except for the Liens created by the Collateral
Documents and other Liens permitted by this Agreement, all such
properties and assets are free and clear of Liens. The Company
has title to all the Collateral and title to each item of
Collateral is subject to no Liens other than Liens which would
be permitted pursuant to any Collateral Documents; provided
that no such Lien (other than Prior Liens) shall be superior to
the Lien of such applicable Collateral Document. The Company
holds all material licenses, certificates of occupancy or
operation and similar material certificates and clearances of
municipal and other authorities necessary to own and operate
its properties in the manner and for the purposes currently
operated by the Company.
Section 4.6 Litigation; Adverse Facts. Except as
has been disclosed in the Information Package, there is no
action, suit, proceeding, governmental investigation of which
the Company has knowledge or arbitration (whether or not
purportedly on behalf of the Company or any Subsidiary thereof)
at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, pending
or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any
property of the Company or any Subsidiary thereof which would
reasonably be expected to result in any material adverse change
in the business, operations, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries,
taken as a whole, or that would impair the ability of the
Company to perform any of the Obligations.
Section 4.7 Payment of Taxes. Except to the extent
permitted by Section 5.3, all material tax returns and reports
of the Company and each Subsidiary thereof required to be filed
by any of them have been filed, and all taxes, assessments,
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fees and other governmental charges upon such Persons and upon
their respective properties, assets, income and franchises
which are due and payable have been paid. The Company does not
know of any proposed tax assessment against any such Person
that would be material to the condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a
whole, which is not being actively contested in good faith by
such Person to the extent affected thereby in good faith and by
appropriate proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
Section 4.8 Performance of Agreements. Neither the
Company nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the material
obligations, covenants or conditions contained in any
Contractual Obligation of any such Person, and no condition
exists which, with the giving of notice or the lapse of time or
both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults,
if any, would not have a material adverse effect on the
business, properties, assets, operations or condition
(financial or otherwise) of the Company and its Subsidiaries,
taken as a whole. Schedules C and F annexed hereto correctly
identify all credit facilities of the Company and its
Subsidiaries as of December 31, 1994 in excess of $1,000,000.
Section 4.9 Governmental Regulation. Neither the
Company nor any of its Subsidiaries (A) is subject to
regulation under the Public Utility Holding Company Act of 1935
or to any federal or state statute or regulation limiting its
ability to incur Indebtedness for money borrowed as
contemplated hereby or by any other Loan Document or (B) is an
"investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940, as amended.
Section 4.10 Securities Activities. Neither the
Company nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any
Margin Stock.
Section 4.11 Employee Benefit Plans.
4.11.1. The Company and each of its ERISA Affiliates
are and each Pension Plan is in compliance in all material
respects with all applicable provisions of ERISA and the
Internal Revenue Code and the regulations and published
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interpretations thereunder with respect to all Pension Plans
and Multiemployer Plans.
4.11.2. Except for (A) the standard termination in
accordance with Section 4041(b) of ERISA of the Lily-Tulip,
Inc. Salary Retirement Plan and (B) the occurrence of the
Reportable Event described in Regulation 29 C.F.R. Section
2615.23(a)(1)(ii) with respect to the Fort Howard Cup
Corporation Bargaining Unit Pension Plan upon the transfer of
all the issued and outstanding shares of capital stock of
Sweetheart Cup Company, Inc., no Termination Event has occurred
or is reasonably expected to occur with respect to any Pension
Plan and no Termination Event that is described in clause (E)
of the definition of "Termination Event" has occurred.
4.11.3. The sum of the amount of unfunded benefit
liabilities under all Pension Plans (excluding each Pension
Plan with an amount of unfunded benefit liabilities of zero or
less) is not more than $35,000,000.
4.11.4. Neither the Company nor any of its ERISA
Affiliates has incurred or reasonably expects to incur any
withdrawal liability under Title IV of ERISA to any
Multiemployer Plan individually or in the aggregate in excess
of $25,000,000.
4.11.5. Neither the Company nor any of its ERISA
Affiliates has incurred any accumulated funding deficiency
(whether or not waived) with respect to any Pension Plan
individually or in the aggregate in excess of $15,000,000.
4.11.6. Neither the Company nor any of its ERISA
Affiliates has or reasonably expects to become subject to a
lien in favor of any Pension Plan under Section 302(f) of ERISA
individually or in the aggregate in excess of $15,000,000.
As used in this Section 4.11, the term "amount of
unfunded benefit liabilities" has the meaning specified in
Section 4001(a)(18) of ERISA, and the term "accumulated funding
deficiency" has the meaning specified in Section 302 of ERISA
and Section 412 of the Internal Revenue Code.
Section 4.12 Certain Fees. Other than as disclosed
in the Information Package by the Company, no broker's or
finder's fee or commission will be payable with respect to the
offer, issue and sale, of the Notes and the Company hereby
indemnifies the Lenders against and agrees that it will hold
the Lenders harmless from any claim, demand or liability for
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broker's or finder's fees alleged to have been incurred in
connection with any such offer, issue and sale or any of the
other transactions contemplated hereby and any expenses,
including reasonable legal fees, arising in connection with any
such claim, demand or liability. Except as so disclosed, no
other similar fees or commissions will be payable by the
Company or any of its Subsidiaries for any other services
rendered to the Company or any of its Subsidiaries ancillary to
the transactions contemplated hereby.
Section 4.13 Disclosure. Except as disclosed in the
Information Package, taken as a whole, the representations and
warranties of the Company contained in this Agreement and any
other document, certificate or written statement furnished to
the Lenders by or on behalf of the Company or any Subsidiary of
the Company for use in connection with the transactions
contemplated by this Agreement (including, without limitation,
the Information Package but excluding the Projections (as to
which the Company makes the representations and warranties set
forth below)) do not contain any untrue statement of a material
fact or omit to state a material fact (known to any such person
in the case of any document not furnished by it) necessary in
order to make the statements contained herein or therein not
misleading. Any reaffirmation of the foregoing sentence is
subject to any change in the facts and conditions on which such
representations and warranties are based, which changes are
required, contemplated or permitted under this Agreement and
subject to further disclosure contemplated by Section 5.1;
provided that in all cases, taken as a whole, representations
and warranties of the Company contained in this Agreement and
any other document, certificate or written statement furnished
to the Lenders by or on behalf of the Company or any Subsidiary
of the Company for use in connection with the transactions
contemplated by this Agreement did not contain at the time made
any untrue statement of a material fact or omit at the time
made to state a material fact (known to the Company or any
Subsidiary of the Company in the case of any document not
furnished by it) necessary in order to make the statements
contained herein or therein not misleading. The Projections
are based upon good faith estimates and assumptions believed by
the Company and its Subsidiaries to be reasonable at the time
made, it being recognized by the Lenders that projections as to
future events are not to be viewed as facts and that actual
results during the period or periods covered by the Projections
may differ from the projected results. Except as disclosed in
the Information Package, there is no fact known to the Company
(other than matters of a general economic nature) which
materially and adversely affects the business, operations,
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property, assets or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, which has not
been disclosed herein or in such other documents, certificates
and statements furnished to the Lenders for use in connection
with the transactions contemplated hereby.
Section 4.14 Patents, Trademarks, etc. The Company
and its Subsidiaries own, or are licensed to use, all patents,
trademarks, trade names, copyrights, technology, know-how and
processes, service marks and rights with respect to the
foregoing used in or necessary for the conduct of their
respective businesses as currently conducted which are material
to the condition (financial or otherwise), business or
operations of the Company and its Subsidiaries, taken as a
whole. To the Company's knowledge, the use of such patents,
trademarks, trade names, copyrights, technology, know-how,
processes and rights with respect to the foregoing by the
Company, its Subsidiaries and their respective Subsidiaries
does not infringe on the rights of any Person, subject to such
claims and infringements as do not, in the aggregate, give rise
to any liability on the part of the Company, its Subsidiaries
and their respective Subsidiaries which is material to the
Company and its Subsidiaries, taken as a whole. The
consummation of the transactions contemplated by this Agreement
does not require any consent to be obtained with respect to
such patents, trademarks, trade names, copyrights, technology,
know-how or processes, or the license to use any of such
patents, trademarks, trade names, copyrights, technology, know-
how, processes or rights with respect thereto, which if not
obtained will in any material manner or to any material extent
impair the ownership of (or the license to use, as the case may
be) any of such patents, trademarks, trade names, copyrights,
technology, know-how or processes by the Company and its
Subsidiaries to an extent which in the aggregate would have a
material adverse effect on the condition (financial or
otherwise), business or operations of the Company and its
Subsidiaries, taken as a whole. To the best knowledge of the
Company, the rights of the Company, its Subsidiaries and their
respective Subsidiaries so to sell, franchise or license under
such brand names then being used may be transferred in
connection with any sale of assets or stock of the related
business by the Company, its Subsidiaries or any of their
respective Subsidiaries with only such exceptions as are not
material to the Company and its Subsidiaries, taken as a whole.
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Section 4.15 Environmental Protection.
4.15.1. The Company, its Subsidiaries and their
respective Subsidiaries have either (A) obtained all material
permits, licenses and other authorizations which are required
with respect to the operation of its business under any
Environmental Law or (B) submitted a timely application in
respect of such permits, licenses or other authorizations (the
submission of which, by itself or in conjunction with other
appropriate action by the Company, its Subsidiaries or any of
their respective Subsidiaries, is sufficient under applicable
law to allow the Company, its Subsidiaries and their respective
Subsidiaries to continue its business or operations pending a
determination with respect to such application) and received at
least oral confirmation from the relevant government authority
that such permits, licenses or other authorizations will be
issued or reserved, as appropriate under current operating
conditions.
4.15.2. The Company, its Subsidiaries and their
respective Subsidiaries are in material compliance with all
terms and conditions of the required material permits, licenses
and authorizations, and are also in material compliance with
all other material limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules
and timetables contained in any applicable Environmental Laws.
4.15.3. Except as disclosed in the Information
Package, there is no material civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice of demand letter pending or,
to the knowledge of the Company, threatened against the
Company, its Subsidiaries or any of their respective
Subsidiaries under the Environmental Laws.
4.15.4. Except as disclosed in the Information
Package, there are no material past or present events,
conditions, circumstances, activities, practices, incidents,
actions or plans which may materially interfere with or prevent
material compliance with the Environmental Laws, or which may
give rise to any material common law or legal liability,
including, without limitation, liability under the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or similar state, local or
foreign laws, or otherwise form the basis of any material
claim, action, demand, suit, proceeding, hearing or notice of
violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage,
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disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any
pollutant, contaminant, chemical or industrial, toxic or
hazardous substance or waste which would have a material
adverse effect on the business, operations, condition
(financial or otherwise) of the Company and its Subsidiaries
taken as a whole.
Section 4.16 Security Interests. On and as of the
Closing Date, each of the Collateral Documents creates, as
security for the obligations purported to be secured thereby, a
valid and enforceable perfected security interest in and Lien
on all of the Collateral, which Lien shall be a first priority
Lien subject only to Prior Liens. No filings or recordings are
required in order to perfect the Liens created under the
Collateral Documents except for filings or recordings which on
or before the date of execution and delivery of such Collateral
Document will have been made.
Section 4.17 Solvency.
4.17.1. Immediately after the consummation of the
transactions to occur on the Closing Date and the Funding Date
and immediately following the making of the Loans and after
giving effect to the application of the proceeds of the Loans,
(A) the fair value of the assets of the Company and its
Subsidiaries on a consolidated basis, at a fair valuation, will
exceed the debts and liabilities, subordinated, contingent or
otherwise, of the Company and its Subsidiaries on a
consolidated basis, (B) the fair saleable value of the property
of the Company and its Subsidiaries on a consolidated basis
will be greater than the amount that will be required to pay
the probable liability of the Company and its Subsidiaries on a
consolidated basis on their debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured, (C) the Company and
its Subsidiaries on a consolidated basis will be able to pay
their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and
matured, and (D) the Company and its Subsidiaries on a
consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged
as such businesses are now conducted and are proposed to be
conducted following the Closing Date and the Funding Date.
4.17.2. The Company does not intend to, or to permit
any of its Subsidiaries to, and does not believe that it or any
of its Subsidiaries will, incur debts beyond the Company's or
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such Subsidiary's ability to pay such debts as they mature,
taking into account the timing of and amounts of cash to be
received by the Company or such Subsidiary and the timing of
the amounts of cash to be payable on or in respect of the
Company's Indebtedness or the Indebtedness of such Subsidiary.
ARTICLE V
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any
of the Commitments hereunder shall be in effect and until
payment in full of the Loans and the Notes, unless the
Requisite Lenders shall otherwise agree in writing, the Company
shall perform all covenants in this ARTICLE V:
Section 5.1 Financial Statements and Other Reports.
The Company will maintain, and cause each of its Subsidiaries
to maintain, a system of accounting established and
administered in accordance with sound business practices to
permit preparation of consolidated financial statements in
conformity with GAAP. The Company will deliver to the Lenders:
(i) As soon as practicable and in any event within
30 days after the end of each month ending after the
Closing Date in each of the Company's fiscal years, other
than months which are the last month in a fiscal quarter,
(A) the consolidated balance sheet of the Company and its
consolidated Subsidiaries, as at the end of such month,
and (B) the related consolidated statements of earnings
and retained earnings and cash flow statements of the
Company and its consolidated Subsidiaries for such month
and for the period from the beginning of the then current
fiscal year to the end of such month;
(ii) As soon as practicable and in any event within
45 days after the end of each fiscal quarter ending during
or after 1995, other than quarters which are the last
quarter in a fiscal year, (A) the consolidated balance
sheet of the Company and its consolidated Subsidiaries, as
at the end of such period and (B) the related consolidated
statements of earnings and retained earnings and cash flow
statements of the Company and its consolidated
Subsidiaries for such fiscal quarter and for the period
from the beginning of the then current fiscal year to the
end of such fiscal quarter, all prepared in accordance
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with Rule 10-01 of Regulation S-X of the General Rules and
Regulations Under the Securities Act of 1933, or any
successor rule that sets forth the manner in which interim
financial statements shall be prepared, it being
understood that the foregoing shall include (1) a
statement of profit and loss to the gross margin,
including specified cost components and (2) statements of
capital expenditures setting forth in comparative form,
the corresponding periods of the previous fiscal year, the
corresponding figures from the consolidated plan for the
then current fiscal year delivered pursuant to
subparagraph (xii) of this Section 5.1, all in reasonable
detail and certified by the chief financial officer of the
Company that, in the case of such consolidated financial
statements, they fairly present the financial condition of
the Company and its consolidated Subsidiaries as at the
dates indicated and the results of their operations and
cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustment and,
insofar as relates to divisions, based on the Company's
normal accounting procedures applied on a consistent
basis;
(iii) As soon as practicable and in any event within
90 days after the end of each fiscal year of the Company
(commencing with fiscal year 1995) (A) (1) the
consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such year and
(2) the related consolidated statements of earnings and
retained earnings and cash flow statements of the Company
and its consolidated Subsidiaries for such fiscal year, it
being understood that the foregoing shall include (x) a
statement of profit and loss to the gross margin,
including specified cost components and (y) statements of
capital expenditures setting forth in comparative form the
corresponding figures for the previous year, the
corresponding figures from the consolidated plan for the
current fiscal year delivered pursuant to
subparagraph (xii) of this Section 5.1, all in reasonable
detail, and (B) in the case of such consolidated financial
statements, accompanied by a report thereon of Arthur
Andersen & Co. or such other independent certified public
accountants of recognized national standing selected by
the Company which report shall be unqualified as to going
concern and scope of audit and shall state that such
consolidated financial statements present fairly the
financial position of the Company and its consolidated
Subsidiaries as at the dates indicated and the results of
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their operations and cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with
prior years (except for such changes as are concurred in
by such accountants) and that the examination by such
accountants in connection with such consolidated financial
statements has been made in accordance with generally
accepted auditing standards;
(iv) Together with each delivery of financial
statements of the Company and its Subsidiaries pursuant to
subparagraphs (ii) and (iii) of this Section 5.1, (A) an
Officers' Certificate of the Company substantially in the
form of Exhibit XIII annexed hereto stating that the
signers have reviewed or caused to be reviewed under their
supervision the terms of this Agreement, the Notes and the
other Loan Documents and have made, or caused to be made
under their supervision, a review in reasonable detail of
the transactions and condition of the Company and its
Subsidiaries during the accounting period covered by such
financial statements and that such review has not
disclosed the existence during or at the end of such
accounting period, and that the signers do not have
knowledge of the existence as at the date of the Officers'
Certificate, of any condition or event which constitutes
an Event of Default or Potential Event of Default, or, if
any such condition or event existed or exists, specifying
the nature and period of existence thereof and what action
the Company has taken, is taking and proposes to take with
respect thereto and (B) a Compliance Certificate
substantially in the form of Exhibit IV annexed hereto
demonstrating in reasonable detail compliance (as
determined in accordance with GAAP) during and at the end
of such accounting periods with the restrictions contained
in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.9, 6.10
and 6.14 and a computation as of the last day of the
applicable fiscal quarter of the Company of Ratio 1,
Ratio 2 and the Applicable Category in respect of the
period succeeding such quarter and the then unutilized
amounts of the Discretionary Excess Cash Flow Balance and
the Discretionary Equity Proceeds Balance in respect of
the most recently ended fiscal year and, in addition, a
written statement of the chief accounting officer or chief
financial officer of the Company describing in reasonable
detail the differences between the financial information
contained in such financial statements and the information
contained in the Compliance Certificate relating to the
Company's compliance with Sections 6.6, 6.9 and 6.14;
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(v) Together with each delivery of consolidated
financial statements of the Company and its consolidated
Subsidiaries pursuant to subparagraph (iii) of this
Section 5.1, a written statement by the independent public
accountants giving the report thereon (A) stating that
their audit examination has included a review of the terms
of this Agreement and the other Loan Documents as they
relate to accounting matters, (B) stating whether, in
connection with their audit examination, any condition or
event which constitutes an Event of Default or Potential
Event of Default has come to their attention, and if such
a condition or event has come to their attention,
specifying the nature and period of existence thereof;
provided that such accountants shall not be liable to any
Lender by reason of any failure to obtain knowledge of any
such Event of Default or Potential Event of Default that
would not be disclosed in the ordinary course of their
audit examination and (C) stating that based on their
audit examination nothing has come to their attention
which causes them to believe that the information
contained in either or both of the certificates delivered
therewith pursuant to subparagraph (iv) of this
Section 5.1 is not correct or that the matters set forth
in the Compliance Certificate delivered therewith pursuant
to clause (B) of such subparagraph (iv) of this
Section 5.1 for the applicable fiscal year are not stated
in accordance with the terms of this Agreement;
(vi) Promptly upon receipt thereof, copies of all
reports submitted to the Company or any Subsidiary thereof
by independent public accountants in connection with each
annual, interim or special audit of the financial
statements of the Company or any Subsidiary thereof made
by such accountants, including, without limitation, any
comment letter submitted by such accountants to management
in connection with their annual audit;
(vii) Promptly upon their becoming available, copies
of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company
or by any Subsidiary thereof to its respective security
holders (other than the Company or any Subsidiary
thereof), of all regular and periodic reports and all
registration statements and prospectuses, if any, filed by
the Company or any Subsidiary thereof with any securities
exchange or with the Securities and Exchange Commission
and of all press releases and other statements made
available generally by the Company or any such Subsidiary
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to the public concerning material developments in the
business of the Company or any Subsidiary thereof;
(viii) Promptly upon any officer of the Company
obtaining knowledge (A) of any condition or event which
constitutes an Event of Default or Potential Event of
Default, or becoming aware that any Lender has given any
notice or taken any other action with respect to a claimed
Event of Default or Potential Event of Default under this
Agreement, (B) that any Person has given any notice to the
Company or any Subsidiary of the Company or taken any
other action with respect to a claimed default or event or
condition of the type referred to in Section 7.2, (C) of
any condition or event which would be required to be
disclosed in a current report filed by the Company with
the Securities and Exchange Commission on Form 8-K (Items
1, 2 and 4 of such Form as in effect on the date hereof)
if the Company were required to file such reports under
the Exchange Act or (D) of a material adverse change in
the business, operations, properties, assets or condition
(financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, an Officers' Certificate
specifying the nature and period of existence of any such
condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of
such claimed default, Event of Default, Potential Event of
Default, event or condition, and what action the Company
has taken, is taking and proposes to take with respect
thereto;
(ix) Promptly upon any officer of the Company
obtaining knowledge of (A) the institution of, or non-
frivolous threat of, any action, suit, proceeding,
governmental investigation or arbitration against or
affecting the Company or any of its Subsidiaries or any
property of the Company or any of its Subsidiaries not
previously disclosed by the Company to the Lenders, or (B)
any material development in any such action, suit,
proceeding, governmental investigation or arbitration,
which, in either case, if adversely determined, would
materially and adversely affect the business, operations,
properties, assets or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole, the
Company shall promptly give notice thereof to the Lenders
and provide such other information as may be reasonably
available to it (without waiver of any applicable
evidentiary privilege) to enable the Lenders and CG&R to
evaluate such matters;
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(x) Promptly upon any officer of the Company
becoming aware of the occurrence of any (A) Termination
Event, (B) "prohibited transaction", within the meaning of
Section 406 of ERISA or Section 4975 of the Internal
Revenue Code, or (C) filing by the Company or any of its
ERISA Affiliates of an application for a waiver of an
accumulated funding deficiency, in connection with any
Pension Plan or any trust created thereunder, a written
notice specifying the nature thereof, what action the
Company or its ERISA Affiliates have taken, are taking or
propose to take with respect thereto, and, when known, any
action taken or threatened by the Internal Revenue
Service, Department of Labor or the Pension Benefit
Guaranty Corporation with respect thereto;
(xi) With reasonable promptness, copies of (A) all
notices received by the Company or any of its ERISA
Affiliates of the Pension Benefit Guaranty Corporation's
intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan, (B) each
Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by the Company or any of its
ERISA Affiliates with the Internal Revenue Service with
respect to each Pension Plan and (C) all notices received
by the Company or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning the imposition or
amount of withdrawal liability pursuant to Section 4202 of
ERISA;
(xii) As soon as practicable and in any event by the
sixtieth day of each fiscal year of the Company, a
consolidated plan, prepared in accordance with the
Company's normal accounting procedures applied on a
consistent basis, for such fiscal year of the Company,
including, without limitation, (A) a forecasted
consolidated balance sheet and a consolidated statement of
changes in financial position of the Company for such
fiscal year, including a forecasted statement of profit
and loss to the gross margin and forecasted statements of
working capital and capital expenditures and (B) the
amount of total forecasted capital expenditures and
forecasted consolidated selling, general and
administrative expenses for such fiscal year;
(xiii) As soon as practicable and in any event by the
last day of each fiscal year of the Company, a report in
form and substance reasonably satisfactory to the
Administrative Agent and the Requisite Lenders outlining
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all material insurance coverage maintained as of the date
of such report by the Company and its Subsidiaries and all
material insurance coverage planned to be maintained by
such Persons in the subsequent fiscal year;
(xiv) Together with each delivery of financial
statements of the Company and its Subsidiaries pursuant to
subparagraph (ii) of this Section 5.1, an Officers'
Certificate of the Company substantially in the form of
Exhibit XIV annexed hereto stating that the signers made,
or caused to be made under their supervision, a review of
the terms of, and the records relating to, all of the
Intercompany Indebtedness of the Company and its
Subsidiaries and stating the amount of all outstanding
Intercompany Indebtedness, including all Intercompany
Indebtedness of all Subsidiaries to other Subsidiaries and
the Company and all Intercompany Indebtedness of all
consolidated Subsidiaries to other Consolidated
Subsidiaries and the Company as of the date of such
financial statements; and
(xv) With reasonable promptness, such other
information and data (other than Sensitive Information),
with respect to the Company or any of its Subsidiaries as
from time to time may be reasonably requested by the
Administrative Agent or any Lender.
Notwithstanding anything to the contrary set forth above, the
Company's failure to comply with subparagraphs (viii) and (ix)
of this Section 5.1 (other than clause (A) of subparagraph
(viii) of this Section 5.1, except to the extent that
materiality is relevant to the existence or non-existence of an
Event of Default or a Potential Event of Default) based on a
good-faith determination by an officer of the Company that such
condition, event or development is not material shall not be
the basis for an Event of Default.
Section 5.2 Corporate Existence, etc. The Company
will at all times preserve and keep in full force and effect
its corporate existence and rights and franchises material to
its business and those of each of its Subsidiaries; provided
that the corporate existence of any such Subsidiary may be
terminated if such termination is in the best interest of its
parent and would not have a material adverse effect on the
ability of the Company to perform its obligations under the
Loan Documents; and provided, further, that neither the Company
nor any of its Subsidiaries shall be required to preserve any
right or franchise if the Board of Directors of the Company or
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such Subsidiary shall have determined that the preservation
thereof is no longer desirable in the conduct of the business
of the Company or such Subsidiary, as the case may be.
Section 5.3 Payment of Taxes and Claims; Tax
Consolidation.__________________
5.3.1. The Company will, and will cause each of its
Subsidiaries to, pay all taxes, assessments and other
governmental charges imposed upon them or any of their
properties or assets or in respect of any of their franchises,
business, income or property before any material penalty
accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums
which have become due and payable and which by law have or may
become a material Lien upon any of their material properties or
assets, prior to the time when any material penalty or fine
shall be incurred with respect thereto; provided that no such
charge or claim need be paid if being contested in good faith
by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have
been made therefor.
5.3.2. The Company will not, and will not permit any
of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any Person (other than any
of their respective Subsidiaries or such other Person as may be
reasonably acceptable to the Requisite Lenders).
Section 5.4 Maintenance of Properties; Insurance.
The Company will maintain or cause to be maintained in good
repair, working order and condition (ordinary wear and tear
excepted) all material properties used in the business of the
Company and its Subsidiaries and from time to time will make or
cause to be made all appropriate repairs, renewals and
replacements thereof and will maintain and renew as necessary
all material licenses, permits and other material clearances
necessary to use and occupy the material properties of the
Company and its Subsidiaries. The Company will maintain or
cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business
and the properties and business of its Subsidiaries against
loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or
similar businesses and similarly situated, of such types and in
such amounts as are customarily carried under similar
circumstances by such other corporations to the extent that
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such types and such amounts of insurance are available at
commercially reasonable rates. The Company will furnish to
each Lender, upon reasonable request, information as to the
insurance carried, and will not cancel any such insurance
without the consent of the Requisite Lenders.
Section 5.5 Inspection. The Company shall maintain
books and records pertaining to the Collateral in such detail,
form and scope as is consistent with good business practice and
agrees that such books and records will reflect the Collateral
Agent's and the Lenders' interest in the Receivables of the
Company. The Company shall permit any authorized
representatives designated by any Lender to visit and inspect
any of the properties of the Company, all upon reasonable
notice and at such reasonable times during normal business
hours and as often as may be reasonably requested, for the
purpose, subject to Section 9.17, of (i) inspecting and/or
copying (at the Company's expense) any and all records
pertaining to the Collateral, (ii) discussing the Company's and
its Subsidiaries' affairs, finances and accounts with its and
their officers and independent public accountants and (iii)
verifying Eligible Receivables; provided that in light of
(A) the highly proprietary nature of the following information,
(B) its historically demonstrated and ongoing value and
importance in the Company's operating performance and (C) the
substantial risk to the value of the Company's business if such
information were not maintained on a strictly confidential
basis, in no event shall the Company be required to disclose to
any Person any information with regard to the Company's dry
form technology or de-inking technology, any formulas, recipes,
process flow diagrams, equipment specifications, equipment
purchase costs or manufacturing and process costs related
thereto (the "Sensitive Information").
Section 5.6 No Further Negative Pledges. Except as
provided in this Section 5.6, neither the Company nor any of
its Subsidiaries shall enter into any agreement prohibiting the
creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired. The foregoing
provisions of this Section 5.6 shall not be deemed violated by
the following: (A) any Contractual Obligation restricting
Liens on assets owned by a Foreign Subsidiary or on the shares
of stock of any Foreign Subsidiary (other than Collateral as
defined in the Senior Credit Agreement and other than the
shares of stock of Sterling International (U.K.) Limited and
Sterling International Limited) or on the shares of stock of
SIL Company (other than Collateral as defined in the Senior
Credit Agreement), (B) the provisions of (1) Section 3.08 of
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the indenture governing the 9 1/4% Unsecured Notes, as in
effect on the Closing Date, (2) Section 3.08 of the indenture
governing the 8 1/4% Unsecured Notes, as in effect on the
Closing Date, or (3) any similar provision of any instrument
comprising the Refinancing Senior Unsecured Debt that is no
less favorable to the Company and the Lenders than the
provisions of each such Section 3.08 referred to above, (C) the
provisions of Section 3.08 of the indenture governing the 9%
Senior Subordinated Notes, as in effect on the Closing Date, or
the provisions of Section 3.08 of the indenture governing the
10% Subordinated Notes, as in effect on the Closing Date,
(D) the provisions of any Capital Leases that restrict the
imposition of Liens on the assets specifically demised pursuant
thereto, (E) the provisions of Section 5.6 of the Senior
Credit Agreement as in effect on the date hereof, and (F) the
provisions of any other instrument governing Indebtedness of
the Company or any Domestic Subsidiary of the Company permitted
under Section 6.1, which Indebtedness is secured by a Lien
permitted under Section 6.2, to the extent such provisions
operate to restrict the ability of the Company or any of its
Subsidiaries to grant Liens on the specific assets securing
such Indebtedness.
Section 5.7 Compliance with Laws, etc. The Company
and its Subsidiaries shall comply with the requirements of all
applicable laws, including Environmental Laws, rules,
regulations and orders of any Governmental Authority,
noncompliance with which would materially adversely affect the
business, properties, assets, operations or condition
(financial or otherwise) of the Company and its Subsidiaries,
taken as a whole.
Section 5.8 Lender Meeting. The Company will
participate in a meeting of Lenders once during each fiscal
year to be held at a location and a time selected by the
Company.
Section 5.9 Security Interests.
5.9.1. The Company shall perform any and all acts
and execute any and all documents (including, without
limitation, the execution, amendment or supplementation of any
financing statement, continuation statement or other statement)
for filing under the provisions of the UCC and the rules and
regulations thereunder, or any other statute, rule or
regulation of any applicable federal, state or local
jurisdiction, which are necessary or advisable, from time to
time, in order to grant, continue and maintain in favor of the
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Collateral Agent for the benefit of the Lenders a valid and
perfected Lien on the Collateral, which Lien is a first
priority Lien subject only to Prior Liens.
5.9.2. The Company shall deliver or cause to be
delivered to the Administrative Agent from time to time such
other documentation, consents, authorizations, approvals and
orders in form and substance satisfactory to the Collateral
Agent as the Collateral Agent shall deem reasonably necessary
or advisable to perfect or maintain the Liens for the benefit
of the Lenders, including assets which are required to or do
become Collateral after the Closing Date.
Section 5.10 Certain Dispositions of Collateral.
The Company shall not sell, lease, assign, transfer or
otherwise dispose of any interest in any Collateral (each, a
"Release Transaction") except in compliance with this
Section 5.10 and the Collateral Documents. Upon such
compliance, the Company shall be entitled to receive from the
Collateral Agent an instrument (each, a "Release") releasing
the Lien of any applicable Collateral Document with respect to
such Collateral. The Company shall exercise its rights under
this Section 5.10 by delivery to the Collateral Agent of a
notice (each, a "Release Notice"), which shall refer to this
subsection, describe with particularity the items of property
proposed to be covered by the Release and be accompanied by a
counterpart of the Release fully executed by all parties
thereto other than the Collateral Agent and in form for
execution by the Collateral Agent, and an Officers' Certificate
certifying as to the satisfaction of the Release Conditions.
The Collateral Agent shall execute and deliver to the Company
such counterpart within 10 days after receipt by the Collateral
Agent of a Release Notice and the satisfaction of the Release
Conditions. The Collateral Agent's obligation to deliver any
Release and the Company's rights to enter into any sale, lease,
assignment, transfer or other disposition of any Collateral
pursuant to the provisions of this Section shall be subject to
the following conditions (collectively, "Release Conditions"):
(i) no Event of Default or Potential Event of
Default shall have occurred and be continuing as of the
proposed effective date of such Release;
(ii) Any Receivables sold, transferred or otherwise
disposed of by the Company shall be sold, transferred or
otherwise disposed of to a Person other than an Affiliate
of the Company for face value without any discount or
allowance;
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(iii) such sale, transfer or other disposition shall
not result in the incurrence by the Company of any
Indebtedness not otherwise permitted by Section 6.1; and
(iv) all proceeds of such sale, transfer or other
disposition shall be applied to prepay the Loans in
accordance with subsection 2.5.2(a).
In connection with any Release Transaction, the Company shall
(A) execute, deliver, file and obtain such instruments as the
Administrative Agent or the Requisite Lenders may reasonably
require, including, without limitation, amendments to the
Collateral Documents and this Agreement and (B) deliver to the
Administrative Agent such evidence of the satisfaction of the
Release Conditions as the Administrative Agent or the Requisite
Lenders may reasonably require. The Company shall reimburse
the Administrative Agent and Lenders upon demand for all costs
or expenses incurred by each thereof in connection with any
action contemplated by this Section 5.10.
Section 5.11 Recapitalization. The Company shall
take all reasonable actions to cause to be consummated as soon
as practicable following the Closing Date the redemption and
retirement of the Existing Subordinated Debt and the other
transactions and payments required to complete the
Recapitalization.
Section 5.12 Collateral Reporting. The Company
shall timely deliver to the Administrative Agent and each of
the Lenders weekly, before 12:00 noon on Friday of each week,
a duly completed Borrowing Base Certificate, which shall:
(i) identify the balance of the Company's Eligible Receivables
as of Friday of the immediately preceding week; (ii) be
prepared by or under the supervision of such Borrower's chief
executive officer or chief financial officer or treasurer and
certified by such officer subject only to adjustment upon
completion of the normal year-end audit; and (iii) have
attached thereto such additional schedules and other
information as the Administrative Agent may, from time to time,
reasonably request.
Section 5.13 Cash Collateral. If, at any time, the
aggregate principal amount of Loans outstanding shall exceed
the Borrowing Base (as determined by the Administrative Agent
based upon the Dollar amount of Eligible Receivables as
reflected in the most recent Borrowing Base Certificate
delivered by the Company to the Administrative Agent), the
Administrative Agent may, within five (5) Business Days of its
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receipt of such Borrowing Base Certificate, deliver to the
Company a notice (each, a "Deficiency Notice") indicating the
amount by which the principal amount of Loans then outstanding
exceeds the Borrowing Base (such amount, the "Deficiency
Amount"). The Company shall, within two (2) Business Days of
its receipt of any Deficiency Notice, cause Cash or Cash
Equivalents in an amount at least equal to the Deficiency
Amount to be deposited into the Cash Collateral Account. If
any subsequent Borrowing Base Certificate delivered to the
Administrative Agent and the Lenders indicates that (i) the
aggregate principal amount of Loans outstanding does not exceed
the Borrowing Base or (ii) the aggregate principal amount of
Loans outstanding exceeds the Borrowing Base by an amount which
is less than the amount of Cash and Cash Equivalents then on
deposit in the Cash Collateral Account, the Company may deliver
to the Administrative Agent a written request for the release
of such excess funds (each, a "Cash Release Request"), which
request shall indicate the amount of cash to be released, the
basis for the Company's determination that such release is
appropriate and a direction as to the manner of payment of such
funds. Upon its receipt of any Cash Release Request, the
Administrative Agent shall confirm the amount of funds to be
released and, upon such confirmation, shall promptly return
such funds as directed in the Cash Release Notice.
ARTICLE VI
NEGATIVE COVENANTS
The Company covenants and agrees that, so long as any
of the Commitments shall be in effect and until payment in full
of the Loans and all of the Notes, unless the Requisite Lenders
shall otherwise give prior written consent, the Company will
perform all covenants in this ARTICLE VI.
Section 6.1 Indebtedness. The Company and its
Subsidiaries shall not directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or
indirectly liable with respect to, any Indebtedness, except:
(i) The Company and its Subsidiaries may become and
remain liable with respect to the Obligations;
(ii) The Company may become and remain liable with
respect to the Indebtedness evidenced by the Refinancing
Senior Unsecured Debt; provided that the principal amount
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of such Indebtedness shall not exceed, in the case of a
refinancing of either the 9-1/4% Unsecured Notes, the
8-1/4% Unsecured Notes or any Refinancing Senior Unsecured
Debt, the then outstanding principal amount thereof; and
provided, further, that such Indebtedness (A) provides for
interest at rates which do not exceed the market rates for
similar types of Indebtedness prevailing at the time such
Indebtedness is incurred, (B) has a final scheduled
maturity date that is subsequent to the date on which the
final Scheduled Term Loans Principal Payment in respect of
Tranche B Term Loans is due under the Senior Credit
Agreement, (C) has an Average Life to Stated Maturity
greater than the remaining Average Life to Stated Maturity
of the Tranche B Term Loans on the date such Indebtedness
is incurred, (D) contains no representation and warranty,
covenant or event of default that (1) is in addition to
the representations and warranties, covenants and events
of default that are currently set forth in the instruments
(as in effect on the Closing Date) evidencing or governing
the 9-1/4% Unsecured Notes or the 8-1/4% Unsecured Notes,
as the case may be, or (2) is more burdensome (to the
Company) than the most burdensome (to the Company)
corresponding representation and warranty, covenant or
event of default set forth in the instruments (as in
effect on the Closing Date) evidencing or governing the
9-l/4% Unsecured Notes or the 8-l/4% Unsecured Notes, as
the case may be and (E) if the Refinancing Senior
Unsecured Debt is Subordinated Indebtedness, contains
subordination provisions no less favorable to the Lenders
than the least favorable subordination provisions (to the
Lenders) in the Existing Subordinated Debt;
(iii) The Company and its Subsidiaries may remain and
may become and remain liable with respect to Intercompany
Indebtedness; provided that (A) all such Intercompany
Indebtedness shall be evidenced by promissory notes, which
may be master promissory notes governing all advances made
by the maker of such note to the payee of such note and
(B) any Intercompany Indebtedness owed by the Company to
any Subsidiary shall be subordinated pursuant to the terms
of the promissory note or notes evidencing such Inter-
company Indebtedness in right of payment, from and after
such time as the Loans shall have become due and payable
(whether at date of maturity, by acceleration or
otherwise), to the payment in full of the Obligations; and
provided, further, that the aggregate amount of Inter-
company Indebtedness of all Foreign Subsidiaries owing to
the Company and the Subsidiaries of the Company (other
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than any Foreign Subsidiaries) shall not exceed the
amounts permitted pursuant to the provisions of
Section 6.3 (other than Intercompany Indebtedness owing as
a result of or incurred to finance payment of Royalty or
Management Fees that are payable by Foreign Subsidiaries
to the Company and the Subsidiaries of the Company);
(iv) The Company and its Subsidiaries may remain
liable with respect to Existing Indebtedness which is
described on Schedule C annexed hereto and may become and
remain liable in respect of the Refinancing Foreign Debt;
(v) The Company and its Subsidiaries (other than any
Foreign Subsidiary) may become and remain liable (A) with
respect to Indebtedness in respect of Capital Leases if
such Capital Leases would be permitted by Section 6.9 and
(B) with respect to other Indebtedness secured by Liens
permitted by Section 6.2;
(vi) The Company and its Subsidiaries (other than any
Foreign Subsidiary) may become and remain liable with
respect to Contingent Obligations permitted by Section 6.4
and, upon any obligations actually arising pursuant
thereto, with respect to the Indebtedness corresponding to
the Contingent Obligations so extinguished;
(vii) The Company and its Subsidiaries (other than any
Foreign Subsidiary) may become and remain liable with
respect to Indebtedness incurred in connection with
Sale/Leaseback Transactions permitted by Section 6.10;
(viii) The Company may become and remain liable with
respect to Indebtedness of the Company incurred pursuant
to the Management Agreements;
(ix) Any Foreign Subsidiary of the Company may become
and remain liable with respect to Indebtedness for money
borrowed to the extent that the Dollar equivalent of the
aggregate Indebtedness of such Foreign Subsidiary
outstanding pursuant to this subparagraph (ix) does not
exceed, at any time, an amount equal to 150% of the
aggregate amount of (A)(i) each investment made by the
Company (whether in the form of equity contributions,
Intercompany Indebtedness, contribution of a Contingent
Obligation or otherwise) and the amount of each equity
investment of all other investors in such Foreign
Subsidiary since the Closing Date (all such investments
being valued as at the time of investment) and (ii) the
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Fair Value (as of the Closing Date) of all equity
Investments in such Foreign Subsidiary made by all such
other investors prior to the Closing Date reduced by
(B) the excess, if any, of (1) the aggregate Fair Value of
all assets (determined, in each case, as at the time of
transfer thereof) transferred by such Foreign Subsidiary
(whether by dividend, loan, contribution or otherwise
(other than obligations of any Subsidiary of the Company))
since the Closing Date (other than interest on
Intercompany Indebtedness in amounts and at rates not in
excess of those payable in transactions between
unaffiliated parties and payments of, or payments of
principal of indebtedness related to, Royalty or
Management Fees) to any investor in such Foreign
Subsidiary over (2) the net income of such Foreign
Subsidiary since the later of the Closing Date and the
first date of such Investment by the Company or any
Subsidiary of the Company; provided that, except as
otherwise permitted in Section 6.4, neither the Company
nor any of its Domestic Subsidiaries shall have personal
liability for repayment of such Indebtedness;
(x) The Company or any Domestic Subsidiary of the
Company may become and remain liable with respect to
Indebtedness for money borrowed constituting Permitted
Expansion Construction Financing to the extent that the
aggregate Indebtedness outstanding pursuant to this
subparagraph (x) does not exceed the aggregate amounts
permitted under subsection 6.1(x) of the Senior Credit
Agreement;
(xi) The Company may become and remain liable with
respect to Indebtedness constituting Permitted Expansion
Financings;
(xii) The Company may become and remain liable with
respect to Indebtedness in an aggregate principal amount
not to exceed $1,440,000,000 under the Senior Credit
Agreement; and
(xiii) In addition to the Indebtedness permitted by
subparagraphs (i) through (xii) of this Section 6.1, the
Company and its Subsidiaries may become and remain liable
with respect to Indebtedness not exceeding $25,000,000 in
the aggregate at any time outstanding.
Section 6.2 Liens. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly,
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create, incur, assume or suffer or permit to exist any Lien
upon or with respect to any property of the Company that is or
should (pursuant to the terms hereof) be subject to the Lien of
any Collateral Document except (i) Liens in favor of the
Collateral Agent for the benefit of the lenders under the
Senior Credit Agreement granted to secure the Company's
obligations thereunder, which Liens on the Collateral shall be
subject and subordinate to the Liens granted to the Collateral
Agent for the benefit of the Lenders hereunder, and (ii) Liens
which would be permitted pursuant to any applicable Collateral
Documents; provided that no such Lien (other than Prior Liens)
shall be superior to the Lien of such applicable Collateral
Document. With respect to assets other than Collateral, the
Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to such property or asset,
whether now owned or hereafter acquired, or any income or
profits therefrom, except:
(i) Permitted Encumbrances;
(ii) Liens described on Schedule D annexed hereto;
(iii) Liens affecting assets, comprised of Existing
Mill Expansion Equipment or Greenfield Expansion Assets,
securing reimbursement obligations of the Company and its
Subsidiaries with respect to letters of credit permitted
by subparagraph (vi) of Section 6.4, in each case which
Liens do not encumber Collateral pledged pursuant to any
Collateral Document and which are granted pursuant to
documents relating to such letters of credit;
(iv) Liens encumbering customary initial deposits and
margin deposits, and other Liens incurred in the ordinary
course of business (other than any Lien imposed by ERISA)
and which are either within the general parameters
customary in the industry (as concurred in by the
Administrative Agent) or are otherwise approved by the
Requisite Lenders securing obligations under Commodities
Agreements entered into by the Company or any of its
Subsidiaries;
(v) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or any
of its Subsidiaries incurred in the ordinary course of
business or as a result of this Agreement or the
incurrence, guaranteeing or granting of security interests
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in respect of Obligations incurred pursuant to this
Agreement or the other Loan Documents;
(vi) Liens securing Indebtedness permitted under
subparagraph (v) (clause A) or (vii) of Section 6.1,
incurred in connection with Capital Leases or
Sale/Leaseback Transactions permitted by Section 6.9 or
6.10 so long as such Liens do not extend to assets other
than the assets subject to such Capital Lease or
Sale/Leaseback Transaction and do not secure any
Indebtedness other than Indebtedness directly incurred to
finance such Capital Lease or Sale/Leaseback Transaction;
(vii) Liens securing Indebtedness of (or of the Wholly
Owned Subsidiaries of) a Foreign Subsidiary of the Company
permitted under Section 6.1 so long as such Liens do not
extend to assets other than assets owned by such Foreign
Subsidiary or its Wholly Owned Subsidiaries and do not
secure any Indebtedness other than Indebtedness of (or of
the Wholly Owned Subsidiaries of) such Foreign Subsidiary;
provided that no such Liens (other than Liens constituting
Preexisting Assumed Liens) may encumber any common stock
or other equity interest in any First Tier Foreign
Subsidiary;
(viii) Liens granted in favor of a Lender under the
Senior Credit Agreement to secure the obligations of the
Company pursuant to any Qualified Interest Rate Agreement
or Qualified Currency Agreement;
(ix) Liens securing Indebtedness constituting
Permitted Expansion Construction Financing and incurred in
accordance with the provisions of subparagraph (x) of
Section 6.1; provided that no such Lien may extend to any
assets of the Company other than the assets contemplated
in the definition of Permitted Expansion Construction
Financing;
(x) Liens affecting assets, comprised of Existing
Mill Expansion Equipment or Greenfield Expansion Assets,
securing Indebtedness constituting Permitted Expansion
Financings (other than any such Indebtedness constituting
Unsecured Expansion Financings);
(xi) Liens on assets of the Company and its
Subsidiaries required pursuant to the Senior Credit
Agreement as in effect on the date hereof to be granted by
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the Company and its Subsidiaries to secure Indebtedness
under the Senior Credit Agreement; and
(xii) In addition to Liens permitted by subparagraphs
(i) through (xi) above, the Company and its Subsidiaries
may at any time have Liens securing the payment of
Indebtedness with respect to property or assets with an
aggregate Fair Value of not more than $25,000,000 (as
measured from the Closing Date).
Nothing in this Section 6.2 shall prohibit (A) the sale,
assignment, transfer, conveyance or other disposition of any
Margin Stock owned by the Company or any of its Subsidiaries at
its fair value or (B) the creation, incurrence, assumption or
existence of any Lien on or with respect to any Margin Stock.
Section 6.3 Investments; Joint Ventures. The
Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, make or own any Investment in any
Person or enter into any Joint Venture, except:
(i) The Company and its Subsidiaries may make and
own Investments in Cash and Cash Equivalents;
(ii) The Company may acquire and own Common Stock to
the extent permitted under Section 6.5;
(iii) The Company and its Subsidiaries may continue to
own Investments in existence on the date hereof, and which
are specifically described in Schedule E annexed hereto;
(iv) The Company and its Subsidiaries may make
intercompany loans to the Company or any Domestic
Subsidiary of the Company to the extent permitted under
Section 6.1;
(v) The Company and its Subsidiaries may continue to
own Investments in respect of Joint Ventures in existence
on the date hereof, and which are specifically described
in Schedule E annexed hereto;
(vi) The Company and its Subsidiaries may make and
own Investments in Joint Ventures operating in the United
States after the date hereof; provided that the aggregate
amount of such Investments made after the date hereof
shall not exceed $25,000,000;
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(vii) The Company or any Subsidiary of the Company may
make and own Investments received in connection with the
bankruptcy or reorganization of any of its suppliers and
customers and in settlement of delinquent obligations of,
and other disputes with, its customers and suppliers
arising in the ordinary course of business;
(viii) The Company or any Subsidiary of the Company may
make and own Investments arising in connection with
Commodities Agreements entered into in the ordinary course
of its business;
(ix) The Company and its Domestic Subsidiaries may
make and own Investments in Foreign Subsidiaries; provided
that the aggregate amount of the Fair Values of all assets
(including, but not limited to, Cash, Cash Equivalents,
capital and other assets) transferred by the Company and
its Domestic Subsidiaries (such Fair Value to be measured
in each case as of the actual date of transfer) to, and
the maximum amount of all Contingent Obligations incurred
for the benefit of, one or more Foreign Subsidiaries by
way of capital contribution, loan, guarantee or otherwise
shall not exceed at any time (A) the aggregate Fair Value
of all assets (including, but not limited to, Cash, Cash
Equivalents, capital and other assets) transferred after
the Closing Date by all Foreign Subsidiaries in the
aggregate to the Company and its Domestic Subsidiaries
(such Fair Value to be measured in each case as of the
actual date of transfer) by way of capital contribution,
loan, dividend, distribution or otherwise (other than
obligations of any Subsidiary of the Company) and all
reductions in Investments constituting Contingent
Obligations (effected as a result of the retirement after
the Closing Date by the applicable Foreign Subsidiary of
Indebtedness guaranteed by the Company or any Domestic
Subsidiary of the Company), plus (B) (i) during the period
commencing on the Closing Date and ending on June 30,
1996, $40,000,000, and (ii) during all periods after
June 30, 1996, $40,000,000 until such time as the Company
shall have achieved an Interest Coverage Ratio of 1.9 or
more, after which time such amount shall be increased to
$100,000,000, plus (C) the aggregate of all amounts of the
unutilized Discretionary Equity Proceeds Balance and the
unutilized Discretionary Excess Cash Flow Balance which
the Company has from time to time elected to apply to the
making of Investments pursuant to this subparagraph (ix)
(provided that the total of all amounts of the unutilized
Discretionary Equity Proceeds Balance which the Company
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may elect to apply pursuant to this clause (C) shall not
exceed, at any time, an amount equal to 50% of the sum of
the Closing Date Excess Equity Proceeds Amount and the
aggregate amount, as of such time, of all net cash
proceeds received by the Company or any of its
Subsidiaries after the Closing Date from all Equity
Offerings after the Closing Date (exclusive of any shares
sold pursuant to an overallotment option in respect of the
Common Stock Offering) plus (D) the aggregate amount of
Royalty and Management Fees on a consolidated basis
previously paid after the Closing Date by Foreign
Subsidiaries to the Company and its Subsidiaries; and
provided, further, that nothing set forth in this
subparagraph (ix) shall be construed to permit the
transfer to any Foreign Subsidiary of any asset which
constitutes Collateral or which constitutes Collateral (as
such term is defined in the Senior Credit Agreement as in
effect on the date hereof);
(x) The Company and its Domestic Subsidiaries may
make and own Investments in any Foreign Subsidiary
consisting of the transfer of tangible assets to such
Foreign Subsidiary; provided that (A) the aggregate book
value of all such tangible assets so transferred after the
Closing Date pursuant to this subparagraph (x)
(determined, in each case, as of the date of transfer)
after the Closing Date shall not exceed $10,000,000 and
(B) the aggregate Fair Value (as so determined) of all
such tangible assets so transferred after the Closing Date
pursuant to this subparagraph (x) shall not exceed
$25,000,000;
(xi) The Company and its Subsidiaries may make and
own Investments in equity securities (other than equity
securities of the Company or any of its Subsidiaries)
listed on the New York Stock Exchange ("NYSE"); provided
that the aggregate value, as determined by the closing
price on the NYSE for such equity securities on the
Business Day prior to making the Investment, of such
equity securities shall not at any time exceed $2,000,000;
(xii) The Company or any Subsidiary may continue to
own Investments in, and may make and own Investments in,
Consolidated Domestic Capital Expenditures permitted to be
made or owned by the Company or such Subsidiary under
Section 6.14 and may make Investments as a direct
consequence of the discharge of Contingent Obligations
permitted under Section 6.4;
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(xiii) The Company may make Investments constituting
recourse and non-recourse loans to management and other
employees of the Company to purchase Common Stock and to
pay taxes in respect of such purchases as permitted by the
Management Agreements in an aggregate principal amount not
to exceed $10,000,000 (plus accrued and unpaid interest
thereon) at any time outstanding; and
(xiv) In addition to Investments permitted by subpara-
graphs (i) through (xiii) of this Section 6.3, the Company
and its Subsidiaries may after the Closing Date make and
own Investments (other than Investments in Foreign
Subsidiaries or other Persons, properties or operations
that are not organized or located in the United States of
America (exclusive of its territories and possessions))
(A) with an aggregate Fair Value (determined, in each
case, at the time such Investment is made) of not more
than $25,000,000 outstanding at any time, and (B) (without
limiting the rights of the Company under clause (A)
hereof) in an aggregate amount (determined, in each case,
at the time such Investment is made) outstanding at any
time not exceeding the aggregate of all amounts of the
unutilized Discretionary Equity Proceeds Balance and the
unutilized Discretionary Excess Cash Flow Balance which
the Company has from time to time elected to apply to the
making of Investments pursuant to this subparagraph (xv);
provided that, except as set forth in subparagraph (xi) of
this Section 6.3, neither the Company nor any of its
Subsidiaries may make or own Investments in any Margin
Stock other than Common Stock.
Section 6.4 Contingent Obligations. The Company
will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or become or be liable with
respect to any Contingent Obligation except:
(i) Guarantees resulting from endorsement of
negotiable instruments for collection in the ordinary
course of business;
(ii) Obligations under the Guarantor Subsidiary
Guarantees as in effect on the date hereof;
(iii) Guarantees of Interest Rate Agreements and
Currency Agreements entered into by the Company which are
permitted by subparagraphs (iv) and (v) of this
Section 6.4;
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(iv) Interest Rate Agreements and Currency Agreements
(other than Leveraged Swaps) entered into by the Company
and any Lender;
(v) Commodities Agreements and Currency Agreements
(other than Leveraged Swaps) entered into by the Company
or any Subsidiary of the Company and any financial
institution in the ordinary course of business;
(vi) Contingent reimbursement obligations not
exceeding $10,000,000 in the aggregate outstanding at one
time under letters of credit (including any such letters
of credit in existence as of the date hereof) other than
Letters of Credit;
(vii) Contingent Obligations in existence on the date
hereof described in Schedule G and extensions and renewals
thereof so long as the amount of any such Contingent
Obligations so extended or renewed is not increased
thereby from the amount thereof at the time extended or
renewed;
(viii) Contingent Obligations in respect of any
obligation (other than any obligation with respect to
Indebtedness) of (A) the Company or one of its Domestic
Subsidiaries and (B) Foreign Subsidiaries to the extent,
in the case of clause (A) and (B), such Contingent
Obligation is an Investment permitted under Section 6.3;
(ix) Contingent Obligations represented by
performance bonds and similar obligations relating to the
sale of the Company's or its Subsidiaries' products
incurred in the ordinary course of business (exclusive of
obligations for payment of borrowed money) not to exceed
$10,000,000 at any time;
(x) Contingent Obligations represented by surety
bonds and similar obligations incurred in the ordinary
course of business (exclusive of obligations for payment
of borrowed money) not to exceed $15,000,000 at any time;
(xi) Contingent Obligations pursuant to the
Management Agreements;
(xii) Contingent Obligations in respect of
Indebtedness of (A) the Company or a Domestic Subsidiary
of the Company and (B) Foreign Subsidiaries to the extent
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such Contingent Obligations are Investments permitted
under Section 6.3;
(xiii) Contingent reimbursement obligations not
exceeding $50,000,000 in the aggregate outstanding at any
time under Letters of Credit; and
(xiv) In addition to the Contingent Obligations
permitted by subparagraphs (i) through (xiii) of this
Section 6.4, the Company and its Subsidiaries may become
and remain liable with respect to other Contingent
Obligations except Contingent Obligations which constitute
Investments in Foreign Subsidiaries pursuant to
Section 6.3 or which are for the benefit of any Foreign
Subsidiary of the Company; provided that the maximum
aggregate liability of the Company and its Subsidiaries in
respect of all Contingent Obligations incurred pursuant to
this subparagraph (xiv) shall not at any time exceed
$25,000,000.
Section 6.5 Restricted Junior Payments. The Company
will not, and will not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment except that (A) dur-
ing each of the first two twelve-month periods starting on the
Closing Date, the Company may declare and pay cash dividends to
holders of its Common Stock in an amount up to $3,000,000 for
each such period, (B) during any twelve-month period commencing
on or after the second anniversary of the Closing Date, the
Company may declare and pay cash dividends to holders of its
Common Stock in an annual amount not to exceed 6% of the sum of
(1) $300,000,000 less the amount of all Transaction Costs
reasonably determined by the Company to be attributable to the
first $300,000,000 of gross proceeds of the Common Stock
Offering and (2) the aggregate net cash proceeds of all
issuances of Common Stock of the Company occurring after the
Closing Date (excluding the Common Stock Offering and any
Common Stock sold pursuant to an overallotment option in
connection with the Common Stock Offering); provided that no
dividend in excess of $3,000,000 that is proposed to be
declared or paid pursuant to this clause (B) may be declared or
paid unless at the date of declaration and the date of payment
thereof the unutilized portion of the Revolving Loan Commitment
under the Senior Credit Agreement shall equal or exceed
$100,000,000, (C) the Company may, commencing on March 31, 1996
and on each March 31 thereafter, declare and pay cash dividends
to holders of its Common Stock in an amount not to exceed the
then unutilized portion of the Discretionary Excess Cash Flow
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Balance, (D) the Company may (1) repurchase or redeem the
Senior Unsecured Notes, in each case on the terms provided in
the indentures governing the Senior Unsecured Notes (each as in
effect on the date hereof), with the proceeds of Refinancing
Senior Unsecured Indebtedness incurred in compliance with the
provisions of Section 6.1, (2) repurchase or redeem its Common
Stock pursuant to the Management Agreements and the
Stockholders Agreements (each as in effect on the date hereof
or, in the case of a Broad-Based Plan, the date of adoption
thereof) to the extent that the aggregate amount of such
repurchases and redemptions does not exceed $35,000,000 in the
aggregate (as measured from the Closing Date) and (3) make
purchases of Common Stock owned by MS Group for immediate
resale to Persons other than the Company or a Subsidiary of the
Company, (E) the Company may issue Indebtedness permitted under
subparagraph (viii) of Section 6.1, (F) the Company may make
Investments under subparagraph (xiii) of Section 6.3, (G) the
Company may make, from time to time, Restricted Junior Payments
of the character contemplated in clauses (A) and (D)(1) above
and, following the retirement of all the Senior Unsecured Notes
or the refinancing of all the Senior Unsecured Notes with
Refinancing Senior Unsecured Debt having a final maturity later
than the final maturity of the Tranche B Term Loans, the
Company may repurchase or redeem Subordinated Indebtedness in
an aggregate amount not exceeding, at any time, the aggregate
of all amounts of the unutilized Discretionary Equity Proceeds
Balance which the Company has from time to time elected to
apply to the making of Restricted Junior Payments pursuant to
this clause (G); provided that if and for so long as the
Company shall have achieved the Investment Grade Ratings in
respect of the senior unsecured debt obligations of the
Company, the Company shall not be required, as a condition to
any exercise of its rights under this clause (G) with respect
to redemptions and repurchases of Subordinated Indebtedness, to
first refinance, repurchase or retire all Senior Unsecured
Notes and all Refinancing Senior Unsecured Notes, (H) the
Company may, from time to time, make Restricted Junior Payments
of the character contemplated in clauses (A) and (D)(1) above,
and the Company may repurchase or redeem Subordinated
Indebtedness in an aggregate amount not exceeding at any time,
the aggregate of all amounts of the unutilized Discretionary
Excess Cash Flow Balance which the Company has from time to
time elected to apply to the making of Restricted Junior
Payments pursuant to this clause (H) and (I) the Company may
redeem the 12 5/8% Subordinated Debentures and the 14 1/8%
Discount Debentures as contemplated by the Recapitalization.
Notwithstanding the foregoing, the Company may not declare or
pay any dividends or redeem or repurchase any Securities or
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issue any Indebtedness or make any Investments referred to
above (1) except to the extent permitted by applicable law or
(2) if, at the time of such declaration or payment or
redemption, repurchase, issuance or investment and immediately
after giving effect thereto, no Potential Event of Default or
Event of Default shall have occurred and be continuing.
Section 6.6 Financial Covenants.
6.6.1. Interest Coverage Ratio. The Company will
not permit the Interest Coverage Ratio to be less than (A) for
the first and second full fiscal quarters (taken as one
accounting period) beginning after the Closing Date, 1.25, (B)
for the first, second, and third full fiscal quarters (taken as
one accounting period) beginning after the Closing Date, 1.25,
and (C) for any period of four consecutive full fiscal quarters
(in each case taken as one accounting period) beginning after
the Closing Date and ended during a period set forth below, the
ratio set forth opposite such period:
Period Ratio
12/31/95 - 12/30/96 1.40x
12/31/96 - 12/30/97 1.50x
12/31/97 - 12/30/98 1.60x
12/31/98 - 12/30/99 1.75x
12/31/99 - 12/30/00 1.85x
12/31/00 and thereafter 2.00x
6.6.2. Maximum Leverage Ratio. The Company will not
permit the Leverage Ratio as of the end of any fiscal quarter
set forth during any period below to be more than the ratio set
forth opposite such period:
Period Ratio
9/30/95 - 12/30/95 4.25x
12/31/95 - 3/30/96 4.00x
3/31/96 - 6/29/96 3.90x
6/30/96 - 9/29/96 3.80x
9/30/96 - 12/30/96 3.70x
12/31/96 - 3/30/97 3.45x
3/31/97 - 6/29/97 3.30x
6/30/97 - 9/29/97 3.20x
9/30/97 - 12/30/97 3.10x
12/31/97 - 12/30/98 3.00x
12/31/98 - 12/30/99 2.75x
12/31/99 - 12/30/00 2.50x
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12/31/00 and thereafter 2.00x
Section 6.7 Restriction on Fundamental Changes.
Subject to Section 5.2, neither the Company nor any of its
Subsidiaries will enter into any transaction of merger or
consolidate, or liquidate, wind-up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business,
property or fixed assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or
substantially all the business, property or fixed assets of, or
stock or other evidence of beneficial ownership of, any Person,
except:
6.7.1. Any Subsidiary of the Company may be merged
or consolidated with or into the Company or any Wholly Owned
Subsidiary of the Company (other than a Foreign Subsidiary), or
be liquidated, wound up or dissolved, or all or substantially
all of its business, property or assets may be conveyed, sold,
leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to the Company or any
Wholly Owned Subsidiary of the Company (other than a Foreign
Subsidiary); provided that (A) any Foreign Subsidiary of the
Company (other than a Foreign Subsidiary that is a Material
Subsidiary) may be merged or consolidated with or into any
other Foreign Subsidiary, or be liquidated, wound up or
dissolved, or (B) all or substantially all of the business,
property or assets of any Foreign Subsidiary (other than a
Foreign Subsidiary that is a Material Subsidiary) may be
conveyed, sold, leased, or transferred or otherwise disposed
of, in one transaction or a series of transactions to another
Foreign Subsidiary (other than to a Foreign Subsidiary that is
also a Material Subsidiary) or (C) any of the foregoing
transactions may occur between two Foreign Subsidiaries that
are Material Subsidiaries; and provided, further, that, in the
case of such a merger or consolidation of a Subsidiary and the
Company, the Company shall be the continuing or surviving
corporation, or, in the case of a merger or consolidation of a
Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation,
or, in the case of a merger or consolidation of two Wholly
Owned Subsidiaries, either of such Subsidiaries shall be the
surviving or continuing corporation;
6.7.2. The Company or any of its Subsidiaries may
convey, sell, transfer or otherwise dispose of any Margin
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Stock, whether now owned or hereafter acquired; provided that
such disposition is for Fair Value;
6.7.3. The Company and its Subsidiaries may sell or
dispose of in the ordinary course of business (A) property
which is obsolete or no longer useful in any of its businesses
or is of de minimis value (as determined, in the case of any
such property the Fair Value of which is in excess of
$10,000,000, in good faith by the Board of Directors of the
Company or any Subsidiary selling such property, as the case
may be), (B) Cash and Cash Equivalents, (C) other Investments
described in subparagraphs (vii) and (x) of Section 6.3;
provided that any such sale or other disposition is made for at
least the Fair Value of such assets and (D) Receivables subject
to the requirements of Sections 5.10 and 6.11;
6.7.4. Subject to Sections 5.2 and 5.10 and 6.7 in
respect of sales of Collateral, so long as no Event of Default
has occurred and is continuing or shall be caused thereby, the
Company and its Subsidiaries may sell or otherwise dispose of
any of their respective assets outside the ordinary course of
business; provided that (A) any such sale or other disposition
is made for at least the Fair Value of such assets, (B) any
sale or other disposition of more than $250,000,000 in Fair
Value of stock or other assets in any one transaction or a
related series of transactions shall be subject to the prior
written consent of Requisite Lenders unless such sale or other
disposition is of Margin Stock, and (C) in the case of any
Collateral shall be subject to the requirements of Sections
5.10 and 6.11;
6.7.5. The Company and its Subsidiaries may sell,
resell or otherwise dispose of real or personal property held
for sale or resale in the ordinary course of business; and
6.7.6. The Company and its Subsidiaries may make
Investments otherwise permitted pursuant to Section 6.3 and
Capital Expenditures otherwise permitted pursuant to
Section 6.14.
Section 6.8 ERISA. The Company will not, and will
not permit any of its ERISA Affiliates to:
6.8.1. engage in any transaction in connection with
which the Company or any of its ERISA Affiliates could be
subject to either a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the
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Internal Revenue Code in either case in an aggregate amount in
excess of $1,000,000;
6.8.2. fail to make full payment when due of all
amounts which, under the provisions of any Pension Plan, or
under ERISA or the Internal Revenue Code, the Company or any of
its ERISA Affiliates is required to pay as contributions
thereto; or permit to exist any accumulated funding
deficiencies for which a waiver from the Internal Revenue
Service has not been obtained with respect to all Pension Plans
in an aggregate amount greater than $5,000,000;
6.8.3. permit the sum of the amount of unfunded
benefit liabilities under all Pension Plans (excluding each
Pension Plan with an amount of unfunded benefit liabilities of
zero or less) to exceed $25,000,000; or
6.8.4. fail to make any payments in an amount
individually or in the aggregate greater than $1,000,000 to any
Multiemployer Plan that the Company or any of its ERISA
Affiliates may be required to make under such Multiemployer
Plan, any agreement relating to such Multiemployer Plan, or any
law pertaining thereto.
As used in this Section 6.8, the term "accumulated
funding deficiency" has the meaning specified in Section 302 of
ERISA and Section 412 of the Internal Revenue Code, and the
term "amount of unfunded benefit liabilities" has the meaning
specified in Section 4001(a)(18) of ERISA.
Section 6.9 Restriction on Leases. The Company will
not, and will not permit any of its Subsidiaries to, become or
remain liable in any way, whether directly or by assignment or
as a guarantor or other surety, for the obligations as or of
the lessee under any lease (other than intercompany leases
between and among the Company and its Domestic Subsidiaries),
whether an Operating Lease or a Capital Lease, unless,
immediately after giving effect to the incurrence of liability
with respect to such lease, the Consolidated Rental Payments at
the time in effect during the then current fiscal year of the
Company shall not exceed the applicable amount set forth below:
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Fiscal Year Amount
1995 $ 50,000,000
1996 $ 55,000,000
1997 $ 60,000,000
1998 $ 65,000,000
1999 $ 70,000,000
2000 $ 75,000,000
2001 $ 80,000,000
2002 $ 85,000,000
Notwithstanding the foregoing, if the Company or any of its
Subsidiaries shall have sold any Subsidiary or any line of
business to any Person (other than the Company or any
Subsidiary), each of the above amounts with respect to any
period from or after the date of such sale shall be reduced by
an amount equal to the reasonable good faith estimates by the
Company (using such methods as the Administrative Agent may
reasonably approve) of Consolidated Rental Payments of such
Subsidiary or such line of business for such periods.
Section 6.10 Sales and Leasebacks. The Company will
not, and will not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as
guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any property (whether
real or personal or mixed), whether now owned or hereafter
acquired in a Sale/Leaseback Transaction; provided that the
Company or any of its Subsidiaries may enter into
Sale/Leaseback Transactions otherwise prohibited under this
Section 6.10 if (A) the assets to be subject to such
Sale/Leaseback Transaction are acquired, constructed or placed
in service after the Closing Date, and (B) the provisions of
Section 6.9 would not be breached thereby.
Section 6.11 Sale or Discount of Receivables
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, sell with or without
recourse, or discount or otherwise sell for less than the face
value thereof, notes or accounts receivable except notes issued
in favor of the Company or any of its Subsidiaries in
connection with sales or other dispositions of assets (other
than inventory) so long as the Company or such Subsidiary, as
the case may be, receives the Fair Value of such notes and such
notes are sold without recourse.
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Section 6.12 Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, enter into or
permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder of 5% or more of any
class of equity securities of the Company or with any Affiliate
of the Company or of any such holder, on terms that are less
favorable to the Company or such Subsidiary, as the case may
be, than those which might be obtained at the time from Persons
who are not such a holder or Affiliate; provided that the
foregoing restriction shall not apply to (A) any transaction
between the Company and any of its Wholly Owned Subsidiaries or
between any of its Wholly Owned Subsidiaries, (B) customary
fees paid to members of the Board of Directors of the Company
and its Subsidiaries, (C) the payment of fees to MS Group or
its Affiliates from time to time for financial, consulting and
underwriting services, such fees not to exceed the then usual
and customary fees of MS Group or its Affiliates for similar
services, (D) transactions contemplated by the Management
Agreements and the Stockholders Agreement and (E) transactions
permitted by Section 6.5.
Section 6.13 Disposal of Subsidiary Stock. Except
as permitted by Section 5.6, 6.2 or 6.7 and, except with
respect to Margin Stock, the Company will not:
6.13.1. directly or indirectly sell, assign, pledge
or otherwise encumber or dispose of any shares of capital stock
or other equity securities of (or warrants, rights or options
to acquire shares or other equity securities of) any of its
Subsidiaries, except to qualify directors if required by
applicable law; or
6.13.2. permit any of its Subsidiaries directly or
indirectly to sell, assign, pledge or otherwise encumber or
dispose of any shares of capital stock or other equity
securities or convertible debt securities of (or warrants,
rights or options to acquire shares or other equity securities
or convertible debt securities of) such Subsidiary, except to
the Company, another Wholly Owned Subsidiary of the Company or
to qualify directors if required by applicable law.
Nothing in this Section 6.13 shall prohibit the sale,
assignment, transfer, conveyance or other disposition of any
Margin Stock owned by the Company or any of its Subsidiaries or
the creation, incurrence, assumption or existence of any Lien
on or with respect to any Margin Stock.
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Section 6.14 Limitation on Capital Expenditures.
6.14.1. The Company will not, and will not permit
any of its Subsidiaries to, incur Capital Expenditures, except
as specifically permitted in the following subsections of this
Section 6.14.
6.14.2. Any one or more of the Foreign Subsidiaries
of the Company may incur Capital Expenditures in such amounts
and for such purposes as shall be determined by the Company or
any such Foreign Subsidiary in its discretion; provided,
however, that the Company and its Subsidiaries shall comply and
have complied in all respects with the provisions of
subsections (ix) and (x) of Section 6.3 in respect thereof to
the extent applicable to such Capital Expenditures.
6.14.3. During each fiscal year of the Company
ending on or after December 31, 1995, the Company and its
Domestic Subsidiaries may incur on or after January 1, 1995, in
respect of (A) the Green Bay Sludge Boiler, (B) the Savannah
Boiler and (C) other matters not constituting Expansion
Projects, Consolidated Domestic Capital Expenditures in an
aggregate amount not in excess of $75,000,000 (the "Base Annual
Capex Amount").
6.14.4. Without limiting the rights of the Company
and its Domestic Subsidiaries to incur Consolidated Domestic
Capital Expenditures in accordance with subsection 6.14.3
above, the Company and its Domestic Subsidiaries may incur
Consolidated Domestic Capital Expenditures in respect of
Expansion Projects (other than the Green Bay Sludge Boiler and
the Savannah Boiler) on the following terms and subject to each
of the following conditions:
(i) the aggregate amount (the "Domestic Capex
Maximum") of Consolidated Domestic Capital Expenditures in
the aggregate which may be incurred in respect of all such
Expansion Projects shall not at any time exceed the sum of
(a) $250,000,000 plus (b) the total amount of net cash
proceeds received by the Company or any of its
Subsidiaries after the Closing Date and prior to such time
in respect of Permitted Expansion Financings (other than
any Permitted Expansion Financings relating solely to the
Green Bay Sludge Boiler or the Savannah Boiler);
(ii) except for Capital Expenditures incurred in
connection with the Initial Major Expansion Project or the
Green Bay Dry Form Machine, neither the Company nor any of
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its Domestic Subsidiaries shall be permitted to incur, or
become bound by any Contractual Obligation to incur,
Consolidated Domestic Capital Expenditures in respect of
any single such Expansion Project (the first of such
Expansion Projects, the "Second Expansion Project") in
excess of $30,000,000, unless the Company shall have, in
respect of any period of four full consecutive fiscal
quarters of the Company commencing after the Closing Date
and ending with the quarter immediately preceding the
quarter in which such amount in excess of $30,000,000 is
first committed to be spent by the Company, achieved an
Interest Coverage Ratio of 1.9 or greater (it being
understood that, if the Second Interest Coverage Ratio
shall have been so achieved, the Company shall not be
required to maintain such Interest Coverage Ratio as a
condition to incurring further expenditures in respect of
the Second Expansion Project); and
(iii) except for Capital Expenditures incurred in
connection with the Initial Major Expansion Project or the
Second Expansion Project (to the extent permitted under
clause (ii) above), neither the Company nor any of its
Domestic Subsidiaries shall be permitted to incur, or
become bound by any Contractual Obligation to incur,
Consolidated Domestic Capital Expenditures in respect of
any single Expansion Project in excess of $30,000,000
unless the Company shall have, in respect of any period of
four consecutive fiscal quarters of the Company commencing
on or after the Closing Date and ending after the quarter
immediately preceding the quarter in which such amount in
excess of $30,000,000 is first spent or committed to be
spent by the Company in respect of such Expansion Project,
achieved an Interest Coverage Ratio of 2.15 or greater (it
being understood that, if such Interest Coverage Ratio
shall have been so achieved, the Company shall not be
required to maintain such Interest Coverage Ratio as a
condition to incurring further expenditures in respect of
such Expansion Project).
6.14.5. The Company may elect by written notice to
the Lenders to apply to the making of Consolidated Domestic
Capital Expenditures, in addition to the Base Annual Capex
Amount and the Domestic Capex Maximum permitted under
subsection 6.14.3 and 6.14.4, as applicable, (A) portions of
the then unutilized Discretionary Equity Proceeds Balance and
the then unutilized Discretionary Excess Cash Flow Balance and
(B) 100% of the unused amount (the "Capex Carryover Amount") of
Consolidated Domestic Capital Expenditures, if any, in respect
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of prior fiscal years (beginning with fiscal year 1995)
permitted under subsection 6.14.3.
6.14.6. For purposes of this Section 6.14 only,
"Capital Expenditures" shall exclude expenditures of insurance
proceeds received upon destruction of property to the extent
such proceeds are used to effect restoration, replacement or
repair of such property.
Section 6.15 Conduct of Business. The Company will
not, and will not permit any of its Subsidiaries to, engage in
any business other than (A) the business it and its
Subsidiaries are engaged in on the date hereof as described in
the Prospectus and similar or related businesses, (B) such
other businesses as are engaged in by it and its Subsidiaries
on the date hereof as shall not be of a nature which are
material to it and its Subsidiaries and (C) such other lines of
business as may be consented to by the Requisite Lenders (such
consent not to be unreasonably withheld).
Section 6.16 Amendments or Waivers of Certain
Documents; Prepayments of Indebtedness.
6.16.1. Neither the Company nor any of its
Subsidiaries will agree to any (A) amendment to provisions of
the Management Agreements imposing any additional obligation on
the Company with respect to the acquisition by the Company or
any of its Subsidiaries of any capital stock of the Company to
the extent the aggregate amount of all such additional
obligations would cause the Company to exceed the limitation on
repurchases or redemptions of its Common Stock set forth in
subclause (D)(2) of Section 6.5 (it being understood that any
and all such additional obligations will be taken into account
in determining whether such limitation has been exceeded), or
(B) amendment to provisions of the Stockholders' Agreement
which is materially adverse to the interests of the Lenders.
6.16.2. Neither the Company nor any of its
Subsidiaries will (A) amend or otherwise change the terms of
the Subordinated Notes or the indentures relating thereto, the
Existing Subordinated Debt or the indentures relating thereto,
the Senior Unsecured Notes or the indentures related thereto,
any Refinancing Senior Unsecured Debt, any Permitted Expansion
Financing, any Expansion Lease, the Senior Credit Agreement and
the documentation executed in connection therewith, the
documents evidencing the 1988 Revenue Bonds or the 1988 Revenue
Bond Indenture, if the effect of such amendment or change is to
increase the interest rate on such Indebtedness or the rental
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amounts due thereunder, as the case may be, change the dates
upon which payments of rent, principal or interest are due
thereon, change any event of default or condition to an event
of default with respect to such Indebtedness or Expansion
Lease, grant any security interest in favor of such
Indebtedness, change the redemption provisions thereof, change
the subordination provisions thereof, cause such Indebtedness
or Expansion Lease to be guaranteed by any Subsidiary of the
Company or which, together with all other amendments or changes
made, increase materially the obligations of the obligor or
confer additional rights on the holder of such Indebtedness or
Expansion Lease which would be adverse to the Company or the
Lenders or (B) except as otherwise expressly permitted in this
Agreement, defease, or make any payments the effect of which is
to defease, any such Indebtedness in whole or in part (whether
pursuant to the defeasance provisions of such Indebtedness or
otherwise).
6.16.3. Except for the making of Restricted Junior
Payments expressly permitted under Section 6.5, the Company
will not make any payment or prepayment of principal of, or
interest on, or premium (if any) on, any of the Subordinated
Notes except, in each case, for (A) regularly scheduled
payments of principal, if any, and interest in accordance with
the terms of the instruments evidencing or governing such
Indebtedness, (B) payment of principal on the scheduled final
maturity date of such Indebtedness in accordance with the terms
of the governing instruments with respect thereto and (C) any
mandatory payment or prepayment required to be made as a result
of acceleration pursuant to the terms of the instruments
governing such Indebtedness as in effect on the date hereof.
6.16.4. Neither the Company nor any of its
Subsidiaries will make any payment or prepayment of principal
of, or interest on, or premium (if any) on, the Senior
Unsecured Notes or the Refinancing Senior Unsecured Debt,
except, in each case, for (A) a refinancing of the Senior
Unsecured Notes with the proceeds of Refinancing Senior
Unsecured Debt permitted under Section 6.5, (B) regularly
scheduled payments of interest in accordance with the terms of
the applicable Senior Unsecured Notes Indenture or the
instruments governing the Refinancing Senior Unsecured Debt, as
the case may be, (C) payment of principal on the scheduled
final maturity date of the Senior Unsecured Notes or the
Refinancing Senior Unsecured Debt, in each case, in accordance
with the terms of the applicable loan agreement, indenture or
other governing instruments and (D) any mandatory payment or
prepayment required to be made as a result of acceleration
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pursuant to the terms of the applicable Senior Unsecured Notes
Indenture or the instruments governing the Refinancing Senior
Unsecured Debt, as the case may be, in each case as in effect
on the date hereof.
6.16.5. Neither the Company nor any of its
Subsidiaries will voluntarily terminate any Expansion Lease or
otherwise optionally make, either directly or indirectly, any
payment to acquire or otherwise reacquire any assets leased by
the Company under any Expansion Lease or any interest therein
(including, without limitation, any beneficial interest
therein) or any Indebtedness secured thereby, or make any
optional prepayment of any rental obligation under any
Expansion Lease to any other party to any Expansion Lease.
6.16.6. Neither the Company nor any of its
Subsidiaries will make any payment or prepayment of principal
of, or interest on, or premium (if any) on, any Indebtedness
constituting Permitted Expansion Financing except for (A)
regularly scheduled payments of principal, if any, and interest
in accordance with the terms of the instruments governing such
Indebtedness, (B) payment of principal on the scheduled final
maturity date of such Indebtedness in accordance with the terms
of the instruments governing such Indebtedness and (C) any
mandatory payment or prepayment required to be made as a result
of acceleration or otherwise pursuant to the terms of the
instruments governing such Indebtedness.
6.16.7. Neither the Company nor any of its
Subsidiaries will make any payment or prepayment of principal
of, or interest on, or premium (if any) on the Senior Loans,
except, in each case, for (A) mandatory prepayments required
pursuant to Section 2.7.2 of the Senior Credit Agreement as in
effect on the date hereof, (B) regularly scheduled payments of
interest in accordance with the terms of the Senior Credit
Agreement as in effect on the date hereof and (C) any mandatory
payment or prepayment required to be made as a result of
acceleration or otherwise pursuant to the terms of the Senior
Credit Agreement as in effect on the date hereof.
Section 6.17 Payment of Cash Interest on
Subordinated Debt. Except with the consent of the Requisite
Lenders, the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay any interest in
cash on Subordinated Debt where the Company has the option to
pay such interest in securities or to accrue the interest
payable with respect to such Subordinated Debt.
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ARTICLE VII
EVENTS OF DEFAULT
If any of the following conditions or events ("Events
of Default") shall occur and be continuing:
Section 7.1 Failure To Make Payments When Due.
Failure to pay the Loans when due, whether at stated maturity,
by acceleration, by notice of prepayment or otherwise or
failure to pay for 5 days after the day when due any interest
on the Loans or any other amount due under this Agreement; or
Section 7.2 Default in Other Agreements. Failure of
the Company or any of its Subsidiaries to pay when due (A) any
principal or interest on any Indebtedness (other than
Indebtedness referred to in Section 7.1) in an individual
principal amount of $15,000,000 or more or items of
Indebtedness with an aggregate principal amount of $30,000,000
or more or (B) any Contingent Obligation in an individual
amount of $15,000,000 or more or Contingent Obligations with an
aggregate amount of $30,000,000 or more, in each case at the
stated maturity thereof or beyond the end of any period after
which the obligee thereunder is permitted to accelerate payment
thereunder, or breach or default of the Company or any of its
Subsidiaries with respect to any other material term of any
loan agreement, mortgage, indenture or other agreement relating
to any Indebtedness in an individual principal amount of
$15,000,000 or more or items of Indebtedness with an aggregate
principal amount of $30,000,000 or more or any Contingent
Obligation in an individual amount of $15,000,000 or more or
Contingent Obligations with an aggregate amount of $30,000,000
or more; if the effect of such failure, default or breach is to
cause, or to permit the holder or holders of that Indebtedness
or Contingent Obligation (or a trustee on behalf of such holder
or holders) then to cause, that Indebtedness or Contingent
Obligation to become or be declared due prior to its stated
maturity (or the stated maturity of any underlying obligation,
as the case may be); or
Section 7.3 Breach of Certain Covenants. Failure of
the Company to perform or comply with any term or condition
contained in Section 2.6, 5.2 or 5.6, ARTICLE VI or Section 9.6
of this Agreement; or
Section 7.4 Breach of Warranty. Any representation
or warranty made by the Company in any Loan Document or in any
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statement or certificate at any time given by such Person in
writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as
of which made; or
Section 7.5 Other Defaults Under Agreement or Loan
Documents. The Company shall default in the performance of or
compliance with any term contained in this Agreement or other
Loan Documents other than those referred to above in Sections
7.1, 7.3 or 7.4 and such default shall not have been remedied
or waived within 30 days after receipt of notice from the
Administrative Agent or any Lender of such default; or
Section 7.6 Involuntary Bankruptcy; Appointment of
Receiver, etc.________________________
7.6.1. A court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the
Company, or any of its Subsidiaries which, as of the date of
entry of such decree or order, would constitute a Material
Subsidiary (whether or not, as of such date, such Subsidiary is
or has been deemed to be, or not to be, a Material Subsidiary
under any other applicable provision of this Agreement) in an
involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed; or any other
similar relief shall be granted under any applicable federal or
state law; or
7.6.2. An involuntary case is commenced against the
Company or any of its Subsidiaries which, as of the date of
such commencement, would constitute a Material Subsidiary
(whether or not, as of such date, such Subsidiary is or has
been deemed to be, or not to be, a Material Subsidiary under
any other applicable provision of this Agreement) under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer
having similar powers over the Company or any of such
Subsidiaries, or over all or a substantial part of the property
of the Company or any of such Subsidiaries, shall have been
entered; or an interim receiver, trustee or other custodian of
the Company or any of such Subsidiaries for all or a
substantial part of the property of the Company or any of such
Subsidiaries is involuntarily appointed; or a warrant of
attachment, execution or similar process is issued against any
substantial part of the property of the Company or any of such
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Subsidiaries, and the continuance of any such events in this
subsection 7.6.2 for 60 days unless dismissed, bonded or
discharged; or
Section 7.7 Voluntary Bankruptcy; Appointment of
Receiver, etc. The Company or any of its Subsidiaries which,
as of the date of entry of such decree or order, would
constitute a Material Subsidiary (whether or not, as of such
date, such Subsidiary is or has been deemed to be, or not to
be, a Material Subsidiary under any other applicable provision
of this Agreement) shall have a decree or an order for relief
entered with respect to it or commence a voluntary case under
the Bankruptcy Code or any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or shall consent
to the entry of a decree or an order for relief in an
involuntary case, or to the conversion of an involuntary case
to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its
property; the making by the Company or any of such Subsidiaries
of any general assignment for the benefit of creditors; or the
inability or failure of the Company or any of such Subsidiaries
generally to pay its debts as such debts become due; or the
Board of Directors of the Company or any of such Subsidiaries
(or any committee thereof) adopts any resolution or otherwise
authorizes action to approve any of the foregoing; or
Section 7.8 Judgments and Attachments. Any money
judgment, writ or warrant of attachment, or similar process
involving (A) in any individual case an amount in excess of
$10,000,000 or (B) in the aggregate at any time an amount in
excess of $20,000,000 (in either case not adequately covered by
insurance as to which the insurance company has acknowledged
coverage) shall be entered or filed against the Company or any
of its Subsidiaries which, as of the date of such entry or
filing, would constitute a Material Subsidiary (whether or not,
as of such date, such Subsidiary is or has been deemed to be,
or not to be, a Material Subsidiary under any other applicable
provision of this Agreement) or any of their respective assets
and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 30 days or in any event later than five days
prior to the date of any proposed sale thereunder; or
Section 7.9 Dissolution. Any order, judgment or
decree shall be entered against the Company or any of its
Subsidiaries which, as of the date of such entry, would
constitute a Material Subsidiary (whether or not, as of such
date, such Subsidiary is or has been deemed to be, or not to
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be, a Material Subsidiary under any other applicable provision
of this Agreement) decreeing the dissolution or split up of the
Company or such Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
Section 7.10 Unfunded ERISA Liabilities.
7.10.1. Any Pension Plan maintained by the Company
or any of its ERISA Affiliates shall be terminated within the
meaning of Title IV of ERISA; or
7.10.2. A trustee shall be appointed by an
appropriate United States district court to administer any
Pension Plan; or
7.10.3. The Pension Benefit Guaranty Corporation (or
any successor thereto) shall institute proceedings to terminate
any Pension Plan or to appoint a trustee to administer any
Pension Plan; or
7.10.4. The Company or any of its respective ERISA
Affiliates shall withdraw (under Section 4063 of ERISA) from a
Pension Plan; or
7.10.5. The Termination Event that is described in
clause (E) of the definition of "Termination Event" shall have
occurred and be continuing;
if as of the date thereof or any subsequent date, the sum of
each of the Company's and its ERISA Affiliates' various
liabilities (such liabilities to include, without limitation,
any liability to the Pension Benefit Guaranty Corporation (or
any successor thereto) or to any other party under ERISA or the
Internal Revenue Code and to be calculated after giving effect
to the tax consequences thereof) resulting from all such events
listed in subsections 7.10.1 through 7.10.5 above exceeds
$25,000,000; or
Section 7.11 Withdrawal Liability Under Multi-
employer Plan. The Company or any of its ERISA Affiliates as
employer under a Multiemployer Plan shall have made a complete
or partial withdrawal from such Multiemployer Plan and the plan
sponsor of such Multiemployer Plan shall have notified such
withdrawing employer that such employer has incurred a
withdrawal liability requiring annual payments in an amount
individually or in the aggregate exceeding $1,500,000 in any
one year; unless (A) prior to the time any payment of such
withdrawal liability is due in accordance with Section
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4219(c)(2) of ERISA, the plan sponsor agrees in writing that
the correct amount of the annual payment is less than
$1,500,000, or (B) prior to the time any payment of such
withdrawal liability is due in accordance with Section
4219(c)(2) of ERISA, a court of competent jurisdiction has
enjoined and continues to enjoin the collection of such
payment, or (C) Section 4219 of ERISA has been amended to
provide that notification that such withdrawing employer has
incurred a withdrawal liability would not, in the ordinary
course or with the lapse of time, require the payment; provided
that, in the event of such an amendment, an Event of Default
shall be deemed to occur when any payment of such withdrawal
liability becomes due or would, in the ordinary course or with
the lapse of time, become due; or
Section 7.12 Failure of Security. Any Collateral
Document shall, at any time, cease to be in full force and
effect or shall be declared null and void, or the legality,
validity or enforceability thereof shall be contested by the
Company or the Administrative Agent, as agent for the Lenders,
shall not have or shall cease to have valid and perfected (to
the extent required by the Collateral Documents) Lien in the
Collateral with a face value of more than $2,000,000 in the
aggregate of the priority contemplated by the applicable
Collateral Document in each case for any reason other than the
failure of the Administrative Agent to take any action within
its control, or the Company shall fail to perform or observe in
any material respect any Collateral Document; or
Section 7.13 Change in Control. If there shall
occur any Change in Control;
THEN (A) upon the occurrence of and during the
continuance of any Event of Default described in the foregoing
Section 7.6 or 7.7 (other than the last clause of Section 7.7),
each of (i) the unpaid principal amount of and accrued interest
on the Loans, and (ii) all other amounts comprising the
Obligations shall automatically become immediately due and
payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly
waived by the Company and (B) upon the occurrence of and during
the continuance of any other Event of Default, the Requisite
Lenders may, by written notice to the Company, declare the
Loans to be, and the same shall forthwith become, due and
payable, together with accrued interest thereon. Whether or
not the Loans or other Obligations shall have been accelerated
or become due as set forth above, upon the occurrence and
during the continuance of any Event of Default, the
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Administrative Agent or any Lender may exercise any remedy
available under the Loan Documents or applicable law in respect
thereof (including, without limitation, foreclosure of the
Liens in respect of the Collateral). If at any time within 60
days after acceleration of the maturity of any Loan, the
Company shall pay all arrears of interest and all payments on
account of the principal which shall have become due otherwise
than by acceleration (with interest on principal and, to the
extent permitted by law, on overdue interest, at the rates
specified in this Agreement or the Notes) and all Events of
Default and Potential Events of Default (other than non-payment
of principal of and accrued interest on the Loans and the
Notes, and payments of amounts referred to in subclause (2)
above, in each case due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section
9.6, then the Requisite Lenders by written notice to the
Company may rescind and annul the acceleration and its
consequences, but such action shall not affect any subsequent
Event of Default or Potential Event of Default or impair any
right consequent thereon.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Section 8.1 Appointment. Bankers is hereby
appointed the Administrative Agent hereunder by each Lender,
and each Lender hereby authorizes the Administrative Agent to
act hereunder and under the other instruments and agreements
referred to herein as its agent hereunder and thereunder.
Bankers is hereby authorized, as the Administrative Agent to
execute consents to service of process and such other documents
on behalf of Lenders, as may be required by law or as may be
necessary or desirable. Bankers agrees to act as such upon the
express conditions contained in this ARTICLE VIII and in the
Collateral Documents. The provisions of this ARTICLE VIII,
except as provided in subsections 8.6.2 and 8.6.3 and
Section 8.7 where the consent of the Company is required, are
solely for the benefit of the Administrative Agent, and the
Company shall not have any rights as a third party beneficiary
of any of the provisions hereof except for those contained in
subsections 8.6.2 and 8.6.3 and Section 8.7 where the consent
of the Company is required. In performing its functions and
duties under this Agreement, the Administrative Agent shall act
solely as agent of the Lenders and does not assume and shall
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not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for the Company.
Section 8.2 Powers; General Immunity.
8.2.1. Duties Specified. Each Lender irrevocably
authorizes the Administrative Agent to take such action on such
Lender's behalf and to exercise such powers hereunder and under
the other instruments and agreements referred to herein as are
specifically delegated to the Administrative Agent by the terms
hereof and thereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent shall have only
those duties and responsibilities which are expressly specified
in this Agreement and the Collateral Documents and it may
perform such duties by or through its agents or employees. The
duties of the Administrative Agent shall be mechanical and
administrative in nature; and the Administrative Agent shall
not have by reason of this Agreement a fiduciary relationship
in respect of any Lender. Nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to
impose upon the Administrative Agent any obligations in respect
of this Agreement or the other instruments and agreements
referred to herein except as expressly set forth herein or
therein.
8.2.2. No Responsibility for Certain Matters. The
Administrative Agent shall not be responsible to any Lender for
the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this
Agreement, the Collateral Documents or the Notes issued
hereunder, or for the perfection or priority of any Lien
created or purported to be created by any Loan Document or for
any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or
in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or
therewith furnished or made by the Administrative Agent to
Lenders or by or on behalf of the Company or any of its
Subsidiaries to the Administrative Agent or any Lender, or be
required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to
the use of the proceeds of the Loans or of the existence or
possible existence of any Event of Default or Potential Event
of Default.
8.2.3. Exculpatory Provisions. Neither the
Administrative Agent nor any of its officers, directors,
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employees or agents shall be liable to the Lenders for any
action taken or omitted hereunder or in connection herewith
(including, without limitation, any act or omission under the
Collateral Documents) unless caused by its or their gross
negligence or willful misconduct. If the Administrative Agent
shall request instructions from the Lenders with respect to any
act or action (including the failure to take an action) in
connection with this Agreement or the other instruments and
agreements referred to herein, the Administrative Agent shall
be entitled to refrain from such act or taking such action
unless and until the Administrative Agent shall have received
instructions from the Requisite Lenders. Without prejudice to
the generality of the foregoing, (A) the Administrative Agent
shall be entitled to rely, and shall be fully protected in
relying, upon any communication, instrument or document
believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions
and judgments of attorneys (who may be attorneys for the
Company), accountants, experts and other professional advisors
selected by it and (B) no Lender shall have any right of action
whatsoever against the Administrative Agent as a result of the
Administrative Agent acting or (where so instructed) refraining
from acting under this Agreement or the other instruments and
agreements referred to herein in accordance with the
instructions of the Requisite Lenders. The Administrative
Agent shall be entitled to refrain from exercising any power,
discretion or authority vested in it under this Agreement or
the other instruments and agreements referred to herein unless
and until it has obtained the instructions of the Requisite
Lenders.
8.2.4. Administrative Agent Entitled to Act as
Lender. The agency hereby created shall in no way impair or
affect any of the rights and powers of, or impose any duties or
obligations upon, the Administrative Agent in its individual
capacity as a Lender hereunder. With respect to its
participation in the Loans, the Administrative Agent shall have
the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the
duties and functions delegated to it hereunder, and the term
"Lender" or "Lenders" or any similar term shall, unless the
context clearly otherwise indicates, include the Administrative
Agent in its individual capacity. The Administrative Agent and
its Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial
advisory or other business with the Company or any Subsidiary
or Affiliate of the Company as if it were not performing the
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duties specified herein, and may accept fees and other
consideration from the Company or any such Subsidiary or
Affiliate for services in connection with this Agreement and
otherwise without having to account for the same to the
Lenders.
Section 8.3 Representations and Warranties; No
Responsibility for Appraisal of Creditworthiness. Each Lender
represents and warrants that it has made its own independent
investigation of the financial condition and affairs of the
Company and its Subsidiaries in connection with the making of
the Loans and other disbursements on the Closing Date and
thereafter and has made and shall continue to make its own
appraisal of the creditworthiness of each of them. The
Administrative Agent shall not have any duty or responsibility
either initially or on a continuing basis to make any such
investigation or any such appraisal on behalf of the Lenders or
to provide any Lender with any credit or other information with
respect thereto whether coming into its possession before the
making of the Loans and other disbursements on the Closing Date
and thereafter or any time or times thereafter, and the
Administrative Agent shall have no responsibility with respect
to the accuracy of or the completeness of the information
provided to Lenders.
Section 8.4 Right to Indemnity. Each Lender
severally agrees to indemnify the Administrative Agent, on its
demand and as incurred proportionately to its Commitment, to
the extent the Administrative Agent shall not have been
reimbursed by the Company, for and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Administrative Agent in performing
its duties hereunder or in any way relating to or arising out
of this Agreement or any other Loan Document; provided that no
Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that result from the
Administrative Agent's gross negligence or willful misconduct.
If any indemnity furnished to the Administrative Agent for any
purpose shall, in the opinion of the Administrative Agent be
insufficient or become impaired, the Administrative Agent may
call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is
furnished.
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Section 8.5 Registered Holder of Note Treated as
Owner. The Administrative Agent may deem and treat the
registered holder of any Note as the owner thereof for all
purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been registered with
the Administrative Agent. Any request, authority or consent of
any person or entity who at the time of making such request or
giving such authority or consent, is the holder of any Note
shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Note or of any Note or Notes
issued in exchange therefor.
Section 8.6 Resignation by Administrative Agent.
8.6.1. The Administrative Agent may resign from the
performance of all its functions and duties hereunder at any
time by giving 15 Business Days' prior written notice to the
Company and the Lenders. Such resignation shall take effect
upon the acceptance by a successor Administrative Agent of
appointment pursuant to subsections 8.6.2 and 8.6.3 below or as
otherwise provided below.
8.6.2. Upon any such notice of resignation, the
Requisite Lenders shall appoint a successor Administrative
Agent acceptable to the Company in its reasonable discretion
and which shall be an incorporated bank or trust company.
8.6.3. If a successor Administrative Agent shall not
have been so appointed within such 15 Business Day period, the
resigning Administrative Agent with the consent of the Company,
shall then appoint a successor Administrative Agent who shall
serve as the Administrative Agent until such time, if any, as
the Requisite Lenders appoint a successor Administrative Agent
as provided above.
8.6.4. If no successor Administrative Agent has been
appointed pursuant to subsection 8.6.2 or 8.6.3 by the 20th
Business Day after the date such notice of resignation was
given by the resigning Administrative Agent, the Administrative
Agent's resignation shall become effective and Requisite
Lenders shall thereafter perform all the duties of the
Administrative Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor Administrative Agent as
provided above.
Section 8.7 Collateral Documents. Each Lender
hereby authorizes the Administrative Agent to act as Collateral
Agent on behalf of and for the benefit of such Lender. Each
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Lender hereby authorizes the Collateral Agent to enter into the
Collateral Documents and to take all action contemplated by the
Collateral Documents; provided that the Collateral Agent shall
not enter into or consent to any amendment, modification,
termination or waiver of any provision contained in the
Collateral Documents without the prior consent of the Requisite
Lenders. Each Lender agrees that no Lender shall have any
right individually to realize upon the security granted by any
Collateral Document, it being understood and agreed that such
rights and remedies may be exercised by the Collateral Agent
for the benefit of the Lenders upon the terms of the Collateral
Documents.
Section 8.8 Successor Administrative Agent. Upon
the acceptance of any appointment as the Administrative Agent
hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of
the retiring or removed Administrative Agent, and the retiring
or removed Administrative Agent shall be discharged from its
duties and obligations as the Administrative Agent under this
Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as the Administrative
Agent the provisions of this ARTICLE VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Successors and Assigns; Participations.
9.1.1. This Agreement shall be binding upon and
inure to the benefit of the Company, the Lenders, the
Administrative Agent and all future registered holders of the
Notes and their respective successors and registered assigns,
except that the Company may not assign or transfer any of its
rights or obligations under this Agreement without the prior
written consent of each Lender.
9.1.2. Any Lender may at any time sell to one or
more banks or other entities ("Participants") participating
interests in its Commitment or any other right of such Lender
hereunder or thereunder. In the event of any such sale by a
Lender of participating interests to a Participant, such
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Lender's obligations under this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the registered
holder of any such Note for all purposes under this Agreement,
and the Company and the Administrative Agent shall continue to
deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. The
Company agrees that if amounts outstanding under this Agreement
or the Notes are due and unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall, to the extent
permitted by applicable law, be deemed to have the right of
setoff in respect of its participating interest in amounts
owing under this Agreement and any Note to the same extent as
if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note; provided
that such right of setoff shall be subject to the obligation of
such Participant to share with the Lenders, and the Lenders
agree to share with such Participant, as provided in Sections
9.4 and 9.5 hereof. The Company also agrees that each
Participant shall be entitled to the benefits, subject to any
limitations set forth therein, of Sections 2.7 and 2.8 hereof
with respect to its participation in the Adjusted LIBOR Loans
and ABR Loans outstanding from time to time; provided that no
Participant shall be entitled to receive any greater payment
under any of such Sections than the relevant Lender would have
been entitled to receive with respect to the Loans, unless such
participation is made with the Company's prior written consent.
Each Lender agrees that any agreement between such Lender and
any such Participant in respect of such participating interest
shall refer to this Agreement and shall not restrict such
Lender's right to agree to any amendment, supplement or
modification to this Agreement or any of the Loan Documents
except (A) to extend the final maturity of any Loan or Note, or
any installment thereof, or reduce the rate or extend the time
of payment of interest or fees thereon (except in connection
with a waiver of applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or
increase the amount of the Participant's participation over the
amount thereof then in effect (it being understood that waivers
or modifications of conditions precedent, covenants, Events of
Default or of a mandatory reduction in Total Loan Commitments
shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan
shall be permitted without the consent of any Participant if
such Participant's participation is not increased as a result
thereof), or (B) to consent to the assignment or transfer by
the Company of any of its rights and obligations under this
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Agreement. Each Lender agrees to use commercially reasonable
efforts to include and require in each participation agreement
delivered by it pursuant to this subsection 9.1.2 to a
Participant that is not a commercial bank a specific
acknowledgment by such Participant (and by each other Person
that may obtain, directly or indirectly from such Participant,
an interest in any one or more Commitments and Loans) of the
representations, warranties, covenants and agreements deemed to
be made by such Participant pursuant to the provisions of
Section 9.23; provided that no Lender shall have any liability
hereunder in respect of any act or omission of, or state of
facts or circumstances relating to, any Person to whom the
holder of any such participating interest may grant or sell
sub-participating interests.
9.1.3. (a) Any Lender may, (A) without the consent
of any Person, at any time, assign to any Lender or any
Affiliate thereof and (B) with the prior written consent of the
Company (which consent shall not be unreasonably withheld or
delayed) to one or more additional banks or financial
institutions (all such Affiliates, Lenders and additional banks
or financial institutions being "Purchasing Lenders"), all or
any part of its Commitment pursuant to a Registered Transfer
Supplement, substantially in the form of Exhibit X annexed
hereto (any such Registered Transfer Supplement, a "Registered
Transfer Supplement"), executed by such Purchasing Lender, such
transferor Lender and the Administrative Agent and in
compliance with subsection 9.1.5; provided that (1) each such
assignment pursuant to clause (A) above shall be limited to an
amount equal to the lesser of (x) such Lender's Commitment then
in effect and (y) a minimum amount of $5,000,000 and integral
multiples of $1,000,000 above such amount, (2) such transferor
Lender and Purchasing Lender deliver to the Administrative
Agent the tax documentation required by paragraph (e) of
subsection 2.7.7, if applicable, and a processing and
recordation fee of $2,500, (3) no such consent of the Company
will be required if a Potential Event of Default or an Event of
Default shall have occurred and be continuing and (4) the
Company shall be entitled to withhold its consent to any such
proposed assignment for any reason or no reason if
(x) immediately after giving effect thereto, the Purchasing
Lender would be an Affected Lender or the Company would be
required to make payments pursuant to or on behalf of such
Purchasing Lender pursuant to subsection 2.7.7 and (y) the
transferor Lender was not an Affected Lender as to which the
Company has declined or failed to exercise its rights pursuant
to Section 2.9 and was not, at the time of such assignment,
entitled to receive any payments pursuant to paragraph (a), (b)
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or (c) of subsection 2.7.7. Subject to compliance with the
foregoing sentence, upon (A) such execution of such Registered
Transfer Supplement, (B) delivery of an executed copy thereof
to the Company, (C) payment by such Purchasing Lender to such
transferor Lender of an amount equal to the purchase price
agreed between such transferor Lender and such Purchasing
Lender, (D) the receipt of a processing and recording fee of
$2,500 by the Administrative Agent and (E) recordation of
assignment in the Register pursuant to subsection 9.1.5, such
Purchasing Lender shall for all purposes be a Lender party to
this Agreement and shall have all the rights (including,
without limitation, the benefits of Section 2.8) and
obligations of a Lender under this Agreement to the same extent
as if it were an original party hereto with the Commitment set
forth in such Registered Transfer Supplement, and no further
consent or action by the Company, the Lenders or the
Administrative Agent shall be required. Such Registered
Transfer Supplement shall be deemed to amend this Agreement to
the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment
of the Commitments arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of
such transferor Lender under this Agreement, the Commitments
and the Notes. Upon the consummation of any transfer to a
Purchasing Lender pursuant to this subsection 9.1.3, the
transferor Lender, the Administrative Agent and the Company
shall make appropriate arrangements as required under
subsection 9.1.5 so that a replacement Note is issued to such
transferor Lender and a new Note or, as appropriate, a
replacement Note, issued to such Purchasing Lender, in each
case in principal amounts reflecting their Commitments or, as
appropriate, their outstanding Loans, as adjusted pursuant to
such Registered Transfer Supplement.
(b) In addition to the assignments permitted under
paragraph (a) of subsection 9.1.3 above, any Lender may at any
time assign all or any portion of its rights under this
Agreement to a Federal Reserve Bank without the prior written
consent of the Company, the Administrative Agent or Bankers;
provided that no such assignment shall release a Lender from
any of its obligations hereunder or substitute any such Federal
Reserve Bank for such Lender as a party or entitle such Federal
Reserve Bank to require such Lender to take or omit to take any
action hereunder.
9.1.4. The Company authorizes each Lender to
disclose to any Participant or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all
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financial information in such Lender's possession concerning
the Company and any Subsidiary of the Company which has been
delivered to such Lender by or on behalf of the Company
pursuant to this Agreement or any other Loan Document or which
has been delivered to such Lender by the Company in connection
with such Lender's credit evaluation of the Company and its
Subsidiaries prior to entering into this Agreement; provided
that if such information is confidential information as
contemplated by Section 9.17 hereof, such Lender may so
disclose such information only if such Transferee or
prospective Transferee previously agrees to be bound by the
terms of Section 9.17.
9.1.5. (a) The Company and other Loan Parties
hereby designate the Administrative Agent to serve as the
Company's agent, solely for purposes of this subsection 9.1.5,
to maintain a register (the "Register") on which the
Administrative Agent will record the Commitments from time to
time of each Lender, the Loans made by each Lender and each
repayment in respect of the principal amount of the Loans of
each Lender and to retain a copy of each Registered Transfer
Supplement delivered to the Administrative Agent pursuant to
this subsection. Failure to make any such recordation, or any
error in such recordation shall not affect the Company's
obligations in respect of such Loans. The entries in the
Register shall be conclusive, in the absence of manifest error,
and the Company, the other Loan Parties, the Administrative
Agent and the Lenders shall treat each Person in whose name a
Loan and the Note evidencing the same is registered as the
owner thereof for all purposes of this Agreement,
notwithstanding notice or any provision herein to the contrary.
With respect to any Lender, the assignment or other transfer of
the Commitment of such Lender and the rights to the principal
of, and interest on, any Loan made and Note issued pursuant to
this Agreement shall not be effective until such assignment or
other transfer is recorded on the Register and, except to the
extent provided in this subsection 9.1.5, otherwise complies
with subsection 9.1.3, and prior to such recordation all
amounts owing to the transferor Lender with respect to such
Commitments, Loans and Notes shall remain owing to the
transferor Lender. The registration of assignment or other
transfer of all or part of any Commitment, Loans and Notes for
a Lender shall be recorded by the Administrative Agent on the
Register only upon the acceptance by Agent of a properly
executed and delivered Registered Transfer Supplement
substantially in the form of Exhibit X annexed hereto.
Coincident with the delivery of such Registered Transfer
Supplement to the Administrative Agent for acceptance and
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registration of assignment or sale of all or part of a Loan, or
as soon thereafter as practicable, the assigning or transferor
Lender shall surrender the Note evidencing such Loan, and
thereupon one or more new Notes in the same aggregate principal
amount shall be issued to the assigning or transferor Lender
and/or the new Lender. The Company agrees to indemnify the
Administrative Agent from and against any and all losses,
claims, damages and liabilities or whatsoever nature which may
be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this sub
section 9.1.5 (other than losses, claims, damages and
liabilities arising from acts or omissions that represent gross
negligence or willful misconduct on the part of the
Administrative Agent). The Register shall be available at the
offices where kept by the Administrative Agent for inspection
by the Company and any Lender at any reasonable time upon
reasonable prior notice to the Administrative Agent.
(b) The Company may not replace any Lender pursuant
to Section 2.9 or Section 9.22, unless, with respect to any
Notes held by such Lender, the requirements of sub-
section 9.1.5(a) have been satisfied.
Section 9.2 Expenses. Whether or not the
transactions contemplated hereby shall be consummated, the
Company agrees to promptly pay (A) all the actual and
reasonable costs and expenses of preparation of the Loan
Documents and all the costs of furnishing all opinions by
counsel for the Company and the other Loan Parties (including,
without limitation, any
opinions requested by Requisite Lenders as provided in
ARTICLE III hereof as to any legal matters arising hereunder),
(B) the reasonable fees, expenses and disbursements of CG&R in
connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Loans hereunder,
and any amendments and waivers hereto or thereto, (C) all the
actual costs and expenses of creating, perfecting, continuing
and maintaining Liens in favor of Lenders pursuant to any Loan
Document, including filing and recording fees and expenses,
fees and expenses of counsel for providing such opinions as
Requisite Lenders may reasonably request as provided therein
and reasonable fees and expenses of CG&R, and (D) after the
occurrence of an Event of Default, all costs and expenses
(including, without limitation, reasonable attorneys fees,
including allocated costs of internal counsel) incurred by the
Lenders and/or the Administrative Agent in enforcing any
Obligations of or in collecting any payments due from the
Company hereunder or under the Notes or any of the other Loan
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Documents by reason of such Event of Default or in connection
with any refinancing or restructuring of the credit
arrangements provided under this Agreement, including, without
limitation, in the nature of a "work-out" or of any insolvency
or bankruptcy proceedings.
Section 9.3 Indemnity. In addition to the payment
of expenses pursuant to Section 9.2, whether or not the
transactions contemplated hereby shall be consummated, the
Company agrees to indemnify, pay and hold the Administrative
Agent, and each Person who is or was a Lender and any holder of
any of the Notes, and the officers, directors, employees,
agents, and affiliates of such Person and such holders
(collectively called the "Indemnitees"), upon their demand and
as incurred, harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of
any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party
thereto), which may be imposed on, incurred by, or asserted
against such Indemnitee, in any manner relating to or arising
out of this Agreement, the other Loan Documents, the Lenders'
agreement to make the Loans or other disbursements on the
Closing Date or thereafter or the use or intended use of the
proceeds of the Loan or disbursements hereunder (the
"indemnified liabilities"); provided that the Company shall
have no obligation to an Indemnitee hereunder with respect to
indemnified liabilities that result from the gross negligence
or willful misconduct of that Indemnitee or from claims,
litigation, investigations or proceedings made or initiated by,
as the case may be, one Indemnitee against any other
Indemnitee. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in the preceding sentence may
be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them except to the extent
set forth in the proviso to the next preceding sentence.
Section 9.4 Set Off. In addition to any rights now
or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence of any Event
of Default, each Lender is hereby authorized by the Company at
any time or from time to time, without notice to the Company,
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or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, without limitation,
Indebtedness evidenced by certificates of deposit, whether
matured or unmatured but not including trust accounts) and any
other Indebtedness at any time held or owing by that Lender to
or for the credit or the account of the Company against and on
account of the obligations and liabilities of the Company to
such Lender or that subsequent holder under this Agreement and
the Notes, including, without limitation, all claims of any
nature or description arising out of or connected with this
Agreement or the Notes, irrespective of whether or not (A) such
Lender shall have made any demand hereunder or (B) such Lender
shall have declared the principal or the interest on the Loan
and Notes, and other amounts due hereunder to be due and
payable as permitted by ARTICLE VII and although said
obligations and liabilities, or any of them, may be contingent
or unmatured.
Section 9.5 Ratable Sharing.
9.5.1. Each Lender and each subsequent holder by
acceptance of a Note agree among themselves that (A) with
respect to all amounts received by them which are applicable to
the payment of principal of or interest on the Notes and
commitment commissions with respect to the Commitments,
equitable adjustment will be made so that, in effect, all such
amounts will be shared among the Lenders proportionately to
their respective interests in the Notes and the Loans as the
same may appear, whether received by voluntary payment, by the
exercise of the right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any or
all of the Notes, (B) if any of them shall exercise any right
of counterclaim, set-off, banker's lien or similar right with
respect to amounts owed by the Company hereunder or under the
Notes relating to the Loans, such Lender or holder, as the case
may be, shall apportion the amount recovered as a result of the
exercise of such right pro rata in accordance with all amounts
outstanding at such time owed by the Company in respect of the
Loans, and (C) if any of them shall thereby through the
exercise of any right of counterclaim, set-off, banker's lien
or otherwise or as adequate protection of a deposit treated as
cash collateral under the Bankruptcy Code, receive payment or
reduction of a proportion of the aggregate amount of principal
and interest due with respect to the Notes held by the Lender
relating to the Loans or any participation therein or any
amount payable hereunder, as the case may be, which is greater
than the proportion received by any other holder of the Notes
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in respect to such aggregate amount of principal and interest
due with respect to such Notes held by it, such Lender or such
holder of such Notes receiving such proportionately greater
payments shall (1) notify each other applicable Lender and the
Administrative Agent of such receipt and (2) enter into
arrangements as directed by the Administrative Agent relating
to the Notes relating to the Loans held by the other holders so
that all such recoveries of principal and interest with respect
to such Notes shall be proportionate to their respective
interests in the Loans; provided that, if all or part of such
proportionately greater payment received by such holder is
thereafter recovered from such holder, all such arrangements
shall be rescinded and the purchase prices paid in respect of
such arrangements shall be returned to that holder to the
extent of such recovery, but without interest. The Company
expressly consents to the foregoing arrangement and agrees that
any holder of an interest in any such Note, so purchased and
any other subsequent holder of an interest in any Note
otherwise acquired may to the extent permitted by applicable
law, exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by the
Company to such holder as fully as if that holder were a holder
of such a Note in the amount of the interest held by such
holder. Any amounts required to be shared or used to purchase
participations pursuant to this subsection 9.5.1 shall be
applied to all Lenders ratably in respect of all such amounts
then due and payable to each such lender.
Section 9.6 Amendments and Waivers. Neither this
Agreement nor any other Loan Document nor any terms hereof or
thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing
signed by the Company and the Requisite Lenders; provided that
no such change, waiver, discharge or termination shall, without
the consent of each Lender affected thereby, (A) extend the
Maturity Date (it being understood that any waiver of the
application of any prepayment of or collateralization for or
the method of application of any prepayment to the amortization
of the Loan or other Obligations shall not constitute any such
extension), or reduce the rate or extend the time of payment of
interest, commissions or fees (other than as a result of
waiving the applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or
increase the Commitment of any Lender over the amount thereof
then in effect (it being understood that a waiver of any
Potential Event of Default or Event of Default or of a
mandatory reduction in the Total Loan Commitment or a waiver of
the type contemplated in the second next preceding
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parenthetical shall not constitute a change in the terms of any
Commitment of any Lender), (B) release or permit the release of
all or substantially all of the Collateral (except as expressly
provided in the Loan Documents), (C) amend, modify or waive any
provision of this Section, (D) reduce the percentage specified
in, or otherwise modify, the definition of Requisite Lenders,
Commitment or (E) consent to the assignment or transfer by the
Company of any of its rights and obligations under this
Agreement; and provided, further, that no such change, waiver,
discharge or termination shall amend, modify or waive any of
the terms contained in subsection 2.1.5 or Section 2.5 without
the consent of the Required Lenders (to the extent that, in any
such case, such amendment, modification or waiver would reduce,
or change the time of payment of, any amounts received by
Lenders). Any amendment, modification, termination or waiver
of any of the provisions contained in ARTICLE III shall be
effective only if evidenced by a writing signed by or on behalf
of the Administrative Agent and the Requisite Lenders. No
amendment, modification, termination or waiver of any provision
of ARTICLE VIII hereof shall be effective without the written
concurrence of the Administrative Agent. The Administrative
Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of such Lender. Any waiver or
consent shall be effective only in the specific instance and
for the specific purpose for which it was given. No notice to
or demand on the Company in any case shall entitle the Company
to any further notice or demand in similar or other
circumstances. Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 9.6
shall be binding upon each holder of the Notes at the time
outstanding, each future holder of the Notes, and, if signed by
the Company, on the Company.
Section 9.7 Independence of Covenants. All
covenants hereunder shall be given independent effect so that
if a particular action or condition is prohibited by any of
such covenants, the fact that it would be permitted by an
exception to, or be otherwise outside the limitation of,
another covenant shall not avoid the occurrence of an Event of
Default or Potential Event of Default if such action is taken
or condition exists.
Section 9.8 Change in Accounting Principles; Fiscal
Year or Tax Laws. If (A) any change in the accounting
principles under GAAP used in preparation of the financial
statements referred to in Section 4.3 hereafter occasioned by
the promulgation of rules, regulations, pronouncements and
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opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants
(or successors thereto or agencies with similar functions)
result in a change in the method of calculation of financial
covenants, standards or terms found in ARTICLES I, V and VI
hereof, or (B) there is a material change in federal tax laws
which materially affects the Company's ability to comply with
the financial covenants, standards or terms found in ARTICLE I,
V or VI hereof, the parties hereto agree to enter into
negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that the
criteria for evaluating the Company's financial condition shall
be the same after such changes as if such changes had not been
made; provided that, unless and until an agreement is reached
following such negotiations, such provisions shall remain
unchanged and in full force and effect.
Section 9.9 Notices. Unless otherwise provided
herein, any notice or other communication herein required or
permitted to be given shall be in writing and may be personally
served, telecopied, telexed or sent by United States mail and
shall be deemed to have been given (A) when delivered in person
or a legible copy is received by telecopy or telex or (B) four
Business Days after deposit in the United States mail,
registered or certified, with postage prepaid and properly
addressed; provided that notices to the Administrative Agent
shall not be effective until received by the Administrative
Agent. For the purposes hereof, the address of each of the
parties hereto (until notice of a change thereof is delivered
as provided in this Section 9.9) shall be set forth under such
party's name on the signature pages hereto.
Section 9.10 Survival of Warranties and Certain
Agreements. Notwithstanding anything in this Agreement or
implied by law to the contrary and without limiting any
survival provision set forth in any Collateral Document, the
agreements of the Company set forth in subsections 2.7.2,
2.7.5, 2.7.7 and 2.7.9 and Sections 9.2 and 9.3 and the
agreements of Lenders set forth in subsections 2.7.7, 2.7.8,
2.7.11, 8.2.3 and 9.1.2 (last sentence only) and Sections 8.4,
9.4 and 9.5 shall survive the payment of the Loans and the
Notes and the termination of this Agreement.
Section 9.11 Failure or Indulgence Not Waiver;
Remedies Cumulative. No failure or delay on the part of any
Lender or any holder of any Note in the exercise of any power,
right or privilege under any Loan Document shall impair such
power, right or privilege or be construed to be a waiver of any
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default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power
or privilege. All rights and remedies existing under any Loan
Document are cumulative to and not exclusive of, any rights or
remedies otherwise available.
Section 9.12 Severability. In case any provision in
or obligation under this Agreement or the Notes shall be
invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not, to the extent permitted
by law, in any way be affected or impaired thereby.
Section 9.13 Obligations Several; Independent Nature
of the Lenders' Rights. The obligation of each Lender
hereunder is several, and no Lender shall be responsible for
the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement and no action taken by
Lenders pursuant hereto shall be deemed to constitute Lenders
to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time
hereunder to each Lender shall be a separate and independent
debt, and each Lender shall be entitled to protect and enforce
its rights arising out of this Agreement and it shall not be
necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose. Notwithstanding the
foregoing, each Lender agrees that no Lender shall have any
right individually to realize upon the security granted by the
Collateral Documents, it being understood and agreed that such
rights and remedies may only be exercised by the Administrative
Agent for the benefit of the Lenders.
Section 9.14 Headings. Section and subsection
headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive
effect.
Section 9.15 Applicable Law. THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 9.16 Consent to Jurisdiction and Service of
Process. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE COMPANY
WITH RESPECT TO THIS AGREEMENT OR ANY NOTE MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
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STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY ACCEPTS (TO THE MAXIMUM EXTENT PERMITTED
BY LAW) FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT
SUBJECT TO RIGHT OF APPEAL. THE COMPANY DESIGNATES AND
APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., 500
CENTRAL AVENUE, ALBANY, NEW YORK 12206 AND SUCH OTHER PERSONS
AS MAY HEREAFTER BE SELECTED BY THE COMPANY IRREVOCABLY
AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS
BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE
COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO THE COMPANY AT ITS ADDRESS PROVIDED IN THE APPLICABLE
SIGNATURE PAGE HERETO, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY
APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT
THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
THE COMPANY REFUSES TO ACCEPT SERVICE, THE COMPANY HEREBY
AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF ANY LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE
COURTS OF ANY OTHER JURISDICTION.
Section 9.17 Confidentiality. Subject to Section
9.1, the Lenders shall hold all non-public information obtained
pursuant to the requirements of this Agreement which has been
identified as such by the Company in accordance with their
customary procedures for handling confidential information of
this nature and in accordance with safe and sound commercial
practices and in any event, subject to Section 9.1, may make
disclosure reasonably required by any bona fide prospective or
current transferee or Participant in connection with any Note
or participation therein or in any Obligation or as required or
requested by any governmental agency or representative thereof
or pursuant to legal process; provided that, unless
specifically prohibited by applicable law or court order, each
Lender shall notify the Company of any request by any
governmental agency or representative thereof (other than any
such request in connection with an examination of the financial
condition of such Lender by such governmental agency) for
disclosure of any such non-public information prior to
disclosure of such information so that either or both of them
may seek an appropriate protective order; and provided,
further, that in no event shall any Lender be obligated or
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required to return any materials furnished by the Company or
any of its Subsidiaries.
Section 9.18 Counterparts; Effectiveness. This
Agreement and any amendments, waivers, consents or supplements
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective upon
the execution of a counterpart hereof by each of the parties
hereto, and written or telephonic notification of such
execution and authorization of delivery thereof has been
received by the Company and the Administrative Agent and all
applicable conditions to such effectiveness have been
satisfied.
Section 9.19 Determinations Pursuant to Collateral
Documents. In each circumstance where, under any provision of
a Collateral Document, the Collateral Agent shall have the
right to grant or withhold any consent, exercise any remedy,
make any determination or direct any action under such
Collateral Document, the Collateral Agent shall act in respect
of such consent, exercise of remedies, determination or action,
as the case may be, only with the consent of or at the
direction of the Requisite Lenders; provided that no consent of
any party shall be required with respect to any consent,
determination or other matter that is, in the reasonable
judgment of the Collateral Agent, ministerial or administrative
in nature. In each circumstance where any consent of or
direction from the Requisite Lenders is required, the
Collateral Agent shall send to the Lenders a notice setting
forth a description in reasonable detail of the matter as to
which consent or direction is requested and the Collateral
Agent's proposed course of action with respect thereto. In the
event the Collateral Agent shall not have received a response
from any Lender within ten Business Days after the giving of
such notice, such Lender shall be deemed to have agreed to the
course of action proposed by the Collateral Agent.
Section 9.20 Certain Obligations of Company.
Nothing in this Agreement shall be construed to limit any
obligation of the Company set forth in any Collateral Document.
Section 9.21 Waiver of Jury Trial. Each of the
Company and the Lenders hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of
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or related to any of the Loan Documents or the actions of the
Administrative Agent and any Lender in the negotiation,
administration, performance or enforcement hereof and thereof.
Section 9.22 Lenders' ERISA Matters.
9.22.1. Lenders' Representations and Warranties.
Except as otherwise provided in subsection 9.22.2, each Lender
and each Transferee, solely with respect to itself, severally
represents and warrants that one or more of the following is
true with respect to all of the funds used to make or purchase
any interest in any Loan (or one or more of the following is
true with respect to each portion of the funds used to make or
purchase such interest in such Loan if such funds are from more
than one source):
(i) no part of the funds to be used by it
constitutes under the Internal Revenue Code or ERISA the
assets of any Plan; or
(ii) (A) the funds to be used by it constitute, under
the Internal Revenue Code or ERISA, the assets of an
insurance company pooled separate account, as such term is
used in Prohibited Transaction Class Exemption 90-1 issued
by the U.S. Department of Labor, or a "collective
investment fund," as defined in Section IV of Prohibited
Transaction Class Exemption 91-38 issued by the U.S.
Department of Labor, in which a Plan has an interest, and
(B) such Loan or interest therein is, and the subsequent
holding of the Note or any agreement related thereto shall
at all times thereafter be, entitled to full relief under
Prohibited Transaction Class Exemption 90-1 or 91-38, as
applicable; or
(iii) (A) the funds to be used by it for any Loan or
interest therein which constitute, under the Internal
Revenue Code or ERISA, the assets of any Plan are invested
in an investment fund which is managed by a "Qualified
Professional Asset Manager" as such term is defined in
Prohibited Transaction Class Exemption 84-14 issued by the
U.S. Department of Labor, and (B) such Loan or interest
therein is and the subsequent holding of the Note or any
agreement related thereto shall at all times thereafter
be, exempt under Prohibited Transaction Class Exemption
84-14 to the fullest extent provided therein.
9.22.2. General Account Assets. A Lender or
Transferee which is an insurance company subject to state
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regulation that is making or purchasing an interest in a Loan
with General Account Assets represents with respect to the
portion of its assets constituting General Account Assets, in
lieu of making a representation under subsection 9.22.1 with
respect thereto, that one of the following is true:
(i) no part of the General Account Assets used to
make or purchase such interest in a Loan will be from
assets allocated to a segment of its general account in
which one or more Plans has any interest, other than an
interest which will not result in the Note relating
thereto being deemed to be the assets of any such Plan; or
(ii) such Lender or Transferee is an "insurance
company" and such General Account Assets are assets of an
"insurance company general account" as defined in Section
V of Proposed Class Exemption for Certain Transactions
Involving Insurance Company General Accounts issued by the
U.S. Department of Labor, 59 Federal Register 43134,
August 22, 1994 (Application No. D-9662) ("Proposed
Prohibited Transaction Exemption D-9662") and such Loan or
interest therein is, and shall at all times thereafter
satisfy the requirements to be and shall be exempt under
the Proposed Prohibited Transaction Exemption D-9662 to
the fullest extent provided therein (assuming for this
purpose that the Proposed Prohibited Transaction Exemption
D-9662 was granted as a final prohibited transaction
exemption by the U.S. Department of Labor on the date and
in the form it was proposed).
9.22.3. Representations of Transferees. Each Person
that becomes a Transferee hereunder shall be deemed to make,
effective upon the acceptance of any assignment of an interest
hereunder or the entering into of any participation agreement
contemplated in subsection 9.1.2, the representations and
warranties set forth in subsection 9.22.1 or, with respect to
General Account Assets used to acquire its interest or
participation, subsection 9.22.2. Such deemed representation
shall be effective against, and binding on, such Transferee to
the same extent as if such Transferee had executed an original
counterpart of this Agreement.
9.22.4. Additional ERISA Representations. Each
Lender that now or hereafter makes or maintains any Loan with
any assets of any Plan (i) represents and warrants that it has
evaluated for itself the merits of making or maintaining such
Loan; has not solicited and has not received from the Company,
MS Group or any of their Affiliates, any evaluation or other
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investment advice on any basis in respect of the advisability
of making or maintaining such Loan; and is not relying and has
not relied on the Company, MS Group or any of their Affiliates
for any investment advice with respect to making or maintaining
such Loan in any manner that would cause the Company, MS Group
or any of their Affiliates to become a "party in interest"
(within the meaning of ERISA) or a "disqualified person"
(within the meaning of the Internal Revenue Code) in connection
with making or maintaining such Loan and (ii) acknowledges and
confirms that none of the Company, MS Group or any of their
Affiliates is acting as a "fiduciary" (within the meaning of
ERISA, the Internal Revenue Code or any other applicable law or
any rulings or regulations thereunder) for such Lender in
connection with making or maintaining such Loan.
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WITNESS the due execution hereof by the respective
duly authorized officers of the undersigned as of the date
first written above.
BORROWER:
FORT HOWARD CORPORATION
By: /s/ R. Michael Lempke
Print Name: R. Michael Lempke
Title: Vice President and
Treasurer
Notice Address:
Fort Howard Corporation
1919 South Broadway
Green Bay, Wisconsin 54304
Attention:
Telephone:
Telecopier:
BANKERS TRUST COMPANY,
Individually, and as
Administrative Agent
By: /s/ Mary Kay Coyle
Print Name: Mary Kay Coyle
Title: Vice President
Notice Address:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Mary Kay Coyle
Telephone: (212) 250-9094
Telecopier: (212) 250-7218
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Lender
By: /s/ Barry R. Dunn
Print Name: Barry R. Dunn
Title: Vice President
Notice Address:
Bank of America National Trust
and Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Barry Dunn
Telephone: (312) 828-3023
Telecopier: (312) 828-3864
CHEMICAL BANK, as a Lender
By: /s/ Christopher C. Wardell
Print Name: Christopher C. Wardell
Title: Managing Director
Notice Address:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Doug Traver
Telephone: (212) 270-1915
Telecopier: (212) 270-1063
EXHIBIT 10.3(A)
CONFORMED COPY
STOCKHOLDERS AGREEMENT dated as of March 1, 1995, among
FORT HOWARD CORPORATION, a Delaware corporation (the "Company"), and the other
parties to the Stockholders and Registration Rights Agreement, dated as of
August 1, 1988, as amended.
WHEREAS, FH Holdings Corp., formerly a Delaware corporation ("FH
Holdings Corp."), and certain of the parties hereto entered into a
Stockholders and Registration Rights Agreement, dated as of August 1, 1988
(the "1988 Agreement"), which Agreement has heretofore been amended or
otherwise modified pursuant to instruments dated as of September 21, 1988,
November 1, 1989 and July 31, 1990 and was amended and restated in its
entirety pursuant to an instrument dated as of December 7, 1990 (such
Agreement, as so amended and modified, the "1990 Stockholders Agreement"); and
WHEREAS, the Company and the other parties hereto desire to make
certain amendments to the 1990 Stockholders Agreement and to otherwise restate
the provisions thereof;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the 1990 Stockholders Agreement is hereby amended
and restated in its entirety as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1. Definitions.
"Additional Sellers" shall have the meaning set forth in Section
4.1(a) hereof.
"Affiliate" shall have the meaning given to such term in Rule
12b-2 promulgated under the Exchange Act.
"Bankers Trust" means Bankers Trust New York Corporation, a
New York corporation.
"Bankers Trust Stock Purchase Agreement" means the Stock Purchase
Agreement dated as of August 1, 1988 between FH Holdings Corp. and Bankers
Trust, as amended from time to time.
"beneficial owner" shall have the meaning given to such term in
Rule 13d-3 promulgated under the Exchange Act.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or
obligated by law to be closed.
"Cash Equivalents" means (i) marketable direct obligations issued
or unconditionally guaranteed by the United States federal government or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year from the date
of acquisition thereof; (ii) marketable direct obligations issued by any state
of the United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having the highest
rating obtainable from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; or (iii) commercial paper maturing no more than one
year from the date of creation thereof and, at the time of acquisition, having
the highest rating obtainable from either Standard & Poor's Ratings Group or
Moody's Investors Service, Inc.
"Commission" means the Securities and Exchange Commission and any
successor commission or agency having similar powers.
"Common Stock" means common stock of the Company, par value $.01
per share.
"control" shall have the meaning given to such term in Rule 12b-2
promulgated under the Exchange Act.
"Direct Investors" means FPGT, Leeway and Bankers Trust.
"Duly Endorsed" means duly endorsed in blank by the person or
persons in whose name a stock certificate is registered or accompanied by a
duly executed stock assignment separate from the certificate with the
signature(s) thereon guaranteed by a commercial bank or trust company or a
member of a national securities exchange or of the NASD.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FPGT" means First Plaza Group Trust, as trustee for certain
pension funds.
"First Registration Period" means the period commencing on the
effective date of this amendment and restatement and terminating one year
thereafter.
"Fort Howard Equity Investors II" means Fort Howard Equity
Investors II, L.P., a Delaware limited partnership.
"Fully Diluted" means, with respect to Shares, all outstanding
Shares and Shares issuable in respect of Share Equivalents.
"Holder" means each person (other than the Company or any of its
subsidiaries) that, as a result of such Person's ownership of Shares or Share
Equivalents, is or shall have become a party to this Agreement, whether in
connection with the execution and delivery of the 1988 Agreement, the 1990
Agreement or any Purchase Agreement, pursuant to Section 7.10 hereof or
otherwise; provided, however, that for purposes of this Agreement, the term
"Holder" shall not include any person who owns solely Share Equivalents (and
has never owned Shares) on or prior to the effective date of this amendment
and restatement; and provided further, that for purposes of Sections 2.1, 2.4
and 2.5 of Article II hereof, the term "Holder" shall not include any
Management Investor other than Paul J. Schierl; and provided further, that for
purposes of Sections 2.4 and 2.5 of Article II hereof, the term "Holder" shall
not include The Nippon Housing Loan Co. or Kowa Real Estate Investment Co.
Ltd.
"June 27, 1990 Letter Agreements" means those certain letter
agreements dated June 27, 1990 between the Company and certain Management
Investors.
"Leeway" means Leeway & Co., as nominee for State Street Bank &
Trust Co., as trustee for a master pension trust.
"MEPA" means the Amended and Restated Management Equity
Participation Agreement dated as of August 8, 1988, by and among FH Holdings
Corp. and the other parties signatory thereto, as amended from time to time,
and giving effect to the June 27, 1990 Letter Agreements.
"MEP" means the Fort Howard Corporation Management Equity Plan, as
amended from time to time.
"Management Investor" means a party identified as a Management
Investor on a signature page to the MEPA or a person deemed to be a
"Management Investor" pursuant to the terms of the June 27, 1990 Letter
Agreements, or a person who purchased shares of Common Stock pursuant to the
MEP prior to the effective date of this amendment and restatement.
"Minimum Registration Amount" means that number of Registrable
Securities outstanding at the following designated times which represent the
following percentages of Fully Diluted Shares: (i) prior to the end of the
First Registration Period, the Registrable Securities then outstanding
representing not less than 15% of the Fully Diluted Shares; and (ii) following
the end of the First Registration Period, the Registrable Securities then
outstanding representing not less than 8% of the Fully Diluted Shares.
"Minimum Registration Request Percentage" means Registrable
Securities outstanding at the following designated times representing the
following percentages of Fully Diluted Shares: (i) at any time during the
First Registration Period, the Registrable Securities then outstanding
representing at least 51% of the Fully Diluted Shares or the Registrable
Securities then outstanding representing at least 5% of the Fully Diluted
Shares held by Management Investors and (ii) at any time following the First
Registration Period, the Registrable Securities then outstanding representing
at least 8% of the Fully Diluted Shares or the Registrable Securities then
outstanding representing at least 5% of the Fully Diluted Shares held by
Management Investors.
"Morgan Stanley" means Morgan Stanley Group Inc., a Delaware
corporation, and its Affiliates, but shall not include MSLEF.
"Morgan Stanley & Co." means Morgan Stanley & Co. Incorporated, a
Delaware corporation.
"Morgan Stanley Group" means Morgan Stanley Group Inc., a Delaware
corporation.
"MS/Fund Investors" means MSLEF and Morgan Stanley Group.
"MSLEF" means The Morgan Stanley Leveraged Equity Fund II, L.P., a
Delaware limited partnership.
"NASD" means the National Association of Securities Dealers, Inc.
"Newco" shall have the meaning set forth in Section 6.2 hereof.
"1995 Initial Public Offering" means the underwritten public
offering of Common Stock pursuant to a registration statement on Form S-1
filed with the Commission on November 23, 1994, as amended.
"1991 Subscription Agreement" means the Subscription Agreement
dated as of March 12, 1991, between the Company and Fort Howard Equity
Investors II.
"1990 Agreement" means the Agreement dated as of July 31, 1990,
between the Company and Paul J. Schierl and Carol A. Schierl, as amended from
time to time.
"1990 Subscription Agreement" means the Subscription Agreement
dated as of December 7, 1990, among the Company and FPGT and Leeway, as
amended from time to time.
"Permitted Transferees" has the meaning ascribed to it in the 1990
Agreement.
"person" means an individual, partnership, corporation, limited
liability partnership, limited liability company, business trust, joint stock
company, trust, unincorporated association, joint venture, or other entity of
whatever nature.
"Public Offering" means an underwritten public offering of equity
securities of the Company pursuant to an effective registration statement
under the Securities Act, other than a registration statement on Form S-8.
"Purchase Agreements" means, collectively, the MEPA, the
Agreements as defined in the MEP, the Securities Purchase Agreement, the
Bankers Trust Stock Purchase Agreement, the June 27, 1990 Letter Agreements,
the 1990 Agreement, the 1990 Subscription Agreement, the 1991 Subscription
Agreement and all other agreements providing for the purchase of Shares
heretofore entered into or which otherwise have been or hereafter will be
designated by the Company as "Purchase Agreements".
"Readily Marketable Securities" means those securities that are
(i) (A) debt or equity securities of or other interests in any person that are
traded on a national securities exchange, reported on by the National
Association of Securities Dealers Automated Quotation System or otherwise
actively traded over-the-counter or (B) debt securities of an issuer that has
debt or equity securities that are so traded or so reported on and which a
nationally recognized securities firm has agreed to make a market in, and (ii)
which are not subject to restrictions on transfer as a result of any
applicable contractual provisions or the provisions of the Securities Act or,
if subject to such restrictions under the Securities Act, are also subject to
registration rights reasonably acceptable to the Holders of a majority of the
Shares that are not held by the Controlling Stockholders (as determined
pursuant to Section 2.5(a)).
"Registrable Securities" means Shares and Share Equivalents
acquired pursuant to the Purchase Agreements or granted to Management
Investors by the Company or acquired upon the exercise of Registrable
Securities; provided, however, that securities shall cease to be Registrable
Securities if and when (i) a registration statement with respect to the
disposition of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of pursuant to
such effective registration statement, (ii) such securities shall have been
sold under circumstances in which all of the applicable conditions of Rule 144
(or any similar provisions then in force) under the Securities Act are met,
(iii) such securities shall have been otherwise transferred, if new
certificates or other evidences of ownership for such securities not bearing a
legend restricting further transfer and not subject to any stop transfer order
or other restrictions on transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act, or (iv) such
securities shall have ceased to be outstanding.
"Registration Expenses" means (i) all registration and filing
fees, (ii) fees and expenses of compliance with state securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection
with blue sky qualifications of the Registrable Securities), (iii) printing
expenses, (iv) internal expenses (including, without limitation, all salaries
and expenses of officers and employees performing legal or accounting duties),
(v) fees and disbursements of counsel for the Company and customary fees and
expenses for independent certified public accountants retained by the Company
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letters requested pursuant to Section 4.4(h) hereof), (vii) fees and
expenses of any special experts retained by the Company in connection with
such registration, (viii) reasonable fees and expenses of one counsel (who
shall be reasonably acceptable to the Company) for the Holders, (ix) fees and
expenses of listing the Registrable Securities on a securities exchange, (x)
rating agency fees and (xi) fees and disbursements of underwriters customarily
paid by issuers or sellers of securities; but shall not include any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, any out-of-pocket expenses of the Holders (or the
agents who manage their accounts) or any fees and expenses of underwriter's
counsel.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of August 1, 1988 among FH Holdings Corp., FPGT, Leeway and
the other parties signatory thereto, as amended from time to time.
"Share Equivalents" means securities of any kind issued by the
Company prior to the effective date of this amendment and restatement,
convertible into or exchangeable for Shares or options, warrants or other
rights to purchase or subscribe for shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock, issued by the
Company prior to the effective date of this amendment and restatement and
owned by a Holder.
"Shares" means any share of Common Stock acquired prior to the
effective date of this amendment and restatement.
"Third Party" means a prospective purchaser of Shares in an
arm's-length transaction from a Holder where such purchaser is not an
Affiliate of such Holder.
ARTICLE II
RESTRICTIONS ON TRANSFER
SECTION 2.1. General Restrictions. Each Holder may, directly or
indirectly, offer, sell, assign, transfer, grant a participation in, pledge or
otherwise dispose of any Shares (or solicit any offers to buy or otherwise
acquire, or take a pledge of any Shares), provided that such offer, sale,
assignment, transfer, grant, pledge or other disposition is in compliance with
the Securities Act, the Purchase Agreement to which such Holder is a party and
the restrictions contained in this Agreement.
SECTION 2.2. Legends.
(a) Each certificate evidencing outstanding Shares that is issued
to any Management Investor, other than Paul J. Schierl, shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY APPLICABLE
STATE SECURITIES LAWS. THIS SECURITY MAY BE OFFERED, SOLD
OR TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF
SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
(b) Each certificate evidencing outstanding Shares that is issued
to (i) any Holder other than any Holder who is a Management Investor and (ii)
Paul J. Schierl, shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY APPLICABLE
STATE SECURITIES LAWS. THIS SECURITY MAY BE OFFERED, SOLD
OR TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF
SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE [PURCHASE AGREEMENT], DATED AS
OF [DATE], AND THE STOCKHOLDERS AGREEMENT DATED AS OF MARCH
1, 1995, AS AMENDED, COPIES OF EACH OF WHICH MAY BE OBTAINED
FROM FORT HOWARD CORPORATION."
(c) In the event that any Shares or Share Equivalents shall cease
to be Registrable Securities, the Company shall, upon the written request of
the Holder thereof, issue to such Holder a new certificate evidencing such
Shares or Share Equivalents without the legend required by Section 2.2(a) or
the first and second sentences of the legend required by Section 2.2(b) hereof
endorsed thereon; provided, however, that, under the circumstances described
in clause (ii) or clause (iii) of the definition of Registrable Securities,
such request is accompanied by an opinion of counsel, reasonably acceptable to
the Company, that the Shares or Share Equivalents are no longer Registrable
Securities. In the event that any Shares or Share Equivalents shall cease to
be subject to the restrictions on transfer set forth in this Agreement and the
Purchase Agreements, the Company shall, upon the written request of the Holder
thereof, issue to such Holder a new certificate evidencing such Shares or
Share Equivalents without the third sentence of the legend required by Section
2.2(b) hereof endorsed thereon; provided, however, that such Holder, upon the
reasonable request of the Company or its transfer agent, provides an opinion
of counsel, reasonably acceptable to the Company, that the Shares or Share
Equivalents are no longer subject to the restrictions on transfer set forth in
this Agreement and the Purchase Agreements.
SECTION 2.3. [INTENTIONALLY OMITTED]
SECTION 2.4. Rights of Inclusion.
(a) (i) Subject to Section 2.5(c) hereof, no Holder or Holders
shall, individually or collectively, in any one transaction or any series of
similar transactions, directly or indirectly, sell or otherwise dispose of a
majority of the outstanding Shares then subject to this Section 2.4 to any
Third Party unless the terms and conditions of such sale or other disposition
to such Third Party shall include an offer to each of the other Holders and
their respective Permitted Transferees, if any (the "Section 2.4 Transfer
Offerees"), to include, at the option of each Section 2.4 Transfer Offeree, in
the sale or other disposition to the Third Party, such number of Shares owned
by each such Section 2.4 Transfer Offeree as determined in accordance with
this Section 2.4(a). If any Holder or Holders receive from a Third Party a
bona fide offer or offers to purchase or otherwise acquire (a "Section 2.4
Transfer Offer") that number of Shares (the "Section 2.4 Transfer Stock")
representing an amount greater than a majority of the outstanding Shares
subject to this Section 2.4, such Holders (collectively, the "Section 2.4
Offering Holder") shall then cause the Section 2.4 Transfer Offer to be
reduced to writing and shall provide written notice (the "Section 2.4 Transfer
Notice") of such Section 2.4 Transfer Offer to each of the Section 2.4
Transfer Offerees in the manner set forth in this Section 2.4 hereof. The
Section 2.4 Transfer Notice shall contain a true and correct copy of the
Section 2.4 Transfer Offer. In addition, the Section 2.4 Transfer Notice
shall identify the Third Party, the Section 2.4 Transfer Stock, the price
contained in the Section 2.4 Transfer Offer, all the other terms and
conditions of the Section 2.4 Transfer Offer and, in the case of a Transfer
Offer in which the consideration payable for Shares consists in part or in
whole of consideration other than cash, such information relating to such
consideration as the Company may reasonably determine. The Section 2.4
Transfer Offerees shall have the right and option, within 30 days after the
date the Section 2.4 Transfer Notice is given to such Section 2.4 Transfer
Offerees (the "Section 2.4 Notice Period"), to accept the Section 2.4 Transfer
Offer for up to such number of Shares as is determined in accordance with the
provisions of this Section 2.4(a). Each Section 2.4 Transfer Offeree which
desires to exercise such option shall provide the Section 2.4 Offering Holder
with written notice (specifying the number of shares of the Section 2.4
Transfer Stock as to which such Section 2.4 Transfer Offeree is accepting the
offer) and delivering to the Section 2.4 Offering Holder the certificate or
certificates representing the Shares to be sold or otherwise disposed of
pursuant to such offer by such Section 2.4 Transfer Offeree, together with a
limited power-of-attorney authorizing the Section 2.4 Offering Holder to sell
or otherwise dispose of such Shares pursuant to the terms of the Section 2.4
Transfer Offer. Delivery of such certificate or certificates representing the
Shares to be sold and the limited power-of-attorney authorizing the Section
2.4 Offering Holder to sell or otherwise dispose of such Shares shall
constitute an irrevocable acceptance of the Section 2.4 Transfer Offer by the
Section 2.4 Transfer Offeree.
(ii) Each Section 2.4 Transfer Offeree shall have the right
to sell pursuant to the Section 2.4 Transfer Offer Shares equal to the product
of (A) the total number of Shares then beneficially owned by such Section 2.4
Transfer Offeree, and (B) a fraction, the numerator of which shall be the
total number of Shares proposed to be sold by such Section 2.4 Offering
Holder, and the denominator of which shall be the total number of Shares
beneficially owned by such Section 2.4 Offering Holder (the "Section 2.4
Transfer Offeree Shares").
(iii) Promptly after the consummation of the sale or other
disposition of the Shares of the Section 2.4 Offering Holder and the Section
2.4 Transfer Offerees to the Third Party pursuant to the Section 2.4 Transfer
Offer, the Section 2.4 Offering Holder shall notify the Section 2.4 Transfer
Offerees thereof, shall remit to each of the Section 2.4 Transfer Offerees the
total sales price of the Shares of such Section 2.4 Transfer Offeree sold or
otherwise disposed of pursuant thereto, and shall furnish such other evidence
of the completion and time of completion of such sale or other disposition and
the terms thereof as may be reasonably requested by the Section 2.4 Transfer
Offerees.
(iv) If at the termination of the Notice Period any Section
2.4 Transfer Offeree shall not have accepted the offer contained in the
Section 2.4 Transfer Notice, such Section 2.4 Transfer Offeree will be deemed
to have waived any of and all of its rights under this Section 2.4 with
respect to the sale or other disposition of its Section 2.4 Transfer Offeree
Shares to such Third Party. The Section 2.4 Offering Holder shall have 60
days in which to sell the Section 2.4 Transfer Stock and the Section 2.4
Transfer Offeree Shares, not otherwise excluded pursuant to the previous
sentence, to the Third Party, at a price not higher than that contained in the
Section 2.4 Transfer Notice and on terms not more favorable to the Section 2.4
Offering Holder than were contained in the Section 2.4 Transfer Notice.
Promptly after any sale pursuant to this Section 2.4, the Offering Holder
shall notify the Company of the consummation thereof and shall furnish such
evidence of the completion thereof (including time of completion) of such sale
and of the terms thereof as the Company may request. If, at the end of such
60-day period, the Section 2.4 Offering Holder has not completed the sale of
all the Section 2.4 Transfer Stock and Section 2.4 Transfer Offeree Shares,
not otherwise excluded pursuant to this Section 2.4(a)(iv), the Section 2.4
Offering Holder shall return to such Section 2.4 Transfer Offerees all
certificates representing the Shares which such Section 2.4 Transfer Offerees
delivered for sale or other disposition pursuant to this Section 2.4(a), and
all the restrictions on sale or other disposition contained in this Agreement
with respect to Shares owned by the Section 2.4 Offering Holder shall again be
in effect.
(v) Notwithstanding anything contained in this Section
2.4(a), there shall be no liability on the part of the Section 2.4 Offering
Holder to any Section 2.4 Transfer Offeree in the event that the sale of
Shares pursuant to Section 2.4(a)(iv) is not consummated for whatever reason.
Whether to effect a sale of Shares pursuant to this Section 2.4(a) by the
Section 2.4 Offering Holder is in the sole and absolute discretion of such
Section 2.4 Offering Holder.
(b) The provisions of Section 2.4(a) hereof shall not be
applicable to any transfer of Shares (i) from any Holder effected in a
transaction through a broker-dealer over the facilities of the Nasdaq National
Market System or any exchange on which the Common Stock is listed or (ii) made
pursuant to a Public Offering.
SECTION 2.5. Rights to Compel Sale.
(a) If any Holder or Holders that collectively own a majority of
the outstanding Shares then subject to this Section 2.5 (collectively, the
"Controlling Stockholders") propose to sell to a Third Party for cash, Cash
Equivalents or Readily Marketable Securities all Shares held by them and their
respective Permitted Transferees, if any, to a Third Party (the "Section 2.5
Transfer Offer"), then (in addition to the right of the remaining Holders and
their respective Permitted Transferees, if any, to participate in such sale
pursuant to Section 2.4 hereof) the Controlling Stockholders may, at their
option, but subject to Section 2.5(d) hereof, require each and every one of
the remaining Holders and their respective Permitted Transferees, if any (the
"Remaining Holders"), to sell all Shares held by such Remaining Holders to the
Third Party, for the same consideration per Share and otherwise on the same
terms and conditions upon which the Controlling Stockholders sell their
Shares.
(b) (i) The Controlling Stockholders shall cause the Section 2.5
Transfer Offer to be reduced to writing and shall provide a written notice
(the "Section 2.5 Transfer Notice") of such Section 2.5 Transfer Offer to the
Company and the Company shall provide written notice of such Section 2.5
Transfer Offer to the Remaining Holders. The Section 2.5 Transfer Notice
shall contain written notice of the exercise of the Controlling Stockholders'
rights pursuant to Section 2.5(a) hereof, setting forth the consideration per
Share to be paid by the Third Party and the other terms and conditions of the
Section 2.5 Transfer Offer. Within 20 days following the date of the Section
2.5 Transfer Notice, each of the Remaining Holders shall deliver to a
representative of the Controlling Stockholders designated in the Section 2.5
Transfer Notice certificates representing the Shares held by such Remaining
Holder, Duly Endorsed, together with all other documents required to be
executed in connection with such Section 2.5 Transfer Offer or, if such
delivery is not permitted by applicable law, an unconditional agreement to
deliver such Shares pursuant to this Section 2.5(b) at the closing for such
Section 2.5 Transfer Offer against delivery to such Remaining Holder of the
consideration therefor. In the event that a Remaining Holder should fail to
deliver such certificates to the Controlling Stockholders, the Company shall
cause the books and records of the Company to show that such Shares are bound
by the provisions of this Section 2.5(b) and that such Shares shall be
transferred only to the Third Party upon surrender for transfer by the
Remaining Holder thereof.
(ii) If, within 120 days after the Controlling Stockholders
give the Transfer Notice, they have not completed the sale of all the Transfer
Stock, the Controlling Stockholders shall return to each of the Remaining
Holders all certificates representing Shares that such Remaining Holder
delivered for sale pursuant hereto, and all the restrictions on sale or other
disposition contained in the Agreement with respect to Shares owned by the
Controlling Stockholders shall again be in effect.
(iii) Promptly after the consummation of the sale of Shares
of the Controlling Stockholders and Remaining Holders pursuant to this Section
2.5, the Controlling Stockholders shall give notice thereof to the Remaining
Holders, shall remit to each of the Remaining Holders the total sales price of
the Shares of such Remaining Holders sold pursuant thereto, and shall furnish
such other evidence of the completion and time of completion of such sale or
other disposition and the terms thereof as may be reasonably requested by such
Remaining Holders.
(c) In the event that any Remaining Holder shall be required to
sell Shares pursuant to the provisions of Section 2.5 hereof, then the
provisions of Section 2.4 hereof shall not be applicable to such Remaining
Holder.
(d) Notwithstanding the foregoing provisions of this Section 2.5,
no Remaining Holder which is a trust under an employee benefit plan subject to
ERISA (an "ERISA Holder") shall be obligated to sell any Shares pursuant to
this Section 2.5 if such Remaining Holder determines in good faith, upon
advice of counsel, that there is a material risk that such sale would
constitute a prohibited or a party-in-interest transaction or would otherwise
contravene ERISA and gives the Controlling Stockholders notice thereof within
20 days after receiving a Section 2.5 Transfer Notice. Notwithstanding the
foregoing provisions of this Section 2.5(d), such ERISA Holder shall, if
requested by the Controlling Stockholders, use reasonable commercial efforts
to obtain an appropriate exemption from any such ERISA restriction or to
participate in restructuring such proposed transaction in such a manner that
such ERISA Holder can determine that no such material risk exists, and the
Controlling Stockholder, such ERISA Holder and the Company shall cooperate
with each other in such regard; provided, however, that neither of them shall
be required to take any action which it determines in good faith to be
contrary to its best interests.
SECTION 2.6. Improper Transfer. Any attempt to sell, assign,
transfer, grant a participation in, pledge or otherwise dispose of any Shares
not in compliance with this Agreement shall be null and void and neither the
Company nor any transfer agent shall give any effect in the Company's stock
records to such attempted sale, assignment, transfer, grant of a participation
in, pledge or other disposition.
ARTICLE III
CERTAIN AGREEMENTS REGARDING THE BOARD OF DIRECTORS
SECTION 3.1. Nomination of Directors and Certain Other Management
Rights. So long as MSLEF or Fort Howard Equity Investors II shall own shares
of Common Stock of the Company, MSLEF and Fort Howard Equity Investors II, as
the case may be, each shall have the following rights with respect to the
Company: (i) the right to have a designee nominated for election to the Board
of Directors at any annual meeting of the Company's shareholders, provided
that MSLEF or Fort Howard Equity Investors II, as the case may be, does not
already have a designee as a member of the Board of Directors at the time of
such annual meeting; (ii) in the event of a vacancy on the Board of Directors
created by the resignation, removal or death of a director nominated by MSLEF
or Fort Howard Equity Investors II, as the case may be, the right to have a
designee nominated for election to fill such vacancy; (iii) the right to
routinely consult with the management of the Company on matters relating to
the Company; (iv) the right to inspect the books and records of the Company;
(v) if MSLEF and Fort Howard Equity Investors II each do not have a designee
elected as a member of the Board of Directors of the Company or each do not
elect to have a designee nominated, the right to have a representative of
MSLEF and Fort Howard Equity Investors II attend the meetings of the Board of
Directors and to participate in discussions (but not vote) at such meetings;
and (vi) the right to inspect the properties and operations of the Company;
provided, however, that any such nominee of MSLEF or Fort Howard Equity
Investors II, as the case may be, shall be reasonably acceptable to the Board
of Directors of the Company. To the extent the Company's proxy statement for
any annual meeting includes a recommendation regarding the election of any
other nominees to the Company's Board of Directors, the Company agrees to
include a recommendation that the shareholders also vote in favor of the
foregoing nominees. The rights provided to MSLEF and Fort Howard Equity
Investors II in this Section 3.1 are intended to enable MSLEF and Fort Howard
Equity Investors II or any partner of MSLEF and Fort Howard Equity Investors
II to be operated as a "venture capital operating company" within the meaning
of the regulations of the Department of Labor set forth in 29 CFR Section
2510.3-101(d), and this Section 3.1 shall be interpreted accordingly.
ARTICLE IV
REGISTRATION RIGHTS
SECTION 4.1. Registration on Request of Holders.
(a) Subject to the Company's Right of First Refusal as provided
in Section 5.1(a) hereof, upon the written request of Holders of the Minimum
Registration Request Percentage of the Registrable Securities outstanding (the
"Selling Investors"), requesting that the Company effect the registration
under the Securities Act of not less than the Minimum Registration Amount of
Registrable Securities, and specifying the intended method of disposition
thereof, the Company will promptly give written notice of such requested
registration to all other Holders of Registrable Securities, and thereupon
will use its best efforts to effect, as expeditiously as possible, the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by the Selling Investors of at least the Minimum
Registration Amount, then held by the Selling Investors and their
respective Permitted Transferees, if any; and
(ii) all other Registrable Securities which the Company has been
requested to register by any other Holder thereof by written request
received by the Company within five Business Days after the giving of
such written notice by the Company (which request shall specify the
intended method of disposition of such Registrable Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided, however, that
(A) the Company shall not be obligated to file a registration
statement relating to a registration request under this Section 4.1(a)
within a period of six months after the effective date of any other
registration statement of the Company other than any registration
statement relating to Shares issuable upon exercise of employee stock
options or in connection with any employee benefit or similar plan of
the Company or in connection with an acquisition by the Company of
another company,
(B) with respect to any registration statement filed, or to be
filed, pursuant to this Section 4.1, if the Company shall furnish to the
Selling Investors a certified resolution of the Board of Directors
stating that in the Board of Directors' good faith judgment it would
(because of the existence of, or in anticipation of, any acquisition or
financing activity, or the unavailability for reasons beyond the
Company's control of any required financial statements, or any other
event or condition of similar significance to the Company) be
significantly disadvantageous (a "Disadvantageous Condition") to the
Company or its stockholders for such a registration statement to be
maintained effective, or to be filed and become effective, and setting
forth the general reasons for such judgment, the Company shall be
entitled to cause such registration statement to be withdrawn and the
effectiveness of such registration statement terminated, or, in the
event no registration statement has yet been filed, shall be entitled
not to file any such registration statement, until such Disadvantageous
Condition no longer exists (notice of which the Company shall promptly
deliver to the Selling Investors and any other holders selling
securities pursuant to an effective registration statement) and upon
receipt of any such notice of a Disadvantageous Condition such Selling
Investors and any other holders selling securities pursuant to an
effective registration statement (the "Additional Sellers") will
forthwith discontinue use of the prospectus contained in such
registration statement and, if so directed by the Company, each such
Holder will deliver to the Company all copies, other than permanent file
copies then in such Holder's possession, of the prospectus then covering
such Registrable Securities current at the time of receipt of such
notice and, in the event no registration statement has yet been filed,
all drafts of the prospectus covering such Registrable Securities, and
(C) subject to Section 4.1(f) hereof, the Company shall not be
obligated to pay any Registration Expenses in connection with more than
four registrations requested in the aggregate pursuant to this Section
4.1.
Unless the Holders of Registrable Securities (representing a majority of the
Fully Diluted Shares) then held by the Selling Investors and the Additional
Sellers and their Permitted Transferees, if any, shall otherwise consent in
writing, no other person (including the Company), other than another Holder of
Registrable Securities, shall be permitted to offer any securities under any
registration pursuant to this Section 4.1. Promptly after the expiration of
the five Business Day period referred to in Section 4.1(a)(ii) hereof, the
Company will notify all the Holders to be included in the registration of the
other Holders and the number of shares of Registrable Securities requested to
be included therein. A majority of the Selling Investors requesting a
registration under this Section 4.1(a) may, at any time prior to the effective
date of the registration statement relating to such registration, revoke such
request, without liability (except as set forth in Section 4.1(c) hereof) to
any of the other Selling Investors or to any other holders of Registrable
Securities requested to be registered pursuant to Section 4.1(a)(ii) hereof,
by providing a written notice to the Company revoking such request. In the
event that the Company shall give any notice of the withdrawal of a
registration statement contemplated by clause (B) above, the Company shall at
such time as it in good faith deems appropriate file a new registration
statement covering the Registrable Securities that were covered by such
withdrawn registration statement, and such registration statement shall be
maintained effective for such time as may be necessary so that the period of
effectiveness of such new registration statement, when aggregated with the
period during which such initial registration statement was effective, shall
be such time as may be otherwise required by this Agreement. There is no
limitation on the number of times that the Company may withdraw a registration
statement pursuant to this Section 4.1(a). Notwithstanding anything contained
in this Agreement to the contrary, nothing herein shall be construed as
requiring the Company to register any of its securities other than Shares.
(b) Registration Statement Form. If, pursuant to a registration
request under this Section 4.1, (i) the Company proposes to effect
registration by filing a registration statement on Form S-3 (or any successor
or similar short-form registration statement), (ii) such registration is in
connection with a Public Offering and (iii) the managing underwriter shall
advise the Company in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success of such
proposed offering, then such registration shall be effected on such other
form.
(c) Expenses. The Company will pay all Registration Expenses in
connection with four registrations which are requested and become effective
pursuant to this Section 4.1. The Company shall not be liable for Registration
Expenses in connection with a registration that shall not have become
effective due to a revocation by the Selling Investors requesting such
registration under this Section 4.1. In such event, the obligation to pay the
Registration Expenses in connection with such revoked registration shall be
due and payable by the Selling Investors who initially requested and revoked
such registration and the obligation of the Company to pay all Registration
Expenses in connection with four registrations shall not be affected by such
revoked registration. However, each Holder shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to a registration
requested pursuant to this Section 4.1.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 4.1 shall not be deemed to have been effected unless
the registration statement relating thereto (i) has become effective under the
Securities Act and any of the Registrable Securities of the Selling Investors
and their Permitted Transferees, if any, included in such registration have
actually been sold thereunder, and (ii) has remained effective for a period of
at least 90 days (or such shorter period in which all Registrable Securities
of the Selling Investors and the Additional Sellers and their respective
Permitted Transferees, if any, included in such registration have actually
been sold thereunder); provided, however, that if any effective registration
statement requested pursuant to this Section 4.1 is discontinued in connection
with a Disadvantageous Condition, such registration statement shall be at the
sole expense of the Company and shall not be included as one of the four
registrations which may be requested pursuant to Section 4.1 hereof; and
provided further, that if after any registration statement requested pursuant
to this Section 4.1 becomes effective (i) such registration statement is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court solely due to the actions
or omissions to act of the Company and (ii) less than 75% of the Registrable
Securities included in such registration have been sold thereunder, such
registration statement shall be at the sole expense of the Company and shall
not be included as one of the four registrations which may be requested
pursuant to Section 4.1 hereof.
(e) Selection of Underwriters. If any requested registration
pursuant to this Section 4.1 is in the form of a Public Offering, the Company
will select Morgan Stanley & Co. as the manager or, if Morgan Stanley & Co. so
desires, as the co-manager, that will administer the offering, provided that
Morgan Stanley & Co. shall perform such services as underwriter at the then
customary market rates for similar underwriting services. If Morgan Stanley &
Co. declines to act as manager or co-manager of the offering, the Holders of a
majority of the Registrable Securities then held by the Selling Investors and
their Permitted Transferees, if any, which are to be registered pursuant to
this Section 4.1 shall have the right to select the manager or co-managers
that will administer the offering.
(f) Pro Rata Participation in Requested Registrations. If a
requested registration pursuant to this Section 4.1 involves a Public Offering
and the managing underwriter shall advise the Company that, in its view, the
number of equity securities requested to be included in such registration
(including securities which the Company requests to be included which are not
Registrable Securities) exceeds the largest number of securities which can be
sold without having an adverse effect on such offering, including the price at
which such securities can be sold (the "Maximum Offering Size"), the Company
will include in such registration, in the priority listed below, up to the
Maximum Offering Size:
(i) Demand Registrants' Securities. First, Registrable
Securities requested to be included in such registration pursuant to
Section 4.1(a)(i) and Section 4.1(a)(ii) hereof be allocated (if
necessary for the offering not to exceed the Maximum Offering Size) pro
rata among the Holders requesting registration pursuant to Section
4.1(a)(i) and Section 4.1(a)(ii) hereof on the basis of the relative
number of Fully Diluted Shares represented by the Registrable Securities
each such Holder has requested to be included in such registration).
(ii) The Issuer's Securities. Second, the equity securities
proposed to be sold by the Company but only to the extent such
allocation would not result in the offering exceeding the Maximum
Offering Size.
(iii) Other Holders' Securities. Third, the equity securities
proposed to be sold by any other person to the extent that the Holders
of a majority of the Registrable Securities then held by the Selling
Investors and their Permitted Transferees, if any, have consented,
pursuant to Section 4.1(a) hereof, to the inclusion in such registration
of such securities of such other persons, shall be allocated (if
necessary for the offering not to exceed the Maximum Offering Size) pro
rata among all such other persons on the basis of the relative number of
securities each such person has requested to be included in such
registration or on such other basis as may be consented to by the
Company and the Selling Investors.
(g) If Registrable Securities representing at least 50% of the
number of Fully Diluted Shares requested to be registered by the Selling
Investors and their Permitted Transferees, if any, are not included in such
registration, then the Selling Investors and their Permitted Transferees, if
any, may request that the Company effect an additional registration under the
Securities Act of all or part of the Selling Investors' and such Permitted
Transferees', if any, Registrable Securities in accordance with the provisions
of this Section 4.1, and the Company shall pay the Registration Expenses in
connection with such additional registration (in addition to the four
registrations referred to in Section 4.1(a) hereof).
SECTION 4.2. Incidental Registration.
(a) If the Company at any time proposes to register any of its
equity securities (the "Priority Securities") under the Securities Act (other
than a registration (i) on Form S-8 or S-4 or any successor or similar forms,
(ii) relating to Shares issuable upon exercise of employee stock options or in
connection with any employee benefit or similar plan of the Company, (iii) in
connection with a direct or indirect acquisition by the Company of another
company, (iv) pursuant to a registration under Section 4.1 hereof, (v) of
preferred securities or convertible or exchangeable debt or equity securities,
or (vi) relating to any Shares purchased by certain parties in connection with
various put options and call options granted under the MEPA to the Electing
Parties (as defined therein)), whether or not for sale for its own account, in
a manner which would permit registration of Registrable Securities for sale to
the public under the Securities Act, it will each such time, subject to the
provisions of Section 4.2(b) hereof, give prompt written notice to all Holders
of record of Registrable Securities of its intention to do so and of such
Holders' rights under this Section 4.2, at least 30 days prior to the
anticipated filing date of the registration statement relating to such
registration; provided that, if such registration involves a Public Offering,
no such notice shall be required if the managing underwriter of the proposed
offering advises that the number of Priority Securities equals or exceeds the
Maximum Offering Size. Any such notice shall offer all such Holders the
opportunity to include in such registration statement such number of
Registrable Securities as each such Holder may request. Upon the written
request of any such Holder made within 20 days after the receipt of notice
from the Company (which request shall specify the number of Registrable
Securities intended to be disposed of by such Holder and the intended method
of disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof, to the
extent requisite to permit the disposition (in accordance with such intended
methods thereof) of the Registrable Securities so to be registered; provided
that (i) if such registration involves a Public Offering, all Holders of
Registrable Securities requesting to be included in the Company's registration
must sell their Registrable Securities to the underwriters selected by the
Company on the same terms and conditions as apply to the Company; and (ii) if,
at any time after giving written notice of its intention to register any
securities pursuant to this Section 4.2(a) and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company shall give written notice to all Holders of Registrable Securities
and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (without
prejudice, however, to rights of Holders under Section 4.1 hereof). If a
registration pursuant to this Section 4.2(a) involves a Public Offering, any
Holder of Registrable Securities requesting to be included in such
registration may elect, in writing not less than five Business Days prior to
the effective date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration. No registration effected under this Section 4.2 shall relieve
the Company of its obligations to effect registrations upon request under
Section 4.1 hereof. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 4.2, and each Holder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a registration statement
effected pursuant to this Section 4.2.
(b) Priority in Incidental Registrations. If a registration
pursuant to this Section 4.2 involves a Public Offering and the managing
underwriter advises the Company that, in its view, the number of equity
securities (including all Registrable Securities) which the Company, the
Holders and any other persons intend to include in such registration exceeds
the Maximum Offering Size, the Company will include in such registration, in
the following priority, up to the Maximum Offering Size:
(i) first, all the Priority Securities (including any to be sold
for the Company's own account or for other holders of Priority
Securities), with such priorities among them as the Company may
determine;
(ii) second, all Registrable Securities requested to be included
in such registration by the Holders pursuant to Section 4.2(a) hereof
(allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata among the Holders requesting registration of
such Registrable Securities pursuant to Section 4.2(a) hereof on the
basis of the relative number of Fully Diluted Shares represented by the
Registrable Securities each such Holder has requested to be included in
such registration); and
(iii) third, the equity securities requested to be sold for the
account of any other persons (allocated, if necessary for the offering
not to exceed the Maximum Offering Size, pro rata among the persons
requesting registration of such equity securities on the basis of the
relative number of Fully Diluted Shares represented by the equity
securities each such person has requested to be included in such
registration).
SECTION 4.3. Holdback Agreements.
(a) Except as otherwise provided in Sections 4.3(c) and 4.3(d)
hereof, if any registration of Registrable Securities shall be in connection
with a Public Offering, each Holder of Registrable Securities and their
Permitted Transferees, if any, agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144, or any successor
provision, under the Securities Act, of any Registrable Securities, and not to
effect any such public sale or distribution of any other equity security of
the Company or of any security convertible into or exchangeable or exercisable
for any equity security of the Company (in each case, other than as part of
such Public Offering) during the 7 days prior to, and during the 120-day
period which begins on the effective date of such registration statement
(except as part of such registration) provided that each Holder of Registrable
Securities and their Permitted Transferees, if any, has received written
notice of such registration at least two Business Days prior to the
anticipated beginning of the 7-day period referred to above; provided,
however, that this Section 4.3(a) shall apply only to transactions in Common
Stock that is not held by third-party investment advisers who have
discretionary power to invest the assets of any Holder in publicly-traded
securities. The 120-day period referred to in this Section 4.3(a) may be
extended to 180 days upon the underwriters' reasonable request.
(b) If any registration of Registrable Securities shall be in
connection with a Public Offering, the Company agrees not to effect any public
sale or distribution of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than any such sale or distribution of such securities in
connection with any merger or consolidation by the Company or any subsidiary
of the Company or the acquisition by the Company or a subsidiary of the
Company of the capital stock or substantially all the assets of any other
person or in connection with an employee stock ownership or other benefit
plan) during the 7 days prior to, and during the 120-day period which begins
on, the effective date of such registration statement (except as part of such
registration).
(c) If a registration pursuant to Section 4.2 involves a Public
Offering of Priority Securities and except as otherwise provided in Section
4.3(d) hereof, each Holder and their Permitted Transferees, if any, agrees
(notwithstanding the fact that none of such Holder's or Permitted Transferee's
Registrable Securities are to be included as part of such offering) that,
without the prior written consent of Morgan Stanley & Co. (or in the case of
Morgan Stanley and its Affiliates and MSLEF, without the prior written consent
of the co-managers of such offering), it will not, during the 7 days prior to,
and during the 180-day period which begins on the effective date of the
registration statement relating to such offering, (i) offer, pledge, sell,
contract to sell, sell an option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (ii) enter into any swap or similar agreement that transfers,
in whole or in part, the economic risk of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise; provided, however, that this Section 4.3(c) shall not apply to
transactions in Common Stock other than the Shares that is held by a third-
party investment adviser who has discretionary power to invest the assets of
any Holder in publicly-traded securities; and provided further, that any
Holder who is a natural person and is not a Management Investor may,
notwithstanding anything to the contrary contained in this Section 4.3(c) or
Section 4.3(d), transfer shares of Common Stock which are not Shares by gift,
will, bequest or devise.
(d) Each Holder who is not a Management Investor agrees, in
connection with the 1995 Initial Public Offering and notwithstanding the fact
that none of such Holder's Registrable Securities are to be included as part
of such offering, that, without the prior written consent of Morgan Stanley &
Co. (or in the case of Morgan Stanley and its Affiliates and MSLEF, without
the prior written consent of the co-managers of such offering), it will not,
during the 7 days prior to, and during the one-year period which begins on,
the effective date of the registration statement relating to such offering,
(i) offer, pledge, sell, contract to sell, sell an option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (ii) enter into any swap or
similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise; provided, however, that this Section
4.3(d) shall not apply to transactions in Common Stock other than the Shares
that is held by a third-party investment adviser who has discretionary power
to invest the assets of any Holder in publicly-traded securities; and provided
further, that any Holder who is a natural person and is not a Management
Investor may, notwithstanding anything to the contrary contained in Section
4.3(c) or this Section 4.3(d), transfer shares of Common Stock which are not
Shares by gift, will, bequest or devise.
(e) The managers of the 1995 Initial Public Offering and of any
other Public Offering to which this Section 4.3 applies are expressly made
third party beneficiaries of the agreements contained in Sections 4.3(a),
4.3(c) and 4.3(d) hereof.
SECTION 4.4. Registration Procedures. Whenever Holders request
that any Registrable Securities be registered pursuant to Section 4.1 or 4.2
hereof, the Company will, subject to the provisions of such Sections, use its
best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof as
quickly as practicable, and in connection with any such request:
(a) The Company will as expeditiously as possible prepare and
file with the Commission a registration statement on any form for which
the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with
the intended method of distribution thereof, and use its best efforts to
cause such filed registration statement to become and remain effective
for a period of not less than 180 days.
(b) The Company will, if so requested, prior to filing a
registration statement or prospectus or any amendment or supplement
thereto, furnish to each Holder and each underwriter, if any, of the
Registrable Securities covered by such registration statement copies of
such registration statement as proposed to be filed, and thereafter the
Company will furnish to such Holder and underwriter, if any, such number
of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as such Holder or underwriter may reasonably request in
order to facilitate the disposition of the Registrable Securities owned
by such Holder.
(c) After the filing of the registration statement, the Company
will promptly notify each Holder of Registrable Securities covered by
such registration statement of any stop order issued or threatened by
the Commission and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or
qualify the Registrable Securities under such other state securities or
blue sky laws of such jurisdictions in the United States as any Holder
of Registrable Securities covered by such registration statement
reasonably (in light of such Holder's intended plan of distribution)
requests and (ii) cause such Registrable Securities to be registered
with or approved by such other governmental agencies or authorities as
may be necessary by virtue of the business and operations of the Company
and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Holder to consummate the
disposition of the Registrable Securities owned by such Holder; provided
that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d), (B) subject itself to taxation in
any such jurisdiction or (C) consent to general service of process in
any such jurisdiction.
(e) The Company will immediately notify each Holder of
Registrable Securities covered by such registration statement, at any
time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly
make available to each such Holder any such supplement or amendment.
(f) The Company will enter into customary agreements (including
an underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities.
(g) The Company will make available for inspection by any Holder
of Registrable Securities covered by such registration statement, any
underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other
professional retained by any such Holder or underwriter (collectively,
the "Inspectors") all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
Inspectors in connection with such registration statement. Records
which the Company determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary
to avoid or correct a misstatement or omission in such registration
statement or (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each
Holder agrees that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in the securities of the Company
or its Affiliates unless and until such is made generally available to
the public. Each Holder further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential.
(h) The Company will furnish to each Holder of Registrable
Securities covered by such registration statement and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion or opinions of counsel to the Company and
(ii) a comfort letter or comfort letters from the Company's independent
public accountants, each in customary form and covering such matters of
the type customarily covered by opinions or comfort letters, as the case
may be, as a majority of the Holders of the Registrable Securities
included in such registration statement or the managing underwriter
therefor reasonably requests.
(i) The Company will otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its securityholders, as soon as reasonably practicable, an
earnings statement covering a period of 12 months, beginning within
three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act.
(j) The Company will use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed.
The Company may require each Holder of Registrable Securities
included in such registration statement to promptly furnish in writing to the
Company such information regarding the distribution of the Registrable
Securities as the Company may from time to time reasonably request and such
other information as may be legally required in connection with such
registration.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 4.4(e)
hereof, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4.4(e) hereof, and, if so directed
by the Company, such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event that the Company shall give such notice, the Company
shall extend the period during which such registration statement shall be
maintained effective (including the period referred to in Section 4.4(a)
hereof) by the number of days during the period from and including the date of
the giving of notice pursuant to Section 4.4(e) hereof to the date when the
Company shall make available to the Holders a prospectus supplemented or
amended to conform with the requirements of Section 4.4(e) hereof.
SECTION 4.5. Indemnification by the Company. The Company agrees
to indemnify and hold harmless each Holder of Registrable Securities covered
by a registration statement, its officers, directors and agents, and each
person, if any, who controls such Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Company by such Holder or on such
Holder's behalf expressly for use therein; provided, however, that with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus, or in any prospectus, as the case
may be, the indemnity agreement contained in this paragraph shall not apply to
the extent that any such loss, claim, damage, liability or expense results
from the fact that a current copy of the prospectus (or, in the case of a
prospectus, the prospectus as amended or supplemented) was not sent or given
to the person asserting any such loss, claim, damage, liability or expense at
or prior to the written confirmation of the sale of the Registrable Securities
concerned to such person if it is determined that the Company has provided
such prospectus and it was the responsibility of such Holder to provide such
person with a current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) and such current copy of the prospectus (or
such amended or supplemented prospectus, as the case may be) would have cured
the defect giving rise to such loss, claim, damage, liability or expense. The
Company also agrees to indemnify any underwriters of the Registrable
Securities, their officers and directors and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
the Holders provided in this Section 4.5.
SECTION 4.6. Indemnification by Holders of Registrable Securities
and Underwriters. Each Holder of Registrable Securities included in any
registration statement agrees, severally but not jointly, to indemnify and
hold harmless the Company, its officers, directors and agents and each
person, if any, who controls the Company within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent
as the foregoing indemnity from the Company to such Holder, but only (i) with
respect to information furnished in writing by such Holder or on such Holder's
behalf expressly for use in any registration statement or prospectus relating
to the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus or (ii) to the extent that any loss, claim, damage,
liability or expense described in Section 4.5 results from the fact that a
current copy of the prospectus (or, in the case of a prospectus, the
prospectus as amended or supplemented) was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to
the written confirmation of the sale of the Registrable Securities concerned
to such person if it is determined that it was the responsibility of such
Holder to provide such person with a current copy of the prospectus (or such
amended or supplemented prospectus, as the case may be) and such current copy
of the prospectus (or such amended or supplemented prospectus, as the case may
be) would have cured the defect giving rise to such loss, claim, damage,
liability or expense. Each such Holder also agrees to indemnify and hold
harmless underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Company provided in this
Section 4.6. As a condition to including Registrable Securities in any
registration statement filed in accordance with Article IV hereof, the Company
may require that it shall have received an undertaking reasonably satisfactory
to it from any underwriter to indemnify and hold it harmless to the extent
customarily provided by underwriters with respect to similar securities.
SECTION 4.7. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2, such person (an "Indemnified Party") shall promptly notify
the person against whom such indemnity may be sought (the "Indemnifying
Party") in writing and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Party, and shall assume the payment of all fees and expenses;
provided that the failure of any Indemnified Party so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent that the Indemnifying Party is materially
prejudiced by such failure to notify. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of such counsel or (ii) in the reasonable
judgment of such Indemnified Party, representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for
the Indemnified Parties, such firm shall be designated in writing by the
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Party
is or could have been a party and indemnity could have been sought hereunder
by such Indemnified Party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability arising out of such
proceeding.
SECTION 4.8. Contribution. If the indemnification provided for
in this Article 4 is unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) as between the Company and
the Holders of Registrable Securities covered by a registration statement on
the one hand and the underwriters on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company and such
Holders on the one hand and the underwriters on the other from the offering of
the Registrable Securities, or if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but also the relative fault of the Company and such Holders
on the one hand and of the underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii)
as between the Company on the one hand and each Holder of Registrable
Securities covered by a registration statement on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and
of each such Holder in connection with such statements or omissions, as well
as any other relevant equitable considerations. The relative benefits
received by the Company and such Holders on the one hand and the underwriters
on the other shall be deemed to be in the same proportion as the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company and the Holders bear to the
total underwriting discounts and commissions received by the underwriters, in
each case as set forth in the table on the cover page of the prospectus. The
relative fault of the Company and the Holders on the one hand and of the
underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Holders or by the underwriters.
The relative fault of the Company on the one hand and of each Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
such party, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.8 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 4.8, no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and no Holder shall be required to contribute any amount in excess
of the amount by which the total price at which the Registrable Securities of
such Holder were offered to the public exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Each Holder's obligation to
contribute pursuant to this Section 4.8 is several in the proportion that the
proceeds of the offering received by such Holder bears to the total proceeds
of the offering received by all the Holders and not joint.
SECTION 4.9. Participation in Public Offering. No person may
participate in any Public Offering hereunder unless such person (a) agrees to
sell such person's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
registration rights.
SECTION 4.10. Other Indemnification. Indemnification similar to
that specified herein (with appropriate modifications) shall be given by the
Company and each Holder of Registrable Securities with respect to any required
registration or other qualification of securities under any federal or state
law or regulation or governmental authority other than the Securities Act.
ARTICLE V
RIGHT OF FIRST REFUSAL
SECTION 5.1. Right of First Refusal.
(a) (i) Upon receipt of a registration request made by the
Selling Investors pursuant to Section 4.1(a) hereof, the Company (or any
person the Company may designate, a "Section 5.1 Designee") shall have the
right (a "Right of First Refusal") to purchase, pursuant to the procedures set
forth in this Section 5.1, all the Shares (the "First Refusal Shares") in
respect of which the Company has received such registration request. Subject
to Section 5.1(a)(ii), the Company or the Section 5.1 Designee shall have the
right to purchase the First Refusal Shares at a price per share equal to the
Fair Market Value of the Company's common stock by giving notice in writing to
such effect to the Selling Investors (the "Purchase Notice") within 10 days of
the Company's receipt of such registration request. For purposes of this
Section 5.1, "Fair Market Value" means the average daily closing price of the
Company's publicly traded shares on the Nasdaq National Market or such other
securities exchange on which the shares may be traded (as reported in The Wall
Street Journal) for the 45 trading days immediately preceding the Company's
delivery of the Purchase Notice. If the Company or the Section 5.1 Designee
elects not to purchase the First Refusal Shares or fails to deliver the
Purchase Notice by 5:00 p.m. (New York City time) on the tenth day after the
Company's receipt of such registration request, the Selling Investors shall be
entitled to the demand registration rights provided in Section 4.1. If the
tenth day after the Company's receipt of such registration request is not a
Business Day, the Company or the Section 5.1 Designee shall be entitled to
deliver the Purchase Notice by 5:00 p.m. (New York City time) on the next
succeeding Business Day.
(ii) A majority of the Selling Investors requesting the
registration in respect of which the Company delivered the Purchase Notice may
withdraw such registration request by giving notice in writing to such effect
to the Company (the "Withdrawal Notice") at any time prior to the date which
is five days after the date of delivery of the Purchase Notice.
(b) If the Company or the Section 5.1 Designee shall have
delivered the Purchase Notice (and no Withdrawal Notice shall have been
delivered), the closing of the purchase of the First Refusal Shares pursuant
to this Section 5.1 shall take place in New York City on the date specified in
the Purchase Notice which date shall neither be earlier than 5 days nor later
than 20 days after the date of delivery of the Purchase Notice. Promptly upon
receipt of the Purchase Notice, if no Withdrawal Notice shall have been
delivered, each Selling Investor of First Refusal Shares shall deliver to the
Company the certificates for such Shares, in form for transfer, Duly Endorsed,
against payment therefor. The Company or the Section 5.1 Designee, as the
case may be, shall make payment on the closing date by delivering to each
Selling Investor a certified check or wire transfer in immediately available
funds for the purchase price of such Selling Investor's First Refusal Shares,
against delivery of the certificates for such Shares, in form for transfer,
Duly Endorsed. If the Company or the Section 5.1 Designee, as the case may
be, shall fail to purchase the First Refusal Shares in accordance with this
Section 5.1(b), the Selling Investors shall be entitled to the demand
registration rights provided in Section 4.1.
(c) Notwithstanding the foregoing provisions of this Section 5.1,
no Selling Investor which is an ERISA Holder shall be obligated to sell any
First Refusal Shares pursuant to this Section 5.1 if such Selling Investor
determines in good faith, upon advice of counsel, that there is a material
risk that such sale would constitute a prohibited or a party-in-interest
transaction or would otherwise contravene ERISA and gives the Company notice
thereof within 20 days after receiving a Purchase Notice. Notwithstanding the
foregoing provisions of this Section 5.1(c), such ERISA Holder shall, if
requested by the Company, use reasonable commercial efforts (which shall be,
without limitation, reasonable as to time and expense) to obtain an
appropriate exemption from any such ERISA restriction or to participate in
restructuring such proposed transaction in such a manner that such ERISA
Holder can determine that no such material risk exists, and the Company and
such ERISA Holder shall cooperate with each other in such regard; provided
that neither of them shall be required to take any action which it determines
in good faith to be contrary to its best interests. If within 20 days of the
Company's receipt of such ERISA Holder's notice, such ERISA Holder shall
furnish to the Company a statement in writing that (i) after discussions with
the Department of Labor, it is determined that there is a risk that such sale
would constitute a prohibited or party-in-interest transaction or would
otherwise contravene ERISA and (ii) because of the time and expense involved
in obtaining an exemption from such ERISA restriction such sale is
commercially unreasonable or contrary to such ERISA Holder's best interests,
then such ERISA Holder shall be entitled to the demand registration rights
provided in Section 4.1 hereof; provided that any exercise of such
registration rights shall be subject to the provisions of Section 4.1,
including the Minimum Registration Amount.
ARTICLE VI
ADDITIONAL RIGHTS AND OBLIGATIONS OF HOLDERS
SECTION 6.1. Certain Matters. For purposes hereof, with respect
to Shares, and options to purchase Shares, of the Company held by Paul J.
Schierl, (a) Mr. Schierl shall be deemed a "Holder", (b) all references to the
"MEPA" and the "Purchase Agreements" shall be deemed to include the 1990
Agreement, and (c) all references to "Management Investors" shall be deemed to
include Mr. Schierl except where otherwise indicated, and except that for
purposes of clauses (ii) and (iii) of Section 7.12 hereof, Mr. Schierl shall
be deemed to be a "Direct Investor" and not a "Management Investor."
SECTION 6.2. Reorganization. In the event the Board of Directors
determines that it is in the best interest of the stockholders of the Company
to establish Newco (as defined below) then, in the event that any capital
stock, other securities or other interests are issued in respect of, in
exchange for, or in substitution of, any Shares held by Holders by reason of
any reorganization, recapitalization, reclassification, merger or
consolidation involving the Company in which a newly formed corporation or
partnership ("Newco") becomes the parent or holding company for or the
successor to the Company, each Holder hereby agrees to (i) in the event
stockholder approval is required to effect such reorganization, vote all
Shares beneficially owned by it in favor of such reorganization, and (ii)
exchange, or cause the exchange, of Shares held by it into the applicable
securities of Newco, such exchange to be made on a ratable basis among the
Holders. Any references in this Agreement to "Shares" shall include any
successor securities of Newco into which Shares may be exchanged in accordance
with this Section 6.2 and any references to "stockholders of the Company"
shall include the holders of such successor securities of Newco. All
references to the Company in this Agreement shall include Newco.
SECTION 6.3. Pro Rata Purchase. Notwithstanding anything in this
Agreement to the contrary, nothing herein shall prohibit the Company from
offering to purchase Shares from a Holder, and consummating the purchase
thereof, provided that any such offer (other than with respect to Shares held
by current or former employees of the Company or any of its subsidiaries
pursuant to any agreement between the Company and any such employee) is made
pro rata to each Holder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 7.2. No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement. The Company has not previously entered into any agreement
with respect to any of its debt or equity securities granting any registration
rights to any person.
SECTION 7.3. Remedies. The Company acknowledges and agrees that
in the event of any breach of this Agreement by it, the Holders would be
irreparably harmed and could not be made whole by monetary damages. The
Company accordingly agrees (i) to waive the defense in any action for specific
performance that a remedy at law would be adequate, and (ii) that the Holders,
in addition to any other remedy to which they may be entitled at law or in
equity, shall be entitled to compel specific performance of this Agreement in
any action instituted in the United States District Court for the Southern
District of New York, or, in the event such Court would not have jurisdiction
for such action, in any court of the United States or any state thereof having
subject matter jurisdiction for such action. The Company consents to personal
jurisdiction in any such action brought in the United States District Court
for the Southern District of New York, or any such other court and to service
of process upon it in the manner set forth in Section 7.6 hereof.
SECTION 7.4. Frustration of Purpose. No Holder may do directly
or indirectly, including, without limitation, through the sale of capital
stock of its subsidiary or otherwise, that which is not permitted by the
Agreement. The Board of Directors, in its sole discretion, shall have the
right to make any determination pursuant to this Section 7.4, which
determination shall be final and binding upon all the parties hereto,
including, but not limited to, determinations with respect to certain sales of
Shares pursuant to the rights of first refusal contained in Section 5.1 hereof
and certain rights to compel the sale of Shares contained in Section 2.5
hereof.
SECTION 7.5. Entire Agreement. This Agreement, together with the
Purchase Agreements referred to herein, constitute the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein, and there are no restrictions, promises, representations,
warranties, covenants, or undertakings with respect to the subject matter
hereof, other than those expressly set forth or referred to herein or therein.
This Agreement and the Purchase Agreements supersede all prior agreements and
understandings between the parties hereto with respect to the subject matter
hereof.
SECTION 7.6. Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto
shall be in writing, shall be delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, or by overnight
delivery service, to the address of the party theretofore furnished to the
Company or to such other address as the party to whom notice is to be given
may provide in a written notice to the Company, a copy of which written notice
shall be on file with the Secretary. Notice shall be effective when sent by
registered or certified mail, return receipt requested, postage prepaid to the
party, and when received if delivered personally or otherwise by the party to
whom it is directed.
SECTION 7.7. Applicable Law. The laws of the State of Delaware
shall govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under applicable
principles of conflicts of laws.
SECTION 7.8. Severability. The invalidity or unenforceability of
any provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this
Agreement, including any such provision, in any other jurisdiction, it being
intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
SECTION 7.9. Termination. This Agreement shall terminate and be
of no further force or effect upon the earlier of: (i) such time as both
MSLEF and Fort Howard Equity Investors II cease to own any of the then
outstanding Shares or (ii) the tenth anniversary of this amendment and
restatement.
SECTION 7.10. Additional Holders. Each employee of the Company
or any direct or indirect subsidiary of the Company who becomes a holder of
Shares or Share Equivalents after August 8, 1988 shall, at the option of the
Company, become a party to this Agreement and be bound by its terms and be
able to enforce his rights as a Management Investor and as a Holder hereunder.
Each other person which enters into a Purchase Agreement on or after August 8,
1988 and becomes a holder of Shares or Share Equivalents shall, at the option
of the Company, become a party to this Agreement and be bound by its terms and
be able to enforce its rights as a Holder hereunder. If the Company so
determines, such employee or such other person shall enter into a
supplementary agreement with the Company to such effect. Each such
supplementary agreement shall become effective upon its execution by the
Company and the new holder of Shares or Share Equivalents, and it shall not
require the signatures or the consent of any other Holder. The supplementary
agreement between the Company and any new holder of Shares or Share
Equivalents may modify some of the terms of this Agreement as they affect the
rights and obligations of the new holder of Shares or Share Equivalents;
provided that the modified terms shall not be materially adverse to any of the
other Management Investors, Direct Investors or MS/Fund Investors.
SECTION 7.11. Other Agreements. Nothing contained in this
Agreement shall be deemed to be a waiver of, or release from, any obligations
any party hereto may have under, or any restrictions on the transfer of
Shares, Share Equivalents or other securities of the Company or any direct or
indirect subsidiary of the Company imposed by, any other agreement including,
but not limited to, the Purchase Agreements.
SECTION 7.12. Successors, Assigns, Transferees. The provisions
of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns.
Notwithstanding the foregoing, neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or any Holder, except as permitted by Section 2.4 or
Section 5.1 hereof, without the prior written consent of (i) the Holders of a
majority of the Shares then held by MSLEF and Morgan Stanley Group, (ii) the
Holders of a majority of the Shares then held by the Direct Investors and
their Permitted Transferees, (iii) the Holders of a majority of the Shares
then held by the Management Investors and (iv) the Company; provided, however,
that (A) the Company may assign any of its rights and remedies hereunder to
any Affiliate of the Company, and such Affiliate may assume any of its
obligations and liabilities, without obtaining the prior written consent of
the Holders specified in clauses (i), (ii) and (iii) of this Section 7.12; and
(B) if the provisions of this Agreement are no longer applicable to one or
more of the Holders specified in clauses (i), (ii) and (iii) of this Section
7.12, then the consent of such Holder or Holders shall not be required under
this Section 7.12.
SECTION 7.13. Defaults. A default by any party to this Agreement
in such party's compliance with any of the conditions or covenants hereof or
performance of any of the obligations of such party hereunder shall not
constitute a default by any other party.
SECTION 7.14. Amendments; Waivers. This Agreement may not be
amended, modified or supplemented and no waivers of or consents to departures
from the provisions hereof may be given unless consented to in writing by the
Company and the Holders specified in clauses (i) through (iii) inclusive of
Section 7.12 hereof; provided, however, that any amendment to Article II
hereof shall only require the written consent of a majority of the Holders
subject to Article II.
SECTION 7.15. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same Agreement.
SECTION 7.16. Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the successful party shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
SECTION 7.17. Recapitalization, etc. In the event that any
capital stock or other securities are issued in respect of, in exchange for,
or in substitution of, any Shares by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial
or complete liquidation, stock dividend, split-up, sale of assets,
distribution to stockholders or combination of the Shares or any other change
not contemplated or provided for in Section 6.2 in the capital structure of
the Company, appropriate adjustments shall be made with respect to Article II
hereof so as to fairly and equitably preserve, as far as practicable, the
original rights and obligations of the parties hereto under this Agreement.
SECTION 7.18. Effectiveness. This amendment and restatement of
the 1990 Stockholders Agreement shall become effective upon the execution and
delivery hereof, pursuant to Section 7.14, by the Company and the Holders
specified in clauses (i) through (iii) inclusive of Section 7.12 hereof, and
thereupon, subject to Section 7.12, shall be binding on, and inure to the
benefit of, each holder of record of Shares or Share Equivalents as of the
date hereof that is a party to the 1990 Stockholders Agreement as of the date
hereof, a schedule of which is maintained in the records of the Company, and
their respective heirs, successors and permitted assigns, whether or not such
holders, other than the signatories to this amendment and restatement, shall
execute this amendment and restatement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
FORT HOWARD CORPORATION
By: /s/ James W. Nellen II
Name: James W. Nellen II
Title: Vice President, Secretary
and General Counsel
MORGAN STANLEY GROUP INC.
By: /s/ Charles B. Hintz
Name: Charles B. Hintz
Title: Treasurer
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: MORGAN STANLEY LEVERAGED
EQUITY FUND II, INC.,
General Partner
By: /s/ Frank V. Sica
Name: Frank V. Sica
Title: Vice President
FORT HOWARD EQUITY INVESTORS, L.P.,
a Delaware limited partnership
By: MORGAN STANLEY EQUITY
INVESTORS INC.,
General Partner
By: /s/ Frank V. Sica
Name: Frank V. Sica
Title: Vice President
FORT HOWARD EQUITY INVESTORS II,
L.P.
By: MORGAN STANLEY EQUITY
INVESTORS INC.,
General Partner
By: /s/ Frank V. Sica
Name: Frank V. Sica
Title: Vice President
MELLON BANK, N.A., TRUSTEE for First
Plaza Group Trust (as directed by
General Motors Investment Management
Corporation)
By: /s/ Patricia J. Veilleux
Name: Patricia J. Veilleux
Title: Associate Counsel
LEEWAY & CO.
By: STATE STREET BANK & TRUST CO.,
a partner
By: /s/ John Muir
Name: John Muir
Title: Assistant Secretary
DONALD H. DEMEUSE
/s/ Donald H. DeMeuse
KATHLEEN J. HEMPEL
/s/ Kathleen J. Hempel
MICHAEL T. RIORDAN
/s/ Michael T. Riordan
JAMES W. NELLEN II
/s/ James W. Nellen II
EXHIBIT 10.8(F)
Fort Howard Corporation
1919 South Broadway
Green Bay, Wisconsin 54304
March 1, 1995
Amended and Restated Management Equity
--------------------------------------
Participation Agreement
-----------------------
Dear Sirs:
Reference is made to the Amended and Restated Management Equity
Participation Agreement, dated as of August 8, 1988, by and among FH Holdings
Corp., a Delaware corporation, and the other parties signatory thereto, as
amended and supplemented from time to time, including the letter agreements
dated June 27, 1990, between Fort Howard Corporation, a Delaware corporation
(the "Company"), and the other parties signatory thereto (collectively, the
"MEPA").
The provisions of the MEPA, insofar as such provisions relate to
the shares of Voting Common Stock, par value $.01 per share, of the Company
sold to Management Investors (as defined in the MEPA) pursuant to the
provisions of the MEPA, and options to purchase shares of such Voting Common
Stock granted to Management Investors pursuant to the provisions of the MEPA,
are hereby amended, effective as of March 1, 1995 (the "1995 MEPA Amendment"),
as follows:
1. Section 1.1 is amended by deleting the definition of "Fair
Market Value" and by substituting the following therefor:
""Fair Market Value" means, on any given date, the closing
price of the shares of Common Stock, as reported on the
NASDAQ/National Market System for such date or such national
securities exchange as may be designated by the Committee (as
defined in the Fort Howard Corporation Management Equity Plan) or,
if Common Stock was not traded on such date, on the next preceding
day on which Common Stock was traded."
2. The definition of "Options" set forth in Section 1.1 is
amended by deleting the last sentence thereof and by adding the
following sentence to the end thereof:
"The exercise price of a Vested Option may be paid in the form of
cash or, in the sole discretion of the Committee, in shares of
Common Stock already owned by the Management Investor (valued at
their fair market value as determined by the Committee in its sole
discretion), in other property acceptable to the Committee or in
any combination of cash, shares of Common Stock or such other
property. The exercise price may also, in the Committee's sole
discretion, be paid in the form of shares of Common Stock withheld
by the Company from the shares that would otherwise have been
received by a Management Investor upon exercise of the Vested
Option (which shares shall be valued by the Committee at their
fair market value, net of the applicable exercise price, as
determined by the Committee in its sole discretion). In its
discretion, the Committee may also permit a Management Investor to
exercise a Vested Option through a "cashless exercise" procedure
involving a broker or dealer approved by the Committee, provided
that the Management Investor has delivered an irrevocable notice
of exercise (the "Notice") to the broker or dealer and such broker
or dealer agrees: (A) to sell immediately the number of shares of
Common Stock specified in the Notice to be acquired upon exercise
of the Vested Option in the ordinary course of its business, (B)
to pay promptly to the Company the aggregate exercise price (plus
the amount necessary to satisfy any applicable tax liability) and
(C) to pay to the Management Investor the balance of the proceeds
of the sale of such shares over the amount determined under clause
(B) of this sentence, less applicable commissions and fees;
provided, however, that the Committee may modify the provisions of
this sentence to the extent necessary to conform the exercise of
the Vested Option to Regulation T of the Exchange Act."
3. Section 1.1 is amended by deleting the definition of
"Stockholders Agreement" and by substituting the following therefor:
""Stockholders Agreement" shall mean the Stockholders
Agreement dated as of March 1, 1995, among the Company and the
other parties thereto, as amended from time to time."
4. Section 1.1 is amended by deleting (i) the definition of
"Transfer Restriction Period" and (ii) all definitions that are used
solely in Sections 8.1, 8.2, 8.3, 8.4, 8.5 and 8.6 (as in effect prior
to the amendments set forth herein).
5. Section 1.1 is amended by deleting the definition of "Vested
Options" and by substituting the following therefor:
""Vested Options" shall mean all Options granted to an
individual and which are outstanding on the effective date of the
1995 MEPA Amendment, which Options shall vest and become
exercisable on such date; provided, however, that Vested Options
shall not be exercisable unless the Common Stock subject to such
Vested Options has been registered under the Securities Act and
qualified under applicable state "blue sky" laws in connection
with the offer and sale thereof, or the Company has determined
that an exemption from registration under the Securities Act and
from qualification under such state "blue sky" laws is available."
6. Section 5.1 is amended by deleting the words "and VIII" and
"except in the case of sales pursuant to Sections 2.4, 2.5 and Articles IV and
V of the Stockholders Agreement".
7. Section 7.1 is amended in its entirety to read as follows:
"General Restrictions on Transfer. Each Management Investor
agrees that he will not Sell (as defined below) any Common Stock
or any interest therein (i) for the period ending 180 days after
the effective date of the Registration Statement filed with the
Commission on November 23, 1994, as amended, or (ii) following the
expiration of such 180-day period, except in compliance with the
Securities Act and any applicable state securities laws. Subject
to Section 7.5 hereof, no Option (whether or not a Vested Option)
or any right or interest therein may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of
(collectively, "Sell"). A Vested Option can only be exercised in
accordance with the terms of this Agreement. No transfer of
Common Stock in violation of this Agreement shall be made or
recorded on the books of the Company and any such transfer shall
be void and of no effect."
8. The legend set forth in Section 7.2 is amended in its
entirety to read as follows:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS. THIS SECURITY MAY BE OFFERED, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF ONLY IN COMPLIANCE WITH THE REQUIREMENTS
OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
9. The first sentence of Section 7.4 is amended by deleting the
words "pursuant to Section 7.5(a) hereof (other than paragraph (a)
thereof)" and inserting the words "(other than a transfer of Vested
Options pursuant to Section 7.5 hereof)" after the words "Common Stock
or any interest therein".
10. Section 7.5 is amended in its entirety to read as follows:
"SECTION 7.5. Certain Permitted Transfers. Each Management
Investor shall have the right to Sell Vested Options to a
Permitted Transferee (as defined below). For purposes of this
Agreement, the term "Permitted Transferee" means a Person to whom
a transfer is made by will or the laws of descent and distribution
upon the death of any Management Investor; provided that no
transfer pursuant to this Section 7.5 shall be given effect on the
books of the Company unless and until the transferee shall agree
in writing, in form and substance satisfactory to the Company, to
become, and becomes, bound by all the terms of this Agreement and,
at the option of the Company, the Stockholders Agreement.
Anything to the contrary contained herein notwithstanding, no
transfer from a Management Investor or any Permitted Transferee
shall be made or recorded on the stock transfer records of the
Company if, as a result thereof, the Company would be required to
register any Common Stock under the Securities Act, the Exchange
Act, or any applicable state securities or "blue sky" laws or
would become subject to or would be in violation of the Investment
Company Act."
11. Article VIII is amended by deleting Sections 8.1, 8.2, 8.3,
8.4, 8.5 and 8.6 thereof and by renumbering Sections 8.7, 8.8, 8.9 and
8.10 (as applicable) as Sections 8.1, 8.2, 8.3 and 8.4, respectively.
12. The first sentence of Section 9.2 is amended by deleting the
portion of such sentence that follows the words "in the event of such
breach he shall" and by substituting the following therefor:
", in the case of any Vested Options exercised within six months
of (or subsequent to) such termination of employment, promptly pay
to the Company an amount in cash equal to the difference between
the Fair Market Value of a share of Common Stock on the date of
exercise of such Vested Options and the exercise price of such
Vested Options multiplied by the number of shares of Common Stock
subject to such Vested Options."
13. The second sentence of Section 9.2 is amended by deleting
the words "clause (i) or (ii) of" and ", as applicable".
FORT HOWARD CORPORATION
By: /s/ James W. Nellen II
-------------------------
Name: James W. Nellen II
Title: Vice President
Agreed:
/s/ Donald H. DeMeuse
-------------------------
Donald H. DeMeuse
/s/ Kathleen J. Hempel
-------------------------
Kathleen J. Hempel
EXHIBIT 10.9(B)
March 1, 1995
Fort Howard Corporation
Management Equity Plan
-----------------------
The Management Investors Committee of the Fort Howard Corporation
Management Equity Plan (the "Plan") hereby amends, effective as of March 1,
1995 (the "1995 MEP Amendment"), the provisions of the Plan as follows:
1. Section 1.2 is amended by deleting the definition of "Fair
Market Value" and by substituting the following therefor:
""Fair Market Value" means, on any given date, the closing
price of the shares of Common Stock, as reported on the
NASDAQ/National Market System for such date or such national
securities exchange as may be designated by the Committee or, if
Common Stock was not traded on such date, on the next preceding
day on which Common Stock was traded."
2. Section 1.2 is amended by deleting the definition of
"Stockholders Agreement" and by substituting the following therefor:
""Stockholders Agreement" means the Stockholders Agreement
dated as of March 1, 1995, among the Company and the other parties
thereto, as amended from time to time."
3. Section 1.2 is amended by deleting (i) the definition of
"Transfer Restriction Period" and (ii) all definitions that are used
solely in Sections 6.1, 6.2, 6.3, 6.4, 6.5 and 6.6 (as in effect prior
to the amendments set forth herein).
4. The first sentence of Section 2.3 is amended in its entirety
to read as follows:
"The maximum aggregate number of shares of Common Stock that may
be issued in connection with Options granted under the Plan
(excluding the December 1988 Options, but after taking into
account the 6.5-for-one stock split that is anticipated to occur
and described in the Registration Statement filed with the
Commission on November 23, 1994, as amended (the "Registration
Statement")) shall be 696,150, subject to adjustment as set forth
in Section 8.3."
5. Section 3.1 is amended to add the following sentence to the
end thereof:
"The Exercise Price may also, in the Committee's sole discretion,
be paid in the form of shares of Common Stock withheld by the
Company from the shares that would otherwise have been received by
a Management Investor upon exercise of the Vested Option (which
shares shall be valued by the Committee at their fair market
value, net of the applicable Exercise Price, as determined by the
Committee in its sole discretion). In its discretion, the
Committee may also permit a Management Investor to exercise a
Vested Option through a "cashless exercise" procedure involving a
broker or dealer approved by the Committee, provided that the
Management Investor has delivered an irrevocable notice of
exercise (the "Notice") to the broker or dealer and such broker or
dealer agrees: (A) to sell immediately the number of shares of
Common Stock specified in the Notice to be acquired upon exercise
of the Vested Option in the ordinary course of its business, (B)
to pay promptly to the Company the aggregate Exercise Price (plus
the amount necessary to satisfy any applicable tax liability) and
(C) to pay to the Management Investor the balance of the proceeds
of the sale of such shares over the amount determined under clause
(B) of this sentence, less applicable commissions and fees;
provided, however, that the Committee may modify the provisions of
this sentence to the extent necessary to conform the exercise of
the Vested Option to Regulation T of the Exchange Act."
6. The first sentence of Section 3.3 is amended in its entirety
to read as follows:
"All Options granted under the Plan shall vest and become
exercisable ("Vested Options") as of the effective date of the
1995 MEP Amendment."
7. Section 5.1 is amended in its entirety to read as follows:
"Stockholders Agreement. Each Management Investor who
purchases a share of Common Stock pursuant to the Plan prior to
the effective date of the 1995 MEP Amendment shall, on or prior to
the first issuance of Common Stock to such Management Investor,
agree to become a "Holder" for the purposes of the Stockholders
Agreement and to be bound by all the terms of the Stockholders
Agreement applicable to such a Holder, and to be entitled to the
benefits of a Holder thereof. Notwithstanding any conflicting
provision in the applicable Agreement, no Management Investor,
other than the Management Investors described in the preceding
sentence, shall be deemed to be a Holder for the purposes of the
Stockholders Agreement with respect to any shares of Common Stock
acquired upon exercise of Vested Options."
8. Section 5.2 is amended in its entirety to read as follows:
"General Restrictions on Transfer. A Management Investor
may not Sell (as defined below) any Common Stock or any interest
therein (i) for the period ending 180 days after the effective
date of the Registration Statement or (ii) following the
expiration of such 180-day period, except in compliance with the
Securities Act and any applicable state securities laws. Subject
to Section 5.6 hereof, no Option (whether or not a Vested Option)
or any right or interest therein may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of
(collectively, "Sell"). A Vested Option can only be exercised in
accordance with the terms of the Plan and the applicable
Agreement. No transfer of Common Stock in violation of the Plan
shall be made or recorded on the books of the Company and any such
transfer shall be void and of no effect."
9. The legend set forth in Section 5.3 is amended in its
entirety to read as follows:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS. THIS SECURITY MAY BE OFFERED, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF ONLY IN COMPLIANCE WITH THE REQUIREMENTS
OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
10. The first sentence of Section 5.5 is amended by deleting the
words "pursuant to Section 5.6 hereof (other than paragraph (a)
thereof)" and inserting the words "(other than a transfer of Vested
Options pursuant to Section 5.6 hereof)" after the words "Common Stock
or any interest therein".
11. Section 5.6 is amended in its entirety to read as follows:
"SECTION 5.5. Certain Permitted Transfers. Each Management
Investor shall have the right to Sell Vested Options to a
Permitted Transferee (as defined below). For purposes of the
Plan, the term "Permitted Transferee" means a Person to whom a
transfer is made by will or the laws of descent and distribution
upon the death of any Management Investor; provided that no
transfer pursuant to this Section 5.5 shall be given effect on the
books of the Company unless and until the transferee shall agree
in writing, in form and substance satisfactory to the Company, to
become, and becomes, bound by all the terms of the Plan, the
applicable Agreement and, at the option of the Company, the
Stockholders Agreement. Anything to the contrary contained herein
notwithstanding, no transfer from a Management Investor or any
Permitted Transferee shall be made or recorded on the stock
transfer records of the Company if, as a result thereof, the
Company would be required to register any Common Stock under the
Securities Act, the Exchange Act, or any applicable state
securities or "blue sky" laws or would become subject to or would
be in violation of the Investment Company Act."
12. Article VI is amended by deleting Sections 6.1, 6.2, 6.3,
6.4, 6.5 and 6.6 thereof and by renumbering Sections 6.7 and 6.8 as
Sections 6.1 and 6.2, respectively.
13. The first sentence of Section 7.2 is amended by (x) deleting
the words "A Management Investor shall agree" and by substituting
therefor "Notwithstanding any conflicting provision in the applicable
Agreement, each Management Investor shall be deemed to have agreed" and
(y) deleting the portion of such sentence that follows the words "in the
event of such breach," and by substituting the following therefor:
"in the case of any Vested Options exercised within six months of
(or subsequent to) such termination of employment, promptly pay to
the Company an amount in cash equal to the difference between the
Fair Market Value of a share of Common Stock on the date of
exercise of such Vested Options and the Exercise Price of such
Vested Options multiplied by the number of shares of Common Stock
subject to such Vested Options."
14. The second sentence of Section 7.2 is amended by (x)
deleting the words "A Management Investor shall also agree" and by
substituting therefor "Notwithstanding any conflicting provision in the
applicable Agreement, each Management Investor shall be deemed to have
agreed" and (y) deleting the words "clause (i) or (ii) of" and ", as
applicable".
Each of the foregoing amendments to the Plan shall, where
applicable, be deemed to be an amendment to the corresponding provision set
forth in each applicable Agreement (as defined in the Plan), and in the event
of any conflict or inconsistency between the Plan, as amended, and any such
Agreement, as deemed to be amended, the Plan shall govern.
/s/ Donald H. DeMeuse
-------------------------------------
Donald H. DeMeuse
/s/ Kathleen J. Hempel
-------------------------------------
Kathleen J. Hempel
EXHIBIT 10.11(C)
FORT HOWARD CORPORATION
1919 SOUTH BROADWAY
GREEN BAY, WISCONSIN 54304
March 9, 1995
Paul J. Schierl
Carol A. Schierl
1815 Rainbow Drive
DePere, Wisconsin 54115
Schedule A to the
July 31, 1990 Agreement
-----------------------
Dear Mr. and Mrs. Schierl:
Reference is made to (i) Schedule A to the Agreement dated as of
July 31, 1990, between Fort Howard Corporation, a Delaware corporation (the
"Company"), Paul J. Schierl and Carol A. Schierl, as amended from time to time
(collectively, the "Schierl MEPA"; unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to such terms
in the Schierl MEPA), (ii) the shares of Common Stock sold to Paul J. Schierl
pursuant to the Schierl MEPA on October 24, 1988, and June 27, 1990, and (iii)
the options to purchase shares of Common Stock granted to Paul J. Schierl
pursuant to the Schierl MEPA on October 24, 1988, and June 27, 1990.
A. Section 8.1(a) of the Schierl MEPA is hereby amended by adding the
following to the end thereof:
"(iii) Notwithstanding anything in this Agreement to the
contrary, in the event that (x) the Management Investor or any of his
Permitted Transferees sells (an "Open Market Sale") any or all of the
shares of Common Stock owned of record by the Management Investor on the
Resignation Date (the "Shares" and individually, a "Share") in a
transaction effected through Morgan Stanley & Co. Incorporated, a
Delaware corporation ("Morgan Stanley"), over the facilities of the
Nasdaq National Market System pursuant to a sell order delivered in
writing to Morgan Stanley (Attention: Steven J. Alley, Managing
Director, Telecopier No. (312) 765-6337, with a copy in writing to the
Company (Attention: James W. Nellen II, Vice President, General Counsel
and Secretary, Telecopier No. (414) 498-3225)), at any time during the
period beginning 180 days after the date of the effective date (the "IPO
Date") of the Registration Statement filed by the Company with the
Commission on November 23, 1994, as amended (Registration No. 33-56573)
and ending 190 days after the IPO Date and (y) the amount per Share (the
"Realized Amount") realized by the Management Investor or such Permitted
Transferee, as the case may be, in such Open Market Sale (net of
brokerage commissions) is less than the amount equal to the sum (the
"Put Price") of (A) the Management Investor's or Permitted Transferee's,
as the case may be, average Cost of the Shares sold and (B) interest on
such average Cost from the IPO Date to the date (the "Sale Date") of the
Open Market Sale at a rate per annum, compounded annually, equal to the
Applicable Rate (as defined below), then the Company shall pay to the
Management Investor or such Permitted Transferee, as the case may be, as
promptly as practicable after the Sale Date, an amount (the "Put
Differential") in cash equal to the difference between the Put Price and
the Realized Amount multiplied by the number of Shares sold in such Open
Market Sale. For purposes of the preceding sentence, the "Applicable
Rate" shall equal the then-current yield to maturity on United States
treasury bills of comparable maturity, as determined in good faith by
the Company, plus 50 basis points. Any sale of Shares through Morgan
Stanley pursuant to this clause (iii) shall be effected in a manner
calculated to minimize any negative impact on the Realized Amount.
(iv) The Management Investor and his Permitted Transferees agree
to take the position on their respective tax returns that the portion
(the "Non-Interest Portion") of any Put Differential paid to the
Management Investor or any such Permitted Transferee pursuant to clause
(iii) above that is based on the excess, if any, of the average Cost of
the Shares sold over the Realized Amount constitutes capital gain for
Federal, state and local income tax purposes. If, notwithstanding such
position, the IRS asserts in writing that the Non-Interest Portion
constitutes ordinary income for Federal income tax purposes, the
Management Investor or his Permitted Transferee, as the case may be,
shall promptly notify the Company of such assertion, and shall consult
and cooperate with the Company in good faith to attempt to favorably
resolve the issue with the IRS. Upon a final determination, within the
meaning of Section 1313(a) of the Code (a "Final Determination"), that
the Non-Interest Portion constitutes ordinary income for Federal income
tax purposes, the Company shall pay to the Management Investor or such
Permitted Transferee, as the case may be, as promptly as practicable
after such Final Determination, an additional amount (the "Additional
Amount") in cash equal to the additional Federal, state and local income
taxes payable by the Management Investor or such Permitted Transferee,
as the case may be, as a result of the difference between (a) the
aggregate ordinary income tax rate applicable to the Management Investor
or such Permitted Transferee, as the case may be, with respect to the
Non-Interest Portion and (b) the aggregate capital gains tax rate that
would have been applicable to the Management Investor or such Permitted
Transferee, as the case may be, with respect to the Non-Interest Portion
had the Non-Interest Portion been treated as capital gains for Federal
income tax purposes; provided, however, that the Additional Amount shall
be (i) decreased by the amount of any tax deductions, credits or other
benefits realized by the Management Investor or such Permitted
Transferee as a result of the treatment of the Non-Interest Portion as
ordinary income for tax purposes and (ii) increased by the amount of any
Federal, state and local income taxes imposed on the Management Investor
or such Permitted Transferee with respect to the income realized upon
the receipt of the Additional Amount. Neither the Management Investor
nor any of his Permitted Transferees shall enter into or consent to any
Final Determination with respect to the Non-Interest Portion without the
consent of the Company, which consent shall not be unreasonably
withheld.
(v) Neither the Management Investor nor any of his Permitted
Transferees shall (i), during the 7 days prior to, and during the
180-day period which begins on, the IPO Date, without the prior written
consent of Morgan Stanley, (A) offer, pledge, sell, contract to sell,
sell an option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly any shares of Common
Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (B) enter into any swap or similar agreement that
transfers, in whole or in part, the economic risk of ownership of the
Common Stock, whether any such transaction described in clause (A) or
(B) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise or (ii) exercise the put provided for
in Section 8.1(a)(i)."
B. In the event that the Company files a registration statement on
Form S-8 with the Commission relating to shares of Common Stock issuable upon
exercise of stock options previously granted to employees of the Company, the
Company agrees that it shall, to the extent permitted under the applicable
securities laws, cover the shares of Common Stock issuable upon exercise of
the Management Investor's Putable Options under such registration statement,
provided that the Management Investor agrees to make such changes to the
Schierl MEPA as may be necessary to permit such shares of Common Stock to be
covered under such registration statement, including the amendment of the
definition of "Permitted Transferee" set forth in the Schierl MEPA, and
otherwise cooperates with the Company in good faith to satisfy the
requirements of the securities laws.
C. The Company agrees that it shall consult with the Management
Investor and his Permitted Transferees in good faith with respect to the
application of the federal and state securities laws to any Open Market Sale,
and shall undertake in good faith to promptly issue new certificates
evidencing the shares of Common Stock sold in any Open Market Sale in
accordance with the procedure specified in the first sentence of
Section 2.2(c) of the Stockholders Agreement dated as of March 1, 1995, among
the Company and other parties thereto, as amended from time to time, provided
that the Management Investor and his Permitted Transferees fulfill their
obligations under such Section 2.2(c).
FORT HOWARD CORPORATION
By /s/ James W. Nellen II
Name: James W. Nellen II
Title: Vice President
Accepted and Agreed:
/s/ Paul J. Schierl
--------------------------------
Paul J. Schierl
/s/ Carol A. Schierl
--------------------------------
Carol A. Schierl
/s/ Paul J. Schierl, Trustee
--------------------------------
Paul J. Schierl, as Trustee of the
Paul J. Schierl Trust
/s/ Carol A. Schierl
--------------------------------
Carol A. Schierl, as Potential
Successor Trustee of the
Paul J. Schierl Trust
/s/ John W. Hickey
--------------------------------
John W. Hickey, as Co-Trustee of
the Paul J. Schierl Irrevocable
Children's Trust
/s/ James J. Schoshinski
--------------------------------
James J. Schoshinski, as Co-Trustee
of the Paul J. Schierl Irrevocable
Children's Trust
EXHIBIT 12
FORT HOWARD CORPORATION
DEFICIENCY OF EARNINGS AVAILABLE TO COVER FIXED CHARGES
(In thousands)
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Loss before taxes........ $(61,016) $(2,056,432) $ (69,800) $ (97,999) $(119,659)
Interest expense......... 337,701 342,792 338,374 371,186 422,663
One-fourth of operating
lease rental expense... 1,881 1,731 1,632 1,356 1,435
-------- ----------- --------- --------- ---------
$278,566 $(1,711,909) $ 270,206 $ 274,543 $ 304,439
======== =========== ========= ========= =========
Fixed Charges:
Interest expense......... $337,701 342,792 $ 338,374 $ 371,186 $ 422,663
Capitalized interest..... 4,230 8,369 11,047 5,331 3,503
One-fourth of operating
lease rental expense... 1,881 1,731 1,632 1,356 1,435
-------- ----------- --------- --------- ---------
$343,812 $ 352,892 $ 351,053 $ 377,873 $ 427,601
======== =========== ========= ========= =========
Deficiency of Earnings
Available to Cover
Fixed Charges (1)........ $(65,246) $(2,064,801) $ (80,847) $(103,330) $(123,162)
======== =========== ========= ========= =========
</TABLE>
(1) For purposes of these computations, earnings consist of consolidated
loss before taxes plus fixed charges (excluding capitalized interest) of both
consolidated and unconsolidated subsidiaries. Fixed charges consist of
interest on indebtedness (including capitalized interest and amortization of
deferred loan costs) plus that portion (deemed to be one-fourth) of operating
lease rental expense representative of the interest factor.
EXHIBIT 21
SUBSIDIARIES OF FORT HOWARD CORPORATION
Name of Subsidiary State or Country of Incorporation
------------------ ---------------------------------
Fort Howard Export, Ltd. U.S. Virgin Islands
Fort Sterling Limited England
Harmon Assoc., Corp. New York
