SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996 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: 0-20473
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
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 15, 1996
----- -------------------------------
Voting Common Stock, par value $.01 73,984,928
per share
PART I. FINANCIAL INFORMATION
FORT HOWARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales........................... $408,163 $426,116 $1,196,307 $1,205,602
Cost of sales....................... 234,007 299,974 715,863 865,474
-------- -------- ---------- ----------
Gross income........................ 174,156 126,142 480,444 340,128
Selling, general and administrative. 38,857 30,773 106,243 85,893
-------- -------- ---------- ----------
Operating income ................... 135,299 95,369 374,201 254,235
Interest expense.................... 61,867 74,177 198,841 237,258
Other expense (income), net......... 2,545 (1,600) 3,583 (2,537)
-------- -------- ---------- ----------
Income before taxes................. 70,887 22,792 171,777 19,514
Income tax expense.................. 27,813 8,292 65,386 6,913
-------- -------- ---------- ----------
Net income before
extraordinary item................ 43,074 14,500 106,391 12,601
Extraordinary item -- loss on
debt repurchases (net of income
taxes of $2,180 in 1996 and
$11,986 in 1995).................. -- -- (3,340) (18,748)
-------- -------- ---------- ----------
Net income (loss)................... $ 43,074 $ 14,500 $ 103,051 $ (6,147)
======== ======== ========== ==========
Net income (loss) per share:
Net income before
extraordinary item.............. $ 0.58 $ 0.23 $ 1.55 $ 0.22
Extraordinary item................ -- -- (0.05) (0.33)
-------- -------- ---------- ----------
Net income (loss)................. $ 0.58 $ 0.23 $ 1.50 $ (0.11)
======== ======== ========== ==========
Average shares outstanding.......... 73,970 63,371 68,720 56,495
======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 2 -
FORT HOWARD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION> September 30, December 31,
1996 1995
------------- ------------
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............... $ 693 $ 946
Receivables, less allowances of $3,304
in 1996 and $2,883 in 1995............ 90,157 97,707
Inventories............................. 136,696 163,076
Deferred income taxes................... 51,000 29,000
Income taxes receivable................. 400 700
---------- ----------
Total current assets.................. 278,946 291,429
Property, plant and equipment............. 2,009,804 1,971,641
Less: Accumulated depreciation......... 778,953 706,394
---------- ----------
Net property, plant and equipment..... 1,230,851 1,265,247
Other assets.............................. 77,905 95,761
---------- ----------
Total assets.......................... $1,587,702 $1,652,437
========== ==========
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable........................ $ 121,179 $ 112,384
Interest payable........................ 23,481 64,375
Income taxes payable.................... 6,145 1,339
Other current liabilities............... 90,530 85,351
Current portion of long-term debt....... 69,865 62,720
---------- ----------
Total current liabilities............. 311,200 326,169
Long-term debt............................ 2,500,695 2,903,299
Deferred and other long-term income taxes. 270,227 225,043
Other liabilities......................... 34,970 36,355
Shareholders' deficit:
Common Stock............................ 740 634
Additional paid-in capital.............. 1,100,884 895,652
Cumulative translation adjustment....... (2,194) (2,844)
Retained deficit........................ (2,628,820) (2,731,871)
---------- ----------
Total shareholders' deficit........... (1,529,390) (1,838,429)
---------- ----------
Total liabilities and shareholders'
deficit............................. $1,587,702 $1,652,437
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 3 -
FORT HOWARD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION> Nine Months Ended
September 30,
------------------
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Cash provided from (used for) operations:
Net income (loss).............................. $ 103,051 $ (6,147)
Depreciation................................... 75,727 73,751
Non-cash interest expense...................... 10,103 9,634
Deferred income tax (credit) expense........... 23,228 (3,967)
Pre-tax loss on debt repurchases............... 5,520 30,734
Decrease in receivables........................ 7,550 17,972
(Increase) decrease in inventories............. 26,380 (41,820)
Decrease in income taxes receivable............ 300 4,500
Increase in accounts payable................... 8,795 26,623
Decrease in interest payable................... (40,894) (58,538)
Increase in income taxes payable............... 4,806 429
All other, net................................. 7,435 (12,228)
---------- ---------
Net cash provided from operations............ 232,001 40,943
Cash used for investment activity:
Additions to property, plant and equipment..... (40,876) (32,150)
Cash provided from (used for) financing activities:
Proceeds from long-term borrowings............. -- 1,438,900
Repayment of long-term borrowings.............. (395,227) (1,682,623)
Debt issuance costs............................ (1,489) (49,155)
Issuance of Common Stock, net of offering
costs........................................ 205,338 284,104
---------- ---------
Net cash used for financing activities....... (191,378) (8,774)
---------- ---------
Increase (decrease) in cash...................... (253) 19
Cash at beginning of period...................... 946 422
---------- ---------
Cash at end of period.......................... $ 693 $ 441
========== =========
Supplemental Cash Flow Disclosures:
Interest paid.................................. $ 229,561 $ 286,439
Income taxes paid (refunded) - net............. 35,052 (5,705)
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- 4 -
FORT HOWARD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements reflect all adjustments
(consisting only of normally recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented. Certain reclassifications have been made to conform prior
years' data to the current format. These financial statements should be read
in conjunction with the Company's annual report on Form 10-K for 1995 and the
Company's quarterly reports on Form 10-Q for the quarters ended March 31, 1996
and June 30, 1996.
2. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed on the basis of the weighted
average number of common shares outstanding during the periods. The weighted
average number of common shares outstanding for the three and nine month
periods ended September 30, 1996 were 73,969,946 and 68,719,716, respectively.
The weighted average number of common shares outstanding for the three and
nine month periods ended September 30, 1995 were 63,370,794 and 56,494,512,
respectively. The assumed exercise of all outstanding stock options has been
excluded from the computation of earnings (loss) per share for the three and
nine month periods ended September 30, 1996 and 1995 because the result was
not material or was antidilutive.
3. INVENTORIES
Inventories consist of:
September 30, December 31,
1996 1995
------------ ------------
(In thousands)
Raw materials and supplies $ 67,110 $ 80,134
Finished and partly-finished products 69,586 82,942
-------- --------
$136,696 $163,076
======== ========
- 5 -
4. COMMON STOCK OFFERING
On May 15, 1996, the Company issued 10 million shares of Common Stock at
$20.25 per share in a public offering (the "Offering"). Proceeds from the
Offering, net of underwriting commissions and other related expenses totaling
$9 million, were $194 million. On June 4, 1996, an additional 520,000 shares
of Common Stock were issued at $20.25 per share upon the exercise of a portion
of the underwriters' over-allotment option granted in connection with the
Offering, resulting in additional net proceeds of $10 million after deducting
underwriting commissions.
5. LONG-TERM DEBT
The Company used the net proceeds of its Common Stock Offering of $204
million to prepay a portion of the outstanding indebtedness under the 1995
Bank Credit Agreement.
At September 30, 1996, the available capacity under the 1995 Revolving
Credit Facility under the Company's 1995 Bank Credit Agreement was
$297 million.
6. INCOME TAXES
In 1992, the Internal Revenue Service (the "IRS") disallowed income tax
deductions for the 1988 tax year which were claimed by the Company for fees
and expenses, other than interest, related to 1988 debt financing and
refinancing transactions. The Company deducted the balance of the disallowed
fees and expenses related to the 1988 debt instruments during the tax years
1989 through 1995. In disallowing these deductions, the IRS relied on
Internal Revenue Code of 1986, as amended (the "Code"), Section 162(k) (which
denies deductions for otherwise deductible amounts paid or incurred in
connection with stock redemptions). The Company is contesting the
disallowance. 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.
Prior to the entry of a decision in the U.S. Tax Court, Code
Section 162(k) was amended in August 1996 to provide that, retroactive to
1986, such Code Section was not applicable to deductions for amounts properly
allocable to indebtedness and amortized over the term of such indebtedness.
Accordingly, the Company and the IRS filed a joint motion for reconsideration
of the Court's opinion requesting a determination that the Company may deduct
all disallowed fees and expenses related to the 1988 debt instruments. On
October 22nd the Court granted the joint motion and issued its supplemental
opinion that the Company may deduct the fees and expenses previously
disallowed. The Company anticipates the Court's final decision on this matter
in the fourth quarter of 1996.
The Company has paid to the IRS tax of approximately $5 million 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 opinion of the U.S. Tax Court, which
the Company had been planning to appeal, was ultimately sustained, the
potential amount of additional taxes due on account of such disallowance for
the period 1989 through 1995 would be approximately $38 million exclusive of
interest, which amount the Company has fully reserved.
- 6 -
7. CONTINGENCIES
The Company and its subsidiaries are parties to lawsuits and state and
federal administrative proceedings incidental to their businesses. Although
the final results in such suits and proceedings cannot be predicted with
certainty, the Company currently 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 on its results of operations.
- 7 -
FORT HOWARD CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter and First Nine Months of 1996 Compared to 1995
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands, except percentages)
<S> <C> <C> <C> <C>
Net sales:
Domestic tissue............ $346,752 $348,058 $1,017,234 $ 965,551
International operations... 44,825 43,041 131,178 120,394
Harmon..................... 16,586 35,017 47,895 119,657
-------- -------- ---------- ----------
Consolidated............... $408,163 $426,116 $1,196,307 $1,205,602
======== ======== ========== ==========
Operating income:
Domestic tissue............ $127,679 $ 88,982 $ 351,561 $ 238,457
International operations... 6,744 4,995 20,026 11,354
Harmon..................... 876 1,392 2,614 4,424
-------- -------- ---------- ----------
Consolidated............... $135,299 $ 95,369 $ 374,201 $ 254,235
======== ======== ========== ==========
Consolidated net income
(loss)..................... $ 43,074 $ 14,500 $ 103,051 $ (6,147)
======== ======== ========== ==========
Operating income as a
percent of net sales....... 33.1% 22.4% 31.3% 21.1%
</TABLE>
Net sales. Net sales in the Company's domestic tissue operations
increased 5.4% for the first nine months of 1996 compared to the first nine
months of 1995. The increase was due to a 2.1% increase in converted products
volume and a 3.2% increase in net selling prices for the first nine months of
1996 compared to the first nine months of 1995. Domestic tissue operations'
net sales for the third quarter of 1996 decreased 0.4% compared to the third
quarter of 1995. The decrease was due to lower net selling prices offset by
volume increases. Because of significantly lower selling prices in the
Company's wastepaper brokerage subsidiary, consolidated net sales decreased
4.2% for the third quarter of 1996 and 0.8% for the first nine months of 1996
compared to the respective periods in 1995.
From the second quarter of 1996 to the third quarter of 1996, overall
domestic tissue net selling prices decreased 1.5% as a result of price
decreases in the consumer market which took effect in April and June 1996 on
certain product lines. Commercial pricing was unchanged from the second
quarter of 1996 to the third quarter of 1996.
For the third quarter and first nine months of 1996 compared to the
respective periods in 1995, domestic volume was stronger in the consumer
market than in the commercial market.
- 8 -
Net sales of the Company's international operations increased 4.1% and
9.0% for the third quarter and first nine months of 1996 compared to 1995,
respectively. For the third quarter of 1996 compared to the third quarter of
1995, the Company's U.K. facilities experienced volume increases partially
offset by lower net selling prices. For the first nine months of 1996
compared to 1995, the Company's U.K. facilities experienced both increased
volume and increased net selling prices. Net sales of the Company's
wastepaper brokerage subsidiary, Harmon Assoc. Corp. ("Harmon"), decreased
52.6% and 60.0% for the third quarter and first nine months of 1996 compared
to 1995, respectively, due to significantly lower selling prices on slightly
higher volume.
Gross Income. Consolidated gross income for the third quarter of 1996
increased 38.1% over the third quarter of 1995 due to significantly lower raw
material costs and sales volume increases in the consumer business offset by
lower consumer selling prices. For the first nine months of 1996 compared to
the same period in 1995, consolidated gross income increased 41.3% due to
lower raw material costs, selling price increases and increases in consumer
volume. Consolidated gross margins increased to 42.7% and 40.2% for the third
quarter and first nine months of 1996 from 29.6% and 28.2% for the third
quarter and first nine months of 1995, respectively. Domestic tissue gross
margins increased for the third quarter and first nine months of 1996 compared
to the third quarter and first nine months of 1995 primarily due to
significantly lower wastepaper prices. Gross margins of international
operations increased in both the third quarter and first nine months of 1996
compared to 1995. In addition, consolidated gross margins were positively
affected for both the third quarter and first nine months of 1996 compared to
1995 because net sales by Harmon (which typically has very low margins
compared to either domestic or international tissue operations) were a smaller
proportion of total net sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses, as a percent of net sales, increased to 9.5% and 8.9%
for the third quarter and first nine months of 1996, compared to 7.2% and 7.1%
for the third quarter and first nine months of 1995, respectively. The
increase was principally due to the impact of the Company's strong earnings
performance on employee compensation plans, higher selling expenses resulting
from greater consumer product sales and lower net sales by Harmon.
Operating Income. Operating income increased to $135 million and
$374 million for the third quarter and first nine months of 1996 from
$95 million and $254 million for the third quarter and first nine months of
1995, respectively. Operating income as a percent of net sales increased to
33.1% and 31.3% in the third quarter and first nine months of 1996 compared to
22.4% and 21.1% in the third quarter and first nine months of 1995,
respectively. Domestic tissue operating income as a percent of net sales
increased to 36.8% and 34.6% in the third quarter and first nine months of
1996 from 25.6% and 24.7% in the third quarter and first nine months of 1995,
respectively. In addition, consolidated operating income increased as a
percent of net sales because net sales by Harmon (which typically has very low
operating income margins compared to either domestic or international tissue
operations) were a smaller proportion of total net sales.
- 9 -
Extraordinary Loss. The Company's net income in the first nine months of
1996 was decreased by an extraordinary loss of $3 million (net of income taxes
of $2 million) representing the write-offs of deferred loan costs associated
with the prepayment of a portion of the outstanding indebtedness under the
1995 Bank Credit Agreement. The Company's net loss in the first nine months
of 1995 was increased by an extraordinary loss of $19 million (net of income
taxes of $12 million) from debt repurchases.
Net Income (Loss). For the third quarter of 1996, net income was
$43 million compared to net income of $15 million for the third quarter of
1995. For the first nine months of 1996, net income was $103 million compared
to a net loss of $6 million for the first nine months of 1995.
FINANCIAL CONDITION
For the first nine months of 1996, cash decreased $253,000. Capital
additions of $41 million and debt repayments of $395 million were funded
principally by net proceeds of $205 million from the sale of Common Stock and
$232 million of cash from operations provided by strong operating results.
During the first nine months of 1996, receivables decreased $7.6 million
due principally to lower net selling prices in the domestic tissue and
international operations in the third quarter of 1996 compared to the fourth
quarter of 1995. Inventories decreased by $26.4 million principally due to
lower raw material costs. Accounts payable increased $8.8 million due to
higher selling expenses and the timing of payments to vendors. The liability
for interest payable decreased $40.9 million due to lower debt balances as a
result of the Offering and cash provided from operations and also as a result
of the timing of the quarter end relative to semi-annual interest payment
dates. Other current liabilities increased $5.2 million primarily resulting
from the timing of compensation payments. As a result of all these changes
and the prepayment of a portion of the indebtedness due within one year under
the 1995 Bank Credit Agreement from the net proceeds of the Offering, net
working capital deficit decreased to $32 million at September 30, 1996, from a
deficit of $35 million at December 31, 1995.
In September 1996, the Company's Board of Directors authorized the
installation of a new tissue paper machine and associated facilities at one of
its U.S. mills. The expansion is planned for completion in 1999 at an
estimated cost of $160 million.
The Company's 1995 Revolving Credit Facility, which may be used for
general corporate purposes, has a final maturity of March 16, 2002. At
September 30, 1996, the Company had $297 million in available capacity under
the 1995 Revolving Credit Facility.
- 10 -
PART II. OTHER INFORMATION
1. LEGAL PROCEEDINGS
In July 1992, the United States Environmental Protection Agency 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 Steam Generators. In June of 1996, the Company paid $350,000 and
entered into a consent decree to settle this matter without admitting any
wrongdoing. During September 1996, the Company completed certain
modifications to its No. 8 boiler provided for in the consent decree which do
not affect its utility.
In 1992, the IRS disallowed income tax deductions for the 1988 tax year
which were claimed by the Company for fees and expenses, other than interest,
related to 1988 debt financing and refinancing transactions. The Company
deducted the balance of the disallowed fees and expenses related to the 1988
debt instruments during the tax years 1989 through 1995. 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 is contesting the disallowance. 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.
Prior to the entry of a decision in the U.S. Tax Court, Code
Section 162(k) was amended in August 1996 to provide that, retroactive to
1986, such Code Section was not applicable to deductions for amounts properly
allocable to indebtedness and amortized over the term of such indebtedness.
Accordingly, the Company and the IRS filed a joint motion for reconsideration
of the Court's opinion requesting a determination that the Company may deduct
all disallowed fees and expenses related to the 1988 debt instruments. On
October 22nd the Court granted the joint motion and issued its supplemental
opinion that the Company may deduct the fees and expenses previously
disallowed. The Company anticipates the Court's final decision on this matter
in the fourth quarter of 1996.
The Company has paid to the IRS tax of approximately $5 million 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 opinion of the U.S. Tax Court, which
the Company had been planning to appeal, was ultimately sustained, the
potential amount of additional taxes due on account of such disallowance for
the period 1989 through 1995 would be approximately $38 million exclusive of
interest, which amount the Company has fully reserved.
As previously reported, the Company responded during the first and second
quarters of 1995 to a Civil Investigative Demand issued by the U.S. Department
of Justice concerning a civil antitrust investigation into possible agreements
in restraint of trade in connection with the sales of commercial sanitary
paper products. On May 20, 1996, the Company received a subpoena to provide
certain documents to a federal grand jury in Cleveland that is investigating
possible antitrust violations in the sale of commercial sanitary paper
products. The Company has responded to the subpoena and is continuing to
cooperate in the investigation.
- 11 -
2. CHANGES IN SECURITIES
None
3. DEFAULTS UPON SENIOR SECURITIES
None
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
5. OTHER INFORMATION
None
6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit No. Description
3 Amended and Restated By-Laws
10 Stock Award Agreement dated September 10, 1996
27 Financial Data Schedule for the nine months ended
September 30, 1996.
99 News release containing financial results for the
quarter ended September 30, 1996.
b) No reports on Form 8-K were filed by the Company for the quarter
for which this report is filed.
- 12 -
FORT HOWARD CORPORATION
SIGNATURES
Pursuant to the requirement 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
Registrant
October 23, 1996 /s/ Kathleen J. Hempel
---------------------------------------
Kathleen J. Hempel, Vice Chairman and
Chief Financial Officer and Principal
Accounting Officer
October 23, 1996 /s/ James W. Nellen II
---------------------------------------
James W. Nellen II, Vice President
and Secretary
- 13 -
INDEX TO EXHIBITS
Exhibit No. Description
3 Amended and Restated By-Laws
10 Stock Award Agreement dated September 10, 1996
27 Financial Data Schedule for the nine months ended
September 30, 1996.
99 News release containing financial results for the
quarter ended September 30, 1996.
-14-
EXHIBIT 3
AMENDED AND 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. Officers. The officers of the Corporation shall be a
Chairman of the Board, a President and Chief Executive Officer, a Vice
Chairman, 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 President and 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. 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. President and Chief Executive Officer. The President
and 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. 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 President and Chief Executive Officer, 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 of, and be subject to all the
restrictions upon, the Chairman of the Board.
SECTION 7. Vice Chairman. The Vice Chairman, subject to the
direction of the President and Chief Executive Officer, shall assist the
President and Chief Executive Officer in carrying out the orders and
resolutions of the Board and shall perform such other duties as the President
and Chief Executive Officer or the Board shall from time to time assign.
SECTION 8. 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 9. 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 10. Treasurer. The Treasurer of the Corporation shall
have charge and custody of and be responsible for all funds and securities of
the Corporation.
SECTION 11. 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 12. 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 10
AWARD AGREEMENT dated as of September 10, 1996 (the "AWARD
AGREEMENT") between FORT HOWARD CORPORATION, a Delaware corporation (the
"COMPANY"), and the other party signatory hereto (the "PARTICIPANT").
WHEREAS, the Participant is currently an officer or key employee of
the Company or one of its Subsidiaries and, pursuant to the Company's 1995
Stock Incentive Plan (the "PLAN") and upon the terms and subject to the
conditions hereinafter set forth, the Company desires to provide the
Participant with an additional incentive to remain in its employ or the employ
of one of its Subsidiaries and to increase his or her interest in the success
of the Company by granting to the Participant (i) a Restricted Stock Award
consisting of restricted shares (the "RESTRICTED SHARES") of Common Stock, par
value $.01 per share, of the Company (the "COMMON STOCK") and (ii) a Stock
Equivalent Award consisting of units relating to shares of Common Stock (the
"STOCK EQUIVALENTS");
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto agree as follows:
1. DEFINITIONS; INCORPORATION OF PLAN TERMS. Capitalized terms
used herein without definition shall have the meanings assigned to them in the
Plan, a copy of which is attached hereto. This Award Agreement, the
Restricted Shares and the Stock Equivalents shall be subject to the Plan, the
terms of which are hereby incorporated herein by reference, and in the event
of any conflict or inconsistency between the Plan and this Award Agreement,
the Plan shall govern. The date of grant with respect to the Restricted
Shares and the Stock Equivalents (the "DATE OF GRANT") shall be the date
specified at the foot of the signature page hereof.
2. GRANT OF RESTRICTED SHARES. Subject to the terms and conditions
contained herein and in the Plan, the Company hereby grants to the
Participant, effective as of the Date of Grant, the number of Restricted
Shares specified at the foot of the signature page hereof.
3. TERMS AND CONDITIONS OF RESTRICTED SHARES. The Restricted
Shares evidenced hereby are subject to the following terms and conditions:
(a) RESTRICTION PERIOD. Subject to the terms and conditions
contained herein and in the Plan, none of the Restricted Shares may be
sold, assigned, transferred, pledged, encumbered or otherwise disposed of
prior to the Vesting Date (as defined below) applicable to such
Restricted Shares.
(b) LAPSE OF RESTRICTIONS. (i) Unless previously vested or
forfeited in accordance with the terms of the Plan or this Award
Agreement, 20% of the Participant's Restricted Shares shall vest and the
restrictions thereon shall lapse as of each of the first five
anniversaries of the Date of Grant (each, a "VESTING DATE") so long as
the Participant has remained in the continuous employment of the Company
or any of its Subsidiaries through the applicable Vesting Date; PROVIDED,
HOWEVER, that in the event of the death or Disability of the Participant,
or a termination of the Participant's employment by the Company or any of
its Subsidiaries without Cause (as such term is defined in Section 6),
100% of the Participant's Restricted Shares shall vest and the
restrictions thereon shall lapse as of the date of death, Disability or
termination; PROVIDED FURTHER, HOWEVER, that under no circumstances shall
any of the Restricted Shares vest, or the restrictions thereon lapse,
during the first six months after the Date of Grant. In the event of a
Change in Control and except as the Committee (as constituted immediately
prior to such Change in Control) may otherwise determine in its sole
discretion, all of the Participant's Restricted Shares, whether or not
vested (other than any Restricted Shares granted within six months of
such Change in Control), shall become fully vested and all restrictions
thereon shall lapse as of the date of the Change in Control.
(ii) Upon termination of the Participant's employment with the
Company or any of its Subsidiaries for any reason, any Restricted Shares
which have not theretofore vested (and which do not vest by reason of
such termination of employment) shall be forfeited without any
consideration being paid therefor. Notwithstanding any other provision
in this Award Agreement, in the event that the Participant's employment
with the Company or any of its Subsidiaries terminates for any reason
within six months of the Date of Grant, the Participant's Restricted
Shares shall be forfeited as of the date of such termination without any
consideration being paid therefor.
(c) ISSUANCE OF CERTIFICATE. A certificate or certificates in
respect of the Participant's Restricted Shares shall be registered in the
Participant's name as of the Date of Grant but shall be held in custody
by the Company until the restrictions thereon shall have lapsed, and, as
a condition of the Restricted Stock Award, the Participant shall have
delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award. Each such certificate shall be registered in the
name of such Participant, and shall bear a legend in substantially the
following form as determined by the Committee:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO
THE FORT HOWARD CORPORATION 1995 STOCK INCENTIVE PLAN AND ARE
SUBJECT TO THE TERMS AND CONDITIONS THEREOF AND OF AN AWARD
AGREEMENT BETWEEN FORT HOWARD CORPORATION AND THE BENEFICIAL OWNER
HEREOF, INCLUDING RESTRICTIONS ON SALE, TRANSFER AND ENCUMBRANCE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933. UNLESS FORT HOWARD
CORPORATION DETERMINES OTHERWISE, NO TRANSFER OF SUCH SECURITIES MAY
BE MADE WITHOUT AN OPINION OF COUNSEL, SATISFACTORY TO FORT HOWARD
CORPORATION, THAT SUCH TRANSFER MAY PROPERLY BE MADE WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR THAT SUCH
SECURITIES HAVE BEEN SO REGISTERED UNDER A REGISTRATION STATEMENT
WHICH IS IN EFFECT AT THE DATE OF SUCH TRANSFER.
COPIES OF THE 1995 STOCK INCENTIVE PLAN AND THE AWARD AGREEMENT ARE
ON FILE AT THE OFFICE OF THE SECRETARY AND MAY BE INSPECTED DURING
NORMAL BUSINESS HOURS.
(d) RIGHTS AS SHAREHOLDER. The Participant shall have, with
respect to the Restricted Shares, all of the rights of a shareholder of
the Company, including the right to vote the shares and the right to
receive any cash dividends. Stock dividends issued with respect to the
Restricted Shares shall be treated as additional shares under the
Participant's Restricted Stock Award and shall be subject to the same
restrictions and other terms and conditions that apply to the Restricted
Shares with respect to which such dividends are issued.
4. GRANT OF STOCK EQUIVALENTS. Subject to the terms and conditions
contained herein and in the Plan, the Company hereby grants to the
Participant, effective as of the Date of Grant, the number of Stock
Equivalents specified at the foot of the signature page hereof.
5. TERMS AND CONDITIONS OF STOCK EQUIVALENTS. The Stock
Equivalents evidenced hereby are subject to the following terms and
conditions:
(a) GENERAL. Subject to the terms and conditions contained herein
and in the Plan, each Stock Equivalent shall represent the unfunded and
unsecured promise of the Company to pay an amount in cash equal to the
Fair Market Value of a share of Common Stock. The Participant, as a
holder of such Stock Equivalents, has only the rights of a general
unsecured creditor of the Company.
(b) VESTING (i) Unless previously vested or forfeited in
accordance with the terms of the Plan or this Award Agreement, 20% of
the Participant's Stock Equivalents shall vest as of each Vesting Date so
long as the Participant has remained in the continuous employment of the
Company or any of its Subsidiaries through the applicable Vesting Date;
PROVIDED, HOWEVER, that in the event of the death or Disability of the
Participant, or a termination of the Participant's employment by the
Company or any of its Subsidiaries without Cause, 100% of the
Participant's Stock Equivalents shall vest as of the date of death,
Disability or termination; PROVIDED FURTHER, HOWEVER, that no Stock
Equivalent shall under any circumstances vest during the first six months
after the Date of Grant. In the event of a Change in Control and except
as the Committee (as constituted immediately prior to such Change in
Control) may otherwise determine in its sole discretion, all of the
Participant's Stock Equivalents, whether or not vested (other than any
Stock Equivalent granted within six months of such Change in Control),
shall become fully vested as of the date of the Change in Control.
(ii) Upon termination of the Participant's employment with the
Company or any of its Subsidiaries for any reason, any Stock Equivalents
which have not theretofore vested (and which do not vest by reason of
such termination of employment) shall terminate and be cancelled without
any consideration being paid therefor. Notwithstanding any other
provision in this Award Agreement, in the event that the Participant's
employment with the Company or any of its Subsidiaries terminates for any
reason within six months of the Date of Grant, the Participant's Stock
Equivalents shall terminate and be cancelled as of the date of such
termination without any consideration being paid therefor.
(c) PAYMENT. Subject to the terms and conditions contained herein
and in the Plan, the Company shall settle the Participant's Stock
Equivalents as promptly as practicable after the applicable Vesting Date
(or such earlier date upon which such Stock Equivalents vest pursuant to
Section 5(b)(i)) by payment to the Participant of an amount in cash equal
to (i) the Fair Market Value of a share of Common Stock as of the
applicable Vesting Date (or such earlier date upon which such Stock
Equivalents vest pursuant to Section 5(b)(i)) multiplied by (ii) the
number of Stock Equivalents that became vested as of such Vesting Date
(or such earlier date upon which such Stock Equivalents vest pursuant to
Section 5(b)(i)).
(d) CERTAIN RESTRICTIONS. None of the Stock Equivalents or any
rights or interests therein may be sold, transferred, assigned, pledged,
or otherwise encumbered or disposed of, except by will or the laws of
descent and distribution or pursuant to a "qualified domestic relations
order" as defined in the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder. During the Participant's lifetime, payment in settlement of
a Stock Equivalent shall be made only to the Participant (or an
"alternate payee" under a "qualified domestic relations order" as defined
in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder). Each
transferee of a Stock Equivalent pursuant to a qualified domestic
relations order shall, as a condition to the transfer thereof, execute an
agreement pursuant to which it shall become a party to this Award
Agreement.
(e) NO RIGHTS AS A SHAREHOLDER. The Participant shall have no
rights as a shareholder with respect to any Stock Equivalent.
6. CAUSE. For purposes of this Award Agreement, "CAUSE" (i) has
the meaning specified in an employment agreement applicable to the
Participant, or (ii) in the event the Participant does not have an employment
agreement that defines "Cause", means the occurrence of any of the following
circumstances:
(A) the wilful and continued failure by the Participant to
substantially perform his or her duties with the Company in his or her
established position on a full-time basis (other than any such failure
resulting from Disability) after a written demand for substantial
performance is delivered to the Participant by the Board, which demand
specifically identifies the manner in which the Board believes that he or
she has not substantially performed such duties;
(B) the wilful engaging by the Participant in conduct which is
significantly injurious to the Company, monetarily or otherwise, after a
written demand for cessation of such conduct is delivered to the
Participant by the Board, which demand specifically identifies the manner
in which the Board believes that the Participant has engaged in such
conduct and the injury to the Company;
(C) the conviction of the Participant of a crime involving moral
turpitude; or
(D) the Participant's abuse of illegal drugs or other controlled
substances or habitual intoxication.
For purposes of the foregoing definition of "Cause", no act, or failure to
act, on the part of the Participant shall be deemed wilful unless knowingly
done, or omitted to be done, by the Participant not in good faith and without
reasonable belief that such action or omission was in the best interests of
the Company.
7. REPRESENTATIONS AND WARRANTIES. The Participant is aware of and
familiar with the restrictions imposed on the transfer of any Restricted
Shares or Stock Equivalents, including, without limitation, those imposed by
the Securities Act of 1933, as amended, and any applicable state "blue sky"
laws. The Participant represents that this Award Agreement has been duly
executed and delivered by the Participant and constitutes a legal, valid and
binding agreement of the Participant, enforceable against the Participant in
accordance with its terms, except as limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors'
rights generally and by general principles of equity.
8. ENGAGING IN COMPETITION WITH THE COMPANY. (i) For a period of
two years from the date of termination of the employment of the Participant
with the Company or any direct or indirect Subsidiary of the Company, the
Participant shall not become an employee, owner (except for passive
investments of not more than three percent of the outstanding shares of, or
any other equity interest in any company or entity listed or traded on a
national securities exchange or in an over-the-counter securities market),
officer, agent or director of any firm or Person which either directly
competes with a line or lines of business of the Company or any Subsidiary
accounting for ten percent (10%) or more of the Company's or such Subsidiary's
gross sales, revenues or earnings before taxes or derives ten percent (10%) or
more of such firm's or Person's gross sales, revenues or earnings before taxes
from a line or lines of business which directly competes with the Company or
any Subsidiary. In the event of a breach by the Participant of the non-
compete provisions set forth in the first sentence of this Section 8(i) (or
the provisions of Section 8(ii) below), the Committee, in its sole discretion,
may require that the Participant promptly pay to the Company, in the case of
any Restricted Shares that vest within six (6) months of such termination of
employment, an amount in cash equal to the Fair Market Value of a share of
Common Stock on the date of vesting of such Restricted Shares multiplied by
the number of Restricted Shares that so vested. If, in any judicial
proceeding, a court shall refuse to enforce all of the separate covenants
deemed included in the first sentence of this Section 8(i), the Company and
the Participant intend that those of such covenants which, if eliminated,
would permit the remaining separate covenants to be enforced in such
proceedings shall, for the purpose of such proceedings, be deemed eliminated
from such provisions.
(ii) The Participant agrees to observe the terms of any
confidentiality, secrecy or other non-competition agreement that he or
she has previously entered into with the Company (the terms of which
shall be incorporated by reference into this Award Agreement) and agrees
that, in the event of any breach of any such agreement by the
Participant, he or she shall be subject to the provisions of the second
sentence of Section 8(i) above.
9. MISCELLANEOUS.
(a) NO RIGHTS TO GRANTS OR CONTINUED EMPLOYMENT. The Participant
shall not have any claim or right to receive grants of Restricted Shares,
Stock Equivalents or other Awards under the Plan. Nothing in the Plan or
in any Award or in this Award Agreement shall confer upon the Participant
any right to continued employment with the Company or any Subsidiary, as
the case may be, or interfere in any way with the right of the Company or
a Subsidiary to terminate the employment of the Participant at any time,
with or without cause.
(b) TAX WITHHOLDING. It shall be a condition to the obligation of
the Company to deliver any certificates evidencing Common Stock pursuant
to the vesting of any Restricted Shares that the Participant pay to the
Company such amount as may be required by the Company for the purpose of
satisfying any federal, state, or local tax withholding requirements.
The Company shall also have the right to deduct from all cash payments
made pursuant to, or in connection with, any Stock Equivalents any
federal, state or local taxes required to be withheld with respect to
such payments.
(c) NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CORPORATE CHANGES.
Neither the Plan nor this Award Agreement shall affect or restrict in any
way the right or power of the Company or its shareholders to make or
authorize any adjustment, recapitalization, reorganization or other
change in the capital structure or business of the Company, or any merger
or consolidation of the Company, or any issue of stock or of options,
warrants or rights to purchase stock or of bonds, debentures, preferred
or prior preference stocks whose rights are superior to or affect the
Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of the assets or
business of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding, whether
of a similar character or otherwise.
(d) EXCHANGE ACT. Notwithstanding anything contained in the Plan
or this Award Agreement to the contrary, if the consummation of any
transaction under the Plan or this Award Agreement would result in the
possible imposition of liability on the Participant pursuant to Section
16(b) of the Exchange Act, the Committee shall have the right, in its
sole discretion, but shall not be obligated, to defer such transaction to
the extent necessary to avoid such liability, but in no event for a
period in excess of 180 days.
10. SURVIVAL; ASSIGNMENT.
(a) All agreements, representations and warranties made herein and
in any certificates delivered pursuant hereto shall survive the issuance
to the Participant of the Restricted Shares, the Stock Equivalents and
any shares of Common Stock and, notwithstanding any investigation
heretofore or hereafter made by the Participant or the Company or on the
Participant's or the Company's behalf, shall continue in full force and
effect. Except as expressly provided in the Plan or this Award
Agreement, the Participant may not assign any of his rights hereunder.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the heirs and permitted successors
and assigns of such party; and all agreements herein by or on behalf of
the Company, or by or on behalf of the Participant, shall bind and inure
to the benefit of the heirs and permitted successors and assigns of such
parties hereto.
(b) The Company shall have the right to assign to any of its
affiliates any of its rights, or to delegate to any of its affiliates any
of its obligations, under this Award Agreement.
11. CERTAIN REMEDIES. Without intending to limit the remedies
available to the Company, the Participant agrees that damages at law will be
an insufficient remedy in the event the Participant violates the terms of this
Award Agreement. The Participant agrees that the Company may apply for and
have injunctive or other equitable relief in any court of competent
jurisdiction to restrain the breach or threatened breach of, or otherwise
specifically to enforce, any of the provisions hereof.
12. ARBITRATION. Any dispute or controversy arising under or in
connection with this Award Agreement shall be settled exclusively by
arbitration in a location mutually agreed to by the Company and the
Participant before one arbitrator of exemplary qualifications and stature who
shall be jointly selected by the Company and the Participant, or if the
Company and the Participant cannot agree on the selection of the arbitrator,
such arbitrator shall be selected by the American Arbitration Association.
The parties agree to use their best efforts to cause (i) the arbitrator to be
appointed within 30 days of the date that either party hereto notifies the
other party that a dispute or controversy exists that necessitates the
appointment of an arbitrator, and (ii) any arbitration hearing to be held
within 30 days of the date of selection of the arbitrator and, as a condition
to his or her selection, such arbitrator must consent to be available for a
hearing at such time. Judgment may be entered on the arbitrator's award in
any court having jurisdiction. The parties hereto also agree that the
arbitrator shall be empowered to enter an equitable decree mandating specific
enforcement of the terms of this Award Agreement. The Company shall bear all
expenses of the arbitrator incurred in any arbitration hereunder, PROVIDED
that in the event that the Participant seeks arbitration and the arbitrator
determines that such claims are frivolous in nature or were not brought or
pursued in good faith, the Participant will promptly reimburse the Company for
all amounts paid by the Company for such expenses. Each party hereto will pay
its own legal fees in connection with any such arbitration.
13. NOTICES. All notices and other communications provided for
herein shall be in writing and shall be delivered by hand or sent by certified
or registered mail, return receipt requested, postage prepaid, addressed, if
to the Participant, to his attention at the mailing address set forth at the
foot of this Award Agreement (or to such other address as the Participant
shall have specified to the Company in writing) and, if to the Company, to it
at 1919 South Broadway, Green Bay, Wisconsin 54304, Attention: Secretary.
All such notices shall be conclusively deemed to be received and shall be
effective, if sent by hand delivery, upon receipt, or if sent by registered or
certified mail, on the fifth day after the day on which such notice is mailed.
14. WAIVER. The waiver by either party of compliance with any
provision of this Award Agreement by the other party shall not operate or be
construed as a waiver of any other provision of this Award Agreement, or of
any subsequent breach by such party of a provision of this Award Agreement.
15. ENTIRE AGREEMENT; GOVERNING LAW. This Award Agreement and the
Plan set forth the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings relating to the
subject matter hereof. This Award Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same agreement. The
headings of sections and subsections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of this Award Agreement. This Award Agreement shall be governed
by, and construed in accordance with, the laws of the State of Wisconsin
without giving effect to conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused this Award Agreement to
be executed by its duly authorized officer and the Participant has executed
this Award Agreement, both as of the day and year first above written.
FORT HOWARD CORPORATION
By: /s/ James W. Nellen II
------------------------------------------
Name: James W. Nellen II
Title: Vice President and Secretary
PARTICIPANT
/s/ Michael T. Riordan
------------------------------------------
Name: Michael T. Riordan
Address:
Number of Restricted Shares: 12,000
------
Number of Stock Equivalents: 8,000
------
Date of Grant: September 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORT
HOWARD CORPORATION'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000038195
<NAME> FORT HOWARD CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 693
<SECURITIES> 0
<RECEIVABLES> 93,461
<ALLOWANCES> 3,304
<INVENTORY> 136,696
<CURRENT-ASSETS> 278,946
<PP&E> 2,009,804
<DEPRECIATION> 778,953
<TOTAL-ASSETS> 1,587,702
<CURRENT-LIABILITIES> 311,200
<BONDS> 2,500,695
<COMMON> 740
0
0
<OTHER-SE> (1,530,130)
<TOTAL-LIABILITY-AND-EQUITY> 1,587,702
<SALES> 1,196,307
<TOTAL-REVENUES> 1,196,307
<CGS> 715,863
<TOTAL-COSTS> 715,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 198,841
<INCOME-PRETAX> 171,777
<INCOME-TAX> 65,386
<INCOME-CONTINUING> 106,391
<DISCONTINUED> 0
<EXTRAORDINARY> (3,340)
<CHANGES> 0
<NET-INCOME> 103,051
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.50
</TABLE>
Exhibit 99
NEWS
For further information contact:
(FORT HOWARD LOGO here)
Media:
Cliff Bowers, Ext. 4087
Financial:
Mike Lempke, Ext. 2492
P. O. Box 19130
Green Bay, WI 54307-9130
414/435-8821
FOR RELEASE: IMMEDIATELY
FORT HOWARD EPS MORE THAN DOUBLES
TO $0.58 FOR 3RD QUARTER,
OPERATING INCOME RISES 42%
GREEN BAY, WI - October 23, 1996 - Fort Howard Corporation today reported
its seventh consecutive year-over-year quarterly increase in operating income.
Net income per share reached $0.58 for the third quarter ending September 30,
1996, compared to net income per share of $0.23 in the same period of 1995.
"Our strong market positions, supported by Fort Howard's unique operating
efficiencies, have propelled our positive performance for this quarter as they
have for the past several," said Fort Howard President and Chief Executive
Officer, Michael T. Riordan. "Very strong order flow for our at-home
products, stable pricing in our away-from-home business and low recovered
fiber costs were key factors."
Fort Howard's operating income rose 42% in the third quarter of 1996
compared to the third quarter of 1995. Its operating income margin for the
quarter was 33% compared to 22% for the third quarter of 1995 and 31% for the
second quarter of 1996.
-- More --
-- Ad One --
According to Riordan, the growing demand for the company's at-home
branded and private label tissue products, combined with its plans for
continued product enhancements, led to its capacity-expansion announcement
last month.
Fort Howard will add a state-of-the-art, 270-inch paper machine at either
its Rincon, GA, operation near Savannah, or its Muskogee, OK, facility.
Start-up is expected in 1999.
NET SALES PERFORMANCE
Although volume increased in the 3rd quarter, domestic tissue revenues
declined slightly from the same quarter of 1995 due primarily to lower selling
prices for Fort Howard's at-home products. Net sales of the company's
international operations increased 4% for the third quarter of 1996 compared
to third quarter 1995 due to higher volume at the company's U.K. facilities,
offset by lower selling prices. For the third quarter, Fort Howard's
consolidated net sales decreased to $408,163,000 compared to third quarter
1995 net sales of $426,116,000. This is principally due to lower sales from
the company's recovered fiber brokerage operations that experienced
significantly lower prices for commodity wastepaper.
Domestic tissue sales increased 5% for the first nine months of 1996
compared to 1995. Net sales of the company's international operations
increased 9% for the first nine months of 1996 compared to 1995 due to an
increase in both net selling prices and volume at the company's United
Kingdom facilities. Offsetting sales increases at domestic and international
tissue operations were lower sales from the company's recovered fiber
brokerage operations resulting from lower prices. First nine months 1996
consolidated net sales were $1,196,307,000, a decrease of 0.8% from 1995 net
sales of $1,205,602,000 for the same period.
-- Ad Two --
OPERATING INCOME INCREASES
Operating income increased 42% to $135,299,000 for the third quarter
compared to $95,369,000 for the third quarter of 1995. Operating income
increased 47% to $374,201,000 in the first nine months of 1996 compared to
$254,235,000 for the first nine months of 1995. The year-to-date increase was
primarily due to higher volume and selling prices and lower recovered fiber
costs in both the company's domestic and international operations.
NET INCOME NEARLY TRIPLES
For the third quarter of 1996, net income was $43,074,000 resulting in
net income for the first nine months of 1996 of $103,051,000 compared to net
income of $14,500,000 and net loss of $6,147,000 (after extraordinary item)
for the same periods in 1995, respectively. The net income per share was
$0.58 for the third quarter of 1996 compared to $0.23 for the third quarter of
1995. Net income per share before extraordinary items were $1.55 and $0.22
for the first nine months of 1996 and 1995, respectively. For the first nine
months of 1996, net income per share after extraordinary item was $1.50
compared to a net loss per share after extraordinary item of $0.11 for the
first nine months of 1995.
In April 1995, the company completed a recapitalization, including an IPO
of 25 million shares of common stock. Had the recapitalization been completed
on January 1, 1995, net income per share for the first nine months of 1995
would have been $0.36 per share on a pro forma basis based on 63,371,000
shares outstanding.
Extraordinary losses related to debt repurchases in 1996 and 1995 (see
Notes to Financial Information) impacted the company's financial performance
during the first nine months of 1996 and 1995.
Fort Howard is a leading manufacturer and marketer of consumer tissue
products for both the away-from-home and at-home markets in the United States
and United Kingdom.
-- More --
-- Ad Three --
In the domestic at-home market, its principal consumer brands include
Mardi Gras printed napkins (which holds the leading domestic market position)
and paper towels, Soft 'N Gentle bath and facial tissue, So-Dri paper towels,
and Green Forest, the leading domestic line of environmentally positioned
recycled tissue paper products.
Prominent away-from-home market brands include the Preference Ultra line
of premium products, Preference near-premium products, and the Envision line
of environmentally positioned products.
(FINANCIAL INFORMATION AND NOTES FOLLOW ON SEPARATE PAGES. THE NOTES ARE AN
INTEGRAL PART OF THESE STATEMENTS.)
# # # # #
FORT HOWARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $408,163 $426,116 $1,196,307 $1,205,602
Cost of sales 234,007 299,974 715,863 865,474
-------- -------- ---------- ----------
Gross income 174,156 126,142 480,444 340,128
Selling, general and
administrative 38,857 30,773 106,243 85,893
-------- -------- ---------- ----------
Operating income 135,299 95,369 374,201 254,235
Interest expense 61,867 74,177 198,841 237,258
Other expense
(income), net 2,545 (1,600) 3,583 (2,537)
-------- -------- ---------- ----------
Income before taxes 70,887 22,792 171,777 19,514
Income tax expense 27,813 8,292 65,386 6,913
-------- -------- ---------- ----------
Net income before
extraordinary item 43,074 14,500 106,391 12,601
Extraordinary item -
loss on debt
repurchases, net -- -- (3,340) (18,748)
-------- -------- ---------- ----------
Net income (loss) $ 43,074 $ 14,500 $ 103,051 $ (6,147)
======== ======== ========== ==========
Net income (loss) per share:
Before extraordinary
item $ 0.58 $ 0.23 $ 1.55 $ 0.22
Extraordinary item -- -- (0.05) (0.33)
-------- -------- ---------- ----------
Net income (loss) $ 0.58 $ 0.23 $ 1.50 $ (0.11)
======== ======== ========== ==========
</TABLE>
FORT HOWARD CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION> September 30, December 31,
1996 1995
------------ ------------
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 693 $ 946
Receivables, less allowances of $3,304 in 1996
and $2,883 in 1995 90,157 97,707
Inventories 136,696 163,076
Deferred income taxes 51,000 29,000
Income taxes receivable 400 700
---------- ----------
Total current assets 278,946 291,429
Property, plant and equipment 2,009,804 1,971,641
Less: Accumulated depreciation 778,953 706,394
---------- ----------
Net property, plant and equipment 1,230,851 1,265,247
Other assets 77,905 95,761
---------- ----------
Total assets $1,587,702 $1,652,437
========== ==========
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable $ 121,179 $ 112,384
Interest payable 23,481 64,375
Income taxes payable 6,145 1,339
Other current liabilities 90,530 85,351
Current portion of long-term debt 69,865 62,720
---------- ----------
Total current liabilities 311,200 326,169
Long-term debt 2,500,695 2,903,299
Deferred and other long-term income taxes 270,227 225,043
Other liabilities 34,970 36,355
Shareholders' deficit:
Common Stock 740 634
Additional paid-in capital 1,100,884 895,652
Cumulative translation adjustment (2,194) (2,844)
Retained deficit (2,628,820) (2,731,871)
---------- ----------
Total shareholders' deficit (1,529,390) (1,838,429)
---------- ----------
Total liabilities and shareholders' deficit $1,587,702 $1,652,437
========== ==========
</TABLE>
FORT HOWARD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION> Nine Months Ended
September 30,
--------------------
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Cash provided from (used for) operations:
Net income (loss) $ 103,051 $ (6,147)
Depreciation 75,727 73,751
Non-cash interest expense 10,103 9,634
Deferred income tax (credit) expense 23,228 (3,967)
Pre-tax loss on debt repurchases 5,520 30,734
Decrease in receivables 7,550 17,972
(Increase) decrease in inventories 26,380 (41,820)
Decrease in income taxes receivable 300 4,500
Increase in accounts payable 8,795 26,623
Decrease in interest payable (40,894) (58,538)
Increase in income taxes payable 4,806 429
All other, net 7,435 (12,228)
--------- ---------
Net cash provided from operations 232,001 40,943
Cash used for investment activity:
Additions to property, plant and equipment (40,876) (32,150)
Cash provided from (used for) financing activities:
Proceeds from long-term borrowings -- 1,438,900
Repayment of long-term borrowings (395,227) (1,682,623)
Debt issuance costs (1,489) (49,155)
Issuance of Common Stock, net of offering costs 205,338 284,104
--------- ---------
Net cash (used for)financing activities (191,378) (8,774)
--------- ---------
Increase (decrease) in cash (253) 19
Cash at beginning of period 946 422
--------- ---------
Cash at end of period $ 693 $ 441
========= =========
</TABLE>
*****
FORT HOWARD CORPORATION
NOTES TO FINANCIAL INFORMATION
(Unaudited)
1. In May and June 1996 the company sold 10.52 million primary shares of
common stock in a registered public offering. The net proceeds of the
offering were used to reduce outstanding bank debt. Also included in the
offering were 6.52 million secondary shares of common stock sold by
certain shareholders of Fort Howard. The company did not receive any of
the proceeds from the sale of shares by the selling shareholders. In
connection with the offering in the second quarter of 1996, the company
reported an extraordinary loss of $3 million (net of income taxes of $2
million) representing write-offs of deferred loan costs associated with
the prepayment of indebtedness outstanding under the company's 1995 Bank
Credit Agreement on May 15, 1996.
2. The company completed a recapitalization, including an IPO of 25 million
shares of common stock, in April 1995.
A. In connection with the April 1995 recapitalization, the company
reported an extraordinary loss of $19 million (net of income taxes of
$12 million) representing the redemption premiums on the repurchases
of all the company's outstanding 12 5/8% Subordinated Debentures at
the redemption price of 102.5% of the principal amount thereof and
write-offs of deferred loan costs associated with the prepayment or
repurchases of all indebtedness outstanding under the company's 1988
Bank Credit Agreement, the 1993 Term Loan and the Senior Secured
Floating Rate Notes on March 16, 1995, and the repurchase of all
outstanding 12 5/8% Subordinated Debentures and 14 1/8% Junior
Subordinated Discount Debentures on April 15, 1995.
B. Assuming that all components of the recapitalization had been
consummated as of January 1, 1995, for the first nine months of 1995,
pro forma interest expense would have decreased $16 million from $237
million to $221 million. After adjusting the income tax (credit) for
the decrease in interest expense at an effective rate of 38.5%, the
pro forma net income (loss) before extraordinary item and pro forma
net income (loss) per share before extraordinary item (assuming that
63,371,000 weighted average shares were outstanding for the period)
would have been $22.6 million and $0.36 per share for the first nine
months of 1995, respectively.
# # # # #
