As Filed with the Securities and Exchange Commission on March 4, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Fort James Corporation
(Exact name of registrant as specified in its charter)
Commonwealth of Virginia 54-0848173
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
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75 Tri-State International Office Center
Suites 100 and 175
Lincolnshire, Illinois 60069
(847) 317-5000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CLIFFORD A. CUTCHINS, IV, ESQ.
Senior Vice President and General Counsel
Fort James Corporation
75 Tri-State International Office Center
Suites 100 and 175
Lincolnshire, Illinois 60069
(847) 317-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With a Copy to:
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Marshall H. Earl, Jr., Esq. Patricia A. Vlahakis, Esq.
McGuire, Woods, Battle & Wachtell, Lipton, Rosen & Katz
Boothe LLP 51 West 52nd Street
One James Center New York, New York 10019
901 East Cary Street (212) 403-1000
Richmond, Virginia 23219
(804) 775-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box:[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to Amount to Be Offering Price Aggregate Amount of
Be Registered Registered Per Unit(1) Offering Price(1) Registration Fee
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Debt Securities $ 800,000,000(2) 100%(3) $ 800,000,000(3) $236,000
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Such amount represents the issue price rather than the principal amount of
any Debt Securities issued at an original issue discount. Any offering of
Debt Securities denominated other than in U.S. dollars will be treated as
the equivalent in U.S. dollars based on the official exchange rate
applicable to the purchase of Debt Securities from the Registrant.
(3) Plus accrued interest, if any.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
[FORT JAMES LOGO]
PROSPECTUS
Fort James Corporation
DEBT SECURITIES
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Fort James Corporation, a Virginia corporation ("Fort James" or the
"Company"), may offer from time to time its debt securities consisting of
debentures, notes and/or other evidences of indebtedness (the "Debt
Securities"), from which the Company will receive proceeds of up to
$800,000,000 (or the equivalent in foreign denominated currencies or units of
two or more currencies, based on the applicable exchange rate at the time of
offering, as shall be designated by the Company at the time of offering). The
Debt Securities may be offered in one or more series, in amounts, at prices and
on terms to be determined at the time of offering. Each issue of Debt
Securities may vary, where applicable, as to aggregate principal amount,
maturity date, public offering or purchase price, interest rate or rates and
timing of payments thereof, provision for redemption or sinking fund
requirements, if any, currencies or currency units of denomination or
currencies or currency units otherwise applicable thereto, and any other
variable terms and methods of distribution. The specific terms with regard to
the Debt Securities in respect of which this Prospectus is being delivered are
set forth in one or more accompanying Prospectus Supplements (each a
"Prospectus Supplement").
The Debt Securities will be senior unsecured obligations of the Company
and will rank equally with all other existing and future senior unsecured and
unsubordinated indebtedness of the Company, but will rank behind the Company's
secured indebtedness. The Company is a holding company and therefore the Debt
Securities will be effectively subordinated to all liabilities (including trade
payables) of the Company's subsidiaries.
The Debt Securities may be issued in registered form ("Registered
Securities") or bearer form ("Bearer Securities"), or both. In addition, all or
a portion of the Debt Securities of a series may be issuable in temporary or
permanent global form. Bearer Securities, Debt Securities represented by a
permanent global Debt Security exchangeable for Bearer Securities, and Debt
Securities initially represented by a temporary global Debt Security described
under "Description of Debt Securities -- Temporary Global Securities"
(collectively, "Euro-Securities") are offered only to Non-United States persons
and to offices of certain United States financial institutions located outside
the United States and its possessions. See "Limitations on Issuance of
Euro-Securities." For a discussion of certain United States federal income tax
consequences to Holders of Debt Securities, see "United States Taxation."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company may sell Debt Securities to one or more underwriters for
public offering and sale by them or it may sell Debt Securities to investors
directly or through agents. See "Plan of Distribution." The accompanying
Prospectus Supplement sets forth the names of any underwriters, dealers, or
agents involved in the sale of the Debt Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission, or discount
arrangements with them.
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is , 1998.
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No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus or any Prospectus Supplement and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company or by any underwriter, agent or dealer. Neither the delivery of this
Prospectus or any Prospectus Supplement nor any sale made hereunder or
thereunder shall under any circumstances create an implication that there has
been no change in the affairs of the Company since the date hereof or thereof
or that the information contained herein or therein is correct at any time
subsequent to the date hereof or thereof. This Prospectus and any Prospectus
Supplement do not constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
AVAILABLE INFORMATION
Fort James is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements, and other information filed by
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can also be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such information may also be
accessed electronically by means of the Commission's website on the Internet
(http://www.sec.gov). The Company's common stock is listed on the New York
Stock Exchange, and such reports, proxy and information statements, and other
information concerning the Company can be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus does not contain all the information set forth in the
registration statement to which this Prospectus relates (the "Registration
Statement") and the exhibits thereto which the Company has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby incorporated
by reference into this Prospectus:
(a) the Annual Report of the Company on Form 10-K for the fiscal year
ended December 29, 1996;
(b) the Quarterly Reports of the Company on Form 10-Q for the quarters
ended March 30, 1997, June 29, 1997 and September 28, 1997; and
(c) the Current Reports of the Company on Form 8-K dated May 4, 1997 (2
reports), June 29, 1997, July 2, 1997, August 7, 1997, August 8, 1997, August
12, 1997, August 13, 1997 (4 reports), September 15, 1997, October 23, 1997,
February 3, 1998 and March 2, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act subsequent to the date of the Registration
Statement on Form S-3 of which this Prospectus is a part and prior to the
effectiveness thereof or subsequent to the date of the final prospectus and
prior to the termination of the offering of Debt Securities shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained
herein or in a document all or any portion of which is incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus. As used
herein, the terms "Prospectus" and "herein" mean this Prospectus, including the
documents incorporated by reference, as the same may be amended, supplemented,
or otherwise modified from time to time. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein do not purport to be complete and are qualified in all respects by
reference to all of the provisions of such contract or other document.
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<PAGE>
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents which are not specifically incorporated by reference in such
documents. Requests for such copies should be directed to Celeste Gunter, Vice
President, Investor Relations, Fort James Corporation, 120 Tredegar Street,
Richmond, Virginia 23219 (telephone (804) 649-4307 or (888) 649-4362).
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference herein contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. These statements are based on
management's beliefs and assumptions, relying on information currently
available to management, and are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of the Company set forth (1) under "The
Company" herein, (2) under "Business" and "Management's Discussion and
Analysis" in the Company's Annual Report on Form 10-K and in each Quarterly
Report on Form 10-Q, and under "The Company", "Risk Factors", "Business" and
"Management's Discussion and Analysis" in certain Current Reports on Form 8-K,
incorporated by reference herein and (3) in this Prospectus and the documents
incorporated by reference herein preceded by, followed by or that include the
words "believes," "expects," "anticipates," "intends," "plans," "estimates" or
similar expressions.
Forward-looking statements are not guarantees of performance as they
involve risks, uncertainties and assumptions. The future results of the Company
may differ materially from those expressed in these forward-looking statements.
Many of the factors that will determine these results are beyond the Company's
ability to control or predict. Purchasers of Debt Securities are cautioned not
to put undue reliance on any forward-looking statements. The Company claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Purchasers of Debt Securities should understand that certain risks and
uncertainties, in addition to those discussed herein and elsewhere in the
documents which are incorporated by reference herein, could affect the future
results of the Company and could cause results to differ materially from those
expressed in such forward-looking statements. Such risks and uncertainties
include, but are not limited to, general business and economic conditions;
competitive pricing pressures for the Company's products; changes in raw
material, energy and other costs; opportunities that may be presented to and
pursued by the Company; determinations by regulatory and governmental
authorities; the ability to successfully integrate the businesses of the former
James River Corporation of Virginia ("James River") and the former Fort Howard
Corporation ("Fort Howard"); and the ability to achieve synergistic and other
cost reductions and efficiencies.
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THE COMPANY
Fort James is a preeminent worldwide manufacturer and marketer of
paper-based consumer products, including towel and tissue products as well as
disposable tabletop and foodservice products. The Company's principal towel and
tissue products include bathroom tissue, paper towels, table napkins, boxed
facial tissue and wipers. Disposable tabletop and foodservice products include
paper and plastic cups, paper plates, and plastic cutlery. Fort James also
produces and markets paper-based packaging for food and pharmaceuticals and
communications papers.
Fort James is the result of the merger of a wholly owned subsidiary of
James River into Fort Howard in August 1997 (the "Merger"). In connection with
the Merger, James River was renamed "Fort James Corporation."
Fort James' principal U.S. retail tissue brands include QUILTED NORTHERN
bathroom tissue, BRAWNY paper towels, MARDI GRAS printed napkins and paper
towels, VANITY FAIR premium dinner napkins, NORTHERN paper napkins, SOFT'N
GENTLE bath and facial tissue, SO-DRI paper towels, and GREEN FOREST recycled
tissue products. The Company's principal retail tabletop brand is its DIXIE
brand of disposable cups and plates. Fort James also believes it is the leading
supplier of private label tissue products and the leading supplier of both
tissue and disposable tabletop products to the growing warehouse club channel.
The U.S. away-from-home channel, where the Company sells its products to
foodservice, janitorial supply and sanitary paper distributors for use in
restaurants, offices, factories, hospitals, schools and hotels, is also an
important distribution channel for the Company. The Company is a leading
producer of tissue products for the U.S. away-from-home channel and is also one
of the largest producers of disposable cups, plates and related products for
the away-from-home foodservice industry.
In Europe, sales into retail channels are supported by both branded and
private label product offerings. European branded products include LOTUS
bathroom tissue and VANIA feminine hygiene products, sold primarily in France,
COLHOGAR bathroom tissue, sold in Spain, TENDERLY bathroom tissue, sold in
Italy, and KITTENSOFT and INVERSOFT bathroom tissue, sold in the British Isles.
The Company believes that it is among the lowest-cost producers of tissue
products in North America. The Company believes its cost advantage in North
America is derived from a number of factors, including the size and scale of
certain of its manufacturing plants, the competitive state of its tissue-making
manufacturing assets and the benefits it realizes from the Fort Howard
proprietary deinking technology.
The Company's principal executive offices are currently located at 75
Tri-State International Office Center, Suites 100 and 175, Lincolnshire,
Illinois 60069, telephone (847) 317-5000. In the spring of 1998, the Company's
principal executive offices will be located at 1650 Lake Cook Road, Deerfield,
Illinois 60015-4753.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated.
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<CAPTION>
Fiscal Year Ended(1) Nine Months Ended(1)
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12/27/92 12/26/93 12/25/94 12/31/95 12/29/96 12/28/97 9/29/96 9/28/97
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Ratio of Earnings to Fixed Charges
(unaudited) ..................... (2)(3) (2)(4) (2) 1.45x 2.06x 1.64x 2.08x 2.77x
</TABLE>
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(1) In computing the ratio of earnings to fixed charges, earnings consist
of income before income taxes, extraordinary items, the cumulative effect of
changes in accounting principles, minority interests, and fixed charges
excluding capitalized interest. Fixed charges consist of interest expense,
capitalized interest, and that portion of rental expense deemed representative
of the interest factor. Earnings and fixed charges also include the Company's
proportionate share of such amounts for unconsolidated affiliates which are
owned 50% or more and distributed income from less than 50% owned affiliates.
(2) For the following years earnings were inadequate to cover fixed
charges and the amount of the deficiencies were: for the year ended December
27, 1992 -- $276.4 million; for the year ended December 26, 1993 -- $2,056.0
million; for the year ended December 25, 1994 -- $84.0 million.
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(3) During 1992, the Company initiated a productivity enhancement program
and recorded a $112 million pretax restructuring charge which has been included
in the calculation of the ratio of earnings to fixed charges for this year.
Excluding the impact of the $112 million pretax charge from earnings, the
amount of the deficiency of earnings compared to fixed charges would have been
$164.4 million for this year.
(4) During 1993, the Company wrote-off $1,980.4 million of goodwill which
has been included in the calculation of the ratio of earnings to fixed charges
for this year. Excluding the impact of the $1,980.4 write-off of good will, the
amount of the deficiency of earnings compared to fixed charges would have been
$75.6 million for this year.
USE OF PROCEEDS
Except as may be described otherwise in a Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes which may include, but are not limited to, one
or more of the following: repayment of borrowings or other indebtedness,
acquisitions, working capital, capital expenditures, investments in and
advances to subsidiaries of the Company, refinancing of debt and the redemption
of bonds or stock. The precise amount and timing of the application of such net
proceeds will depend on the funding requirements and the availability of other
funds to the Company and its subsidiaries. Pending such application by the
Company, such net proceeds may be temporarily invested in marketable securities
or applied to the reduction of the Company's short-term indebtedness.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture dated as of November
1, 1991, as supplemented by the First Supplemental Indenture dated as of
September 19, 1997 (as further amended or supplemented from time to time, the
"Indenture") between the Company and The Bank of New York, as Trustee (the
"Trustee"). A copy of the Indenture is incorporated by reference as an exhibit
to the Registration Statement to which this Prospectus relates. The statements
under this caption, as modified or superseded by the applicable Prospectus
Supplement, are brief summaries of certain provisions of the Indenture, do not
purport to be complete, and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture. Wherever particular
Sections or defined terms of the Indenture are referred to, such Sections or
defined terms are incorporated herein by reference.
The term "Securities," as used in this Prospectus, refers to all
Securities issued under the Indenture and includes the Debt Securities. Unless
otherwise indicated, currency amounts in this Prospectus and any Prospectus
Supplement are stated in United States dollars ("$" or "dollars").
The Securities may be issued from time to time in one or more series. The
particular terms of each series of Securities offered by a Prospectus
Supplement or Prospectus Supplements will be described in such Prospectus
Supplement or Prospectus Supplements relating to such series.
The Indenture limits the ability of the Company to incur certain secured
indebtedness and to engage in certain sale and leaseback transactions. See
"Certain Covenants" below.
General
The Indenture provides that, in addition to Securities previously issued
thereunder, additional Securities may be issued in separate series thereunder
without limitation as to aggregate principal amount. The terms of each series
of Securities will be established by or pursuant to a resolution of the Board
of Directors of the Company and set forth or determined in the manner provided
in an Officers' Certificate or by a supplemental indenture. (Section 301)
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Securities of each series: (1) the title of
the Securities; (2) any limit on the aggregate principal amount of the
Securities; (3) whether the Securities are to be issuable as Registered
Securities or Bearer Securities or both, whether any of the Securities are to
be issuable initially in temporary global form, and whether any of the
Securities are to be issuable in permanent global form; (4) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
the Securities will be issued; (5) the date or dates on which the principal of
the Securities is payable; (6) the rate or rates per annum at which the
Securities will bear interest, if any, or the formula pursuant to which such
rate or rates will be determined, and the date or dates from which any such
interest will accrue; (7) the Interest Payment Dates on which any such interest
on the Securities will be payable and the Regular Record Date for any interest
payable on any Registered Securities on any Interest Payment Date; (8) the
Person to whom any Registered Securities of such series will be payable, if
other than the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, the manner in which, or the Person to whom, any interest on
any Bearer Security of such series will be payable, if otherwise than upon
presentation and surrender of the coupons appertaining thereto, and the extent
to which, or the manner in which, any interest payable on a temporary global
Security on an Interest Payment Date will be paid if other than in the manner
described under "Temporary Global Securities" below and the extent to which, or
the manner in which, any interest payable on a permanent global Security on an
Interest Payment Date will be paid; (9) each office or agency where, subject to
the terms of the Indenture as described below under "Payment and Paying
Agents," the principal of and any premium and interest on the Securities will
be payable and each office or agency where, subject to the terms of the
Indenture as described below under "Form, Exchange, Registration and Transfer,"
the Securities may be presented for registration of transfer or exchange; (10)
the period or periods within which and the price or prices at which the
Securities may, pursuant to any optional redemption provisions, be redeemed, in
whole or in part, and the other detailed terms and provisions of any such
optional redemption provisions; (11) the obligation, if any, of the Company to
redeem or purchase the Securities pursuant to any sinking fund or analgous
provisions or at the option of the Holder thereof and the period or periods
within which and the price or prices at which the Securities will be redeemed
or purchased, in whole or in part, pursuant to such obligation, and the other
detailed terms and provisions of such obligation; (12) the denominations in
which any Registered Securities will be issuable, if other than denominations
of $1,000 and any integral multiple thereof, and the denomination or
denominations in which Bearer Securities will be issuable, if other than
denominations of $5,000; (13) the currency or currency units of payment of
principal of and any premium and interest on the Securities; (14) any index
used to determine the amount of payments of principal of and any premium and
interest on the Securities; (15) if other than the
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principal amount thereof, the portion of the principal amount of the Securities
which shall be payable upon declaration of acceleration of the Maturity
thereof; (16) any limitation on the application of the terms of the Indenture
described below under "Defeasance and Covenant Defeasance;" (17) the
application, if any, of judgments in respect of Specified Currency, to the
Securities; (18) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may be
specified; (19) any deletions from, modifications of or additions to the Events
of Default or convenants (including any deletions from, modifications of or
additions to Section 1010) of the Company with respect to Securities of the
series, whether or not such Events of Default or covenants are consistent with
the Events of Default or covenants set forth herein; (20) whether, under what
circumstances and the currency in which the Company will pay additional amounts
as contemplated by Section 1010 on the Securities of the series to any Holder
who is not a United States person (including any modification to the definition
of such term) in respect of any tax, assessment or governmental charge and, if
so, whether the Company will have the option to redeem such Securities rather
than pay such additional amounts (and the terms of any such option); and (21)
any other terms of the Securities not inconsistent with the provisions of the
Indenture. (Section 301) Any such Prospectus Supplement or Prospectus
Supplements will also describe any special provisions for the payment of
additional amounts relating to specified taxes, assessments or other
governmental charges in respect of the Securities of such series and whether
the Company has the option to redeem the affected Securities rather than pay
such additional amounts.
Securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a Security, including any zero-coupon
Security, which is issued at a price lower than the amount payable upon the
Stated Maturity thereof, and which provides that, upon redemption or
accelaration of the Maturity thereof, an amount less than the amount payable
upon the Stated Maturity thereof and determined in accordance with the terms of
such Security shall become due and payable. Special United States federal
income tax considerations applicable to Securities issued at an original issue
discount, including Original Issue Discount Securities, and special United
States tax considerations applicable to any Securities which are denominated in
a currency or currency unit other than United States dollars, are described
below under "United States Taxation -- Original Issue Discount."
The Securities of each series will be unsecured and will rank pari passu
with all other unsecured and unsubordinated indebtedness of the Company.
The Indenture does not contain any provisions which may afford the Holders
of Securities of any series protection in the event of a highly leveraged
transaction or other transaction which may occur in connection with a takeover
attempt resulting in a decline in the credit rating of the Securities. Any such
provisions, if applicable to the Securities of any series, will be described in
the Prospectus Supplement or Prospectus Supplements relating thereto.
Form, Exchange, Registration and Transfer
Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in an applicable
Prospectus Supplement or Prospectus Supplements, Bearer Securities will have
interest coupons attached. The Indenture also provides that Securities of a
series may be issuable in temporary or permanent global form. (Section 201) See
"Temporary Global Securities" and "Permanent Global Securities."
In connection with its sale during the Restricted Period (as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations), no
Euro-Security shall be delivered to any location in the United States or its
possessions. Except as may otherwise be provided in the applicable Prospectus
Supplement, a Euro-Security (not including a Security in temporary global form)
may be delivered in connection with its sale during the Restricted Period only
if the person entitled to physical delivery of such Euro-Security furnishes
written certification, in the form required by the Indenture, to the effect
that (i) such Euro-Security is not owned or being acquired by or on behalf of a
United States person (as defined under "Limitations on Issuance of
Euro-Securities"), (ii) such Euro-Security is owned or being acquired by or on
behalf of (A) the foreign branch of a United States person that is a financial
institution within the meaning of Section 1.165-12(c)(1)(v) of the United
States Treasury Regulations (a "Financial Institution") purchasing for its own
account or for resale or (B) a United States person who acquired such
Euro-Security through the foreign branch of a United States Financial
Institution and who holds such Euro-Security through such Financial Institution
on the date of such written certification (and, in either case (A) or (B), the
Financial Institution has agreed to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"), and the regulations thereunder), or (iii) such Euro-
Security is owned or is being acquired by a Financial Institution for the
purpose of resale during the Restricted Period. A Financial Institution
described in clause (iii) above, whether or not also described in clause (i) or
(ii) above, must certify
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that it has not acquired the Euro-Security for purposes of resale directly or
indirectly to a United States person or to a person within the United States or
its possessions. In the case of a Euro-Security in permanent global form, such
certification must be given in connection with the notation of a beneficial
owner's interest therein upon original issuance of such Security or upon
exchange of a portion of a temporary global Security. (Section 303) See
"Temporary Global Securities" and "Limitations on Issuance of Euro-Securities."
At the option of the Holder, subject to the terms of the Indenture,
Registered Securities of any series will be exchangeable for other Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. In addition, at the option of the Holder,
subject to the terms of the Indenture, Bearer Securities (with all unmatured
coupons, except as provided below, and with all matured coupons in default) of
such series will be exchangeable for Registered Securities of the same series
of any authorized denominations and of a like aggregate principal amount and
tenor. Bearer Securities surrendered in exchange for Registered Securities
between a Regular Record Date or a Special Record Date and the relevant date
for payment of interest shall be surrendered without the coupon relating to
such date for payment of interest and interest will not be payable in respect
of the Registered Security issued in exchange for such Bearer Security, but
will be payable only to the Holder of such coupon when due in accordance with
the terms of the Indenture. Registered Securities, including Registered
Securities received in exchange for Bearer Securities, may not be exchanged for
Bearer Securities. (Section 305) Each Bearer Security and coupon will bear a
legend to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code." (Section 201)
Securities may be presented for exchange as provided above, and Registered
Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Securities and referred to in an
applicable Prospectus Supplement or Prospectus Supplements, without a service
charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request. The
Company has appointed the Trustee as Security Registrar. (Section 305) If a
Prospectus Supplement or Prospectus Supplements refer to any transfer agents
(in addition to the Security Registrar) initially designated by the Company
with respect to any series of Securities, the Company may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that, if Securities of a
series are issuable solely as Registered Securities, the Company will be
required to maintain a transfer agent in each Place of Payment for such series
and, if Securities of a series are issuable as Bearer Securities, the Company
will be required to maintain (in addition to the Security Registrar) a transfer
agent in a Place of Payment for such series located outside the United States
and its possessions. The Company may at any time designate additional transfer
agents with respect to any series of Securities. (Section 1002)
In the event of any redemption in part, the Company shall not be required
(i) to issue, register the transfer of or exchange any Security during a period
beginning at the opening of business 15 days before any selection for
redemption of Securities of like tenor and of the series of which such Security
is a part, and ending at the close of business on the earliest date on which
the relevant notice of redemption is deemed to have been given to all Holders
of Securities of like tenor and of such series to be redeemed; (ii) to register
the transfer of or exchange any Registered Security so selected for redemption,
in whole or in part, except the unredeemed portion of any Security being
redeemed in part; or (iii) to exchange any Bearer Security so selected for
redemption, except to exchange such Bearer Security for a Registered Security
of that series and like tenor which is immediately surrendered for redemption.
(Section 305)
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, principal of and any premium and interest on Bearer
Securities will be payable, subject to any applicable laws and regulations, at
the offices of such Paying Agents outside the United States and its possessions
as the Company may designate from time to time or, at the option of the Holder,
by check or by transfer to an account maintained by the payee with a financial
institution located outside the United States and its possessions. Unless
otherwise indicated in an applicable Prospectus Supplement or Prospectus
Supplements, payment of interest on a Bearer Security on any Interest Payment
Date will be made only against surrender to the Paying Agent of the coupon
relating to such Interest Payment Date. (Section 1001) No payment with respect
to any Bearer Security will be made at any office or agency of the Company in
the United States or its possessions or by check mailed to any address in the
United States or its possessions or by transfer to any account maintained with
a financial institution located in the United States or its possessions.
Notwithstanding the foregoing, payments of principal of and
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any premium and interest on Bearer Securities denominated and payable in U.S.
dollars will be made at the office of the Paying Agent in the Borough of
Manhattan, The City of New York, if (but only if) payment of the full amount
thereof in U.S. dollars at all offices or agencies outside the United States
and its possessions is illegal or effectively precluded by exchange controls or
other similar restrictions. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, principal of and any premium and interest on Registered
Securities will be payable, subject to any applicable laws and regulations, at
the office of such Paying Agent or Paying Agents as the Company may designate
from time to time, except that at the option of the Company payment of any
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register. Unless otherwise
indicated in an applicable Prospectus Supplement or Prospectus Supplements,
payment of interest on a Registered Security on any Interest Payment Date will
be made to the Person in whose name such Registered Security (or Predecessor
Security) is registered at the close of business on the Regular Record Date for
such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, the Corporate Trust Office of the Trustee in The City
of New York will be designated as a Paying Agent for the Company for payments
with respect to Securities of each series which are issuable solely as
Registered Securities and as a Paying Agent for payments with respect to
Securities of each series (subject to the limitations described above in the
case of Bearer Securities) which are issuable solely as Bearer Securities or as
both Registered Securities and Bearer Securities. Any Paying Agents outside the
United States and its possessions and any other Paying Agents in the United
States or its possessions initially designated by the Company for the
Securities of each series will be named in an applicable Prospectus Supplement
or Prospectus Supplements. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agent or approve a
change in the office through which any Paying Agent acts, except that if
Securities of a series are issuable solely as Registered Securities, the
Company will be required to maintain a Paying Agent in each Place of Payment
for such series and, if Securities of a series are issuable as Bearer
Securities, the Company will be required to maintain (i) a Paying Agent in the
Borough of Manhattan, The City of New York for payments with respect to any
Registered Securities of the series (and for payments with respect to Bearer
Securities of the series in the circumstances described above, but not
otherwise), and (ii) a Paying Agent in a Place of Payment located outside the
United States and its possessions where Securities of such series and any
coupons appertaining thereto may be presented and surrendered for payment;
provided, however, that if the Securities of such series are listed on The
International Stock Exchange of the United Kingdom and the Republic of Ireland,
Limited (the "London Stock Exchange"), the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and its possessions and
such stock exchange shall so require, the Company will maintain a Paying Agent
in London, Luxembourg or any other required city located outside the United
States and its possessions, as the case may be, for the Securities of such
series. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of the
principal of and any premium or interest on any Security of any series which
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company after
the Trustee has been afforded the opportunity to publish a notice in an
Authorized Newspaper, at the Company's expense, and the Holder of such Security
or any coupon appertaining thereto will thereafter look only to the Company for
payment thereof. (Section 1003)
Temporary Global Securities
If so specified in an applicable Prospectus Supplement or Prospectus
Supplements, all or any portion of the Securities of a series issuable as
Bearer Securities will initially be represented by one or more temporary global
Securities, without interest coupons, to be deposited with Morgan Guaranty
Trust Company of New York, Brussels Office, as the operator of the Euroclear
System (the "Euroclear Operator") and Cedel S.A. ("CEDEL") for credit to the
designated accounts. On and after the date determined as provided in any such
temporary global Security and described in an applicable Prospectus Supplement
or Prospectus Supplements (the "Exchange Date"), each such temporary global
Security will be exchanged for definitive Bearer Securities, definitive
Registered Securities or all or a portion of a permanent global Security, or
any combination thereof, as specified in an applicable Prospectus Supplement or
Prospectus Supplements, but, unless otherwise specified in an applicable
Prospectus Supplement or Prospectus Supplements, only upon receipt by the
Company of written certification in the form and to the effect described above
under "Form, Exchange, Registration and Transfer." No Security delivered in
exchange for any portion of a temporary global Security shall be delivered to
any location in the United States or its possessions in connection with such
exchange. (Section 304)
Unless otherwise specified in an applicable Prospectus Supplement or
Prospectus Supplements, interest in respect of any portion of a temporary
global Security payable in respect of an Interest Payment Date occurring prior
to the issuance
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of definitive Securities (including a permanent global Security) will be paid
to each of the Euroclear Operator and CEDEL with respect to the portion of the
temporary global Security held for its account for which it provides
certification in the form described in the Indenture. Each of the Euroclear
Operator and CEDEL will undertake in such circumstances to credit such interest
received by it in respect of a temporary global Security to the respective
accounts for which it holds such temporary global Security, and for which it
has received written certification that, as of the relevant Interest Payment
Date, is in the form and to the effect described above under "Form, Exchange,
Registration and Transfer." Receipt of such certification shall be deemed to be
a request for an interest in a permanent global Security (unless the account
holder requests that such portion be exchanged for a definitive Registered
Security or Securities or a definitive Bearer Security or Securities). If an
Interest Payment Date occurs prior to the issuance of definitive Securities
(including a permanent global Security) but on or after the Exchange Date,
written certification in the form and to the effect described above under
"Form, Exchange, Registration and Transfer" will also be required to obtain an
interest payment, and upon receipt of such certificate the Euroclear Operator
or CEDEL, as the case may be, will exchange the portion of the temporary global
Security relating to such certification for an interest in a permanent global
Security (unless the account holder requests that such portion be exchanged for
a definitive Registered Security or Securities or a definitive Bearer Security
or Securities). (Section 304)
Permanent Global Securities
If any Securities of a series are issuable in permanent global form, the
applicable Prospectus Supplement or Prospectus Supplements will describe the
circumstances, if any, under which beneficial owners of interests in any such
permanent global Security may exchange such interests for Securities of such
series and of like tenor and principal amount in any authorized form and
denomination. No Bearer Security delivered in exchange for any portion of a
permanent global Security shall be delivered to any location in the United
States or its possessions in connection with such exchange. (Section 305)
Principal of and any premium and interest on any permanent global Security will
be payable in the manner described in the applicable Prospectus Supplement or
Prospectus Supplements.
Certain Covenants
Liens. The Indenture provides that the Company will not create, incur,
assume, or guarantee and will not permit any Restricted Subsidiary (as defined
below) to create, incur, assume or guarantee any indebtedness that is secured
by a mortgage, security interest, pledge or lien (hereinafter, collectively,
"lien") on any Principal Property (as defined below) or shares of capital stock
or indebtedness of any Restricted Subsidiary, whether owned at the date of the
Indenture or thereafter acquired, without effectively providing that the
Outstanding Securities shall be secured by such lien equally and ratably with
any and all other indebtedness or obligations thereby secured. The foregoing
restrictions, however, shall not apply to, among others, indebtedness secured
by (i) liens on any Principal Property acquired, constructed or improved by the
Company or any Restricted Subsidiary after the date of the Indenture to secure
indebtedness incurred for the purpose of financing all or any part of the
purchase price or construction costs of such Principal Property or the
improvements thereon or liens on any Principal Property at the time of its
acquisition; (ii) liens on property or shares of capital stock or indebtedness
of a corporation existing at the time such corporation is merged into or
consolidated with the Company or a Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of a corporation as an
entirety or substantially as an entirety to the Company or a Restricted
Subsidiary; (iii) liens on property or shares of capital stock or indebtedness
of a corporation existing at the time such corporation becomes a Restricted
Subsidiary; (iv) liens to secure indebtedness of any Restricted Subsidiary to
the Company or another Restricted Subsidiary but only so long as such
indebtedness is held by the Company or a Restricted Subsidiary; (v) liens in
favor of the United States of America or any state thereof, or any department,
agency or political subdivision of the United States of America or any state
thereof, to secure partial, progress, advance or other payments pursuant to any
contract or statute including, without limitation, liens to secure indebtedness
represented by pollution control or industrial revenue bonds, or to secure any
indebtedness incurred for the purpose of financing all or any part of the
purchase price or the cost of constructing or improving the portion of the
property subject to such liens; (vi) certain liens in favor of a customer in
respect of payments for goods produced for or services rendered to such
customer; (vii) liens existing at the date of the Indenture or liens existing
at the date of the original issuance of the Securities of a series; (viii)
mechanics' or other similar liens arising in the ordinary course of business;
(ix) certain pledges or deposits, liens resulting from litigation or judgments,
taxes or other governmental charges or landlord or tenant rights and other
liens incidental to the conduct of the business or the ownership of the
property and assets of the Company or a Restricted Subsidiary which were not
incurred in connection with borrowing of money or the obtaining of advances or
credit, and which do not, in the opinion of the Company, materially detract
from the value of the property or assets or materially impair the use thereof
in the operation of the business of the Company and its Restricted
Subsidiaries, taken as a whole; (x) guarantees of indebtedness that are secured
by a lien on Principal Property located outside of the United States; and (xi)
liens for
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the sole purpose of extending, renewing or replacing in whole or in part any
lien referred to in the foregoing clauses (i) to (x), inclusive, or in this
clause (xi), provided that the principal amount of indebtedness secured thereby
shall not exceed the principal amount of indebtedness so secured at the time of
such extension, renewal or replacement and that such extension, renewal or
replacement shall be limited to all or a part of the property subject to the
lien so extended, renewed or replaced (plus improvements on such property).
(Section 1006)
For purposes of the "Liens" covenant described herein, the giving of a
guarantee which is secured by a lien on a Principal Property (including shares
of capital stock or indebtedness), other than a Principal Property located
outside of the United States, of a Restricted Subsidiary, and the creation of a
lien on Principal Property (including shares of capital stock or indebtedness)
of the Company or of any Restricted Subsidiary to secure indebtedness which
existed prior to the creation of such lien, will be deemed to involve the
creation of indebtedness secured by a lien in an amount equal to, without
duplication, the principal amount secured by such lien.
Sale and Lease-Back Transactions. The Indenture provides that the Company
will not, nor will it permit any Restricted Subsidiary to, enter into any
arrangement with any Person providing for the leasing by the Company or any
Restricted Subsidiary of any Principal Property (except for leases of not more
than three years and except for leases between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries), which property has been owned
and operated by the Company or any Restricted Subsidiary for more than 180 days
and has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person (a "Sale and Lease-Back Transaction"), unless either
(a) the Company or such Restricted Subsidiary would be entitled to incur
indebtedness secured by a lien on such property without equally and ratably
securing the Securities pursuant to the Indenture or (b) the Company shall
apply an amount equal to the Attributable Debt (as defined below) of such Sale
and Lease-Back Transaction to (i) the acquisition of another Principal Property
of equal or greater fair market value, (ii) the retirement of indebtedness for
borrowed money, including the Securities, incurred or assumed by the Company or
any Restricted Subsidiary (other than indebtedness for borrowed money owed to
the Company or any Restricted Subsidiary) or (iii) any combination of the
foregoing; provided that the amount to be applied to the retirement of such
indebtedness of the Company or any Restricted Subsidiary shall be reduced by
(a) the principal amount of any Securities delivered within 180 days after such
sale to the Trustee for retirement and cancellation and (b) the principal
amount of such indebtedness, other than Securities, voluntarily retired by the
Company or any Restricted Subsidiary within 180 days after such sale.
Notwithstanding the foregoing, no retirement referred to in clause (ii) of the
preceding sentence may be effected by payment at maturity or pursuant to any
mandatory sinking fund payment or any mandatory prepayment provision. (Section
1007)
Limitation on Funded Indebtedness of Restricted Subsidiaries. The Company
will not permit any Restricted Subsidiary to create, issue, assume, guarantee
or otherwise incur, any Funded Indebtedness, unless immediately thereafter and
after giving effect to the existence of such Funded Indebtedness, to the
receipt and application of the net proceeds thereof and to the retirement of
any indebtedness or obligations which are concurrently being retired out of the
net proceeds of such Funded Indebtedness and assuming for purposes of this
covenant such Funded Indebtedness were considered indebtedness for borrowed
money secured by a lien on a Principal Property within the meaning of the Liens
covenant, the incurrence of such liens would be permitted under the Liens
covenant or the Exemption from Limitations covenant. (Section 1009)
Exemption from Limitations. Notwithstanding the restrictions described
above, the Company or any Restricted Subsidiary may, without equally and
ratably securing the Outstanding Securities, create, incur, assume, or
guarantee indebtedness secured by liens and enter into Sale and Lease-Back
Transactions which would otherwise be restricted by the foregoing provisions,
provided that at such time (and after giving effect to the transactions, to the
receipt and application of the net proceeds thereof and to the retirement of
any indebtedness which is concurrently being retired out of such proceeds) the
sum of the aggregate indebtedness secured by such liens plus the Attributable
Debt of all Sale and Lease-Back Transactions shall not exceed 10% of
Consolidated Net Tangible Assets (as defined below) as determined in accordance
with the most recent published consolidated balance sheet of the Company.
(Section 1008)
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof, excluding renewals,
discounted at a rate per annum equal to the prevailing market interest rate, at
the time such lease was entered into, on United States Treasury obligations
having a maturity substantially the same as the average term of such lease,
plus 3%. The net amount of rent required to be paid under any such lease for
any such period shall be the amount of the rent payable by the lessee with
respect to such period, after excluding amounts required to be paid on account
of maintenance and repairs, insurance, taxes, assessments, water rates and
similar charges
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and contingent rents such as those based on sales. In the case of any lease
which is terminable by the lessee upon the payment of a penalty, such net
amount shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.
"Consolidated Net Tangible Assets" means the total of all assets at their
net book values (after deducting related depreciation, depletion, amortization
and all other valuation reserves which, in accordance with generally accepted
accounting principles, should be set aside in connection with the business
conducted) after deducting therefrom (i) all current liabilities and (ii) the
value of all goodwill, tradenames, trademarks, patents and other intangible
assets, in each case net of applicable amortization, as appearing on a
consolidated balance sheet of the Company and its consolidated Subsidiaries,
prepared in accordance with generally accepted accounting principles.
"Funded Indebtedness" means, without duplication, all indebtedness,
contingent or otherwise, for borrowed money created, incurred, assumed or
guaranteed in any manner by any corporation (or in effect guaranteed by such
corporation through an agreement to purchase), or outstanding indebtedness,
contingent or otherwise, incurred in connection with the acquisition of
property, which matures more than one year after, or which by its terms is
renewable or extendible or payable out of the proceeds of similar indebtedness
incurred pursuant to the terms of any revolving credit agreement or any similar
agreement at the option of such corporation for a period ending more than one
year after, the date as of which Funded Indebtedness is being determined
(excluding any amount thereof which is included in current liabilities);
provided, however, that Funded Indebtedness shall not include any guarantee of
indebtedness secured by a lien on a Principal Property located outside of the
United States or any guarantee by any Restricted Subsidiary the primary assets
of which are Principal Properties located outside of the United States, or any
indebtedness for the payment, redemption or satisfaction of which money (or
evidences of indebtedness, if permitted under the instrument creating or
evidencing such indebtedness) in the necessary amount shall have been deposited
in trust with a trustee or proper depository either at or before the maturity
or redemption date thereof.
"Principal Property" means any manufacturing plant, research facility or
warehouse owned or leased by the Company or any Restricted Subsidiary which has
a net book value exceeding 2.5% of Consolidated Net Tangible Assets, but not
including (1) any property which in the opinion of the Company is not of
material importance to the total business conducted by the Company as an
entirety or (2) any portion of a particular property which is similarly found
not to be of material importance to the use or operation of such property.
"Restricted Subsidiary" means a subsidiary of the Company which owns a
Principal Property.
Events of Default
The following are Events of Default under the Indenture with respect to
Securities of any series: (a) failure to pay principal of or any premium on any
of the Securities of that series when due; (b) failure to pay any interest on
any Security of that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment when due in respect of any Security of that
series; (d) failure to perform or breach of any other covenant of the Company
in the Indenture (other than a covenant included in the Indenture solely for
the benefit of a series of Securities other than that series) continued for 90
days after written notice by the Trustee or Holders of at least 25% of the
principal amount of the Outstanding Securities of that series as provided in
the Indenture; (e) certain events of bankruptcy, insolvency or reorganization
of the Company; (f) a default under any other indenture or instrument
evidencing or under which the Company has outstanding any indebtedness for
borrowed money in a principal amount of $25 million or more individually or $50
million or more in the aggregate, as a result of which such indebtedness shall
have been accelerated without such indebtedness having been discharged or such
acceleration having been annulled within 10 days after written notice thereof
shall first have been received by the Company from the Trustee or by such
Trustee and the Company from the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities, provided that if such default shall be
cured or waived pursuant to such other indenture or instrument, it shall cease
to be an Event of Default under the Indenture and any acceleration of the
Securities shall be automatically rescinded and annulled without action by the
Trustee or the Holders of the Securities; (g) failure within 60 days to pay,
bond or otherwise discharge any uninsured judgment or court order for the
payment of money in excess of $50 million which is not stayed on appeal or is
not otherwise being contested in good faith; and (h) any other Event of Default
provided with respect to Securities of that series. (Section 501) Subject to
the provisions of the Indenture, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders of Securities of any series or any related
coupons unless such Holders shall have offered to the Trustee reasonable
indemnity. (Sections 601, 603) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate
principal amount of the Outstanding Securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to Securities of that series. (Section 512)
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If an Event of Default with respect to Securities of any series at the
time Outstanding shall occur and be continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if any such
Securities are Original Issue Discount Securities, such lesser amount as may be
described in an applicable Prospectus Supplement or Prospectus Supplements) of
all the Securities of that series to be due and payable immediately. At any
time after a declaration of acceleration with respect to Securities of any
series has been made but before a judgment or decree for payment of the money
due has been obtained by the Trustee, the Holders of a majority in aggregate
principal amount of Outstanding Securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due (other
than those due as a result of acceleration) have been made, or deposited with
the Trustee and all other Events of Default with respect to Securities of that
series have been cured or waived. (Section 502)
No Holder of any Securities of any series or any related coupons will have
any right to institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default with respect to
Securities of that series, the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities of that series shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in aggregate principal amount of the Outstanding Securities of
that series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not
apply to a suit instituted by a Holder of an Outstanding Security of that
series for enforcement of payment of the principal of, or any premium or
interest on, such Security on or after the respective due dates expressed in
such Security. (Sections 507, 508)
The Company is required to furnish to the Trustee annually a statement as
to performance or fulfillment of covenants, agreements or conditions in the
Indenture and as to the absence of default. (Section 1004)
Modification and Waiver; Meetings
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on any Security,
(b) reduce the principal amount of, or premium or interest on, any Security,
(c) change any obligation of the Company to pay certain additional amounts, (d)
reduce the amount of principal of an Original Issue Discount Security payable
upon acceleration of the Maturity thereof, (e) change any Place of Payment
where, or change the coin, currency or currency unit in which any Security or
any premium or interest thereon is payable, (f) impair the right to institute
suit for the enforcement of any payment on or with respect to any Security, (g)
reduce the percentage in principal amount of Outstanding Securities of any
series, the consent of whose Holders is required for modification or amendment
of the Indenture or for waiver of compliance with certain provisions of the
Indenture or for waiver of certain defaults, (h) reduce the requirements
contained in the Indenture for quorum or voting, (i) change any obligation of
the Company to maintain an office or agency in the places and for the purposes
required by the Indenture, or (j) modify any of the above provisions or certain
other provisions relating to waiver. (Section 902)
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of a series may, on behalf of all Holders of
Securities of that series and any coupons appertaining thereto, waive any past
default under the Indenture with respect to Securities of that series, except a
default (a) in the payment of principal of or any premium or interest on any
Security of such series or (b) in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the Holder
of each Outstanding Security of such series affected. Upon waiver on the terms
set forth in the Indenture, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured. (Section 513)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or are present at a meeting of Holders of Securities for quorum purposes, (i)
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon acceleration
of the Maturity thereof, and (ii) the principal amount of a Security
denominated in a foreign currency or currency unit shall be the U.S. dollar
equivalent, determined as of the date of original issuance of such Security, of
the principal amount of such Security or, in the case of an Original Issue
Discount Security, the U.S. dollar equivalent, determined as of the date of
original issuance of such Security, of the amount determined as provided in (i)
above. (Section 101)
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The Indenture contains provisions for convening meetings of the Holders of
Securities of any or all series. (Article Thirteen) A meeting may be called at
any time by the Trustee, and also, upon request, by the Company or the Holders
of at least 10% in aggregate principal amount of the Outstanding Securities of
such series, in any such case upon notice given in accordance with "Notices"
below. (Section 1302) Except for any consent which must be given by the Holder
of each Outstanding Security affected thereby, as described above, any
resolution presented at a meeting at which a quorum is present may be adopted
by the affirmative vote of the Holders of a majority in principal amount of the
Outstanding Securities of that series; provided, however, that, except for any
consent which must be given by the Holder of each Outstanding Security affected
thereby, as described above, any resolution with respect to any consent,
waiver, request, demand, notice, authorization, direction or other action which
may be given by the Holders of not less than a specified percentage in
principal amount of the Outstanding Securities of a series may be adopted at a
meeting at which a quorum is present only by the affirmative vote of the
Holders of not less than such specified percentage in principal amount of the
Outstanding Securities of that series. Any resolution passed or decision taken
at any meeting of Holders of Securities of any series duly held in accordance
with the Indenture will be binding on all Holders of Securities of that series
and the related coupons. The quorum at any meeting called to adopt a resolution
will be Persons holding or representing a majority in principal amount of the
Outstanding Securities of a series; provided, however, that if any action is to
be taken at such meeting with respect to a consent, waiver, request, demand,
notice, authorization, direction or other action which may be given by the
Holders of not less than a specified percentage in principal amount of the
Outstanding Securities of a series, the Persons holding or representing such
specified percentage in principal amount of the Outstanding Securities of such
series will constitute a quorum for that purpose. (Section 1304)
Consolidation, Merger, Conveyance or Transfer of Assets
The Company may, without the consent of the Holders of any of the
Outstanding Securities of a series, consolidate with, merge into or convey or
transfer its assets substantially as an entirety to any corporation organized
under the laws of any domestic or foreign jurisdiction, provided that (i) the
successor corporation expressly assumes the Company's obligations on the
Securities of each series and under the Indenture pursuant to a supplemental
indenture approved by the Trustee, (ii) after giving effect thereto, no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing, and (iii)
certain other conditions are met. (Sections 801, 802) Subject to the foregoing,
the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights (charter and
statutory) and franchises; provided, however, the Company has no such
obligation where the preservation of any such right or franchise in the
Company's determination, is no longer desirable in the conduct of business and
that the loss thereof is not materially disadvantagous to the Holders. (Section
1005) The successor corporation shall be substituted for, and may exercise
every right and power of, the Company under the Indenture. (Section 802)
Notices
Except as otherwise provided in the Indenture, notices to Holders of
Bearer Securities will be given by publication at least twice in a daily
newspaper of general circulation in The City of New York and in such other city
or cities as may be specified in such Securities. Notices to Holders of
Registered Securities will be given by mail to the addresses of such Holders as
they appear in the Security Register. (Sections 101, 106)
Title
Title to any Bearer Securities (including Bearer Securities in temporary
global form and in permanent global form) and any coupons appertaining thereto
will pass by delivery. The Company, the Trustee and any agent of the Company or
the Trustee may treat the bearer of any Bearer Security and the bearer of any
coupon and the registered owner of any Registered Security as the absolute
owner thereof (whether or not such Security or coupon shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308)
Replacement of Securities and Coupons
Any mutilated Security or a Security with a mutilated coupon appertaining
thereto will be replaced by the Company at the expense of the Holder upon
surrender of such Security to the Trustee. Securities or coupons that become
destroyed, lost or stolen will be replaced by the Company at the expense of the
Holder upon delivery to the Trustee of evidence of the destruction, loss or
theft thereof satisfactory to the Company and the Trustee; in the case of any
coupon which becomes destroyed, lost or stolen, such coupon will be replaced by
issuance of a new Security in exchange for the Security to which such coupon
appertains. In the case of a destroyed, lost or stolen Security or coupon, an
indemnity satisfactory to the Trustee
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and the Company may be required at the expense of the Holder of such Security
or coupon before a replacement Security will be issued. (Section 306)
Defeasance and Covenant Defeasance
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may elect either (i) to defease and be discharged from any and all
obligations with respect to the Securities of any series (except as otherwise
provided in the Indenture) ("defeasance") or (ii) to be released from its
obligations with respect to certain covenants applicable to such Securities,
including its obligations described above under "Certain Covenants" ("covenant
defeasance"), upon the deposit with the Trustee (or other qualifying trustee),
in trust for such purpose, of money and/or U.S. Government Obligations which
through the payment of principal and interest in accordance with their terms
will provide money in an amount sufficient, without reinvestment, to pay the
principal of and any premium or interest on such Securities to Maturity or
redemption, as the case may be, and any mandatory sinking fund or analogous
payments thereon and upon the satisfaction of various other conditions. As a
condition to defeasance or covenant defeasance, the Company must deliver to the
Trustee an Opinion of Counsel to the effect that the Holders of such Securities
will not recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred. Such Opinion of Counsel, in the case of
defeasance under clause (i) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable United States federal
income tax law occurring after the date of the Indenture. (Article Fourteen)
The Company may exercise its defeasance option with respect to such
Securities notwithstanding its prior exercise of its covenant defeasance
option. If the Company exercises its defeasance option, payment of such
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of such Securities
may not be accelerated by reference to the released covenant or covenants noted
under clause (ii) above. However, if acceleration were to occur, the realizable
value at the acceleration date of the money and U.S. Government Obligations in
the defeasance trust could be less than the principal and interest then due on
such Securities, in that the required deposit in the defeasance trust is based
upon scheduled cash flows rather than market value, which will vary depending
upon interest rates and other factors.
Governing Law
The Indenture is, and the Securities and the coupons will be, governed by
and construed in accordance with the laws of the State of New York. (Section
113)
Concerning the Trustee
The Company and certain of its subsidiaries may from time to time maintain
lines of credit, and have other customary banking relationships, with The Bank
of New York, the Trustee under the Indenture.
LIMITATIONS ON ISSUANCE OF EURO-SECURITIES
United States tax laws and regulations impose certain restrictions on the
issuance of any securities in bearer form. Except as may otherwise be provided
in the Prospectus Supplement applicable thereto, in accordance with the federal
tax laws and regulations of the United States, Euro-Securities may not, in
connection with their offer or sale during the Restricted Period (as defined
above under "Description of Debt Securities -- Form, Exchange, Registration and
Transfer"), be offered or sold, directly or indirectly, (i) to any person in
the United States or its possessions, or (ii) to any United States person (as
defined below) other than (x) a foreign branch of a United States Financial
Institution (as defined above under "Description of Debt Securities -- Form,
Exchange, Registration and Transfer") purchasing for its own account or for the
account of a customer, provided that such Financial Institution agrees in
writing to comply with the requirements of section 165(j)(3)(A), (B), or (C) of
the Code and the regulations thereunder or (y) otherwise as permitted by United
States Treasury Regulations section 1.163-5(c)(2)(i)(D). In addition,
Euro-Securities may not, in connection with their sale, at any time during the
Restricted Period be delivered in definitive form within the United States or
its possessions. Any underwriters, agents and dealers participating in the
offering of Debt Securities must covenant that they will not offer or sell
during the Restricted Period any Euro-Securities to any person in the United
States or its possessions or to any United States person (other than (x) a
foreign branch of a United States Financial Institution or (y) otherwise as
permitted by United States Treasury Regulations section 1.163-5(c)(2)(i)(D)).
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In addition, any such underwriters, agents and dealers must have in effect
procedures reasonably designed to ensure that their employees or agents who are
directly engaged in selling Euro-Securities are aware of the above restrictions
on the offer or sale of Euro-Securities. Moreover, Bearer Securities (including
a permanent global Debt Security) and any coupons appertaining thereto will not
be delivered in definitive form or, if prior to delivery in definitive form,
interest will not be paid on any Euro-Securities, unless the Company has
received a signed certificate in writing (or an electronic certificate
described in United States Treasury Regulations section
1.163-5(c)(2)(i)(D)(3)(ii)) in the form and to the effect described above under
"Description of Debt Securities -- Form, Exchange, Registration and Transfer."
Bearer Securities (including a permanent global Debt Security) and coupons will
bear a legend to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in sections 165(j) and 1287(a) of the
Internal Revenue Code." The sections referred to in such legend provide that a
United States person (other than a Financial Institution or a United States
person holding through a Financial Institution) who holds a Bearer Security or
coupon will not be allowed to deduct any loss realized on the sale, exchange or
redemption of such Bearer Security or coupon and any gain (which might
otherwise be characterized as capital gain) recognized on such sale, exchange
or redemption will be treated as ordinary income.
As used herein, "United States person" means a citizen of the United
States, a resident of the United States for United States federal income tax
purposes, a corporation, partnership or other entity created or organized in or
under the laws of the United States or an estate or trust the income of which
is subject to United States federal income taxation on a net income basis.
"United States" means the United States of America (including the States and
the District of Columbia) and "possessions" of the United States include Puerto
Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.
FOREIGN CURRENCY RISKS
Debt Securities denominated or payable in foreign currencies or currency
units may entail significant risks. These risks include, without limitation,
the possibility of significant fluctuations in the foreign currency markets.
These risks will vary depending upon the currency or currencies involved and
will be more fully described in the Prospectus Supplement relating thereto.
UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of ownership of Debt Securities is based upon the opinion of
McGuire, Woods, Battle & Boothe LLP, counsel to the Company. It deals only with
Debt Securities held as capital assets, and not with special classes of
Holders, such as dealers in securities or currencies, banks, tax-exempt
organizations, life insurance companies, persons that hold Debt Securities that
are part of a hedge or that are hedged against currency risks or that are part
of a straddle or conversion transaction, or persons whose functional currency
is not the U.S. dollar. It also does not deal with Holders other than original
purchasers who purchase Debt Securities at the original issue price and thus
does not deal with the "market discount rules." Moreover, the summary deals
only with Debt Securities that are due to mature not later than 30 years from
the date on which they are issued. The United States federal income tax
consequences of ownership of Debt Securities that are due to mature more than
30 years from their date of issue will be discussed in an applicable Prospectus
Supplement. Further, it does not include any description of the tax laws of any
state or local government that may be applicable to the Debt Securities. The
summary is based on the Code, its legislative history, existing and proposed
regulations thereunder, judicial decisions, and published rulings and other
administrative guidance issued by the Internal Revenue Service (the "Service"),
as currently in effect, all of which are subject to change at any time,
possibly with retroactive effect.
PROSPECTIVE PURCHASERS OF DEBT SECURITIES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE CONSEQUENCES OF OWNERSHIP OF DEBT SECURITIES, IN THEIR
PARTICULAR CIRCUMSTANCES, UNDER THE CODE AND THE APPLICABLE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
United States Holders
Payments of Interest
Except as provided below under "Original Issue Discount", interest on a
Debt Security (including "qualified stated interest" on a "Discount Debt
Security", as defined below) will be taxable to a United States Holder as
ordinary income at the time it is received or accrued, depending on the
holder's method of accounting for tax purposes. A United States Holder
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is a beneficial owner who or that is (i) a citizen or resident of the United
States, (ii) a domestic corporation or (iii) otherwise subject to United States
federal income taxation on a net income basis in respect of the Debt Security.
If an interest payment is denominated in, or determined by reference to, a
currency, composite currency or basket of currencies other than the U.S.
dollars (a "foreign currency"), the amount of income recognized by a cash basis
United States Holder will be the U.S. dollar value of the interest payment,
based on the exchange rate in effect on the date of receipt, regardless of
whether the payment is in fact converted into U.S. dollars.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a foreign currency in accordance with either of two methods.
Under the first method, the amount of income accrued will be based on the
average exchange rate in effect during the interest accrual period (or, with
respect to an accrual period that spans two taxable years, the part of the
period within the taxable year).
Under the second method, the United States Holder may elect to determine
the amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election must apply to all
debt instruments held by the United States Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the United
States Holder, and may not be revoked without the consent of the Service.
Upon receipt of an interest payment (including a payment attributable to
accrued but unpaid interest upon the sale or retirement of a Debt Security)
denominated in, or determined by reference to, a foreign currency, the accrual
basis United States Holder will recognize ordinary income or loss measured by
the difference between (x) the average exchange rate used to accrue the
interest income represented by such payment, or the exchange rate as determined
under the second method described above if the United States Holder elects that
method, and (y) the exchange rate in effect on the date of receipt, regardless
of whether the payment is in fact converted into U.S. dollars.
Original Issue Discount
General. A Debt Security with a maturity of more than one year from the
date of issue will be treated as issued at an original issue discount (a
"Discount Debt Security") if its "stated redemption price at maturity" exceeds
its issue price by more than a "de minimis amount" (as defined below).
Generally, the issue price of a Debt Security will be the first price at which
a substantial amount of Debt Securities included in the issue of which the Debt
Security is a part are sold to persons other than bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents, or wholesalers. The stated redemption price at maturity of a
Debt Security is the total of all payments provided by the Debt Security that
are not payments of "qualified stated interest." A qualified stated interest
payment generally is any one of a series of stated interest payments on a Debt
Security that are unconditionally payable in cash or property (other than debt
instruments of the Company) at least annually at a single fixed rate (with
certain exceptions for lower rates paid during some periods) applied to the
outstanding principal amount of the Debt Security. Interest is payable at a
single fixed rate only if the rate appropriately takes into account the length
of the interval between payments. Special rules for determining qualified
stated interest payable on certain Debt Securities bearing interest at a
variable rate are described below under "Original Issue Discount -- Variable
Rate Debt Securities."
In general, if a Debt Security's stated redemption price at maturity
exceeds its issue price by less than an amount equal to 1/4 of 1 percent of the
Debt Security's stated redemption price at maturity multiplied by the number of
complete years to its maturity (the "de minimis amount"), then such excess, if
any, constitutes "de minimis original issue discount" and the Debt Security is
not a Discount Debt Security. Unless the election described below under
"Election to Treat All Interest as Original Issue Discount" is made, a United
States Holder of a Debt Security with de minimis original issue discount must
include such de minimis original issue discount in income as stated principal
payments on the Debt Security are made. The includible amount with respect to
each such payment will equal the total amount of the Debt Security's de minimis
original issue discount multiplied by a fraction, the numerator of which is the
amount of the principal payment made and the denominator of which is the stated
principal amount of the Debt Security.
United States Holders of Discount Debt Securities having a maturity of
more than one year from their date of issue must, generally, include in
computing their taxable income original issue discount ("OID") calculated on a
constant-yield method before the receipt of cash attributable to such income,
and generally will have to include in income increasingly
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greater amounts of OID over the life of the Debt Security. The amount of OID
includible in income by a United States Holder of a Discount Debt Security is
the sum of the daily portions of OID with respect to the Discount Debt Security
for each day during the taxable year or portion of the taxable year on which
the United States Holder holds such Discount Debt Security ("accrued OID"). The
daily portion is determined by allocating to each day in any "accrual period" a
pro rata portion of the OID allocable to that accrual period. Accrual periods
with respect to a Debt Security may be of any length selected by the United
States Holder and may vary in length over the term of the Debt Security as long
as (i) no accrual period is longer than one year and (ii) each scheduled
payment of interest or principal on the Debt Security occurs on either the
final or first day of an accrual period. The amount of OID allocable to an
accrual period equals the excess of (a) the product of the Discount Debt
Security's adjusted issue price at the beginning of the accrual period and such
Debt Security's yield to maturity (determined on the basis of compounding at
the close of each accrual period and properly adjusted for the length of the
accrual period) over (b) the sum of the payments of qualified stated interest
on the Debt Security allocable to the accrual period. The "adjusted issue
price" of a Discount Debt Security at the beginning of any accrual period is
the issue price of the Debt Security increased by (x) the amount of accrued OID
for each prior accrual period and decreased by (y) the amount of any payments
previously made on the Debt Security that were not qualified stated interest
payments. For purposes of determining the amount of OID allocable to an accrual
period, if an interval between payments of qualified stated interest on the
Debt Security contains more than one accrual period, the amount of qualified
stated interest payable at the end of the interval (including any qualified
stated interest that is payable on the first day of the accrual period
immediately following the interval) is allocated pro rata on the basis of
relative lengths of each accrual period in the interval, and the adjusted issue
price at the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior to the
first day of the accrual period but that is not payable until the end of the
interval. The amount of OID allocable to an initial short accrual period may be
computed using any reasonable method if all other accrual periods other than a
final short accrual period are of equal length. The amount of OID allocable to
the final accrual period is the difference between (x) the amount payable at
the maturity of the Debt Security (other than any payment of qualified stated
interest) and (y) the Debt Security's adjusted issue price as of the beginning
of the final accrual period.
Acquisition Premium. A United States Holder that purchases a Debt Security
for an amount less than or equal to the sum of all amounts payable on the Debt
Security after the purchase date (other than payments of qualified stated
interest) but in excess of its adjusted issue price (any such excess being
"acquisition premium") and that does not make the election described below
under "Election to Treat All Interest as Original Issue Discount" is permitted
to reduce the daily portions of OID by a fraction, the numerator of which is
the excess of the United States Holder's adjusted basis in the Debt Security
immediately after its purchase over the adjusted issue price of the Debt
Security, and the denominator of which is the excess of the sum of all amounts
payable on the Debt Security after the purchase date, other than payments of
qualified stated interest, over the Debt Security's adjusted issue price.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Debt Security is attributable to pre-issuance accrued interest, (ii)
the first stated interest payment on the Debt Security is to be made within one
year of the Debt Security's issue date and (iii) the payment will equal or
exceed the amount of pre-issuance accrued interest, then the United States
Holder may elect to decrease the issue price of the Debt Security by the amount
of pre-issuance accrued interest. In that event, a portion of the first stated
interest payment will be treated as a return of the excluded pre-issuance
accrued interest and not as an amount payable on the Debt Security.
Debt Securities Subject to Contingencies Including Optional Redemption. In
general, if a Debt Security provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or contingencies
(other than a remote or incidental contingency) and the timing and amounts of
the payments that comprise each payment schedule are known as of the issue
date, special rules apply for purposes of determining the yield and maturity of
the Debt Security. If, based on all the facts and circumstances as of the issue
date, a single payment schedule, including the stated payment schedule, is
significantly more likely than not to occur, then, in general, the yield and
maturity of the Debt Security are computed based on that payment schedule.
If there is no single payment schedule that is significantly more likely
than not to occur (other than because of a mandatory sinking fund), the amount
of interest taken into account for each accrual period would be determined by
constructing a projected payment schedule for the Debt Security and applying
rules similar to those for accruing OID on a noncontingent debt instrument.
This method is applied by first determining the yield at which the Company
would issue a fixed rate debt instrument with terms and conditions similar to
the contingent payment Debt Security (the comparable yield) and then
determining a payment schedule as of the issue date that would produce the
comparable yield.
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Notwithstanding the general rules for determining yield and maturity in
the case of Debt Securities subject to contingencies, if the Company or the
Holder has an unconditional option or options that, if exercised, would require
payments to be made on the Debt Security under an alternative payment schedule
or schedules, then (i) in the case of an option or options of the Company, the
Company will be deemed to exercise or not exercise an option or combination of
options in the manner that minimizes the yield on the Debt Security and (ii) in
the case of an option or options of the Holder, the Holder will be deemed to
exercise or not exercise an option or combination of options in the manner that
maximizes the yield on the Debt Security. If both the Company and the Holder
have options described in the preceding sentence, those rules apply to such
options in the order in which they may be exercised. For purposes of those
calculations, the yield on the Debt Security is determined by using any date on
which the Debt Security may be redeemed or repurchased as the maturity date and
the amount payable on such date in accordance with the terms of the Debt
Security as the principal amount payable at maturity.
If a contingency (including the exercise of an option) fails to occur, or
actually occurs but in a manner inconsistent with the assumption made according
to the above rules (a "change in circumstances") then, except to the extent
that a portion of the Debt Security is repaid as a result of the change in
circumstances and solely for purposes of the accrual of OID, the yield and
maturity of the Debt Security are redetermined by treating the Debt Security as
having been retired and reissued on the date of the change in circumstances for
an amount equal to the Debt Security's adjusted issue price on that date.
The federal income tax treatment of Debt Securities providing for
alternative payment schedules applicable upon the occurrence of one or more
contingencies will be described in greater detail in the applicable Prospectus
Supplement.
Election to Treat All Interest as Original Issue Discount. A United States
Holder may elect to include in gross income all interest that accrues on a Debt
Security using the constant-yield method described above under the heading
"Original Issue Discount -- General", with the modifications described below.
For purposes of this election, interest includes stated interest, OID, de
minimis original issue discount, market discount, de minimis market discount
and unstated interest, as adjusted by any amortizable bond premium (described
below under "Debt Securities Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Debt Security with respect to
which this election has been made, the issue price of the Debt Security will
equal the electing United States Holder's adjusted basis in the Debt Security
immediately after its acquisition, the issue date of the Debt Security will be
the date of its acquisition by the electing United States Holder, and no
payments on the Debt Security will be treated as payments of qualified stated
interest. This election will generally apply only to the Debt Security with
respect to which it is made and may not be revoked without the consent of the
Service. If this election is made with respect to a Debt Security with
amortizable bond premium, then the electing United States Holder will be deemed
to have elected to apply amortizable bond premium against interest with respect
to all debt instruments with amortizable bond premium (other than debt
instruments the interest on which is excludible from gross income) held by the
electing United States Holder as of the beginning of the taxable year in which
the Debt Security with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Service.
Variable Rate Debt Securities. A "Variable Rate Debt Security" is a Debt
Security that: (i) has an issue price that does not exceed the total
noncontingent principal payments by more than the lesser of (1) .015 multiplied
by the product of (x) the total noncontingent principal payments and (y) the
number of complete years to maturity from the issue date, or (2) 15 percent of
the total noncontingent principal payments; (ii) does not provide for any
stated interest other than stated interest compounded or paid at least annually
at (1) one or more "qualified floating rates" , (2) a single fixed rate and one
or more qualified floating rates, (3) a single "objective rate" or (4) a single
fixed rate and a single objective rate that is a "qualified inverse floating
rate;" (iii) provides that a qualified floating rate or objective rate in
effect at any time during the term of the instrument must be set at a "current
value" of that rate (i.e., the value of the rate on any day that is no earlier
than 3 months prior to the first day on which that value is in effect and no
later than one year following that first day); and (iv) does not provide for
any contingent principal payments other than as provided in clause (i) of this
sentence.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Debt Security is denominated or (ii) it is equal to the product of a qualified
floating rate described in clause (i) and either (a) a fixed multiple that is
greater than .65 but not more than 1.35, or (b) a fixed multiple greater than
.65 but not more than 1.35, increased or decreased by a fixed rate. If a Debt
Security provides for two or more qualified floating rates that (i) are within
0.25 percent of each other on the issue date or (ii) can reasonably be expected
to have approximately the same values throughout the term of the Debt Security,
the qualified floating rates together constitute a single qualified floating
rate. A rate is not a
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qualified floating rate, however, if the rate is subject to certain
restrictions (including caps, floors, governors or other similar restrictions)
unless such restrictions are fixed throughout the term of the Debt Security or
are not reasonably expected to significantly affect the yield on the Debt
Security.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single, fixed formula and that is based on objective
financial or economic information, including one or more qualified floating
rates or the yield or changes in the price of one or more actively traded items
of personal property other than stock or debt of the issuer or a related party.
A variable rate is not an objective rate, however, if it is based on
information within the control of the issuer or a related party or is unique to
the circumstances of the issuer or a related party such as dividends, profits,
or the value of the issuer's stock (although a rate does not fail to be an
objective rate merely because it is based on the credit quality of the issuer),
or if it is reasonably expected that the average value of the rate during the
first half of the Debt Security's term will be either significantly less than
or significantly greater than the average value of the rate during the final
half of the Debt Security's term. An objective rate is a "qualified inverse
floating rate" if (i) the rate is equal to a fixed rate minus a qualified
floating rate, and (ii) the variations in the rate can reasonably be expected
to inversely reflect contemporaneous variations in the cost of the qualified
floating rate.
If interest on a Debt Security is stated at a fixed rate for an initial
period of one year or less followed by either a qualified floating rate or an
objective rate for a subsequent period and (i) the fixed rate and the qualified
floating rate or objective rate have values on the issue date of the Debt
Security that do not differ by more than 0.25 percent or (ii) the value of the
qualified floating rate or objective rate is intended to approximate the fixed
rate, the fixed rate and the qualified floating rate or the objective rate
constitute a single qualified floating rate or objective rate.
In general, if a Variable Rate Debt Security provides for stated interest
at a single qualified floating rate or objective rate and the interest is
unconditionally payable in cash or property at least annually, all stated
interest on the Debt Security is qualified stated interest and the amount of
OID, if any, is determined by using, in the case of a qualified floating rate
or qualified inverse floating rate, a fixed rate equal to the value as of the
issue date of the qualified floating rate or qualified inverse floating rate,
or, in the case of any other objective rate, a fixed rate that reflects the
yield reasonably expected for the Debt Security.
If a Variable Rate Debt Security does not provide for stated interest at a
single qualified floating rate or objective rate or at a fixed rate (other than
at a single fixed rate for an initial period), the amount of interest and OID
accruals on the Debt Security are generally determined by (i) determining a
fixed rate substitute for each variable rate provided under the Variable Rate
Debt Security (generally, the value of each variable rate as of the issue date
or, in the case of an objective rate that is not a qualified inverse floating
rate, a rate that reflects the reasonably expected yield on the note), (ii)
constructing the equivalent fixed rate debt instrument (using the fixed rate
substitute described above), (iii) determining the amount of qualified stated
interest and OID with respect to the equivalent fixed rate debt instrument, and
(iv) making the appropriate adjustments for actual variable rates during the
applicable accrual period.
If a Variable Rate Debt Security provides for stated interest either at
one or more qualified floating rates or at a qualified inverse floating rate,
and in addition provides for stated interest at a single fixed rate (other than
at a single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Debt Security is treated, for purposes of
the first three steps of the determination, as if it provided for a qualified
floating rate (or a qualified inverse floating rate, as the case may be) rather
than the fixed rate. The qualified floating rate (or qualified inverse floating
rate) replacing the fixed rate must be such that the fair market value of the
Variable Rate Debt Security as of the issue date would be approximately the
same as the fair market value of an otherwise identical debt instrument that
provides for the qualified floating rate (or qualified inverse floating rate)
rather than the fixed rate.
The federal income tax treatment of any Debt Security that provides for
payments of stated interest at a variable rate, but does not meet the foregoing
requirements of a Variable Rate Debt Security, will be described in the
applicable Prospectus Supplement.
Short-Term Debt Securities. In general, an individual or other cash basis
United States Holder of a Debt Security with a term of one year or less (a
"short-term Debt Security") is not required to accrue OID (as specially defined
below for the purposes of this paragraph) for United States federal income tax
purposes unless it elects to do so (but may be required to include any stated
interest in income as the interest is received). Accrual basis United States
Holders and certain other United States Holders, including banks, regulated
investment companies, dealers in securities, common trust funds, United States
Holders who hold Debt Securities as part of certain identified hedging
transactions, certain pass-through entities and
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<PAGE>
cash basis United States Holders who so elect, are required to accrue OID on
short-term Debt Securities on either a straight-line basis or under the
constant-yield method (based on daily compounding), at the election of the
United States Holder.
In the case of a United States Holder not required and not electing to
include OID in income currently, any gain realized on the sale or retirement of
the short-term Debt Security will be ordinary income to the extent of the OID
accrued on a straight-line basis (unless an election is made to accrue the OID
under the constant-yield method) through the date of sale or retirement. United
States Holders who are not required and do not elect to accrue OID on
short-term Debt Securities will be required to defer deductions for interest on
borrowings allocable to short-term Debt Securities in an amount not exceeding
the deferred income until the deferred income is realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Debt Security, including stated interest, are
included in the short-term Debt Security's stated redemption price at maturity.
Foreign Currency Discount Debt Securities. OID for any accrual period on a
Discount Debt Security that is denominated in, or determined by reference to, a
foreign currency will be determined in the foreign currency and then translated
into U.S. dollars in the same manner as stated interest accrued by an accrual
basis United States Holder, as described under "Payments of Interest." Upon
receipt of an amount attributable to OID (whether in connection with a payment
of interest or the sale or retirement of a Debt Security), a United States
Holder may recognize ordinary income or loss.
Debt Securities Purchased at a Premium
A United States Holder that purchases a Debt Security for an amount in
excess of the sum of all remaining payments on the Debt Security (other than
qualified stated interest) may elect to treat such excess as "amortizable bond
premium", in which case the amount required to be included in the United States
Holder's income each year with respect to interest on the Debt Security will be
reduced by the amount of amortizable bond premium allocable (based on the Debt
Security's yield to maturity) to such year. Recently issued Treasury
Regulations require that a U.S. Holder that purchases a Debt Security at a
premium, and elects to amortize such premium, must amortize such premium under
a constant yield method. There are special rules, however, that apply to defer
the amortization of bond premium in the event a Debt Security has an earlier
call date. In the case of a Debt Security that is denominated in, or determined
by reference to, a foreign currency, bond premium will be computed in units of
foreign currency, and amortizable bond premium will reduce interest income in
units of the foreign currency. At the time amortized bond premium offsets
interest income, exchange gain or loss (taxable as ordinary income or loss) is
realized measured by the difference between exchange rates at that time and at
the time of the acquisition of the Debt Securities. Any election to amortize
bond premium shall apply to all bonds (other than bonds the interest on which
is excludible from gross income) held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder, and is irrevocable without the consent of
the Service. See also "Original Issue Discount -- Election to Treat All
Interest as Original Issue Discount."
Purchase, Sale and Retirement of the Debt Securities
A United States Holder's tax basis in a Debt Security will generally be
its U.S. dollar cost (as defined below), increased by the amount of any OID or
market discount included in the United States Holder's income with respect to
the Debt Security and the amount, if any, of income attributable to de minimis
original issue discount and de minimis market discount included in the United
States Holder's income with respect to the Debt Security, and reduced by (i)
the amount of any payments that are not qualified stated interest payments, and
(ii) the amount of any amortizable bond premium applied to reduce interest on
the Debt Security. The U.S. dollar cost of a Debt Security purchased with a
foreign currency will generally be the U.S. dollar value of the purchase price
on the date of purchase or, in the case of Debt Securities traded on an
established securities market, as defined in the applicable Treasury
Regulations, that are purchased by a cash basis United States Holder (or an
accrual basis United States Holder that so elects), on the settlement date for
the purchase.
A United States Holder will generally recognize gain or loss on the sale
or retirement of a Debt Security equal to the difference between the amount
realized on the sale or retirement and its tax basis in the Debt Security. The
amount realized on a sale or retirement for an amount in foreign currency will
be the U.S. dollar value of such amount on (i) the date payment is received in
the case of a cash basis United States Holder, (ii) the date of disposition in
the case of an accrual basis United States Holder or (iii) in the case of Debt
Securities traded on an established securities market, as defined in the
applicable Treasury Regulations, sold by a cash basis United States Holder (or
an accrual basis United States Holder that so elects), on the settlement date
for the sale. Except to the extent described above under "Original Issue
Discount -- Short-Term Debt Securities" or described in the next succeeding
paragraph or attributable to accrued but unpaid interest or subject to the
general rules governing contingent payment obligations, gain or loss recognized
on the sale or retirement of a Debt Security will be capital gain or loss and
will be long-term capital gain or loss if the Debt Security was held for more
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than one year, or in the case of individuals, mid-term capital gain or loss if
the Debt Security has been held for more than 12 months but no more than 18
months, and long-term capital gain or loss if the Debt Security has been held
for more than 18 months. Under the Taxpayer Relief Act of 1997, individuals are
subject to a maximum long-term capital gain rate of 20 percent and a maximum
mid-term capital gain rate of 28 percent on the sale of certain investments
such as the Debt Securities.
Gain or loss recognized by a United States Holder on the sale or
retirement of a Debt Security that is attributable to changes in exchange rates
will be treated as ordinary income or loss. However, exchange gain or loss is
taken into account only to the extent of total gain or loss realized on the
transaction.
Exchange of Amounts in Other Than U.S. Dollars
Foreign currency received as interest on a Debt Security or on the sale or
retirement of a Debt Security will have a tax basis equal to its U.S. dollar
value at the time such interest is received or at the time of such sale or
retirement. Foreign currency that is purchased will generally have a tax basis
equal to the U.S. dollar value of the foreign currency on the date of purchase.
Any gain or loss recognized on a sale or other disposition of a foreign
currency (including its use to purchase Debt Securities or upon exchange for
U.S. dollars) will be ordinary income or loss.
Indexed Debt Securities
The applicable Prospectus Supplement will contain a discussion of any
special United States federal income tax rules with respect to Indexed Debt
Securities (other than Debt Securities subject to the rules governing Variable
Rate Debt Securities).
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
beneficial owner of a Debt Security who is not a United States Holder and not
subject to United States federal income tax on a net income basis in respect of
income or gain from a Debt Security. This discussion assumes that the Debt
Security or coupon is not subject to the rules of Section 871(h)(4)(A) of the
Code (relating to interest payments that are determined by reference to the
income, profits, changes in the value of property or other attributes of the
debtor or a related party). In addition, solely with respect to United States
federal estate tax, the discussion assumes that the Debt Security had a
maturity date, when issued, that was not less than 184 days from the date of
issuance.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
(1) payments of principal, premium (if any) and interest, including OID,
by the Company or any of its paying agents to any holder of a Debt Security or
coupon that is a United States Alien Holder will not be subject to United
States federal withholding tax if, in the case of interest or OID, (i) the
beneficial owner of the Debt Security or coupon does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (ii) the beneficial owner of
the Debt Security is not a controlled foreign corporation that is related to
the Company through stock ownership, (iii) if the Debt Security is a Registered
Security, either (a) the beneficial owner of the Debt Security certifies to the
Company or its agent, under penalties of perjury, that it is not a United
States Holder and provides its name and address or (b) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Debt Security on behalf of a beneficial owner
certifies to the Company or its agent, under penalties of perjury, that such
statement has been received from the beneficial owner by it or by a financial
institution between it and the beneficial owner and furnishes the payor with a
copy thereof and (iv) in the case of a Debt Security which is not a Registered
Security, the Debt Security is offered, sold and delivered in compliance with
applicable restrictions relating to issuance of debt obligations which are not
in registered form and payments on the Debt Securities are made in accordance
with the applicable procedures relating to the issuance of debt obligations
which are not in registered form (both of which restrictions and procedures
will be described in the applicable Prospectus Supplement);
(2) a United States Alien Holder of a Debt Security or coupon will not be
subject to United States federal income or withholding tax on any gain realized
on the sale, exchange or retirement of a Debt Security or coupon unless, in the
case of an individual holder, such holder is present in the United States for
183 days or more in the taxable year of the sale, exchange or retirement and
certain other conditions are met; and
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(3) a Debt Security or coupon held by an individual who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the United States federal estate tax
as a result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and (b) the income on the Debt
Security would not have been effectively connected with a United States trade
or business of the individual at the individual's death.
Recently issued Treasury Regulations provide alternative methods for
satisfying the certification requirement described in clause (1)(iii) above. In
the case of Debt Securities held by a foreign partnership, the new regulations
require that (1) the certification described in clause (1)(iii) above be
provided by the partners of the foreign partnership or, alternatively, by the
foreign partnership if it has entered into an agreement with the Service to be
treated as a "withholding foreign partnership," and (2) the foreign partnership
provide certain information, including a United States taxpayer identification
number. A look-through rule applies in the case of tiered partnerships. The new
regulations are effective for payments made after December 31, 1998.
Backup Withholding and Information Reporting
United States Holders
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Debt Security and the proceeds of the
sale of a Debt Security before maturity within the United States to, and to the
accrual of OID on a Discount Debt Security with respect to, certain holders,
including non-corporate holders, and "backup withholding" at a rate of 31% will
apply to such payments and to payments of OID if the United States Holder fails
to provide an accurate taxpayer identification number or to report all interest
and dividends required to be shown on its federal income tax returns.
United States Alien Holders
Under current law, information reporting and backup withholding will not
apply to payments of principal, premium (if any) and interest (including OID)
made by the Company or a paying agent to a United States Alien Holder on a Debt
Security if, in the case of Debt Securities which are Registered Securities,
either of the certifications described in clause (1)(iii) under "United States
Alien Holders" above is received, provided that the payor does not have actual
knowledge that the holder is a United States person. The Company or a paying
agent, however, may report (on Internal Revenue Service Form 1042S) payments of
interest (including OID) on Debt Securities that are Registered Securities.
Payments of the proceeds from the sale by a United States Alien Holder of
a Debt Security made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that if the
broker is a United States person, a controlled foreign corporation for United
States tax purposes, a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, or (in the case of payments made after December 31, 1998) a
foreign partnership with certain connections to the United States, information
reporting may apply to such payments. Payments of the proceeds from the sale of
a Debt Security to or through the United States office of a broker is subject
to information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of the following ways: (i)
through underwriters or dealers, (ii) directly to a limited number of
institutional purchasers or to a single institutional purchaser, (iii) through
agents and (iv) a combination of any of the foregoing. Any such underwriter,
dealer or agent may be deemed to be an underwriter within the meaning of the
Securities Act. The Prospectus Supplement or Prospectus Supplements with
respect to the Debt Securities of a particular series will set forth the terms
of the offering of such Debt Securities, including the name or names of any
underwriters or agents, the public offering or purchase price and the proceeds
to the Company from such sale, any discounts and commissions to be allowed or
paid to the underwriters or agents, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers,
if any, and the securities exchanges, if any, on which the Debt Securities will
be listed.
Unless otherwise set forth in the Prospectus Supplement relating to a
particular series or issue of Debt Securities, the obligations of the
underwriters to purchase such Debt Securities will be subject to certain
conditions precedent, and each of the underwriters with respect to such Debt
Securities will be obligated to purchase all of the Debt Securities of such
series
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or issue allocated to it if any such Debt Securities are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If so indicated in the applicable Prospectus Supplement or Prospectus
Supplements, the Company will authorize underwriters, dealers or agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company pursuant to Delayed Delivery Contracts providing for payment and
delivery on the date stated in the applicable Prospectus Supplement or
Prospectus Supplements. Each such contract will be for an amount not less than
the amount specified in the applicable Prospectus Supplement or Prospectus
Supplements and unless the Company otherwise agrees, the aggregate principal
amount of Debt Securities sold pursuant to such contracts shall not be more
than the respective amounts stated in the applicable Prospectus Supplement or
Prospectus Supplements. Institutions with whom such contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies and educational and charitable institutions, but
shall in all cases be subject to the approval of the Company. Delayed Delivery
Contracts will not be subject to any conditions except that the purchase by an
institution of the Debt Securities covered thereby shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject. The applicable Prospectus Supplement will
set forth the commission payable for the solicitation of such contracts.
Under the agreements that may be entered into with the Company, the
underwriters, dealers and agents may be entitled to indemnification by the
Company against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which the
underwriters, dealers or agents may be required to make in respect thereof.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, the Company in the ordinary course of business.
Each underwriter and agent participating in the distribution of any Debt
Securities which are issuable in bearer form will agree that it will not offer,
sell or deliver, directly or indirectly, Debt Securities in bearer form in the
United States or to United States persons (other than qualifying financial
institutions) in connection with the original issuance of Debt Securities.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the Company by
McGuire, Woods, Battle & Boothe LLP, Richmond, Virginia. Anne M. Whittemore, a
director of the Company, is a partner of McGuire, Woods, Battle & Boothe LLP.
Lawyers of such firm own an aggregate of approximately 25,000 shares of the
Company's Common Stock.
EXPERTS
The consolidated balance sheets of James River and subsidiaries as of
December 29, 1996 and December 31, 1995, and the related consolidated
statements of operations, cash flows and changes in capital accounts for each
of the three years in the period ended December 29, 1996, included in James
River's 1996 Annual Report on Form 10-K, have been audited by Coopers & Lybrand
L.L.P., independent accountants, as set forth in their report thereon included
therein, and incorporated by reference herein. The supplemental consolidated
balance sheets of the Company as of December 29, 1996, and December 31, 1995,
and the supplemental consolidated statements of operations, cash flows and
changes in capital accounts for each of the three years in the period ended
December 29, 1996, contained in the Company's Current Report on Form 8-K dated
August 13, 1997 (filed on August 27, 1997), have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their report thereon
included therein and incorporated by reference herein. The consolidated balance
sheets of Fort James as of December 29, 1996, and December 31, 1995, and the
consolidated statements of operations, cash flows and changes in capital
accounts for each of the three years in the period ended December 29, 1996,
contained in the Company's Current Report on Form 8-K dated August 13, 1997
(filed February 3, 1998) have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon included therein
and incorporated herein. Such consolidated financial statements and
supplemental consolidated financial statements have been incorporated herein by
reference in reliance on such reports given on the authority of such firm as
experts in accounting and auditing.
The consolidated balance sheets of Fort Howard and subsidiaries as of
December 31, 1996 and December 31, 1995, and the related consolidated
statements of operations, cash flows and changes in capital accounts for each
of the three years in the period ended December 31, 1996, included in the
Company's Current Report on Form 8-K dated August 13, 1997 (filed on August 25,
1997), have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements have
been incorporated herein by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
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[FORT JAMES LOGO]
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
Registration Statement filing fee ......... $ 236,000
Legal fees and expenses ................... 100,000
Blue Sky fees and expenses ................ 10,000
Accounting fees and expenses .............. 40,000
Printing and engraving costs .............. 25,000
Rating agencies' fees ..................... 270,000
Miscellaneous ............................. 4,000
----------
Total ................................. $ 685,000*
==========
</TABLE>
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* Estimated
ITEM 15. Indemnification of Directors and Officers.
Article 10 of the Virginia Stock Corporation Act (the "VSCA") sets forth
conditions and limitations governing the indemnification of officers,
directors, and other persons of the Registrant.
The Registrant's Restated Articles of Incorporation (the "Registrant
Charter") provide as follows:
(a) In every instance permitted by the VSCA, the liability of a director
or officer of the Registrant to the Registrant or its shareholders arising out
of a single transaction, occurrence or course of conduct is limited to one
dollar.
(b) The Registrant will indemnify any individual who is, was or is
threatened to be made a party to a proceeding (including a proceeding by or in
the right of the Registrant) because he is or was a director or officer of the
Registrant or because he is or was serving the Registrant or any other legal
entity in any capacity at the request of the Registrant while a director or
officer of the Registrant, against all liabilities and reasonable expenses
incurred in the proceeding except such liabilities and expenses as are incurred
because of his willful misconduct or knowing violation of the criminal law.
Service as a director or officer of a legal entity controlled by the Registrant
is deemed service at the request of the Registrant. The determination that
indemnification under this provision of the Registrant Charter is permissible
and the evaluation as to the reasonableness of expenses in a specific case will
be made, in the case of a director, as provided by law, and in the case of an
officer, as provided in paragraph (c) below, provided, however, that if a
majority of the directors of the Registrant has changed after the date of the
alleged conduct giving rise to a claim for indemnification, such determination
and evaluation shall, at the option of the person claiming indemnification, be
made by special legal counsel agreed upon by the board of directors and such
person. Unless a determination has been made that indemnification is not
permissible, the Registrant will make advances and reimbursements for expenses
incurred by a director or officer in a proceeding upon receipt of an
undertaking from him to repay the same if it is ultimately determined that he
is not entitled to indemnification. Such undertaking will be an unlimited,
unsecured general obligation of the director or officer and shall be accepted
without reference to his ability to make repayment. The termination of a
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent will not of itself create a presumption that a
director or officer acted in such a manner as to make him ineligible for
indemnification. The Registrant is authorized to contract in advance to
indemnify and make advances and reimbursements for expenses to any of its
directors or officers to the same extent provided in this paragraph (b).
(c) The Registrant may, to a lesser extent or to the same extent that it
is required to provide indemnification and make advances and reimbursements for
expenses to its directors and officers pursuant to paragraph (b) above, provide
indemnification and make advances and reimbursements for expenses to its
employees and agents, the directors, officers, employees and agents of its
subsidiaries and predecessor entities, and any person serving any other legal
entity in any capacity at the request of the Registrant and, if authorized by
general or specific action of the Board of Directors of the Registrant, may
contract in advance to do so. The determination that indemnification under the
provisions described in this paragraph (c) is permissible, the authorization of
such indemnification and the evaluation as to the reasonableness of expenses in
a specific case shall be made as authorized from time to time by general or
specific action of the Board of Directors of the Registrant, which action may
be taken before or after a claim for indemnification is made or as otherwise
provided by law. No person's rights under paragraph (b) above shall be limited
by the provisions in this paragraph (c).
(d) Every reference in the provisions described above to persons who are
or may be entitled to indemnification includes all persons who formerly
occupied any of the positions referred to and their respective heirs, executors
and administrators.
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<PAGE>
Special legal counsel selected to make determinations under these provisions
may be counsel for the Registrant. Indemnification pursuant to these provisions
shall not be exclusive of any other right of indemnification to which any
person may be entitled, including indemnification pursuant to a valid contract,
indemnification by legal entities other than the Registrant and indemnification
under policies of insurance purchased and maintained by the Registrant or
others. However, no person will be entitled to indemnification by the
Registrant to the extent he is indemnified by another, including an insurer.
The Registrant is authorized to purchase and maintain insurance against any
liability it may have under these provisions or to protect any of the persons
named above against any liability arising from their service to the Registrant
or any other legal entity at the request of the Registrant regardless of the
Registrant's power to indemnify against such liability.
(e) The provisions described above apply to indemnification, advances and
reimbursement for expenses made after the Registrant Charter's adoption whether
arising from conduct or events occurring before or after such adoption. No
amendment, modification or repeal of these provisions will diminish the rights
provided thereunder to any person arising from conduct or events occurring
before the adoption of such amendment, modification or repeal.
The Registrant has insurance to indemnify its directors and officers,
within the limits of the Registrant's insurance policies, for those liabilities
in respect of which such indemnification insurance is permitted under the laws
of the State of Virginia.
ITEM 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
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<S> <C>
1.1 Form of Underwriting Agreement, filed herewith
4.1 Indenture dated as of November 1, 1991, between the Company and The Bank of New York, as
Trustee (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form
S-3 (Registration No. 33-43335))
4.2 First Supplemental Indenture dated as of September 19, 1997, between the Company and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (Registration No. 333-36317))
5.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP as to the validity of the Debt
Securities, filed herewith
8.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP as to certain tax matters, filed
herewith
12.1 Computation of ratios of earnings to fixed charges, filed herewith
23.1 Consent of Coopers & Lybrand L.L.P., filed herewith
23.2 Consent of Arthur Andersen LLP, filed herewith
24.1 Power of Attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of the Trustee,
filed herewith
</TABLE>
ITEM 17. Undertakings.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
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Provided, however, that paragraphs (a) (i) and (a) (ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Exchange
Act that are incorporated by reference in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Fort James Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Richmond, Commonwealth of Virginia,
as of March 4, 1998.
FORT JAMES CORPORATION
By: /s/ Clifford A. Cutchins, IV
- --------------------------------------
POWER OF ATTORNEY
Know All Men and Women By These Presents that each individual whose
signature appears below constitutes and appoints Ernst A. Haberli, Clifford A.
Cutchins, IV and R. Michael Lempke, and each of them, such individual's true
and lawful attorneys-in-fact and agents with full power of substitution, for
such individual and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement and any registration statement
related to the offering contemplated by this registration statement, and to
file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------- ---------------------------------------- --------------
<S> <C> <C>
/s/ Miles L. Marsh Chairman of the Board, Chief Executive March 4, 1998
---------------------------------- Officer and Director
Miles L. Marsh
/s/ Michael T. Riordan President and Chief Operating Officer March 4, 1998
---------------------------------- and Director
Michael T. Riordan
/s/ Ernst A. Haberli Executive Vice President and Chief March 4, 1998
---------------------------------- Financial Officer (Principal Financial
Ernst A. Haberli and Accounting Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------- ---------- --------------
<S> <C> <C>
/s/ Barbara L. Bowles Director March 4, 1998
----------------------------------
Barbara L. Bowles
Director
----------------------------------
William T. Burgin
/s/ James L. Burke Director March 4, 1998
----------------------------------
James L. Burke
/s/ Worley H. Clark, Jr. Director March 4, 1998
----------------------------------
Worley H. Clark, Jr.
Director
----------------------------------
William T. Comfort, Jr.
/s/ Gary P. Coughlan Director March 4, 1998
----------------------------------
Gary P. Coughlan
Director
----------------------------------
William V. Daniel
/s/ Bruce C. Gottwald Director March 4, 1998
----------------------------------
Bruce C. Gottwald
Director
----------------------------------
Robert H. Niehaus
/s/ Robert M. O'Neil Director March 4, 1998
----------------------------------
Robert M. O'Neil
/s/ Richard L. Sharp Director March 4, 1998
----------------------------------
Richard L. Sharp
Director
----------------------------------
Frank V. Sica
Director
----------------------------------
Anne Marie Whittemore
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ------------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement, filed herewith
4.1 Indenture dated as of November 1, 1991, between the Company and The Bank of New York, as
Trustee (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-3 (Registration No. 33-43335))
4.2 First Supplemental Indenture dated as of September 19, 1997, between the Company and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (Registration No. 333-36317))
5.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP as to the validity of the Debt
Securities, filed herewith
8.1 Opinion and consent of McGuire, Woods, Battle & Boothe LLP as to certain tax matters, filed
herewith
12.1 Computation of ratios of earnings to fixed charges, filed herewith
23.1 Consent of Coopers & Lybrand L.L.P., filed herewith
23.2 Consent of Arthur Andersen LLP, filed herewith
24.1 Power of Attorney (included on signature page)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of the Trustee,
filed herewith
</TABLE>
II-6
EXHIBIT 1.1
$ OF DEBT SECURITIES
FORT JAMES CORPORATION
FORM OF UNDERWRITING AGREEMENT
<PAGE>
FORT JAMES CORPORATION
FORM OF UNDERWRITING AGREEMENT
New York, New York
To the Representatives
named in Schedule I
hereto of the
Underwriters named in
Schedule II hereto
Dear Sirs:
Fort James Corporation (formerly James River Corporation of Virginia), a
Virginia corporation (the "Company"), proposes to sell to the underwriters
named in Schedule II hereto (the "Underwriters"), for whom you (the
"Representatives") are acting as representatives, the principal amount of its
securities identified in Schedule I hereto (the "Securities"), to be issued
under an indenture dated as of November 1, 1991, between the Company and The
Bank of New York, as trustee (the "Trustee"), as amended and supplemented by
the First Supplemental Indenture, dated as of September 19, 1997 (as further
amended or supplemented from time to time, the "Indenture"). The term
"Indenture", as used herein, includes the Officer's Certificate (as defined in
the Indenture) establishing the forms and terms of the Securities. If the firm
or firms listed in Schedule II hereto include only the firm or firms listed in
Schedule I hereto, then the terms "Underwriters" and "Representatives", as used
herein, shall each be deemed to refer to such firm or firms.
1. Representations and Warranties. The Company represents and warrants to,
and agrees with, each Underwriter as set forth below in this Section 1. Certain
terms used in this Section 1 are defined in paragraph (c) hereof.
(a) If the offering of the Securities is a Delayed Offering (as specified
in Schedule I hereto), paragraph (i) below is applicable and, if the
offering of the Securities is a Non-Delayed Offering (as so specified),
paragraph (ii) below is applicable.
(i) The Company meets the requirements for the use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement (file number 333- ) on such Form, including a basic
prospectus, for registration under the Act of the offering and sale of
the Securities. The Company may have filed one or more amendments
thereto, and may have used a Preliminary Final Prospectus, each of which
has previously been furnished to you. The registration statement, as so
amended, and any Rule 462(b) Registration Statement has become effective
and no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under
the Act and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of the Company, are contemplated by the
Commission. The offering of the Securities is a Delayed Offering and,
although the Basic Prospectus may not include all the information with
respect to the Securities and the offering thereof required by the Act
and the rules and regulations of the Commission thereunder to be included
in the Final Prospectus, the Basic Prospectus includes all such material
information required by the Act and the rules and regulations of the
Commission thereunder to be included therein as of the Effective Date;
provided, however, that the Company makes no representations or
warranties as to (i) that part of the Registration Statement which shall
constitute the Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") of the Trustee or (ii) the information contained in or omitted from
the Registration Statement or the Final Prospectus (or any supplement
thereto) in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of any Underwriter through the
Representatives specifically for use in connection with the preparation
of the Registration Statement or the Final Prospectus (or any supplement
thereto). The Company will next file with the Commission pursuant to
Rules 415 and 424(b)(2) or (5) a final supplement to the form of
prospectus included in Registration Statement No. 333- relating to
the Securities and the offering thereof. As filed, such final prospectus
supplement shall include all required material information with respect
to the Securities and the offering thereof.
(ii) The Company meets the requirements for the use of Form S-3 under
the Act and has filed with the Commission a registration statement (file
number 333- ) on such Form, including a basic prospectus, for
registration under the Act of the offering and sale of the Securities.
The Company may have filed one or more amendments thereto, including a
Preliminary Final Prospectus, each of which has previously been furnished
to you. The
2
<PAGE>
Company will next file with the Commission either (x) a final prospectus
supplement relating to the Securities in accordance with Rules 430A and
424(b)(1) or (4), or (y) prior to the effectiveness of the registration
statement, an amendment to such registration statement, including the
form of final prospectus supplement. In the case of clause (x), the
Company has included in such registration statement, as amended at the
Effective Date, all material information (other than Rule 430A
Information) required by the Act and the rules and regulations of the
Commission thereunder to be included in the Final Prospectus with respect
to the Securities and the offering thereof; provided, however, that the
Company makes no representations or warranties as to (i) that part of the
Registration Statement which shall constitute the Statement of
Eligibility and Qualification (Form T-1) under the Trust Indenture Act of
the Trustee or (ii) the information contained in or omitted from the
Registration Statement or the Final Prospectus (or any supplement
thereto) in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of any Underwriter through the
Representatives specifically for use in connection with the preparation
of the Registration Statement or the Final Prospectus (or any supplement
thereto). As filed, such final prospectus supplement or such amendment
and form of final prospectus supplement shall contain all Rule 430A
Information, together with all other such required material information,
with respect to the Securities and the offering thereof.
(b) On the Effective Date, the Registration Statement did or will, and
when the Final Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Final Prospectus (and any
supplement thereto) will, comply in all material respects with the
applicable requirements of the Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Trust Indenture Act, and the
respective rules and regulations of the Commission thereunder; on the
Effective Date and on the Closing Date, the Registration Statement did not
or will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading; on the Effective Date and on
the Closing Date the Indenture did or will comply in all material respects
with the requirements of the Trust Indenture Act and the rules of the
Commission thereunder; and, on the Effective Date, the Final Prospectus, if
not filed pursuant to Rule 424(b), did not or will not, and on the date of
any filing pursuant to Rule 424(b) and on the Closing Date, the Final
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to (i)
that part of the Registration Statement which shall constitute the
Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of the Trustee or (ii) the information contained in or
omitted from the Registration Statement or the Final Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives specifically for use in connection with the
preparation of the Registration Statement or the Final Prospectus (or any
supplement thereto). Each Preliminary Final Prospectus and the Final
Prospectus delivered to the Underwriters for use in connection with the
offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to the Commission's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR") except to the extent
permitted by Regulation S-T.
(c) The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "the Effective Date" shall mean each date that
Registration Statement No. 333- , any post-effective amendment or
amendments thereto and any Rule 462(b) Registration Statement referred to
below became or become effective. "Execution Time" shall mean the date and
time that this Agreement is executed and delivered by the parties hereto.
"Basic Prospectus" shall mean the prospectus referred to in paragraph (a)
above contained in Registration Statement No. 333- at its Effective
Date. "Preliminary Final Prospectus" shall mean any preliminary prospectus
supplement to the Basic Prospectus which describes the Securities and the
offering thereof and is used prior to filing of the Final Prospectus.
"Final Prospectus" shall mean the prospectus supplement relating to the
Securities that is first filed pursuant to Rule 424(b) after the Execution
Time, together with the Basic Prospectus or, if, in the case of a
Non-Delayed Offering, no filing pursuant to Rule 424(b) is required, shall
mean the form of final prospectus relating to the Securities, including the
Basic Prospectus, included in the Registration Statement at the Effective
Date. "Registration Statement" shall mean the registration statement
referred to in paragraph (a) above, including incorporated documents,
exhibits and financial statements, as amended at the Execution Time (or, if
not effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective Date
as provided by Rule 430A. "Rule 415", "Rule 424", "Rule 430A" and
"Regulation S-K" refer to such rules or regulations of the Commission under
the Act. "Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be
3
<PAGE>
omitted from the Registration Statement when it becomes effective pursuant
to Rule 430A. Any reference herein to the Registration Statement, the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall
be deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the Exchange
Act on or before any Effective Date of the Registration Statement or the
issue date of the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, as the case may be; and any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Registration
Statement, the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act on or before any Effective Date of the
Registration Statement or the issue date of the Basic Prospectus, any
Preliminary Final Prospectus or the Final Prospectus, as the case may be;
and any reference herein to the terms "amend", "amendment" or "supplement"
with respect to the Registration Statement, the Basic Prospectus, any
Preliminary Final Prospectus or the Final Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act
after any Effective Date of the Registration Statement or the issue date of
the Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated therein by
reference. Any Registration Statement filed pursuant to Rule 462(b) of the
1933 Act Regulations is herein referred to as the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. For purposes of this
Agreement, all references to the Registration Statement, any Preliminary
Final Prospectus, the Final Prospectus or any amendment or supplement to
the foregoing shall be deemed to include the copy filed with the Commission
pursuant to EDGAR. A "Non- Delayed Offering" shall mean an offering of
securities which is intended to commence promptly after the effective date
of a registration statement, with the result that, pursuant to Rules 415
and 430A, all information (other than Rule 430A Information) with respect
to the securities so offered is required under the rules and regulations of
the Commission under the Act to be included in such registration statement
at the effective date thereof. A "Delayed Offering" shall mean an offering
of securities pursuant to Rule 415 which does not commence promptly after
the effective date of a registration statement, with the result that only
information required pursuant to Rule 415 need be included in such
registration statement at the effective date thereof with respect to the
securities so offered. Whether the offering of the Securities is a Non-
Delayed Offering or a Delayed Offering shall be set forth in Schedule I
hereto.
(d) Fort James Operating Company (formerly James River Paper Company,
Inc.) ("FJOC"), Fort James Fiber Company ("FJFC") and Fort James N.V.
(together with FJOC and FJFC, the "Significant Subsidiaries") are the only
directly-owned "significant subsidiaries" of the Company (as such term is
defined in Regulation S-X).
(e) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated
therein, (i) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings or business affairs of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business (a "Material Adverse Effect"),
and (ii) there have been no transactions entered into by the Company or any
of its subsidiaries, other than those in the ordinary course of business,
which are material with respect to the Company and its subsidiaries
considered as one enterprise.
(f) This Agreement has been duly authorized, executed and delivered by
the Company. The Indenture has been duly authorized by the Company and duly
qualified under the Trust Indenture Act and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally and is subject to general principles of equity (whether
considered in a proceeding in equity or at law).
(g) The Securities have been duly authorized and, at the Closing Date,
will have been duly executed by the Company and, when authenticated, issued
and delivered in the manner provided for in the Indenture and delivered
against payment of the purchase price therefor as provided in this
Agreement, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and subject to general
principles of equity (whether considered in a proceeding in equity or at
law), and will be in the form contemplated by, and entitled to the benefits
of, the Indenture. The Securities and the Indenture will conform in all
material respects to the respective statements relating thereto contained
in the Basic Prospectus and the Final Prospectus and will be in
substantially the respective forms filed or incorporated by reference, as
the case may be, as exhibits to the Registration Statement.
4
<PAGE>
(h) The execution, delivery and performance of this Agreement, the
Indenture and the Securities by the Company and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectus
under the caption "Use of Proceeds") and compliance by the Company with its
obligations hereunder and under the Indenture and the Securities have been
duly authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or Fort
James Operating Company (formerly James River Paper Company, Inc.)
("FJOC"), Fort James Fiber Company ("FJFC"), or Fort James N.V. (the
"Significant Subsidiaries") pursuant to, any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of the Significant Subsidiaries is a
party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any Significant Subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or
by-laws of the Company or any Significant Subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign, known
to the Company having jurisdiction over the Company or any Significant
Subsidiary or any of their respective assets, properties or operations
which would result in a Material Adverse Effect. As used herein, a
"Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person acting
on such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
subsidiary.
(i) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental
authority or agency is necessary or required for the performance by the
Company of its obligations hereunder, in connection with the offering,
issuance or sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement or for the due execution,
delivery or performance of the Indenture by the Company, except such as
have been already obtained, and except for such that would not reasonably
be expected to have a Material Adverse Effect or as may be required under
the 1933 Act or the 1933 Act Regulations or state securities laws and
except for the qualification of the Indenture under the Trust Indenture
Act.
(j) Except as disclosed in the Registration Statement (including the
documents incorporated therein by reference), or as would not, individually
or in the aggregate, have a Material Adverse Effect:
(i) the Company and the Significant Subsidiaries (A) are in compliance
with all, and are not subject to any asserted liability or, to the
Company's knowledge, any liability, in each case with respect to any,
applicable Environmental Laws (as defined below), (B) hold or have
applied for all Environmental Permits (as defined below) and (C) are in
compliance with their respective Environmental Permits;
(ii) neither the Company nor any Significant Subsidiary has received
any written notice, demand, letter, claim or request for information
alleging that the Company or any of its subsidiaries may be in violation
of, or liable under, any Environmental Law;
(iii) neither the Company nor any Significant Subsidiary (A) has
entered into or agreed to any consent decree or order or is subject to
any judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation, sampling,
monitoring, treatment, remediation, removal or cleanup of Hazardous
Materials (as defined below) and, to the knowledge of the Company, no
investigation, litigation or other proceeding is pending or threatened in
writing with respect thereto, or (B) is an indemnitor in connection with
any threatened or asserted claim by any third-party indemnitee for any
liability under any Environmental Law or relating to any Hazardous
Materials; and
(iv) none of the real property owned or leased by the Company or any
Significant Subsidiary is listed or, to the knowledge of the Company,
proposed for listing on the "National Priorities List" under CERCLA, as
updated through the date hereof, or any similar state or foreign list of
sites requiring investigation or cleanup.
For purposes of this Agreement:
"CERCLA" means Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended as of the date hereof.
5
<PAGE>
"Environmental Laws" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, treaty, writ or order and any
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decrees, judgment, stipulation,
injunction, permit, authorization, policy, opinion, or agency requirement, in
each case having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and safety
or natural resources, including, without limitation, those relating to the use,
handling, presence, transportation, treatment, storage, disposal, release,
threatened release or discharge of Hazardous Materials or noise, odor,
wetlands, pollution, contamination or any injury or threat of injury to persons
or property.
"Environmental Permits" means any permit, approval, identification number,
license and other authorization required under any applicable Environmental
Law.
"Hazardous Materials" means (a) any petroleum, petroleum by-products or
breakdown products, radioactive materials, asbestos- containing materials or
polychlorinated biphenyls or (b) any chemical, material or other substance
defined or regulated as toxic or hazardous or as a pollutant or contaminant or
waste under any applicable Environmental Law.
2. Purchase and Sale. Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Company agrees to
sell to each Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from the Company, at the purchase price set forth in
Schedule I hereto the principal amounts of each series of the Securities set
forth opposite such Underwriter's name in Schedule II hereto, plus any
additional principal amount of Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 8 hereof, except
that, if Schedule I hereto provides for the sale of Securities pursuant to
delayed delivery arrangements, the respective principal amounts of Securities
to be purchased by the Underwriters shall be as set forth in Schedule II hereto
less the respective amounts of Contract Securities determined as provided
below. Securities to be purchased by the Underwriters are herein sometimes
called the "Underwriters' Securities" and Securities to be purchased pursuant
to Delayed Delivery Contracts as hereinafter provided are herein called
"Contract Securities".
If so provided in Schedule I hereto, the Underwriters are authorized to
solicit offers to purchase Securities from the Company pursuant to delayed
delivery contracts ("Delayed Delivery Contracts"), substantially in the form of
Schedule III hereto but with such changes therein as the Company may authorize
or approve. The Underwriters will endeavor to make such arrangements and, as
compensation therefor, the Company will pay to the Representatives, for the
account of the Underwriters, on the Closing Date, the percentage set forth in
Schedule I hereto of the principal amount of the Securities for which Delayed
Delivery Contracts are made. Delayed Delivery Contracts are to be with
institutional investors, including commercial and savings banks, insurance
companies, pension funds, investment companies and educational and charitable
institutions. The Company will enter into Delayed Delivery Contracts in all
cases where sales of Contract Securities arranged by the Underwriters have been
approved by the Company but, except as the Company may otherwise agree, each
such Delayed Delivery Contract must be for not less than the minimum principal
amount set forth in Schedule I hereto and the aggregate principal amount of
Contract Securities may not exceed the maximum aggregate principal amount set
forth in Schedule I hereto. The Underwriters will not have any responsibility
in respect of the validity or performance of Delayed Delivery Contracts. The
principal amount of Securities to be purchased by each Underwriter as set forth
in Schedule II hereto shall be reduced by an amount which shall bear the same
proportion to the total principal amount of Contract Securities as the
principal amount of Securities set forth opposite the name of such Underwriter
bears to the aggregate principal amount set forth in Schedule II hereto, except
to the extent that you determine that such reduction shall be otherwise than in
such proportion and so advise the Company in writing; provided, however, that
the total principal amount of Securities to be purchased by all Underwriters
shall be the aggregate principal amount set forth in Schedule II hereto less
the aggregate principal amount of Contract Securities.
3. Delivery and Payment. Delivery of and payment for the Underwriters'
Securities shall be made on the date and at the time specified in Schedule I
hereto, which date and time may be postponed by agreement between the
Representatives and the Company or as provided in Section 8 hereof (such date
and time of delivery and payment for the Underwriters' Securities being herein
called the "Closing Date"). Delivery of the Underwriters' Securities shall be
made to the Representatives for the respective accounts of the several
Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to the Company by wire transfer
of immediately available funds to a bank account designated by the Company.
Delivery of the Underwriters' Securities shall be made at such location as the
Representatives shall reasonably request at least one business day in advance
of the Closing Date and payment for the Securities shall be made at the office
specified in Schedule I hereto. Certificates for the Underwriters' Securities
shall be registered in such names and in such denominations as the
Representatives may request not less than two full business days in advance of
the Closing Date.
6
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The Company agrees to have the Underwriters' Securities available for
inspection, checking and packaging by the Representatives in New York, New
York, not later than 1:00 PM on the business day prior to the Closing Date.
4. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to qualify the Indenture under
the Trust Indenture Act and to cause the Registration Statement, if not
effective at the Execution Time, and any amendment thereto, to become
effective. Prior to the termination of the offering of the Securities, the
Company will not file any amendment of the Registration Statement or
supplement (including the Final Prospectus or any Preliminary Final
Prospectus) to the Basic Prospectus (other than (i) subject to Section
4(f), any prospectus supplement relating to the offering of other
securities registered under the Registration Statement and (ii) other than
any document required to be filed under the Exchange Act that upon filing
is deemed to be incorporated by reference therein, except for such
documents required to be filed during the period from the Execution Time
through the Closing Date) unless the Company has furnished you a copy for
your review prior to filing and will not file any such proposed amendment
or supplement to which you reasonably object. Subject to the foregoing
sentence, the Company will cause the Final Prospectus, properly completed,
and any supplement thereto and the Preliminary Final Prospectus to be filed
with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence reasonably
satisfactory to the Representatives of such timely filing. The Company will
advise the Representatives promptly after it shall receive notice or obtain
knowledge thereof (i) when the Registration Statement, if not effective at
the Execution Time, and any amendment thereto, including any Post-
Effective Amendment, shall have become effective, (ii) when the Final
Prospectus, and any supplement thereto, and any Preliminary Final
Prospectus shall have been filed with the Commission pursuant to Rule
424(b), (iii) when, prior to termination of the offering of the Securities,
any amendment to the Registration Statement, including any Rule 462(b)
Registration Statement, shall have been filed or become effective, (iv) of
any request by the Commission for any amendment of the Registration
Statement or supplement to the Final Prospectus or for any additional
information, (v) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (vi) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of
any such stop order and, if issued, to obtain the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Final Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Final Prospectus to comply
with the Act or the Exchange Act or the respective rules and regulations of
the Commission thereunder, the Company promptly will prepare and file with
the Commission, subject to the second sentence of paragraph (a) of this
Section 4, an amendment or supplement which will correct such statement or
omission or effect such compliance.
(c) As soon as practicable, the Company will make generally available to
its security holders and to the Representatives an earning statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representatives and counsel for the
Underwriters, without charge, five copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of any
Preliminary Final Prospectus and the Final Prospectus and any supplement
thereto as the Representatives may reasonably request. Copies of the
Registration Statement and each amendment thereto, any Preliminary Final
Prospectus and the Final Prospectus furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(e) The Company will use its best efforts to qualify the Securities for
sale under the laws of such jurisdictions as the Representatives may
reasonably designate, will maintain such qualifications in effect so long
as required for the distribution of the Securities, except that the Company
shall not be required in connection therewith to qualify as a foreign
corporation, to execute a general consent to service of process in any
state or to otherwise subject itself to taxation (other than stock transfer
taxes) in connection with any such qualification, and will arrange for the
determination of the legality of the Securities for purchase by
institutional investors.
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(f) Except to the extent specified on Schedule I hereto, until the
business date set forth on Schedule I hereto, the Company will not, without
the consent of the Representatives, offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of,
any debt securities issued or guaranteed by the Company (other than the
Securities or other securities issued in the ordinary course of business).
5. Conditions to the Obligations of the Underwriters. The obligations of
the underwriters to purchase the Underwriters' Securities shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time and Closing Date, to the accuracy of
the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) The Registration Statement has become effective and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
threatened; if filing of the Final Prospectus, or any supplement thereto,
is required pursuant to Rule 424(b), the Final Prospectus, and any such
supplement, shall have been filed in the manner and within the time period
required by Rule 424(b).
(b) The Company shall have furnished to the Representatives the opinion
of McGuire, Woods, Battle & Boothe LLP, counsel for the Company, dated the
Closing Date, to the effect that:
(i) The Company has been duly organized and is validly existing and in
good standing under the laws of the Commonwealth of Virginia; each of the
Significant Subsidiaries has been duly organized and is validly existing
and, if applicable, in good standing under the laws of the jurisdiction
of its incorporation; the Company and each Significant Subsidiary has
corporate power and authority to conduct its business as described in the
Final Prospectus; the Company and each Significant Subsidiary is, if
applicable, duly qualified to do business and is, if applicable, in good
standing in each jurisdiction in which it owns or leases a material
amount of real property;
(ii) The authorized capital stock of the Company is as set forth in
the Final Prospectus; and the Securities conform to the description
thereof contained in the Final Prospectus;
(iii) The Indenture and the Securities have been duly authorized; the
Indenture has been duly qualified under the Trust Indenture Act; the
Indenture has been executed and delivered by the Company and constitutes
a valid and legally binding obligation of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles; the
Securities have been duly executed, issued and delivered by the Company
as provided in the Company's Articles of Incorporation, as amended to
date, and in the Indenture and when the Securities have been duly
authenticated by the Trustee as provided for in the Indenture and
delivered and paid for by the Underwriters pursuant to this Agreement, in
the case of Underwriters Securities, or by the purchasers thereof
pursuant to Delayed Delivery Contracts, in the case of any Contract
Securities, the Securities will constitute valid and legally binding
obligations of the Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(iv) All of the outstanding shares of capital stock of the Significant
Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and are owned beneficially, directly or indirectly,
(except as otherwise stated in the Final Prospectus) by the Company
subject to no perfected mortgage, pledge, lien, encumbrance, charge or
adverse claim and, to the knowledge of such counsel, any other mortgage,
pledge, lien, encumbrance, charge or adverse claim;
(v) Such counsel has been advised by the staff of the Commission that
the Registration Statement has become effective under the Act; any
required filing of the Basic Prospectus, any Preliminary Final Prospectus
and the Final Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required by
Rule 424(b); and to the best knowledge of such counsel no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been issued and no
proceeding for that purpose has been instituted or, to the knowledge of
such counsel, threatened under the Act;
(vi) The Registration Statement, including any Rule 462(b)
Registration Statement, and the Final Prospectus, and any amendment or
supplement thereto (other than the financial statements and other
financial data therein, as to which such counsel need express no
opinion), comply as to form in all material respects with the
requirements
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of the Act, the rules and regulations of the Commission thereunder and
the Trust Indenture Act and the rules of the Commission thereunder;
(vii) The descriptions in the Registration Statement and the Final
Prospectus of statutes, legal and governmental proceedings, contracts and
other documents are accurate in all material respects and fairly present
the information required to be shown; and such counsel does not know of
any statutes or legal or governmental proceedings required to be
described in the Final Prospectus that are not described as required, or
of any contracts or documents of a character required to be described in
the Registration Statement or Final Prospectus (or required to be filed
under the Exchange Act if upon such filing they would be incorporated, in
whole or in part, by reference therein) or to be filed as exhibits to the
Registration Statement that are not described and filed as required; and
(viii) This Agreement, any Delayed Delivery Contracts and the
Indenture have been duly authorized, executed and delivered by the
Company; the Company's execution, delivery and performance of this
Agreement, any Delayed Delivery Contracts, the Indenture and the
Securities, or the consummation of the transactions herein contemplated
and the Company's compliance with its obligations under this Agreement,
the Indenture, and the Securities, will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, any agreement or instrument known to such counsel to
which the Company or any Significant Subsidiary is a party or by which it
is bound or to which any of the property of the Company or any
Significant Subsidiary is subject, the Company's or any Significant
Subsidiary's Articles of Incorporation, as amended to date, or by-laws,
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any
Significant Subsidiary or any of their respective properties; and no
consent, approval, authorization or order of, or filing with, any court
or governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement or in any Delayed Delivery
Contract, except such as have been obtained under the Act or the Trust
Indenture Act and such as may be required under state securities laws in
connection with the purchase and distribution of such Securities by the
Underwriters; provided that no opinion is called for with respect to any
such consent, approval, authorization or order required to be obtained
under the Act and regulations thereunder or the Trust Indenture Act that
have been obtained or as may be required under state securities laws or
Blue Sky Laws of the various states. The form of the Indenture filed as
an exhibit to the Registration Statement conforms to the descriptions
thereof contained in the Prospectus in all material respects.
Such counsel shall also state that: they have no reason to believe that at the
Effective Date the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Final Prospectus at the time the Final Prospectus is issued or at the Closing
Date includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the documents
from which information is incorporated by reference in the Final Prospectus,
when they became effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the requirements of the
Act and of the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder; it being understood that such counsel need express
no opinion as to the financial statements or other financial information
included in any of the documents mentioned in this sentence.
References to the Final Prospectus in this paragraph (b) include any
supplements thereto at the Closing Date.
(c) The Representatives shall have received from Shearman & Sterling,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the
Indenture, any Delayed Delivery Contracts, the Registration Statement, the
Final Prospectus (together with any supplement thereto) and other related
matters as the Representatives may reasonably require, and such counsel
shall have received such papers and information as they request for the
purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Representatives a certificate
of the Company, signed by the Chairman, Chief Executive Officer, an
Executive Vice President, a Senior Vice President or a Vice President and
by the principal financial or accounting officer or treasurer, dated the
Closing Date, to the effect that, to the best of their knowledge, based
upon reasonable investigation:
(i) the representations and warranties of the Company in this
Agreement are true and correct, as if made at and as of the Closing Date,
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
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(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose has been
instituted or is threatened, by the Commission; and
(iii) since the date of the most recent financial statements included
in the Final Prospectus (exclusive of any supplement thereto), there has
been no material adverse change or development involving a prospective
material adverse change in the condition (financial or other), earnings,
business or properties of the Company and its subsidiaries, whether or
not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Final Prospectus (exclusive of any
supplement thereto).
(e) At the Execution Time and on the Closing Date, Coopers & Lybrand
L.L.P. shall have furnished to the Representatives a letter or letters,
dated as of the Execution Time and the Closing Date, in form and substance
satisfactory to the Representatives, which confirms that they are
independent certified public accountants with respect to the Company within
the meaning of the Act and the applicable published rules and regulations
thereunder and containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in the
Registration Statement and Final Prospectus.
(f) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purpose of Rule 436(g) under the Act) or any notice given of any intended
or potential decrease in any such rating or of a possible change in any
such rating that does not indicate the direction of the possible change.
(g) Prior to the Closing Date, the Company shall have furnished to the
Representatives such further information, certificates and documents as the
Representatives may reasonably request.
(h) The Company shall have accepted Delayed Delivery Contracts in any
case where sales of Contract Securities arranged by the Underwriters have
been approved by the Company.
If any of the conditions specified in this Section 5 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or
if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of
such cancellation shall be given to the Company in writing or by telephone or
fax confirmed in writing.
6. Expenses. (a) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto (including any post-effective amendment thereto), (ii) the preparation,
printing and delivery to the Underwriters of this Agreement, any Agreement
among Underwriters to which the Company is a party, the Indenture and such
other documents as may be required in connection with the offering, purchase,
sale, issuance or delivery of the Securities, (iii) the preparation, issuance
and delivery of the certificates for the Securities to the Underwriters, (iv)
the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 4(e) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each Preliminary Final Prospectus and of the Final
Prospectus and any amendments or supplements thereto, (vii) the fees and
expenses of the Trustee, including the fees and disbursements of counsel for
the Trustee in connection with the Indenture and the Securities, (viii) any
fees payable in connection with the rating of the Securities, and (ix) the
filing fees incident to, and the reasonable fees and disbursements of counsel
to the Underwriters in connection with the review by the National Association
of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the
Securities.
(b) If the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 5 hereof is not satisfied, because of any termination pursuant to
Section 9 hereof or because of any refusal, inability or failure on the
part of the Company to perform any agreement herein or comply with any
provision hereof other than by reason of a default by any of the
Underwriters, the Company will reimburse the Underwriters severally upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities.
7. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls any Underwriter within
the meaning of either Section 15 of the Act or Section 20 of the Exchange Act
as follows: (i) against any and all losses, claims,
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damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the Securities as originally filed or in any amendment thereof (including any
post-effective amendment), or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arise out of any
untrue statement or alleged untrue statement of a material fact included in any
Preliminary Final Prospectus or the Final Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; (ii) against
any and all loss, liability, claim, damage and expense whatsoever, as
reasonably incurred, to the extent of the aggregate amount paid in settlement
of any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement or
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that any such settlement is
effected with the written consent of the Company in the Company's sole
discretion, and; (iii) agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representatives
specifically for use in connection with the preparation thereof; and provided
further that the Company shall not be liable in any such case to any such
Underwriter to the extent that any such loss, claim, damage or liability
results from the fact that such Underwriter sold Securities to a person to whom
there was not given or sent, at or prior to the written confirmation of such
sale, a copy of the Final Prospectus, as then amended or supplemented
(excluding the documents incorporated by reference therein) if the Company has
previously furnished copies thereof to such Underwriter and has otherwise
complied with Section 4(b), and if the Company has sustained the burden of
proof that, with respect to statements or omissions, other than those made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representatives
specifically for use in connection with the preparation of the documents
referred to in the foregoing indemnity, such Final Prospectus, or any amendment
or supplement thereto (including the documents incorporated by reference
therein) corrected the untrue statement or alleged untrue statement or omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or alleged omission giving rise to such loss,
claim, damage or liability. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act,
to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with respect to untrue statements or omissions, or
alleged untrue statements of a material fact required to be stated therein
or necessary to make the statements therein not misleading or omissions
made in the documents referred to in the foregoing indemnity in reliance on
and in conformity with written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter through the
Representatives specifically for use in connection with the preparation of
the documents referred to in the foregoing indemnity, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which any Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in writing of the
commencement thereof, but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification and reimbursement obligations provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint counsel
of the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for
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the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be reasonable satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including not more than two
local counsels), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available
to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a
reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize in writing the indemnified party to
employ separate counsel at the expense of the indemnifying party. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement. An indemnifying
party will not, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to
such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and does
not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Company and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by
the Company and by the Underwriters from the offering of the Securities;
provided, however, that no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission. If the allocation
provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Underwriters shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and of the Underwriters in
connection with the statements or omissions which resulted in such Losses
as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the total net proceeds from
the offering (before deducting expenses), and benefits received by the
Underwriters shall be deemed to be equal to the total underwriting
discounts and commissions, in each case as set forth on the cover page of
the Final Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Underwriters agree that it would
not be just and equitable if contribution were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or any other method of allocation which does not take account of
the equitable considerations referred to above. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
paragraph (d), notify such party or parties from whom contribution may be
sought, but the omission to so notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have hereunder (other than under this
paragraph (d)) or otherwise. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 7, each person who controls an Underwriter within
the meaning of either Section 15 of the Act or Section 20 of the Exchange
Act and each director, officer, employee and agent of an Underwriter shall
have the same rights to contribution as such Underwriter, and each person
who controls the Company within the meaning of either Section 15 of the Act
or Section 20 of the Exchange Act, each officer of the Company who shall
have signed the Registration
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Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms
and conditions of this paragraph (d).
The Underwriters' respective obligations to contribute pursuant to this
Section are several in proportion to the principal amount of Securities set
forth opposite their respective names in Schedule II hereto and not joint.
8. Default by an Underwriter. If any one or more Underwriters shall fail
to purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule II hereto bears to the aggregate amount
of Securities set forth opposite the names of all the remaining Underwriters)
the Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase; provided, however, that in the event that the aggregate
amount of Securities which the defaulting Underwriter or Underwriters agreed
but failed to purchase shall exceed 10% of the aggregate amount of Securities
set forth in Schedule II hereto, the remaining Underwriters shall have the
right to purchase all, but shall not be under any obligation to purchase any,
of the Securities, and if such nondefaulting Underwriters do not purchase all
the Securities, this Agreement will terminate without liability to any
nondefaulting Underwriter or the Company. In the event of a default by any
Underwriter as set forth in this Section 8, the Closing Date shall be postponed
for such period, not exceeding seven days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Final Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company and any nondefaulting Underwriter for
damages occasioned by its default hereunder.
9. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if after the Execution
Time and prior to such time (i) if there has been, since the time of execution
of this Agreement or since the respective dates as of which information is
given in the Final Prospectus, a material adverse change or any development
involving a prospective material adverse change in the condition, financial or
otherwise, or in the earnings or business affairs of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which
is such as to make it, in the judgment of the Representatives, impracticable to
market the Securities, or (iii) if trading in any securities of the Company has
been suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New
York Stock Exchange or in the NASDAQ National Market has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) if a
banking moratorium has been declared by either federal or New York authorities.
10. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or
its officers and of the Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of any Underwriter or the Company or any of the officers,
directors or controlling persons referred to in Section 7 hereof, and will
survive delivery of and payment for the Securities. The provisions of Sections
6 and 7 hereof shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Representatives, will be mailed, delivered
or telecopied and confirmed to them, at the address specified in Schedule I
hereto; or, if sent to the Company, will be mailed, delivered or telegraphed
and confirmed to it at 120 Tredegar Street, Richmond, Virginia 23219, telefax
number: (804) 343-4609, attention of the Senior Vice President and General
Counsel.
12. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 7 hereof, and no other
person will have any right or obligation hereunder.
In all dealings with the Company under this Agreement, you shall act on
behalf of each of the several Underwriters, and any action under this Agreement
taken by you or by any one of you designated in Schedule II hereto will be
binding upon all the Underwriters.
13. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
13
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters. Alternatively, the execution of
this Agreement by the Company and its acceptance by or on behalf of the
Underwriters may be evidenced by an exchange of telecopied or other written
communications.
Very truly yours,
Fort James Corporation
By:
----------------------------------
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date specified in
Schedule I hereto.
The Representatives named in Schedule I hereto of the Underwriters named in
Schedule II hereto.
By:
By:
----------------------------
Authorized Signatory
For themselves and as
Representative of the other
Underwriters, named in
Schedule II to the foregoing Agreement.
14
<PAGE>
SCHEDULE I
Underwriting Agreement dated:
Registration Statement No. 33-
Representatives(s):
Title, Purchase Price and Description of Securities:
Title:
Principal amount:
Interest:
Purchase price (include accrued interest, if any):
(i) to Underwriters:
(ii) to Public:
Maturity Date:
Sinking fund provisions:
Redemption provisions:
Defeasance provisions:
Other provisions:
Closing Date, Time and Location:
(i) Office for Checking Securities:
(ii) Office for Payment of Securities:
(iii) Date and Time of Closing: , at EST at , or such
other date, time or location as the parties may agree in writing
Type of offering:
Delayed Delivery arrangements:
Fee:
Minimum principal amount of each contract: $
Maximum aggregate principal amount of all contracts: $
Date referred to in Section 4(f) after which the Company may offer or sell debt
securities issued or guaranteed by the Company without the consent of the
Representative(s):
Modification of Section 4(f): The parties agree that the term debt securities
does not include, among other items, bank loans, commercial paper, bid notes,
money market notes, any debt securities with a maturity of less than two years,
leveraged sale leasebacks and letter of credit arrangements
15
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Principal
Amount of
[Debt Securities]
Underwriters to be Purchased
-------------- ------------------
<S> <C> <C>
Total Underwriters ( )
</TABLE>
16
<PAGE>
SCHEDULE III
Delayed Delivery Contract
, 19
[Insert name and address of lead Representative]
Dear Sirs:
The undersigned hereby agrees to purchase from Fort James Corporation (the
"Company"), and the Company agrees to sell to the undersigned on , 19
(the "Delivery Date"), $ principal amount of the Company's (the
"Securities") offered by the Company's Prospectus dated , 19 , and
related Prospectus Supplement dated , 19 , receipt of a copy of which is
hereby acknowledged, at a purchase price of % of the principal amount
thereof, plus [accured interest] [amortization of original issue discount], if
any, thereon from , 19 , to the date of payment and delivery, and on the
further terms and conditions set forth in this contract.
Payment for the Securities to be purchased by the undersigned shall be
made on or before 11:00 AM, New York City time, on the Delivery Date to or upon
the order of the Company in New York Clearing House (next day) funds, at your
office or at such other place as shall be agreed between the Company and the
undersigned, upon delivery to the undersigned of the Securities in definitive
fully registered form and in such authorized denominations and registered in
such names as the undersigned may request by written or telegraphic
communication addressed to the Company not less than five full business days
prior to the Delivery Date. If no request is received, the Securities will be
registered in the name of the undersigned and issued in a denomination equal to
the aggregate principal amount of Securities to be purchased by the undersigned
on the Delivery Date.
The obligation of the undersigned to take delivery of and make payment for
Securities on the Delivery Date, and the obligation of the Company to sell and
deliver Securities on the Delivery Date, shall be subject to the conditions
(and neither party shall incur any liability by reason of the failure thereof)
that (1) the purchase of Securities to be made by the undersigned, which
purchase the undersigned represents is not prohibited on the date hereof, shall
not on the Delivery Date be prohibited under the laws of the jurisdiction to
which the undersigned is subject, and (2) the company, on or before the
Delivery Date, shall have sold to certain underwriters (the "Underwriters")
such principal amount of the Securities as is to be sold to them pursuant to
the Underwriting Agreement referred to in the Prospectus and Prospectus
Supplement mentioned above. Promptly after completion of such sale to the
Underwriters, the Company will mail or deliver to the undersigned at its
address set forth below notice to such effect, accompanied by a copy of the
opinion of counsel for the Company delivered to the Underwriters in connection
therewith. The obligation of the undersigned to take delivery of and make
payment for the Securities, and the obligation of the Company to cause the
Securities to be sold and delivered, shall not be affected by the failure of
any purchaser to take delivery of and make payment for the Securities pursuant
to other contracts similar to this contract.
This contract will inure to the benefit of and be binding upon the parties
hereto and their respective successors, but will not be assignable by either
party hereto without the written consent of the other.
It is understood that acceptance of this contract and other similar
contracts is in the Company's sole discretion and, without limiting the
foregoing, need not be on a first come, first served basis. If this contract is
acceptable to the Company, it is required that the Company sign the form of
acceptance below and mail or deliver one of the counterparts hereof to the
undersigned at its address set forth below. This will become a binding contract
between the Company and the undersigned, as of the date first above written,
when such counterpart is so mailed or delivered.
17
<PAGE>
This agreement shall be governed by and construed in accordance with the
laws of the State of New York.
Very truly yours,
--------------------------------
(Name of Purchaser)
By------------------------------
(Signature and Title of Officer
--------------------------------
(Address)
Accepted:
Fort James Corporation
By----------------------------
(Authorized Signature)
18
EXHIBIT 5.1
March 3, 1998
Fort James Corporation
75 Tri-State International Office Center
Suites 100 and 175
Lincolnshire, IL 60069
Fort James Corporation
(Registration Statement on Form S-3)
for Debt Securities to be offered Pursuant to Rule 415
------------------------------------------------------
Gentlemen:
We have acted as counsel to Fort James Corporation, a Virginia corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the proposed issuance and sale from time to time
by the Company of debt securities ("Debt Securities") having an aggregate issue
price of up to $800,000,000, each series of which will be offered on terms to be
determined at the time of sale.
The Debt Securities are to be issued pursuant to the terms of the Indenture
dated as of November 1, 1991, as supplemented by the First Supplemental
Indenture dated as of September 19, 1997 (as further amended or supplemented
from time to time, the "Indenture"), between the Company and The Bank of New
York, as Trustee, and may be sold directly to purchasers, through agents, to
dealers or to underwriters, as described in the Registration Statement. The
Indenture provides for the issuance of Debt Securities in series having such
terms, conditions and other provisions as may be authorized and designated in
accordance with the procedures set forth in the Indenture.
We have participated in the preparation of the Registration Statement and
have examined the corporate records and documents, statements and certificates
of officers of the Company and such other materials as we have deemed necessary
to the issuance of this opinion.
Based on the foregoing, we are of the opinion that when (a) the actions
required by the Indenture for the authorization and designation of a series of
Debt Securities and the establishment of the form, terms, conditions and other
provisions of debt have been duly and properly taken, (b) the Debt Securities
have been executed and authenticated in accordance with the provisions of the
<PAGE>
Fort James Corporation
March 3, 1998
Page 2
Indenture, and (c) the Debt Securities have been issued and delivered against
payment therefor, such Debt Securities will be validly issued and binding
obligations of the Company, subject to (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors'
rights generally and (ii) general principles of equity, whether considered in a
proceeding in equity or at law.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the statement made in reference to our firm in the related
Prospectus under the heading "Validity of Debt Securities" and in any
supplemented versions of the Prospectus. We do not admit by giving this consent
that we are in the category of persons whose consent is required under Section 7
of the Securities Act.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
March 3, 1998
Fort James Corporation
75 Tri-State International Office Center
Suites 100 and 175
Lincolnshire, IL 60069
Ladies and Gentlemen:
We have been requested, as counsel, to render federal tax advice in
connection with the Registration Statement on Form S-3 (the "Registration
Statement") being filed by Fort James Corporation, a Virginia corporation (the
"Company"), with the Securities and Exchange Commission in connection with
registering under the Securities Act of 1933, as amended (the "Securities Act"),
$800,000,000 aggregate principal amount of the Company's debt securities (the
"Debt Securities").
We have reviewed the statements set forth in the Registration Statement
under the heading "United States Taxation" and hereby advise you that such
statements, insofar as they are or refer to statements of United States law or
legal conclusions relating thereto, are accurate in all material respects.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "United
States Taxation" in the Registration Statement. We do not admit by giving this
consent that we are in the category of persons whose consent is required under
Section 7 of the Securities Act.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe LLP
<TABLE>
<CAPTION>
FORT JAMES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(a)
(Dollar amounts in millions)
Fiscal Year Ended
--------------------------------------------------------------------------
December December December December December December
28,1997 29,1996 31, 1995 25, 1994 26, 1993 27, 1992
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks)
- ------------------------------------------------------------------------------------------------------------------------------------
(d) (c,d) (b,d)
<S> <C> <C> <C> <C> <C> <C>
Pretax income (loss) from continuing
operations, before minority interests,
extraordinary item and cumulative effect
of changes in accounting principles $267.3 $499.2 $272.2 $(76.7) $(2,042.3) $(252.6)
Add:
Interest charged to operations 360.2 433.6 545.9 547.8 525.8 531.3
Portion of rental expenses representative
of interest factor 30.1 25.8 26.0 26.1 20.8 21.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total earnings, as adjusted $657.6 $958.6 $844.1 $497.2 $(1,495.7) $299.8
====================================================================================================================================
Fixed charges:
Interest charged to operations $360.2 $433.6 $545.9 $547.8 $525.8 $531.3
Capitalized interest 11.0 6.6 9.0 7.3 13.7 23.8
Portion of rental expense representative
of interest factor 30.1 25.8 26.0 26.1 20.8 21.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed charges $401.3 $466.0 $580.9 $581.2 $560.3 $576.2
====================================================================================================================================
Ratio 1.64 2.06 1.45 -- -- --
====================================================================================================================================
See accompanying footnote explanations
</TABLE>
<PAGE>
Exhibit 12.1(continued)
FORT JAMES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in millions)
Nine Months Ended
------------------------------
September 28, September 29,
1997 1996
(39 Weeks) (39 Weeks)
- --------------------------------------------------------------------------------
Pretax income from continuing operations
before minority interests and extraordinary item $558.3 $393.1
Add:
Interest charged to operations 284.3 334.3
Portion of rental expense representative of
interest factor 19.4 19.7
- --------------------------------------------------------------------------------
Total earnings, as adjusted $862.0 $747.1
================================================================================
Fixed charges:
Interest charged to operations $284.3 $334.3
Capitalized interest 7.2 4.4
Portion of rental expense representative of
interest factor 19.4 19.7
- --------------------------------------------------------------------------------
Total fixed charges $310.9 $358.4
================================================================================
Ratio 2.77 2.08
================================================================================
See accompanying footnote explanations.
<PAGE>
Exhibit 12 (continued)
FORT JAMES CORPORATION
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(a) In, computing the ratio of earnings to fixed charges, earnings consist of
income before income taxes, minority interests, extraordinary item,
cumulative effect of changes in accounting principles and fixed charges
excluding capitalized interest. Fixed charges consist of interest expense,
capitalized interest, and that portion of rental expense deemed
representative of the interest factor. Earnings and fixed charges also
include the Company's proportionate share of such amounts for
unconsolidated affiliates which are owned 50% or more and distributed
income from less than 50% owned affiliates.
(b) During 1992, the Company initiated a productivity enhancement program and
recorded a $112 million pretax charge which has been included in the
calculation of the ratio of earnings to fixed charges for this year.
(c) During 1993, the Company wrote off $1,980.4 million of goodwill which has
been included in the calculation of the ratio of earnings to fixed charges
for this year.
(d) For the following periods, earnings were inadequate to cover fixed charges,
and the amounts of the deficiencies were: year ended December 27, 1992 -
$276.4 million; year ended December 26, 1993 - $2,056.0 million; year ended
December 25, 1994 - $84.0 million.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 (the "Registration Statement"), of our report dated January 23, 1997,
except as to the information presented in Note 17, for which the date is
February 21, 1997, on our audits of the consolidated financial statements of
James River Corporation of Virginia and Subsidiaries ("James River") as of
December 29, 1996 and December 31, 1995, and for each of the three fiscal years
in the period ended December 29, 1996, which report is included in the Annual
Report on Form 10-K of James River for the year ended December 29, 1996.
We also consent to the incorporation by reference in the Registration Statement
of our report dated August 13, 1997, on our audits of the supplemental
consolidated financial statements of Fort James corporation and Subsidiaries
("Fort James") as of December 29, 1996 and December 31, 1995, and for each of
the three fiscal years in the period ended December 29, 1996, which report is
included in the Current Report on Form 8-K filed on August 27, 1997. The
supplemental consolidated financial statements give retroactive effect to the
merger of James River and Fort Howard Corporation on August 13, 1997, which has
been accounted for as a pooling of interests as described in Notes 1 and 2 to
the supplemental consolidated financial statements. These financial statements
did not extend through the date of consummation and were prepared prior to the
issuance of financial statements of Fort James covering the date of consummation
of the business combination. However, generally accepted accounting principles
proscribe giving effect to a consummated business combination accounted for by
the pooling of interests method in financial statements that do not include the
date of consummation.
We also consent to the incorporation by reference in the Registration Statement
of our report dated August 13, 1997, on our audits of the consolidated financial
statements of Fort James as of December 29, 1996 and December 31, 1995, and for
each of the three fiscal years in the period ended December 29, 1996, which
report is included in the Current Report on Form 8-K dated August 13, 1997
(filed on February 3, 1998).
We also consent to the reference to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Richmond, Virginia
March 3, 1998
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 31, 1997,
included in Fort James Corporation's current report on Form 8-K dated August 13,
1997 (filed on August 25, 1997) and to all references to our Firm included in
this registration statement.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Milwaukee, Wisconsin,
March 3, 1998
CONFORMED COPY
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
FORT JAMES CORPORATION
(Exact name of obligor as specified in its charter)
Commonwealth of Virginia 54-0848173
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
75 Tri-State International Office Center
Suites 100 and 175
Lincolnshire, Illinois 60069
(Address of principal executive offices) (Zip code)
----------------------
Debt Securities
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 2nd day of March, 1998.
THE BANK OF NEW YORK
By: /s/ JAMES W.P. HALL
--------------------------
Name: JAMES W.P. HALL
Title: VICE PRESIDENT
-4-
<PAGE>
Exhibit 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
ASSETS Dollar Amounts
Cash and balances due from depository institutions: in Thousands
Noninterest-bearing balances and
currency and coin ...................................... $ 5,004,638
Interest-bearing balances .............................. 1,271,514
Securities:
Held-to-maturity securities ............................ 1,105,782
Available-for-sale securities .......................... 3,164,271
Federal funds sold and Securities purchased
under agreements to resell ............................. 5,723,829
Loans and lease financing receivables:
Loans and leases, net of unearned
income .................34,916,196
LESS: Allowance for loan and
lease losses ..............581,177
LESS: Allocated transfer risk
reserve........................429
Loans and leases, net of unearned
income, allowance, and reserve ....................... 34,334,590
Assets held in trading accounts .......................... 2,035,284
Premises and fixed assets (including
capitalized leases) .................................... 671,664
Other real estate owned .................................. 13,306
Investments in unconsolidated
subsidiaries and associated
companies .............................................. 210,685
Customers' liability to this bank on
acceptances outstanding ................................ 1,463,446
Intangible assets ........................................ 753,190
Other assets ............................................. 1,784,796
------------
Total assets ............................................. $ 57,536,995
============
LIABILITIES
Deposits:
In domestic offices .................................... $ 27,270,824
Noninterest-bearing ......12,160,977
Interest-bearing .........15,109,847
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ....................... 14,687,806
Noninterest-bearing .........657,479
Interest-bearing .........14,030,327
Federal funds purchased and Securities
sold under agreements to repurchase .................... 1,946,099
Demand notes issued to the U.S.
Treasury ............................................... 283,793
Trading liabilities ...................................... 1,553,539
Other borrowed money:
With remaining maturity of one year
or less .............................................. 2,245,014
With remaining maturity of more than
one year through three years ......................... 0
With remaining maturity of more than
three years .......................................... 45,664
Bank's liability on acceptances executed
and outstanding ...................................... 1,473,588
Subordinated notes and debentures ........................ 1,018,940
Other liabilities ........................................ 2,193,031
------------
Total liabilities ........................................ 52,718,298
------------
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital
reserves ............................................... 2,943,008
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................. 25,428
Cumulative foreign currency translation
adjustments ........................................... (16,342)
------------
Total equity capital ..................................... 4,818,697
------------
Total liabilities and equity
capital ................................................ $ 57,536,995
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
