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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GAYLORD CONTAINER CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2653 36-3472452
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of
incorporation or Classification Code Number) Identification No.)
organization)
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500 LAKE COOK ROAD, SUITE 400
DEERFIELD, ILLINOIS 60015
TELEPHONE: (847) 405-5500
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
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DANIEL P. CASEY
500 LAKE COOK ROAD, SUITE 400
DEERFIELD, ILLINOIS 60015
TELEPHONE: (847) 405-5500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
ALAN G. BERKSHIRE
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2035
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
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9 3/4% Senior Notes due
2007, Series B........... $225,000,000 100% $225,000,000 $68,182
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)
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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 THAT 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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SUBJECT TO COMPLETION, DATED , 1997
PRELIMINARY PROSPECTUS
, 1997
GAYLORD CONTAINER CORPORATION
OFFER TO EXCHANGE ITS 9 3/4% SENIOR NOTES DUE 2007, SERIES B
FOR ANY AND ALL OF ITS OUTSTANDING 9 3/4% SENIOR NOTES DUE 2007, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
Gaylord Container Corporation, a Delaware corporation (the "Company") hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 9 3/4%
Senior Notes due 2007, Series B (the "Exchange Notes"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this prospectus is a part, for each $1,000
principal amount of its outstanding 9 3/4% Senior Notes due 2007, Series A (the
"Initial Notes"), of which $225,000,000 principal amount is outstanding. The
form and terms of the Exchange Notes are the same as the form and terms of the
Initial Notes except that (i) the Exchange Notes will bear a Series B
designation and a different CUSIP number, (ii) the issuance of the Exchange
Notes has been registered under the Securities Act and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and (iii) holders
of the Exchange Notes will not be entitled to certain rights of holders of
Initial Notes under the Registration Rights Agreement (as defined). The Initial
Notes and the Exchange Notes are referred to herein collectively as the "Notes."
The Exchange Notes will evidence the same debt as the Initial Notes (which they
replace) and will be issued under and be entitled to the benefits of the
Indenture dated as of June 12, 1997 (the "Indenture") by and among the Company
and State Street Bank and Trust Company, as successor to Fleet National Bank, as
trustee, governing the Notes. See "The Exchange Offer" and "Description of
Exchange Notes."
The net proceeds of the Initial Note Offering (as defined) were used to
redeem (the "Redemption") all of the Company's 11 1/2% Senior Notes due 2001
(the "Old Notes") and to repay borrowings under the Company's revolving credit
facilities. The Initial Note Offering and the Redemption are collectively
referred to herein as the "Refinancing." See "The Refinancing."
The Company will accept for exchange any and all Initial Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time on
, 1997, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Initial Notes may be withdrawn at any time prior
to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. See "The Exchange Offer."
Interest on the Notes will accrue from their date of original issuance and
will be payable semi-annually in arrears on June 15 and December 15 of each
year, commencing December 15, 1997, at the rate of 9 3/4% per annum. The Notes
will mature on June 15, 2007. The Notes are redeemable, in whole or in part, at
the option of the Company on or after June 15, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, to the date of
redemption. In addition, prior to June 15, 2000, the Company may, at its option,
redeem up to 33% of the aggregate principal amount of the Notes with the net
cash proceeds of one or more Equity Offerings (as defined), at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption; provided that at least $100.0 million aggregate principal amount
of the Notes remain outstanding after any such redemption. See "Description of
Exchange Notes."
The Notes will be general unsecured obligations of the Company and will rank
pari passu in right of payment to all senior indebtedness of the Company,
including indebtedness under the Credit Agreement (as defined), will be
structurally subordinated to all indebtedness of the subsidiaries of the Company
that do not become Subsidiary Guarantors (as defined), including the Trade
Receivable Facility (as defined), and will rank senior in right of payment to
the existing $404.3 million aggregate principal amount of 12 3/4% Senior
Subordinated Discount Debentures due 2005 (the "12 3/4% Debentures"). All
indebtedness under the Credit Agreement is secured by substantially all of the
assets of the Company. At March 31, 1997, there was no outstanding indebtedness
under the Credit Agreement (but there was approximately $156.3 million of credit
available under the revolving portion of the Credit Agreement as well as undrawn
letters of credit of approximately $12.5 million) and the total outstanding
indebtedness under the Trade Receivable Facility was $25.5 million (with
approximately $27.2 million of additional credit available under the Trade
Receivable Facility). See "Description of Exchange Notes."
Upon a Change of Control (as defined), the Company will be required to make
an offer to repurchase the Notes at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase. Upon the occurrence of a Change of Control prior to June 15, 2002,
the Company, at its option, may redeem all, but not less than all, of the
outstanding Notes at a redemption price equal to 100% of the principal amount
thereof, plus the applicable Make-Whole Premium (as defined). In addition, the
Company will be obligated to offer to repurchase the Notes at 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to date of
repurchase in the event of certain asset sales. See "Description of Exchange
Notes."
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SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DESCRIPTION OF CERTAIN RISKS
TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR INITIAL NOTES IN THE EXCHANGE
OFFER.
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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 COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
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Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Initial Notes may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. See "The Exchange Offer -- Resale of
the Exchange Notes." Holders of Initial Notes wishing to accept the Exchange
Offer must represent to the Company, as required by the Registration Rights
Agreement, that such conditions have been met. Each broker-dealer (a
"Participating Broker-Dealer") that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Notes received in exchange
for Initial Notes where such Initial Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
Holders of Initial Notes not tendered and accepted in the Exchange Offer
will continue to hold such Initial Notes and will be entitled to all the rights
and benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. See "The
Exchange Offer."
There has not previously been any public market for the Initial Notes or
the Exchange Notes. The Company does not intend to list the Exchange Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Absence of a Public Market
Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent
that Initial Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Initial Notes could be
adversely affected.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF INITIAL NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE
OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
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WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM", THE COMPANY EXPECTS
THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTE (AS DEFINED), WHICH WILL BE DEPOSITED WITH, OR ON
BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME OR IN
THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE
REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE
INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN CERTIFICATED FORM WILL BE ISSUED
IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN
THE INDENTURE. SEE "BOOK-ENTRY; DELIVERY AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE
CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR
SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. NEITHER THE
COMPANY NOR ANY OTHER PERSON IS MAKING ANY REPRESENTATION TO ANY PROSPECTIVE
INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN INVESTMENT THEREIN
BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS.
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WERE OBTAINED FROM INTERNAL
COMPANY SURVEYS AND INDUSTRY PUBLICATIONS. INDUSTRY PUBLICATIONS GENERALLY STATE
THAT THE INFORMATION CONTAINED THEREIN HAS BEEN OBTAINED FROM SOURCES BELIEVED
TO BE RELIABLE, BUT THAT THE ACCURACY AND COMPLETENESS OF SUCH INFORMATION IS
NOT GUARANTEED. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED THIS MARKET DATA.
SIMILARLY, INTERNAL COMPANY SURVEYS, WHILE BELIEVED BY THE COMPANY TO BE
RELIABLE, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES.
FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL
RESULTS COULD DIFFER MATERIALLY. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE
NOT LIMITED TO, GENERAL ECONOMIC AND BUSINESS CONDITIONS, COMPETITIVE MARKET
PRICING, INCREASES IN RAW MATERIAL, ENERGY AND OTHER MANUFACTURING COSTS,
FLUCTUATIONS IN DEMAND FOR THE COMPANY'S PRODUCTS, POTENTIAL EQUIPMENT
MALFUNCTIONS AND PENDING LITIGATION.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company and the Exchange Offer, reference is made to the
Exchange Offer Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of
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the document or matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports and other information with the
Commission. The Exchange Offer Registration Statement, including the exhibits
thereto, and periodic reports and other information filed by the Company with
the Commission 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, or at its regional offices located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such materials can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
was required to file such Forms, including for each a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereof by the Company's independent
certified public accountants and (ii) all reports that would be required to be
filed on Form 8-K if the Company were required to file such reports. In
addition, for so long as any of the Initial Notes remain outstanding, the
Company has agreed to make available to any prospective purchaser of the Initial
Notes or beneficial owner of the Initial Notes, in connection with any sale
thereof, the information required by Rule 144A(d)(4) under the Securities Act.
The Company, a corporation organized under the laws of Delaware, has its
principal executive offices located at 500 Lake Cook Road, Suite 400, Deerfield,
Illinois 60015; its telephone number is (847) 405-5500.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996.
2. The Company's Quarterly Report on Form 10-Q for the quarterly
periods ended December 31, 1996 and March 31, 1997.
3. The Company's Current Report on Form 8-K dated June 6, 1997 and
filed June 19, 1997.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, that indicate on the cover page
thereof that they are to be incorporated by reference, after the date of this
Prospectus and prior to the Expiration Date, shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of the filing of such
reports and documents.
Any statement contained in a document 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 incorporated or
deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A PROSPECTUS IS DELIVERED A COPY
OF ANY AND ALL OF THE INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE IN
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THIS PROSPECTUS (NOT INCLUDING EXHIBITS TO THE INFORMATION INCORPORATED BY
REFERENCE UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THE INFORMATION THAT THE PROSPECTUS INCORPORATES) UPON WRITTEN OR ORAL REQUEST
TO DAVID F. TANAKA, VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY OF
THE COMPANY, 500 LAKE COOK ROAD, SUITE 400, DEERFIELD, ILLINOIS 60015,
TELEPHONE: (847) 405-5500. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY , 1997 (FIVE BUSINESS DAYS PRIOR TO THE
EXPIRATION DATE).
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
statements, including notes thereto, appearing elsewhere in or incorporated by
reference into this Prospectus. Unless otherwise stated in this Prospectus or
unless the context otherwise requires, the "Company" refers to Gaylord Container
Corporation and its subsidiaries, and references to financial information
presented on a "pro forma basis" give effect to the Refinancing.
THE COMPANY
The Company is a major national manufacturer and distributor of brown paper
and brown paper packaging products. The Company produces linerboard and
unbleached kraft paper at its paper mills located in Bogalusa, Louisiana;
Antioch, California; and Pine Bluff, Arkansas. Through its network of 19
converting facilities, the Company converts the majority of its primary mill
products into corrugated containers and sheets and multiwall bags for the food,
beverage, agricultural and other industries. As of September 30, 1996, the
Company was the tenth largest domestic producer of linerboard with approximately
1.35 million tons of annual capacity and the fourth largest producer of
unbleached kraft paper with approximately 0.28 million tons of annual capacity.
Since its inception in 1986, the Company has made significant capital
expenditures primarily to expand capacity, install advanced paper making
technology, improve product quality, realize operating efficiencies and maintain
its existing facilities. As part of a major capital expenditure program
completed in fiscal 1990, the Company invested approximately $240 million to
expand capacity, improve operating efficiencies and enhance product quality at
the Company's mills, providing the Company with a high-quality, cost-effective
mill system. Mill productive capacity has increased by more than 65% compared to
1987 levels. The Company believes that all of its mills are low-cost producers
in their respective segments and that its Bogalusa mill is one of the premier
mills in the industry. The focus of the Company's current capital plan for the
five year period beginning in fiscal 1994 is on its converting operations, with
approximately 60% of the budgeted $250 million for that period allocated to
upgrading and expanding the Company's corrugated container, sheet feeder and bag
plants. The goal of the converting plant capital program is to increase capacity
and to achieve quality enhancements and cost efficiencies similar to those at
the Company's mills.
The Company's operating strategy is to maintain or improve its position as
a low-cost, high-quality producer of linerboard, unbleached kraft paper and
related converted products. Specifically, the Company has emphasized production
of high-performance linerboard, high-recycled content linerboard and packaging
products, and the use of multicolor packaging graphics, because it believes
these products represent the higher-growth segments of the brown paper packaging
industry. Further, the Company's goal is to become 100% forward integrated over
time by increasing converting capacity to a level that equals or exceeds its
mill productive capacity. The Company will also continue to seek growth
opportunities including acquisitions and other strategic investments.
Approximately 94% of the Company's linerboard productive capacity is
capable of manufacturing high-performance grades of linerboard, which have the
same performance characteristics as standard grades of linerboard, but achieve
these levels using less fiber which results in a lower basis weight. Basis
weight is the weight of linerboard per 1,000 square feet. When converted into a
corrugated container, high-performance linerboard, using the same square footage
as standard linerboard, reduces weight while maintaining performance
characteristics, and thus, is more economical.
The Company is also a major producer in the growing recycled linerboard and
packaging segments of the brown paper industry. The Antioch mill uses 100%
recycled fiber, and the Company as a whole uses approximately 820 thousand tons
annually of pre- and post-consumer waste as a fiber source. Recycled fiber
provides approximately 45% of the Company's fiber needs.
The Company continues to emphasize the use of high-quality packaging
graphics through a preprint linerboard facility, state-of-the-art multicolor
print capabilities at its converting facilities and computer-aided-design
systems at its corrugated container facilities to meet customers' growing demand
for these products and
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services. The Company believes participation in this segment provides higher
margins and a more stable customer base.
Consistent with its long term operating strategy, the Company intends to
continue to sell primary mill product to independent converters and to the
export market, and to purchase mill product in the open market. The Company
believes that increased forward integration will reduce the impact of primary
product price volatility on its profits, provide more stable demand (which
enhances efficiency) for the Company's mill production and increase its product
distribution capabilities. In fiscal 1996, the Company converted the equivalent
of approximately 80% of its linerboard production and converted or sold to its
grocery bag joint venture approximately 59% of its unbleached kraft paper
production. The Company intends to continue to increase converting capacity
through internal expansion, converting plant acquisitions and strategic joint
ventures.
THE REFINANCING
The Company believes that the Refinancing provides lower interest rates,
extended maturities and additional financial flexibility, thus enhancing the
Company's ability to implement its operating strategy.
Substantially all of the net proceeds of the Initial Note Offering were
used to redeem the outstanding Old Notes and to repay borrowings under the
Company's revolving credit facilities. Concurrently with the consummation of the
Initial Note Offering, the Company provided an irrevocable notice of the
exercise of its option to redeem on July 14, 1997 all outstanding Old Notes and
deposited into an escrow account U.S. Treasury bills in an amount sufficient to
fund 104.93% of the principal amount of, plus accrued and unpaid interest on,
the Old Notes to the redemption date. The Old Notes will be redeemed by the
Escrow Agent (as defined) on July 14, 1997.
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THE INITIAL OFFERING
Initial Notes...................... The Initial Notes were sold by the
Company on June 12, 1997 to BT Securities
Corporation, Bear, Stearns & Co. Inc. and
Salomon Brothers Inc (the "Initial
Purchasers") pursuant to a Purchase
Agreement dated June 5, 1997 (the
"Initial Offering"). The Initial
Purchasers subsequently placed the
Initial Notes with qualified
institutional buyers ("QIBs") pursuant to
Rule 144A under the Securities Act.
Registration Rights Agreement...... Pursuant to the Purchase Agreement, the
Company and the Initial Purchasers
entered into a Registration Rights
Agreement dated as of June 12, 1997 (the
"Registration Rights Agreement"), which
grants the holder of the Initial Notes
certain exchange and registration rights.
The Exchange Offer is intended to satisfy
such exchange rights which terminate upon
the consummation of the Exchange Offer.
Upon consummation of the Exchange Offer,
the Company will have no further
obligation under the Registration Rights
Agreement to register Initial Notes
except in the limited circumstances in
which the Company has agreed to file a
Shelf Registration Statement. See
"Prospectus Summary -- The Exchange
Offer -- Untendered Initial Notes" and
"The Exchange Offer -- Purpose and Effect
of the Exchange Offer."
THE EXCHANGE OFFER
Securities Offered................. $225,000,000 aggregate principal amount
of 9 3/4% Senior Notes due 2007, Series
B, of the Company (the "Exchange Notes").
The Exchange Offer................. $1,000 principal amount of Exchange Notes
in exchange for each $1,000 principal
amount of Initial Notes. As of the date
hereof, $225,000,000 aggregate principal
amount of Initial Notes are outstanding.
The Company will issue the Exchange Notes
to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff
of the Commission set forth in no-action
letters issued to third parties, the
Company believes that Exchange Notes
issued pursuant to the Exchange Offer in
exchange for Initial Notes may be offered
for resale, resold and otherwise
transferred by any holder thereof (other
than any such holder which is an
"affiliate" of the Company within the
meaning of Rule 405 under the Securities
Act) without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that such Exchange Notes are
acquired in the ordinary course of such
holder's business and that such holder
does not intend to participate and has no
arrangement or understanding with any
person to participate in the distribution
of such Exchange Notes.
Any Participating Broker-Dealer that
acquired Initial Notes for its own
account as a result of market-making
3
<PAGE> 10
activities or other trading activities
may be a statutory underwriter. Each
Participating Broker-Dealer that receives
Exchange Notes for its own account
pursuant to the Exchange Offer must
acknowledge that it will deliver a
prospectus in connection with any resale
of such Exchange Notes. The Letter of
Transmittal states that by so
acknowledging and by delivering a
prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by a Participating
Broker-Dealer in connection with resales
of Exchange Notes received in exchange
for Initial Notes where such Initial
Notes were acquired by such Participating
Broker-Dealer as a result of
market-making activities or other trading
activities. The Company has agreed that,
for a period of 180 days after the
Expiration Date, it will make this
Prospectus available to any Participating
Broker-Dealer for use in connection with
any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange
Offer with the intention to participate,
or for the purpose of participating, in a
distribution of the Exchange Notes could
not rely on the position of the staff of
the Commission enunciated in no-action
letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction.
Failure to comply with such requirements
in such instance may result in such
holder incurring liability under the
Securities Act for which the holder is
not indemnified by the Company.
Expiration Date.................... 5:00 p.m., New York City time, on
, 1997 unless the Exchange Offer
is extended, in which case the term
"Expiration Date" means the latest date
and time to which the Exchange Offer is
extended.
Accrued Interest on the Exchange
Notes and the Initial Notes........ Each Exchange Note will bear interest
from its issuance date. Holders of
Initial Notes that are accepted for
exchange will receive, in cash, accrued
interest thereon to, but not including,
the issuance date of the Exchange Notes.
Such interest will be paid with the first
interest payment on the Exchange Notes on
December 15, 1997. Interest on the
Initial Notes accepted for exchange will
cease to accrue upon issuance of the
Exchange Notes.
Interest on the Exchange Notes is payable
semi-annually on each June 15 and
December 15, commencing on December 15,
1997.
Conditions to the Exchange Offer... The Exchange Offer is subject to certain
customary conditions, which may be waived
by the Company. See "The Exchange
Offer--Conditions."
4
<PAGE> 11
Procedures for Tendering Initial
Notes.............................. Each holder of Initial Notes wishing to
accept the Exchange Offer must complete,
sign and date the accompanying Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of
Transmittal, or such facsimile, together
with the Initial Notes and any other
required documentation to the Exchange
Agent (as defined) to the address set
forth herein. By executing the Letter of
Transmittal, each holder represents to
the Company that, among other things, the
Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or
not such person is the holder, that
neither the holder nor any such other
person has any arrangement or
understanding with any person to
participate in the distribution of such
Exchange Notes and that neither the
holder nor any such other person is an
"affiliate," as defined under Rule 405 of
the Securities Act, of the Company. See
"The Exchange Offer -- Purpose and Effect
of the Exchange Offer" and "-- Procedures
for Tendering."
Untendered Initial Notes........... Following the consummation of the
Exchange Offer, holders of Initial Notes
eligible to participate but who do not
tender their Initial Notes will not have
any further exchange rights and such
Initial Notes will continue to be subject
to certain restrictions on transfer.
Accordingly, the liquidity of the market
for such Initial Notes could be adversely
affected.
Consequences of Failure to
Exchange........................... The Initial Notes that are not exchanged
pursuant to the Exchange Offer will
remain restricted securities.
Accordingly, such Initial Notes may be
resold only (i) to the Company, (ii)
pursuant to Rule 144A or Rule 144 under
the Securities Act or pursuant to some
other exemption under the Securities Act,
(iii) outside the United States to a
foreign person pursuant to the
requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an
effective registration statement under
the Securities Act. See "The Exchange
Offer -- Consequences of Failure to
Exchange."
Federal Income Tax
Considerations..................... The Company believes that the exchange of
Initial Notes for Exchange Notes pursuant
to the Exchange Offer will not be treated
as an "exchange" for federal income tax
purposes because the Exchange Notes will
not be considered to differ materially in
kind or extent from the Initial Notes.
Shelf Registration Statement....... If any holder of the Initial Notes (other
than any such holder which is an
"affiliate" of the Company or a
Subsidiary Guarantor within the meaning
of Rule 405 under the Securities Act) is
not eligible under applicable securities
laws to participate in the Exchange
Offer, and such holder
5
<PAGE> 12
has satisfied certain conditions relating
to the provision of information to the
Company for use therein, the Company has
agreed to register the Initial Notes on a
shelf registration statement (the "Shelf
Registration Statement") and use its best
efforts to cause it to be declared
effective by the Commission as promptly
as practical on or after the consummation
of the Exchange Offer. The Company has
agreed to maintain the effectiveness of
the Shelf Registration Statement for,
under certain circumstances, a maximum of
two years, to cover resales of the
Initial Notes held by any such holders.
Special Procedures for Beneficial
Owners............................. Any beneficial owner whose Initial Notes
are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and who wishes to tender
should contact such registered holder
promptly and instruct such registered
holder to tender on such beneficial
owner's behalf. If such beneficial owner
wishes to tender on such owner's own
behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Initial
Notes, either make appropriate
arrangements to register ownership of the
Initial Notes in such owner's name or
obtain a properly completed bond power
from the registered holder. The transfer
of registered ownership may take
considerable time. The Company will keep
the Exchange Offer open for not less than
twenty business days in order to provide
for the transfer of registered ownership.
Guaranteed Delivery Procedures..... Holders of Initial Notes who wish to
tender their Initial Notes and whose
Initial Notes are not immediately
available or who cannot deliver their
Initial Notes, the Letter of Transmittal
or any other documents required by the
Letter of Transmittal to the Exchange
Agent (or comply with the procedures for
book-entry transfer) prior to the
Expiration Date must tender their Initial
Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights.................. Tenders may be withdrawn at any time
prior to 5:00 p.m., New York City time,
on the Expiration Date.
Acceptance of Initial Notes and
Delivery of Exchange Notes......... The Company will accept for exchange any
and all Initial Notes which are properly
tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange Offer
-- Terms of the Exchange Offer."
Use of Proceeds.................... There will be no cash proceeds to the
Company from the exchange pursuant to the
Exchange Offer.
Exchange Agent..................... State Street Bank and Trust Company.
6
<PAGE> 13
THE EXCHANGE NOTES
General............................ The form and terms of the Exchange Notes
are the same as the form and terms of the
Initial Notes (which they replace) except
that (i) the Exchange Notes bear a Series
B designation and a different CUSIP
number, (ii) the issuance of the Exchange
Notes has been registered under the
Securities Act and, therefore, the
Exchange Notes will not bear legends
restricting the transfer thereof, and
(iii) the holders of Exchange Notes will
not be entitled to certain rights under
the Registration Rights Agreement,
including the provisions providing for an
increase in the interest rate on the
Initial Notes in certain circumstances
relating to the timing of the Exchange
Offer, which rights will terminate when
the Exchange Offer is consummated. See
"The Exchange Offer -- Purpose and Effect
of the Exchange Offer." The Exchange
Notes will evidence the same debt as the
Initial Notes and will be entitled to the
benefits of the Indenture. See
"Description of Exchange Notes."
Exchange Notes Offered............. $225,000,000 aggregate principal amount
of 9 3/4% Senior Notes due 2007, Series
B.
Maturity Date...................... June 15, 2007.
Interest Rate and Payment Dates.... The Exchange Notes will bear interest at
a rate of 9 3/4% per annum. Interest on
the Exchange Notes will accrue from the
date of issuance (the "Issue Date") and
is payable semi-annually on each June 15
and December 15, commencing December 15,
1997.
Optional Redemption................ The Exchange Notes are redeemable, in
whole or in part, at the option of the
Company on or after June 15, 2002, at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, to
the date of redemption. In addition,
prior to June 15, 2000, the Company, at
its option, may redeem up to 33% of the
aggregate principal amount of the
Exchange Notes with the net cash proceeds
of one or more Equity Offerings at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, to
the date of redemption; provided that at
least $100.0 million aggregate principal
amount of the Notes remain outstanding
after any such redemption. See
"Description of Exchange Notes --
Optional Redemption."
Change of Control.................. Upon a Change of Control, the Company
will be obligated to offer to repurchase
all outstanding Notes at a price equal to
101% of their principal amount, plus
accrued and unpaid interest, if any, to
the date of repurchase. There can be no
assurance that, in the event of a Change
of Control, the Company will have, or be
able to obtain, sufficient funds to
repurchase the Notes or that the Company
will be permitted to do so under the
Credit Agreement or any other
indebtedness outstanding at such time.
See "Risk Factors -- Purchase of the
Notes Upon Change of Control." As
defined, a "Change of Control" may not
include certain transactions which
involve the transfer of
7
<PAGE> 14
additional voting power to certain
affiliates or significant corporate
transactions not involving transfers of
voting power in excess of certain levels.
In addition, upon the occurrence of a
Change of Control prior to June 15, 2002,
the Company, at its option, may redeem
all, but not less than all, of the
outstanding Notes at a redemption price
equal to 100% of the principal amount
thereof plus the applicable Make-Whole
Premium. See "Description of Exchange
Notes -- Change of Control."
Offers to Purchase................. In the event of certain asset sales, the
Company will be required to offer to
repurchase the Notes at 100% of their
principal amount, plus accrued and unpaid
interest, if any, to the date of
repurchase, with the net proceeds of such
asset sales.
Ranking............................ The Exchange Notes will be general
unsecured obligations of the Company,
will rank pari passu in right of payment
to all senior indebtedness of the Company
including indebtedness under the Credit
Agreement, will be structurally
subordinated to all indebtedness of the
subsidiaries of the Company that do not
become Subsidiary Guarantors, including
the Trade Receivable Facility, and will
rank senior in right of payment to the
existing $404.3 million aggregate
principal amount of 12 3/4% Debentures.
All indebtedness under the Credit
Agreement is secured by substantially all
of the assets of the Company. At March
31, 1997, there was no outstanding
Indebtedness under the Credit Agreement
(but there was approximately $156.3
million of credit available under the
revolving portion of the Credit Agreement
as well as undrawn letters of credit of
approximately $12.5 million) and the
total outstanding indebtedness under the
Trade Receivable Facility was $25.5
million (with approximately $27.2 million
of additional credit available under the
Trade Receivable Facility). See
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations--Liquidity and Capital
Resources" and "Description of Exchange
Notes."
Certain Covenants.................. The indenture pursuant to which the
Exchange Notes will be issued (the
"Indenture") imposes certain limitations
on the ability of the Company and its
Restricted Subsidiaries (as defined) to,
among other things, incur additional
indebtedness, incur liens, pay dividends
or make certain other restricted payments
or restricted investments, consummate
certain asset sales, enter into certain
transactions with affiliates, impose
restrictions on the ability of a
subsidiary to pay dividends or make
certain payments to the Company and its
Restricted Subsidiaries, merge or
consolidate with any other person or
sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially
all of the Company's assets. The
Indenture also requires the Company's
Restricted Subsidiaries to become
guarantors of the Exchange Notes under
certain circumstances.
For additional information regarding the Exchange Notes, see "Description of
Exchange Notes."
8
<PAGE> 15
USE OF PROCEEDS
There will be no cash proceeds to the Company from the exchange pursuant to
the Exchange Offer. The Company used the proceeds of the Initial Offering to
redeem the Old Notes pursuant to the Redemption and to repay borrowings under
the Company's revolving credit facilities. See "Use of Proceeds."
RISK FACTORS
See "Risk Factors" beginning on page 12 for a discussion of certain factors
that should be considered before tendering Initial Notes in exchange for
Exchange Notes. These risk factors are generally applicable to the Initial Notes
as well as the Exchange Notes.
9
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical consolidated financial data of the Company
for the years ended September 30, 1994, 1995 and 1996 (other than operating
data) were derived from the historical audited consolidated financial statements
of the Company. The following summary historical consolidated financial data of
the Company as of March 31, 1997 and for the six months ended March 31, 1996 and
1997 were derived from unaudited consolidated financial statements of the
Company, which, in the opinion of the Company, reflect all adjustments necessary
for a fair presentation of the results for the unaudited periods. The following
summary unaudited pro forma consolidated income statement and other data have
been prepared to give effect to the Refinancing as if such transaction occurred
on October 1, 1995. The "As Adjusted" balance sheet data have been prepared to
give effect to the Refinancing as if such transaction occurred on March 31,
1997.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED SEPTEMBER 30,(1) ENDED MARCH 31,
------------------------------------------ ---------------------------
PRO FORMA PRO FORMA
1994 1995 1996 1996(2) 1996 1997 1997(2)
---- ---- ---- --------- ---- ---- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................ $784.4 $1,051.4 $922.0 $922.0 $473.1 $388.0 $388.0
Gross margin............................. 93.0 296.4 205.8 205.8 120.0 33.7 33.7
Selling and administrative costs......... (81.0) (95.5) (99.1) (99.1) (46.5) (40.9) (40.9)
Non-recurring charges.................... (15.5) (5.4) (8.1) (8.1) -- -- --
Operating earnings (loss)................ (3.5) 195.5 98.6 98.6 73.5 (7.2) (7.2)
Interest expense -- net.................. (80.3) (86.1) (78.3) (79.5) (39.1) (39.4) (40.0)
Income (loss) before income tax
(provision) benefit and extraordinary
item................................... (84.0) 110.0 20.1 18.9 34.6 (46.4) (47.0)
Income tax (provision) benefit and
extraordinary item..................... -- 24.2 (11.5) (11.0) (16.9) 18.2 18.4
Net income (loss)........................ (84.0) 134.2 8.6 7.9 17.7 (28.2) (28.6)
Ratio of earnings to fixed charges(3).... NM 2.2 1.2 1.2 1.8 NM NM
OTHER DATA:
EBITDA(4)................................ $69.6 $260.4 $167.9 $167.9 $104.7 $23.9 $23.9
Depreciation and amortization............ 61.2 64.8 64.5 64.4 32.7 32.7 32.7
Capital expenditures..................... 40.4 58.9 54.8 54.8 29.4 14.4 14.4
Ratio of EBITDA to interest
expense -- net......................... 0.9 3.0 2.1 2.1 2.7 0.6 0.6
OPERATING DATA:
Production:
Containerboard (thousand tons)......... 1,194.9 1,200.5 1,243.3 560.6 610.4
Unbleached kraft paper (thousand
tons)................................ 250.7 263.9 256.9 122.0 137.9
Shipments:
Corrugated containers (billion square
feet)................................ 12.7 12.3 13.3 6.1 6.6
Multiwall bags (thousand tons)......... 51.5 52.4 51.9 24.6 29.1
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------
AS
ACTUAL ADJUSTED(5)
------ -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 64.4 $ 69.7
Property -- net........................................... 597.1 597.1
Total assets.............................................. 902.5 914.3
Long-term debt............................................ 644.8 664.6
Stockholders' equity...................................... 86.9 79.4
</TABLE>
10
<PAGE> 17
(1) The Company operates on a 52/53 week fiscal year. Fiscal 1994 and fiscal
1995 were 52-week years and fiscal 1996 was a 53-week year.
(2) The summary unaudited pro forma consolidated income statement and other data
have been prepared to give effect to the Refinancing as if such transaction
occurred on October 1, 1995. Pro Forma interest expense during the periods
has been increased by the interest expense relating to the Notes and reduced
by the interest expense relating to the Old Notes. The Pro Forma interest
expense has not been adjusted to reflect the effect of the repayment of
borrowings under the Company's revolving credit facilities as described in
Note (5) below (which would on a pro forma basis have amounted to $0.5
million for the year ended September 30, 1996 and $0.3 million for the six
months ended March 31, 1997) or the investment of excess cash available
after the repayment. Accordingly, interest expense -- net would have been
lower. In addition, the Refinancing is expected to result in an
extraordinary loss of approximately $7.5 million, net of an income tax
benefit of $4.8 million.
(3) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary item, interest expense, taxes and one-third of
rent expense by the sum of interest expense and one-third of rent expense.
The ratio of earnings to fixed charges is not meaningful for periods that
result in a deficit. For the year ended September 30, 1994 and the six
months ended March 31, 1997, earnings before fixed charges were insufficient
to cover fixed charges by $84.9 million and $46.9 million, respectively. On
a pro forma basis for the six months ended March 31, 1997, earnings before
fixed charges were insufficient to cover fixed charges by $47.5 million.
(4) "EBITDA" represents, for any relevant period, the sum of operating earnings,
depreciation of property, plant and equipment, amortization of intangible
assets included in operating earnings and non-recurring charges for asset
write-downs. The Company believes that EBITDA, as presented, provides useful
information regarding the Company's ability to service its debt, but should
not be considered in isolation or as a substitute for consolidated income
statement data prepared in accordance with generally accepted accounting
principles.
(5) Adjusted to give effect to the Refinancing as if such transaction occurred
on March 31, 1997. The adjustments reflect the repayment of $179.7 million
principal amount of Old Notes outstanding on such date (together with an
approximately $8.9 million redemption premium) and the repayment of $25.5
million of borrowings under the Company's revolving credit facilities
outstanding on such date. The Refinancing is expected to result in an
extraordinary loss of approximately $7.5 million, net of an income tax
benefit of $4.8 million.
11
<PAGE> 18
RISK FACTORS
In addition to the other information set forth in this Prospectus,
prospective purchasers of the Initial Notes should carefully consider the
following risk factors before tendering Initial Notes in exchange for Exchange
Notes. The risk factors set forth below are generally applicable to the Initial
Notes as well as the Exchange Notes.
LEVERAGE
At March 31, 1997, the Company had $655.8 million of total debt and $86.9
million of stockholders' equity and approximately $183.5 million of credit
available under the revolving portions of the credit facilities. On a pro forma
basis as of March 31, 1997, the Refinancing would have increased total debt by
approximately $19.8 million and decreased stockholders' equity by approximately
$7.5 million. In addition, subject to the restrictions in the Credit Agreement,
the 12 3/4% Debenture Indenture (as defined) and the Indenture, the Company may
incur additional indebtedness from time to time to finance acquisitions or
capital expenditures or for other purposes. See "Description of Other
Indebtedness and Other Obligations."
For the fiscal year ended September 30, 1996, on a pro forma basis after
giving effect to the Refinancing as if it had occurred on October 1, 1995, the
Company's ratio of earnings to fixed charges would have been 1.2:1. For the six
months ended March 31, 1997, earnings before fixed charges would have been
insufficient to cover fixed charges by $47.5 million on the same pro forma
basis.
The level of the Company's indebtedness could have important consequences
to holders of the Exchange Notes, including: (i) a substantial portion of the
Company's cash flow from operations must be dedicated to debt service and will
not be available for other purposes; (ii) the Company's ability to obtain
additional debt financing in the future for working capital, capital
expenditures or acquisitions may be limited; and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in the industry
and economic conditions generally. Some of the Company's competitors currently
operate on a less leveraged basis and have significantly greater operating and
financing flexibility than the Company. The Company's ability to pay interest on
the Exchange Notes and to satisfy its other debt obligations will depend upon
its future operating performance, which will be affected by prevailing economic
conditions and financial, business and other factors, some of which are beyond
its control. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
RANKING
The Exchange Notes will be general unsecured obligations of the Company and
will rank pari passu in right of payment to all senior indebtedness of the
Company, including indebtedness under the Credit Agreement. All indebtedness
under the Credit Agreement is secured by substantially all of the assets of the
Company. As of March 31, 1997, there was no outstanding indebtedness under the
Credit Agreement, but there was approximately $156.3 million of credit available
under the Credit Agreement. As of March 31, 1997, the Company also had
approximately $12.5 million of undrawn letters of credit outstanding under the
Credit Agreement. In addition, certain other senior indebtedness of the Company
is secured by the properties financed with such indebtedness. The Exchange Notes
will rank senior in right of payment to the 12 3/4% Debentures. As of March 31,
1997, the Company had outstanding approximately $404.3 million aggregate
principal amount of its 12 3/4% Debentures. In the event of a bankruptcy,
liquidation or reorganization of the Company, in the event of a Change of
Control or a significant asset disposition or in the event that any default in
payment of any secured indebtedness, holders of secured indebtedness of the
Company will be entitled to payment in full from the proceeds of all assets of
the Company pledged to secure such indebtedness prior to any payment of such
proceeds to holders of the Exchange Notes. Consequently, there can be no
assurances that the Company will have sufficient funds to make such payments to
holders of the Exchange Notes. See "Description of Exchange Notes" and
"Description of Other Indebtedness and Other Obligations."
The Exchange Notes will be structurally subordinated to existing and future
liabilities of the Company's subsidiaries that do not become Subsidiary
Guarantors, including trade payables and the Trade Receivable Facility, as to
the assets of such subsidiaries. As of March 31, 1997, liabilities (including
trade payables) of
12
<PAGE> 19
the subsidiaries of the Company were approximately $27.4 million, including
$25.5 million under the Trade Receivable Facility (with approximately $27.2
million of additional credit available under the Trade Receivable Facility).
INDUSTRY AND CYCLICAL FACTORS
Demand for corrugated containers, containerboard and unbleached kraft paper
is cyclical and has historically corresponded to changes in the rate of growth
in the U.S. economy and exchange rates for the U.S. dollar. Growth in the U.S.
economy generally stimulates demand for packaging products. In addition,
weakness of the U.S. dollar versus the currencies of the United States' major
trading partners stimulates domestic demand for corrugated products and makes
export sales of containerboard more price competitive.
The cyclicality of demand is accentuated by the inelasticity of supply due
to the capital intensive nature of the industry. Because productive capacity
cannot be added quickly, during periods of rising demand containerboard and
unbleached kraft paper inventory levels tend to fall, exerting upward pressure
on prices. In periods when capacity exceeds demand, efforts to control inventory
levels are limited because containerboard and unbleached kraft paper mills
operate most economically near capacity operating levels.
Adverse pricing conditions have affected the paper and corrugated container
industry generally since the fall of 1995 and, as a result, the Company's cash
flow levels have been substantially reduced. The Company will continue to be
unprofitable until industry pricing conditions improve. During the six months
ended March 31, 1997, the Company's operating results were adversely affected by
a continued decline in product prices compared to the comparable prior six
months. Unless there is significant price improvement in fiscal 1998,
modifications would be required to certain financial covenants in the Credit
Agreement. There can be no assurance that adverse industry conditions will not
continue or worsen. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Description of Other Indebtedness and Other Obligations."
In recent years, a number of domestic and foreign competitors have
increased their utilization of recycled fiber. This increased utilization of
recycled fiber has resulted in greater volatility of recycled fiber costs. The
volatility of recycled fiber costs may be particularly acute when linerboard
prices increase. See "Business -- Raw Materials"
COMPETITION
Many of the Company's competitors are substantially larger and have
significantly greater financial resources; however, the most important
competitive factors are price, quality and service. The manufacture of
containerboard and unbleached kraft paper is capital intensive with high
barriers to entry because new facilities require substantial capital and take at
least two years to construct. Many of the Company's larger competitors own
timberlands. Although the Company does not own timberlands, it has fiber supply
agreements covering a substantial portion of its fiber needs. Such agreements
covered approximately 40% of the Company's pulpwood and wood chip requirements
in fiscal 1996.
In contrast to the containerboard and unbleached kraft paper segment of the
industry, the converting segment, which manufactures corrugated products and
multiwall bags, has comparatively low barriers to entry. Competition in
corrugated products and, to a lesser extent, multiwall bags, is primarily
localized, with proximity to customers an important factor in minimizing
shipping costs. There are a substantial number of competitors in each of the
geographic areas in which the Company's converting facilities are located. Many
of such competing facilities are owned by other integrated producers.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture will restrict, among other things, the Company's ability to
incur additional indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, impose restrictions on the ability of a subsidiary to
pay dividends or
13
<PAGE> 20
make certain payments to the Company and incur indebtedness, merge or
consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company.
The Credit Agreement contains certain restrictions on the Company's
operations and contains requirements that the Company achieve and maintain
certain financial ratios. Such restrictions include, among other things,
limitations on the ability of the Company and its subsidiaries to incur
additional indebtedness, to create, incur or permit the existence of certain
liens, to make certain investments, to make capital expenditures above certain
levels, to make certain sales of assets, to make certain payments with respect
to its outstanding stock, to effect certain fundamental changes and to enter
into certain types of transactions. There can be no assurance that the Company
will be able to achieve and maintain compliance with the prescribed financial
ratio tests or other requirements of the Credit Agreement. Failure to achieve or
maintain compliance with such financial ratio tests or other requirements under
the Credit Agreement would result in an event of default and could lead to the
acceleration of the Company's obligations under the Credit Agreement as well as
the acceleration of other indebtedness of the Company which, by the terms of the
instruments creating, evidencing or governing such indebtedness, would be in
default upon an acceleration under the Credit Agreement. All indebtedness under
the Credit Agreement is secured by substantially all of the assets of the
Company. See "Description of Other Indebtedness and Other Obligations -- Credit
Agreement."
The 12 3/4% Debenture Indenture restricts, among other things, the
Company's ability to incur additional indebtedness, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, incur indebtedness that is subordinate in
right of payment to any Senior Debt (as defined in the 12 3/4% Debenture
Indenture) and senior in right of payment to the 12 3/4% Debentures, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of the assets of the Company.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local environmental requirements,
particularly relating to air and water quality, waste disposal and the cleanup
of contaminated soil and groundwater, is a significant factor in the Company's
business. The Company made capital expenditures for environmental purposes of
approximately $4.3 million, $5.5 million and $2.3 million in fiscal 1996, fiscal
1995 and fiscal 1994, respectively. Inherent in manufacturing operations and the
real estate ownership activity of the Company is the risk of environmental
liabilities as a result of both current and past operations, which cannot be
predicted with certainty. The Company has incurred and will continue to incur
costs, on an ongoing basis, associated with environmental regulatory compliance
in its business. The Company believes that it is in compliance in all material
respects with applicable federal, state and local environmental regulations.
Although the Company will attempt to be in compliance with all existing
environmental regulatory requirements, any newly adopted legislation or
regulations, and changed interpretation of existing legislation or regulations,
there can be no assurance that the Company will be in compliance, and any such
noncompliance could have a material adverse effect on the Company. See "Business
- -- Environmental Matters."
LITIGATION
The Company is a party to various legal proceedings, including litigation
incidental to normal business activities and other litigation described in
"Business -- Legal Proceedings." The Company believes the outcome of such
litigation will not have a material adverse effect on the Company's financial
position, results of operations or cash flows. There can be no assurance,
however, that such litigation will not have such a material adverse effect.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Initial Notes were issued to, and the Company believes are currently
owned by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there was no public market for the Initial Notes. The Initial Notes have
not been registered under the Securities Act and will be subject to restrictions
on transferability to the extent that they are not exchanged for Exchange Notes
by holders who are entitled to participate in this Exchange Offer. After
consummation of the Exchange Offer, the market for Initial Notes
14
<PAGE> 21
not tendered or exchanged (or tendered but not accepted for exchange) in the
Exchange Offer will be more limited than their existing market. The holders of
Initial Notes (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who are not eligible to
participate in the Exchange Offer are entitled to certain registration rights,
and the Company is required to file a Shelf Registration Statement with respect
to such Initial Notes. The Exchange Notes will constitute a new issue of
securities with no established trading market. The Company does not intend to
list the Exchange Notes on any national securities exchange or seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Initial Purchasers have advised the Company that
they currently intend to make a market in the Exchange Notes, but they are not
obligated to do so and may discontinue such market making at any time. In
addition, such market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer and the pendency of the Shelf Registration Statement. Accordingly, no
assurance can be given that an active public or other market will develop for
the Exchange Notes or as to the liquidity of the trading market for the Exchange
Notes. If a trading market does not develop or is not maintained, holders of the
Exchange Notes may experience difficulty in reselling the Exchange Notes or may
be unable to sell them at all. If a market for the Exchange Notes develops, any
such market may be discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from their
principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Initial Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
such Initial Notes, a properly completed and duly executed Letter of Transmittal
and all other required documents. Therefore, holders of the Initial Notes
desiring to tender such Initial Notes in exchange for Exchange Notes should
allow sufficient time to ensure timely delivery. The Company is under no duty to
give notification of defects or irregularities with respect to the tenders of
Initial Notes for exchange. Initial Notes that are not tendered or are tendered
but not accepted will, following the consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof, and,
upon consummation of the Exchange Offer certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Initial
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities, and if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Initial Notes, where such Initial Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Initial Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Initial Notes could be
adversely affected. See "The Exchange Offer."
PURCHASE OF THE EXCHANGE NOTES UPON CHANGE OF CONTROL
Upon a Change of Control (such as, for example, the acquisition of a
majority of the outstanding voting stock of the Company by a third party), the
Company is required to offer to purchase all outstanding Exchange Notes at 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase. The source of funds for any such purchase will be the
Company's available cash or cash generated from operations or other sources,
including borrowings, sales of assets, sales of equity or funds provided by a
new controlling person. However, there can be no assurance that in the event of
a Change of Control, the Company will have or be able to obtain sufficient funds
to repurchase the Exchange Notes, or that the Company will be permitted to do so
under the Credit Agreement or any other indebtedness outstanding at such time.
See "Description of Exchange Notes -- Change of Control."
15
<PAGE> 22
THE COMPANY
GENERAL
The Company is a major national manufacturer and distributor of brown paper
and brown paper packaging products. The Company produces linerboard and
unbleached kraft paper at its paper mills located in Bogalusa, Louisiana;
Antioch, California; and Pine Bluff, Arkansas. Through its network of 19
converting facilities, the Company converts the majority of its primary mill
products into corrugated containers and sheets and multiwall bags for the food,
beverage, agricultural and other industries. As of September 30, 1996, the
Company was the tenth largest domestic producer of linerboard with approximately
1.35 million tons of annual capacity and the fourth largest producer of
unbleached kraft paper with approximately 0.28 million tons of annual capacity.
Since its inception in 1986, the Company has made significant capital
expenditures primarily to expand capacity, install advanced paper making
technology, improve product quality, realize operating efficiencies and maintain
its existing facilities. As part of a major capital expenditure program
completed in fiscal 1990, the Company invested approximately $240 million to
expand capacity, improve operating efficiencies and enhance product quality at
the Company's mills, providing the Company with a high-quality, cost-effective
mill system. Mill productive capacity has increased by more than 65% compared to
1987 levels. The Company believes that all of its mills are low-cost producers
in their respective segments and that its Bogalusa mill is one of the premier
mills in the industry. The focus of the Company's current capital plan for the
five year period beginning in fiscal 1994 is on its converting operations, with
approximately 60% of the budgeted $250 million for that period allocated to
upgrading and expanding the Company's corrugated container, sheet feeder and bag
plants. The goal of the converting plant capital program is to increase capacity
and to achieve quality enhancements and cost efficiencies similar to those at
the Company's mills.
OPERATING STRATEGY
The Company's operating strategy is to maintain or improve its position as
a low-cost, high-quality producer of linerboard, unbleached kraft paper and
related converted products. Specifically, the Company has emphasized production
of high-performance linerboard, high-recycled content linerboard and packaging
products, and the use of multicolor packaging graphics, because it believes
these represent the higher-growth segments of the brown paper packaging
industry. Further, the Company's goal is to become 100% forward integrated over
time by increasing converting capacity to a level that equals or exceeds its
mill productive capacity. The Company will also continue to seek growth
opportunities including acquisitions and other strategic investments.
High-Performance Linerboard. Approximately 94% of the Company's linerboard
productive capacity is capable of manufacturing high-performance grades of
linerboard, which have the same performance characteristics as standard grades
of linerboard, but achieve these levels using less fiber which results in a
lower basis weight. Basis weight is the weight of linerboard per 1,000 square
feet. When converted into a corrugated container, high-performance linerboard,
using the same square footage as standard linerboard, reduces weight while
maintaining performance characteristics, and thus, is more economical.
Recycled Linerboard and Recycled Packaging. The Company is also a major
producer in the growing recycled linerboard and packaging segments of the brown
paper industry. The Antioch mill uses 100% recycled fiber, and the Company as a
whole uses approximately 820 thousand tons annually of pre- and post-consumer
waste as a fiber source. Recycled fiber provides approximately 45% of the
Company's fiber needs.
Enhanced Graphic Capabilities. The Company continues to emphasize the use
of high-quality packaging graphics through a preprint linerboard facility,
state-of-the-art multicolor print capabilities at its converting facilities and
computer-aided-design systems at its corrugated container facilities to meet
customers' growing demand for these products and services. The Company believes
participation in this segment provides higher margins and a more stable customer
base.
16
<PAGE> 23
Integration. Consistent with its long term operating strategy, the Company
intends to continue to sell primary mill product to independent converters and
to the export market, and to purchase mill product in the open market. The
Company believes that increased forward integration will reduce the impact of
primary product price volatility on its profits, provide more stable demand
(which enhances efficiency) for the Company's mill production and increase its
product distribution capabilities. In fiscal 1996, the Company converted the
equivalent of approximately 80% of its linerboard production and converted or
sold to its grocery bag joint venture approximately 59% of its unbleached kraft
paper production. The Company intends to continue to increase converting
capacity through internal expansion, converting plant acquisitions and strategic
joint ventures.
THE REFINANCING
The Company believes that the Refinancing provides lower interest rates,
extended maturities and additional financial flexibility, thus enhancing the
Company's ability to implement its operating strategy.
Substantially all of the net proceeds of the Initial Note Offering were
used to redeem the outstanding Old Notes and to repay borrowings under the
Company's revolving credit facilities. Concurrently with the consummation of the
Initial Note Offering, the Company provided an irrevocable notice of the
exercise of its option to redeem on July 14, 1997 all outstanding Old Notes and
deposited into an escrow account U.S. Treasury bills in an amount sufficient to
fund 104.93% of the principal amount of, plus accrued and unpaid interest on,
the Old Notes to the redemption date. The Old Notes will be redeemed by the
Escrow Agent (as defined) on July 14, 1997.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Initial Notes in like
principal amount, the form and terms of which are the same as the form and terms
of the Exchange Notes (which replace the Initial Notes), except as otherwise
described herein. The Initial Notes surrendered in exchange for Exchange Notes
will be retired and canceled and cannot be reissued. Accordingly, issuance of
the Exchange Notes will not result in any increase or decrease in the
indebtedness of the Company. As such, no effect has been given to the Exchange
Offer in the pro forma statements or capitalization tables.
The net proceeds from the issuance of the Initial Notes were used to
consummate the Redemption and to repay borrowings under the Company's revolving
credit facilities.
17
<PAGE> 24
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of March 31, 1997 and as adjusted to give effect to the
Refinancing as if it occurred on such date. The information presented below
should be read in conjunction with the financial statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN MILLIONS)
<S> <C> <C>
Current maturities of long-term debt..................... $ 11.0 $ 11.0
------ ------
Long-term debt (less current maturities):
Credit Agreement and Trade Receivable Facility
debt(1)............................................. 25.5 --
Other senior debt...................................... 35.3 35.3
9 3/4% Senior Notes due 2007........................... -- 225.0
11 1/2% Senior Notes due 2001.......................... 179.7 --
12 3/4% Senior Subordinated Discount Debentures due
2005................................................ 404.3 404.3
------ ------
Total long-term debt.............................. 644.8 664.6
------ ------
Stockholders' equity:
Class A Common Stock................................... -- --
Capital in excess of par value......................... 173.9 173.9
Retained deficit(2).................................... (74.3) (81.8)
Common stock in treasury-at cost....................... (11.5) (11.5)
Recognition of minimum pension liability............... (1.2) (1.2)
------ ------
Total stockholders' equity........................ 86.9 79.4
------ ------
Total capitalization.............................. $742.7 $755.0
====== ======
</TABLE>
- -------------------------
(1) At March 31, 1997, the Company had $25.5 million of outstanding borrowings
under its Trade Receivable Facility, approximately $12.5 million of undrawn
letters of credit issued under the Credit Agreement and approximately $183.5
million of credit available under the revolving portions of the credit
facilities.
(2) The Refinancing is expected to result in an extraordinary loss of
approximately $7.5 million, net of an income tax benefit of $4.8 million.
18
<PAGE> 25
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical consolidated financial data of the
Company for the years ended September 30, 1992, 1993, 1994, 1995 and 1996 (other
than operating data) were derived from the historical audited consolidated
financial statements of the Company. The following selected historical
consolidated financial data of the Company as of March 31, 1997 and for the six
months ended March 31, 1996 and 1997 were derived from unaudited consolidated
financial statements of the Company, which, in the opinion of the Company,
reflect all adjustments necessary for a fair presentation of the results for the
unaudited periods. The following selected unaudited pro forma consolidated
income statement and other data have been prepared to give effect to the
Refinancing as if such transaction occurred on October 1, 1995. The "As
Adjusted" balance sheet data have been prepared to give effect to the
Refinancing as if such transaction occurred on March 31, 1997.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED SEPTEMBER 30,(1) ENDED MARCH 31,
-------------------------------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1992 1993 1994 1995 1996 1996(2) 1996 1997 1997(2)
---- ---- ---- ---- ---- --------- ---- ---- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................ $722.8 $733.5 $784.4 $1,051.4 $922.0 $922.0 $473.1 $388.0 $388.0
Gross margin..................... 114.4 81.4 93.0 296.4 205.8 205.8 120.0 33.7 33.7
Selling and administrative
costs.......................... (77.0) (73.8) (81.0) (95.5) (99.1) (99.1) (46.5) (40.9) (40.9)
Non-recurring charges............ (58.9) (9.9) (15.5) (5.4) (8.1) (8.1) -- -- --
Operating earnings (loss)........ (21.5) (2.3) (3.5) 195.5 98.6 98.6 73.5 (7.2) (7.2)
Interest expense -- net.......... (110.8) (68.2) (80.3) (86.1) (78.3) (79.5) (39.1) (39.4) (40.0)
Income (loss) before income tax
(provision) benefit, accounting
change and extraordinary
item........................... (132.5) (70.0) (84.0) 110.0 20.1 18.9 34.6 (46.4) (47.0)
Income tax (provision) benefit,
accounting change and
extraordinary item............. -- 200.2 -- 24.2 (11.5) (11.0) (16.9) 18.2 18.4
Net income (loss)................ (132.5) 130.2 (84.0) 134.2 8.6 7.9 17.7 (28.2) (28.6)
Ratio of earnings to fixed
charges(3)..................... NM NM NM 2.2 1.2 1.2 1.8 NM NM
OTHER DATA:
EBITDA(4)........................ $91.9 $64.0 $69.6 $260.4 $167.9 $167.9 $104.7 $23.9 $23.9
Depreciation and amortization.... 59.3 61.1 61.2 64.8 64.5 64.4 32.7 32.7 32.7
Capital expenditures............. 22.9 23.7 40.4 58.9 54.8 54.8 29.4 14.4 14.4
Ratio of EBITDA to interest
expense -- net................. 0.8 0.9 0.9 3.0 2.1 2.1 2.7 0.6 0.6
OPERATING DATA:
Production:
Containerboard (thousand
tons)........................ 1,087.3 1,151.9 1,194.9 1,200.5 1,243.3 560.6 610.4
Unbleached kraft paper
(thousand tons).............. 227.4 241.1 250.7 263.9 256.9 122.0 137.9
Shipments:.......................
Corrugated containers (billion
square feet)................. 10.3 11.9 12.7 12.3 13.3 6.1 6.6
Multiwall bags (thousand
tons)........................ 44.1 48.7 51.5 52.4 51.9 24.6 29.1
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED(5)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 64.4 $ 69.7
Property -- net........................................... 597.1 597.1
Total assets.............................................. 902.5 914.3
Long-term debt............................................ 644.8 664.6
Stockholders' equity...................................... 86.9 79.4
</TABLE>
- -------------------------
(1) The Company operates on a 52/53 week fiscal year. Fiscal 1992 through fiscal
1995 were 52-week years and fiscal 1996 was a 53-week year.
(2) The summary unaudited pro forma consolidated income statement and other data
have been prepared to give effect to the Refinancing as if such transaction
occurred on October 1, 1995. Pro Forma interest expense during the periods
has been increased by the interest expense relating to the Notes and reduced
by the interest expense relating to the Old Notes. The Pro Forma interest
expense has not been adjusted to reflect the effect of the repayment of
borrowings under the Company's revolving credit facilities as described in
Note (5) below (which would on a pro forma basis have amounted to $0.5
million for the year ended September 30, 1996 and $0.3 million for the six
months ended March 31, 1997) or the investment of excess cash available
after the repayment. Accordingly, interest expense -- net would have been
lower. In addition, the Refinancing is expected to result in an
extraordinary loss of approximately $7.5 million, net of an income tax
benefit of $4.8 million.
19
<PAGE> 26
(3) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary item, interest expense, taxes and one-third of
rent expense by the sum of interest expense and one-third of rent expense.
The ratio of earnings to fixed charges is not meaningful for periods that
result in a deficit. For the years ended September 30, 1992, 1993, and 1994
and the six months ended March 31, 1997, earnings before fixed charges were
insufficient to cover fixed charges by $133.0 million, $70.5 million, $84.9
million and $46.9 million, respectively. On a pro forma basis for the six
months ended March 31, 1997, earnings before fixed charges were insufficient
to cover fixed charges by $47.5 million.
(4) "EBITDA" represents, for any relevant period, the sum of operating earnings,
depreciation of property, plant and equipment, amortization of intangible
assets included in operating earnings and non-recurring charges for asset
write-downs. The Company believes that EBITDA, as presented, provides useful
information regarding the Company's ability to service its debt, but should
not be considered in isolation or as a substitute for consolidated income
statement data prepared in accordance with generally accepted accounting
principles.
(5) Adjusted to give effect to the Refinancing as if such transaction occurred
on March 31, 1997. The adjustments reflect the repayment of $179.7 million
principal amount of Old Notes outstanding on such date (together with an
approximately $8.9 million redemption premium) and the repayment of $25.5
million of borrowings under the Company's revolving credit facilities
outstanding on such date. The Refinancing is expected to result in an
extraordinary loss of approximately $7.5 million, net of an income tax
benefit of $4.8 million.
20
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Demand for corrugated containers, containerboard and unbleached kraft paper
is cyclical and has historically corresponded to changes in the rate of growth
in the U.S. economy and exchange rates for the U.S. dollar. Growth in the U.S.
economy generally stimulates demand for packaging products. In addition,
weakness of the U.S. dollar versus the currencies of the United States' major
trading partners stimulates domestic demand for corrugated products and makes
export sales of containerboard more price competitive.
The cyclicality of demand is accentuated by the inelasticity of supply due
to the capital intensive nature of the industry. Because productive capacity
cannot be added quickly, during periods of rising demand containerboard and
unbleached kraft paper inventory levels tend to fall, exerting upward pressure
on prices. In periods when capacity exceeds demand, efforts to control inventory
levels are limited because containerboard and unbleached kraft paper mills
operate most economically near capacity operating levels.
Demand for unbleached kraft paper has declined in recent years due to
displacement by plastics. The Company can vary its production of unbleached
kraft paper, depending on market conditions, because all four of the Company's
paper machines that produce unbleached kraft paper also have the capability to
produce containerboard.
During the cyclical downturn ending in the fall of 1993, published
linerboard and grocery sack paper transaction prices declined approximately 27%
and 34%, respectively. Published prices for linerboard and grocery sack paper
recovered significantly throughout fiscal 1994 and fiscal 1995, increasing
approximately 80% and 84%, respectively, and reaching record highs. Increases in
industry containerboard capacity and softening demand for corrugated containers
contributed to a decrease of approximately 40% in published prices for
linerboard between September 1995 and March 1997. In addition, during the same
period published prices for grocery sack paper declined approximately 20%.
FIRST SIX MONTHS OF FISCAL 1997 COMPARED WITH FIRST SIX MONTHS OF FISCAL 1996
Net sales for the first six months of fiscal 1997 were $388.0 million, a
decrease of approximately 18% compared with net sales of $473.1 million for the
first six months of fiscal 1996. The operating loss for the current period was
$7.2 million compared with operating earnings of $73.5 million for the year-ago
period. The net loss for the current period totaled $28.2 million, or $0.53 per
share, compared with net income of $17.7 million, or $0.32 per share (including
a $2.6 million extraordinary loss ($0.05 per share) on the early retirement of
debt), for the year-ago period.
Sales and earnings in the first six months of fiscal 1997 were adversely
affected by lower average selling prices for the Company's products, which
decreased operating earnings by approximately $93 million compared with the
prior-year period. Average selling prices for the Company's domestic linerboard,
export linerboard and corrugated products decreased approximately 30%, 29% and
24%, respectively, in the first six months of fiscal 1997 compared with the
comparable prior-year period. Average selling prices for the Company's
unbleached kraft paper and multiwall bags decreased approximately 22% and 7%,
respectively, in the first six months of fiscal 1997 compared with the year-ago
period.
Sales and earnings in the first six months of fiscal 1997 were favorably
affected by higher mill production and corrugated shipments. Higher volume
increased operating earnings by approximately $22 million.
Total mill production in the first six months of fiscal 1997 of 4,113 tons
per day ("TPD," as calculated on the basis of the number of days in the period)
increased approximately 10% from 3,751 TPD in the year-ago period.
Containerboard production in the first six months of fiscal 1997 of 3,354 TPD
increased approximately 9% from 3,080 TPD in the prior-year period. Unbleached
kraft paper production in the current period increased approximately 13% to 759
TPD from 671 TPD in the prior-year period. This favorable volume variance is
primarily due to an estimated 74,000 tons of production "lost" due to
non-maintenance downtime
21
<PAGE> 28
taken during the first six months of fiscal 1996, compared with an estimated
15,000 tons "lost" during the first six months of fiscal 1997.
Corrugated shipments of approximately 6.6 billion square feet increased
approximately 8% in the first six months of fiscal 1997 compared with 6.1
billion square feet shipped in the year-ago period. Multiwall bag shipments
increased to 29.1 thousand tons in the current period compared with shipments of
24.6 thousand tons in the first six months of fiscal 1996.
Gross margins as a percentage of net sales for the first six months of
fiscal 1997 decreased to 8.7% from 25.4% in the prior-year period primarily due
to lower selling prices for the Company's products, partially offset by improved
volume. In addition, gross margin was adversely affected by higher gas prices
($4 million) and wood costs ($3 million).
Selling and administrative costs of $40.9 million for the current period
decreased from $46.5 million in the prior-year period. The favorable comparison
in selling and administrative costs is primarily due to the exchange of the
Company's grocery bag and sack manufacturing assets for a 35% equity interest in
S&G Packaging Company, L.L.C. ("S&G Packaging"), a joint venture with Stone
Container Corporation ("Stone Container"), in the fourth quarter of fiscal 1996.
Net interest expense increased from the prior-year period by $0.3 million to
$39.4 million in the first six months of fiscal 1997.
In the first six months of fiscal 1997, the Company recorded a tax benefit
of $18.2 million which corresponds to an effective tax rate of approximately 39
percent. In the first six months of fiscal 1996, the Company recorded a tax
provision of $14.3 million which corresponded to an effective rate of
approximately 41%.
During the first quarter of fiscal 1996, the Company repurchased and
retired approximately $65.3 million principal amount of its publicly traded debt
securities. In conjunction with the repurchase, approximately $1.4 million of
deferred financing fees were written off. These transactions resulted in an
extraordinary loss of $2.6 million, net of an income tax benefit of $1.8
million.
YEAR ENDED SEPTEMBER 30, 1996 (FISCAL 1996) COMPARED WITH YEAR ENDED SEPTEMBER
30, 1995 (FISCAL 1995)
Net sales for fiscal 1996 were $922.0 million, a decrease of approximately
12% compared with record net sales of $1,051.4 million for fiscal 1995.
Operating earnings for fiscal 1996 were $98.6 million compared with record
operating earnings of $195.5 million for fiscal 1995 after non-recurring
operating charges of $8.1 million and $5.4 million in fiscal 1996 and fiscal
1995, respectively. Net income was $8.6 million, or $0.16 per share, after a
$3.2 million extraordinary loss ($0.06 per share) on the early retirement of
debt, versus net income in fiscal 1995 of $134.2 million, or $2.44 per share,
including a $24.2 million income tax benefit.
Sales and earnings in fiscal 1996 were adversely affected by declining
product prices which resulted in significantly lower average selling prices for
the Company's products compared with fiscal 1995. Lower average selling prices
decreased operating earnings by approximately $151 million versus the prior
fiscal year. Average selling prices for the Company's domestic linerboard,
export linerboard and corrugated products decreased approximately 19%, 33% and
10%, respectively, in fiscal 1996 compared with fiscal 1995. Average selling
prices for the Company's unbleached kraft paper and multiwall bags decreased
approximately 25% and 1%, respectively, in fiscal 1996 versus the prior year.
Sales and earnings for fiscal 1996 benefited from record mill production.
Increased volume had a favorable effect on operating earnings of approximately
$8 million. Total mill production increased approximately 2% in fiscal 1996
compared with the prior year. Production in fiscal 1996 benefited from an extra
week in the fiscal year. Adjusting for the extra week in fiscal 1996, production
was marginally higher despite approximately 80,000 tons of "lost" production
primarily due to market downtime. In fiscal 1996, production of linerboard
increased approximately 2% to 3,351 TPD from 3,298 TPD while production of
unbleached kraft paper decreased approximately 4% to 693 TPD from 725 TPD in the
prior year.
Corrugated shipments were a record 13.3 billion square feet in fiscal 1996,
an increase of approximately 8% from fiscal 1995. Adjusting for the extra week,
corrugated shipments increased approximately 6% due to
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shipments from a new sheet feeder plant and capacity additions related to the
capital investment program. Multiwall bag shipments of 51,900 tons in fiscal
1996 were approximately equal to the prior year. Prior to contributing its
grocery bag manufacturing assets to S&G Packaging, a joint venture with Stone
Container effected in July, 1996, the Company shipped (for the 9 1/2-month
period) 88,200 tons of grocery bags and sacks versus 105,000 tons in fiscal
1995.
Gross margin as a percentage of net sales for fiscal 1996 decreased to
22.3% from 28.2% in the prior year. The decrease in margin is primarily due to
significantly lower average net selling prices for the Company's products,
partially offset by reduced fiber costs (primarily the cost of old corrugated
containers ("OCC")) which favorably affected operating earnings by approximately
$72 million.
Selling and administrative costs for fiscal 1996 were $3.6 million higher
than fiscal 1995. The increase is primarily the result of increased professional
fees and group insurance costs, partially offset by a decrease in incentive
compensation as a result of reduced profitability.
Net interest expense decreased to $78.3 million in fiscal 1996 from $86.1
million in fiscal 1995. The decrease was primarily due to lower average debt
levels, partially offset by accretion in the discount on subordinated debt.
During fiscal 1996, the Company repurchased and retired $75.2 million
principal amount of its publicly traded debt securities. In conjunction with the
repurchase, $1.5 million of deferred financing fees were written off. These
transactions resulted in an extraordinary loss of $3.2 million, net of an income
tax benefit of $2.3 million.
YEAR ENDED SEPTEMBER 30, 1995 (FISCAL 1995) COMPARED WITH YEAR ENDED SEPTEMBER
30, 1994 (FISCAL 1994)
Net sales for fiscal 1995 were a record $1,051.4 million, an increase of
approximately 34% compared with net sales of $784.4 million for fiscal 1994.
Operating earnings for fiscal 1995 were a record $195.5 million compared with an
operating loss of $3.5 million for fiscal 1994 after $5.4 million and $15.5
million of non-recurring operating charges in fiscal 1995 and fiscal 1994,
respectively. Net income was a record $134.2 million, or $2.44 per share,
including a $24.2 million income tax benefit, versus a net loss in fiscal 1994
of $84.0 million, or $1.57 per share.
Sales and earnings in fiscal 1995 benefited from a series of product price
increases resulting in significantly higher average selling prices for the
Company's products compared with fiscal 1994. Higher average selling prices
increased operating earnings by approximately $279 million versus the prior
fiscal year. Average selling prices for the Company's domestic linerboard,
export linerboard and corrugated products increased approximately 43%, 84% and
30%, respectively, in fiscal 1995 compared with fiscal 1994. Average selling
prices for the Company's unbleached kraft paper, grocery bags and sacks and
multiwall bags increased approximately 41%, 72% and 8%, respectively, in fiscal
1995 versus the prior year.
Sales and earnings for fiscal 1995 also benefited from record mill
production. The increase in production was achieved despite the temporary idling
of the Bogalusa, Louisiana and Antioch, California mills in the fourth quarter
of fiscal 1995 to avoid a build-up of inventories, which resulted in
approximately 35,000 tons of "lost" production. In addition, extended down time
at the Bogalusa mill in the first quarter of fiscal 1995 to install a new
extended nip press resulted in approximately 10,000 tons of "lost" production.
Increased volume had a positive effect on operating earnings of approximately $6
million. The volume variance includes the benefit of fixed costs eliminated with
the sale or closure of two corrugated container plants in fiscal 1994, net of
incremental fixed operating costs associated with capital investments to expand
capacity in the Company's converting operations. Total mill production increased
approximately 1% in fiscal 1995 compared with the prior year. In fiscal 1995,
production of linerboard increased slightly to 3,298 TPD from 3,282 TPD while
production of unbleached kraft paper increased approximately 5% to 725 TPD from
689 TPD in the prior year.
Corrugated shipments of 12.3 billion square feet for fiscal 1995 were
approximately 3% lower than fiscal 1994; however, shipments for fiscal 1994
include production from two corrugated container plants that were subsequently
sold or closed. Adjusting for the prior-year shipments from these two plants,
corrugated shipments increased approximately 1% year over year. Multiwall bag
shipments of 52,400 tons in fiscal 1995
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were approximately 2% higher than the prior year. Grocery bag and sack shipments
were 105,000 tons, a decrease of approximately 10% versus shipments of 116,500
tons in fiscal 1994. The decline in shipments in fiscal 1995 was primarily due
to reduced demand for standard grocery sacks as a result of greater displacement
by plastic bags as prices for grocery sacks increased, partially offset by
increased shipments of Gaylord Handle-Bags(R).
Gross margin as a percentage of net sales for fiscal 1995 increased to
28.2% from 11.9% in the prior year. The margin improvement, primarily due to
significantly higher average selling prices for the Company's products, was
partially offset by increased fiber costs (primarily the cost of OCC) which
adversely affected operating earnings by approximately $65 million.
Year-over-year, average OCC prices increased approximately 78% in fiscal 1995.
In addition, operating earnings were adversely affected by a $5.4 million non-
recurring charge for costs associated with an early retirement option accepted
by certain hourly employees at the Antioch mill to reduce future unit labor
costs, higher labor costs for incentive programs tied to improved profitability
(approximately $7 million) and general inflation of other manufacturing costs.
Selling and administrative costs for fiscal 1995 were $14.5 million higher
than fiscal 1994. The increase is primarily the result of higher incentive
compensation costs related to improved profitability.
Net interest expense increased to $86.1 million in fiscal 1995 from $80.3
million in fiscal 1994. The increase was primarily due to higher accretion of
the discount on subordinated debt of $5.4 million.
In the fourth quarter of fiscal 1995, the Company recorded a $28.0 million
income tax benefit primarily due to the recognition of tax benefits about which
substantial doubt as to their realization had previously existed. In general,
the Company has regular and Alternative Minimum Tax ("AMT") operating loss
carryforwards that exceed its earnings for fiscal 1995. The Company recorded a
current tax provision of $3.8 million in fiscal 1995 primarily because Internal
Revenue Service regulations limit the use of AMT operating loss carryforwards to
90% of AMT income.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through cash provided
by operations, borrowings under its credit agreements and the issuance of debt
and equity securities. The Company's principal uses of cash are to pay operating
expenses, fund capital expenditures and service debt.
Net cash provided by operations for fiscal 1996 was $164.4 million compared
with $194.2 million for the prior year. The unfavorable comparison to fiscal
1995 was due to significantly lower selling prices for the Company's products.
Net cash used for operations for the first six months of fiscal 1997 was $34.4
million, compared with net cash provided by operations of $92.9 million for the
year-ago period. The unfavorable comparison to the prior-year period was
primarily due to reduced earnings and the first semi-annual interest payment in
November 1996 on the Company's 12 3/4% Debentures, on which interest had
previously been accreting.
Capital expenditures were $54.8 million, $58.9 million and $40.4 million in
fiscal 1996, fiscal 1995 and fiscal 1994, respectively. In addition to the
capital spending, the Company acquired $5.6 million, $45.1 million and $8.4
million of equipment financed by capital leases and debt obligations secured by
the assets acquired in fiscal 1996, fiscal 1995 and fiscal 1994, respectively.
Capital expenditures of $14.4 million in the first six months of fiscal 1997
decreased by $15.0 million from $29.4 million in the first six months of fiscal
1996.
In fiscal 1992, the Company determined it would be unlikely that its
Antioch, California virgin fiber mill (the "East Mill"), which was closed in
fiscal 1991, could be sold as a mill site or that the East Mill, or some portion
thereof, could be operated economically by the Company. For the first six months
of fiscal 1997, East Mill related costs exceeded proceeds from asset disposals
by approximately $0.5 million. At March 31, 1997, balance sheet valuation
allowances for demolition and asbestos removal were approximately $1.6 million
and $15.3 million, respectively, reducing the carrying value of the East Mill to
$1.2 million.
In the fourth quarter of fiscal 1996, the Company recognized a $8.1 million
pre-tax charge primarily for enhanced retirement benefits and post-retirement
medical costs, and severance payments associated with a
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<PAGE> 31
staff reduction program. In fiscal 1997, the Company charged approximately $1.1
million of severance costs to balance sheet accruals. At March 31, 1997, the
Company had remaining balance sheet accruals for severance payments of
approximately $0.7 million and anticipates making substantially all of such
payments by September 1997. In addition, the Company has remaining balance sheet
accruals of approximately $1.8 million for non-recurring operating charges
(primarily lease termination costs) recognized prior to fiscal 1995. The Company
anticipates incurring such costs over the next nine months.
At March 31, 1997, the Company had cash and equivalents of $10.1 million, a
decrease of $29.1 million from September 30, 1996, as cash used for operations
and investments exceeded cash provided by financing. Total debt increased by
$21.4 million to $655.8 million at March 31, 1997 from $634.4 million at
September 30, 1996 as a result of revolver borrowings. At March 31, 1997, the
Company had $25.5 million of borrowings outstanding and approximately $184
million of credit available under the revolving portions of its credit
agreements. In the third quarter of fiscal 1997, the Company amended certain
financial covenants in the Credit Agreement to provide future access to its
liquidity.
The Company announced price increases for containerboard and kraft paper to
take effect in the fall of 1996. Although the Company realized higher prices for
these products during the first quarter of fiscal 1997, containerboard prices
declined to the pre-increase levels in January and resulted in retroactive
pricing adjustments which were recorded in the first quarter of fiscal 1997.
During the second quarter of fiscal 1997, primary product prices declined
approximately 8 percent further. On April 22, 1997, the Company announced to its
customers that it was raising linerboard prices by $50 per ton effective with
orders entered for shipment on or after June 2, 1997. The announced price
increase will not be realized for the month of June and there can be no
assurance as to when this, or any, price increase will be realized.
Assuming current fiber costs, maintenance levels of capital spending, and a
minimum $50 per ton primary product price increase from current levels (and
passed through to converted product prices) by the fourth quarter of fiscal
1998, the Company believes that cash provided by operations, and amounts
available under its credit agreements will provide adequate liquidity to meet
its debt service obligations and other liquidity requirements over the next 12
to 24 months. However, unless there is significant product price improvement
beginning in the fall of this year, the Company will seek additional covenant
modifications to the Credit Agreement to maintain continuing access to this
liquidity.
FORWARD-LOOKING STATEMENTS
FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL
RESULTS COULD DIFFER MATERIALLY. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE
NOT LIMITED TO, GENERAL ECONOMIC AND BUSINESS CONDITIONS, COMPETITIVE MARKET
PRICING, INCREASES IN RAW MATERIAL, ENERGY AND OTHER MANUFACTURING COSTS,
FLUCTUATIONS IN DEMAND FOR THE COMPANY'S PRODUCTS, POTENTIAL EQUIPMENT
MALFUNCTIONS AND PENDING LITIGATION.
PENDING ACCOUNTING STANDARD
In March, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" which simplifies
the computation of earnings per share. The statement is effective for financial
statements issued for periods ending after December 15, 1997. The statement will
be adopted in fiscal 1998 and will not impact the Company's results of
operations, financial position or cash flows or have a material impact on its
earnings per share.
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BUSINESS
HISTORY
The Company acquired businesses which had been owned by Crown Zellerbach
Corporation on November 17, 1986 for approximately $260 million. Since its
inception, the Company has expanded its business through strategic acquisitions
and capital investments. The Company financed the acquisitions and capital
expenditures with cash provided by operations, borrowings under its credit
agreements and the issuance of debt and equity securities. The Company's
facilities currently consist of three containerboard and unbleached kraft paper
mills, 14 corrugated container plants, three corrugated sheet feeder plants, two
multiwall bag plants, a preprint and graphics center, a cogeneration facility
and through a wholly owned, independently operated subsidiary, a specialty
chemicals facility.
In September 1992, the Company filed a voluntary petition for relief and a
plan of reorganization (the "Prepackaged Plan") under Chapter 11 of the United
States Bankruptcy Code. In November 1992, the Prepackaged Plan was consummated.
In fiscal 1994, the Company initiated a five-year capital plan that
provides for a total investment of approximately $250 million. The plan targets
approximately 60% of the capital spending to enhance the capacity, flexibility
and cost effectiveness of the Company's converting facilities with the remainder
to be invested in its paper mills. In fiscal 1995, as part of the capital plan,
the Company opened one new converting plant and relocated or expanded three
converting plants.
On July 12, 1996, the Company contributed its grocery bag manufacturing net
assets to S&G Packaging, a joint venture with Stone Container, in exchange for a
35% equity interest in the new company. The Company has the option to purchase
an additional 15% interest prior to the fifth anniversary of the joint venture.
GENERAL
Corrugated containers are a safe and economical way to transport
manufactured and bulk goods. Increasingly, corrugated containers are also used
as integrated transportation and marketing devices in the form of point-of-sale
displays. The major corrugated container end-use markets are food, beverage and
agricultural products; paper and fiber products; petroleum, petrochemical
resins, plastics and rubber products; glass and metal containers; electronic
appliances; and electrical and other machinery. Most corrugated containers are
produced and sold according to individual customer specifications.
Containerboard, consisting of linerboard and corrugating medium, is the
principal raw material used in the manufacture of corrugated containers.
Linerboard provides the strength component of a container while corrugating
medium provides rigidity. Corrugating medium is fluted and laminated to
linerboard in corrugated container and corrugated sheet feeder plants to produce
corrugated sheets. The sheets are subsequently printed, cut, folded and glued in
corrugated container or corrugated sheet plants to produce corrugated
containers.
Generally, corrugated containers are delivered by truck because of the
large number of customers and demand for timely service. The dispersion of
customers and the high bulk, low density and value of corrugated containers make
shipping costs a relatively high percentage of total costs. As a result,
corrugated container plants tend to be located close to customers to minimize
freight costs.
To reduce the cost of shipping containerboard from mills to widely
dispersed corrugated plants, vertically integrated containerboard manufacturers
routinely exchange containerboard from mills in one location for containerboard
having a similar value from mills located elsewhere in the United States.
Producers also exchange containerboard to take advantage of manufacturing
efficiencies resulting from operating paper machines in their most efficient
basis weight ranges and trim widths and to obtain paper grades they do not
produce.
Unbleached kraft paper is the principal raw material used in the
manufacture of multiwall bags and grocery bags and sacks. Multiwall bags are
used by producers in such industries as pet food, chemical,
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<PAGE> 33
agricultural, food, metal, plastics and rubber. Multiwall bags and grocery bags
and sacks are manufactured through a process of printing, cutting, folding and
gluing kraft paper to meet customer specifications.
Cellulose fiber, produced from woodchips, is the principal raw material
used in the manufacture of containerboard and kraft paper. The industry's use of
recycled fiber, however, has been increasing. Fiber costs are generally the
largest cost component in the manufacture of containerboard and unbleached kraft
paper.
In calendar 1995, industry trade associations estimated U.S. corrugated
product sales and multiwall bag sales to be $23.4 billion and $1.3 billion,
respectively. It has also been estimated that virgin containerboard and
unbleached kraft paper capacity utilization rates in the United States averaged
95% and 76%, respectively, in calendar 1995 and 92% and 73%, respectively, for
the first nine months of calendar 1996.
Industry trade publications estimated that calendar year 1996 U.S.
containerboard and unbleached kraft paper annual capacities were 35.6 million
tons and 2.6 million tons, respectively. This represents an increase in
containerboard capacity of approximately 6% and a decrease in unbleached kraft
paper capacity of approximately 4%, compared with the prior year.
Demand for corrugated containers, containerboard and unbleached kraft paper
is affected by the level of growth of economic activity and, in the case of
containerboard, the strength of the U.S. dollar. For further information
regarding the industry and factors that influence prices and the demand for
paper packaging products, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General."
SALES
Corrugated containers and sheets, multiwall bags and solid fibre products
collectively represent approximately 85% of the Company's net sales while
containerboard and unbleached kraft paper represent approximately 15% of such
sales. Sales of the Company's products are not seasonal to any significant
degree.
The Company sells its products to thousands of customers, with the 10
largest accounting for approximately 16% of net sales in fiscal 1996 and 13% and
11%, respectively, in fiscal 1995 and fiscal 1994. The Company's largest
customer accounted for approximately 4% of the Company's net sales in fiscal
1996 and approximately 3% and 2%, respectively, in fiscal 1995 and fiscal 1994.
Corrugated containers are generally produced to customer order for delivery from
four to ten days after receipt of the order. As a result, the Company's backlog
generally does not exceed 3% of annual corrugated container sales at any
particular time.
In general, each converting facility has its own sales force that is
responsible for marketing and distribution to local customers. A national
account sales force handles converted product sales to large customers who
utilize centralized purchasing for multiple locations. In total, the Company's
sales force for converted products at September 30, 1996 consisted of
approximately 130 salespersons. Sales and exchanges of containerboard and
unbleached kraft paper are the responsibility of a small centralized marketing
and sales group.
The Company exports linerboard and unbleached kraft paper, certain
converted products and specialty chemicals. Such sales totaled $71.5 million,
$113.9 million and $45.7 million in fiscal 1996, fiscal 1995 and fiscal 1994,
respectively. Fluctuations in export sales are primarily the result of changes
in selling prices for linerboard and unbleached kraft paper.
PRODUCTS
CORRUGATED PRODUCTS. The Company produces many varieties of corrugated
containers and sells the majority of its production to manufacturing end users.
Corrugated shipments were a record 13.3 billion square feet in fiscal 1996, an
increase of approximately 8% from the prior year. Shipments in fiscal 1996
benefited from an extra week in the fiscal year. Adjusting for the extra week,
corrugated shipments increased approximately 6% due to shipments from a new
sheet feeder plant and capacity additions related to the capital investment
program. From fiscal 1994 to fiscal 1995, corrugated shipments decreased
approximately 3%,
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<PAGE> 34
primarily due to the sale or closing of two corrugated container plants during
fiscal 1994. Adjusting for the prior year shipments from these two plants,
corrugated shipments increased approximately 1% in fiscal 1995.
CONTAINERBOARD. The Company's containerboard mills in the aggregate have
the ability to manufacture containerboard in a broad spectrum of grades and
weights. Production of containerboard increased slightly to a record 1,243,300
tons in fiscal 1996 from 1,200,500 tons in the prior year. Adjusting for the
extra week in fiscal 1996, containerboard production increased approximately 2%
versus the prior year despite "losing" approximately 60,000 tons of production
primarily due to market-driven downtime. During fiscal 1995, the Company's
production of containerboard increased slightly from 1,194,900 tons in fiscal
1994. In addition to its own production, the Company has agreed to purchase, at
market prices, through 2004 approximately 24,000 tons per year of containerboard
from Newark Group Industries, Inc. During fiscal 1996, fiscal 1995 and fiscal
1994, the Company's corrugated plants consumed the equivalent of approximately
80%, 78% and 82%, respectively, of the Company's containerboard production and
purchase commitments.
MULTIWALL BAGS. The Company produces many varieties of medium to large
multiwall bags and sells them to manufacturers and processors for packaging
their products. The Company's multiwall bag shipments were essentially flat in
fiscal 1996. The Company's multiwall bag shipments increased to a record 52,400
tons in fiscal 1995, an increase of approximately 2% from 51,500 tons in fiscal
1994.
GROCERY BAGS AND SACKS. Prior to contributing its grocery bag manufacturing
assets to S&G Packaging in July 1996, the Company shipped (for the 9 1/2 month
period) approximately 88,200 tons of grocery bags and sacks. The Company shipped
approximately 105,000 tons of grocery bags and sacks in fiscal 1995, a decrease
of approximately 10% versus shipments of 116,500 tons in the prior year. The
decrease in shipments in fiscal 1995 was primarily due to reduced demand for
standard grocery sacks as a result of greater displacement by plastic bags as
prices for grocery sacks increased. This decline was partially offset by
increased shipments of Gaylord Handle-Bags.
UNBLEACHED KRAFT PAPER. The Company is a supplier of unbleached kraft paper
to independent multiwall bag and grocery bag and sack converters. During fiscal
1996, the Company produced 256,900 tons of unbleached kraft paper despite the
"loss" of approximately 20,000 tons primarily due to market-driven downtime.
This compares with 263,900 tons and 250,700 tons in fiscal 1995 and fiscal 1994,
respectively. In addition to its own production, the Company has agreed to
purchase approximately 35,000 tons per year of unbleached kraft paper from
Riverwood International U.S.A., Inc., through 1999. The Company has an agreement
to supply S&G Packaging with approximately 130,000 tons of unbleached kraft
paper per year. During fiscal 1996, the Company's multiwall bag and grocery bag
and sack plants consumed, or the Company sold pursuant to its paper supply
agreement, approximately 59% of its unbleached kraft paper production and
purchase commitments. During fiscal 1995 and fiscal 1994, the Company's
multiwall bag and grocery bag and sack plants consumed the equivalent of
approximately 54% and 58%, respectively, of the Company's unbleached kraft paper
production and purchase commitments.
SPECIALTY CHEMICALS. Gaylord Chemical Corporation ("Gaylord Chemical"), a
wholly owned, independently operated, subsidiary of the Company, utilizes a
process stream from the Bogalusa, Louisiana paper mill manufacturing operations
to produce dimethyl sulfide ("DMS") and dimethyl sulfoxide ("DMSO"). DMS is a
low boiling-point liquid used as a presulfiding agent for catalysts for the
petroleum industry, a natural gas odorant, a processing aid in ethylene
production and a feedstock for the manufacture of DMSO. DMSO is used as a
solvent for a wide range of complex manufacturing processes used in the
chemical, agricultural and pharmaceutical industries. Management believes that
Gaylord Chemical is the sole domestic producer of DMSO and estimates that
Gaylord Chemical produces 35% to 40% of the world's supply of DMSO. Sales of
these products for fiscal 1996, fiscal 1995 and fiscal 1994 were $18.2 million,
$16.7 million and $14.3 million, respectively.
OTHER PRODUCTS. At its Bogalusa, Louisiana corrugated container plant, the
Company produces solid fibre products which are primarily used as beverage
carriers and pallet substitutes. Solid fibre is produced using technology and
manufacturing processes similar to those used for corrugated containers.
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The Company operates a cogeneration facility at its Antioch, California
mill, which produces steam and electricity for the mill. Pursuant to a long-term
agreement, the Company sells a specified amount of electricity representing the
cogeneration facility's anticipated excess capacity at the contract date to
Pacific Gas & Electric Company, subject to certain adjustments. Electricity
sales pursuant to this agreement were $6.6 million in both fiscal 1996 and
fiscal 1995 and $8.5 million in fiscal 1994.
RAW MATERIALS
The Bogalusa, Louisiana mill uses approximately 75% pulpwood and woodchips
in the manufacture of containerboard and unbleached kraft paper, of which 40% to
45% was supplied by Weyerhaeuser Company ("Weyerhaeuser"), successor in interest
to Hanson Natural Resources Company, in the last three fiscal years and the
remainder was purchased on the open market. The Company has certain agreements
through 2016 pursuant to which Weyerhaeuser is committed to supply the Company
with significant quantities of wood chips, roundwood and stumpage at prices
based on independent market transactions and, through 1998, hog fuel (which
consists of bark and other residual fiber from trees) at prices derived from
prices of an alternative fuel. Recycled fiber accounts for the remainder of the
mill's fiber requirements.
The Antioch, California mill uses 100% recycled fiber. Approximately 80% of
the OCC used as a source of recycled fiber at the Antioch mill are supplied
under contracts with several suppliers at market prices. Upon expiration of such
contracts, the Company believes it will be able to negotiate new contracts with
these or other suppliers to provide significant quantities of OCC at market
prices. The remainder is purchased on the open market.
The Pine Bluff, Arkansas mill uses approximately 75% wood chips, of which
approximately 32%, 23% and 25% was supplied by Weyerhaeuser in fiscal 1996,
fiscal 1995 and fiscal 1994, respectively, with the remainder generally
purchased pursuant to annual contracts with a number of different chip suppliers
in the area. The contract with Weyerhaeuser provides for a supply of wood chips
at market prices through June 30, 1997, at which time it will be renegotiated.
Recycled fiber accounts for the remainder of the mill's fiber requirements.
During fiscal 1996, the Company's performance, as compared to fiscal 1995,
was favorably affected by lower fiber costs, primarily due to significant
decreases in OCC prices. From its peak of $230 per ton in May 1995 the delivered
cost of OCC dropped to approximately $95 per ton in September 1996. The
secondary fiber market, however, is difficult to predict, and there can be no
assurance of the direction future OCC prices will take. In fiscal 1996, fiber
represented approximately 40% of the Company's containerboard and unbleached
kraft paper production costs and future increases in fiber prices would
adversely affect the Company's profitability.
ENERGY
The Company's mills require significant amounts of steam and electricity in
their operation. The Company has a supply agreement through 1998 pursuant to
which Weyerhaeuser provides hog fuel for the production of steam at the Bogalusa
mill. In fiscal 1996, the Bogalusa mill produced all of its steam and generated
approximately 63% of its electricity requirements. During the same period, the
Antioch mill produced all of its steam and approximately 97% of its electricity.
The Antioch mill has a contract to sell electricity from its cogeneration
facility to a public utility through 2013. See "-- Products -- Other Products."
Certain aspects of the energy operations of the Bogalusa mill and the Antioch
mill are regulated by the Federal Energy Regulatory Commission. The Pine Bluff
mill produces all of its own steam, but purchases all of its electricity from a
local public utility.
In fiscal 1996, energy costs accounted for approximately 8% of the
Company's containerboard and unbleached kraft paper production costs and future
increases in energy prices would adversely affect the Company's profitability.
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COMPETITION
Many of the Company's competitors are substantially larger and have
significantly greater financial resources; however, the most important
competitive factors are price, quality and service. The manufacture of
containerboard and unbleached kraft paper is capital intensive with high
barriers to entry because new facilities require substantial capital and take at
least two years to construct. Many of the Company's larger competitors own
timberlands. Although the Company does not own timberlands, it has fiber supply
agreements described in "-- Raw Materials." Such agreements covered
approximately 40% of the Company's pulpwood and wood chip requirements in fiscal
1996.
In contrast to the containerboard and unbleached kraft paper segment of the
industry, the converting segment, which manufactures corrugated products and
multiwall bags, has comparatively low barriers to entry. Competition in
corrugated products and, to a lesser extent, multiwall bags, is primarily
localized, with proximity to customers an important factor in minimizing
shipping costs. There are a substantial number of competitors in each of the
geographic areas in which the Company's converting facilities are located. Many
of such competing facilities are owned by other integrated producers.
ENVIRONMENTAL MATTERS
Compliance with federal, state and local environmental requirements,
particularly relating to air and water quality, waste disposal and the cleanup
of contaminated soil and groundwater, is a significant factor in the Company's
business. The Company made capital expenditures for environmental purposes of
approximately $4.3 million, $5.5 million and $2.3 million in fiscal 1996, fiscal
1995 and fiscal 1994, respectively, and the Company expects that capital
expenditures for environmental purposes for fiscal 1997 and fiscal 1998 will be
of the same order of magnitude as such prior fiscal years. The Company believes
that it is in compliance in all material respects with applicable federal, state
and local environmental regulations.
In December 1993, the Environmental Protection Agency (EPA) proposed
regulations implementing portions of the Clean Air Act of 1990 and the Clean
Water Act applicable to the pulp and paper industry known as the "cluster
rules." The EPA has indicated that significant changes to the regulations will
be considered prior to the adoption of the final regulations which are expected
to be issued in 1997, with compliance required within three years from that
date. The Company is evaluating the potential impact of the proposed rules on
its operations and capital expenditures over the next several years.
Preliminary estimates indicate that the Company could be required to make
capital expenditures of approximately $5 million to $7 million per year during
the three years following issuance to meet the requirements of the proposed
rules. The ultimate financial impact of the regulations cannot be predicted with
any reasonable certainty and will depend on several factors including the actual
requirements imposed under the final rules, new developments in control process
technology and cost inflation.
The Company has been identified as an alleged and de minimis potentially
responsible party ("PRP") for liability arising from offsite waste disposal by a
predecessor entity at three sites pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act or similar state laws. Although
liability for environmental remediation under these laws can be imposed on a
strict or joint and several basis, such liability is commonly allocated based
upon each PRP's volumetric contribution of waste. In light of the Company's
small volumetric contribution to the identified sites, and the active
involvement of other well-funded PRP's, the Company does not believe that its
liability at these sites, if any, will have a material adverse effect on its
business, financial condition, results of operations or cash flow. Because
liability under these laws is retroactive, it is possible that in the future the
Company may be identified as a PRP with respect to other sites.
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DESCRIPTION OF PROPERTIES
MANUFACTURING PROPERTIES. The Company's plants are maintained in generally
good condition and management believes they are suitable for their specific
purposes. Set forth below is certain information concerning these facilities:
<TABLE>
<CAPTION>
PLANT PRODUCTS OWNED/LEASED
----- -------- ------------
<S> <C> <C>
Mills:
Antioch, California........... Containerboard Owned
Bogalusa, Louisiana........... Containerboard and unbleached kraft paper Owned
Pine Bluff, Arkansas.......... Containerboard and unbleached kraft paper Owned
Corrugated Plants:
Antioch, California........... Corrugated containers Owned
Atlanta, Georgia.............. Corrugated containers Owned
Bogalusa, Louisiana........... Corrugated containers and solid fibre Owned
Carol Stream, Illinois........ Corrugated containers Owned
City of Industry,
California.................. Corrugated sheets Owned
Dallas, Texas................. Corrugated containers Leased
Gilroy, California............ Corrugated containers Leased
Greenville, South Carolina.... Corrugated containers Owned
Marion, Ohio.................. Corrugated containers Owned
Newark, Delaware.............. Corrugated containers Owned
Phoenix, Arizona.............. Corrugated containers Owned
Raleigh, North Carolina....... Corrugated containers Owned
St. Louis, Missouri........... Corrugated containers Owned
San Antonio, Texas............ Corrugated containers Leased
San Antonio, Texas............ Corrugated sheets Owned
Sunnyvale, California......... Corrugated sheets Owned
Tampa, Florida................ Corrugated containers Leased
Bag Plants:
Pine Bluff, Arkansas.......... Multiwall bags Owned
Twinsburg, Ohio............... Multiwall bags Leased
Other Facilities:
Antioch, California........... Electricity cogeneration Owned
Bogalusa, Louisiana........... Specialty chemicals Owned
Livermore, California......... Preprinted linerboard Leased
</TABLE>
The Bogalusa mill has five paper machines with the capacity to produce
linerboard, corrugating medium and unbleached kraft paper. The mill uses
softwood and hardwood pulp and recycled fiber from OCC and double lined kraft
("DLK") clippings.
The Antioch mill has one paper machine with the capacity to produce
recycled linerboard and corrugating medium using 100% recycled fiber.
The Pine Bluff mill has one paper machine with the capacity to produce
unbleached kraft paper and linerboard. The mill uses softwood pulp and recycled
fiber from DLK. See "Business -- Products."
OTHER PROPERTIES. The Company leases its executive and general and
administrative offices in Deerfield, Illinois. It also leases numerous warehouse
facilities and sales offices throughout the United States.
EMPLOYEES
At September 30, 1996, the Company employed approximately 3,900 people.
Approximately 62% of the Company's employees are hourly wage employees most of
whom are members of various labor unions. The Company's labor agreements
covering its employees at its Bogalusa, Antioch and Pine Bluff mills expire in
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<PAGE> 38
fiscal 2000, fiscal 2001 and fiscal 2002, respectively. In conjunction with the
renegotiation of the Antioch mill's labor contract, in fiscal 1995 certain
hourly employees accepted an early retirement option, which was designed to
reduce future unit labor costs. In fiscal 1996, the Company instituted a staff
reduction program to reduce future administrative and overhead costs. The
program eliminated approximately 8% of the Company's salaried positions. At
September 30, 1996, labor contracts at five of the Company's manufacturing
facilities covering approximately 16% of the Company's union employees have
expired or are scheduled to expire before the end of fiscal 1997. The Company
believes it has satisfactory relations with its employees and their unions and,
based on previous experience, does not anticipate any significant difficulties
in renegotiating labor contracts as they expire.
LEGAL PROCEEDINGS
The Company and certain of its officers and directors have been named in a
civil suit filed in Cook County (Illinois) Circuit Court alleging that they
omitted or misrepresented facts about the Company's operations in connection
with the Company's initial public offering of stock in 1988 and in certain
periodic reports. The complaint, a purported class action, originally sought
unspecified damages under the Illinois Consumer Fraud and Deceptive Practices
Act and for common law fraud. On January 10, 1996, the court dismissed both
counts with prejudice, and plaintiff has appealed. A similar lawsuit, based on
the same factual allegations, but alleging violations of federal securities laws
and filed in the United States District Court for the Northern District of
Illinois, was voluntarily dismissed by the same plaintiff in July 1993. The
Company believes that, after investigation of the facts, the allegations in the
complaint are without merit, and the Company is vigorously defending itself.
On October 18 and December 4, 1995, the Company, its directors and certain
of its officers were named in complaints which have been consolidated in the
Court of Chancery of the state of Delaware alleging breach of fiduciary duties
on two counts. The first count is a putative class action and the second is an
alleged derivative claim brought on behalf of the Company against the individual
defendants. Both counts allege that the Company's stockholder Rights Agreement,
adopted on June 12, 1995, amendments to the Company's charter and by-laws,
adopted on July 21, 1995, and a redemption of Warrants in June 1995 all were
designed to entrench the individual defendants in their capacities as directors
and officers at the expense of stockholders who otherwise would have been able
to take advantage of a sale of the Company. The complaint asks the court, among
other things, to rescind the amendments and prohibit the use of the stockholder
Rights Agreement to discourage any bona fide acquirer. In the alternative, the
plaintiffs seek compensatory damages. On December 19, 1996, the Delaware
Chancery Court denied the Company's motion to dismiss the complaint in its
entirety. The case is now in the preliminary discovery stage. The Company
believes the allegations are without merit and is defending itself vigorously.
On October 23, 1995, a rail tank car exploded on the premises of the
Bogalusa, Louisiana plant of Gaylord Chemical Corporation, a wholly owned,
independently operated subsidiary of the Company. The accident resulted in the
venting of certain chemicals, including by-products of nitrogen tetroxide, a raw
material used by the plant to produce dimethyl sulfoxide, a solvent used in the
manufacture of pharmaceutical and agricultural chemicals. More than 160 lawsuits
have been filed in both federal and state courts naming as defendants Gaylord
Chemical Corporation and/or the Company, certain of their respective officers
and other unrelated corporations and individuals. The lawsuits allege personal
injury, property damage, economic loss, related injuries and fear of injuries as
a result of the accident. On April 1, 1996, the federal judge dismissed all but
one of the federal actions for failing to state claims under federal law and
remanded the remaining tort cases to the district court in Washington Parish,
Louisiana, where they have been consolidated. Discovery in the remaining federal
action, a suit to recover alleged clean-up costs, was ordered coordinated with
the Louisiana State action.
On May 21, 1996 the Louisiana state court established a Plaintiff's Liaison
Committee ("PLC") to coordinate and oversee the consolidated cases on behalf of
plaintiffs. On June 26, 1996 the PLC and defendants agreed to a Case Management
Order ("CMO") that was subsequently entered by the Court. Pursuant to the CMO,
the plaintiffs filed a single Consolidated Master Petition against Gaylord
Chemical Corporation, the Company and twenty-one other defendants. In the
Consolidated Master Petition all claims
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<PAGE> 39
against the individual defendants (including the officers of Gaylord Chemical
Corporation and the Company) were dropped. Also, pursuant to the terms of the
CMO, all of the individual actions filed before the Consolidated Master Petition
have been, or are scheduled to be, dismissed. The Consolidated Master Petition
includes substantially all of the claims and theories asserted in the prior
lawsuits, including negligence and strict liability, as well as several claims
of statutory liability. Compensatory and punitive damages are sought. The
Company and its subsidiaries are vigorously contesting all of these claims.
On July 15, 1996 the Louisiana state court certified these consolidated
actions as a single class action. The class was tentatively defined to include
all those persons or entities who claim to have been injured as a result of the
October 23, 1995 accident. On March 27, 1997, the Louisiana Court of Appeal for
the First Circuit reversed the trial court's order granting class certification,
defining the class, approving class notice, requiring all notice forms be
notarized and appointing the plaintiffs' attorneys to the PLC. The Court of
Appeal ordered the trial court to conduct a new class certification hearing to
allow additional evidence on the adequacy of class representatives and class
counsel and instructed the trial court to create a concise geographic definition
of the class of individuals allegedly impacted. Finally, the Court of Appeal
instructed the trial judge to approve a new class notice form that permits the
use of notice of claim forms and/or proof of claim forms only after a
determination of liability, if any. The Louisiana Supreme Court declined to
review that decision. On May 23, 1997, the trial court reappointed the PLC and
ordered that a second amended Consolidated Master Petition be filed by June 6,
1997. The court also set July 28, 1997 as the hearing date for class
certification.
In addition, the Company, its subsidiary and numerous other third party
companies have been named as defendants in eleven actions brought by plaintiffs
in Mississippi state court, who claim injury as a result of the October 23, 1995
accident at the Bogalusa facility. Included among these cases are two actions
which purport to be on behalf of over 9,000 individuals. These cases are not
filed as a class action but have been consolidated before a single judge in
Hinds County, Mississippi. All of these cases seek to allege claims similar to
those in the Louisiana state court. To date, discovery in these consolidated
cases has been coordinated with the ongoing discovery in the Louisiana class
action. The Company and its subsidiary are vigorously contesting these claims.
The Company and its subsidiary maintain insurance and have filed separate
suits seeking a declaratory judgement of coverage for the October 23, 1995
accident against their general liability and directors and officers liability
insurance carriers. These cases are currently pending in Louisiana state court
with the liability cases. The carrier with the first layer of coverage under the
general liability policy has agreed to pay the Company's and its subsidiary's
defense costs under a reservation of rights. Discovery in these declaratory
judgment cases is proceeding. On May 9, 1997, two of the nine excess level
insurers moved for summary judgment before the trial court claiming that
coverage for the accident is excluded because of a pollution exclusion contained
in these policies. The Company is vigorously opposing these motions.
The Company believes the outcome of such litigation will not have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
DESCRIPTION OF OTHER INDEBTEDNESS AND OTHER OBLIGATIONS
CREDIT AGREEMENT
General. On June 30, 1995, the Company entered into the Amended and
Restated Credit Agreement among various financial institutions, Bankers Trust
Company, as agent (the "Agent") and the Company (the "Credit Agreement"). The
Credit Agreement provided for (a) the refinancing of existing term loans,
revolving loans and standby letter of credit loans and (b) an increase in the
existing revolving credit facility.
Term Loans. The outstanding amount of term loans which were refinanced
under the Credit Agreement was $42,704,208.05 as of June 30, 1995. The Company
prepaid the entire amount of such outstanding term loans prior to September 30,
1995 and did not incur any related prepayment premium or penalty. No amounts are
available to be reborrowed under this facility.
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<PAGE> 40
Revolving Credit Facility. The revolving credit facility provides for
borrowings of up to $175 million and expires by its terms and is payable in full
on June 30, 2000. The Company is permitted to issue up to $30 million of letters
of credit as part of its revolving credit facility. The Company has the right to
prepay the revolving credit facility in whole or in part from time to time
without incurring any prepayment premium or penalty. Amounts borrowed under the
revolving credit facility may be repaid and reborrowed.
The revolving credit facility also includes a swing line loan facility. The
swing line loan facility allows the Company to make same day borrowings up to
the lesser of $25 million or the amount currently undrawn and available under
the revolving credit facility. Amounts outstanding under the swing line loan
facility reduce amounts available under the revolving credit facility.
Letter of Credit Loan Facility. The outstanding balance of a promissory
note issued by the Company to the Export-Import Bank of the United States and an
instrument issued at the time of the acquisition by the Company of certain
assets of the Container Products Division of Fibreboard Corporation are the two
obligations collateralized by the letter of credit facility under the Credit
Agreement. Standby letter of credit loans can be incurred only in the event that
either of the two outstanding standby letters of credit are drawn due to the
nonpayment of principal or interest by the Company on the underlying debt
instruments. The standby letter of credit loan commitments are reduced
periodically to reflect principal repayments on the underlying debt instruments.
If the standby letter of credit loans are incurred, the Company will be
required to repay certain of such loans in equal semi-annual installments on the
last business day of the Company's second and fourth fiscal quarters, commencing
with the first such date that the relevant standby letter of credit loans have
been in existence and ending on April 30, 1999. Certain other standby letter of
credit loans will be required to be repaid immediately. Under the Credit
Agreement, the Company will continue to have the right to prepay the standby
letter of credit loans in whole or in part from time to time without incurring
any prepayment premium or penalty. As of March 31, 1997, the aggregate standby
letter of credit commitment was approximately $6.2 million.
Collateral. Indebtedness under the Credit Agreement is secured by a first
priority security interest in substantially all of the Company's assets and a
pledge of all of the outstanding common stock of each of Gaylord Chemical, GMA
Sales Corporation and Gaylord Container de Mexico, S.A. de C.V., each a
subsidiary of the Company.
Interest Rates. Interest accrues on indebtedness under the Credit Agreement
at one or a combination (at the Company's election) of the following: (a) prime
rate loans are payable at a rate per annum which is the Prime Rate (as defined
in the Credit Agreement) plus a borrowing margin of one and one-half percent
(1 1/2%) per annum; (b) certificate of deposit rate loans are payable at a rate
per annum which is the relevant CD Rate (as defined in the Credit Agreement)
plus a borrowing margin of two and five-eighths percent (2 5/8%) per annum; (c)
eurodollar rate loans are payable at a rate per annum which is the relevant
Eurodollar Rate (as defined in the Credit Agreement) plus a borrowing margin of
two and one-half percent (2 1/2%) per annum; and (d) overdue principal and (to
the extent permitted by law) overdue interest in respect of each loan bears
interest at a rate per annum equal to two percent (2%) per annum above the Prime
Rate plus one and one-half percent (1 1/2%). Interest is computed based on
actual days elapsed in a 360-day year, payable monthly, and with respect to
eurodollar rate loans and certificate of deposit rate loans, subject to
compensation, increased cost, indemnification and other standard Eurodollar Rate
and CD Rate pricing provisions. The Company has the option upon the expiration
of any interest period to convert all or any part of the outstanding borrowings
to any of such three interest rate options, subject to certain customary
exceptions. Whenever the Company desires to borrow under the Credit Agreement,
the Company selects the type of loan and interest rate in a notice of borrowing
delivered to the Agent at least one business day in advance of the proposed
funding date in the case of a loan at the Prime Rate, at least two business days
in advance of the proposed funding date in the case of a loan at the CD Rate,
and three business days in the case of a loan at the Eurodollar Rate. Swing line
loans (as defined in the Credit Agreement) are automatically borrowed at the
Prime Rate option described above.
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<PAGE> 41
Commitment Fees. The Company is obligated to pay the Agent, for pro rata
distribution to the Banks (according to commitments), an unused commitment fee
computed at the rate of (a) 3/8 of 1% per annum from June 30, 1995 until such
time as outstanding revolving loans under the Credit Agreement equal or exceed
$66 million and thereafter, at a rate of 1/2 of 1% per annum (on the basis of
actual days elapsed in a 365/366-day year, as applicable) with respect to the
unutilized revolving loan commitment.
Affirmative Covenants and Financial Tests. The Credit Agreement contains
various covenants regarding financial reporting, compliance with laws,
maintenance of corporate existence and maintenance of adequate insurance
coverage. In addition, the Credit Agreement requires that the Company must
maintain a specified minimum interest coverage ratio, minimum net worth, and
minimum current ratio. Certain financial covenants were modified in the third
quarter of fiscal 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Negative Covenants. The Credit Agreement contains covenants which, among
other things, limit the Company's ability to (a) incur additional obligations
for borrowed money, (b) create or permit liens on the Company's assets, (c) make
capital expenditures, (d) make guarantees, (e) acquire the assets or capital
stock of other businesses, (f) merge or consolidate, (g) dispose of any accounts
receivable and assets constituting collateral of the Banks, (h) make
investments, (i) make any voluntary prepayments of any indebtedness for money
borrowed (other than under the Credit Agreement), (j) pay dividends and (k)
enter into transactions with affiliates.
Events of Default. The Credit Agreement contains customary events of
default (subject to cure periods where applicable) including, but not limited
to, failure to pay principal, interest or other amounts due to the Banks, breach
of representations and warranties contained in the Credit Agreement and related
collateral documents, failure to meet covenants contained in the Credit
Agreement, cross-defaults to other indebtedness in an amount of $1 million or
more, certain events of bankruptcy or insolvency, attachment of judgments of $1
million or more, determination of certain liabilities related to ERISA (as
defined), uninsured damage to the Company's property in excess of $5 million and
a change of control of the Company.
AMENDMENTS TO THE CREDIT AGREEMENT
In connection with the Initial Note Offering, the Redemption and the
Exchange Offer, the Company entered into certain amendments to the Credit
Agreement to permit such transactions.
12 3/4% DEBENTURES
As of March 31, 1997, the Company had outstanding $404,327,000 aggregate
principal amount of the 12 3/4% Debentures. The Company issued $434,222,000 in
aggregate principal amount (discounted to $299,999,638 at the issue date) of the
12 3/4% Debentures under an Indenture dated as of May 18, 1993, between the
Company and Ameritrust Texas, National Association, as Trustee (the "12 3/4%
Debenture Indenture"). In fiscal 1996, the Company repurchased on the open
market and retired approximately $29.9 million principal amount of the 12 3/4%
Debentures.
The 12 3/4% Debentures are unsecured obligations of the Company and are
subordinated in right of payment to all Senior Debt of the Company (as defined
in the 12 3/4% Debenture Indenture) which term includes the Notes offered
hereby.
The 12 3/4% Debentures are redeemable at the option of the Company, in
whole or in part, at any time on or after May 15, 1998, initially at 106.38% of
their principal amount, plus accrued interest, declining to 100% of their
principal amount, plus accrued interest on or after May 15, 2003.
The 12 3/4% Debenture Indenture contains certain restrictive covenants that
among other things, limit the ability of the Company and its subsidiaries to
incur indebtedness, make restricted payments, engage in transactions with
stockholders and affiliates, issue capital stock of subsidiaries, sell assets,
engage in mergers and consolidations and make investments in unrestricted
subsidiaries.
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<PAGE> 42
OLD NOTES
As of March 31, 1997, the Company had outstanding $179,700,000 aggregate
principal amount of the Old Notes. The Old Notes were issued under an Indenture
dated as of May 18, 1993, between the Company and Fleet National Bank, as
successor to Shawmut Bank Connecticut, National Association, as Trustee (the
"Old Note Indenture"). The Old Notes were senior unsecured obligations of the
Company with a maturity date of May 15, 2001. Concurrently with the consummation
of the Initial Note Offering, the Company provided an irrevocable notice of the
exercise of its option to redeem all outstanding Old Notes and deposited into an
escrow account U.S. Treasury bills in an amount sufficient to fund 104.93% of
the principal amount of, plus accrued and unpaid interest on, the Old Notes to
the redemption date. The Old Notes will be redeemed by the Escrow Agent on July
14, 1997.
TRADE RECEIVABLE FACILITY
In September 1993, the Company established a $70.0 million trade
receivables backed revolving credit facility (the "Trade Receivable Facility")
pursuant to which a wholly owned, special purpose subsidiary, Gaylord
Receivables Corporation ("GRC") purchases (on an ongoing basis) substantially
all of the accounts receivable of the Company. Concurrently, GRC and a group of
banks established the Trade Receivable Facility which is due in September, 1999.
GRC transfers the accounts receivable to a trust in exchange for certain trust
certificates representing ownership interests in the accounts receivable. The
trust certificates received by GRC from the trust are solely the assets of GRC.
In the event of liquidation of GRC, the creditors of GRC would be entitled to
satisfy their claims from GRC's assets prior to any distribution to the Company.
GRC has various interest rate options for Trade Receivable Facility
borrowings based on one or a combination of the following two rates: (i) prime
rate loans at the higher of (a) the prime rate in effect from time to time or
(b) the relevant federal funds rate plus 0.5 percent per annum, or (ii) LIBOR
rate loans at the relevant LIBOR rate plus a borrowing margin of 0.75 percent
per annum. Interest is payable monthly. GRC is obligated to pay a commitment fee
of 0.5 percent per annum on the unused credit available under the Trade
Receivable Facility. Credit availability under the Trade Receivable Facility is
based on a borrowing base formula. As a result, the full amount of the facility
may not be available at all times. At March 31, 1997, $25.5 million was
outstanding under the Trade Receivable Facility and approximately $27.2 million
of additional credit was available to GRC pursuant to the borrowing base
formula. The highest outstanding principal balance under the Trade Receivable
Facility during fiscal 1996 was $30.0 million and the weighted average interest
rate was 8.2%. At March 31, 1997 and 1996, the Company's consolidated balance
sheet included $83.2 million and $93.6 million, respectively, of accounts
receivable sold to GRC.
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<PAGE> 43
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes offered hereby will be issued as a separate series under
an indenture (the "Indenture") dated as of June 12, 1997 by and between the
Company and State Street Bank and Trust Company, as successor to Fleet National
Bank, as trustee (the "Trustee"). The form and terms of the Exchange Notes are
the same as the form and terms of the Initial Notes (which they replace) except
that (i) the Exchange Notes bear a Series B designation and a different CUSIP
number, (ii) the issuance of the Exchange Notes has been registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof, and (iii) the holders of Exchange Notes will
not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Initial Notes in certain circumstances relating to the timing of the Exchange
Offer, which rights will terminate when the Exchange Offer is consummated. The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Indenture Act of 1939, as amended (the "TIA"), and to all of the
provisions of the Indenture (a copy of which has been filed as an exhibit to the
Exchange Offer Registration Statement), including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
TIA as in effect on the date of the Indenture. The definitions of certain
capitalized terms used in the following summary are set forth under "Certain
Definitions." The Exchange Notes and the Initial Notes are referred to herein
collectively as the "Notes."
The Notes will be unsecured obligations of the Company and will rank pari
passu in right of payment to all senior indebtedness of the Company, including
all obligations of the Company under the Credit Agreement. The Notes will rank
senior in right of payment to the obligations of the Company under the 12 3/4%
Debentures.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any Paying Agent and Registrar without notice to holders. The Company will pay
principal (and premium, if any) on the Notes at the Trustee's corporate office
in New York, New York. At the Company's option, interest may be paid at the
Trustee's corporate trust office or by check mailed to the registered address of
holders. Any Initial Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $225,000,000 and
will mature on June 15, 2007. Interest on the Notes will accrue at the rate of
9 3/4% per annum and will be payable semi-annually on each June 15 and December
15, commencing on December 15, 1997, to the persons who are registered holders
at the close of business on each June 1 and December 1 immediately preceding the
applicable interest payment date. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from and including the date of issuance. The Company shall pay interest on
overdue principal from time to time on demand at the rate of 10 3/4% per annum;
it shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate of 10 3/4% per
annum. Interest will be computed on the basis of a 360-day year comprising
twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any time
or in part from time to time, on or after June 15, 2002 at the following
redemption prices (expressed as percentages of the principal
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<PAGE> 44
amount) if redeemed during the twelve-month period commencing on June 15 of the
year set forth below, plus, in each case, accrued and unpaid interest, if any,
thereon to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 104.875%
2003........................................................ 103.250%
2004........................................................ 101.625%
2005 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 15, 2000, the
Company may redeem up to 33% of the aggregate principal amount of Notes with the
net proceeds from one or more Equity Offerings of the Company at a redemption
price equal to 109.75% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of redemption; provided, however, that,
after giving effect to any such redemption, at least $100.0 million aggregate
principal amount of the Notes originally issued remain outstanding. Any such
redemption must occur on or prior to 120 days after the receipt of such net
proceeds.
In addition, upon the occurrence of a Change of Control prior to June 15,
2002, the Company, at is option, may redeem all, but not less than all, of the
outstanding Notes at a redemption price equal to 100% of the principal amount
thereof plus the applicable Make-Whole Premium (a "Change of Control
Redemption"). The Company shall give not less than 30 nor more than 60 days
notice of such redemption within 30 days following a Change of Control.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants.
Limitation on Restricted Payments. The Indenture provides that the Company
shall not, and shall not permit any of its Restricted Subsidiaries to, directly
or indirectly, (a) declare or pay any dividend or make any distribution (other
than dividends or distributions payable in Qualified Capital Stock of the
Company) on shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock, other than the exchange of such
Capital Stock for Qualified Capital Stock, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company or its Restricted
Subsidiaries that is subordinate or junior in right of payment to the Notes or
(d) make any Investment (other than Permitted Investments) (each of the
foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to
as a "Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing, (ii) the Company is not able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant or (iii) the aggregate amount of Restricted Payments made subsequent to
the Issue Date (the amount expended for such purposes, if other than in cash,
shall be the fair market value of such property as determined by the Board of
Directors of the Company in good faith) shall exceed the sum, without
duplication, of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned during the period beginning on the first day of the fiscal
year of the Company commencing after the Issue Date and ending on the last day
of the most recent fiscal quarter ending at least 45 days prior to the date the
Restricted Payment occurs (treating such period as a single accounting period);
(x) 100% of the aggregate net proceeds, including the fair market value of
property other than cash as determined by the Board of Directors of the Company
in good faith, received by the Company from any Person (other than a Restricted
Subsidiary of the Company) from the issuance and sale subsequent to the Issue
Date of Qualified Capital Stock of the Company or of debt securities of the
Company that have been converted into Qualified Capital Stock (excluding (A)
Qualified Capital Stock made as a distribution on any Capital Stock or as
interest on any Indebtedness and (B) any net proceeds from issuances and sales
of Qualified Capital Stock financed directly or indirectly using funds borrowed
from the Company or any Restricted Subsidiary of the Company, until and
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<PAGE> 45
to the extent such borrowing is repaid), (y) $50 million and (z) the amount of
the net reduction in Investments made as Restricted Payments in accordance with
this sentence in Unrestricted Subsidiaries resulting from (1) the payment of
cash dividends or the repayment in cash of the principal of loans or the cash
return on any Investment, in each case to the extent received by the Company or
any wholly owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries, (2) to the extent that any Investment in an Unrestricted
Subsidiary that was made after the date of this Indenture is sold for cash or
otherwise liquidated or repaid for cash, the after-tax cash return of capital
with respect to such Investment (less the cost of disposition, if any) or (3)
the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries, such
aggregate amount of the net reduction in such Investments not to exceed, in the
case of any Unrestricted Subsidiary, the amount of such Investments made as
Restricted Payments previously made by the Company or any Restricted Subsidiary
in such Unrestricted Subsidiary, which amount was included in the calculation of
the amount of Restricted Payments.
Notwithstanding the foregoing, these provisions do not prohibit: (1) the
payment of any dividend, making of any distribution or consummation of
irrevocable redemption within 60 days after the date of declaration of such
dividend, making of such distribution or giving of such notice if the dividend,
distribution or redemption would have been permitted on the date of declaration;
(2) the acquisition of Capital Stock or Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes, either (i) in exchange
for shares of Qualified Capital Stock or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Restricted
Subsidiary of the Company) of shares of Qualified Capital Stock; (3) the
acquisition of Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes, either (i) in exchange for Indebtedness of the
Company that is subordinate or junior in right of payment to the Notes, at least
to the extent that the Indebtedness being acquired is subordinated to the Notes,
and has no scheduled principal prepayment dates prior to the earlier of (a) at
least one year after the scheduled final maturity date of the Notes or (b) the
scheduled final maturity date of the Indebtedness being exchanged, (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Restricted Subsidiary of the Company) of Indebtedness of the
Company that is subordinate or junior in right of payment to the Notes, at least
to the extent that the Indebtedness being acquired is subordinated to the Notes,
and has no scheduled principal prepayment dates prior to the earlier of (a) the
scheduled final maturity date of the Notes or (b) the scheduled final maturity
date of the Indebtedness being refinanced or (iii) any combination of clauses
(i) and (ii) above; (4) the elimination of fractional shares or warrants; (5)
the purchase for value of shares of Capital Stock of the Company (x) held by
directors, officers or employees upon death, disability, retirement, termination
of employment or (y) to fund capital stock-based, long-term incentive programs,
not to exceed $4 million in the aggregate; (6) the repurchase of any 12 3/4%
Debentures in accordance with (i) the "Limitation on Asset Sales" and "Change of
Control" covenants hereunder and (ii) Sections 4.15 and 4.16 of the 12 3/4%
Debenture Indenture; (7) the redemption or repurchase by the Company of up to
$200 million aggregate principal amount of 12 3/4% Debentures through the
application of (a) up to $200 million of net cash proceeds of a substantially
concurrent sale or incurrence (other than to or from a Restricted Subsidiary of
the Company) of secured or unsecured Indebtedness of the Company that ranks pari
passu with the Notes as to payment, (b) up to $100 million of cash from
operations of the Company or (c) any combination of (a) and (b), (8) Restricted
Payments for the redemption, repurchase or other acquisition of shares of
Capital Stock of the Company in satisfaction of indemnification or other claims
arising under any merger, consolidation, asset purchase or investment or similar
acquisition agreement permitted under the Indenture, pursuant to which such
shares of Capital Stock were issued and (9) repurchases of Capital Stock deemed
to occur upon exercise of employee or director stock options; provided that in
the case of clauses (2), (3), (4), (5), (6), (7) and (8), no Default or Event of
Default shall have occurred or be continuing at the time of such payment or as a
result thereof. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date, amounts expended pursuant to clauses (1), (2),
(4), (5), (6), 7(b) and (8) shall be included in such calculation; provided that
amounts expended pursuant to clause (2) shall constitute Restricted Payments
only to the extent any amounts are credited pursuant to clause (iii)(x) of the
next preceding paragraph.
Limitation on Incurrence of Additional Indebtedness. The Indenture provides
that the Company shall not, and shall not permit any of its Restricted
Subsidiaries to, after the Issue Date, directly or indirectly,
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<PAGE> 46
create, incur, assume, guarantee, acquire or become liable, contingently or
otherwise, or otherwise become responsible for the payment of any Indebtedness
other than Permitted Indebtedness. Notwithstanding the foregoing limitations,
the Company and, subject to compliance with the covenant "Guarantees by
Restricted Subsidiaries," Restricted Subsidiaries may incur Indebtedness if (i)
no Default or Event of Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of such Indebtedness and (ii) the
Consolidated Fixed Charge Coverage Ratio of the Company, measured on the date of
the incurrence of such Indebtedness, is greater than 2.0:1. No Indebtedness
incurred pursuant to the next preceding sentence shall be included in
calculating any limitation set forth in the definition of Permitted
Indebtedness. Upon the repayment of Indebtedness which may have been incurred
pursuant to more than one provision of this Indenture, the Company may, in its
sole discretion designate which provision such Indebtedness shall have been
incurred under.
Guarantees by Restricted Subsidiaries. The Indenture provides that the
Company will cause any Borrowing Restricted Subsidiary to become a Subsidiary
Guarantor by executing a guarantee (the "Guarantee") of payment of the Notes by
such Borrowing Restricted Subsidiary (1) if, at the time the Restricted
Subsidiary first becomes a Borrowing Restricted Subsidiary, the total Investment
of the Company and the Restricted Subsidiaries in such Borrowing Restricted
Subsidiary and in all other Borrowing Restricted Subsidiaries that are not
Subsidiary Guarantors, is more than 15% of Total Tangible Assets (the "15%
Investment Threshold"), or (2) if, at the time a Borrowing Restricted Subsidiary
increases the amount of Restricted Subsidiary Indebtedness (excluding for this
purpose, incurrences of indebtedness under a revolving credit facility that do
not exceed the maximum committed borrowings thereunder), the 15% Investment
Threshold is met, or (3) if, at the time the Company or any Restricted
Subsidiary makes a capital contribution or other equity investment in excess of
$1 million during any six-month period in any Borrowing Restricted Subsidiary,
the 15% Investment Threshold is met. If any such incurrence of liability of such
Restricted Subsidiary is provided in respect of Indebtedness that is expressly
subordinated to the Notes, the guarantee or other instrument provided by such
Restricted Subsidiary in respect of such subordinated Indebtedness shall be
subordinated to the Guarantee pursuant to subordination provisions no less
favorable to holders of the Notes than those contained in the 12 3/4% Indenture.
A Borrowing Restricted Subsidiary shall be released as a Subsidiary Guarantor
(i) at such time as it ceases to be a Borrowing Restricted Subsidiary or (ii)
upon the election of the Company, if, after giving effect to such election, the
15% Investment Threshold is not met.
Limitations on Transactions with Affiliates. The Indenture provides that
the Company shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with or for the benefit of, an
Affiliate of the Company or any Restricted Subsidiary (other than transactions
between the Company and a wholly owned Restricted Subsidiary of the Company) (an
"Affiliate Transaction"), other than Affiliate Transactions on terms that are no
less favorable in the aggregate than those that might reasonably have been
obtained or are obtainable in a comparable transaction on an arm's-length basis
from a person that is not an Affiliate; provided that neither the Company nor
any of its Restricted Subsidiaries shall enter into an Affiliate Transaction or
series of related Affiliate Transactions involving or having a value of $10
million or more, unless a majority of disinterested members of the Board of
Directors of the Company determines in good faith as evidenced by a board
resolution that the terms are no less favorable in the aggregate to the Company
than those that might reasonably have been obtained in a comparable transaction
on an arm's-length basis from a Person that is not an Affiliate; provided,
however, that (i) any employment agreement or stock option agreement entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business, (ii) transactions permitted under the covenant described above
under "Certain Covenants -- Limitation on Restricted Payments," (iii) the
payment of reasonable fees and expenses to directors of the Company or its
Restricted Subsidiaries, (iv) any issuance of securities or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding of
employment arrangements, stock options and stock ownership plans of the Company
entered into in the ordinary course of business and (v) transactions pursuant to
agreements existing on the Issue Date or any amendment thereto or any
transactions contemplated thereby (including pursuant to any amendment thereto)
in any replacement agreement thereto, so long as any such amendment or
replacement is not more
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<PAGE> 47
disadvantageous to the holders in any material respect than the original
agreement as in effect on the Issue Date, in each case, shall not be deemed
Affiliate Transactions.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or permit to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends or
make any other distributions on its Capital Stock, (b) make loans or advances or
to pay any Indebtedness or other obligation owed to the Company or a Restricted
Subsidiary of the Company or (c) transfer any of its property or assets to the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) customary nonassignment
provisions of any lease governing a leasehold interest of the Company or any
Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to the Company
or any Restricted Subsidiary of the Company, or the properties or assets of the
Company or any Restricted Subsidiary of the Company, other than the Person, the
properties or assets so acquired; (5) agreements existing on the Issue Date; (6)
any Trade Receivable Facility; (7) customary nonassignment provisions in
contracts entered into in the ordinary course of business, (8) Indebtedness of a
Restricted Subsidiary permitted to be incurred under the Indenture or (9) an
agreement effecting a refinancing, modification, replacement, renewal,
restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale of Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4), (5), (6) or (8) above; provided,
however, that the provisions relating to such encumbrance or restriction
contained in any such refinancing, replacement or substitution agreement are not
less favorable to the Company or Restricted Subsidiary, as the case may be, in
any material respect in the reasonable judgment of the Board of Directors of the
Company than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4), (5), (6) or (8).
Limitation on Asset Sales. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, consummate an
Asset Sale unless (a) the Company or the applicable Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by the Board of Directors of the Company, (b) at least
75% of the consideration received by the Company or the Restricted Subsidiary,
as the case may be, from such Asset Sale shall be cash or Cash Equivalents and
is received at the time of such disposition; provided, however, that this
condition shall not apply to a transaction whereby the Company or any Restricted
Subsidiary effects an Asset Sale by the exchange of assets or property for
Productive Assets or to the sale or other disposition of all or any portion of
the Company's East Mill assets located in Antioch, California, provided,
further, that the amount of (A) any liabilities of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated in right
of payment to the Notes) that are assumed by the transferee of any such assets
shall be deemed to be cash for purposes of this provision and (B) any notes or
other obligations received by the Company or such Restricted Subsidiary from
such transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received) shall be deemed to be
cash for purposes of this provision, and (c) the Company shall (i) apply, or
cause such Restricted Subsidiary to apply, such Net Cash Proceeds of such Asset
Sale within 270 days of the consummation of such Asset Sale (A) to prepay
indebtedness ranking pari passu with the Notes, senior indebtedness of a
Subsidiary Guarantor or debt of a Restricted Subsidiary that is not a Subsidiary
Guarantor or, in the case of any debt under a revolving credit facility, effect
a reduction in the committed availability under any such revolving credit
facility or (B) to make an offer to purchase the Notes and, to the extent
required by the documentation governing such indebtedness and on a pro rata
basis, indebtedness ranking pari passu with the Notes, at a price equal to 100%
of the principal amount of the Notes plus accrued interest thereon to the date
of purchase pursuant to an offer to purchase made by the Company as set forth
below (a "Net Proceeds Offer"), or (ii)(A) commit, or cause such Restricted
Subsidiary to commit (such commitments to include amounts anticipated to be
expended pursuant to the Company's capital investment plan (x) as adopted by the
Board of Directors of the Company and (y) evidenced by the filing of an
officer's certificate with the Trustee stating that the total amount of the Net
Cash Proceeds of such Asset Sale is less than the aggregate amount contemplated
to be expended pursuant to such capital investment plan within 24 months of the
consummation of such Asset Sale) within 270 days of the consummation of such
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<PAGE> 48
Asset Sale, to apply the Net Cash Proceeds of such Asset Sale to reinvest in
Productive Assets and (B) apply, or cause such Restricted Subsidiary to apply,
pursuant to such commitment (which includes amounts actually expended under the
capital investment plan authorized by the Board of Directors of the Company),
such Net Cash Proceeds of such Asset Sale within 24 months of the consummation
of such Asset Sale; provided that if any commitment under this clause (ii) is
terminated or rescinded after the 225th day after the consummation of such Asset
Sale, the Company or such Restricted Subsidiary, as the case may be, shall have
45 days after such termination or rescission to (1) apply such Net Cash Proceeds
pursuant to clause (c)(i) above or (2) to commit, or cause such Restricted
Subsidiary to commit, to apply the Net Cash Proceeds of such Asset Sale to
reinvest in Productive Assets; provided that in any such case, such proceeds
must be applied pursuant to clause (c)(i) or such commitment, as the case may
be, no later than 24 months after the consummation of such Asset Sale or (iii)
any combination of the foregoing; provided, further, that if at any time any
non-cash consideration received by the Company or any Restricted Subsidiary of
the Company, as the case may be, in connection with any Asset Sale is converted
into or sold or otherwise disposed of for cash, then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with clause (c) above; and
provided, further, that the Company may defer making a Net Proceeds Offer until
the aggregate Net Cash Proceeds from Asset Sales to be applied equals or exceeds
$10 million. Pending the final application of any such Net Cash Proceeds the
Company or such Restricted Subsidiary may temporarily reduce Indebtedness under
a revolving credit facility, if any.
Each Net Proceeds Offer will be mailed to holders of Notes as shown on the
register of holders of Notes within 270 days, will specify the purchase date
(which will be no earlier than 30 days nor later than 45 days from the date such
notice is mailed) and will otherwise comply with the procedures set forth in the
Indenture. Upon receiving notice of a Net Proceeds Offer, holders of Notes may
elect to tender their Notes in whole or in part in integral multiples of $1,000.
To the extent holders of the Notes properly tender Notes in an amount exceeding
the applicable Net Proceeds Offer, such Notes of tendering holders will be
repurchased on a pro rata basis (based upon the principal amount tendered).
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer.
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries to, create, incur, assume or
suffer to exist any Liens upon their respective assets, except for (a) Liens
securing Indebtedness under the Credit Agreement, (b) Permitted Liens, (c) Liens
securing Acquired Indebtedness, (d) Liens existing on the Issue Date, (e) Liens
securing Indebtedness to the extent incurred to refinance, replace, renew or
refund secured Indebtedness existing on the Issue Date or Acquired Indebtedness,
(f) Liens securing pollution control bonds and industrial revenue bonds, (g)
Liens securing Indebtedness permitted to be incurred pursuant to clauses (viii)
or (ix) of the definition of Permitted Indebtedness, (h) Liens securing
Indebtedness pursuant to clauses (vii) or (xi) of the definition of Permitted
Indebtedness; provided, however, that if such Indebtedness is incurred to
finance the cost of the property subject to a Lien securing such Indebtedness,
the principal amount of the Indebtedness secured by such Lien shall not exceed
100% of the cost of the property subject thereto plus related financing costs,
(i) Liens in favor of the Trustee and the trustee in respect of any other
outstanding indebtedness of the Company, (j)Liens granted in connection with the
redemption of the Old Notes, or (k) any replacement, extension, renewal,
amendment or modification, in whole or in part, of any Lien described above;
provided that to the extent any such clause limits the amount secured or the
assets subject to such Liens, no extension or renewal will increase the amount
or assets secured by or subject to such Liens.
Merger, Consolidation and Sale of Assets. The Indenture provides that the
Company may not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets to,
another Person or adopt a plan of liquidation, unless (a) either the Company
shall be the survivor of such merger or consolidation or the surviving Person is
a corporation, partnership, limited liability company or trust organized and
existing under the laws of the United States, any state thereof or the District
of Columbia and such surviving Person shall expressly assume, by a supplemental
indenture, all the obligations of the Company under the Notes and the
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<PAGE> 49
related Indenture; (b) immediately after giving effect to such transaction (on a
pro forma basis, including any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Company or the surviving
Person is able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant, (c) immediately after giving effect to such transaction
and the assumption of the obligations set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, no
Default or Event of Default shall have occurred and be continuing and (d) the
Company has delivered to the Trustee an Officers' Certificate and Opinion of
Counsel, each stating that such consolidation, merger, or transfer or adoption
and such supplemental indenture comply with the Indenture, that the surviving
Person (if other than the Company) agrees to be bound thereby and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied. Notwithstanding the foregoing clauses (b), (c) and (d), any
Restricted Subsidiary of the Company may consolidate with, merge into or
transfer all or part of its properties and assets to the Company. For purposes
of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of transactions) of all or substantially all of the
properties and assets of one or more Restricted Subsidiaries, the Capital Stock
of which constitutes all or substantially all of the properties and assets of
the Company, shall be deemed to be the transfer of all or substantially all of
the properties and assets of the Company.
Limitation on Incurrence of Subordinated Indebtedness. The Indenture
prohibits the Company from incurring Indebtedness that is subordinated by
written agreement in right of payment to any other Indebtedness of the Company,
unless the Indebtedness to be incurred is subordinated to the Notes to
substantially the same extent as it is subordinated to such other Indebtedness
pursuant to such written agreement.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each holder will have the right to require that the Company repurchase all or a
portion of such holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase.
Within 30 days following the date upon which the Change of Control
occurred, the Company will send, by first class mail, a notice to each holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the business day prior to the Change of Control Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(a) the failure to pay interest on any Notes for a period of 30 days after such
interest becomes due and payable (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture), (b) the failure to
pay the principal on any Notes when such principal becomes due and payable, at
maturity, upon acceleration or redemption or pursuant to an offer to purchase
required by the Indenture (whether or not such payment shall be prohibited by
the subordination provisions of the Indenture); (c) a default in the observance
or performance of any other covenant or agreement contained in the Indenture,
which default continues for a period of 30 days after the Company receives
written notice of the default by the Trustee or holders of at least 25% in
principal amount of the Notes; (d) the failure to pay at stated maturity the
principal amount of any
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Indebtedness of the Company or any Restricted Subsidiary of the Company, or the
acceleration of the stated maturity of any such Indebtedness, if the aggregate
principal amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at stated
maturity or that has been accelerated, aggregates $20 million or more at any
time; (e) one or more judgments in an aggregate amount in excess of $20 million
shall have been rendered against the Company or any of its Restricted
Subsidiaries and such judgments remain undischarged or unstayed for a period of
60 days after such judgment or judgments become final and non-appealable and (f)
certain events of bankruptcy, insolvency or reorganization affecting the Company
or any of its Restricted Subsidiaries.
Upon the occurrence of any Event of Default specified in the Indenture, the
Trustee or the holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest on all the Notes to be due and
payable by written notice to the Company. Upon any such declaration, such amount
shall be immediately due and payable. If an Event of Default with respect to
bankruptcy, insolvency or reorganization proceedings occurs and is continuing,
then such amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of any of the Trustee or any
holder of Notes.
The Indenture provides that, at any time after a declaration of
acceleration with respect to Notes as described in the preceding paragraph, the
holders of a majority in principal amount of the outstanding Notes may rescind
and cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) if, to the extent the
payment of such interest is lawful, interest on overdue installments of interest
and overdue principal, which has become due otherwise than by such declaration
of acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) if, in the event of the cure or waiver of a
Default or Event of Default of the type described in clause (f) of the
description above of Events of Default, the Trustee shall have received an
Officers' Certificate and an Opinion of Counsel that such Default has been cured
or waived. The holders of a majority in principal amount of the Notes may waive
any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any of such Notes.
SATISFACTION AND DISCHARGE OF INDENTURES; DEFEASANCE
The Company may terminate its obligations under the Indenture at any time
by delivering all outstanding Notes to the Trustee for cancellation. The
Company, at its option, (i) will be discharged from any and all obligations with
respect to the Notes (except for certain obligations of the Company to register
the transfer or exchange of such Notes, replace stolen, lost or mutilated Notes,
maintain paying agencies and hold moneys for payment in trust) or (ii) need not
comply with certain of the restrictive covenants with respect to the Indenture
if the Company deposits with the Trustee, in trust, money, U.S. Legal Tender or
U.S. Government Obligations that, through the payment of interest thereon and
principal thereof in accordance with their terms, will provide money in an
amount sufficient to pay all the principal of and interest on the Notes on the
dates such payments are due in accordance with the terms of such Notes as well
as the Trustee's fees and expenses. To exercise any such option, the Company is
required to deliver to the Trustee (A) an Opinion of Counsel to the effect that
the holders of such Notes will not recognize income, gain or loss for federal
income tax purposes as a result of the deposit and related defeasance and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such option had not been
exercised and, in the case of a discharge pursuant to clause (i) above,
accompanied by a ruling to such effect received from or published by the IRS,
and (B) an Officers' Certificate and an Opinion of Counsel to the effect that
all conditions precedent to the defeasance have been satisfied. Notwithstanding
the foregoing, the Opinion of Counsel required by clause (A) above need not be
delivered if all Notes not theretofore delivered to the Trustee for cancellation
(i) have become due and payable, (ii) will become due and payable on the
maturity date within one year or (iii) are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of the Company.
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<PAGE> 51
REPORTS TO HOLDERS
The Company shall file with the Trustee, within 15 days after filing with
the Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) that the Company files with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the event
the Company is no longer subject to these periodic reporting requirements of the
Exchange Act, it will nonetheless continue to file reports with the Commission
and the Trustee as if it were subject to such periodic reporting requirements.
Regardless of whether the Company is required to furnish such reports to its
stockholders pursuant to the Exchange Act, the Company shall cause its
consolidated financial statements, comparable to that which would have been
required to appear in annual or quarterly reports, to be delivered to the
holders of the Notes.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee without the consent of the
holders of the Notes may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies so long as such change
does not, in the opinion of the Trustee, adversely affect the rights of any of
the holders in any material respect. In formulating its opinion on such matters,
the Trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an Opinion of Counsel. Other
modifications and amendments of the Indenture may be made with the consent of
the holders of a majority in principal amount of the then outstanding Notes,
except that, without the consent of each holder of the Notes affected thereby,
no amendment may (i) change the principal amount of Notes whose holders must
consent to an amendment, supplement or waiver of any provision of the Indenture,
(ii) reduce the rate or extend the time for payment of interest on any Notes,
(iii) reduce the principal amount of any Notes, (iv) change the maturity date of
any Notes or alter the optional redemption provisions in the Indenture or the
Notes in a manner adverse to any holder, (v) make any changes in the provisions
concerning waivers of Defaults or Events of Default by holders or the rights of
holders to recover the principal of, interest on or optional redemption payment
with respect to any Notes or (vi) make the principal of, or interest on, any
Notes payable with anything or in any manner other than as provided for in the
Indenture and the Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or assumed in connection with the acquisition of assets from such
Person and not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary of the Company or
such acquisition.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, any Person
established in connection with any Trade Receivable Facility shall not be deemed
an Affiliate. For purposes of the covenant "Limitation on Transactions with
Affiliates," the term "Affiliate" shall include any Person who, as a result of
any transaction described in the "Limitation on Transactions with Affiliates"
covenant, would become an Affiliate.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
with the Company or any Restricted Subsidiary of the Company or (ii) the
acquisition by the Company or any Restricted Subsidiary of the Company of assets
of any Person or any division or line of business of such Person.
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"Asset Sale" means the sale, lease (other than an operating lease),
assignment or other disposition (including, without limitation, dispositions
pursuant to Sale and Leaseback Transactions) by the Company or one of its
Restricted Subsidiaries to any Person other than the Company or one of its
Restricted Subsidiaries of (i) any capital stock of any Restricted Subsidiary,
(ii) all or substantially all of the properties and assets of any division or
line of business of the Company or any Restricted Subsidiary of the Company or
(iii) any other assets of the Company or any of its Restricted Subsidiaries
greater than $5 million individually, other than those assets sold in the
ordinary course of business of the Company or such Restricted Subsidiary,
respectively. For the purposes of this definition, the term "Asset Sale" shall
not include (i) Capital Stock of the Company, (ii) any transfer of trade
receivables or related assets pursuant to any Trade Receivable Facility, (iii)
any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions set forth under the
"Merger, Consolidation and Sale of Assets" covenant, (iv) an issuance of Capital
Stock by a Restricted Subsidiary to the Company or to a wholly owned Restricted
Subsidiary, (v) a disposition consisting of a Permitted Investment or Restricted
Payment permitted by the "Limitation on Restricted Payments" covenant, (vi) the
surrender or waiver of contract rights or the settlement, release or surrender
of contract, tort or other claims of any kind, (vii) the grant in the ordinary
course of business of any license of patents, trademarks, registrations thereof
and other similar intellectual property, (viii) the sale or discount, in each
case without recourse, of accounts receivables arising in the ordinary course of
business, but only in connection with the compromise or collection thereof, (ix)
the sale for cash or exchange of specific items of equipment, so long as the
purpose of each such sale or exchange is to acquire (and results within 90 days
of such sale or exchange in the acquisition of) replacement items of equipment
which are the functional equivalent of the item of equipment so sold or
exchanged and (x) disposals or replacements of obsolete equipment in the
ordinary course of business.
"Borrowing Restricted Subsidiary" shall mean any Restricted Subsidiary that
incurs, or otherwise becomes liable for, in excess of $5.0 million of Restricted
Subsidiary Indebtedness.
"Capital Stock" means (i) with respect to any Person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, including each class of common stock and preferred stock of
such Person and (ii) with respect to the Company or any other Person formed
other than as a corporation, any and all partnership, membership or other equity
interests of the Company or such other Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, (iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 from Standard & Poor's Corporation or at least P-1 from Moody's Investors
Service, (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than $250
million, (v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv) above and (vi)
investments in money market funds which invest substantially all their assets in
securities of the types described in clauses (i) through (v) above.
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"Change of Control" means if at any time any Person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) acquires, in one or
more transactions, (i) beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 50% or more of the voting power represented by all
voting securities of the Company or (ii) the power to elect a majority of the
Board of Directors of the Company; provided, however, that voting securities
beneficially owned by or voting power controlled by such Person or group will
not be deemed to include common stock beneficially owned or voting power
controlled so long as it is beneficially owned or controlled directly or
indirectly by Mid-America Group, Ltd. (but only so long as MAG is controlled by
Mr. Marvin A. Pomerantz and/or his spouse or their respective heirs or lineal
descendants), or Mr. Marvin A. Pomerantz or Mr. Warren J. Hayford, their
respective spouses or their respective heirs or lineal descendants.
"Commodity Agreements" means without limitation any commodity futures
contract, commodity option agreement or other similar agreement or arrangement
entered into by the Company designed to protect the Company against fluctuations
in the prices of commodities used in the ordinary course of business and not
entered into for any other purpose.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income, (ii) to the extent
Consolidated Net Income has been reduced thereby, all income taxes of such
Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP
for such period (other than income taxes attributable to extraordinary, unusual
or nonrecurring gains or losses), Consolidated Interest Expense, amortization
expense (including write-off of deferred financing costs) and depreciation
expense and (iii) other non-cash items other than non-cash interest reducing
Consolidated Net Income (other than such items incurred in the ordinary course
of business consistent with past practice) less other non-cash items increasing
Consolidated Net Income (other than such items incurred in the ordinary course
of business consistent with past practice), all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four most
recent full fiscal quarters for which financial information is available (the
"Four Quarter Period") ending not more than 135 days prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such
Person for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the Four Quarter Period to (1) the incurrence or repayment of
any Indebtedness of such Person or any of its Restricted Subsidiaries at any
time subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date, as if such incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA associated with such
Asset Acquisition) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Restricted
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges," (1) interest on Indebtedness determined on a fluctuating basis as of
the Transaction Date and that will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date, (2) if interest
on any Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate or other rates, then the interest rate in
effect on the
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Transaction Date will be deemed to have been in effect during the Four Quarter
Period, (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
Interest Rate Agreements, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such Interest Rate Agreements
and (4) the permanent retirement of any Indebtedness during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date shall be given effect as if it occurred at
the beginning of such Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
preferred stock of such Person (except dividends for such period which are
accrued but unpaid) times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
federal, state and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of all cash and non-cash interest expense (minus
amortization or write-off of deferred financing costs included in cash or
non-cash interest expense and minus interest income and capitalized interest)
with respect to all outstanding Indebtedness of such Person and its Restricted
Subsidiaries, including the net costs associated with Interest Rate Agreements,
for such period determined on a consolidated basis in conformity with GAAP.
Consolidated Interest Expense of the Company shall not include any prepayment
premiums or amortization of original issue discount or deferred financing costs.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $5 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto, (b) items classified as
extraordinary, nonrecurring or unusual gains and losses, and the related tax
effects, (c) the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a Restricted
Subsidiary of the Company or is merged or consolidated with the Company or any
Restricted Subsidiary, (d) the net income of any Restricted Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by contract, operation of law
or otherwise and (e) for the purpose of calculating Consolidated Net Income for
clause (iii)(w) of the first paragraph of the covenant "Limitation on Restricted
Payments," the net income (or loss) of any Person, other than a Restricted
Subsidiary, except to the extent of cash dividends or distributions (net of tax,
if applicable) paid to the Company or a Restricted Subsidiary of the Company by
such Person.
"Credit Agreement" means the Credit Agreement dated as of November 17,
1986, and amended and restated as of June 30, 1995, among the Company, the
financial institutions party thereto in their capacities as lenders thereunder,
and Bankers Trust Company as agent for the banks, as the same may be amended
from time to time, and any agreement evidencing the refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension, substitution,
supplement, reissuance or resale thereof, whether including any additional
obligors or with the same or any different agent or group of lenders.
"Currency Agreements" means without limitation any foreign exchange
contract, currency swap agreement, cross currency agreement, currency option
agreement, forward currency agreement, or other similar agreement or arrangement
entered into by the Company designed to protect the Company against fluctuations
in foreign exchange rates and not entered into for any other purpose.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Disqualified Capital Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in whole or in part, on or prior to
the final maturity date of the Notes.
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"Equity Offering" means an offering of Common Stock of the Company
resulting in net proceeds to the Company in excess of $20 million.
"Indebtedness" means with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) all indebtedness of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all indebtedness of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all indebtedness under any title retention
agreement, (v) all indebtedness of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations and (vii) all
indebtedness of any other Person of the type referred to in clauses (i) through
(vi) that is secured by any first Lien on any property or asset of such Person,
the amount of such indebtedness being deemed to be the lesser of the value of
such property or asset or the amount of the indebtedness so secured, but
excluding trade accounts payable arising in the ordinary course of business that
are not overdue in excess of 90 days or the subject of a good faith dispute.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement entered into by the Company designed to protect the Company against
fluctuations in interest rates and not entered into for any other purpose.
"Investment" means any transfer or delivery of cash, stock or other
property of value in exchange for indebtedness, stock or other security or
ownership interest by way of loan, advance (excluding any advances to officers
and employees in the ordinary course of business) or capital contribution. The
amount of any non-cash Investment (other than a Permitted Investment) or any
Investment in an Unrestricted Subsidiary shall be the fair market value of such
Investment, as determined in good faith by management of the Company unless the
fair market value of such Investment exceeds $10 million, in which case such
fair market value shall also be determined in good faith by the Board of
Directors or other equivalent governing body of the Company at the time such
Investment is made. For purposes of the covenant "Limitations on Restricted
Payments," (i) "Investment" in a Subsidiary shall include the portion
(proportionate to the Company's Capital Stock in such Subsidiary) of the fair
market value (as determined in good faith by the Board of Directors) of such
Subsidiary at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's Capital Stock
in such Subsidiary) of the fair market value (as determined in good faith by the
Board of Directors) of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case determined in good faith by the Board of Directors.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Make-Whole Premium" with respect to a Note means an amount equal to the
greater of (i) 1.0% of the outstanding principal amount of such Note and (ii)
the excess of (a) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on June 15,
2002, computed using a discount rate equal to the Treasury Rate plus 62.5 basis
points, over (b) the outstanding principal amount of such Note.
"Net Cash Proceeds" means, (i) with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be actually
payable as a result of any disposition
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of property within two years of the date of disposition and (2) after taking
into account any reduction in tax liability due to available tax credits or
deductions and any tax sharing arrangements), (c) a reasonable reserve for the
after-tax cost of any indemnification obligations (fixed and/or contingent)
attributable to seller's indemnities to the purchaser undertaken by the Company
or any of its Restricted Subsidiaries in connection with such Asset Sale and (d)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale or (ii) with respect to the sale of Capital Stock by any Person, the
aggregate net proceeds received by such Person after payment of expenses,
commissions, underwriting discounts and other similar charges incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the Board of
Directors or other equivalent governing body of such Person, at the time of
receipt, whose determination shall be evidenced by a board resolution).
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Indebtedness" means, without duplication, (i) the Notes and any
Guarantees thereof, (ii) Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon (other than permanent reductions as a result of any
refinancing thereof permitted hereunder), (iii) Indebtedness of the Company and
its Restricted Subsidiaries incurred pursuant to the Credit Agreement in an
aggregate principal amount not to exceed $225 million, (iv) Indebtedness of the
Company and its Restricted Subsidiaries incurred pursuant to Interest Rate
Agreements, (v) intercompany Indebtedness by and among the Company and/or its
wholly owned Restricted Subsidiaries, (vi) Indebtedness of the Company and its
Restricted Subsidiaries (including Acquired Indebtedness) pursuant to pollution
control bonds and industrial revenue bonds not to exceed the sum of the
aggregate amount thereof outstanding on the Issue Date plus $25 million, (vii)
Indebtedness of the Company and its Restricted Subsidiaries (including Acquired
Indebtedness) evidenced by purchase money obligations and Capitalized Lease
Obligations not to exceed $25 million in any fiscal year; provided that any
portion of the $25 million that is not incurred in any fiscal year may be
carried over to successive fiscal years; provided, further, that the maximum
amount that may be incurred in any one fiscal year shall not exceed $50 million,
(viii) additional Indebtedness of the Company and its Restricted Subsidiaries
(including Acquired Indebtedness) incurred for any purpose not to exceed, at any
time outstanding, $200 million (that may be, but need not be, incurred in whole
or in part under the Credit Agreement), (ix) Indebtedness incurred pursuant to
the Trade Receivable Facility, (x) Indebtedness of the Company or its Restricted
Subsidiaries incurred under one or more instruments in connection with any
refinancing, modification, replacement, renewal, restatement, refunding,
deferral, extension, substitution, supplement, reissuance or resale (a
"refinancing") of existing or future Indebtedness of such entity; provided that
any such incurrence and related refinancing, together, shall not (1) result in
an increase in the aggregate principal amount of such Indebtedness (except to
the extent such increase is a result of an incurrence or refinancing of
additional Indebtedness otherwise permitted by the Indenture or such increase
does not exceed the amount of premiums, fees and expenses (including
underwriting discounts) relating to such refinancing, modification, replacement,
renewal, restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale of such existing or future Indebtedness) of the Company and
its Restricted Subsidiaries and (2) create Indebtedness where the Weighted
Average Life to Maturity at the time of such refunded, refinanced, modified,
replaced, renewed, restated, deferred, extended, substituted, supplemented,
reissued or resold Indebtedness is incurred is less than the Weighted Average
Life to Maturity of the Indebtedness being refunded, refinanced, modified,
replaced, renewed, restated, deferred, extended, substituted, supplemented,
reissued or resold; and provided, further, that with respect to the refinancing
of Indebtedness incurred pursuant to clauses (v), (vi), (vii), (xvi) and (xvii),
such Indebtedness may only be refinanced with Indebtedness permitted to be
incurred under such respective clause, (xi) Indebtedness of the Company and its
Restricted Subsidiaries arising in connection with the acquisition or
refinancing of property so long as recourse with respect to such Indebtedness is
limited only to the property being acquired or refinanced or any amendment,
restatement, deferral, extension, modification, refinancing, refunding, renewal,
replacement, substitution, supplement, reissuance or resale thereof so long as
recourse is limited to the property being refinanced, (xii) Indebtedness of the
Company and its Restricted Subsidiaries incurred after the Issue Date relating
to letters of credit available or outstanding under the Credit Agreement (or any
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successor thereto), (xiii) surety obligations of the Company and its Restricted
Subsidiaries entered into in the ordinary course of business, (xiv) Indebtedness
of the Company and its Restricted Subsidiaries incurred to finance the purchase
of insurance in the ordinary course of business, (xv) Indebtedness of the
Company and its Restricted Subsidiaries incurred arising from the honoring by a
bank or other financial institution of a check or draft inadvertently drawn
against insufficient funds in the ordinary course of business, provided that
such Indebtedness is extinguished within two business days of notice of any such
incurrence, (xvi) Indebtedness of the Company and its Restricted Subsidiaries
arising from guarantees of loans and advances by third parties to employees and
officers of the Company or its subsidiaries, not to exceed $1 million in the
aggregate, (xvii) Indebtedness of the Company and its Restricted Subsidiaries
arising from the repurchase of Common Stock not to exceed $4 million (xviii)
Indebtedness of the Company and its Restricted Subsidiaries arising from
Currency Agreements and Commodity Agreements, (xix) the 12 3/4% Debentures and
(xx) the Old Notes.
"Permitted Investments" means in the case of the Company or its Restricted
Subsidiaries, (i) an Investment related to the business of the Company and its
Restricted Subsidiaries as it is conducted on the Issue Date, including, but not
limited to, subsidiaries, joint ventures or other business alliances formed in
the ordinary course of business, (ii) Investments in the Company by any
Restricted Subsidiary or Investments by the Company or any Restricted Subsidiary
(including acquisitions) in any other Person, if after giving effect of any such
Investment, such Person would be a wholly owned Restricted Subsidiary of the
Company, (iii) Investments in cash and Cash Equivalents, (iv) Investments in
Productive Assets, (v) Investments in any Person in connection with the Trade
Receivable Facility, (vi) Investments existing on the date of this Indenture,
(vii) loans and advances to employees and officers of the Company and its
Restricted Subsidiaries not in excess of $1 million at any one time outstanding,
(viii) accounts receivable created or acquired in the ordinary course of
business, (ix) Interest Rate Agreements, Currency Agreements and Commodity
Agreements entered into in the ordinary course of the Company's business and
otherwise in compliance with this Indenture, (x) Investments in Unrestricted
Subsidiaries in an amount at any one time outstanding not to exceed $25 million,
(xi) guarantees by the Company of Indebtedness otherwise permitted to be
incurred by Restricted Subsidiaries of the Company under this Indenture and
(xii) Investments received by the Company or its Restricted Subsidiaries as
consideration for asset sales, including Asset Sales; provided in the case of an
Asset Sale, such Asset Sale is effected in compliance with the covenant
described above under "Certain Covenants -- Limitation on Asset Sales."
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges to the extent not required to be paid, (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other like Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by an appropriate
process of law, and for which a reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made, (iii) pledges or deposits in
the ordinary course of business to secure lease obligations or nondelinquent
obligations under workers' compensation, unemployment insurance or similar
legislation, (iv) Liens to secure the performance of public statutory
obligations that are not delinquent, appeal bonds, performance bonds or other
obligations of a like nature (other than for borrowed money), (v) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of the Company or any of its Subsidiaries, (vi) Liens upon specific
items of inventory or other goods and proceeds of any Person securing such
Person's obligations in respect of bankers' acceptances issued or created for
the account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods in the ordinary course of business, (vii) Liens
securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit and the
products and proceeds thereof, (viii) Liens in favor of custom and revenue
authorities arising as a matter of law to secure payment of nondelinquent
customs duties in connection with the importation of goods, (ix) judgment and
attachment Liens not giving rise to a Default or Event of Default, (x) leases or
subleases granted to others not interfering in any material respect with the
business of the Company or any Subsidiary, (xi) Liens encumbering customary
initial deposits and margin deposits, and other Liens incurred in the ordinary
course of business that are within the general parameters customary in the
industry, in each case securing Indebtedness under Interest Rate Agreements,
Currency Agreements,
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Commodity Agreements and forward contracts, option futures contracts, futures
options or similar agreements or arrangements designed to protect the Company or
any Subsidiary from fluctuations in the price of commodities, (xii) Liens
encumbering deposits made in the ordinary course of business to secure
nondelinquent obligations arising from statutory, regulatory, contractual or
warranty requirements of the Company or its Subsidiaries for which a reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made, (xiii) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or any Subsidiary in the ordinary
course of business in accordance with industry practice, (xiv) any interest or
title of a lessor in the property subject to any lease, whether characterized as
capitalized or operating, other than any such interest or title resulting from
or arising out of default by the Company or any Subsidiary of its obligations
under such lease, (xv) Liens arising from filing UCC financing statements for
precautionary purposes in the connection with true leases of personal property
that are otherwise permitted under this Indenture and under which the Company or
any Subsidiary is lessee, (xvi) Liens on property of a Person existing at the
time such Person is acquired by, merged into or consolidated with the Company or
any Restricted Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company or such Restricted Subsidiary; (xvii) Liens to secure the
payment of all or a part of the purchase price of property or assets acquired or
constructed in the ordinary course of business on or after the date of this
Indenture, provided that (a) such property or assets are used in the same or
similar line of business as the Company was engaged in on the Issue Date, (b) at
the time of incurrence of any such Lien, the aggregate principal amount of the
obligations secured by such Lien shall not exceed the lesser of the cost or fair
market value of the assets or property (or portions thereof) so acquired or
constructed, (c) each such Lien shall encumber only the assets or property (or
portions thereof) so acquired or constructed and shall be attached to such
property within 180 days of the purchase or construction thereof and (d) and
Indebtedness secured by such Lien shall have been permitted to be incurred under
the covenant "Limitation on Incurrence of Additional Indebtedness," and (xviii)
Liens of landlords or of mortgagees of landlords arising by operation of law,
provided that the rental payments secured thereby are not yet due and payable;
(xix) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that (a) are
not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of business)
and (b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of business by
the Company or such Restricted Subsidiary.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Productive Assets" means assets (including Capital Stock) of a kind used
or usable in the business of the Company and its Restricted Subsidiaries as it
is conducted on the Issue Date.
"Qualified Capital Stock" means any stock that is not Disqualified Capital
Stock.
"Restricted Subsidiary" means any direct or indirect Subsidiary of any
Person that is not an Unrestricted Subsidiary of such Person.
"Restricted Subsidiary Indebtedness" means (a) Indebtedness (other than
Indebtedness under any Trade Receivable Facility, intercompany Indebtedness or
Indebtedness outstanding on the Issue Date, including any refinancing of
Indebtedness outstanding on the Issue Date to the extent it does not increase
the principal amount of such Indebtedness) incurred by a Restricted Subsidiary
(other than a Subsidiary Guarantor), or (b) the direct or indirect assumption,
guarantee (other than a Guarantee) or other obligation of any Restricted
Subsidiary (other than a Subsidiary Guarantor) for any Indebtedness of the
Company or any other Restricted Subsidiary by way of the pledge of any
intercompany note or otherwise, or (c) the total amount of committed borrowings
under revolving credit facilities under which the Restricted Subsidiary (other
than a Subsidiary Guarantor) is a borrower or guarantor, but "Restricted
Subsidiary Indebtedness" shall not include any Indebtedness of the Restricted
Subsidiary evidenced by purchase money obligations or Capitalized Lease
Obligations provided for under clause (vii) and Indebtedness provided for under
clause (xi)
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of the definition of Permitted Indebtedness in an aggregate amount not to exceed
$75 million for all Restricted Subsidiaries.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest to elect the
governing body or Persons thereof under ordinary circumstances is at the time,
directly or indirectly, owned by such Person.
"Subsidiary Guarantor" means each of the Company's Restricted Subsidiaries
that becomes a guarantor of the Notes by executing a supplemental indenture in
which such Restricted Subsidiary agrees to be bound by the terms of the
Indenture; provided that any person constituting a Subsidiary Guarantor as
described above shall cease to constitute a Subsidiary Guarantor when its
respective Subsidiary Guarantee is released in accordance with the terms
thereof.
"Total Tangible Assets" means the Company's total consolidated assets minus
all intangible assets, determined in accordance with GAAP.
"Trade Receivable Facility" means the arrangements that have been or may be
entered into by the Company or one or more of its Restricted Subsidiaries
pursuant to which the Company or one or more of its Restricted Subsidiaries may
either transfer to any other Person or grant a security interest in any trade
receivables (whether now existing or arising in the future) and any assets
related to such trade receivables including, without limitation, all collateral
securing such trade receivables and all material contracts and all guarantees or
other Obligations in respect of such trade receivables of the Company or one or
more of its Restricted Subsidiaries.
"Unrestricted Subsidiary" means any Subsidiary of the Company, whether
existing, newly formed or newly acquired, designated as an Unrestricted
Subsidiary by the Board of Directors of the Company and any Subsidiary of an
Unrestricted Subsidiary; provided, however, that at the time of such designation
(i) no Default or Event of Default shall have occurred and be continuing, (ii)
no portion of any Indebtedness or any other obligation (contingent or otherwise)
of such Subsidiary (a) is guaranteed by, or is otherwise the subject of credit
support provided by the Company or any of its Restricted Subsidiaries, (b) is
recourse to or obligates the Company or any of its Restricted Subsidiaries in
any way or (c) subjects any property or asset of the Company or any of its
Restricted Subsidiaries directly or indirectly, contingently or otherwise, to
the satisfaction of such Indebtedness or other obligation, (iii) neither the
Company nor any of its Restricted Subsidiaries has any contract, or agreement,
arrangement or understanding with such Subsidiary other than on terms as
favorable to the Company or such Restricted Subsidiary as those that might be
obtained at the time from Persons that are not Affiliates of the Company and
(iv) neither the Company nor any of its Restricted Subsidiaries has any
obligations (a) to subscribe for additional shares of Capital Stock of such
Subsidiary or (b) to maintain or preserve such Subsidiary's financial condition
or to cause such Subsidiary achieve certain levels of operating results. Any
such designation by the Company's Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified certificate stating that such
designation complies with the foregoing conditions. The Company's Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing, including, without limitation, under the covenants described above
under the caption "Limitations on Incurrence of Indebtedness" assuming the
incurrence by the Company and its Restricted Subsidiaries at the time of such
designation of all existing Indebtedness of the Unrestricted Subsidiary to be so
designated as a Restricted Subsidiary. In the event of any disposition involving
the Company in which the Company is not the Surviving Person, the Board of
Directors of the Surviving Person may (x) prior to such disposition, designate
any of its Subsidiaries, and any of the
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Company's Subsidiaries being acquired pursuant to such disposition that are not
Restricted Subsidiaries, as Unrestricted Subsidiaries, and (y) after such
disposition, designate any of its direct or indirect Subsidiaries as an
Unrestricted Subsidiary under the same conditions and in the same manner as the
Company under the terms of the Indenture.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"wholly owned Restricted Subsidiary" means any Restricted Subsidiary of
which all of the outstanding voting securities or other equity ownership
interest (other than directors qualifying or similar shares required to be held
by third parties in accordance with applicable law, not in any event to exceed 5
percent of the total outstanding voting securities) are owned by the Company or
any wholly owned Restricted Subsidiary of the Company.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Notes initially will be
represented by one or more permanent global certificates in definitive, fully
registered form (the "Global Note"). The Global Note will be deposited on the
date of issue with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") and registered in the name of a nominee of DTC.
Notes (i) originally purchased by or transferred to foreign purchasers or
(ii) held by QIBs who elect to take physical delivery of their certificates
instead of holding their interest through the Global Note (and which are thus
ineligible to trade through DTC) (collectively referred to herein as the
"Non-Global Purchasers") will be issued in registered form (the "Certificated
Note"). Upon the transfer to a QIB of any Certificated Note initially issued to
a Non-Global Purchaser, such Certificated Note will, unless the transferee
requests otherwise or the Global Note has previously been exchanged in whole for
Certificated Notes, be exchanged for an interest in the Global Note.
The Global Note. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Note, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Note will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Note will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. QIBs may hold their interests in the Global
Note directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Note for all purposes
under the Indenture. No beneficial owner of an interest in any of the Global
Note will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided by the Indenture for the Notes.
Payments of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of
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<PAGE> 61
the Company, the Trustee or any Paying Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Note, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Note as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interests in the Global Note held through such participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certified Note for any reason, including
to sell Notes to persons in states which require physical delivery of the Notes,
or to pledge such securities, such holder must transfer its interest in the
Global Note, in accordance with the normal procedures of DTC and with the
procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes. If DTC is at any time unwilling or unable to continue
as a depositary for the Global Note and a successor depositary is not appointed
by the Company within 90 days, Certificated Notes will be issued in exchange for
the Global Note.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Initial Notes were originally sold by the Company to the Initial
Purchasers pursuant to the Purchase Agreement dated June 5, 1997. The Initial
Purchasers subsequently resold the Initial Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act. As a condition to the
closing under the Purchase Agreement, the Company and the Initial Purchasers
entered into the Registration Rights Agreement on June 12, 1997 (the "Issue
Date") pursuant to which the Company agreed, for the benefit of the holders,
that it will, at its own cost, (i) within 60 days after the Issue Date, file a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to the Exchange Offer, (ii) use its best efforts to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 150 days after the Issue Date and (iii) use its best
efforts to consummate the Exchange Offer within 180 days after the Issue Date.
Upon the Exchange Offer Registration Statement being declared effective, the
Company will offer the Exchange Notes in exchange for surrender of the Initial
Notes. The Company will keep the Exchange Offer open for not less than 20
business days (or longer if required by applicable law) after the date the
notice of the Exchange Offer is mailed to the holders of the Initial Notes. For
each of the Initial Notes surrendered pursuant to the Exchange Offer, the holder
who surrendered such Initial Note will receive an Exchange Note having a
principal amount equal to that of the surrendered Initial Note. Interest on each
Exchange Note will accrue from the last interest payment date on which interest
was paid on the Initial Note surrendered in exchange therefor or, if no interest
has been paid on such Initial Note, from the Issue Date. Under existing
Commission interpretations, the Exchange Notes would be freely transferable by
holders thereof other than affiliates of the Company after the Exchange Offer
without further registration under the Securities Act if the holder of the
Exchange Notes represents that it is acquiring the Exchange Notes in the
ordinary course of business, that it has no arrangement or understanding with
any person to participate in the distribution of the Exchange Notes and that it
is not an affiliate of the Company, as such terms are interpreted by the
Commission; provided that broker-dealers ("Participating Broker-Dealers")
receiving Exchange Notes in the Exchange Offer will have a prospectus delivery
requirement with respect to resales of such Exchange Notes. The Commission has
taken the position that the Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Initial Notes)
with the prospectus contained in the Exchange Offer Registration Statement. The
Company has agreed for a period of 180 days after consummation of the Exchange
Offer to make available a prospectus meeting requirements of the Securities Act
to Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements for use in connection with any resale of such
Exchange Notes.
Each holder who wishes to exchange its Initial Notes for Exchange Notes in
the Exchange Offer will be required to represent that any Exchange Notes to be
received by it will be acquired in the ordinary course of its business and that
at the time of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
affiliate of the Company.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
applicable Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Initial Notes that were
acquired as a result of market-making activities or other trading activities, it
will be required to acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect such an Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days after the Issue
Date, or, under certain circumstances, if the Initial Purchasers shall so
request, the Company will at its cost, (a) as promptly as practicable, file a
shelf registration statement covering resales of the Initial Notes (a "Shelf
Registration Statement"), (b) use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act and (c)
use its best efforts to keep effective such Shelf Registration Statement until
the earlier of two years after the Issue Date and such time as all of the
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applicable Initial Notes have been sold thereunder. The Company will, in the
event of the filing of a Shelf Registration Statement, provide to each holder of
the Initial Notes copies of the prospectus which is a part of such Shelf
Registration Statement, notify each such holder when such Shelf Registration
Statement has become effective and take certain other actions as are required to
permit unrestricted resales of the Initial Notes. A holder that sells its
Initial Notes pursuant to a Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations).
Although the Company intends to file the registration statement described
above, there can be no assurance that such registration statement will be filed,
or, if filed, that it will become effective. If the Company fails to comply with
the above provisions or if such registration statement fails to become
effective, then, as liquidated damages, additional interest (the "Additional
Interest") shall become payable with respect to the Initial Notes as follows:
(i) if the Exchange Offer Registration Statement or Shelf Registration
Statement is not filed within 60 days following the Issue Date, Additional
Interest shall accrue on the Initial Notes over and above the stated
interest at a rate of 0.50% per annum for the first 90 days commencing on
the 61st day after the Issue Date, such Additional Interest rate increasing
by an additional 0.50% per annum at the beginning of each subsequent 90-day
period;
(ii) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective within 150 days following
the Issue Date, Additional Interest shall accrue on the Initial Notes over
and above the stated interest at a rate of 0.50% per annum for the first 90
days commencing on the 151st day after the Issue Date, such Additional
Interest rate increasing by an additional 0.50% per annum at the beginning
of each subsequent 90-day period; or
(iii) if (A) the Company has not exchanged all Initial Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to
180 days after the Issue Date or (B) the Exchange Offer Registration
Statement ceases to be effective at any time prior to the time that the
Exchange Offer is consummated or (C) if applicable, the Shelf Registration
Statement has been declared effective and such Shelf Registration Statement
ceases to be effective at any time prior to the third anniversary of the
Issue Date (unless all the Initial Notes have been sold thereunder), then
Additional Interest shall accrue on the Initial Notes over and above the
stated interest at a rate of 0.50% per annum for the first 90 days
commencing on (x) the 181st day after the Issue Date with respect to the
Initial Notes validly tendered and not exchanged by the Company, in the
case of (A) above, or (y) the day the Exchange Offer Registration Statement
ceases to be effective or usable for its intended purpose in the case of
(B) above, or (z) the day such Shelf Registration Statement ceases to be
effective in the case of (C) above, such Additional Interest rate
increasing by an additional 0.50% per annum at the beginning of each
subsequent 90-day period;
provided, however, that the Additional Interest rate on the Initial Notes may
not exceed in the aggregate 1.0% per annum; and provided further, that (1) upon
the filing of the Exchange Offer Registration Statement or Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of the
Exchange Offer Registration Statement or Shelf Registration Statement (in the
case of (ii) above), or (3) upon the exchange of Exchange Notes for all Initial
Notes tendered (in the case of clause (iii)(A) above), or upon the effectiveness
of the Exchange Offer Registration Statement which had ceased to remain
effective in the case of clause (iii)(B) above, or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in the case
of clause (iii)(C) above), Additional Interest on the Initial Notes as a result
of such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original interest payment dates
as the Initial Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Initial Notes multiplied by a fraction, the numerator of which is the number
of days such Additional Interest rate was
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applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
Following the consummation of the Exchange Offer, holders of the Initial
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Initial Notes will not have any further registration rights and
such Initial Notes will continue to be subject to certain transfer restrictions.
Accordingly, the liquidity of the market for such Initial Notes could be
adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Initial
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding
Initial Notes accepted in the Exchange Offer. Holders may tender some or all of
their Initial Notes pursuant to the Exchange Offer. However, Initial Notes may
be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Initial Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Initial Notes, (ii) the
issuance of the Exchange Notes has been registered under the Securities Act and
hence the Exchange Notes will not bear legends restricting the transfer thereof
and (iii) the holders of the Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Initial Notes in certain
circumstances relating to the timing of the Exchange Offer, all of which rights
will terminate when the Exchange Offer is terminated. The Exchange Notes will
evidence the same debt as the Initial Notes and will be entitled to the benefits
of the Indenture.
As of the date of this Prospectus, $225,000,000 aggregate principal amount
of Initial Notes were outstanding. This Prospectus and the Letter of Transmittal
are being mailed to persons who were holders of record of Initial Notes on the
close of business on the date of this Prospectus.
Holders of Initial Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Initial Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Initial Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Initial Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Initial Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Initial
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "-- Fees and Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Initial Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Initial Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on December 15, 1997. Interest on the Initial Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each June 15 and
December 15, commencing on December 15, 1997.
PROCEDURES FOR TENDERING
Only a holder of Initial Notes may tender such Initial Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Initial Notes and any other required documents, to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date. To be tendered
effectively, the Initial Notes, Letter of Transmittal and other required
documents must be completed and received by the Exchange Agent at the address
set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date. Delivery of the Initial Notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of such
book-entry transfer must be received by the Exchange Agent prior to the
Expiration Date.
By executing the Letter of Transmittal, each holder will make to the
Company the representations set forth above in the third paragraph under the
heading "-- Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF INITIAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR INITIAL NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
59
<PAGE> 66
Any beneficial owner whose Initial Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Initial Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Initial Notes listed therein, such Initial Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Initial Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Initial Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Initial Notes at the book-entry transfer facility, the DTC (the "Book-Entry
Transfer Facility"), for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the Book-Entry Transfer Facility's system may make book-entry
delivery of Initial Notes by causing such Book-Entry Transfer Facility to
transfer such Initial Notes into the Exchange Agent's account with respect to
the Initial Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Initial Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the Exchange Agent at its address set forth below on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures. Delivery
of documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Initial Notes and withdrawal of tendered
Initial Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Initial Notes not properly tendered or any Initial Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole discretion
to waive any defects, irregularities or conditions of tender as to particular
Initial Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Initial Notes must be cured within such time as
the Issuer shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Initial Notes, neither the
Issuer, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Initial Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Initial Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
60
<PAGE> 67
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available, (ii) who cannot deliver their Initial Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent or
(iii) who cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Initial Notes and the principal amount of Initial Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Initial Notes (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Initial Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Initial Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Initial Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Initial Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Initial Notes to be
withdrawn (the "Depositor"), (ii) identify the Initial Notes to be withdrawn
(including the certificate number(s) and principal amount of such Initial Notes,
or, in the case of Initial Notes transferred by book-entry transfer, the name
and number of the account at the Book-Entry Transfer Facility to be credited),
(iii) be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such Initial Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Initial Notes register the
transfer of such Initial Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Initial Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Initial Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Initial Notes so withdrawn are validly
retendered. Any Initial Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Initial Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
61
<PAGE> 68
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Initial
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Initial Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Initial Notes and
return all tendered Initial Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Initial Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Initial Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Initial Notes which have not been withdrawn.
EXCHANGE AGENT
The State Street Bank and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<C> <C>
By Mail: Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway Two International Plaza
Concourse Level, Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
Facsimile Transmission: Confirm by Telephone:
(617) 664-5739 (617) 664-5590
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
62
<PAGE> 69
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The expenses incurred in connection with the Exchange Offer will be paid by
the Company. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Initial Notes, which is face value, as reflected in the Company's accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company. The expenses of the Exchange Offer
will be expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Initial Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Initial
Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) so long as the Initial Notes are eligible for resale pursuant
to Rule 144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act in a transaction meeting the requirements of Rule 144A,
in accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Initial Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Initial Notes, where such
Initial Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
63
<PAGE> 70
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives a New Note for
its own account in exchange for Initial Notes must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions.
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. The Company recommends that each holder consult such holder's own tax
advisor as to the particular tax consequences of exchanging such holder's
Initial Notes for Exchange Notes, including the applicability and effect of any
state, local or foreign tax laws.
The Company believes that the exchange of Initial Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for federal
income tax purposes because the Exchange Notes will not be considered to differ
materially in kind or extent from the Initial Notes. Rather, the Exchange Notes
received by a holder will be treated as a continuation of the Initial Notes in
the hands of such holder. As a result, there will be no federal income tax
consequences to holders exchanging Initial Notes for Exchange Notes pursuant to
the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Initial Notes where such Initial Notes were acquired as
a result of market-making activities or other trading activities. The Company
has agreed that for a period of 180 days after the Expiration Date, they will
make this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1997 (90 days after the commencement of the Exchange Offer), all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such
64
<PAGE> 71
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
Participating Broker-Dealer and/or the purchasers of any such Exchange Notes.
Any Participating Broker-Dealer that resells the Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
EXPERTS
The consolidated financial statements as of September 30, 1996 and 1995 and
for each of the three years in the period ended September 30, 1996 included and
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are included
and incorporated by reference herein, and have been so included and incorporated
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby will be
passed upon for the Company by Kirkland & Ellis, Chicago, Illinois.
65
<PAGE> 72
INDEX TO FINANCIAL STATEMENTS
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
REFERENCE
---------
<S> <C>
Independent Auditors' Report -- Deloitte & Touche LLP....... F-2
Consolidated Balance Sheets as of September 30, 1996 and
1995...................................................... F-3
Consolidated Statements of Operations for the years ended
September 30, 1996, 1995 and 1994......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended September 30, 1996, 1995 and 1994............. F-5
Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995 and 1994......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Condensed Consolidated Balance Sheets as of March
31, 1997 and September 30, 1996........................... F-28
Unaudited Consolidated Statements of Operations for the six
months ended March 31, 1997 and 1996...................... F-29
Unaudited Consolidated Statements of Cash Flows for the six
months ended March 31, 1997 and 1996...................... F-30
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-31
</TABLE>
F-1
<PAGE> 73
INDEPENDENT AUDITORS' REPORT
Gaylord Container Corporation:
We have audited the accompanying consolidated balance sheets of Gaylord
Container Corporation and its subsidiaries (the Company) at September 30, 1996
and 1995 and the related consolidated statements of operations, of stockholders'
equity and of cash flows for each of the three years in the period ended
September 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at September 30,
1996 and 1995 and the results of its operations and its cash flows for each of
the three years in the period ended September 30, 1996 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
November 4, 1996
F-2
<PAGE> 74
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 39.2 $ 32.5
Trade receivables (less allowances of $6.9 million and
$6.5 million, respectively) (Note 9)................... 111.0 140.0
Inventories (Note 5)...................................... 70.4 73.1
Prepaid expenses.......................................... 2.2 2.8
Deferred income taxes (Note 8)............................ 5.1 49.6
Other..................................................... 8.2 8.3
------ ------
Total current assets................................... 236.1 306.3
Property -- net (Notes 6 and 14)............................ 612.3 640.0
Other assets:
Deferred charges (Note 7)................................. 18.6 24.0
Deferred income taxes (Note 8)............................ 16.8 --
Other (Notes 4 and 9)..................................... 49.2 17.7
------ ------
Total assets........................................... $933.0 $988.0
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 9)............. $ 11.3 $ 15.6
Trade payables............................................ 60.8 51.7
Accrued interest payable.................................. 27.3 9.7
Accrued and other liabilities (Note 10)................... 66.9 72.9
------ ------
Total current liabilities.............................. 166.3 149.9
Long-term debt (Note 9)..................................... 623.1 671.5
Other long-term liabilities (Note 10)....................... 29.1 27.5
Deferred income taxes (Note 8).............................. -- 25.9
Commitments and contingencies (Note 16)..................... -- --
Stockholders' equity (Notes 11, 12 and 13)
Class A common stock...................................... -- --
Capital in excess of par value............................ 173.5 172.6
Retained deficit (Note 9)................................. (46.1) (54.7)
Common stock in treasury -- at cost....................... (11.7) (0.4)
Recognition of minimum pension liability (Note 15)........ (1.2) (4.3)
------ ------
Total stockholders' equity............................. 114.5 113.2
------ ------
Total liabilities and stockholders' equity........... $933.0 $988.0
====== ======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 75
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
------------------------------------
1996 1995 1994
------ -------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................................................... $922.0 $1,051.4 $784.4
Cost of goods sold.......................................... 716.2 755.0 691.4
------ -------- ------
Gross margin................................................ 205.8 296.4 93.0
Selling and administrative costs............................ (99.1) (95.5) (81.0)
Non-recurring operating charges (Note 2).................... (8.1) (5.4) (15.5)
------ -------- ------
Operating earnings (loss).............................. 98.6 195.5 (3.5)
Interest expense -- net (Note 9)............................ (78.3) (86.1) (80.3)
Other income (expense) -- net............................... (0.2) 0.6 (0.2)
------ -------- ------
Income (loss) before income taxes........................... 20.1 110.0 (84.0)
Income tax (provision) benefit (Note 8)..................... (8.3) 24.2 --
------ -------- ------
Income (loss) before extraordinary item..................... 11.8 134.2 (84.0)
Extraordinary loss (Note 3)................................. (3.2) -- --
------ -------- ------
Net income (loss)...................................... $ 8.6 $ 134.2 $(84.0)
====== ======== ======
Earnings per common and common equivalent share:
Income (loss) before extraordinary item................... $ 0.22 $ 2.44 $(1.57)
Extraordinary loss (Note 3)............................... (0.06) -- --
------ -------- ------
Net income (loss)...................................... $ 0.16 $ 2.44 $(1.57)
====== ======== ======
Average number of common and common equivalent shares
outstanding............................................... 54.7 55.1 53.6
====== ======== ======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 76
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------
CLASS A CLASS B CAPITAL IN RETAINED TREASURY STOCK
-------------------- -------------------- EXCESS OF EARNINGS -------------------
SHARES DOLLARS SHARES DOLLARS PAR VALUE (DEFICIT) SHARES DOLLARS
------ ------- ------ ------- ---------- --------- ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993.... 47,510,789 $-- 5,951,427 $-- $169.4 $(104.9) 85,700 $ (0.8)
Net loss......................... -- -- -- -- -- (84.0) -- --
Options exercised................ 124,416 -- -- -- 0.7 -- -- --
Restricted stock -- net.......... 190,500 -- -- -- -- -- -- --
Adjustment of minimum pension
liability...................... -- -- -- -- -- -- -- --
Other............................ 685,154 -- (685,154) -- 0.4 -- (2,722) --
---------- --- ---------- --- ------ ------- --------- ------
Balance at September 30, 1994.... 48,510,859 -- 5,266,273 -- 170.5 (188.9) 82,978 (0.8)
Net income....................... -- -- -- -- -- 134.2 -- --
Options exercised................ 306,648 -- -- -- 1.5 -- -- --
Mandatory conversion of Class B
Common Stock (Note 12)......... 5,250,082 -- (5,250,082) -- -- -- -- --
Restricted stock -- net.......... 40,750 -- -- -- -- -- -- --
Adjustment of minimum pension
liability...................... -- -- -- -- -- -- -- --
Other............................ 16,191 -- (16,191) -- 0.6 -- (35,975) 0.4
---------- --- ---------- --- ------ ------- --------- ------
Balance at September 30, 1995.... 54,124,530 -- -- -- 172.6 (54.7) 47,003 (0.4)
Net income....................... -- -- -- -- -- 8.6 -- --
Stock repurchased................ -- -- -- -- -- -- 1,570,500 (11.6)
Options exercised................ 122,981 -- -- -- 0.6 -- -- --
Restricted stock -- net.......... 22,500 -- -- -- -- -- -- --
Adjustment of minimum pension
liability...................... -- -- -- -- -- -- -- --
Other............................ -- -- -- -- 0.3 -- (35,725) 0.3
---------- --- ---------- --- ------ ------- --------- ------
Balance at September 30, 1996.... 54,270,011 $-- -- $-- $173.5 $ (46.1) 1,581,778 $(11.7)
========== === ========== === ====== ======= ========= ======
<CAPTION>
TOTAL
MINIMUM STOCKHOLDERS'
PENSION EQUITY
LIABILITY (DEFICIT)
--------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Balance at September 30, 1993.... $(10.1) $ 53.6
Net loss......................... -- (84.0)
Options exercised................ -- 0.7
Restricted stock -- net.......... -- --
Adjustment of minimum pension
liability...................... 5.5 5.5
Other............................ -- 0.4
------ ------
Balance at September 30, 1994.... (4.6) (23.8)
Net income....................... -- 134.2
Options exercised................ -- 1.5
Mandatory conversion of Class B
Common Stock (Note 12)......... -- --
Restricted stock -- net.......... -- --
Adjustment of minimum pension
liability...................... 0.3 0.3
Other............................ -- 1.0
------ ------
Balance at September 30, 1995.... (4.3) 113.2
Net income....................... -- 8.6
Stock repurchased................ -- (11.6)
Options exercised................ -- 0.6
Restricted stock -- net.......... -- --
Adjustment of minimum pension
liability...................... 3.1 3.1
Other............................ -- 0.6
------ ------
Balance at September 30, 1996.... $ (1.2) $114.5
====== ======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 77
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
-----------------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Income (loss) before extraordinary item..................... $ 11.8 $ 134.2 $(84.0)
Adjustments to reconcile income (loss) to net cash provided
by operations:
Depreciation and amortization............................. 64.5 64.8 61.2
Non-cash interest expense................................. 31.2 46.7 41.3
Deferred income taxes..................................... 1.8 (28.0) --
Non-recurring charges..................................... 8.1 5.4 --
Asset write-down.......................................... -- -- 13.4
Acquisition restructuring expenditures.................... (0.7) (1.0) (2.9)
Change in current assets and liabilities, excluding
acquisitions and dispositions:
Receivables............................................ 29.4 (18.2) (18.6)
Inventories............................................ (1.7) (13.5) 1.6
Prepaid expenses and other current assets.............. 0.5 (3.2) (0.6)
Accounts payable and other accrued liabilities......... 21.3 8.2 15.6
Other -- net.............................................. (1.8) (1.2) 2.7
------- ------- ------
Net cash provided by operations............................. 164.4 194.2 29.7
------- ------- ------
CASH FLOWS FROM INVESTMENTS:
Capital expenditures...................................... (54.8) (58.9) (40.4)
Capitalized interest...................................... (0.8) (2.3) (0.9)
Proceeds from asset sales................................. 2.6 3.5 4.5
Other investments -- net.................................. (0.5) (3.6) 1.9
------- ------- ------
Net cash used for investments............................... (53.5) (61.3) (34.9)
------- ------- ------
CASH FLOWS FROM FINANCING:
Treasury stock purchases.................................. (11.6) -- --
Early extinguishment of debt.............................. (77.7) (89.9) --
Senior debt repayments.................................... (15.6) (25.8) (5.4)
Debt issuance costs....................................... -- (3.4) --
Other financing -- net.................................... 0.7 1.3 0.4
------- ------- ------
Net cash used for financing................................. (104.2) (117.8) (5.0)
------- ------- ------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS............. 6.7 15.1 (10.2)
Cash and equivalents, beginning of year..................... 32.5 17.4 27.6
------- ------- ------
Cash and equivalents, end of year........................... $ 39.2 $ 32.5 $ 17.4
======= ======= ======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 78
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL/SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations -- Gaylord Container Corporation (including its
subsidiaries, the Company) is engaged in the integrated production, conversion
and sale of paper packaging products. The Company is a major national
manufacturer and distributor of corrugated containers, corrugated sheets,
containerboard, unbleached kraft paper, multiwall bags and, through a wholly
owned, independently operated subsidiary, specialty chemicals. Corrugated
containers and sheets, multiwall bags and solid fibre products collectively
represent approximately 85 percent of the Company's net sales while
containerboard and unbleached kraft paper represent approximately 15 percent of
such sales. Corrugated containers are produced to customer order primarily for
use in shipping their products and as point-of-sale displays. Containerboard,
consisting of linerboard and corrugating medium, is the principal raw material
used to manufacture corrugated containers and corrugated sheets. The Company
also produces unbleached kraft paper which it converts into multiwall bags or,
through a joint venture, into grocery bags and sacks or sells to independent
converters.
The Company's facilities, which are located throughout the United States,
consist of three containerboard and paper mills, 14 corrugated container plants,
three sheet feeder plants, two multiwall bag plants, a preprint and graphics
center, a cogeneration facility and, through a wholly owned, independently
operated subsidiary, a specialty chemical facility.
Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from such estimates.
Summary of Significant Accounting Policies -- The Company's accounting policies
conform to generally accepted accounting principles. Significant policies
followed are described below:
Basis of Consolidation -- The consolidated financial statements at
September 30, 1996 and 1995 and for the years ended September 30, 1996 (Fiscal
1996), September 30, 1995 (Fiscal 1995) and September 30, 1994 (Fiscal 1994)
include all of the accounts of the Company after elimination of intercompany
transactions and balances. The Company operates on a 52/53-week fiscal year.
Fiscal 1996 is a 53-week fiscal year, while Fiscal 1995 and Fiscal 1994 are
52-week fiscal years. Certain amounts for Fiscal 1995 and Fiscal 1994 have been
reclassified to conform with the current year presentation.
Revenue Recognition -- Sales are recognized when the Company's products are
shipped. Shipments to companies with reciprocal purchase agreements (Exchange
Partners) are not recognized as sale transactions in the statement of
operations. In the balance sheet, however, trade receivables due from and trade
payables due to Exchange Partners are not eliminated because no contractual
right of offset exists.
Cash and Equivalents -- The Company considers all highly liquid debt
instruments, including time deposits, bank repurchase agreements and commercial
paper, with an original maturity of three months or less, to be cash
equivalents.
Inventories are stated at the lower of cost or market value. Cost includes
materials, transportation, direct labor and manufacturing overhead. Cost is
determined by the last-in, first-out (LIFO) method of inventory valuation.
Property is stated at cost, including interest expense capitalized during
construction periods. Maintenance and repairs are charged to expense as
incurred. The Company reviews its property and equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable.
Depreciation is computed using the straight-line method over estimated
useful lives ranging from 10 to 45 years for buildings and improvements and 3 to
20 years for machinery and equipment.
F-7
<PAGE> 79
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Financing Costs -- Costs incurred in connection with the issuance
of long-term debt or other financing arrangements are capitalized. Amortization
of deferred financing costs is computed using the straight-line method over the
term of the related debt and is reported as interest expense.
Start-Up Costs incurred in bringing major new or expanded facilities into
operation are capitalized and charged to expense over periods of not more than
five years.
Investment in Affiliates -- The equity method of accounting is applied to
affiliates in which the Company's ownership interest is greater than 20 percent
but less than or equal to 50 percent. Goodwill is recognized for investments in
affiliates where cost exceeds the equity in net assets acquired. In general,
goodwill is amortized over the average remaining useful life of the
unconsolidated affiliate's property, plant and equipment or such shorter period
as circumstances indicate. The Company's proportionate share of earnings in
unconsolidated affiliates accounted for by the equity method, net of
amortization of goodwill, is included in "Other income (expense) -- net" on the
Company's income statement. The cost method of accounting is applied to
affiliates in which the Company's ownership interest is less than or equal to 20
percent.
Income Taxes -- Deferred income taxes are provided using the liability
method for those items for which the period of reporting differs for financial
reporting and income tax purposes in accordance with Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (FAS No. 109), which was adopted
effective October 1, 1992 (see Note 8).
Business Segment -- The Company manufactures paper packaging products
including corrugated containers, corrugated sheets, preprinted linerboard,
containerboard, unbleached kraft paper and multiwall bags.
Net Income Per Common and Common Equivalent Share is based on the weighted
average number of common shares outstanding during the period plus the weighted
average number of common shares issuable upon exercise of outstanding stock
options (see Note 13) for which the market price of the related stock exceeds
the exercise price of the option, less shares which could have been purchased
with the assumed proceeds from the sale of such stock (treasury stock method).
Pending Accounting Standard -- The Company will adopt the financial
disclosure provisions of Financial Accounting Standard No. 123 "Accounting for
Stock-Based Compensation" (FAS No. 123) in fiscal 1997. Adoption of the
financial disclosure provisions of FAS No. 123 will not affect the Company's
financial position, results of operations or cash flows.
2. NON-RECURRING OPERATING CHARGES
In the fourth quarter of Fiscal 1996, the Company recorded an $8.1 million
pre-tax charge for costs associated with a staff reduction program. The staff
reduction program, which eliminated approximately 8 percent of the Company's
salaried positions, will reduce future administrative and overhead costs. In
Fiscal 1995, the Company recorded a $5.4 million non-recurring charge for costs
associated with an early retirement option accepted by certain hourly employees
at the Antioch, California mill, which will reduce future unit labor costs. In
Fiscal 1994, the Company recorded non-recurring operating charges of $15.5
million for asset write-downs and other costs associated with the relocation,
closure or sale of certain converting facilities.
3. EXTRAORDINARY ITEM
During Fiscal 1996, the Company repurchased and retired approximately $75.2
million principal amount of its publicly traded debt securities. In conjunction
with the repurchases, approximately $1.5 million of deferred financing fees were
written off. These transactions resulted in an extraordinary loss of $3.2
million, net of an income tax benefit of $2.3 million.
F-8
<PAGE> 80
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVESTMENTS IN AFFILIATES
On July 12, 1996, the Company contributed grocery bag manufacturing net
assets with a carrying value of $32.3 million (of which Property -- net
accounted for $25.1 million), to S&G Packaging Company, L.L.C. (S&G Packaging),
a joint venture with Stone Container Corporation, in exchange for a 35 percent
equity interest in the new company. The Company has the option to purchase an
additional 15 percent interest within the next five years. Beginning July 13,
1996, the financial results of S&G Packaging were reported on the equity method
of accounting. Product sales to S&G Packaging during Fiscal 1996 were
approximately $6.8 million.
The Company owns a 50 percent interest in Gaylord Central National, Inc.
(GCN), a joint venture corporation formed with Central National-Gottesman, Inc.
GCN is the primary agent for the Company's export sales of containerboard.
Product sales to GCN during Fiscal 1996, Fiscal 1995 and Fiscal 1994 were
approximately $38.2 million, $62.0 million and $16.6 million, respectively.
The Company owns a 50 percent ownership interest in a corporation that
produces corrugated containers in Mexico. Product sales to this company during
Fiscal 1996 and Fiscal 1995 were approximately $6.4 million and $4.1 million,
respectively.
5. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Finished products........................................... $16.3 $ 17.4
In process.................................................. 31.3 34.8
Raw materials............................................... 8.5 15.1
Supplies.................................................... 14.3 15.8
----- ------
70.4 83.1
LIFO valuation adjustment................................... -- (10.0)
----- ------
Total.................................................. $70.4 $ 73.1
===== ======
</TABLE>
In Fiscal 1996, the Company's total inventory quantities decreased. At the
same time, inventory costs declined substantially, principally due to lower raw
material costs. As a result of the combination of quantity and cost decreases,
the LIFO valuation adjustment was reduced to zero. Approximately $1.4 million of
the change was due to the decrease in quantities, which caused "Cost of goods
sold" to be less than it would have been if such decrease had not occurred.
As a result of a LIFO inventory liquidation in Fiscal 1994, the Company's
"Cost of goods sold" in Fiscal 1994 was approximately $0.2 million less than it
would have been had a liquidation not occurred.
F-9
<PAGE> 81
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY -- NET
Property consists of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Land...................................................... $ 15.5 $ 15.4
Buildings and improvements................................ 127.4 121.5
Machinery and equipment................................... 848.5 841.8
Construction-in-progress.................................. 41.9 35.2
-------- --------
1,033.3 1,013.9
Accumulated depreciation.................................. (421.0) (373.9)
-------- --------
Total................................................ $ 612.3 $ 640.0
======== ========
</TABLE>
7. DEFERRED CHARGES
Deferred charges consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Deferred financing costs................................... $ 40.1 $ 39.9
Capitalized start-up costs................................. -- 5.0
Intangibles................................................ 4.2 4.7
------ ------
44.3 49.6
Accumulated amortization................................... (25.7) (25.6)
------ ------
Total................................................. $ 18.6 $ 24.0
====== ======
</TABLE>
Amortization of deferred charges during Fiscal 1996, Fiscal 1995 and Fiscal
1994 was approximately $4.3 million, $7.4 million and $6.3 million,
respectively. During Fiscal 1996, the Company wrote off approximately $1.5
million of deferred financing fees related to the repurchase and retirement of
its publicly traded debt securities (see Note 3).
F-10
<PAGE> 82
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES
The components of the deferred income tax liabilities and assets, current
and non-current, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Current
Deferred tax assets:
Net operating loss....................................... $ -- $ 42.8
Inventory valuation...................................... 5.1 6.8
------ ------
Deferred tax asset......................................... $ 5.1 $ 49.6
====== ======
Non-Current
Deferred tax assets:
Net operating loss....................................... $ 83.7 $ 93.6
Original issue discount.................................. 59.2 --
Asset write-down......................................... 41.0 49.0
Debt restructuring expenses.............................. 2.4 3.3
Other long-term liabilities.............................. 5.6 2.4
Deferred compensation.................................... 5.5 8.4
Other.................................................... 11.8 8.1
------ ------
Sub-total............................................. 209.2 164.8
------ ------
Deferred tax liabilities:
Depreciation............................................. 178.6 177.2
Capitalized interest..................................... 12.2 11.9
Other.................................................... 1.6 1.6
------ ------
Sub-total............................................. 192.4 190.7
------ ------
Net non-current deferred tax asset (liability)............. $ 16.8 $(25.9)
====== ======
</TABLE>
The current income tax provision for Fiscal 1996 and Fiscal 1995,
principally for state income taxes and Alternative Minimum Tax (AMT), was $4.2
million and $3.8 million, respectively. The deferred income tax provision for
Fiscal 1996 was $1.8 million, net of the deferred tax benefit related to the
extraordinary loss (see Note 3), and the deferred tax benefit for Fiscal 1995
was $28.0 million. Deferred income taxes result from temporary differences in
the period of reporting revenues, expenses and credits in the financial
statements and
F-11
<PAGE> 83
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income tax return. Such temporary differences for Fiscal 1996, Fiscal 1995 and
Fiscal 1994 and their related deferred income tax provision (benefit) follow:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Depreciation expense.................................. $ 1.4 $ 5.8 $ 7.3
Original issue discount............................... (18.1) -- --
Asset write-down...................................... 8.0 (0.6) (2.1)
Restructuring fees.................................... 0.9 0.9 (0.2)
Inventory differences................................. 1.7 (0.8) (2.7)
Net operating loss.................................... 11.6 45.6 (33.0)
Change in valuation allowance......................... -- (75.3) 32.9
Other -- net.......................................... (3.7) (3.6) (2.2)
------ ------ ------
Total deferred income tax provision (benefit)....... $ 1.8 $(28.0) $ --
====== ====== ======
</TABLE>
Income tax benefits that would have been recognized in Fiscal 1994 were
offset by a change in the valuation allowance. This was due to substantial
uncertainty regarding realization of such benefits as a result of the Company's
substantial net operating loss carryforwards. In Fiscal 1995, the future
realization of tax benefits relating to prior net operating losses became more
likely than not due to the Company's improved operating performance and future
economic outlook. Thus in Fiscal 1995, the Company reduced the valuation
allowance to zero.
In Fiscal 1996, the Company reclassified approximately $41 million of its
"Net operating loss" deferred tax asset to "Original issue discount." The
"Original issue discount" is not deductible on the Company's income tax return
until the related debt issue is repaid.
Although realization is not assured, management believes it is more likely
than not that all of the Company's deferred tax assets will be realized.
Management believes anticipated future taxable income, including but not limited
to the reversal of existing temporary differences and implementation of tax
planning strategies, if needed, will be sufficient to allow the future
realization of its deferred tax assets at September 30, 1996.
At September 30, 1996, the Company had cumulative regular net operating
loss carryforwards of approximately $211 million, which may be carried forward
and expire at various dates through the year 2010. At September 30, 1996, AMT
credits of approximately $7 million for tax purposes may be carried forward
indefinitely to be applied against regular tax.
F-12
<PAGE> 84
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of income tax provision (benefit) to the amount computed
by applying the statutory Federal income tax rates to the income (loss) before
taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------
1996 1995 1994
----------------------- ----------------------- -----------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
INCOME INCOME LOSS
BEFORE BEFORE BEFORE
AMOUNT INCOME TAXES AMOUNT INCOME TAXES AMOUNT INCOME TAXES
------ ------------- ------ ------------- ------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Federal statutory income tax..... $ 7.0 35% $ 38.5 35% $(29.4) (35)%
State income taxes -- net of
Federal benefit................ 1.4 7 6.6 6 (4.2) (5)
Limitation on use of net
operating losses............... -- -- -- -- 33.6 40
Reduction in valuation
allowance...................... -- -- (75.3) (68) -- --
Other............................ (0.1) -- 6.0 5 -- --
----- -- ------ --- ------ ---
Total income tax provision
(benefit)................. $ 8.3 42% $(24.2) (22)% $ -- --%
===== == ====== === ====== ===
</TABLE>
9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Revolving Credit Facility (a)............................... $ -- $ --
Trade Receivables Facility (b).............................. -- --
Senior Notes, 11.5%, due May 2001 (d)....................... 179.7 225.0
Pollution control and industrial revenue bonds, interest at
5.7% to 8.3%, due at various dates to 2008 (e)............ 11.6 12.2
Capital lease obligations, interest at 7.6% to 11.8%, due at
various dates to 2002 (c)................................. 16.2 19.0
Other senior debt, interest at 6.5% to 8.75%, due at various
dates to 1999............................................. 22.6 29.3
------ ------
Total senior debt.................................... 230.1 285.5
Senior Subordinated Discount Debentures, 12.75%, due May
2005 (net of unamortized discount of $32.6 million in
Fiscal 1995) (f).......................................... 404.3 401.6
------ ------
Total debt........................................... 634.4 687.1
Less current maturities..................................... (11.3) (15.6)
------ ------
Total................................................ $623.1 $671.5
====== ======
</TABLE>
Scheduled aggregate annual principal payments due on long-term debt during
each of the next five years are (in millions) $11.3, $14.2, $8.6, $5.7 and
$183.6, respectively.
(a) In Fiscal 1996, the Company amended its bank credit agreement (as
amended, the Bank Credit Agreement) to (i) allow the S&G Packaging joint
venture, (ii) allow the Company to repurchase its common stock and (iii) modify
certain financial covenants allowing the Company greater financial flexibility.
In Fiscal 1995, the Company amended and restated its prior bank credit
agreement. Among other changes, the amendment increased the revolving credit
facility from $66 million to $175 million, extended the maturity date of the
revolving credit facility from September 1997 to June 2000, allowed the purchase
or
F-13
<PAGE> 85
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redemption of up to $100 million of public debt securities, increased the level
of permitted capital expenditures by approximately $25 million per year for the
next two years, allowed 100 percent carry-over of unexpended capital expenditure
amounts and reduced the interest rate charged on outstanding borrowings by 0.5
percent. At September 30, 1996, the Bank Credit Agreement was comprised of the
$175 million revolving credit facility due in June 2000 (the Revolving Credit
Facility), and a $7.3 million standby letter of credit facility with a final
maturity in April 1999 (the L/C Facility).
The Company is required to maintain and is in compliance with certain
financial covenants including tests for current ratio, minimum net worth and
minimum interest coverage ratio. The level of the Company's annual capital
expenditures is also limited by the Bank Credit Agreement. All obligations under
the Bank Credit Agreement are secured by liens on substantially all of the
Company's assets. In connection with a trade receivables-backed revolving credit
facility, the Company sells on an ongoing basis substantially all of its
accounts receivable to a wholly owned, special purpose subsidiary, and such
accounts receivable are not subject to a lien under the Bank Credit Agreement.
See (b) below.
The Revolving Credit Facility provides the ability to borrow funds and to
repay such funds in whole or in part from time to time without incurring any
prepayment penalty. Up to $25 million of standby letters of credit, which reduce
the facility by a like amount, may be issued under this agreement. At September
30, 1996, no amounts were outstanding under the Revolving Credit Facility,
$169.2 million of credit was available and $5.8 million of standby letters of
credit were outstanding. The highest outstanding principal balance under the
facility during Fiscal 1996 was $2.5 million, and the weighted average interest
rate was 10.2 percent. A commitment fee of 0.375 percent per year is paid on the
unused portion of the facility.
The L/C Facility provides for standby letter of credit loans which are
incurred only in the event that the standby letters of credit are drawn due to
nonpayment of principal or interest on certain debt instruments, which are
secured by these standby letters of credit. The standby letter of credit
commitment is permanently reduced periodically to reflect principal repayments.
The Company has the right to prepay the standby letter of credit loans in whole
or in part from time to time without incurring any prepayment penalty. At
September 30, 1996, the aggregate standby letter of credit commitment was
approximately $7.3 million. A fee of 2.75 percent per annum is payable on
outstanding letters of credit under both the Revolving Credit Facility and the
L/C Facility.
The Company has various interest rate options for Bank Credit Agreement
borrowings based on one or a combination of the following three rates: (i) prime
rate loans at the prime rate in effect from time to time plus a borrowing margin
of 1.5 percent per annum, (ii) certificate of deposit (CD) rate loans at the
relevant CD rate plus a borrowing margin of 2.625 percent per annum, or (iii)
Eurodollar rate loans at the relevant Eurodollar rate plus a borrowing margin of
2.5 percent per annum. The Company has the option of incurring Eurodollar and CD
rate loans for 30, 60, 90, 120 or 180-day periods. Interest is payable monthly.
(b) In September 1993, the Company established a wholly owned, special
purpose subsidiary, Gaylord Receivables Corporation (GRC). Concurrently, GRC and
a group of banks established a $70 million trade receivables-backed revolving
credit facility (the Trade Receivable Facility) due in September, 1999. In
accordance with the provisions of this program, GRC purchases (on an on-going
basis) substantially all of the accounts receivable of the Company. GRC
transfers the accounts receivable to a trust in exchange for certain trust
certificates representing ownership interests in the accounts receivable. The
trust certificates received by GRC from the trust are solely the assets of GRC.
In the event of liquidation of GRC, the creditors of GRC would be entitled to
satisfy their claims from GRC's assets prior to any distribution to the Company.
GRC has various interest rate options for Trade Receivable Facility
borrowings based on one or a combination of the following two rates: (i) prime
rate loans at the higher of (a) the prime rate in effect from time to time or
(b) the Federal Funds Rate plus 0.5 percent per annum, or (ii) LIBOR rate loans
at the relevant LIBOR rate plus a borrowing margin of 0.75 percent per annum.
Interest is payable monthly. GRC is
F-14
<PAGE> 86
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
obligated to pay a commitment fee of 0.5 percent per annum on the unused credit
available under the Trade Receivable Facility. Credit availability under the
Trade Receivable Facility is based on a borrowing base formula (as defined). As
a result, the full amount of the facility may not be available at all times. At
September 30, 1996, no amounts were outstanding under the Trade Receivable
Facility and $60.3 million of credit was available to GRC pursuant to the
borrowing base formula. The highest outstanding principal balance under the
Trade Receivable Facility during Fiscal 1996 was $30.0 million and the weighted
average interest rate was 8.2 percent. At September 30, 1996 and 1995, the
Company's consolidated balance sheet included $91.8 million and $118.8 million,
respectively, of accounts receivable sold to GRC.
(c) In Fiscal 1996 and Fiscal 1995, in conjunction with the $250 million
capital expenditure program, the Company entered into various capital leases
with an aggregate value of approximately $1.1 million and $29.4 million,
respectively, to finance equipment at its converting facilities. The capital
leases have terms ranging from five to seven years. The capital leases contain
certain covenants which are standard for these types of obligations, but do not
contain any operating or financial covenants.
(d) In May 1993, the Company issued $225 million aggregate principal amount
of 11-1/2% Senior Notes Due 2001 (the Senior Notes). The Senior Notes are
general unsecured obligations of the Company and rank senior in right of payment
to the Subordinated Discount Debentures (as defined in (f) below) and all other
existing and future subordinated indebtedness of the Company. The Senior Notes
rank pari passu with all senior debt of the Company, including indebtedness
under the Bank Credit Agreement. Indebtedness under the Bank Credit Agreement,
however, is secured by liens on substantially all of the assets of the Company.
Interest on the Senior Notes is payable semiannually on May 15 and November 15.
The Senior Notes will mature on May 15, 2001 and are subject to redemption on or
after May 15, 1997 at the option of the Company, in whole or in part, at
declining redemption prices commencing at 104.93 percent of the principal amount
and declining to 100 percent of the principal amount at May 15, 2000 and
thereafter, plus accrued interest to the date of redemption. During Fiscal 1996,
the Company repurchased and retired $45.3 million principal amount of the Senior
Notes (see Note 3).
Upon the occurrence of a change of control (as defined), each holder of the
Senior Notes has the right to require the Company to repurchase such holder's
Senior Notes at a price equal to 101 percent of the principal amount thereof,
plus accrued interest to the date of repurchase. In addition, the Company will
be required to make an offer to repurchase the Senior Notes at 100 percent of
the principal amount, plus accrued interest to the date of repurchase, in the
event of certain asset sales.
(e) The pollution control and industrial revenue bonds were assumed by the
Company from Crown Zellerbach Corporation (Crown Zellerbach). The Company also
acquired a note receivable from Crown Zellerbach for an amount and with terms
identical to those of the bonds. At September 30, 1996 and 1995, such note
receivable was approximately $11.6 million and approximately $12.2 million,
respectively, and was classified as "Other assets."
(f) In May 1993, the Company issued approximately $434.2 million aggregate
principal amount (approximately $300 million of gross proceeds) of 12-3/4%
Senior Subordinated Discount Debentures Due 2005 (the Subordinated Discount
Debentures). The Subordinated Discount Debentures are general unsecured
obligations of the Company and are subordinated in right of payment to all
senior debt of the Company. The Subordinated Discount Debentures were issued at
approximately 69 percent of their principal amount. Commencing May 15, 1996,
interest will accrue until maturity on the Subordinated Discount Debentures at
the rate of 12.75 percent per annum. Interest on the Subordinated Discount
Debentures is payable semiannually on May 15 and November 15, commencing
November 15, 1996. The Subordinated Discount Debentures will mature on May 15,
2005 and are subject to redemption on or after May 15, 1998 at the option of the
Company, in whole or in part, at declining redemption prices commencing at
106.38 percent of the principal amount and declining to 100 percent of the
principal amount at May 15, 2003 and thereafter, plus accrued interest to the
date of redemption. During Fiscal 1996, the Company repurchased on the open
F-15
<PAGE> 87
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
market and retired approximately $29.9 million principal amount of the
Subordinated Discount Debentures (see Note 3).
Upon the occurrence of a change of control (as defined), each holder of the
Subordinated Discount Debentures has the right to require the Company to
repurchase such holder's Subordinated Discount Debentures at a price equal to
101 percent of the principal amount thereof, plus accrued interest to the date
of repurchase. In addition, the Company will be required to make an offer to
repurchase the Subordinated Discount Debentures at 100 percent of the principal
amount, or accreted value thereof, plus accrued interest to the date of
repurchase, in the event of certain asset sales.
The Company has various restrictions under (a), (d) and (f) which limit,
among other things, its ability to (i) incur additional obligations for money
borrowed, (ii) incur certain liens on the Company's assets, (iii) make capital
expenditures, (iv) incur guarantees, (v) acquire the assets or capital stock of
other businesses, (vi) dispose of any material assets constituting collateral,
(vii) make any voluntary prepayments of any indebtedness for money borrowed,
(viii) pay, declare, or distribute dividends on or repurchase its capital stock
or warrants and (ix) enter into certain transactions with affiliates.
10. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Current
Accrued salaries and wages.................................. $27.0 $ 39.6
Other....................................................... 39.9 33.3
----- ------
Total current............................................. 66.9 72.9
----- ------
Long-term
Accrued acquisition restructuring costs..................... 1.3 2.0
Accrued pension expense..................................... 17.3 13.1
Casualty insurance liabilities.............................. 3.4 5.5
Other....................................................... 7.1 6.9
----- ------
Total long-term........................................... 29.1 27.5
----- ------
Total..................................................... $96.0 $100.4
===== ======
</TABLE>
11. PREFERRED STOCK
The Company is authorized to issue up to 25,000,000 shares of preferred
stock. The right of the holders of Class A Common Stock (see Note 12) voting as
a class are not to be limited by the grant of voting rights to any series of
preferred stock. The Company's Certificate of Incorporation prohibits the
issuance of non-voting preferred stock.
12. COMMON STOCK
At September 30, 1996 and 1995, the Company had authorized capital stock of
125,000,000 shares of Class A Common Stock, par value $.0001 per share (Class A
Common Stock), of which 54,270,011 shares and 54,124,530 shares were issued,
respectively, and 52,688,233 shares and 54,077,527 shares were outstanding,
respectively.
F-16
<PAGE> 88
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At September 30, 1996 and 1995, the Company had authorized capital stock of
15,000,000 shares of Class B Common Stock, par value $.0001 per share (Class B
Common Stock and together with the Class A Common Stock, the Common Stock), of
which no shares were issued and outstanding. On July 31, 1995, all of the
Company's 5,250,082 then outstanding shares of Class B Common Stock
automatically converted into an equal number of shares of Class A Common Stock.
The Company has outstanding Warrants to obtain one share of Class A Common
Stock per Warrant. At the time the Company issued the Warrants it also issued an
equal number of shares of Class A Common Stock to the Warrant Trustee for
issuance upon exercise of the Warrants (the Trust Stock). The Warrants are
exercisable only for the shares of Trust Stock held by the Warrant Trustee and
the Company has no obligation to issue or deliver shares of stock pursuant to
the Warrants. The Warrant Trustee has agreed to hold the Trust Stock in trust
and to deliver shares of Trust Stock upon exercise of the Warrants by the
holders thereof or exchange of the Warrants on behalf of the Company. The
Warrant Trustee will vote all shares of Trust Stock in proportion to all other
votes by holders of the Common Stock, except upon the occurrence of certain
votes (as defined).
In June 1995, the Company redeemed 25 percent of its 31,845,533 outstanding
Warrants, and subsequently, a portion of the remaining Warrants were exchanged
pursuant to a "Special Exercise on July 31, 1995." As a result, a total of
13,836,754 Warrants were exchanged for Class A Common Stock in Fiscal 1995.
The remaining 18,008,701 Warrants became exercisable on July 31, 1996 and
expire on November 2, 2002. Each Warrant is exercisable into one share of Class
A Common Stock at an exercise price of $.0001 per Warrant, which amount was paid
with a portion of the consideration received from exchanging noteholders and is
non-refundable. The Company will have the option to redeem any or all of the
unexercised Warrants for one share of Class A Common Stock or for cash at any
time at $16.65 per share.
In June 1995, the Board of Directors adopted a stockholders Rights
Agreement that provides for the distribution of one Preferred Share Purchase
Right on each share of Class A Common Stock. Generally, the rights become
exercisable after a person or group announces a tender offer for, or acquires,
15 percent or more of the outstanding Class A Common Stock. In that event, each
right becomes exercisable to purchase one one-hundredth of a share of junior
participating preferred stock for $50. If 15 percent of the outstanding Class A
Common Stock is acquired, each right (other than the rights held by the
acquiring person) becomes exercisable to purchase, for $50, shares of Class A
Common Stock with a market value of $100. The rights will expire on June 30,
2005 and may be redeemed by the Company for $0.0001 per right at any time prior
to the date on which 15 percent or more of the Class A Common Stock is acquired.
In the third quarter of Fiscal 1996, the Board authorized the repurchase of
up to 6,000,000 shares of Class A Common Stock and canceled a February 1989
authorization for the repurchase of up to 500,000 shares of Class A Common
Stock. During Fiscal 1996, the Company repurchased 1,570,500 shares of Class A
Common Stock and may repurchase additional shares from time to time on the open
market. Shares repurchased under the program are held as treasury stock. At
September 30, 1996 and 1995, 1,581,778 shares and 47,003 shares, respectively,
of Class A Common Stock were held as treasury stock.
In July 1994, the Company established a stock purchase plan (the Plan) for
all full-time employees. The Plan permits employees to invest up to 10 percent
of their after-tax compensation (as defined) for the purchase of shares of Class
A Common Stock. All brokerage fees for the purchase of such shares are paid by
the Company. During Fiscal 1996, Fiscal 1995 and Fiscal 1994 the Company issued
35,725 shares, 35,975 shares and 2,722 shares, respectively, of Class A Common
Stock held as treasury stock to satisfy employee purchases pursuant to the Plan.
The Company neither declared nor paid dividends on its Common Stock during
Fiscal 1996, Fiscal 1995 or Fiscal 1994. The Company does not currently intend
to pay cash dividends on its Common Stock, but intends instead to retain future
earnings for reinvestment in the business and for repayment of debt. At
F-17
<PAGE> 89
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
September 30, 1996, the Company was prohibited from declaring or paying cash
dividends on its Common Stock, except under certain limited circumstances (see
Note 9).
13. STOCK OPTION PLANS
The Company maintains three stock-based plans pursuant to which stock
options may be granted at no less than the market price of the Class A Common
Stock on the date of grant: (i) the 1989 Long-Term Incentive Plan (the 1989
Plan), (ii) the 1987 Key Employee Stock Option Plan (the 1987 Plan) and (iii)
the Outside Director Stock Option Plan (the Director Option Plan) which was
terminated in September 1991.
1989 Plan -- The 1989 Plan authorizes the Company to grant options
(including both incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the Code), and nonqualified stock
options), stock appreciation rights, stock indemnification rights, restricted
stock and performance awards to officers and key employees. The Company has
granted only nonqualified stock options and restricted stock under the 1989
Plan. At September 30, 1996, the Company was authorized to issue 2,279,833
shares of Class A Common Stock, and had outstanding nonqualified stock options
covering 1,115,713 shares of Class A Common Stock at exercise prices from $2.56
per share to $11.63 per share. During Fiscal 1996, the Company granted
nonqualified stock options under the 1989 Plan covering 25,000 shares of Class A
Common Stock (none of which have been forfeited) at exercise prices ranging from
$7.31 per share to $9.00 per share. In general, the options have 10-year terms
and vest at the rate of 33 1/3 percent per year commencing approximately one
year after the date of grant so long as the optionee remains continuously in the
employ of the Company or one of its subsidiaries; provided, however, that 100
percent of such options will vest immediately upon a change in control of the
Company (as defined) or the optionee's death or disability.
At September 30, 1996, options to purchase 839,559 shares of Class A Common
Stock at exercise prices ranging from $2.56 per share to $10.88 per share were
exercisable, 282,078 options had been exercised and 371,217 shares were
available for future grants under the 1989 Plan.
At September 30, 1996, the Company had granted 510,825 restricted shares of
Class A Common Stock under the 1989 Plan. Such shares are restricted in that
unvested shares will be forfeited in the event that the optionee's employment
terminates other than due to death, disability or retirement. The restricted
shares will vest 100 percent in the event of a change in control of the Company
(as defined) or upon the recipient's retirement, death or disability. During
Fiscal 1996, the Company awarded 42,100 restricted shares of Class A Common
Stock (200 of which have been forfeited). As to the restricted shares granted
during Fiscal 1996, 100 shares, 11,800 shares, 20,000 shares, and 10,000 shares
will become 100 percent vested in fiscal 1997, fiscal 1998, fiscal 1999, and
fiscal 2001 respectively. As to 468,925 restricted shares granted prior to
Fiscal 1996, 414,525 shares were 100 percent vested at September 30, 1996 and
35,900 shares, 14,500 shares and 4,000 shares will become 100 percent vested in
fiscal 1997, fiscal 1998 and fiscal 1999, respectively.
1987 Plan -- The 1989 Plan superseded the 1987 Plan under which no
additional options may be granted except for shares of Class A Common Stock
which become available after September 30, 1988 due to expiration, termination
without exercise, unexercisability or forfeiture of any option granted under the
1987 Plan. The Company has reserved 854,467 shares of Class A Common Stock in
connection with grants under the 1987 Plan. At September 30, 1996, the Company
had outstanding nonqualified stock options under the 1987 Plan covering 534,040
shares of Class A Common Stock at exercise prices ranging from $1.24 per share
to $8.38 per share. During Fiscal 1996, the Company granted nonqualified stock
options under the 1987 Plan covering 20,000 shares of Class A Common Stock (none
of which have been forfeited) at an exercise price of $7.88 per share. The
options have 10-year terms and vest at the rate of 33 1/3 percent per year
commencing approximately one year after the date of grant so long as the
optionee remains continuously in the employ of the Company or one of its
subsidiaries; provided, however, that 100 percent of such options will vest
immediately upon a change in control of the Company (as defined) or the
optionee's death or disability.
F-18
<PAGE> 90
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At September 30, 1996, options to purchase 503,006 shares of Class A Common
Stock at exercise prices ranging from $1.24 to $5.38 per share were exercisable
and 15,668 and 15,366 will become exercisable in fiscal 1997 and fiscal 1998,
respectively. At September 30, 1996, options for 306,415 shares had been
exercised and 14,012 shares were available for future grants.
Director Option Plan -- The Director Option Plan authorized grants of stock
options to each director who was not an employee of the Company (the Outside
Directors) in lieu of all or some specified portion of certain cash fees. The
Director Option Plan was terminated on September 26, 1991.
The Company has reserved 115,700 shares of Class A Common Stock in
connection with grants under the Director Option Plan. In the aggregate, the
Company granted options on 121,000 shares (5,300 of which have been forfeited)
of Class A Common Stock at exercise prices of $3.50 and $12.50 per share in lieu
of $220,000 of cash fees payable with respect to fiscal 1991 and fiscal 1990.
At September 30, 1996, options to purchase 59,000 shares of Class A Common
Stock at exercise prices of $3.50 and $12.50 per share were exercisable and
options for 56,700 shares had been exercised under the Director Option Plan.
The following table details stock option activity (excluding restricted
stock) for Fiscal 1996, Fiscal 1995 and Fiscal 1994:
<TABLE>
<CAPTION>
STOCK OPTIONS EXERCISE PRICE
------------- --------------
<S> <C> <C>
Balance at September 30, 1993...................... 1,752,423 $1.24 - $12.50
Grants during Fiscal 1994........................ 357,000 $3.75 - $ 6.25
Exercises........................................ (124,416) $1.24 - $ 3.75
Cancellations.................................... (91,904) $1.24 - $ 3.75
---------
Balance at September 30, 1994...................... 1,893,103 $1.24 - $12.50
Grants during Fiscal 1995........................ 294,000 $8.00 - $11.63
Exercises........................................ (306,648) $1.24 - $ 4.25
Cancellations.................................... (40,785) $1.24 - $ 8.63
---------
Balance at September 30, 1995...................... 1,839,670 $1.24 - $12.50
Grants during Fiscal 1996........................ 45,000 $7.31 - $ 9.00
Exercises........................................ (122,981) $1.24 - $ 8.63
Cancellations.................................... (52,936) $2.56 - $10.88
---------
Balance at September 30, 1996...................... 1,708,753 $1.24 - $12.50
=========
</TABLE>
The following table details restricted stock activity for Fiscal 1996,
Fiscal 1995 and Fiscal 1994:
<TABLE>
<CAPTION>
RESTRICTED STOCK
----------------
<S> <C>
Balance at September 30, 1993............................... 247,025
Issued during Fiscal 1994................................. 213,600
Cancellations............................................. (23,100)
-------
Balance at September 30, 1994............................... 437,525
Issued during Fiscal 1995................................. 47,800
Cancellations............................................. (7,050)
-------
Balance at September 30, 1995............................... 478,275
Issued during Fiscal 1996................................. 42,100
Cancellations............................................. (9,550)
-------
Balance at September 30, 1996............................... 510,825
=======
</TABLE>
F-19
<PAGE> 91
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. LEASES
The Company has capital leases for certain equipment and leasehold
improvements included in "Property -- net." The present value of future minimum
lease payments relating to these leased assets are capitalized based on the
lease contract provisions. Capitalized amounts are amortized over either the
lives of the leases or the normal depreciable lives of the assets. All other
leases are defined as operating leases. Lease expenses related to operating
leases are charged to expense as incurred.
Future minimum lease payments at September 30, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
----------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
1997...................................................... $ 8.8 $ 5.7
1998...................................................... 6.8 4.8
1999...................................................... 5.2 4.6
2000...................................................... 4.3 3.2
2001...................................................... 3.9 1.2
2002 and thereafter....................................... 19.8 --
----- -----
Total future minimum lease payments..................... $48.8 19.5
=====
Less interest........................................ 3.3
-----
Present value of future minimum lease payments.......... $16.2
=====
</TABLE>
Rent expense for Fiscal 1996, Fiscal 1995 and Fiscal 1994 was $11.4
million, $11.7 million and $10.8 million, respectively.
15. EMPLOYEE BENEFIT PLANS
Pension Plan -- The Company has a noncontributory defined benefit pension
plan covering substantially all employees who are age 21 or older and have one
or more years of service. Pension benefits provided for certain union hourly
employees are established pursuant to the collective bargaining agreements in
effect with their respective unions. For hourly employees the normal retirement
benefit is determined by multiplying years of benefit service by a dollar amount
benefit factor separately determined for each bargaining unit. For salaried
employees, the plan generally provides a normal retirement benefit equal to the
greater of the benefit accrued at June 30, 1987 or 1.0 percent of final average
earnings (as defined) multiplied by years of credited service before January 1,
1994 plus 1.25 percent of final average earnings multiplied by years of credited
service after January 1, 1994 less 1.0 percent of primary Social Security
benefits for each year of credited service. The Company has an excess benefit
plan covering officers of the Company whose earned pension benefits would
otherwise be restricted by maximum benefit limitations imposed by Internal
Revenue Service regulations.
In Fiscal 1995, the Company recorded a $5.4 million charge for costs
associated with an early retirement option accepted by certain hourly employees
of the Antioch mill, to reduce future unit labor costs.
In Fiscal 1996, the Company recorded a $5.2 million charge for pension
costs associated with the staff reduction program which will reduce future
administrative and overhead costs (see Note 2).
F-20
<PAGE> 92
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net periodic pension cost follow:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost........................................... $ 4.5 $ 3.6 $ 4.1
Interest cost.......................................... 9.8 8.5 7.8
Return on plan assets.................................. (19.7) (17.9) (2.7)
Net amortization and deferral.......................... 10.5 9.7 (5.3)
Staff reduction program................................ 5.2 -- --
Antioch mill early retirement.......................... -- 5.4 --
------ ------ -----
Net pension cost.................................. $ 10.3 $ 9.3 $ 3.9
====== ====== =====
</TABLE>
Assumptions used to develop the net periodic pension costs were:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 7.5% 8.0% 7.0%
Expected rate of return on plan assets...................... 9.0% 9.0% 9.0%
Expected rate of salary increases........................... 5.0% 5.0% 5.0%
</TABLE>
The discount rate used to determine the accrued pension liability at
September 30, 1996, 1995 and 1994 was 7.5 percent, 7.5 percent and 8.0 percent,
respectively.
The status of the pension plan follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................. $ 121.3 $ 112.4
Nonvested............................................... 8.9 9.7
------- -------
Accumulated benefit obligation.......................... 130.2 122.1
Effect of salary progression............................ 9.8 8.7
------- -------
Projected benefit obligation............................ 140.0 130.8
Plan assets at market value (primarily government
securities, corporate bonds and common stocks).......... (126.7) (108.2)
------- -------
Plan assets less than projected benefit obligation........ 13.3 22.6
Unrecognized net gain (loss).............................. 2.1 (11.1)
Prior service benefit not yet recognized in net periodic
pension cost............................................ (2.6) (2.6)
Adjustment required to recognize minimum pension
liability............................................... -- 4.9
------- -------
Accrued pension liability.......................... $ 12.8 $ 13.8
======= =======
</TABLE>
The Company's funding policy is to contribute annually amounts necessary to
satisfy the statutory requirements of ERISA.
Supplemental Executive Retirement Plans -- Under the terms of their
employment agreements, Marvin A. Pomerantz (Chairman, Chief Executive Officer
and a Director of the Company) and Warren J. Hayford (Former Vice Chairman and a
Director of the Company) will receive supplemental annual retirement income
payments at age 65 equal to approximately 50 percent of their average base
salary and
F-21
<PAGE> 93
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
bonus for their four most highly compensated years of service with the Company,
less primary Social Security benefits and any amounts received under the
Company's pension plan. The agreements also provide for the reduction of
benefits for early retirement. Mr. Hayford elected early retirement on December
31, 1992 and is receiving benefits under the supplemental retirement plan. An
additional supplemental retirement plan covering seven officers provides annual
retirement payments at age 65 equal to 60 percent of their average base salary
and bonus for the four highest of the last seven years prior to retirement, less
primary Social Security and any amounts received under the Company's pension
plan. Benefits are reduced for early retirement.
At September 30, 1996 and 1995, the actuarial present value of projected
benefit obligations for the supplemental retirement income payments described
above was approximately $10.2 million and $8.0 million, respectively. At
September 30, 1996, the actuarial present value of accumulated benefit
obligations exceeded the accrual for the vested portion of the obligations and
the Company recognized a minimum pension liability adjustment of $2.8 million
and a corresponding reduction to stockholders' equity of $1.2 million. Funding
for the supplemental retirement income payments is not subject to the statutory
requirements of ERISA and no assets have been set aside to satisfy the
liability. Required supplemental annual retirement income payments will be made
from general corporate funds.
The components of net periodic pension cost for the supplemental retirement
income payments follow:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
---------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................ $0.5 $0.2 $0.2
Interest cost............................................... 0.6 0.4 0.3
Net amortization and deferral............................... 0.2 0.2 0.2
---- ---- ----
Net pension cost....................................... $1.3 $0.8 $0.7
==== ==== ====
</TABLE>
Assumptions used to develop the net periodic pension costs were:
<TABLE>
<S> <C> <C> <C>
Discount rate............................................. 7.5% 8.0% 7.0%
Expected rate of salary increases......................... 5.0% 5.0% 0.0%
</TABLE>
The discount rate used to determine the accrued pension liability at
September 30, 1996, 1995 and 1994 was 7.5 percent, 7.5 percent and 8.0 percent,
respectively.
Post-retirement Benefits Other Than Pensions -- In connection with the
acquisition of certain of its facilities, the Company assumed a liability for
providing post-retirement medical coverage to age 65 for 96 salaried employees
who elected to take early retirement prior to June 30, 1987. In addition, the
Company has obligations to provide post-retirement medical benefits to age 65
pursuant to collective bargaining agreements at four of its facilities.
The net post-retirement benefit cost for Fiscal 1996, Fiscal 1995 and
Fiscal 1994 was $1.6 million, $0.3 million and $0.3 million, respectively. The
benefit cost for Fiscal 1996 includes a charge of $1.1 million for
post-retirement medical costs for retirees related to the staff reduction
program. The Company funds benefit costs on a pay-as-you-go basis, and, for
Fiscal 1996, Fiscal 1995 and Fiscal 1994, the Company made benefit payments of
approximately $0.7 million, $0.5 million and $0.5 million, respectively.
F-22
<PAGE> 94
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plan's funded status, reconciled with
amounts recognized in the Company's balance sheets.
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Actuarial present value of post-retirement benefits:
Retirees................................................. $ 3.2 $ 3.8
Fully eligible active plan participants.................. 1.3 0.2
Other active plan participants........................... 0.3 0.5
----- -----
Accumulated post-retirement benefit obligation........ 4.8 4.5
Plan assets at market value.............................. -- --
----- -----
Accumulated post-retirement benefit obligation........ 4.8 4.5
Unrecognized net loss.................................... (1.2) (1.6)
----- -----
Accrued post-retirement benefit obligation............... $ 3.6 $ 2.9
===== =====
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation at September 30, 1996 was 8.0 percent in 1997
declining 1.0 percent per year to 6.0 percent in 1999 and thereafter. The
assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation at September 30, 1995 was 9.0 percent in 1996
declining 1.0 percent per year to 6.0 percent in 1999 and thereafter. The
discount rate used in determining the accumulated post-retirement benefit
obligation at September 30, 1996 and 1995 was 7.5 percent. If the health care
cost trend rate assumptions were increased by 1 percent, the accumulated
post-retirement benefit obligation at September 30, 1996 would be increased by
approximately $0.1 million or 2 percent. The effect of this change on the sum of
the service cost and interest cost components of net periodic post-retirement
benefit costs would be an increase of approximately 3 percent.
Savings Plan -- In October 1987, the Company established a defined
contribution retirement savings plan (Section 401K Plan) covering substantially
all salaried employees of the Company subject to certain service requirements
for different aspects of participation. The Section 401K Plan provides for
employees to make contributions on a pre-tax basis up to a maximum of 15 percent
of their compensation (as defined) each year, with their maximum annual
contribution determined pursuant to Internal Revenue Service regulations. Prior
to January 1, 1994, the Company contributed to each participant's plan account
an amount equal to 50 percent of the participant's contribution up to a maximum
of 2 percent of the participant's compensation. Subsequent to January 1, 1994,
the Company contributed to each participant's plan account an amount equal to 75
percent of the participant's contribution up to a maximum of 3 percent of the
participant's compensation. The Company may also make additional discretionary
contributions to the Section 401K Plan. For Fiscal 1996, Fiscal 1995 and Fiscal
1994, the Company's cost relating to the Section 401K Plan was $5.1 million,
$1.6 million and $1.4 million, respectively. The Company's cost for Fiscal 1996
includes $3.5 million for deferred profit sharing contributions.
16. COMMITMENTS AND CONTINGENCIES
The Company has various agreements which provide for the purchase at market
prices of wood chips, hog fuel (bark and other residual fiber from trees) and
stumpage.
The Company has a commitment to sell electricity from its cogeneration
facility to a utility through 2013. The Company does not intend to terminate
this contract; however, if terminated, penalties of approximately $8.3 million
could be imposed.
F-23
<PAGE> 95
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has an agreement to sell at market prices approximately 130,000
tons per year (subject to annual adjustments, as defined) of unbleached kraft
paper to S&G Packaging. The agreement expires five years after the Company no
longer has an ownership interest in S&G Packaging.
The Company has an agreement to purchase at market prices through 1999 the
entire production of an unbleached kraft paper machine at a Riverwood
International U.S.A., Inc. pulp and paper mill. The capacity of this machine is
estimated to be 35,000 tons per year.
The Company has an agreement to purchase at market prices, through 2004,
approximately 24,000 tons per year of containerboard from Newark Group
Industries, Inc.
The Company is not a party to any legal proceedings other than litigation
incidental to normal business activities, except as described below:
The Company and certain of its officers and directors have been named in a
civil suit filed in Cook County (Illinois) Circuit Court alleging that they
omitted or misrepresented facts about the Company's operations in connection
with the Company's initial public offering of stock in 1988 and in certain
periodic reports. The complaint, a purported class action, originally sought
unspecified damages under the Illinois Consumer Fraud and Deceptive Practices
Act and for common law fraud. On January 10, 1996, the court dismissed both
counts with prejudice, and plaintiff has appealed. A similar lawsuit, based on
the same factual allegations, but alleging violations of Federal securities laws
and filed in the United States District Court for the Northern District of
Illinois, was voluntarily dismissed by the same plaintiff in July 1993. The
Company believes that, after investigation of the facts, the allegations in the
complaint are without merit, and the Company is vigorously defending itself.
On October 18 and December 4, 1995, the Company, its directors and certain
of its officers were named in complaints in the Court of Chancery of the state
of Delaware alleging breach of fiduciary duties on two counts. The first is a
derivative count brought on behalf of the Company against the individual
defendants, and the second is a direct count brought on behalf of the Company's
stockholders. Each count alleges that the Company's stockholder Rights
Agreement, adopted on June 12, 1995, amendments to the Company's charter and
bylaws, adopted on July 21, 1995, and redemption of Warrants in July 1995 were
all designed to entrench the individual defendants in their capacities as
directors and officers at the expense of stockholders who otherwise would have
been able to take advantage of a sale of the Company. The complaint asks the
court, among other things, to rescind the amendments and to prohibit the use of
the stockholder Rights Agreement from discouraging any bona fide acquirer. The
Company believes the allegations are without merit and on January 16, 1996 moved
to dismiss the consolidated complaint. The motion is fully briefed and argued,
and the Company is awaiting a decision.
On October 23, 1995, a rail tank car exploded on the premises of the
Bogalusa, Louisiana plant of Gaylord Chemical Corporation, a wholly owned,
independently operated subsidiary of the Company. The accident resulted in the
venting of certain chemicals, including by-products of nitrogen tetroxide, a raw
material used by the plant to produce dimethyl sulfoxide, a solvent used in the
manufacture of pharmaceutical and agricultural chemicals. More than 140 lawsuits
have been filed in both federal and state courts naming as defendants Gaylord
Chemical Corporation, and/or the Company, certain of their respective officers
and other unrelated corporations and individuals. The lawsuits allege personal
injury, property damage, economic loss, related injuries and fear of injuries as
a result of the accident. On April 1, 1996, the federal judge dismissed all but
one of the federal actions for failing to state claims under federal law and
remanded the remaining tort cases to the district court in Washington Parish,
Louisiana, where they have been consolidated. The remaining federal action has
been stayed.
On May 21, 1996, the Louisiana state court established a Plaintiff's
Liaison Committee (PLC) to coordinate and oversee the consolidated cases on
behalf of plaintiffs. On June 26, 1996, the PLC and defendants agreed to a Case
Management Order (CMO) that was subsequently entered by the Court.
F-24
<PAGE> 96
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to this CMO, the plaintiffs filed a single Consolidated Master Petition
against Gaylord Chemical Corporation, the Company and twenty-one other
defendants. In this Consolidated Master Petition all claims against the
individuals (including the officers of Gaylord Chemical Corporation and the
Company) have been dropped. Also, pursuant to the terms of the CMO, all of the
individual actions filed before the Consolidated Master Petition have been, or
shortly will be, dismissed. The Consolidated Master Petition includes
substantially all of the claims and theories asserted in the prior lawsuits,
including negligence and strict liability, as well as several claims of
statutory liability. Compensatory and punitive damages are sought. The Company
and its subsidiary are vigorously contesting all of these claims.
On July 15, 1996 the state court certified these consolidated actions as a
single class action. The class was tentatively defined to include all those
persons or entities who claim to have been injured as a result of the October
23, 1995 incident. This definition may be amended, or subclasses established,
depending on the results of discovery. Written and document discovery is
proceeding.
In June and July several individual plaintiffs filed supervisory writs
seeking to challenge the validity of the Court's (i) May 21, 1996 Order
establishing the PLC; (ii) June 26, 1996 CMO; and (iii) July 15, 1996 Order
certifying these consolidated cases as a class action. Some, but not all, of
these supervisory writs have been fully briefed. Subsequent rulings by the
Louisiana Supreme Court have upheld the CMO.
In addition, the Company, its subsidiary and numerous other third party
companies have been named as defendants in seven actions brought by plaintiffs
in Mississippi state court, including two that name more than 6,000 individual
claimants. This case is not filed as a class action but seeks to allege claims
similar to those in the Louisiana state court. Defendants in the Mississippi
case have filed a motion to sever the actions on grounds of misjoinder. The
Company and its subsidiary are vigorously contesting these claims.
The Company and its subsidiary maintain insurance and have filed separate
suits seeking a declaratory judgment of coverage for the October 23, 1995
accident against their general liability and directors and officers liability
insurance carriers. These cases are currently pending in state court with the
liability cases. The carrier with the first layer of coverage under the general
liability policy has agreed to pay the Company's and its subsidiary's defense
costs under a reservation of rights.
The Company believes that the outcome of all litigation will not have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. Considerable judgment is required, however, in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The
F-25
<PAGE> 97
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
use of different market assumptions and/or methodologies could have a material
effect on the estimated fair value amounts. The estimated fair value of
financial instruments at September 30, 1996 is as follows:
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
-------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Assets
Cash and equivalents...................................... $ 39.2 $ 39.2
Trade receivables......................................... 111.0 111.0
Long-term notes receivable................................ 11.9 12.5
Liabilities
Trade payables............................................ 60.8 60.8
Senior and subordinated notes............................. 584.0 642.4
Capital lease obligations................................. 16.2 16.2
Other senior debt......................................... 34.2 34.7
</TABLE>
Cash and equivalents, trade receivables, trade payables and capital lease
obligations -- The carrying amount of these items are a reasonable estimate of
their fair value.
Senior and subordinated notes -- Estimated fair value is based on estimates
obtained from dealers/brokers.
Long-term notes receivable and other senior debt -- Interest rates that are
currently available to the Company for similar terms and remaining maturities
are used to estimate fair value.
The fair value estimates presented herein are based on pertinent
information available to the Company at September 30, 1996. Although the Company
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been revalued for purposes of these
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein.
The Company is not a party to any lending or borrowing arrangements that
are considered to be derivative financial instruments.
18. SUPPLEMENTAL CASH FLOW DISCLOSURES
The balance sheet effects of non-cash transactions which are not reflected
in the consolidated statements of cash flows and other supplemental cash flow
disclosures are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash paid for interest expense........................ $28.6 $35.5 $37.8
Cash paid for income taxes............................ 5.6 2.5 --
Supplemental schedule of non-cash investing and
financing activities:
Property additions.................................. 5.6 45.1 8.4
Increase in total debt.............................. 5.6 45.1 --
Increase in accrued and other liabilities........... -- -- 4.5
Increase in other long-term liabilities............. -- -- 3.9
Write-off of deferred financing fees................ 1.5 -- --
</TABLE>
F-26
<PAGE> 98
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL 1996
Net sales....................... $253.8 $219.3 $225.5 $223.4 $ 922.0
Gross margin.................... 74.8 45.2 43.8 42.0 205.8
Income (loss) before
extraordinary item............ 19.1 1.2 0.1 (8.6) 11.8
Extraordinary loss.............. (2.6) -- -- (0.6) (3.2)
Net income (loss)............... 16.5 1.2 0.1 (9.2) 8.6
Earnings per common and common
equivalent share:
Income (loss) before
extraordinary item......... 0.35 0.02 0.0 (0.16) 0.22
Extraordinary loss............ (0.05) -- -- (0.01) (0.06)
Net income (loss)............. 0.30 0.02 0.0 (0.17) 0.16
Weighted average common and
common equivalent shares
outstanding................... 55.0 55.1 55.1 53.6 54.7
Common stock price (AMEX)
High.......................... 10 3/8 11 5/8 11 1/2 7 15/16 11 5/8
Low........................... 7 1/16 7 1/2 7 11/16 5 3/8 5 3/8
Warrant price (AMEX)
High.......................... 9 3/8 10 7/8 10 7/8 7 11/16 10 7/8
Low........................... 6 1/2 7 1/4 7 5/8 5 3/4 5 3/4
FISCAL 1995
Net sales....................... $241.2 $256.3 $285.2 $268.7 $1,051.4
Gross margin.................... 57.1 74.5 85.4 79.4 296.4
Net income...................... 11.8 27.5 39.8 55.1 134.2
Net income per common and common
equivalent share.............. 0.21 0.51 0.72 1.00 2.44
Weighted average common and
common equivalent shares
outstanding................... 54.9 55.1 55.2 55.2 55.1
Common stock price (AMEX)
High.......................... 9 3/4 13 7/8 15 1/2 13 3/8 15 1/2
Low........................... 7 1/2 7 3/4 7 3/4 9 7 1/2
Warrant price (AMEX)
High.......................... 8 1/8 10 7/8 11 7/8 11 1/2 11 7/8
Low........................... 5 7/8 6 1/2 7 1/4 8 1/4 5 7/8
FISCAL 1994
Net sales....................... $183.9 $182.5 $203.2 $214.8 $ 784.4
Gross margin.................... 16.7 19.1 23.9 33.3 93.0
Net loss........................ (23.0) (22.6) (19.7) (18.7) (84.0)
Net loss per common and common
equivalent share.............. (0.43) (0.42) (0.37) (0.35) (1.57)
Weighted average common and
common equivalent shares
outstanding................... 53.5 53.6 53.6 53.7 53.6
Common stock price (AMEX)
High.......................... 4 3/4 6 7/8 6 1/4 8 3/4 8 3/4
Low........................... 2 4 3/8 4 3/8 5 1/4 2
Warrant price (AMEX)
High.......................... 4 5 3/8 4 3/4 7 1/8 7 1/8
Low........................... 1 5/8 3 1/4 3 1/8 3 7/8 1 5/8
</TABLE>
F-27
<PAGE> 99
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
--------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 10.1 $ 39.2
Trade receivables (less allowances of $7.0 million and
$6.9 million, respectively)............................ 99.0 111.0
Inventories (Note 2)...................................... 77.6 70.4
Deferred income taxes..................................... 5.1 5.1
Other current assets...................................... 14.7 10.4
-------- --------
Total current assets................................... 206.5 236.1
-------- --------
Property plant and equipment:
Property, plant and equipment, at cost.................... 1,046.8 1,033.3
Less accumulated depreciation............................. 449.7 421.0
-------- --------
Property -- net........................................ 597.1 612.3
-------- --------
Deferred income taxes....................................... 33.2 16.8
Other assets................................................ 65.7 67.8
-------- --------
Total Assets........................................... $ 902.5 $ 933.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 11.0 $ 11.3
Trade payables............................................ 53.6 60.8
Accrued interest payable.................................. 27.3 27.3
Accrued and other liabilities............................. 50.2 66.9
-------- --------
Total current liabilities.............................. 142.1 166.3
-------- --------
Long-term debt.............................................. 644.8 623.1
Other long-term liabilities................................. 28.7 29.1
Commitments and contingencies............................... -- --
Stockholders' equity:
Class A common stock -- par value, $.0001 per share;
authorized 125,000,000 shares; issued 54,352,181 shares
and 54,270,011 shares, respectively, and outstanding
52,791,003 shares and 52,688,233 shares,
respectively........................................... -- --
Capital in excess of par value.............................. 173.9 173.5
Retained deficit............................................ (74.3) (46.1)
Common stock in treasury -- at cost; 1,561,178 shares and
1,581,778 shares, respectively............................ (11.5) (11.7)
Recognition of minimum pension liability.................... (1.2) (1.2)
-------- --------
Total stockholders' equity............................. 86.9 114.5
-------- --------
Total liabilities and stockholders' equity............. $ 902.5 $ 933.0
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-28
<PAGE> 100
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
---------------------
1997 1996
---- ----
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net Sales................................................... $388.0 $473.1
Cost of goods sold.......................................... 354.3 353.1
------ ------
Gross margin................................................ 33.7 120.0
Selling and administrative costs............................ (40.9) (46.5)
------ ------
Operating earnings.......................................... (7.2) 73.5
Interest expense -- net..................................... (39.4) (39.1)
Other income -- net......................................... 0.2 0.2
------ ------
Earnings (loss) before taxes and extraordinary item......... (46.4) 34.6
Income taxes................................................ (18.2) 14.3
------ ------
Earnings (loss) before extraordinary item................... (28.2) 20.3
Extraordinary loss (Note 4)................................. -- (2.6)
------ ------
Net income (loss)........................................... (28.2) $ 17.7
======
Retained deficit:
Beginning of period....................................... (46.1)
------
End of period............................................. $(74.3)
======
Earnings per common and common equivalent share:
Earnings (loss) before extraordinary item................. $(0.53) $ 0.37
Extraordinary loss (Note 4)............................... -- (0.05)
------ ------
Net income (loss)......................................... $(0.53) $ 0.32
====== ======
Average number of common and common equivalent shares
outstanding............................................... 52.7 55.1
====== ======
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-29
<PAGE> 101
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
---------------------
1997 1996
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Earnings (loss) before extraordinary item................ $(28.2) $ 20.3
Adjustments to reconcile earnings (loss) before
extraordinary item to net cash from operating
activities:
Depreciation and amortization......................... 32.7 32.7
Non-cash interest expense............................. -- 24.5
Deferred income taxes................................. (16.4) 13.1
Change in current assets and liabilities, excluding
acquisitions and dispositions....................... (22.5) 4.5
Other -- net.......................................... -- (2.2)
------ ------
Net cash provided by (used for) operations................. (34.4) 92.9
------ ------
CASH FLOWS FROM INVESTMENTS:
Capital expenditures..................................... (14.4) (29.4)
Capitalized interest..................................... (0.5) (0.3)
Other investments -- net................................. 0.4 (0.1)
------ ------
Net cash used for investments.............................. (14.5) (29.8)
------ ------
CASH FLOWS FROM FINANCING:
Senior debt -- repayments................................ (6.0) (9.3)
Early retirement of debt (Note 4)........................ -- (66.8)
Revolver borrowings -- net............................... 25.5 --
Other financing -- net................................... 0.3 0.3
------ ------
Net cash provided by (used for) financing.................. 19.8 (75.8)
------ ------
NET DECREASE IN CASH AND EQUIVALENTS....................... (29.1) (12.7)
Cash and equivalents, beginning of period.................. 39.2 32.5
------ ------
Cash and equivalents, end of period........................ $ 10.1 $ 19.8
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for:
Interest.............................................. $ 38.6 $ 15.9
====== ======
Income taxes.......................................... $ 0.2 $ 1.6
====== ======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Write-off of deferred financing fees..................... $ -- $ 1.4
====== ======
Property additions....................................... $ 0.8 $ --
====== ======
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-30
<PAGE> 102
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all normal and recurring adjustments
and accruals necessary to present fairly the financial position as of March 31,
1997 and the results of operations and cash flows for the six months ended March
31, 1997 and 1996, including all the accounts of Gaylord Container Corporation
(including its subsidiaries, the Company), and are in conformity with Securities
and Exchange Commission Rule 10-01 of Regulation S-X. The financial statements
should be read in conjunction with the audited consolidated financial statements
and the notes thereto on Form 10-K for the fiscal year ended September 30, 1996.
2. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
--------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Inventories consist of:
Finished products.................................. $21.2 $16.3
In process......................................... 42.7 31.3
Raw materials...................................... 6.5 8.5
Supplies........................................... 14.5 14.3
----- -----
84.9 70.4
LIFO valuation adjustment.......................... (7.3) --
----- -----
Total......................................... $77.6 $70.4
===== =====
</TABLE>
3. CONTINGENCIES
The Company is not a party to any legal proceedings other than litigation
incidental to normal business activities, except as described below:
The Company and certain of its officers and directors have been named in a
civil suit filed in Cook County (Illinois) Circuit Court alleging that they
omitted or misrepresented facts about the Company's operations in connection
with the Company's initial public offering of stock in 1988 and in certain
periodic reports. The complaint, a purported class action, originally sought
unspecified damages under the Illinois Consumer Fraud and Deceptive Practices
Act and for common law fraud. On January 10, 1996, the court dismissed both
counts with prejudice, and plaintiff has appealed. A similar lawsuit, based on
the same factual allegations, but alleging violations of Federal securities laws
and filed in the United States District Court for the Northern District of
Illinois, was voluntarily dismissed by the same plaintiff in July 1993. The
Company believes that, after investigation of the facts, the allegations are
without merit, and the Company is vigorously defending itself.
On October 18 and December 4, 1995, the Company, its directors and certain
of its officers were named in complaints which have been consolidated in the
Court of Chancery of the state of Delaware alleging breach of fiduciary duties
on two counts. The first count is a putative class action and the second is an
alleged derivative claim brought on behalf of the Company against the individual
defendants. Both counts allege that the Company's stockholder Rights Agreement,
adopted on June 12, 1995, amendments to the Company's charter and by-laws,
adopted on July 21, 1995, and a redemption of Warrants in June 1995 all were
designed to entrench the individual defendants in their capacities as directors
and officers at the expense of stockholders who otherwise would have been able
to take advantage of a sale of the Company. The complaint asks the court, among
other things, to rescind the amendments and prohibit the use of the stockholder
Rights Agreement to discourage any bona fide acquirer. In the alternative, the
plaintiffs seek compensatory damages. On December 19, 1996, the Delaware
Chancery Court denied the Company's motion to dismiss the complaint
F-31
<PAGE> 103
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in its entirety. The case is now in the preliminary discovery stage. The Company
believes the allegations are without merit and is defending itself vigorously.
On October 23, 1995, a rail tank car exploded on the premises of the
Bogalusa, Louisiana plant of Gaylord Chemical Corporation, a wholly owned,
independently operated subsidiary of the Company. The accident resulted in the
venting of certain chemicals, including by-products of nitrogen tetroxide, a raw
material used by the plant to produce dimethyl sulfoxide, a solvent used in the
manufacture of pharmaceutical and agricultural chemicals. More than 160 lawsuits
have been filed in both federal and state courts naming as defendants Gaylord
Chemical Corporation and/or the Company, certain of their respective officers
and other unrelated corporations and individuals. The lawsuits allege personal
injury, property damage, economic loss, related injuries and fear of injuries as
a result of the accident. On April 1, 1996, the federal judge dismissed all but
one of the federal actions for failing to state claims under federal law and
remanded the remaining tort cases to the district court in Washington Parish,
Louisiana, where they have been consolidated. Discovery in the remaining federal
action was ordered coordinated with the Louisiana State action.
On May 21, 1996 the Louisiana state court established a Plaintiff's Liaison
Committee (PLC) to coordinate and oversee the consolidated cases on behalf of
plaintiffs. On June 26, 1996 the PLC and defendants agreed to a Case Management
Order (CMO) that was subsequently entered by the Court. Pursuant to the CMO, the
plaintiffs filed a single Consolidated Master Petition against Gaylord Chemical
Corporation, the Company and twenty-one other defendants. In the Consolidated
Master Petition all claims against the individual defendants (including the
officers of Gaylord Chemical Corporation and the Company) were dropped. Also,
pursuant to the terms of the CMO, all of the individual actions filed before the
Consolidated Master Petition have been, or are scheduled to be, dismissed. The
Consolidated Master Petition includes substantially all of the claims and
theories asserted in the prior lawsuits, including negligence and strict
liability, as well as several claims of statutory liability. Compensatory and
punitive damages are sought. The Company and its subsidiaries are vigorously
contesting all of these claims.
On July 15, 1996 the Louisiana state court certified these consolidated
actions as a single class action. The class was tentatively defined to include
all those persons or entities who claim to have been injured as a result of the
October 23, 1995 accident. On March 27, 1997, the Louisiana Court of Appeal for
the First Circuit reversed the trial court's order granting class certification,
defining the class, approving class notice, requiring all notice forms be
notarized and appointing the plaintiffs' attorneys to the PLC. The Court of
Appeal ordered the trial court to conduct a new class certification hearing to
allow additional evidence on the adequacy of class representatives and class
counsel and instructed the trial court to create a concise geographic definition
of the class of individuals allegedly impacted. Finally, the Court of Appeal
instructed the trial judge to approve a new class notice form that permits the
use of notice of claim forms and/or proof of claim forms only after a
determination of liability, if any. The Louisiana Supreme Court declined to
review that decision. On May 23, 1997, the trial court reappointed the PLC and
ordered that a second amended Consolidated Master Petition be filed by June 6,
1997. The court also set July 28, 1997 as the hearing date for class
certification.
In addition, the Company, its subsidiary and numerous other third party
companies have been named as defendants in eleven actions brought by plaintiffs
in Mississippi state court, who claim injury as a result of the October 23, 1995
accident at the Bogalusa facility. Included among these cases are two actions
which purport to be on behalf of over 9,000 individuals. These cases are not
filed as a class action but have been consolidated before a single judge in
Hinds County, Mississippi. All of these cases seek to allege claims similar to
those in the Louisiana state court. To date, discovery in these consolidated
cases has been coordinated with the ongoing discovery in the Louisiana class
action. The Company and its subsidiary are vigorously contesting these claims.
The Company and its subsidiary maintain insurance and have filed separate
suits seeking a declaratory judgement of coverage for the October 23, 1995
accident against their general liability and directors and
F-32
<PAGE> 104
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
officers liability insurance carriers. These cases are currently pending in
Louisiana state court with the liability cases. The carrier with the first layer
of coverage under the general liability policy has agreed to pay the Company's
and its subsidiary's defense costs under a reservation of rights. Discovery in
these declaratory judgment cases is proceeding. On May 9, 1997, two of the nine
excess level insurers moved for summary judgment before the trial court claiming
that coverage for the accident is excluded because of a pollution exclusion
contained in these policies. The Company is vigorously opposing these motions.
The Company believes the outcome of such litigation will not have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
4. EXTRAORDINARY ITEM
During the first quarter of fiscal 1996, the Company repurchased and
retired approximately $65.3 million principal amount of its publicly traded debt
securities. In conjunction with the repurchase, approximately $1.4 million of
deferred financing fees were written off. These transactions resulted in an
extraordinary loss of $2.6 million, net of an income tax benefit of $1.8
million.
5. ADOPTION OF NEW ACCOUNTING STANDARD
Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS
123) by electing to continue to apply the intrinsic value-based method of
accounting for stock-based compensation. The Company will provide, if material,
the required pro forma disclosures pertaining to its stock-based compensation in
its year-end fiscal 1997 financial statement footnotes.
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<PAGE> 105
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON 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 ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
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Prospectus Summary.................... 1
Risk Factors.......................... 12
The Company........................... 16
The Refinancing....................... 17
Use of Proceeds....................... 17
Capitalization........................ 18
Selected Historical and Pro Forma
Financial Data...................... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 26
Description of Other Indebtedness and
Other Obligations................... 33
Description of Exchange Notes......... 37
The Exchange Offer.................... 56
Certain Federal Income Tax
Consequences........................ 64
Plan of Distribution.................. 64
Experts............................... 65
Legal Matters......................... 65
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
------------------------
PROSPECTUS
------------------------
$225,000,000
[GAYLORD LOGO]
GAYLORD
CONTAINER
CORPORATION
OFFER TO EXCHANGE ITS 9 3/4% SENIOR NOTES DUE 2007, SERIES B, FOR ANY AND ALL OF
ITS OUTSTANDING 9 3/4% SENIOR NOTES DUE 2007, SERIES A
, 1997
======================================================
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware ("Section
145") provides that a Delaware corporation may indemnify any persons who are, or
are threatened to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
or are threatened to be made, a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reason of the fact that
such person was a director, officer, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director has actually and reasonably incurred.
Article IX of the Certificate of Incorporation, as amended and restated, of
the Company provides that no director of the corporation shall be liable to the
corporation or its stockholders for monetary damages arising from a breach of
fiduciary duty owed to the corporation or its stockholders to the fullest extent
permitted by the Delaware General Corporation Law.
Article IX of the Certificate of Incorporation, as amended and restated,
further provides that the Company shall indemnify and hold harmless, to the
fullest extent authorized by the Delaware General Corporation Law, each person
who was or is made a party or is threatened to be made a party to or is
otherwise involved (including involvement as a witness) in any action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he or she is or was a director or officer of the corporation,
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, whether the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while serving as a
director or officer, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith and such indemnification shall continue as to an indemnitee
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided below with respect to proceedings to enforce
rights to indemnification, the corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors. The right to indemnification is a contract right and includes the
right to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (advancement of expenses);
provided, however, that, if and to the extent that the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee
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benefit plan) shall be made only upon delivery to the corporation of an
undertaking by or on behalf of such indemnitee, to repay all amounts so advanced
if it shall ultimately be determined by final judicial decision from which there
is no further right to appeal than such indemnitee is not entitled to be
indemnified for such expenses.
Article IX of the Certificate of Incorporation, as amended and restated,
further provides that any person serving as a director, officer, employee or
agent of another corporation, partnership, joint venture or other enterprise, at
least 50% of whose equity interests are owned by the corporation, shall be
conclusively presumed to be serving in such capacity at the request of the
Company and, hence, subject to indemnification by the Company.
Article IX of the Certificate of Incorporation, as amended and restated,
further provides that persons who after the date of the adoption of Article IX
become or remain directors or officers of the corporation or who, while a
director or officer of the corporation, become or remain a director, officer,
employee or agent of a subsidiary, shall be conclusively presumed to have relied
on the rights to indemnity, advancement of expenses and other rights contained
in Article IX in entering into or continuing such service. The rights to
indemnification and to the advancement of expenses conferred in Article IX shall
apply to claims made against a indemnitee arising out of acts or omissions which
occurred or occur both prior and subsequent to the adoption hereof. The rights
to indemnification and to the advancement of expenses conferred in Article IX
shall not be exclusive of any other right which any person may have or hereafter
acquire under the Amended and Restated Certificate of Incorporation or under any
statute, bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
Article IX of the Certificate of Incorporation, as amended and restated,
further provides that the corporation may maintain insurance, at its own
expense, to protect itself any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expenses,
liability or loss under the Delaware General Corporation Law.
All of the directors and officers of the Company are covered by insurance
policies maintained and held in effect by such corporation against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Each Exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The Exhibit index indicates the
page number in the sequential numbering system where such exhibit can be found.
Where exhibits are incorporated by reference, this fact is noted in the exhibit
index.
(A) EXHIBITS.
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1.1 Purchase Agreement..........................................
3.1 Amended and Restated Certificate of Incorporation of the
Company, as of July 27, 1995, incorporated by reference to
Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q
(No. 1-9915) for the quarter ended June 30, 1995 filed under
the Securities Exchange Act of 1934, as amended (the June
30, 1995 Form 10-Q)
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3.2 Amended and Restated Bylaws of the Company, as amended,
incorporated by reference to Exhibit 3.1 of the Company's
Current Report on Form 8-K filed on July 5, 1995 under the
Securities Act of 1934, as amended (the July 5, 1995 Form
8-K)
4.1 Indenture dated as of June 12, 1997 among the Company and
State Street Bank and Trust Company, as successor to Fleet
National Bank, as trustee, (Including the forms of Series A
and Series B 9 3/4% Senior Notes)...........................
4.2 Amended and Restated Credit Agreement dated as of June 30,
1995 by and between the Company, the financial institutions
signatory thereto, Bankers Trust Company, as agent and
Co-Manager and Wells Fargo Bank National Association, as
Co-Manager, incorporated by reference to Exhibit 4.1 of the
June 30, 1995 Form 10-Q
4.3 First Amendment to Amended and Restated Credit Agreement
dated as of May 30, 1996 by and between the Company, the
financial institutions signatory thereto, Bankers Trust
Company, as agent and Co-Manager and Wells Fargo Bank
National Association, as Co-Manager, incorporated by
reference to Exhibit 4.1 of the Company's Quarterly Report
on Form 10-Q (No. 1-9915) for the quarter ended June 30,
1996 filed under the Securities Exchange Act of 1934, as
amended (the June 30, 1996 Form 10-Q)
4.4 Second Amendment to Amended and Restated Credit Agreement
dated as of July 19, 1996 by and between the Company, the
financial institutions signatory thereto, Bankers Trust
Company, as agent, incorporated by reference to Exhibit 4.2
of June 30, 1996 Form 10-Q
4.5 Third Amendment to Amended and Restated Credit Agreement
dated as of May 20, 1997 by and between the Company, the
financial institutions signatory thereto, Bankers Trust
Company.....................................................
4.6 Fourth Amendment to Amended and Restated Credit Agreement
dated as of June 6, 1997 by and between the Company, the
financial institutions signatory thereto, Bankers Trust
Company.....................................................
4.7 Registration Rights Agreement dated as of June 5, 1997 among
the Company, BT Securities Corporation, Bear, Stearns & Co.
Inc. and Salomon Brothers Inc...............................
4.8 Credit agreement dated as of October 31, 1989 between the
Company and the Export-Import Bank of the United States
incorporated by reference to Exhibit 4.21 of the Company's
Annual Report on Form 10-K (No. 1-9915) for the year ended
September 30, 1990, filed under the Securities Exchange Act
of 1934, as amended
4.9 Specimen Certificate for the Class A Common Stock, par value
$.0001 per share, of the Company, incorporated by reference
to Exhibit 4.5 of the Company's Current Report on Form 8-K
filed on October 30, 1992 under the Securities Exchange Act
of 1934, as amended (October 30, 1992 Form 8-K)
4.10 Warrant Agreement between the Company and Harris Trust and
Savings Bank, as Warrant Agent, relating to the Company's
Redeemable Exchangeable Warrants, incorporated by reference
to Exhibit 4.3 of the October 30, 1992 Form 8-K
4.11 Specimen Certificate for the Redeemable Exchangeable
Warrants of the Company, incorporated by reference to
Exhibit 4.6 of the October 30, 1992 Form 8-K
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4.12 Trust Agreement between the Company and Harris Trust and
Savings Bank, as Warrant Agent, relating to the Class A
Common Stock obtainable upon exercise of the Redeemable
Exchangeable Warrants, incorporated by reference to Exhibit
4.4 of the October 30, 1992 Form 8-K
4.13 Rights Agreement, dated June 12, 1995, between the Company
and Harris Trust and Savings Bank as Rights agent, including
the form of Certificate of Designation, Preferences and
Rights of Junior Participating Preferred Stock, Series A,
attached thereto, as Exhibit A, the form of Rights
Certificate attached thereto as Exhibit B and the Summary of
Rights attached thereto as Exhibit C, incorporated by
reference to Exhibit 4.1 of the July 5, 1995 Form 8-K
4.14 Form of Indenture between the Company and Shawmut Bank
Connecticut, National Association as Trustee, relating to
the Company's 11 1/2% Senior Notes Due 2001, incorporated by
reference to Exhibit 4(a) of the Company's Registration
Statement on Form S-3 (No. 33-60016), as amended, filed
under the Securities Act of 1933, as amended (the 1993 Debt
Registration Statement)
4.15 Specimen Certificate of the Company's 11 1/2% Senior Notes
Due 2001, incorporated by reference to Exhibit 4(b) of the
1993 Debt Registration Statement
4.16 Form of Indenture between the Company and Ameritrust Texas,
National Association as Trustee, relating to the Company's
12 3/4% Senior Subordinated Discount Debentures Due 2005,
incorporated by reference to Exhibit 4(c) of the 1993 Debt
Registration Statement
4.17 Specimen Certificate of the Company's 12 3/4% Senior
Subordinated Discount Debentures Due 2005, incorporated by
reference to Exhibit 4(d) of the 1993 Debt Registration
Statement
4.18 Subscription and Stockholder Agreement dated as of September
24, 1993 between the Company and Gaylord Receivables
Corporation, incorporated by reference to Exhibit 4.13 of
the Company's Annual Report on Form 10-K (No. 1-9915) for
the year ended September 30, 1993, filed under the
Securities Exchange Act of 1934, as amended (the 1993 Form
10-K)
4.19 Receivables Purchase Agreement dated as of September 24,
1993 between the Company and Gaylord Receivables
Corporation, incorporated by reference to Exhibit 4.14 of
the 1993 Form 10-K
4.20 Amendment No.1 to Receivables Purchase Agreement dated as of
November 7, 1996 between the Company and Gaylord Receivables
Corporation, incorporated by reference to Exhibit 4.16 of
the Company's Annual Report on Form 10-K (No. 1-9915) for
the year ended September 30, 1996, filed under the
Securities Exchange Act of 1934, as amended (the 1996 Form
10-K)
4.21 Gaylord Receivables Master Pooling and Servicing Agreement
dated as of September 24, 1993 between the Company and
Gaylord Receivables Corporation, incorporated by reference
to Exhibit 4.15 of the 1993 Form 10-K
4.22 Revolving Credit Agreement dated as of September 24, 1993
between Gaylord Receivables Corporation, the financial
institutions signatory thereto and Harris Trust and Savings
Bank as Facility Agent, incorporated by reference to Exhibit
4.16 of the 1993 Form 10-K
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4.23 Extension of Credit Agreement dated as of September 27, 1996
between Gaylord Receivables Corporation, the financial
institutions signatory thereto and Harris Trust and Savings
Bank as Facility Agent, incorporated by reference to Exhibit
4.19 of the 1996 Form 10-K
4.24 Security Agreement dated as of September 24, 1993 between
Gaylord Receivables Corporation and Harris Trust and Savings
Bank, incorporated by reference to Exhibit 4.17 of the 1993
Form 10-K
4.25 Series 1993-1 A-RI Supplemental Issuance Agreement dated as
of September 24, 1993 by and between the Company, Gaylord
Receivables Corporation and Manufacturers and Traders Trust
Company, as Trustee, incorporated by reference to Exhibit
4.1 of the Company's Quarterly Report on Form 10-Q (No.
1-9915) for the quarter ended December 31, 1993, filed under
the Securities Exchange Act of 1934, as amended
5.1 Opinion and consent of Kirkland & Ellis**...................
10.1 Bogalusa Hog Fuel Supply Agreement by and between the
Company and Cavenham Forest Industries, Inc. dated as of
March 28, 1986, incorporated by reference to Exhibit 10.8 of
the Company's Registration Statement on Form S-1 (No.
33-13455), as amended, filed under the Securities Act of
1933, as amended (the 1986 Debt Registration Statement)
10.2 Bogalusa Hog Fuel Supply Agreement (St. Francisville) by and
between the Company and Crown Zellerbach Corporation dated
as of March 31, 1986, incorporated by reference to Exhibit
10.9 of the 1986 Debt Registration Statement
10.3 Bogalusa Sawmill Agreement by and between the Company and
Cavenham Forest Industries, Inc. dated as of March 28, 1986,
incorporated by reference to Exhibit 10.11 of the 1986 Debt
Registration Statement
10.4 Bogalusa Timberland Agreement by and between the Company and
Cavenham Forest Industries, Inc. dated as of March 28, 1986,
incorporated by reference to Exhibit 10.12 of the 1986 Debt
Registration Statement
10.5 Transfer and Assumption Agreement by and between the Company
and Gaylord Container Limited dated as of November 17, 1986,
incorporated by reference to Exhibit 10.16 of the 1986 Debt
Registration Statement
10.6 Undertaking by and between the Company and Crown Zellerbach
Corporation dated as of May 2, 1986, incorporated by
reference to Exhibit 10.17 of the 1986 Debt Registration
Statement
10.7 Transaction Agreement by and between James River Corporation
of Virginia and Crown Zellerbach Corporation dated as of
December 14, 1985, incorporated by reference to Exhibit
10.18 of the 1986 Debt Registration Statement
10.8 Stockholder Agreement by and among the Company and the
Persons listed on the signature pages thereto dated as of
June 1, 1988, incorporated by reference to Exhibit 10.22 of
the Company's Registration Statement on Form S-1 (No.
33-21227), as amended, filed under the Securities Act of
1933, as amended (the 1988 Debt Registration Statement)
10.9 Agreement among the Company and the Persons listed on the
signature pages thereto dated as of June 1, 1988,
incorporated by reference to Exhibit 10.23 of the 1988 Debt
Registration Statement
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10.10 Bogalusa Roundwood Supply and Cutting Rights Agreement by
and between the Company and Cavenham Forest Industries, Inc.
dated as of March 28, 1986, incorporated by reference to
Exhibit 10.10 of the 1986 Debt Registration Statement
10.11 Letters dated March 1, 1991 and March 19, 1991 between the
Company and Cavenham Forest Industries Inc., amending the
Bogalusa Roundwood Supply and Cutting Rights Agreement dated
as of March 28, 1986, incorporated by reference to Exhibit
10(e) of the Company's Proxy Statement - Prospectus on Form
S-4 (No. 33-41799) as amended, filed under the Securities
Act of 1933, as amended (the 1991 Proxy Statement -
Prospectus)
10.12 Bogalusa Wood Chip Supply Agreement by and between the
Company and Cavenham Forest Industries, Inc., dated as of
March 28, 1986, incorporated by reference to Exhibit 10.13
of the 1986 Debt Registration Statement
10.13 Letters dated March 1, 1991 and March 19, 1991 between the
Company and Cavenham Forest Industries, Inc. amending the
Bogalusa Wood Chip Supply Agreement dated as of March 28,
1986, incorporated by reference to Exhibit 10(i) of the 1991
Proxy Statement - Prospectus
10.14 Power Purchase Agreement by and between Pacific Gas &
Electric Company and Crown Zellerbach Corporation dated as
of December 29, 1982, incorporated by reference to Exhibit
10.14 of the 1986 Debt Registration Statement
10.15 Indemnification Agreement by and between the Company, Crown
Zellerbach Corporation and Cavenham Forest Industries, Inc.
dated as of November 17, 1986 regarding Power Purchase
Agreement by and between Pacific Gas & Electric Company and
Crown Zellerbach Corporation dated as of December 29, 1982,
incorporated by reference to Exhibit 10.15 of the 1986 Debt
Registration Statement
10.16 Employment Agreement by and between the Company and Marvin
A. Pomerantz dated as of May 18, 1988, incorporated by
reference to Exhibit 10.1 of the 1988 Debt Registration
Statement*
10.17 Amendment No. 1 to Employment Agreement between the Company
and Marvin A. Pomerantz dated February 8, 1989, incorporated
by reference to Exhibit 10.25 of the Company's Registration
Statement on Form S-1 (No. 33-29722), as amended, filed
under the Securities Act of 1933, as amended (the 1989 Debt
Registration Statement)*
10.18 Employment Agreement by and between the Company and Marvin
A. Pomerantz dated June 1, 1997*............................
10.19 Employment Agreement by and between the Company and Warren
J. Hayford dated as of May 18, 1988, incorporated by
reference to Exhibit 10.2 of the 1988 Debt Registration
Statement*
10.20 Amendment No. 1 to Employment Agreement between the Company
and Warren J. Hayford dated February 8, 1989, incorporated
by reference to Exhibit 10.26 of the 1989 Debt Registration
Statement*
10.21 Employment Letter Agreement by and between the Company and
Dale E. Stahl, dated as of November 22, 1993, incorporated
by reference to Exhibit 10.25 of the 1993 Form 10-K*
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10.22 Employment Letter Agreement by and between the Company and
Daniel P. Casey, dated as of November 22, 1993, incorporated
by reference to Exhibit 10.27 of the 1993 Form 10-K*
10.23 Employment Letter Agreement by and between the Company and
Lawrence G. Rogna, dated as of November 22, 1993,
incorporated by reference to Exhibit 10.29 of the 1993 Form
10-K*
10.24 Stock Retention Agreement dated June 25, 1992 between the
Company and Mid-America Group, Ltd., incorporated by
reference to Exhibit 10(nn) of the 1991 Proxy Statement --
Prospectus
10.25 Stock Retention Agreement dated June 25, 1992 between the
Company and Warren J. Hayford, incorporated by reference to
Exhibit 10(pp) of the 1991 Proxy Statement -- Prospectus
10.26 S&G Packaging Company, L.L.C. Joint Venture Agreement dated
as of July 12, 1996 by and between the Company and Stone
Container Corporation incorporated by reference to Exhibit
10.1 of the June 1996 Form 10-Q
10.27 S&G Packaging Company, L.L.C. Limited Liability Company
Agreement dated as of July 12, 1996 incorporated by
reference to Exhibit 10.2 of the June 1996 Form 10-Q
10.28 Gaylord Container Corporation 1987 Key Employee Stock Option
Plan, incorporated by reference to Exhibit 28 of the
Company's Registration Statement on Form S-8 (No. 33-25675)
filed under the Securities Act of 1933, as amended*
10.29 Gaylord Container Corporation 1989 Long-Term Incentive Plan,
incorporated by reference to Exhibit 28.1 of the Company's
Registration Statement on Form S-8 (No. 33-33977) filed
under the Securities Act of 1933, as amended*
10.30 Gaylord Container Corporation Outside Director Stock Option
Plan, incorporated by reference to Exhibit 28 of the
Company's Registration Statement on Form S-8 (No. 33-33871)
filed under the Securities Act of 1933, as amended*
10.31 Gaylord Container Corporation Retirement Plan*
10.32 Gaylord Container Corporation Retirement Savings Plan*
10.33 Gaylord Container Corporation Management Incentive Plan*
10.34 Gaylord Container Corporation Key Performance Compensation
Plan*
10.35 Gaylord Container Corporation Shareholder Value Plan*
10.36 Gaylord Container Corporation Supplemental Retirement Plan*
10.37 Gaylord Container Corporation 1997 Long-Term Equity
Incentive Plan incorporated by reference to Appendix A to
the Definitive Proxy Statement filed December 24, 1996.*
10.38 Gaylord Container Corporation Supplemental Executive
Retirement Plan incorporated by reference to Exhibit 10.36
of the Company's Annual Report on Form 10-K (No. 1-9915) for
the year ended September 30, 1995, filed under the
Securities Exchange Act of 1934, as amended (the 1995 Form
10-K)*
12.1 Statement Regarding Computation of Ratios of Earnings to
Fixed Charges...............................................
21.1 Subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 of the 1993 Form 10-K
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23.1 Consent of Deloitte & Touche LLP............................
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1)
24.1 Power of Attorney...........................................
25.1 Statement of Eligibility of Trustee on Form T-1**...........
27.1 Financial Data Schedule, incorporated by reference to
Exhibit 27.1 of the 1996 Form 10-K
27.2 Financial Data Schedule, incorporated by reference to
Exhibit 27.1 of the Company's Quarterly Report on Form 10-Q
(No. 1-9915) for the quarter ended March 31, 1997 filed
under the Securities Exchange Act of 1934, as amended (the
March 31, 1997 Form 10-Q)
99.1 Form of Letter of Transmittal...............................
99.2 Form of Notice of Guaranteed Delivery.......................
99.3 Form of Tender Instructions.................................
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* Management contract or compensatory plan or arrangement.
** To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
Schedules are omitted because they are not required or are not applicable.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) 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 of 1933.
(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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 the time shall be deemed to
be the initial bona fide offering thereof;
(3) 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.
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(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 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 directors, 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 of 1933 and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-9
<PAGE> 115
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Gaylord
Container Corporation has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Chicago, State of Illinois, on June 27, 1997.
GAYLORD CONTAINER CORPORATION
By: /s/ MARVIN A. POMERANTZ
------------------------------------
Marvin A. Pomerantz
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed on June 27, 1997 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARVIN A. POMERANTZ Chairman, Chief Executive Officer and
- -------------------------------------------------------- Director (Principal Executive Officer)
Marvin A. Pomerantz
/s/ DANIEL P. CASEY Executive Vice President (Principal
- -------------------------------------------------------- Financial Officer)
Daniel P. Casey
/s/ JEFFREY B. PARK Vice President-Corporate Controller
- -------------------------------------------------------- (Principal Accounting Officer)
Jeffrey B. Park
* Director
- --------------------------------------------------------
Mary Sue Coleman
* Director
- --------------------------------------------------------
Harve A. Ferrill
* Director
- --------------------------------------------------------
John E. Goodenow
* Director
- --------------------------------------------------------
David B. Hawkins
* Director
- --------------------------------------------------------
John Hawkinson
* Director
- --------------------------------------------------------
Warren J. Hayford
* Director
- --------------------------------------------------------
Richard S. Levitt
</TABLE>
II-10
<PAGE> 116
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Director
- --------------------------------------------------------
Ralph L. MacDonald Jr.
* Director
- --------------------------------------------------------
Thomas H. Stoner
</TABLE>
- -------------------------
* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement on Form S-4 on behalf of the above named officers and
directors of the Company pursuant to the Power of Attorney executed by such
officers and directors and filed with the Securities and Exchange Commission.
/s/ DANIEL P. CASEY
- ------------------------------
Daniel P. Casey
Attorney-in-fact
II-11
<PAGE> 1
Gaylord Container Corporation
$225,000,000
9-3/4% Senior Notes due 2007
PURCHASE AGREEMENT
June 5, 1997
BT SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
c/o BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Gaylord Container Corporation, a Delaware corporation (the "Company"),
hereby confirms its agreement with you (the "Initial Purchasers"), as set forth
below.
1. The Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Initial Purchasers $225,000,000
aggregate principal amount of its 9-3/4% Senior Notes due 2007, Series A (the
"Notes"). The Notes are to be issued under an indenture (the "Indenture") to
be dated as of June 12, 1997 by and between the Company and Fleet National
Bank, as trustee (the "Trustee").
The Notes will be offered and sold to the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the "Act"), in
reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a final
offering memorandum dated June 5, 1997 (the "Memorandum") setting forth or
including a description of the terms of the Notes, the terms of the offering of
the Notes, a description of the Company and any material developments re-
<PAGE> 2
-2-
relating to the Company occurring after the date of the most recent historical
financial statements included therein.
The Initial Purchasers and their direct and indirect transferees of the
Notes will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration
Rights Agreement"), pursuant to which the Company has agreed, among other
things, to file with the Securities and Exchange Commission (the "Commission")
under the circumstances set forth therein (i) a registration statement (the
"Registration Statement") under the Act relating to the Company's 9-3/4% Senior
Notes due 2007, Series B (the "Exchange Notes"), to be offered in exchange for
the Notes or (ii) a shelf registration statement pursuant to Rule 415 under the
Act relating to the resale of the Notes by holders thereof or, if applicable,
relating to the resale of debt securities of the Company substantially
identical to the Notes (the "Private Exchange Notes") by the Initial Purchasers
pursuant to an exchange of the Notes for Private Exchange Notes.
2. Representations and Warranties. The Company represents and warrants to
and agrees with the Initial Purchasers that:
(a) Neither the Memorandum nor any amendment or supplement thereto
as of the date thereof and at all times subsequent thereto up to the
Closing Date (as defined in Section 3 below) contained or contains any
untrue statement of a material fact or omitted 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, except that
the representations and warranties set forth in this Section 2(a) do not
apply to statements or omissions made in reliance upon and in conformity
with information relating to any of the Initial Purchasers furnished to
the Company in writing by such Initial Purchasers expressly for use in
the Memorandum or any amendment or supplement thereto.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing and is in good standing as a
corporation under the laws of its jurisdiction of incorporation, with all
requisite corporate power and authority to own its properties and
conduct its businesses as now conducted as described in the Memorandum,
<PAGE> 3
-3-
and is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or leasing of its
properties or the conduct of its businesses requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the business, condition (financial or other) or results
of operations of the Company and its subsidiaries, taken as a whole (any
such event, a "Material Adverse Effect"); as of the Closing Date the
Company will have the authorized, issued and outstanding capitalization
set forth in the Memorandum; the outstanding shares of capital stock of
the Company and each of its subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; and except as disclosed in
the Memorandum, all of the outstanding shares of capital stock of each of
its subsidiaries are owned free and clear of all liens, encumbrances,
equities and claims or restrictions on transferability (other than those
imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting. The Company does not own, directly or
indirectly, any shares of stock or any other equity or long-term debt
securities or have any equity interest in any firm, partnership, joint
venture or other entity other than interests in its Subsidiaries or as
described in the Memorandum or as have been acquired in the ordinary
course of business in exchange for bad debts and nominal amounts of
publicly traded securities, which amounts do not exceed 1/2 of 1% of such
class of securities.
(c) No holder of securities of the Company will be entitled to have
such securities registered under the registration statements required to
be filed by the Company pursuant to the Registration Rights Agreement,
other than as expressly permitted thereby.
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes, the
Exchange Notes and the Private Exchange Notes. The Notes, when issued,
will be in the form contemplated by the Indenture. The Notes, the
Exchange Notes and the Private Exchange Notes have each been duly
authorized by the Company and, when executed by the Company and
authenticated by the Trustee in accordance with the provisions of the
Indenture and, in the case of
<PAGE> 4
-4-
the Notes, delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture; the
Indenture has been duly authorized by the Company and, when executed and
delivered by the Company (assuming the due authorization, execution and
delivery by the Trustee), will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be brought.
(e) The Company has all requisite corporate power and authority to
enter into this Agreement, to issue and deliver the Notes and to
consummate the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by the Company. No consent,
approval, authorization or order of any court or governmental agency or
body is required for the performance of this Agreement or the
consummation by the Company of the transactions contemplated hereby,
except such as have been obtained and such as may be required under state
securities or "Blue Sky" laws in connection with the purchase and resale
of the Notes by the Initial Purchasers. None of the Company or any of its
subsidiaries is (i) in violation of its certificate of incorporation or
bylaws (or similar organizational document), (ii) in violation of any
statute, judgment, decree, order, rule or regulation applicable to the
Company or any of its subsidiaries, which violation would have a Material
Adverse Effect, or (iii) in default in the performance or observance of
any
<PAGE> 5
-5-
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate, material contract or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
to which the Company or any of its subsidiaries is subject, which
violation or default would have a Material Adverse Effect.
(f) The Company has all requisite corporate power and authority to
enter into the Registration Rights Agreement. The Registration Rights
Agreement has been duly authorized by the Company and, when executed and
delivered by the Company, will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except that (A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy
considerations.
(g) The execution, delivery and performance by the Company of this
Agreement, the Indenture and the Registration Rights Agreement and the
consummation by the Company of the transactions contemplated hereby and
thereby will not conflict with or constitute or result in a breach or
violation by the Company of any of (i) the terms or provisions of, or
constitute a default by the Company or any of its subsidiaries under, any
contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or to which any
of them or their respective properties is subject (each a "Contract" or
collectively, the "Contracts"), which conflict, breach, violation or
default would have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of the
Company or any of its subsidiaries or (iii) (assuming compliance with all
applicable state securities and "Blue Sky" laws and assuming the accuracy
of the representations and warranties of the Initial Purchasers in
Section 8
<PAGE> 6
-6-
hereof) any statute, judgment, decree, order, rule or regulation of any
court or governmental agency or other body applicable to the Company or
any of its subsidiaries or any of their properties, which conflict,
breach, violation or default would have a Material Adverse Effect.
(h) The audited consolidated financial statements of the Company and
its consolidated subsidiaries included in the Memorandum present fairly
in all material respects the consolidated financial position, results of
operations and cash flows of the Company and its consolidated
subsidiaries at the dates and for the periods to which they relate and
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated
therein. The unaudited consolidated financial statements and the related
notes included in the Memorandum present fairly in all material respects
the consolidated financial position, results of operations and cash flows
of the Company and its consolidated subsidiaries at the dates and for the
periods to which they relate, subject to year-end audit adjustments and
the more detailed note requirements for audited statements, and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated therein. To
the Company's knowledge, Deloitte & Touche LLP, which has examined
certain of such consolidated financial statements and schedules as set
forth in its reports included in the Memorandum is an independent public
accounting firm as required by the Act and the rules and regulations
promulgated thereunder.
(i) The pro forma consolidated financial information (including the
notes thereto) included in the Memorandum (A) comply as to form in all
material respects with the applicable requirements of Regulation S-X
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and (B) have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements. The adjustments to the pro forma consolidated financial
information have been computed in a mathematically correct manner. The
assumptions used in the preparation of the pro forma financial information
included in the Memorandum are reasonable.
<PAGE> 7
-7-
(j) Except as described in the Memorandum, there is not pending or,
to the knowledge of the Company, threatened, any action, suit, proceeding,
inquiry or investigation to which the Company or any of its subsidiaries
is a party, or to which the property of the Company or any of its
subsidiaries is subject, before or brought by any court or governmental
agency or body, that would be reasonably likely to have a Material Adverse
Effect.
(k) The Company and each of its subsidiaries owns or possesses
licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how necessary to conduct the businesses
now or proposed to be operated by it as described in the Memorandum, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with (or knows of any such infringement of or
conflict with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how which, if
such assertion of infringement or conflict were sustained, would have a
Material Adverse Effect.
(l) The Company and its subsidiaries have obtained all licenses,
permits, franchises and other governmental authorizations necessary to
conduct the businesses now or proposed to be operated by it as described
in the Memorandum, the lack of which would have a Material Adverse
Effect.
(m) Subsequent to the respective dates as of which information is
given in the Memorandum and except as described therein or contemplated
thereby, (i) neither the Company nor any of its subsidiaries has incurred
any material liabilities or obligations, direct or contingent, or entered
into any material transactions, not in the ordinary course of business and
(ii) the Company has not purchased any of its outstanding capital stock,
nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock.
(n) Except as disclosed in the Memorandum, either the Company nor
any of its subsidiaries is in violation of any federal, state or local
law relating to occupational safety and health or to the storage,
handling or transportation of hazardous or toxic materials and the
Company or
<PAGE> 8
-8-
its subsidiaries have obtained all permits, licenses or other
approvals required under applicable federal and state occupational safety
and health and environmental laws and regulations to conduct its
businesses as described in the Memorandum, and the Company and its
subsidiaries are in compliance with all terms and conditions of any such
required permit, license or approval, except any such violation of law or
regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms of such permits, licenses
or approvals which would not, singly or in the aggregate, have a Material
Adverse Effect.
(o) Except as described in the Memorandum, neither the Company nor
any of its subsidiaries is in default under any Contract, has received a
notice or claim of any such default or has knowledge of any breach of any
Contract by the other party or parties thereto, except such defaults or
breaches as would not have a Material Adverse Effect.
(p) The Company and each of its subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where
the failure to so file such returns would not have a Material Adverse
Effect, and has paid all taxes shown as due thereon; and other than tax
deficiencies that the Company is contesting in good faith and for which
the Company reasonably believes that it has provided adequate reserves in
accordance with generally accepted accounting principles, there is no tax
deficiency that has been asserted against the Company or any of its
subsidiaries that would have a Material Adverse Effect.
(q) Neither the Company nor any agent acting on its behalf has taken
or will take any action that is likely to cause this Agreement or the
sale of the Notes to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or as
the same may hereafter be in effect, on the Closing Date.
(r) The Company and each of its subsidiaries has good and marketable
title to all real property and good title to all personal property
described in the Memorandum as being owned by it and good and marketable
title to a leasehold estate in the real and personal property de-
<PAGE> 9
-9-
scribed in the Memorandum as being leased by it (except for those leases
of real property in which the Company has good title and that would be
marketable but for the requirement that the landlord consent to an
assignment or sublease of the lease), free and clear of all liens,
charges, encumbrances or restrictions, except, in each case, as described
in the Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would not
have a Material Adverse Effect. All leases, contracts and agreements to
which the Company or any of its subsidiaries is a party or by which any of
them is bound are (i) valid and enforceable against the Company or any
such subsidiary and (ii) to the knowledge of the Company, valid and
enforceable against the other party or parties thereto and are in full
force and effect with only such exceptions as would not, individually or
in the aggregate, have a Material Adverse Effect.
(s) Neither the Company nor any of its subsidiaries has violated any
provisions of the Employee Retirement Income Security Act of 1974
("ERISA") or the rules and regulations promulgated thereunder, that might
result, individually or in the aggregate, in a Material Adverse Effect.
There is no organized strike, labor dispute, slowdown or stoppage pending
against the Company or any of its subsidiaries or, to the best knowledge
of the Company, threatened against the Company, or any of its
subsidiaries, except with respect to any matter specified above,
individually or in the aggregate) such as are not expected to have a
Material Adverse Effect.
(t) The Company and each subsidiary maintain insurance (including
self insurance) covering their properties, operations, personnel and
businesses. Such insurance insures against such losses and risks as are
adequate in accordance with customary industry practice to protect the
Company and its subsidiaries and their businesses. Neither the Company
nor any subsidiary has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures will
have to be made in order to continue such insurance. All such insurance
is outstanding and duly in force on the date hereof and will be
outstanding and duly in force on the Closing Date, except as disclosed in
the Memorandum.
<PAGE> 10
-10-
(u) The Company is not an "investment company" or an affiliated
person of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.
(v) Neither the Company nor, to its knowledge, any of its
directors, officers or controlling persons has taken, directly or
indirectly, any action designed, or that might reasonably be expected, to
cause or result, under the Act or otherwise, in, or that has constituted,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Notes.
(w) The Company has delivered a true and correct copy of its Credit
Agreement to you dated as of November 17, 1986, and amended and restated
as of June 30, 1995, among the Company and the financial institutions
signatory thereto, Bankers Trust Company, as agent and co-manager, as
amended through the date hereof and the Closing Date, together with all
schedules, exhibits and proposed amendments thereto (the "Credit
Agreement"), and of any waivers of the provisions thereof; and there
exists as of the Closing Date (after giving effect to the transactions
contemplated by this Agreement and the Indenture) no condition that would
constitute a Default or an Event of Default (each as defined in the
Credit Agreement) under the Credit Agreement.
(x) The Notes, the Exchange Notes, the Private Exchange Notes, the
Indenture and the Registration Rights Agreement will conform in all
material respects to the descriptions thereof in the Memorandum.
(y) None of the Company, its subsidiaries or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any "security" (as
defined in the Act) that is or could be integrated with the sale of the
Notes in a manner that would require the registration under the Act of
the Notes or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Notes or in any manner
<PAGE> 11
-11-
involving a public offering within the meaning of Section 4(2) of the Act.
Assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof, the Company has not been informed by
counsel that it is necessary in connection with the offer, sale and
delivery of the Notes to the Initial Purchasers in the manner contemplated
by this Agreement to register any of the Notes under the Act or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended (the
"TIA").
(z) No securities of the Company or any subsidiary are of the same
class (within the meaning of Rule 144A under the Act) as the Notes and
listed on a national securities exchange registered under Section 6 of
the Exchange Act, or quoted in a U.S. automated inter-dealer quotation
system.
(aa) The statistical and market-related data included in the
Memorandum are based on or derived from sources that the Company believes
to be reliable and accurate in all material respects.
Any certificate signed by any officer of the Company or any
subsidiary and delivered to any Initial Purchaser or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company to
each Initial Purchaser as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Notes. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers, acting
severally and not jointly, agree to purchase from the Company the Notes in the
respective amounts set forth in Schedule I hereto at 98.0% of their principal
amount. One or more certificates in definitive form for the Notes that the
Initial Purchasers have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial Purchasers
request upon notice to the Company at least 36 hours prior to the Closing Date,
shall be delivered by or on behalf of the Company to the Initial Purchasers,
against payment by or on behalf of the Initial Purchasers of the purchase price
therefor by wire transfer (same day funds) to such account or accounts as the
Company shall specify prior to the Closing Date, or by such means as the parties
hereto shall
<PAGE> 12
-12-
agree prior to the Closing Date. Such delivery of and payment for the Notes
shall be made at the offices of Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois 60601, at 9:00 A.M., Chicago time, on June 12, 1997, or at
such other place, time or date as the Initial Purchasers, on the one hand, and
the Company, on the other hand, may agree upon, such time and date of delivery
against payment being herein referred to as the "Closing Date." The Company
will make such certificate or certificates for the Notes available for checking
and packaging by the Initial Purchasers at the offices of BT Securities
Corporation in New York, New York, or at such other place as BT Securities
Corporation may designate, at least 24 hours prior to the Closing Date.
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Notes at the price and upon the terms set
forth in the Memorandum, as soon as practicable after this Agreement is entered
into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Company. The Company covenants and agrees with
the Initial Purchasers that:
(a) The Company will not amend or supplement the Memorandum or any
amendment or supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a reasonable period
of time prior to the proposed amendment or supplement and as to which the
Initial Purchasers shall not have given its consent, which will not be
unreasonably withheld. The Company will promptly, upon the reasonable
request of the Initial Purchasers or counsel for the Initial Purchasers,
make any amendments or supplements to the Memorandum that may be necessary
or advisable in connection with the resale of the Notes by the Initial
Purchasers.
(b) The Company will cooperate with the Initial Purchasers in
arranging for the qualification of the Notes for offering and sale under
the securities or "Blue Sky" laws of which jurisdictions as the Initial
Purchasers may designate and will continue such qualifications in effect
for as long as may be necessary to complete the resale of the Notes;
provided, however, that in connection therewith, the Company shall not be
required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or subject itself
<PAGE> 13
-13-
to taxation in excess of a minimal dollar amount in any such jurisdiction
where it is not so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Notes or the Private Exchange Notes, any
event occurs or information becomes known as a result of which the
Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Memorandum to comply
with applicable law, the Company will promptly notify the Initial
Purchasers thereof and will prepare, at the expense of the Company, an
amendment or supplement to the Memorandum that corrects such statement or
omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of
the Memorandum or any amendment or supplement thereto as the Initial
Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Memorandum.
(f) For so long as the Notes remain outstanding, the Company will
furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the
Trustee or to the holders of the Notes and, as soon as available, copies
of any reports or financial statements furnished to or filed by the
Company with the Commission or any national securities exchange on which
any class of securities of the Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared, a copy of any
unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Memorandum.
<PAGE> 14
-14-
(h) None of the Company or any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of
any "security" (as defined in the Act) that could be integrated with the
sale of the Notes in a manner which would require the registration under
the Act of the Notes.
(i) The Company will not, and will not permit any of the
Subsidiaries to, engage in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Notes or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(j) The Company will use its best efforts to (i) assist the Initial
Purchasers in permitting the Notes to be designated PORTAL securities in
accordance with the rules and regulations adopted by the NASD relating to
trading in the Private Offerings, Resales and Trading through Automated
Linkages market (the "PORTAL Market") and (ii) permit the Notes to be
eligible for clearance and settlement through The Depository Trust
Company.
6. Expenses. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Memorandum and any amendment or supplement thereto, and any "Blue
Sky" memoranda, (ii) all arrangements relating to the delivery to the Initial
Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation (including printing), issuance and
delivery to the Initial Purchasers of the Notes, (v) the qualification of the
Notes under state securities and "Blue Sky" laws, including filing fees and fees
and disbursements of counsel for the Initial Purchasers relating thereto, (vi)
fees and expenses of the Trustee including fees and expenses of counsel and
(vii) all expenses and listing fees incurred in connection with the application
for quotation of the Notes on the PORTAL Market. If the sale of the Notes
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set
<PAGE> 15
-15-
forth in Section 7 hereof is not satisfied, because this Agreement is terminated
or because of any failure, refusal or inability on the part of the Company to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder (other than solely by reason of a default by the Initial
Purchasers of their obligations hereunder after all conditions hereunder have
been satisfied in accordance herewith), the Company agrees to promptly reimburse
the Initial Purchasers upon demand for all out-of-pocket expenses (including
fees, disbursements and charges of Cahill Gordon & Reindel, counsel for the
Initial Purchasers) that shall have been incurred by the Initial Purchasers in
connection with the proposed purchase and sale of the Notes.
7. Conditions of the Initial Purchasers' Obligations. The
obligation of the Initial Purchasers to purchase and pay for the Notes shall, in
their sole discretion, be subject to the following conditions on or prior to the
Closing Date:
(a) The Initial Purchasers shall have received an opinion in form
and substance satisfactory to the Initial Purchasers, dated the Closing
Date, of Kirkland & Ellis, counsel for the Company, substantially in the
form of Exhibit B hereto. In rendering such opinion, Kirkland & Ellis
shall have received and may rely upon such certificates and other
documents and information as they may reasonably request to pass on such
matters. In addition, in rendering their opinion, Kirkland & Ellis may
state that their opinion is limited to matters of Illinois, New York,
Delaware corporate and federal law. Such opinion of Kirkland & Ellis
shall be rendered to the Initial Purchasers at the request of the Company
and shall so state therein.
(b) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, with respect to certain legal matters relating to this
Agreement, and such other related matters as the Initial Purchasers may
require. In rendering such opinion, Cahill Gordon & Reindel shall have
received and may rely upon such certificates and other documents and
information as they may reasonably request to pass upon such matters. In
addition, in rendering their opinion, Cahill Gordon & Reindel may state
<PAGE> 16
-16-
that their opinion is limited to matters of New York, Delaware corporate
and federal law.
(c) The Initial Purchasers shall have received from Deloitte &
Touche LLP a comfort letter or letters dated, respectively, on or about
the date hereof and the Closing Date, in form and substance satisfactory
to the Initial Purchasers and counsel for the Initial Purchasers.
(d) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects as of
the date hereof and as of the Closing Date; the Company shall have
complied in all material respects with all covenants and agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date; and subsequent to the date of
the most recent financial statements in the Final Memorandum, there shall
have been no material adverse change in the business, condition
(financial or other), results of operations or prospects of the Company
and its subsidiaries, taken as a whole, except as set forth in, or
contemplated by, the Final Memorandum.
(e) The sale of the Notes by the Company hereunder shall not be
enjoined (temporarily or permanently) on the Closing Date.
(f) Subsequent to the date as of which information is given in the
Memorandum, except as described in or as contemplated by the Memorandum,
none of the Company or any of its subsidiaries shall have incurred any
liabilities or obligations, direct or contingent (other than in the
ordinary course of business) that are material to the Company and its
subsidiaries, taken as a whole, or entered into any transactions not in
the ordinary course of business that are material to the business,
condition (financial or other), results of operations or prospects of the
Company and its subsidiaries, taken as a whole, and, other than as
contemplated by the Memorandum, there shall not have been any change in
the capital stock or long-term indebtedness of the Company or its
subsidiaries that is material to the business, condition (financial or
other), results of operations or prospects of the Company and its
subsidiaries, taken as a whole.
<PAGE> 17
-17-
(g) Subsequent to the date as of which information is given in the
Memorandum, the conduct of the business and operations of the Company or
any of its subsidiaries has not been interfered with by strike, fire,
flood, hurricane, accident or other calamity (whether or not insured) or
by any court or governmental action, order or decree, and, except as
otherwise stated therein, the properties of the Company or any of its
subsidiaries have not sustained any loss or damage (whether or not
insured) as a result of any such occurrence, except any such
interference, loss or damage which would not have a Material Adverse
Effect.
(h) The Initial Purchasers shall have received a certificate of the
Company, dated the Closing Date, signed on behalf of the Company by any
two of the Chairman of the Board of Directors, the President, an
Executive Vice President, a Vice President or the Treasurer of the
Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct in all material respects as if made
on and as of the Closing Date, and the Company has performed in all
material respects all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
the Closing Date;
(ii) At the Closing Date, since the date hereof or since the
date of the most recent financial statement in the Memorandum, no
event or events have occurred, nor has any information become known
that individually or in the aggregate would have a Material Adverse
Effect; and
(iii) The sale of the Notes by the Company hereunder has not
been enjoined (temporarily or permanently).
(i) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by the Company and such
agreement shall be in full force and effect on the Closing Date.
On or before the Closing Date, the Initial Purchasers and counsel
for the Initial Purchasers shall have received such
<PAGE> 18
-18-
further documents, opinions, certificates and schedules or instruments relating
to the business, corporate, legal and financial affairs of the Company as they
shall have heretofore reasonably requested from the Company.
All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such opinions,
certificates, letters, schedules, documents and instruments in such quantities
as the Initial Purchasers shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. (a) Each of the
Initial Purchasers represents and warrants that it is a QIB. Each of the
Initial Purchasers agrees with the Company that (i) it has not and will not
solicit offers for, or offer or sell, the Notes by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act; and (ii) it has and will solicit offers for the
Notes only from, and will offer the Notes only to (A) in the case of offers
inside the United States, (x) persons whom it reasonably believes to be QIBs or,
if any such person is buying for one or more institutional accounts for which
such person is acting as fiduciary or agent, only when such person has
represented to it that each such account is a QIB, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A, and, in each
case, in transactions under Rule 144A or (y) a limited number of other
institutional investors reasonably believed by it to be Accredited Investors
that, prior to their purchase of the Notes, deliver to it a letter containing
the representations and agreements set forth in Annex A to the Memorandum and
(B) in the case of offers outside the United States, to persons other than U.S.
persons ("foreign purchasers," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)); provided,
however, that, in the case of this clause (B), in purchasing such Notes such
persons are deemed to have represented and agreed as provided under the caption
"Transfer Restrictions" contained in the Memorandum.
<PAGE> 19
-19-
(b) Each of the Initial Purchasers represents and warrants (as to
itself only) with respect to offers and sales outside the United States that (i)
it has complied and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Notes or has in its
possession or distributes the Memorandum or any such other material, in all
cases at its own expense; (ii) the Notes have not been and will not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the Act or pursuant to an
exemption from the registration requirements of the Act; (iii) it has offered
the Notes and will offer and sell the Notes (A) as part of its distribution at
any time and (B) otherwise until 40 days after the later of the commencement of
the offering and the Closing Date, only in accordance with Rule 903 of
Regulation S and, accordingly, neither it nor any persons acting on its behalf
have engaged or will engage in any directed selling efforts (within the meaning
of Regulation S) with respect to the Notes, and any such persons have complied
and will comply with the offering restrictions requirement of Regulation S; and
(iv) it agrees that, at or prior to confirmation of sales of the Notes, it will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Notes from it during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and
may not be offered and sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of the
distribution of the Securities at any time or (ii) otherwise until
40 days after the later of the commencement of the offering and
the closing date of the offering, except in either case in
accordance with Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above have the meaning given to them
in Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S.
(c) Each of the Initial Purchasers represents and warrants (as to
itself only) that the source of funds being used by it to acquire the Notes does
not include the assets of
<PAGE> 20
-20-
any "employee benefit plan" (within the meaning of Section 3 of ERISA) or any
"plan" (within the meaning of Section 4975 of the Code).
9. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, and each person, if any,
who controls any Initial Purchaser within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any Initial Purchaser or such controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Memorandum or any amendment or
supplement thereto or any application or other document, or any
amendment or supplement thereto, executed by the Company or based
upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Notes under the
securities or "Blue Sky" laws thereof or filed with any securities
association or securities exchange (each an "Application"); or
(ii) the omission or alleged omission to state, in the
Memorandum or any amendment or supplement thereto or any
Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses incurred by the Initial
Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; provided, however, 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 untrue statement or
alleged untrue statement or omission or alleged omission made in the Memorandum
or any amendment or supplement thereto or any Application in reliance upon and
in conformity with written information concerning the Initial Purchasers
furnished to the Company by the Initial Purchasers specifically for use therein.
This indemnity agreement
<PAGE> 21
-21-
will be in addition to any liability that the Company may otherwise have to the
indemnified parties. The Company shall not be liable under this Section 9 for
any settlement of any claim or action effected without its prior written
consent, which shall not be unreasonably withheld.
The Initial Purchasers shall not, without the prior written consent
of the Company, effect any settlement or compromise of any pending or threatened
proceeding in respect of which the Company is or could have been a party, or
indemnity could have been sought hereunder by the Company, unless such
settlement (A) includes an unconditional written release of the Company, in form
and substance reasonably satisfactory to the Company, from all liability on
claims that are the subject matter of such proceeding and (B) does not include
any statement as to an admission of fault, culpability or failure to act by or
on behalf of the Company.
(b) Each of the Initial Purchasers agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its officers
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act against any losses, claims,
damages or liabilities to which the Company or any such director, officer or
controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Memorandum or any
amendment or supplement thereto or any Application, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto or any Application, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Initial Purchaser, furnished
to the Company by such Initial Purchaser specifically for use therein; and
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses incurred by the Company or
any such director, officer or controlling person in connection with
investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement
<PAGE> 22
-22-
will be in addition to any liability that the Initial Purchasers may otherwise
have to the indemnified parties. The Initial Purchasers shall not be liable
under this Section 9 for any settlement of any claim or action effected without
its consent, which shall not be unreasonably withheld. The Company shall not,
without the prior written consent of the Initial Purchasers, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which any Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by any Initial Purchaser, unless such settlement (A)
includes an unconditional written release of the Initial Purchasers, in form and
substance reasonably satisfactory to the Initial Purchasers, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent 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 obligation provided in paragraphs (a) and (b)
above. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that 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 defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party or (iii) the
indemnifying party
<PAGE> 23
-23-
shall not have employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after receipt by the
indemnifying party of notice of the institution of such action, then, in each
such case, the indemnifying party shall not have the right to direct the defense
of such action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 9 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchasers in the case of paragraph (a) of this
Section 9 or the Company in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld), unless
such indemnified party waived in writing its rights under this Section 9, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 9 is unavailable to, or insufficient
to hold harmless, an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution,
<PAGE> 24
-24-
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and the Initial Purchasers on the other shall be deemed to be in
the same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by the Initial Purchasers. The relative fault of the parties 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 Initial Purchasers on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission or alleged statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company and the Initial
Purchasers agree that it would not be just and equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Initial
Purchasers shall not be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by the Initial Purchasers under this Agreement, less the aggregate
amount of any damages that the Initial Purchasers has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and 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 paragraph (d), each person, if any, who
controls the Initial Purchasers within the meaning of
<PAGE> 25
-25-
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Initial Purchasers, and each director of the
Company, each officer of the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and the Initial Purchasers set forth in this Agreement or made by or on
behalf of them pursuant to this Agreement shall remain in full force and effect,
regardless of (a) any investigation made by or on behalf of the Company, any of
its officers or directors, the Initial Purchasers or any controlling person
referred to in Section 9 hereof and (b) delivery of and payment for the Notes.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
(i) the Company shall have sustained any loss or interference with
respect to its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any strike, labor dispute, slow down or work stoppage or any legal or
governmental proceeding, which loss or interference, in the sole judgment
of the Initial Purchasers, has had or has a Material Adverse Effect, or
there shall have been, in the sole judgment of the Initial Purchasers, any
event or development that, individually or in the aggregate, has or could
be reasonably likely to have a Material Adverse Effect, except in each
case as described in the Memorandum (exclusive of any amendment or
supplement thereto);
(ii) trading in securities of the Company or in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have
<PAGE> 26
-26-
been suspended or minimum or maximum prices shall have been established on
any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency or (C) any material change in the financial markets
of the United States that, in the case of (A), (B) or (C) above and in the
sole judgment of the Initial Purchasers, makes it impracticable or
inadvisable to proceed with the offering or the delivery of the Notes as
contemplated by the Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The statements
set forth in the last paragraph on the front cover page and in the third, sixth
and seventh sentences of the third paragraph under the heading "Private
Placement" in the Memorandum (to the extent such statements relate to the
Initial Purchasers) constitute the only information furnished by the Initial
Purchasers to the Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
if sent to the Initial Purchasers, shall be mailed, delivered or telecopied to
(i) BT Securities Corporation, 130 Liberty Street, New York, New York 10006,
Attention: Corporate Finance Department, with a copy to Cahill Gordon &
Reindel, 80 Pine Street, New York, New York 10005, Attention: William B.
Gannett, Esq., Telecopier Number: (212) 269-5420; if sent to the Company, shall
be mailed or delivered to the Company at Gaylord Container Corporation, 500 Lake
Cook Road, Suite 400, Deerfield, Illinois 60015, Attention: David F. Ta-
<PAGE> 27
-27-
naka, Esq., with a copy to Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois 60601, Attention: Alan Berkshire, Esq., Telecopier Number:
(312) 861-2200.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by addressee, if telecopied.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control the Initial Purchasers within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchasers contained in Section 9 of this Agreement
shall also be for the benefit of the directors of the Company, its officers and
any person or persons who control the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act. No purchaser of Notes from the
Initial Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 28
-28-
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Initial Purchasers.
Very truly yours,
GAYLORD CONTAINER CORPORATION
By: /s/ Jeffrey B. Park
-------------------------------
Name: Jeffrey B. Park
Title: Vice President - Corporate Controller
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
BT SECURITIES CORPORATION
By: /s/ Charles G. Denison
---------------------------------
Name: Charles G. Denison
Title: Senior Managing Director
BEAR, STEARNS & CO. INC.
By: /s/ Tylene J. Elliot
---------------------------------
Name: Tylene Elliot
Title: SMD
SALOMON BROTHERS INC
By: /s/ Peter J. Scott
---------------------------------
Name: Peter J. Scott
Title: Vice President
<PAGE> 29
SCHEDULE 1
Initial Purchasers Principal Amount of Notes
BT Securities Corporation $115,000,000
Bear, Stearns & Co. Inc. 80,000,000
Salomon Brothers Inc 30,000,000
Total $225,000,000
<PAGE> 30
EXHIBIT A
[REGISTRATION RIGHTS AGREEMENT]
<PAGE> 31
EXHIBIT B
[KIRKLAND & ELLIS FORM OF OPINION]
(i) The Issuer is a corporation existing and in good standing under
the General Corporation Law of the State of Delaware. The Issuer is
qualified as a foreign corporation in good standing in each of the
jurisdictions set forth on a Schedule to such counsel's opinion.
(ii) As of March 31, 1997, the Issuer had the authorized equity
capitalization set forth in the Memorandum under Capitalization. To such
counsel's actual knowledge, there are no (A) options, warrants or other
rights to purchase, (B) agreements or other obligations of the Issuer to
issue or (C) other rights to convert any obligation into, or exchange any
securities for, shares of capital stock of or ownership interests in any
of the Subsidiaries outstanding.
(iii) The Issuer has the corporate power to enter into and perform
its obligations under the Operative Agreements to which it is a party,
including without limitation the corporate power to issue, sell and
deliver the Notes as contemplated by the Purchase Agreement.
(iv) The Issuer's Board of Directors has adopted by requisite vote
the resolutions necessary to authorize the Issuer's execution, delivery
and performance of the Operative Agreements to which it is a party and the
Issuer's Board of Directors has approved by requisite vote the price and
interest rate set forth therein.
(v) The Issuer has duly executed and delivered this Agreement, the
Indenture and the Registration Rights Agreement.
(vi) Each of this Agreement, the Indenture and the Registration
Rights Agreement is a valid and binding obligation of the Issuer and
(assuming the due authorization, execution and delivery thereof by the
other parties thereto) is enforceable against the Issuer in accordance
with its terms.
<PAGE> 32
-2-
(vii) The Notes have been duly executed and delivered by the Issuer
and, when paid for by the Initial Purchasers in accordance with the terms
of this Agreement (assuming the due authorization, execution and delivery
of the Indenture by the Trustee and due authentication and delivery of
the Notes by the Trustee in accordance with the Indenture), will
constitute the valid and binding obligations of the Issuer, entitled to
the benefits of the Indenture, and enforceable against the Issuer in
accordance with their terms.
(viii) When the Exchange Notes have been duly executed and delivered
by the Issuer in accordance with the terms of the Registration Rights
Agreement, the Exchange Offer and Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee and
due authentication and delivery of the Exchange Notes by the Trustee in
accordance with the Indenture), the Exchange Notes will constitute the
valid and binding obligations of the Issuer, entitled to the benefits of
the Indenture, and enforceable against the Issuer in accordance with their
terms.
(ix) The statements in the Memorandum under the headings "Description
of Notes" and "Exchange Offer and Registration Rights," insofar as such
statements purport to summarize certain provisions of the Indenture, the
Notes and the Registration Rights Agreement and subject to the limitations
contained in such statements, provide a fair and accurate summary in all
material respects of such provisions of such agreements.
(x) The execution and delivery of this Agreement, the Registration
Rights Agreement and the Indenture, and the consummation of the
transactions contemplated thereby (including, without limitation, the
issuance and sale of the Notes to the Initial Purchasers) do not and will
not conflict with or constitute or result in a breach or default under (or
an event which with notice or the passage of time or both would constitute
a default under) or violation of any of, (i) the certificate of
incorporation or bylaws of the Issuer, (ii) any statute or governmental
rule or regulation which, in the experience of such counsel, is normally
applicable both to general business corporations that are not engaged in
regulated business activities and to transactions of the type contemplated
by
<PAGE> 33
-3-
the Memorandum (but without such counsel having made any special
investigation as to other laws and provided that such counsel need express
no opinion with respect to (a) any laws, rules or regulations to which the
Issuer may be subject as a result of any of the Initial Purchasers' legal
or regulatory status or the involvement of any of the Initial Purchasers
in such transactions or (b) any laws, rules or regulations relating to
disclosure, misrepresentations or fraud), (iii) the terms or provisions of
any contract set forth on a Schedule to such counsel's opinion attached
hereto, except (in the case of clauses (ii) and (iii) above) for any such
conflict, breach, violation, default or event which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(xi) To the actual knowledge of such counsel, no consent, waiver,
approval, authorization or order of any court or governmental authority is
required for the issuance and sale by the Issuer of the Notes to the
Initial Purchasers or the consummation by the Issuer of the other
transactions contemplated by the Operative Agreements, except such as may
be required under the Act, the Exchange Act, the TIA and the security or
Blue Sky laws of the various states (and the rules and regulations
thereunder), as to which such counsel need express no opinion in this
paragraph.
(xii) To the actual knowledge of such counsel, no legal or
governmental proceedings are pending to which the Issuer is a party or to
which the property or assets of the Issuer is subject which seek to
restrain, enjoin or prevent the consummation of or otherwise challenge the
issuance or sale of the Notes to be sold to the Initial Purchasers or the
consummation of the other transactions contemplated by the Operative
Documents.
(xiii) The Issuer is not, and immediately after the sale of the Notes
to the Initial Purchasers and application of the net proceeds therefrom as
described in the Memorandum under the caption "Use of Proceeds" will not
be, an "investment company" as such term is defined in the Investment
Issuer Act of 1940, as amended.
(xiv) No registration under the Act of the Notes is required in
connection with the sale of the Notes to the
<PAGE> 34
-4-
Initial Purchasers in the manner contemplated by this Agreement and
the Memorandum or in connection with the initial resale of the Notes by
the Initial Purchasers in accordance with Section 8 hereof, and prior to
the commencement of the Exchange Offer or the effectiveness of the Shelf
Registration Statement, the Indenture is not required to be qualified
under the TIA, in each case assuming (i) that the purchasers who buy such
Notes in the initial resale thereof are qualified institutional buyers as
defined in Rule 144A promulgated under the Act or accredited investors as
defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Act, (ii)
the accuracy and completeness of the Initial Purchasers' representations
in Section 8 hereof and those of the Issuer contained in the Purchase
Agreement regarding the absence of a general solicitation in connection
with the sale of such Notes to the Initial Purchasers and the initial
resale thereof, (iii) the due performance by the Initial Purchasers of the
agreements set forth in Section 8 hereof and (iv) the accuracy of the
representations made by each Accredited Investor who purchased Notes in
the initial resale as set forth in the Memorandum.
(xv) As of the date hereof, none of the Notes are of the same class
(within the meaning of Rule 144A under the Act) as securities of the
Issuer that are listed on a national securities exchange registered under
Section 6 of the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system.
(xvi) Neither the sale, issuance, execution or delivery of the Notes
nor the application of the net proceeds therefrom as described in the
Memorandum under the caption "Use of Proceeds" will contravene Regulation
G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U
(12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
At the time the foregoing opinion is delivered, Kirkland & Ellis
shall additionally state that it has participated in conferences with officers
and other representatives of the Issuer, representatives of the independent
public accountants for the Issuer, representatives of the Initial Purchasers and
counsel for the Initial Purchasers, at which conferences the contents of the
Memorandum and related matters were discussed, and, although it has not
independently verified and is
<PAGE> 35
-5-
not passing upon and assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Memorandum (except to the extent
specified in subsection (x), no facts have come to its attention which lead it
to believe that the Memorandum, on the date thereof or on the Closing Date,
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such firm need express no opinion with respect to the financial statements
and related notes thereto and the other financial, statistical and accounting
data included in the Memorandum).
<PAGE> 1
===============================================================================
GAYLORD CONTAINER CORPORATION,
as Issuer
and
FLEET NATIONAL BANK,
as Trustee
------------------
INDENTURE
Dated as of June 12, 1997
------------------
$225,000,000
9-3/4% Senior Notes due 2007, Series A
and
9-3/4% Senior Notes due 2007, Series B
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
<S> <C>
310(a)(1) ............. 7.10
(a)(2) ............ 7.10
(a)(3) ............ N.A.
(a)(4) ............ N.A.
(a)(5) ............ 7.08; 7.10
(b) ............... 7.08; 7.10; 11.02
(c) ............... N.A.
311(a) ............... 7.11
(b) ............... 7.11
(c) ............... N.A.
312(a) ............... 2.05
(b) ............... 11.03
(c) ............... 11.03
313(a) ............... 7.06
(b)(1) ............ N.A.
(b)(2) ............ 7.06
(c) ............... 7.06; 11.02
(d) ............... 7.06
314(a) ............... 4.07; 4.09; 11.02
(b) ............... N.A.
(c)(1) ............ 11.04
(c)(2) ............ 11.04
(c)(3) ............ N.A.
(d) ............... N.A.
(e) ............... 11.05
(f) ............... N.A
315(a) ............... 7.01(b)
(b) ............... 7.05; 10.02
(c) ............... 7.01(a)
(d) ............... 7.01(c)
(e) ............... 6.11
316(a)(last sentence) 2.09
(a)(1)(A) ......... 6.05
(a)(1)(B) ......... 6.04
(a)(2) ............ N.A.
(b) ............... 6.07
317(a)(1) ............ 6.08
(a)(2) ............ 6.09
(b) ............... 2.04
318(a) ............... 11.01
(c) ............... 11.01
</TABLE>
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
-i-
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCEy
SECTION 1.01. Definitions. ........................ 1
SECTION 1.02. Incorporation by Reference of TIA. .. 24
SECTION 1.03. Rules of Construction. .............. 25
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. ........................ 25
SECTION 2.02. Execution and Authentication. ........... 26
SECTION 2.03. Registrar and Paying Agent. ............. 27
SECTION 2.04. Paying Agent To Hold Assets in Trust. ... 28
SECTION 2.05. Noteholder Lists. ....................... 29
SECTION 2.06. Transfer and Exchange. .................. 29
SECTION 2.07. Replacement Notes. ...................... 30
SECTION 2.08. Outstanding Notes. ...................... 30
SECTION 2.09. Treasury Notes. ......................... 31
SECTION 2.10. Temporary Notes. ........................ 31
SECTION 2.11. Cancellation. ........................... 31
SECTION 2.12. Defaulted Interest. ..................... 32
SECTION 2.13. CUSIP Number. ........................... 32
SECTION 2.14. Deposit of Moneys. ...................... 32
SECTION 2.15. Restrictive Legends. .................... 33
SECTION 2.16. Book-Entry Provisions for Global Note. .. 34
SECTION 2.17. Special Transfer Provisions. ............ 36
SECTION 2.18. Designation. ............................ 38
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. ................. 39
SECTION 3.02. Selection of Notes To Be Redeemed. .. 39
SECTION 3.03. Notice of Redemption. ............... 39
SECTION 3.04. Effect of Notice of Redemption. ..... 40
SECTION 3.05. Deposit of Redemption Price. ........ 41
SECTION 3.06. Notes Redeemed in Part. ............. 41
-ii-
<PAGE> 4
Page
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. ........................... 41
SECTION 4.02. Maintenance of Office or Agency. ............ 42
SECTION 4.03. Limitation on Restricted Payments. .......... 42
SECTION 4.04. Corporate Existence. ........................ 45
SECTION 4.05. Payment of Taxes and Other Claims. .......... 45
SECTION 4.06. Maintenance of Properties and Insurance. .... 46
SECTION 4.07. Compliance Certificate; Notice of Default. .. 46
SECTION 4.08. Compliance with Laws. ....................... 48
SECTION 4.09. SEC Reports. ................................ 48
SECTION 4.10. Waiver of Stay, Extension or Usury Laws. .... 49
SECTION 4.11. Limitation on Transactions with Affiliates. . 49
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness. ............................ 50
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries. ..... 50
SECTION 4.14. Limitation on Liens. ........................ 51
SECTION 4.15. Change of Control. .......................... 52
SECTION 4.16. Limitation on Asset Sales. .................. 54
SECTION 4.17. Limitation on Incurrence of Subordinated Debt. 58
SECTION 4.18. Guarantees by Restricted Subsidiaries. ...... 58
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. ........ 59
SECTION 5.02. Successor Corporation Substituted. .. 60
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. ..................... 60
SECTION 6.02. Acceleration. .......................... 62
SECTION 6.03. Other Remedies. ........................ 63
SECTION 6.04. Waiver of Past Defaults. ............... 63
SECTION 6.05. Control by Majority. ................... 64
SECTION 6.06. Limitation on Suits. ................... 64
SECTION 6.07. Rights of Holders To Receive Payment. .. 64
SECTION 6.08. Collection Suit by Trustee. ............ 65
SECTION 6.09. Trustee May File Proofs of Claim. ...... 65
SECTION 6.10. Priorities. ............................ 66
SECTION 6.11. Undertaking for Costs. ................. 66
-iii-
<PAGE> 5
Page
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee. .......................... 67
SECTION 7.02. Rights of Trustee. .......................... 68
SECTION 7.03. Individual Rights of Trustee. ............... 69
SECTION 7.04. Trustee's Disclaimer. ....................... 69
SECTION 7.05. Notice of Default. .......................... 69
SECTION 7.06. Reports by Trustee to Holders. .............. 70
SECTION 7.07. Compensation and Indemnity. ................. 70
SECTION 7.08. Replacement of Trustee. ..................... 71
SECTION 7.09. Successor Trustee by Merger, Etc. ........... 72
SECTION 7.10. Eligibility; Disqualification. .............. 72
SECTION 7.11. Preferential Collection of Claims Against
Company. ................................. 73
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations. .... 73
SECTION 8.02. Acknowledgment of Discharge by Trustee. .. 75
SECTION 8.03. Application of Trust Money. .............. 75
SECTION 8.04. Repayment to the Company. ................ 76
SECTION 8.05. Reinstatement. ........................... 76
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. ......... 77
SECTION 9.02. With Consent of Holders. ............ 77
SECTION 9.03. Compliance with TIA. ................ 78
SECTION 9.04. Revocation and Effect of Consents. .. 79
SECTION 9.05. Notation on or Exchange of Notes. ... 79
SECTION 9.06. Trustee To Sign Amendments, Etc. .... 80
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee. .................. 80
SECTION 10.02. Severability. ............................. 81
SECTION 10.03. Limitation of Liability. .................. 81
SECTION 10.04. Subsidiary Guarantors May Consolidate,
etc., on Certain Terms. ................. 82
SECTION 10.05. Contribution. ............................. 83
SECTION 10.06. Waiver of Subrogation. .................... 83
SECTION 10.07. Execution of Guarantee. ................... 84
-iv-
<PAGE> 6
Page
SECTION 10.08. Waiver of Stay, Extension or Usury Laws. .. 85
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls. ............................... 85
SECTION 11.02. Notices. .................................... 85
SECTION 11.03. Communications by Holders with Other Holders. 86
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent. ............................... 87
SECTION 11.05. Statements Required in Certificate or
Opinion. ................................. 87
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. .. 87
SECTION 11.07. Legal Holidays. ............................. 88
SECTION 11.08. Governing Law. .............................. 88
SECTION 11.09. No Adverse Interpretation of Other
Agreements. .............................. 88
SECTION 11.10. No Recourse Against Others. ................. 88
SECTION 11.11. Successors. ................................. 88
SECTION 11.12. Duplicate Originals. ........................ 89
SECTION 11.13. Severability. ............................... 89
Signatures .................................................. 90
Exhibit A - Form of Note ............................ A-1
Exhibit B - Form of Exchange Note ................... B-1
Exhibit C - Form of Certificate To Be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors .................... C-1
Exhibit D - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to
Regulation S ............................ D-1
Exhibit E Form of Guarantee ....................... E-1
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
-v-
<PAGE> 7
INDENTURE, dated as of June 12, 1997, between Gaylord Container
Corporation, a Delaware corporation (the "Company"), and Fleet National Bank, a
national banking association, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 9-3/4% Senior
Notes due 2007, Series A (the "Initial Notes"), and 9-3/4% Senior Notes due
2007, Series B (the "Exchange Notes" and, together with the Initial Notes, the
"Notes"), and, to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture. All things necessary to make the
Notes, when duly issued and executed by the Company, and authenticated and
delivered hereunder, the valid obligations of the Company, and to make this
Indenture a valid and binding agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or assumed in connection with the acquisition of assets from
such Person and not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company or such acquisition.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, any
Person established in connection with any Trade Receivable Facility shall not
be deemed an Affiliate. For purposes of
<PAGE> 8
-2-
Section 4.11, the term "Affiliate" shall include any Person who, as a result
of any transaction described in Section 4.11, would become an Affiliate.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company or shall be merged with the Company or any Restricted
Subsidiary of the Company or (ii) the acquisition by the Company or any
Restricted Subsidiary of the Company of assets of any Person or any division or
line of business of such Person.
"Asset Sale" means the sale, lease (other than an operating lease),
assignment or other disposition (including, without limitation, dispositions
pursuant to Sale and Leaseback Transactions) by the Company or one of its
Restricted Subsidiaries to any Person other than the Company or one of its
Subsidiaries of (i) any capital stock of any Restricted Subsidiary, (ii) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary of the Company or (iii)
any other assets of the Company or any of its Restricted Subsidiaries greater
than $5 million individually, other than those assets sold in the ordinary
course of business of the Company or such Restricted Subsidiary, respectively.
For the purposes of this definition, the term "Asset Sale" shall not include
(i) Capital Stock of the Company, (ii) any transfer of trade receivables or
related assets pursuant to any Trade Receivable Facility, (iii) any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets that is governed by the provisions of Article Five, (iv) an issuance of
Capital Stock by a Restricted Subsidiary to the Company or to a Restricted
Subsidiary, (v) a disposition consisting of a Permitted Investment or
Restricted Payment permitted by Section 4.03, (vi) the surrender or waiver of
contract rights or the settlement, release or surrender of contract, tort or
other claims of any kind, (vii) the grant in the ordinary course of business
of any non-exclusive license of patents, trademarks, registrations thereof and
other similar intellectual property, (viii) the sale or discount, in each case
without recourse, of accounts
<PAGE> 9
-3-
receivables arising in the ordinary course of business, but only in
connection with the compromise or collection thereof, (ix) the sale for cash or
exchange of specific items of equipment, so long as the purpose of each such
sale or exchange is to acquire (and results within 90 days of such sale or
exchange in the acquisition of) replacement items of equipment which are the
functional equivalent of the item of equipment so sold or exchanged and (x)
disposals or replacements of obsolete equipment in the ordinary course of
business.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors or other equivalent governing body of such
Person.
"Borrowing Restricted Subsidiary" means any Restricted Subsidiary that
incurs, or otherwise becomes liable for, in excess of $5.0 million of
Restricted Subsidiary Indebtedness.
"Business Day" means a day that is not a Legal Holiday.
"Capital Stock" means (i) with respect to any Person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, including each class of common stock and preferred stock of
such Person and (ii) with respect to the Company or any other Person formed
other than as a corporation, any and all partnership or other equity interests
of the Company or such other Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
<PAGE> 10
-4-
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service; (iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 from Standard & Poor's Corporation or at least P-1 from Moody's Investors
Service; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"Change of Control" means if at any time any Person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) acquires, in one
or more transactions, (i) beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of 50% or more of the voting power represented by
all voting securities of the Company or (ii) the power to elect a majority of
the Board of Directors of the Company; provided, however, that voting
securities beneficially owned by or voting power controlled by such Person or
group will not be deemed to include common stock beneficially owned or voting
power controlled so long as it is beneficially owned
or controlled directly or indirectly by Mid-America Group, Ltd. ("MAG")(but
only so long as MAG is controlled by Mr. Marvin A. Pomerantz and/or his spouse
or their respective heirs or lineal descendants), or Mr. Marvin A. Pomerantz or
Mr. Warren J. Hayford, their respective spouses or their respective heirs or
lineal descendants.
<PAGE> 11
-5-
"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section 4.15.
"Commodity Agreements" means without limitation any commodity futures
contract, commodity option agreement, or other similar agreement or arrangement
entered into by the Company designed to protect the Company against
fluctuations in the prices commodities used in the ordinary course of business
and not entered into for any other purpose.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or nonvoting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income, (ii) to the
extent Consolidated Net Income has been reduced thereby, all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses), Consolidated Interest Expense,
amortization expense (including write-off of deferred financing costs) and
depreciation expense and (iii) other non-cash items other than non-cash
interest reducing Consolidated Net Income (other than such items incurred in
the ordinary course of business consistent
with past practice) less other non-cash items increasing Consolidated Net
Income (other than such items incurred in the ordinary course of business
consistent with past practice), all as determined on a consolidated basis for
such Person and its Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four most
recent full fiscal quarters
<PAGE> 12
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for which financial information is available (the "Four Quarter Period") ending
not more than 135 days prior to the date of the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for
the Four Quarter Period to (1) the incurrence or repayment of any
Indebtedness of such Person or any of its Restricted Subsidiaries at any
time subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date, as if such incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day of the
Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA associated with such
Asset Acquisition) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Indebtedness or Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Restricted
Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges," (1) interest on Indebtedness determined on a fluctuating basis as of
the Transaction Date and that will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date,
(2) if interest on any Indebtedness actually incurred on the Transaction Date
may optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period, (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by Interest Rate Agreements,
<PAGE> 13
-7-
shall be deemed to accrue at the rate per annum resulting after giving effect
to the operation of such Interest Rate Agreements and (4) the permanent
retirement of any Indebtedness during the Four Quarter Period and on or prior
to the Transaction Date shall be given effect as if it occurred at the
beginning of such Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
preferred stock of such Person (except dividends for such period which are
accrued but unpaid) times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
federal, state and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of all cash and non-cash interest expense (minus
amortization or write-off of deferred financing costs included in cash or
non-cash interest expense and minus interest income and capitalized interest)
with respect to all outstanding Indebtedness of such Person and its Restricted
Subsidiaries, including the net costs associated with Interest Rate Agreements,
for such period determined on a consolidated basis in conformity with GAAP.
Consolidated Interest Expense of the Company shall not include any prepayment
premiums or amortization of original issue discount or deferred financing
costs.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from As
set Sales (without regard to the $5 million limitation set forth in the
definition thereof) or abandonments or reserves relating thereto, (b) items
classified as extraordinary, nonrecurring or unusual gains and losses, and the
related tax effects, (c) the net income (or loss) of any Person acquired in a
pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary, (d) the net income of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by
contract, operation of law or otherwise and (e) for the purpose of calculating
Consolidated Net Income for clause (iii)(w) of the
<PAGE> 14
-8-
first paragraph of the covenant "Limitation on Restricted Payments," the net
income (or loss) of any Person, other than a Restricted Subsidiary, except to
the extent of cash dividends or distributions (net of tax, if applicable) paid
to the Company or a Restricted Subsidiary of the Company by such Person.
"Credit Agreement" means the Credit Agreement dated as of November 17,
1986, and amended and restated as of June 30, 1995, among the Company, the
financial institutions party thereto in their capacities as lenders thereunder,
and Bankers Trust Company as agent for the banks, as the same may be amended
from time to time, and any agreement evidencing the refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension,
substitution, supplement, reissuance or resale thereof, whether including any
additional obligors or with the same or any different agent or group of
lenders.
"Currency Agreements" means without limitation any foreign exchange
contract, currency swap agreement, cross currency agreement, currency option
agreement, forward currency agreement, or other similar agreement or
arrangement entered into by the Company designed to protect the Company against
fluctuations in foreign exchange rates and not entered into for any other
purpose.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Discharged" has the meaning provided in Section 8.01.
"Disqualified Capital Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or its
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the final maturity date of the Notes.
<PAGE> 15
-9-
"Equity Offering" means an offering of Common Stock of the Company
resulting in net proceeds to the Company in excess of $20 million.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Exchange Notes" has the meaning provided in the preamble to this
Indenture.
"Exchange Offer" means the registration by the Company under the
Securities Act pursuant to a registration statement of the offer by the Company
to each Holder of the Initial Notes to exchange all the Initial Notes held by
such Holder for the Exchange Notes in an aggregate principal amount equal to
the aggregate principal amount of the Initial Notes held by such Holder, all in
accordance with the terms and conditions of the Registration Rights Agreement.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of the date of this Indenture, except in respect of
any consolidated financial statements delivered pursuant to Section 4.09 from
time to time, GAAP shall mean generally accepted accounting principles as in
effect in the United States of America at the time of delivery of such
consolidated financial statements. If the Company has changed one or more
of the accounting principles used in the preparation of its financial
statements, then a Default or an Event of Default relating to financial
ratios or amounts, calculated under the new accounting principles, shall
not be considered a Default or an Event of Default if the required ratio
or amount would have been complied with had the Company continued to use those
generally accepted accounting principles employed as of the date of this
Indenture.
"Global Note" has the meaning provided in Section 2.01.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
<PAGE> 16
-10-
"Indebtedness" means with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) all indebtedness of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all indebtedness
of such Person issued or assumed as the deferred purchase price of property,
all conditional sale obligations and all indebtedness under any title retention
agreement, (v) all indebtedness of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations and (vii) all
indebtedness of any other Person of the type referred to in clauses (i) through
(vi) that is secured by any first Lien on any property or asset of such Person,
the amount of such indebtedness being deemed to be the lesser of the value of
such property or asset or the amount of the indebtedness so secured, but
excluding trade accounts payable arising in the ordinary course of business
that are not overdue in excess of 90 days or the subject of a good faith
dispute.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Initial Notes" has the meaning provided in the preamble to this
Indenture.
"Initial Purchasers" mean BT Securities Corporation, Salomon Brothers Inc
and Bear Stearns & Co. Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement
or arrangement entered into by the Company designed to protect the Company
against fluctuations in interest rates and not entered into for any other
purpose.
"Interest Swap Obligations" means the obligations of any Person, pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to
<PAGE> 17
-11-
receive from time to time periodic payments calculated by applying either
a floating or a fixed rate of interest on a stated notional amount in
exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means any transfer or delivery of cash, stock or other
property of value in exchange for indebtedness, stock or other security or
ownership interest by way of loan, advance (excluding any advances to officers
and employees in the ordinary course of business) or capital contribution. The
amount of any non-cash Investment (other than a Permitted Investment) or any
Investment in an Unrestricted Subsidiary shall be the fair market value of such
Investment, as determined in good faith by management of the Company unless the
fair market value of such Investment exceeds $10 million, in which case such
fair market value shall also be determined in good faith by the Board of
Directors or other equivalent governing body of the Company at the time such
Investment is made. For purposes of the covenant "Limitations on Restricted
Payments," (i) "Investment" in a Subsidiary shall include the portion
(proportionate to the Company's Capital Stock in such Subsidiary) of the fair
market value (as determined in good faith by the Board of Directors) of such
Subsidiary at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount
(if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's Capital Stock in such Subsidiary) of the fair market value (as
determined in good faith by the Board of Directors) of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case determined in good faith by the
Board of Directors.
"Issue Date" means the date of original issuance of the Notes under this
Indenture.
<PAGE> 18
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"Legal Holiday" has the meaning provided in Section 11.07.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof or any agreement to
give any security interest).
"Make-Whole Premium" with respect to a Note means an amount equal to the
greater of (i) 1.0% of the outstanding principal amount of such Note and (ii)
the excess of (a) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on June 15,
2002, computed using a discount rate equal to the Treasury Rate plus 62.5 basis
points, over (b) the outstanding principal amount of such Note.
"Maturity Date" means June 15, 2007.
"Net Cash Proceeds" means, (i) with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and dales commissions), (b) taxes paid or payable
((1) including, without limitation, income taxes reasonably estimated to
be actually payable as a result of any disposition of property within
two years of the date of disposition and (2) after taking into account
any reduction in tax liability due to available tax credits or deductions
and any tax sharing arrangements), (c) a reasonable reserve for the
after-tax cost of any indemnification obligations (fixed and/or contingent)
attributable to seller's indemnities to the purchaser undertaken by
the Company or any of its Restricted Subsidiaries in connection with such Asset
Sale and (d) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale or (ii) with respect to the sale of Capital
Stock by any Person, the aggregate net proceeds received by such Person after
payment of expenses, commissions, underwriting discounts and other similar
charges incurred in connection therewith, whether such proceeds are in cash or
property (valued at the fair market value thereof, as determined in good faith
by the Board of Directors or other equivalent governing body of such Person, at
<PAGE> 19
-13-
the time of receipt, whose determination shall be evidenced by a board
resolution).
"Net Proceeds Offer" has the meaning provided in Section 4.16.
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.
"Notes" means the Company's 9 3/4% Senior Notes due 2007, as amended or
supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to the Indenture.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum dated June 5, 1997,
pursuant to which the Initial Notes were offered, and any supplement thereto.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller
or the Secretary of such Person.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of such Person and otherwise complying with the
requirements of Sections 11.04 and 11.05, as they relate to the making of an
Officers' Certificate.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Old Notes" means the 11-1/2% Senior Notes due 2001 of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of
Sections 11.04 and 11.05, as they relate to the giving of an Opinion of
Counsel. Unless otherwise required by the TIA, the legal counsel may be an
employee of or counsel to the Company or the Trustee.
<PAGE> 20
-14-
"Participants" has the meaning provided in Section 2.16.
"Paying Agent" has the meaning provided in Section 2.03, except that, for
the purposes of Articles Three and Eight and Sections 4.15 and 4.16, the Paying
Agent shall not be the Company or a Subsidiary of the Company.
"Permitted Indebtedness" means, without duplication, (i) the Notes and any
Guarantees thereof, (ii) Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon (other than permanent reductions as a result of
any refinancing thereof permitted hereunder), (iii) Indebtedness of the Company
and its Restricted Subsidiaries incurred pursuant to the Credit Agreement in an
aggregate principal amount not to exceed $225 million, (iv) Indebtedness of the
Company and its Restricted Subsidiaries incurred pursuant to Interest Rate
Agreements, (v) intercompany Indebtedness by and among the Company and/or its
wholly owned Restricted Subsidiaries, (vi) Indebtedness of the Company and its
Restricted Subsidiaries (including Acquired Indebtedness) pursuant
to pollution control bonds and industrial revenue bonds not to exceed the
sum of the aggregate amount thereof outstanding on the Issue Date plus $25
million, (vii) Indebtedness of the Company and its Restricted Subsidiaries
(including Acquired Indebtedness) evidenced by purchase money obligations and
Capitalized Lease Obligations not to exceed $25 million in any fiscal year;
provided that any portion of the $25 million that is not incurred in any fiscal
year may be carried over to successive fiscal years; provided, further, that
the maximum amount that may be incurred in any one fiscal year shall not exceed
$50 million, (viii) additional Indebtedness of the Company and its Restricted
Subsidiaries (including Acquired Indebtedness) incurred for any purpose not to
exceed, at any time outstanding, $200 million (that may be, but need not be,
incurred in whole or in part under the Credit Agreement), (ix) Indebtedness
incurred pursuant to the Trade Receivable Facility, (x) Indebtedness of the
Company or its Restricted Subsidiaries incurred under one or more instruments
in connection with any refinancing, modification, replacement, renewal,
restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale (a "refinancing") of existing or future Indebtedness of
such entity; provided that any such incurrence and related refinancing,
together, shall not (1) result in an increase in the aggregate principal amount
of such Indebtedness (except to the extent such increase is a result of an
incurrence or refinancing of additional Indebtedness otherwise permitted by the
Indenture or such increase does not exceed the amount of premiums, fees and
expenses (including underwriting discounts) relating to such refinancing,
modification, replacement, renewal, restatement, refunding, deferral,
extension, substitution, supplement, reissuance or resale of such existing or
future Indebtedness) of the Company and its Restricted Subsidiaries and (2)
create Indebtedness where the Weighted Average Life to Maturity at the time of
such refunded, refinanced, modified, replaced, renewed, restated, deferred,
extended, substituted, supplemented, reissued or resold Indebtedness is
incurred is less than the Weighted Average Life to Maturity of the Indebtedness
being refunded, refinanced, modified, replaced, renewed, restated, deferred,
extended, substituted, supplemented, reissued or resold; and provided, further,
that with respect to the refinancing of Indebtedness incurred pursuant to
clauses (v), (vi), (vii), (xvi) and (xvii), such Indebtedness may only be
refinanced with Indebtedness permitted to be incurred under such respective
clause, (xi) Indebtedness of the Company and its Restricted
<PAGE> 21
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Subsidiaries arising in connection with the acquisition or refinancing of
property so long as recourse with respect to such Indebtedness is limited
only to the property being acquired or refinanced or any amendment,
restatement, deferral, extension, modification, refinancing, refunding,
renewal, replacement, substitution, supplement, reissuance or resale thereof
so long as recourse is limited to the property being refinanced, (xii)
Indebtedness of the Company and its Restricted Subsidiaries incurred after
the Issue Date relating to letters of credit available or outstanding under
the Credit Agreement (or any successor thereto), (xiii) surety obligations of
the Company and its Restricted Subsidiaries entered into in the ordinary
course of business, (xiv) Indebtedness of the Company and its Restricted
Subsidiaries incurred to finance the purchase of insurance in the ordinary
course of business, (xv) Indebtedness of the Company and its Restricted
Subsidiaries incurred arising from the honoring by a bank or other
financial institution of a check or draft inadvertently drawn against
insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within two business days of notice of any such
incurrence, (xvi) Indebtedness of the Company and its Restricted Subsidiaries
arising from guarantees of loans and advances by third parties to employees and
officers of the Company or its subsidiaries, not to exceed $1 million in the
aggregate, (xvii) Indebtedness of the Company and its Restricted Subsidiaries
arising from the repurchase of Common Stock not to exceed $4 million, (xviii)
Indebtedness of the Company and its Restricted
<PAGE> 22
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Subsidiaries arising from Currency Agreements and Commodity Agreements, (xix)
the 12 3/4% Debentures and (xx) the Old Notes.
"Permitted Investments" means in the case of the Company or its Restricted
Subsidiaries, (i) an Investment related to the business of the Company and its
Restricted Subsidiaries as it is conducted on the Issue Date, including, but
not limited to, subsidiaries, joint ventures or other business alliances formed
in the ordinary course of business, (ii) Investments in the Company by any
Restricted Subsidiary or Investments by the Company or any Restricted
Subsidiary (including acquisitions) in any other Person, if after giving effect
of any such Investment, such Person would be a wholly owned Restricted
Subsidiary of the Company, (iii) Investments in cash and Cash Equivalents, (iv)
Investments in Productive Assets, (v) Investments in any Person in connection
with the Trade Receivable Facility, (vi) Investments existing on the date of
this Indenture, (vii) loans and advances to employees and officers of the
Company and its Restricted Subsidiaries not in excess of $1 million at any one
time outstanding, (viii) accounts receivable created or acquired in the
ordinary course of business, (ix) Interest Rate Agreements, Currency
Agreements and Commodity Agreements entered into in the ordinary course
of the Company's business and otherwise in compliance with this Indenture,
(x) Investments in Unrestricted Subsidiaries in an amount at any one
time outstanding not to exceed $25 million, (xi) guarantees by the Company
of Indebtedness otherwise permitted to be incurred by Restricted
Subsidiaries of the Company under this Indenture and (xii) Investments
received by the Company or its Restricted Subsidiaries as consideration
for asset sales, including Asset Sales; provided in the case of an Asset
Sale, such Asset Sale is effected in compliance with Section 4.16.
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges to the extent not required to be paid, (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other like Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
an appropriate process of law, and for which a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made, (iii)
pledges or deposits in the ordinary course of business to secure lease
obligations or nondelinquent obligations under workers' compensation,
unemployment insurance or similar legislation, (iv) Liens to secure the
performance of public statutory obligations that are not delinquent, appeal
bonds, performance bonds or other
<PAGE> 23
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obligations of a like nature (other than for
borrowed money), (v) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any of
its Subsidiaries, (vi) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods
in the ordinary course of business, (vii) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof, (viii) Liens in favor of custom and revenue authorities arising as a
matter of law to secure payment of nondelinquent customs duties in connection
with the importation of goods, (ix) judgment and attachment Liens not giving
rise to a Default or Event of Default, (x) leases or subleases granted
to others not interfering in any material respect with the business of the
Company or any proSubsidiary, (xi) Liens encumbering customary initial deposits
and margin deposits, and other Liens incurred in the ordinary course of
business that are within the general parameters customary in the industry, in
each case securing Indebtedness under Interest Rate Agreements, Currency
Agreements, Commodity Agreements and forward contracts, option futures
contracts, futures options or similar agreements or arrangements designed to
protect the Company or any Subsidiary from fluctuations in the price of
commodities, (xii) Liens encumbering deposits made in the ordinary course of
business to secure nondelinquent obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or its
Subsidiaries for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made, (xiii) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Company or any Subsidiary in the ordinary course of business in accordance with
industry practice, (xiv) any interest or title of a lessor in the property
subject to any lease, whether characterized as capitalized or operating, other
than any such interest or title resulting from or arising out of default by the
Company or any Subsidiary of its obligations under such lease, (xv) Liens
arising from filing UCC financing statements for precautionary purposes in the
connection with true leases of personal property that are otherwise permitted
under this Indenture and under which the Company or any Subsidiary is lessee,
(xvi) Liens on property of a Person existing at the time such Person is
acquired by, merged into or consolidated with the Company or any Restricted
Subsidiary of the Company,
<PAGE> 24
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provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other
than those of the Person merged into or consolidated with the Company
or such Restricted Subsidiary, (xvii) Liens to secure the payment of
all or a part of the purchase price of property or assets acquired or
constructed in the ordinary course of business on or after the date of this
Indenture, provided that (a) such property or assets are used in the same or
similar line of business as the Company was engaged in on the Issue Date, (b)
at the time of incurrence of any such Lien, the aggregate principal amount of
the obligations secured by such Lien shall not exceed the lesser of the cost or
fair market value of the assets or property (or portions thereof) so acquired
or constricted, (c) each such Lien shall encumber only the assets or property
(or portions thereof) so acquired or constructed and shall be attached to
such property within 180 days of the purchase or construction thereof and (d)
Indebtedness secured by such Lien shall have been permitted to be incurred
under the covenant "Limitation on Incurrence of Additional Indebtedness," and
(xviii) Liens of landlords or of mortgagees of landlords arising by operation
of law, provided that the rental payments secured thereby are not yet due and
payable; (xix) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Restricted Subsidiary.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, limited liability company or a
governmental agency or political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Plan of Liquidation" means, with respect to any Person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease,
<PAGE> 25
-19-
conveyance or other disposition and all or substantially all of the
remaining assets of such Person to holders of Capital Stock of such Person.
"principal" of any Indebtedness (including the Notes) means the principal
amount of such Indebtedness plus the premium, if any, on such Indebtedness.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.15.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act as interpreted by the
Company in consultation with its independent certified public accountants.
"Proceeds Purchase Date" shall have the meaning provided in Section 4.16.
"Productive Assets" means assets (including Capital Stock) of a kind used
or usable in the business of the Company and its Restricted Subsidiaries as it
is conducted on the Issue Date.
"Qualified Capital Stock" means stock that is not Disqualified Capital
Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Notes.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated June 12, 1997 among the Company and the Initial Purchasers for the
benefit of themselves and the Holders, as the same may be amended or modified
from time to time in accordance with the terms thereof.
<PAGE> 26
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"Regulation S" means Regulation S under the Securities Act.
"Restricted Payment" has the meaning provided in Section 4.03.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any direct or indirect Subsidiary of any
Person that is not an Unrestricted Subsidiary of such Person.
"Restricted Subsidiary Indebtedness" means (a) Indebtedness (other than
Indebtedness under any Trade Receivable Facility, intercompany Indebtedness or
Indebtedness outstanding on the Issue Date, including any refinancing of
Indebtedness outstanding on the Issue Date to the extent it does not increase
the principal amount of such Indebtedness) incurred by a Restricted Subsidiary
(other than a Subsidiary Guarantor), or (b) the direct or indirect assumption,
guarantee (other than a Guarantee) or other obligation of any Restricted
Subsidiary (other than a Subsidiary Guarantor) for any Indebtedness of the
Company or any other Restricted Subsidiary by way of the pledge of any
intercompany note or otherwise, or (c) the total amount of committed borrowings
under revolving credit facilities under which the Restricted Subsidiary (other
than a Subsidiary Guarantor) is a borrower or guarantor, but "Restricted
Subsidiary Indebtedness" shall not include any Indebtedness of the Restricted
Subsidiary evidenced by purchase money obligations or Capitalized Lease
Obligations provided for under clause (vii) and Indebtedness provided for under
clause (xi) of the definition of Permitted Indebtedness in an aggregate amount
not to exceed $75 million for all Restricted Subsidiaries.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Subsidiary to such Person or to any other
<PAGE> 27
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Person from whom funds have been or are to be advanced by said Person
on the security of such Property.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Significant Restricted Subsidiary" means any Restricted Subsidiary of the
Company that satisfies the criteria for a "significant subsidiary" set forth in
Rule 1.02(w) of Regulation S-X under the Securities Act.
"Subordinated Discount Debenture" means the $434,222,000 in aggregate
principal amount of 12 3/4% Senior Subordinated Debentures due 2005 of the
Company, as amended or supplemented from time to time in accordance with the
terms thereof.
"Subordinated Discount Debenture Indenture" means the indenture dated as
of May 18, 1993 between the Company and Texas Commerce Bank National
Association as successor to Ameritrust Texas National Association, as Trustee,
relating to the Subordinated Discount Debentures as in effect on the Issue Date
as amended or supplemented from time to time in accordance with the terms
thereof.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest to elect the
governing body or Persons thereof under ordinary circumstances is at the time,
directly or indirectly, owned by such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.18.
"Subsidiary Guarantor" means each of the Company's Restricted Subsidiaries
that becomes a guarantor of the Notes by executing a supplemental indenture in
form and substance reasonably satisfactory to the Trustee in which such
Restricted Subsidiary agrees to be bound by the terms of the Indenture;
provided that any person constituting a Subsidiary Guarantor as described above
shall cease to constitute a Subsidiary
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Guarantor when its respective Subsidiary
Guarantee is released in accordance with the terms thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sec.Sec.
77aaa-77bbbb), as amended, as in effect on the date on which this Indenture is
qualified under the TIA, except as otherwise provided in Section 9.03.
"Total Tangible Assets" means the Company's total consolidated assets
minus all intangible assets, determined in accordance with GAAP.
"Trade Receivable Facility" means the arrangements that have been or may
be entered into by the Company or one or more of its Restricted Subsidiaries
pursuant to which the Company or one or more of its Restricted Subsidiaries may
either transfer to any other Person or grant a security interest in any trade
receivables (whether now existing or arising in the future) and any assets
related to such trade receivables including, without limitation, all collateral
securing such trade receivables and all material contracts and all guarantees
or other Obligations in respect of such trade receivables of the Company or one
or more of its Restricted Subsidiaries.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) that
has become publicly available at least two business days prior to the Change of
Control Redemption Date (or, if such Statistical Release is no longer
published, any publicly available source or similar market date)) most nearly
equal to the period from the Change of Control Redemption Date to June 15,
2002; provided, however, that if the period from the Change of Control
Redemption Date to June 15, 2002 is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given except that if the period
from the Change of Control Redemption Date to June 15, 2002 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trust Officer" means any officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
<PAGE> 29
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"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" means any Subsidiary of the Company, whether
existing, newly formed or newly acquired, designated as an Unrestricted
Subsidiary by the Board of Directors of the Company and any Subsidiary of an
Unrestricted Subsidiary, provided, however, that at the time of such
designation (i) no Default or Event of Default shall have occurred and be
continuing, (ii) no portion of any Indebtedness or any other obligation
(contingent or otherwise) of such Subsidiary (a) is guaranteed by, or is
otherwise the subject of credit support provided by the Company or any of its
Restricted Subsidiaries, (b) is recourse to or obligates the Company or any of
its Restricted Subsidiaries in any way or (c) subjects any property or asset of
the Company or any of its Restricted Subsidiaries directly or indirectly,
contingently or otherwise, to the satisfaction of such Indebtedness or other
obligation, (iii) neither the Company nor any of its Restricted Subsidiaries
has any contract, or agreement, arrangement or understanding with such
Subsidiary other than on terms as favorable to the Company or such Restricted
Subsidiary as those that might be obtained at the time from Persons that are
not Affiliates of the Company and (iv) neither the Company nor any of its
Restricted Subsidiaries has any obligations (a) to subscribe for additional
shares of Capital Stock of such Subsidiary or (b) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Company's Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified certificate stating that such designation complies with the foregoing
conditions. The Company's Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation, no Default or Event of Default shall
have occurred and be continuing, including, without limitation, under the
covenants described in Section 4.12 assuming the incurrence by the Company and
its Restricted Subsidiaries at the time of such designation of all existing
Indebtedness of the Unrestricted Subsidiary to be so designated as a Restricted
Subsidiary. In the event of any disposition involving the Company in which the
Company is not the Surviving Person, the Board of Directors of the Surviving
Person may (x) prior to such disposition, designate any of its Subsidiaries,
and any of the Company's Subsidiaries, and (y) after such disposition,
designate any of its direct or indirect
<PAGE> 30
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Subsidiaries as an Unrestricted Subsidiary under the same conditions and in
the same manner as the Company under the terms of the Indenture.
"U.S. Government Obligations" has the meaning provided in Section 8.01.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"wholly owned Restricted Subsidiary" means any Restricted Subsidiary of
which all of the outstanding voting securities or other equity ownership
interest (other than directors qualifying or similar shares required to be held
by third parties in accordance with applicable law, not in any event to exceed
5 percent of the total outstanding voting securities) are owned by the Company
or any wholly owned Restricted Subsidiary of the Company.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
<PAGE> 31
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"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Exchange Notes and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit B hereto. The Notes may have notations or depository legends or
endorsements required by law, stock exchange rule or usage. The Company and
the Trustee shall approve the form of the Notes and any notation, legend or
endorsement on them. Each Note
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shall be dated the date of its issuance and shall show the date of its
authentication.
The terms and provisions contained in the Notes annexed hereto as Exhibits
A & B shall constitute, and are hereby expressly made, a part of this Indenture
and, to the extent applicable, the Company and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions
and to be bound thereby; provided, however, that if there are any
inconsistencies between the terms of this Indenture and the terms of the Notes,
the terms of this Indenture shall control.
Notes offered and sold in reliance on Rule 144A shall be issued initially
in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "Global Note"), deposited
with the Trustee, as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth in Section 2.15. The aggregate principal amount of the Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes offered and sold in offshore transactions in reliance on Regulation
S shall be issued in the form of permanent certificated Notes in registered
form in substantially the form set forth in Exhibit A (the "Offshore Physical
Notes). Notes offered and sold to institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) shall be
issued, and Notes offered and sold in reliance on Rule 144A may be issued, in
the form of permanent certificated Notes in registered form, in substantially
the form set forth in Exhibit A (the "U.S. Physical Notes"). The Offshore
Physical Notes and the U.S. Physical Notes are sometimes collectively herein
referred to as the "Physical Notes."
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
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If an Officer or Assistant Secretary whose signature is on a Note was an
Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in the
aggregate principal amount of up to $225,000,000 and (ii) Exchange Notes from
time to time for issue only in exchange for a like principal of Initial Notes,
in each case, upon receipt of written orders of the Company in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of
Notes to be authenticated, the date on which the Notes are to be authenticated
and the aggregate principal amount of Notes outstanding on the date of
authentication and whether the Notes are to be Initial Notes or Exchange Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
$225,000,000, except as provided in Section 2.07. Upon the written order of
the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Notes in substitution of Notes originally issued to reflect any
name change of the Company.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Notes shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where (a) Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying
Agent") and (c) notices and demands to or upon the Company in respect of
<PAGE> 34
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the Notes and this Indenture may be served. The Company may also from time
to time designate one or more other offices or agencies where the Notes may
be presented or surrendered for any or all such purposes and may from time
to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of
its obligation to maintain an office or agency for such purposes. The
Company may act as its own Registrar or Paying Agent except that
for the purposes of Articles Three and Eight and Sections 4.15 and 4.16 neither
the Company, any Subsidiary of the Company nor any of their Affiliates shall
act as Paying Agent. The Registrar shall keep a register of the Notes and of
their transfer and exchange. The Company, upon notice to the Trustee, may have
one or more co-Registrars and one or more additional paying agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
paying agent. The Company initially appoints the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has
been appointed.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee, in advance, of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Notes (whether such assets have been
distributed to it by the Company or any other obligor on the Notes), and shall
notify the Trustee of any Default by the Company (or any other obligor on the
Notes) in making any such payment. If the Company or a Subsidiary of the
Company acts as Paying Agent, it shall segregate such assets and hold them as a
separate trust fund. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have
been delivered by the
<PAGE> 35
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Company to the Paying Agent, the Paying Agent shall have no further
liability for such assets.
SECTION 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.16 and 2.17, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar or co-Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transaction are met; provided, however, that the Notes surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Notes at the
Registrar's or co-Registrar's request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Section
2.02, 2.07, 2.10, 3.06, 4.15, 4.16 or 9.05). The Registrar or co-Registrar
shall not be required to register the transfer of or exchange of any Note (i)
during a period beginning at the opening of business 15 days before the mailing
of a notice of redemption of Notes and ending at the close of business on the
day of such mailing and (ii) selected for redemption in whole or in part
pursuant to Article Three, except the unredeemed portion of any Note being
redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests
<PAGE> 36
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in such Global Note may be effected only through a book entry system
maintained by the Holder of such Global Note (or its agent), and that
ownership of a beneficial interest in the Note shall be required to be
reflected in a book entry.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's requirements are met. If required by the Trustee or the Company,
such Holder must provide an indemnity bond or other indemnity, sufficient in
the judgment of both the Company and the Trustee, to protect the Company, the
Trustee or any Agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Note, including reasonable fees and expenses of
counsel. Every replacement Note shall constitute an additional obligation of
the Company.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to
it for cancellation and those described in this Section as not outstanding. A
Note does not cease to be outstanding because the Company or any of its
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent (other than
the Company or a Subsidiary of the Company) holds U.S. Legal Tender or U.S.
Government Obligations sufficient to pay all of the principal and interest
due on the Notes payable on that date, then on and after that date such
Notes cease to be outstanding and interest on them ceases to accrue; provided,
however, that to the extent the Trustee is enjoined from making payments to
the Holders, interest will continue to accrue until such time as the
Trustee is not so enjoined.
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SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company or an Affiliate (other than (i) Messrs. Marvin A. Pomerantz and
Warren J. Hayford, (ii) any other Affiliate who is an Affiliate solely on
account of his or its ownership of securities of the Company, membership on the
Board of Directors of the Company or employment by the Company or any Affiliate
of the Company, and (iii) any other Affiliate who is an Affiliate solely on
account of his or its relationship with any Person described in clauses (i) or
(ii) above, except in any case to the extent such Person is an affiliate as
defined in Section 316(a) of the TIA) shall be considered as though they are
not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so considered.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon receipt of a written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent (other than the
Company or a Subsidiary of the Company), and no one else, shall cancel and, at
the written direction of the Company, shall dispose of all Notes surrendered
for transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Notes to replace Notes that it has
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paid or delivered to the Trustee for cancellation. If the Company shall
acquire any of the Notes, such acquisition shall not operate as a redemption
or satisfaction of the Indebtedness represented by such Notes unless and
until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall,
unless the Trustee fixes another record date pursuant to Section 6.10, pay the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest to the Persons who are Holders on a subsequent special
record date, which date shall be the fifteenth day next preceding the date
fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Notes may use one or more "CUSIP" numbers, and
if so, the Trustee shall use the CUSIP numbers in notices of redemption or
exchange as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP numbers printed in the notice or on the Notes, and that reliance may
be placed only on the other identification numbers printed on the Notes. The
Company shall promptly notify the Trustee of any change in any of the CUSIP
numbers.
SECTION 2.14. Deposit of Moneys.
Prior to each Interest Payment Date and on the Maturity Date, the Company
shall have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
Maturity Date, as the case may be, in a timely manner that permits the Paying
Agent to remit payment to the Holders on such Interest Payment Date or Maturity
Date, as the case may be.
<PAGE> 39
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SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted Security
shall bear the following legend (the "Private Placement Legend") on the face
thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE ACT) OR (B) IT IS AN "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT)
(AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT
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SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE ACT.
Each Global Note shall also bear the following legend on the face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE
OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE.
SECTION 2.16. Book-Entry Provisions
for Global Note.
(a) The Global Note initially shall (i) be registered in the name of the
Depository or the nominee of such Depository, (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as set forth in Section
2.15.
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Members of, or participants in, the Depository ("Participants") shall have
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depository, or the Trustee as its custodian, or under the Global
Note, and the Depository may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and Participants, the operation of customary practices governing the exercise
of the rights of a Holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in the Global Note if (i) the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial
<PAGE> 42
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interest in the Global Note, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the
Physical Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S.
Persons. The following provisions shall apply with respect to the registration
of any proposed transfer of a Note constituting a Restricted Security to any
Institutional Accredited Investor that is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after June 15,
1999 or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto or (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferor has delivered to the Registrar
a certificate substantially in the form of Exhibit D hereto and such
other information that the Trustee may reasonably request in order to
confirm that such transaction is being made pursuant to an exemption from
or in a transaction not subject to the registration requirements of the
Securities Act; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
<PAGE> 43
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whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with respect
to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within
the meaning of Rule 144A, and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations
in order to claim the exemption from registration provided by Rule 144A;
and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the
Registrar of instructions given in accordance with the Depository's and
the Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global
Note in an amount equal to the principal amount of the Physical Notes to
be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or replacement
of Notes not bearing the Private
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Placement Legend, the Registrar shall deliver Notes that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of
Notes bearing the Private Placement Legend, the Registrar shall deliver only
Notes that bear the Private Placement Legend unless (i) the circumstance
contemplated by paragraph (a)(i)(x) of this Section 2.17 exists or (ii)
there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither
such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing the Private Placement
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.18. Designation.
The indebtedness evidenced by the Notes is hereby irrevocably designated
as "senior indebtedness" or such other term denoting seniority for the purposes
of any future Indebtedness of the Company which the Company expressly makes
subordinate to any senior indebtedness or such other term denoting seniority.
In connection with the issuance of any such future subordinated Indebtedness,
the Company shall take all necessary steps to effectuate the foregoing. For
purposes of the Subordinated Discount Debenture Indenture, the Indebtedness
evidenced by the Notes is hereby designated "Designated Senior Debt" as defined
therein. The Notes are intended to be senior indebtedness with respect to the
Subordinated Discount Debentures.
<PAGE> 45
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 5 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed and
whether it wants the Trustee to give notice of redemption to the Holders (at
the Company's expense) at least 40 days (unless a shorter notice shall be
satisfactory to the Trustee) but not more than 60 days before the Redemption
Date. Any such notice may be cancelled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.02. Selection of Notes To Be Redeemed.
If fewer than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes being
redeemed are listed, or, if the Notes are not listed on a national securities
exchange, on a pro rata basis.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption and shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof, to be redeemed.
Notes in denominations of $1,000 may be redeemed only in whole. The Trustee
may select for redemption portions (equal to $1,000 or any integral multiple
thereof) of the principal of Notes that have denominations larger than $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first class
mail to each Holder whose Notes are to be redeemed, with a copy to the Trustee.
At the Company's request, the Trustee shall give the notice of redemption in
the Company's name and at the Company's expense. Each
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notice for redemption shall identify the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price upon surrender
to the Paying Agent of the Notes redeemed;
(6) if any Note is being redeemed in part, the portion of the
principal amount, of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof
will be issued; and
(7) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount, as the case may be, of Notes
to be outstanding after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03, Notes
called for redemption become due and payable on the Redemption Date and at the
Redemption Price plus accrued interest, if any. Upon surrender to the Trustee
or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price, which shall include accrued and unpaid interest, if any,
thereon to the Redemption Date.
<PAGE> 47
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SECTION 3.05. Deposit of Redemption Price.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price, plus,
without duplication, accrued and unpaid interest, if any, of all Notes to be
redeemed on that date (other than Notes or portions thereof called for
redemption on that date that have been delivered by the Company to the Trustee
for cancellation). The Paying Agent shall promptly return to the Company any
U.S. Legal Tender so deposited that is not required for that purpose, except
with respect to monies owed as obligations to the Trustee pursuant to Article
Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price, plus, without
duplication, accrued and unpaid interest, if any, interest on the Notes to be
redeemed will cease to accrue on and after the applicable Redemption Date,
whether or not such Notes are presented for payment.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Trustee shall
authenticate for the Holder a new Note or Notes equal in principal amount to
the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
The Company shall pay the principal of and interest on the Notes on the
dates and in the manner provided in the Notes. An installment of principal of
or interest on the Notes shall be considered paid on the date it is due if the
Trustee or Paying Agent (other than the Company or a Subsidiary of the Company)
holds on that date U.S. Legal Tender designated for and sufficient to pay the
installment.
The Company shall pay interest on overdue principal from time to time on
demand at the rate of 10 3/4% per annum; it shall pay interest on overdue
installments of interest
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(without regard to any applicable grace periods) from time to time on demand
at the rate of 10 3/4% per annum.
Notwithstanding anything to the contrary contained in this Indenture, the
Company may, to the extent it is required to do so by law, deduct or withhold
income or other similar taxes imposed by the United States of America from
principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
SECTION 4.03. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or
make any distribution (other than dividends or distributions payable in
Qualified Capital Stock of the Company) on shares of the Company's Capital
Stock to holders of such Capital Stock, (b) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company or any warrants,
rights or options to purchase or acquire shares of any class of such Capital
Stock, other than the exchange of such Capital Stock for Qualified Capital
Stock, (c) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of the Company or its Restricted Subsidiaries that is subordinate
or junior in right of payment to the Notes or (d) make any Investment (other
than Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto, (i)
a Default or an Event of Default shall have occurred and be continuing, (ii)
the Company is not able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.12 or (iii)
the aggregate amount of Restricted Payments made subsequent to the Issue Date
(the amount
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expended for such purposes, if other than in cash, shall be the fair market
value of such property as determined by the Board of Directors of the
Company in good faith) shall exceed the sum, without duplication, of: (w)
50% of the cumulative Consolidated Net Income (or if cumulative Consolidated
Net Income shall be a loss, minus 100% of such loss) of the Company earned
during the period beginning on the first day of the fiscal year of the Company
commencing after the Issue Date and ending on the last day of the most recent
fiscal quarter ending at least 45 days prior to the date the Restricted Payment
occurs (treating such period as a single accounting period); (x) 100% of the
aggregate net proceeds, including the fair market value of property other than
cash as determined by the Board of Directors of the Company in good faith,
received by the Company from any Person (other than a Restricted Subsidiary of
the Company) from the issuance and sale subsequent to the Issue Date of
Qualified Capital Stock of the Company or of debt securities of the Company
that have been converted into Qualified Capital Stock (excluding (A) Qualified
Capital Stock made as a distribution on any Capital Stock or as interest on any
Indebtedness and (B) any net proceeds from issuances and sales of Qualified
Capital Stock financed directly or indirectly using funds borrowed from the
Company or any Restricted Subsidiary of the Company, until and to the extent
such borrowing is repaid), (y) $50 million and (z) the amount of the net
reduction in Investments made as Restricted Payments in accordance with this
sentence in Unrestricted Subsidiaries resulting from (1) the payment of cash
dividends or the repayment in cash of the principal of loans or the cash return
on any Investment, in each case to the extent received by the Company or any
wholly owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries, (2) to the extent that any Investment in an Unrestricted
Subsidiary that was made after the date of this Indenture is sold for cash or
otherwise liquidated or repaid for cash, the after-tax cash return of capital
with respect to such Investment (less the cost of disposition, if any) or (3)
the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries, such
aggregate amount of the net reduction in such Investments not to exceed, in the
case of any Unrestricted Subsidiary, the amount of such Investments made as
Restricted Payments previously made by the Company or any Restricted Subsidiary
in such Unrestricted Subsidiary, which amount was included in the calculation
of the amount of Restricted Payments.
Notwithstanding the foregoing, these provisions do not prohibit: (1) the
payment of any dividend, making of any distribution or consummation of
irrevocable redemption within 60 days after the date of declaration of such
dividend, making
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of such distribution or giving of such notice if the dividend, distribution
or redemption would have been permitted on the date of declaration; (2)
the acquisition of Capital Stock or Indebtedness of the Company that
is subordinate or junior in right of payment to the Notes, either
(i) in exchange for shares of Qualified Capital Stock or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Restricted Subsidiary of the Company) of shares of Qualified Capital
Stock; (3) the acquisition of Indebtedness of the Company that is subordinate
or junior in right of payment to the Notes, either (i) in exchange for
Indebtedness of the Company that is subordinate or junior in right of payment
to the Notes, at least to the extent that the Indebtedness being acquired is
subordinated to the Notes, and has no scheduled principal prepayment dates
prior to the earlier of (a) at least one year after the scheduled final
maturity date of the Notes or (b) the scheduled final maturity date of the
Indebtedness being exchanged, (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Restricted Subsidiary
of the Company) of Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes, at least to the extent that the Indebtedness
being acquired is subordinated to the Notes, and has no scheduled principal
prepayment dates prior to the earlier of (a) the scheduled final maturity date
of the Notes or (b) the scheduled final maturity date of the Indebtedness being
refinanced or (iii) any combination of clauses (i) and (ii) above; (4) the
elimination of fractional shares or warrants; (5) the purchase for value of
shares of Capital Stock of the Company (x) held by directors, officers or
employees upon death, disability, retirement, termination of employment or (y)
to fund capital stock-based, long-term incentive programs, not to exceed $4
million in the aggregate; (6) the repurchase of any 12 3/4% Debentures in
accordance with (i) the "Limitation on Asset Sales" and "Change of Control"
covenants hereunder and (ii) Sections 4.15 and 4.16 of the 12 3/4% Debenture
Indenture; (7) the redemption or repurchase by the Company of up to $200
million aggregate principal amount of 12 3/4% Debentures through the
application of (a) up to $200 million of net cash proceeds of a substantially
concurrent sale or incurrence (other than to or from a Restricted Subsidiary of
the Company) of secured or unsecured Indebtedness of the Company that ranks
pari passu with the Notes as to payment, (b) up to $100 million of cash from
operations of the Company or (c) any combination of (a) and (b), (8) Restricted
Payments for the redemption, repurchase or other acquisition of shares of
Capital Stock of the Company in satisfaction of indemnification or other claims
arising under any merger, consolidation, asset purchase or
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investment or similar acquisition agreement permitted under the Indenture,
pursuant to which such shares of Capital Stock were issued and (9) repurchases
of Capital Stock deemed to occur upon exercise of employee or director stock
options; provided that in the case of clauses (2), (3), (4), (5), (6), (7)
and (8), no Default or Event of Default shall have occurred or be continuing
at the time of such payment or as a result thereof. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date,
amounts expended pursuant to clauses (1), (2), (4), (5), (6), 7(b) and (8)
shall be included in such calculation; provided that amounts expended pursuant
to clause (2) shall constitute Restricted Payments only to the extent any
amounts are credited pursuant to clause (iii)(x) of the next preceding
paragraph.
SECTION 4.04. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate or other existence and the corporate or other existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of each such Subsidiary and the material rights
(charter and statutory) and franchises of the Company and each such Subsidiary;
provided, however, that the Company shall not be required to preserve and keep
in full force and effect, with respect to any of its Restricted Subsidiaries,
any such existence, material right or franchise, and with respect to itself,
any material right or franchise if the Board of Directors or other equivalent
governing body of the Company or such Subsidiary, as the case may be, shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company or any such Subsidiary.
SECTION 4.05. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries and (ii) all lawful claims for
labor, materials and supplies that, if unpaid, might by law become a Lien upon
the property of it or any of its Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim if either (a) the amount,
applicability or validity thereof is being contested in
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good faith by appropriate proceedings and an adequate reserve has been
established therefor to the extent required by generally accepted accounting
principles then in effect or (b) the failure to make such payment or effect
such discharge (together with all other such failures) would not have a
material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole.
SECTION 4.06. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its Subsidiaries to,
maintain its properties in good working order and condition (subject to
ordinary wear and tear) and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively conduct and carry
on its business; provided, however, that nothing in this Section shall prevent
the Company or any of its Subsidiaries from discontinuing the operation and
maintenance of any of its properties, if such discontinuance is, in the
judgment of the Company or the Subsidiary, as the case may be, desirable in
the conduct of their respective businesses and is not disadvantageous in any
material respect to the Holders.
(b) The Company shall provide or cause to be provided for itself and each
of its Subsidiaries, insurance (including appropriate self-insurance) against
loss or damage of the kinds that, in the reasonable, good faith opinion of the
Company are adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the reasonable, good faith opinion of the
Company, for companies similarly situated in the industry, unless the failure
to provide such insurance (together with all other such failures) would not
have a material adverse effect on the financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole.
SECTION 4.07. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days after the
end of the Company's fiscal year, an Officers' Certificate stating that a
review of its activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed,
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performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
his knowledge the Company during such preceding fiscal year has kept, observed,
performed and fulfilled each and every such covenant and no Default or Event of
Default occurred during such year and at the date of such certificate there is
no Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity.
The Officers' Certificate shall also notify the Trustee should the Company
elect to change the manner in which it fixes its fiscal year end.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.09 shall be accompanied by a written
report of the Company's independent public accountants (who shall be a firm of
established national reputation) that in conducting their audit of such
financial statements (which is directed primarily to the expression of their
opinion on such financial statements taken as a whole and not toward obtaining
knowledge of non-compliance with credit agreements) nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article Four, Five or Six of this Indenture or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) (i) If any Default or Event of Default has occurred and is
continuing, (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed default under this Indenture or the Notes or (iii) if the
trustee for or the holder of any other evidence of Indebtedness of the Company
or any Restricted Subsidiary seeks to exercise any remedy with respect to a
claimed default (other than with respect to Indebtedness in the principal
amount of less than $20,000,000), the Company shall deliver to the Trustee by
registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action within five Business Days of its
occurrence.
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SECTION 4.08. Compliance with Laws.
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their
respective properties, except such as are being contested in good faith and by
appropriate proceedings and except for such noncompliances as are not in the
aggregate reasonably likely to have a material adverse effect on the financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole.
SECTION 4.09. SEC Reports.
To the extent permitted by applicable law or regulation, whether or not
the Company is subject to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC all quarterly and annual
reports and such other information, documents or other reports (or copies of
such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) required to be filed pursuant to such provisions of the Exchange
Act.
The Company shall file with the Trustee, and prior to the consummation of
the Exchange Offer, the Company shall mail to the Holders and Trustee in
accordance with paragraph (b) of this Section 4.09, within 15 days after it
files the same with the SEC, copies of the quarterly and annual reports and the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that it is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. The Company shall also comply with the other provisions of TIA Sec.
314(a).
Regardless of whether the Company is required to furnish such reports to
its stockholders pursuant to the Exchange Act, the Company shall cause its
consolidated financial statements, comparable to that which would have been
required to appear in annual or quarterly reports, to be delivered to the
holders of the Notes.
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SECTION 4.10. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of this Indenture; and (to the extent that it
may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.11. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with or for the
benefit of, an Affiliate of the Company or any Restricted Subsidiary (other
than transactions between the Company and a wholly owned Restricted Subsidiary
of the Company) (an "Affiliate Transaction"), other than Affiliate Transactions
on terms that are no less favorable in the aggregate than those that might
reasonably have been obtained or are obtainable in a comparable transaction on
an arm's-length basis from a person that is not an Affiliate; provided that
neither the Company nor any of its Restricted Subsidiaries shall enter into an
Affiliate Transaction or series of related Affiliate Transactions involving or
having a value of $10 million or more, unless a majority of disinterested
members of the Board of Directors of the Company determines in good faith as
evidenced by a board resolution that the terms are no less favorable in the
aggregate to the Company than those that might reasonably have been obtained in
a comparable transaction on an arm's-length basis from a Person that is not an
Affiliate; provided, however, that (i) any employment agreement or stock option
agreement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business, (ii) transactions permitted under Section
4.03, (iii) the payment of reasonable fees and expenses to directors of the
Company or its Restricted Subsidiaries, (iv) any issuance of securities or
other payments, awards or grants in cash, securities or otherwise pursuant to,
or the funding of
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employment arrangements, stock options and stock ownership plans of the
Company entered into in the ordinary course of business and (v) transactions
pursuant to agreements existing on the Issue Date or any amendment
thereto or any transactions contemplated thereby (including pursuant to any
amendment thereto) in any replacement agreement thereto, so long as any such
amendment or replacement is not more disadvantageous to the holders in any
material respect than the original agreement as in effect on the Issue Date, in
each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, after the Issue Date, directly or indirectly, create, incur,
assume, guarantee, acquire or become liable, contingently or otherwise, or
otherwise become responsible for the payment of any Indebtedness other
than Permitted Indebtedness. Notwithstanding the foregoing limitations,
the Company and, subject to compliance with Section 4.18, Restricted
Subsidiaries may incur Indebtedness if (i) no Default or Event of
Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of such Indebtedness and (ii) the Consolidated
Fixed Charge Coverage Ratio of the Company, measured on the date of the
incurrence of such Indebtedness, is greater than 2.0:1.0. No Indebtedness
incurred pursuant to the next preceding sentence shall be included in
calculating any limitation set forth in the definition of Permitted
Indebtedness. Upon the repayment of Indebtedness which may have been incurred
pursuant to more than one provision of this Indenture, the Company may, in its
sole discretion, designate which provision such Indebtedness shall have been
incurred under.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock, (b) make loans or advances or to pay any Indebtedness or
other obligation owed to the Company or a Restricted Subsidiary of the Company
or (c) transfer any of its property or assets to the Company, except for such
encumbrances or restrictions existing under or by reason of: (1) applicable
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law; (2) the Indenture; (3) customary nonassignment provisions of any lease
governing a leasehold interest of the Company or any Restricted Subsidiary of
the Company; (4) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to the Company or any Restricted
Subsidiary of the Company, or the properties or assets of the Company or any
Restricted Subsidiary of the Company, other than the Person, the properties or
assets so acquired; (5) agreements existing on the Issue Date; (6) any Trade
Receivable Facility; (7) customary nonassignment provisions in contracts
entered into in the ordinary course of business, (8) Indebtedness of a
Restricted Subsidiary permitted to be incurred under the Indenture; or (9) an
agreement effecting a refinancing, modification, replacement, renewal,
restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale of Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4), (5), (6) or (8) above; provided,
however, that the provisions relating to such encumbrance or restriction
contained in any such refinancing, replacement or substitution agreement
are not less favorable to the Company or Restricted Subsidiary, as the
case may be, in any material respect in the reasonable judgment of the
Board of Directors of the Company than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such
clause (2), (4), (5), (6) or (8).
SECTION 4.14. Limitation on Liens.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens upon their
respective assets, except for (a) Liens securing Indebtedness under the Credit
Agreement, (b) Permitted Liens, (c) Liens securing Acquired Indebtedness, (d)
Liens existing on the Issue Date, (e) Liens securing Indebtedness to the extent
incurred to refinance, replace, renew or refund secured Indebtedness existing
on the Issue Date or Acquired Indebtedness, (f) Liens securing pollution
control bonds and industrial revenue bonds, (g) Liens securing Indebtedness
permitted to be incurred pursuant to clauses (viii) or (ix) of the definition
of Permitted Indebtedness, (h) Liens securing Indebtedness pursuant to clauses
(vii) or (xi) of the definition of Permitted Indebtedness; provided, however,
that if such Indebtedness is incurred to finance the cost of the property
subject to a Lien securing such Indebtedness, the principal amount of the
Indebtedness secured by such Lien shall not exceed 100% of the cost of the
property subject thereto plus related financing costs, (i) Liens in favor of
the Trustee and the trustee in respect of any other outstanding
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indebtedness of the Company, (j) Liens granted in connection with the
redemption of the Old Notes, or (k) any replacement, extension, renewal,
amendment or modification, in whole or in part, of any Lien described above;
provided that to the extent any such clause limits the amount secured or
the assets subject to such Liens, no extension or renewal will increase
the amount or assets secured by or subject to such Liens.
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder will have the
right to require that the Company repurchase all or a portion of such Holder's
Notes pursuant to the offer described in paragraph (b) below (the "Change of
Control Offer") at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of repurchase.
(b) Within 30 days following the date upon which the Change of Control
occurred (the "Change of Control Date"), the Company shall send, by first class
mail, a notice to each Holder, with a copy to the Trustee, which notice shall
govern the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such Holders
to tender Notes pursuant to the Change of Control Offer. Such notice shall
state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered will be accepted for payment;
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of
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Holder to Elect Purchase" on the reverse of the Security completed, to
the Paying Agent at the address specified in the notice prior to the
close of business on the Business Day prior to the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion
of the Notes surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient
to pay the purchase price of all Notes so tendered and (iii) deliver to the
Trustee Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof being purchased by the Company. The Paying Agent
shall promptly mail to the Holders of Notes so accepted payment in an amount
equal to the purchase price, and the Trustee shall promptly authenticate and
mail to such Holders new Notes equal in principal amount to any unpurchased
portion of the Notes surrendered. Any Notes not so accepted shall be promptly
mailed by the Company to the Holder thereof. For purposes of this Section
4.15, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a Change of
Control Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable
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securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (a) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Board of Directors of the Company), (b) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be cash or Cash Equivalents and is received at the time
of such disposition; provided, however, that this condition shall not apply to
a transaction whereby the Company or any Restricted Subsidiary effects an Asset
Sale by the exchange of assets or property for Productive Assets or to the sale
or other disposition of all or any portion of the Company's East Mill assets
located in Antioch, California, provided, further, that the amount of (A) any
liabilities of the Company or any Restricted Subsidiary (other than liabilities
that are by their terms subordinated in right of payment to the Notes) that are
assumed by the transferee of any such assets shall be deemed to be cash for
purposes of this provision and (B) any notes or other obligations received by
the Company or such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received) shall be deemed to be cash for purposes of
this provision, and (c) the Company shall (i) apply, or cause such Restricted
Subsidiary to apply, such Net Cash Proceeds of such Asset Sale within 270 days
of the consummation of such Asset Sale (A) to prepay indebtedness ranking pari
passu with the Notes, senior indebtedness of a Subsidiary Guarantor or debt of
a Restricted Subsidiary that is not a Subsidiary Guarantor or, in the case of
any debt under a revolving credit facility, effect a reduction in the committed
availability under any such revolving credit facility or (B) to make an offer
to purchase the Notes and, to the extent required by the documentation
governing such indebtedness and on a pro rata basis, indebtedness ranking pari
passu with the Notes, at a price equal to 100% of the principal amount of the
Notes plus accrued interest thereon to the date of purchase pursuant to an
offer to purchase made by the Company as set forth below (a "Net Proceeds
Offer"), or (ii)(A) commit, or cause such Restricted Subsidiary to commit (such
commitments to include amounts anticipated to be expended
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pursuant to the Company's capital investment plan (x) as adopted by the Board
of Directors of the Company and (y) evidenced by the filing of an Officers'
Certificate with the Trustee stating that the total amount of the Net Cash
Proceeds of such Asset Sale is less than the aggregate amount contemplated to
be expended pursuant to such capital investment plan within 24 months of the
consummation of such Asset Sale) within 270 days of the consummation of such
Asset Sale, to apply the Net Cash Proceeds of such Asset Sale to reinvest in
Productive Assets and (B) apply, or cause such Restricted Subsidiary to apply,
pursuant to such commitment (which includes amounts actually expended under
the capital investment plan authorized by the Board of Directors of the
Company), such Net Cash Proceeds of such Asset Sale within 24 months of
the consummation of such Asset Sale; provided that if any commitment
under this clause (ii) is terminated or rescinded after the 225th day
after the consummation of such Asset Sale, the Company or such Restricted
Subsidiary, as the case may be, shall have 45 days after such
termination or rescission to (1) apply such Net Cash Proceeds
pursuant to clause (c)(i) above (a "Reapplication Determination") or (2) to
commit, or cause such Restricted Subsidiary to commit, to apply the Net Cash
Proceeds of such Asset Sale to reinvest in Productive Assets; provided that in
any such case, such proceeds must be applied pursuant to clause (c)(i) or such
commitment, as the case may be, no later than 24 months after the consummation
of such Asset Sale or (iii) any combination of the foregoing; provided,
further, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for
cash, then such conversion or disposition shall be deemed to constitute an
Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in
accordance with clause (c) above; and provided, further, that the Company may
defer making a Net Proceeds Offer until the aggregate Net Cash Proceeds from
Asset Sales to be applied equals or exceeds $10 million. Pending the final
application of any such Net Cash Proceeds the Company or such Restricted
Subsidiary may temporarily reduce Indebtedness under a revolving credit
facility, if any.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 270 days following the consummation of the Asset
Sale that requires the Company to make a Net Proceeds Offer (or within 30 days
after a Reapplication Determination, if applicable), with a copy to the
Trustee, will specify the purchase date (which will be no earlier than 30 days
nor later than 45 days from the date such
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notice is mailed) and shall comply with the procedures set forth in
this Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the extent Holders
properly tender Notes in an amount exceeding the aggregate amount of the Net
Proceeds Offer, Notes of tendering Holders will be repurchased on a pro rata
basis (based upon the principal amount tendered). To the extent that the
aggregate amount of Notes tendered pursuant to a Net Proceeds Offer is less
than the aggregate amount of the Net Proceeds Offer, the Company may use such
excess Net Proceeds Offer amount for general corporate purposes or for
any other purpose not prohibited by this Indenture. Upon completion of
any such Net Proceeds Offer, the amount of the Net Proceeds Offer
shall be reset at zero. A Net Proceeds Offer shall remain open for
a period of 20 business days or such longer period as may be required
by law.
The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Net Proceeds Offer and
shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.16 and that all Notes tendered will be accepted for payment; provided,
however, that if the aggregate principal amount of Notes tendered in a
Net Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or multiples thereof shall be
purchased);
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue or accrete interest after the Proceeds Purchase Date;
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(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day prior to the Proceeds
Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than two Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion
of the Notes surrendered.
On or before the Proceeds Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof tendered pursuant to the Net Proceeds Offer
which are to be purchased in accordance with item (1) above, (ii) deposit with
the Paying Agent U.S. Legal Tender sufficient to pay the purchase price of all
Notes to be purchased and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price.
For purposes of this Section 4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue thereof.
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SECTION 4.17. Limitation on Incurrence
of Subordinated Debt.
The Company shall not incur Indebtedness that is subordinated by written
agreement in right of payment to any other Indebtedness of the Company,
unless the Indebtedness to be incurred is subordinated to the Notes
substantially to the same extent as it is subordinated to such other
Indebtedness pursuant to such written agreement.
SECTION 4.18. Guarantees by Restricted Subsidiaries.
The Company will cause any Borrowing Restricted Subsidiary to become a
Subsidiary Guarantor by executing the guarantee (the "Guarantee") of payment of
the Notes by such Borrowing Restricted Subsidiary (1) if, at the time the
Restricted Subsidiary first becomes a Borrowing Restricted Subsidiary, the
total Investment of the Company and the Restricted Subsidiaries in such
Borrowing Restricted Subsidiary and in all other Borrowing Restricted
Subsidiaries that are not Subsidiary Guarantors, is more than 15% of Total
Tangible Assets (the "15% Investment Threshold"), or (2) if, at the time a
Borrowing Restricted Subsidiary increases the amount of Restricted Subsidiary
Indebtedness (excluding for this purpose, incurrences of indebtedness under a
revolving credit facility that do not exceed the maximum committed borrowings
thereunder), the 15% Investment Threshold is met, or (3) if, at the time the
Company or any Restricted Subsidiary makes a capital contribution or other
equity investment in excess of $1 million during any six-month period in any
Borrowing Restricted Subsidiary, the 15% Investment Threshold is met. If any
such incurrence of liability of such Restricted Subsidiary is provided in
respect of Indebtedness that is expressly subordinated to the Notes, the
guarantee or other instrument provided by such Restricted Subsidiary in respect
of such subordinated Indebtedness shall be subordinated to the Guarantee
pursuant to subordination provisions no less favorable to holders of the Notes
than those contained in the 12 3/4% Indenture. A Borrowing Restricted
Subsidiary shall be released as a Subsidiary Guarantor (i) at such time as it
ceases to be a Borrowing Restricted Subsidiary or (ii) upon the election of the
Company, if, after giving effect to such election, the 15% Investment Threshold
is not met.
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.
(a) The Company shall not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its assets to, another Person or adopt a Plan of Liquidation, unless:
(1) either the Company shall be the survivor of such merger or
consolidation or the surviving Person is a corporation, partnership or
trust organized and existing under the laws of the United States, any
State thereof or the District of Columbia, and such surviving Person
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee on or prior to the consummation of such
transaction, in a form satisfactory to the Trustee, all the obligations
of the Company under the Notes and this Indenture;
(2) immediately after giving effect to such transaction (on a pro
forma basis, including any Indebtedness to be incurred in connection with
such transaction), the Company or the surviving Person shall be able to
incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 4.12;
(3) immediately after giving effect to such transaction and the
assumption of the obligations as set forth in clause (1) above and the
incurrence of any Indebtedness to be incurred in connection therewith, no
Default or Event of Default shall have occurred and be continuing; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer or adoption and such supplemental
indenture comply with this Article Five, that the surviving Person (if
other than the Company) agrees to be bound hereby, and that all
conditions precedent herein provided relating to such transaction have
been satisfied.
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Notwithstanding clauses (2), (3) and (4) of this Section 5.01, any
Restricted Subsidiary of the Company may consolidate with, merge into or
transfer all or part of its properties and assets to the Company.
(b) For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets
of the Company.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any transfer of assets in accordance
with Section 5.01, the successor Person formed by such consolidation or into
which the Company is merged or to which such transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein. When a successor corporation assumes all of the
obligations of the Company hereunder and under the Notes and agrees to be bound
hereby and thereby, the predecessor shall be released from such obligations.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Notes
when the same becomes due and payable and the Default continues for a
period of 30 days;
(2) the Company defaults in the payment of the stated principal
amount of any Notes when the same becomes due and payable at maturity,
upon acceleration or redemption or pursuant to an offer to purchase
required hereunder;
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(3) the Company fails to observe or perform any other covenant or
agreement contained in the Notes or this Indenture and the Default
continues for the period and after the notice specified below;
(4) there shall be a failure to pay at stated maturity the principal
amount of any Indebtedness for borrowed money of the Company or any
Restricted Subsidiary of the Company, or the acceleration of the stated
maturity of any such Indebtedness, if the aggregate principal amount of
such Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at stated maturity
or which has been accelerated, aggregates $20,000,000 or more at any
time;
(5) one or more judgments in an aggregate amount in excess of
$20,000,000 shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged or
unstayed for a period of 60 days after such judgment or judgments become
final and non-appealable and after the notice specified below;
(6) the Company or any Significant Restricted Subsidiary (A) admits
in writing its inability to pay its debts generally as they become due,
(B) commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (C) consents to the entry of a judgment, decree
or order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (D) consents to the appointment of a Custodian of it
or for substantially all of its property, (E) consents to or acquiesces
in the institution of a bankruptcy or an insolvency proceeding against
it, (F) makes a general assignment for the benefit of its creditors, or
(G) takes any corporate action to authorize or effect any of the
foregoing; and
(7) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any Significant Restricted
Subsidiary in an involuntary case or proceeding under any Bankruptcy Law,
which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any Significant Restricted Subsidiary, (B) appoint a Custodian
of the Company or any Significant Restricted Subsidiary or for
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substantially all of its property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall
remain unstayed and in effect for a period of 60 consecutive days.
A Default under clause (3) above (other than in the case of any Default
under Section 4.15, 4.16 or 5.01, which Defaults shall be Events of Default
with the notice specified in this paragraph but without the passage of time
specified in this paragraph) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 25% in principal amount of the
outstanding Notes notify the Company and the Trustee of the Default, and the
Company does not cure the Default within 30 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default." Such notice shall be given by the Trustee
if so requested by the Holders of at least 25% in principal amount of the Notes
then outstanding. A Default under clause (5) above shall be an Event of
Default with the notice specified in this paragraph but without the passage of
time referred to in this paragraph.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(6) or (7) with respect to the Company) occurs and is continuing
and has not been waived pursuant to Section 6.04, the Trustee may, by notice to
the Company, or the Holders of at least 25% in principal amount of the Notes
then outstanding may, by written notice to the Company and the Trustee, and the
Trustee shall, upon the request of such Holders, declare the aggregate
principal amount of the Notes outstanding, together with accrued but unpaid
interest thereon to the date of payment, to be due and payable and, upon any
such declaration, the same shall become and be due and payable; provided,
however, that the Trustee shall be under no obligation to follow any request of
any of the Holders unless such Holders shall have offered to the Trustee, after
request by the Trustee, reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred by it in compliance with such
request, order or direction. If an Event of Default specified in Section
6.01(6) or (7) occurs with respect to the Company, all unpaid principal and
accrued interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Noteholder. Upon payment of such principal amount and
interest all of the Company's obligations under the Notes and this Indenture,
other than
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obligations under Section 7.07, shall terminate. The Holders of a majority in
principal amount of the Notes then outstanding by notice to the Trustee may
rescind an acceleration and its consequences if (i) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, (ii)
all existing Events of Default, other than the non-payment of the principal and
interest on the Notes which have become due solely by such declaration of
acceleration, have been cured or waived, (iii) to the extent the payment of
such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of a
Default or Event of Default of the type described in Section 6.01(6) or (7),
the Trustee shall have received an Officer's Certificate and an Opinion of
Counsel that such Default has been cured or waived. No such rescission shall
affect any subsequent default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a majority in principal
amount of the outstanding Notes by notice to the Trustee may waive an existing
Default or Event of Default and its consequences, except a Default in the
payment of principal of or interest on any Note as specified in clauses (1) and
(2) of Section 6.01.
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SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount of the outstanding Notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it
including, without limitation, any remedies provided for in Section 6.03.
Subject to Section 7.01, however, the Trustee may refuse to follow any
direction that conflicts with any law or this Indenture or that the Trustee
determines may be unduly prejudicial to the rights of another Noteholder, or
that may involve the Trustee in personal liability; provided that the Trustee
may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
SECTION 6.06. Limitation on Suits.
A Noteholder may not pursue any remedy with respect to this Indenture or
the Notes unless:
(1) the Holder gives to the Trustee notice of a continuing Event of
Default;
(2) Holders of at least 25% in principal amount of the outstanding
Notes make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee reasonable indemnity against
any loss, liability or expense to be incurred in compliance with such
request;
(4) the Trustee does not comply with the request within 45 days
after receipt of the request and the offer of satisfactory indemnity; and
(5) during such 45-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over such other Noteholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal
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of and interest on a Note, on or after the respective due dates expressed in
such Note, or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Notes for the whole amount of principal and
accrued interest remaining unpaid, together with interest on overdue principal
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the Notes
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: if the Holders are forced to proceed against the Company
directly without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively; and
Fourth: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10%
in principal amount of the outstanding Notes.
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ARTICLE SEVEN
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed.
SECTION 7.01. Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as
a prudent Person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
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(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 or 6.05.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, however, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree with the Company in writing.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 11.04 and 11.05. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers.
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(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall determine
to make such further inquiry or investigation, it shall be entitled, upon
reasonable notice to the Company, to examine the books, records, and
premises of the Company, personally or by agent or attorney.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred by it in compliance with such request,
order or direction.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company any Subsidiary of
the Company, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Notes, it shall not be accountable for the Company's use of
the proceeds from the Notes, and it shall not be responsible for any statement
in the Notes other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Noteholder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or interest on, any Note, including an accelerated
payment and the failure to make
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payment on the Change of Control Payment Date pursuant to a Change of Control
Offer or on the Proceeds Purchase Date pursuant to a Net Proceeds Offer,
the Trustee may withhold the notice if and so long as its board of
directors, the executive committee of its board of directors or a committee
of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Noteholders.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall, to the extent that any of the events
described in TIA Sec. 313(a) occurred within the previous twelve months, but
not otherwise, mail to each Noteholder a brief report dated as of such May 15
that complies with TIA Sec. 313(a). The Trustee also shall comply with TIA
Sec.Sec. 313(b) and 313(c).
A copy of each report at the time of its mailing to Noteholders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes are listed.
The Company shall notify the Trustee if the Notes become listed on any
stock exchange.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all tax obligations imposed on the
Trustee related to this Indenture and all reasonable out-of-pocket expenses
incurred or made by it. Such expenses shall include the reasonable fees and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors for, and hold them harmless against, any loss,
liability or expense incurred by them except for such actions to the extent
caused by any negligence or bad faith on their part, arising out of or in
connection with the administration of this trust including the reasonable costs
and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
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asserted against the Trustee for which it may seek indemnity. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel; provided that the Company will not be required to
pay such fees and expenses if it assumes the Trustee's defense and there is no
conflict of interest between the Company and the Trustee in connection with
such defense as reasonably determined by the Trustee. The Company need not pay
for any settlement made without its written consent. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful
misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor trustee.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal
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amount of the Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA Sec.Sec. 310(a)(1) and 310(a)(5). The Trustee (or in the case of a
corporation included in a bank holding company system, the related bank holding
company) shall have a combined capital and surplus of at least $100,000,000 as
set forth in its most recent published annual report of condition. In
addition, if the Trustee is a corporation included in
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a bank holding company system, the Trustee, independently of such bank holding
company, shall meet the capital requirements of TIA Sec. 310(a)(2). The
Trustee shall comply with TIA Sec. 310(b); provided, however, that there shall
be excluded from the operation of TIA Sec. 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA Sec. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of
Claims Against Company.
The Trustee shall comply with TIA Sec. 311(a), excluding any creditor
relationship listed in TIA Sec. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Sec. 311(a) to the extent indicated therein.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 7.07, 8.04 and 8.05 shall survive the
effect of this Article Eight) when all outstanding Notes theretofore
authenticated and issued have been delivered to the Trustee for cancellation.
In addition, at the Company's option, either (a) the Company shall be
deemed to have been Discharged (as defined below) from its obligations with
respect to the Notes at any time after the applicable conditions set forth
below have been satisfied or (b) the Company shall cease to be under any
obligation to comply with any term, provision or condition set forth in
Sections 4.03, 4.05, 4.09, 4.11 through 4.18 and 5.01 at any time after the
applicable conditions set forth below have been satisfied:
(1) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of the Notes (i) money in an amount, or (ii) U.S. Legal Tender or
U.S. Government Obligations (as defined below) that
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through the payment of interest and principal in respect thereof in
accordance with their terms will provide, not later than one business day
before the due date of any payment, money in an amount, or (iii) a
combination of (i) and (ii), sufficient, in the opinion (with respect to
(i) and (ii)) of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge each installment of principal of and
interest on the outstanding Notes on the dates such installments of
interest or principal are due; provided, that no deposits made pursuant
to this Section 8.01(1) shall cause the Trustee to have a conflicting
interest as defined in and for purposes of the TIA; provided, further,
that no such deposit shall result in the Company, the Trustee or the
trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
(2) No Event of Default or Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit;
(3) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the Holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of its option under this Section 8.01
other than in the same manner and at the same times as would have been
the case if such option had not been exercised, and, accompanied by a
ruling to that effect received from or published by the Internal Revenue
Service, and (ii) all conditions precedent to the Discharge pursuant to
this Section 8.01 have been complied with, together with an Officers'
Certificate to such effect;
(4) The Company shall have paid or duly provided for payment of all
amounts then due to the Trustee pursuant to Section 7.07 hereof; and
(5) No such deposit will result in a Default under this Indenture or
a breach or violation of, or constitute a default under, any other
instrument or agreement (including, without limitation, the Credit
Agreement) to which the Company or any of its subsidiaries is a party or
by which it or its property is bound.
Notwithstanding the foregoing, the Opinion of Counsel required by clause
(i) of paragraph (3) above need not be
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delivered if all Notes not theretofore delivered to the Trustee for
cancellation (i) have become due and payable, (ii) will become due and
payable on the Maturity Date within one year, or (iii) are to be called
for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Notes and to have satisfied all the obligations under this Indenture relating
to the Notes (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except (i) the rights of the
Holders of Notes to receive, from the trust fund described in clause (1) above,
payment of the principal of and the interest on such Notes when such payments
are due, (ii) the Company's obligations with respect to the Notes under
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07 and 7.08 and (iii) the rights,
powers, trusts, duties and immunities of the Trustee hereunder.
SECTION 8.02. Acknowledgment of Discharge by Trustee.
Subject to Section 8.05, after (i) the conditions of Section 8.01 have
been satisfied, (ii) the Company has paid or caused to be paid all other sums
payable hereunder by the Company and (iii) the Company has delivered to the
Trustee an Opinion of Counsel, stating that all conditions precedent referred
to in clause (i) above relating to the satisfaction and discharge of this
Indenture have been complied with, the Trustee upon written request shall
acknowledge in writing the discharge of the Company's obligations under this
Indenture except for those surviving obligations specified in this Article
Eight.
"U.S. Government Obligations" means direct obligations of, and obligations
guaranteed by, the United States of America for the payment of which the full
faith and credit of the United States of America is pledged.
SECTION 8.03. Application of Trust Money.
The Trustee shall hold in trust, money, U.S. Legal Tender or U.S.
Government Obligations deposited with it pursuant to Section 8.01. It shall
apply the deposited money and the money from U.S. Legal Tender and U.S.
Government Obligations through the Paying Agent and in accordance with this
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Indenture to the payment of principal and accrued and unpaid interest on the
Notes.
SECTION 8.04. Repayment to the Company.
The Trustee and the Paying Agent shall promptly pay to the Company any
money held by them for the payment of principal or interest that remains
unclaimed for one year; provided, however, that the Trustee or such Paying
Agent may, at the expense of the Company, cause to be published once in a
newspaper of general circulation in The City of New York or mailed to each
Holder, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company, Holders entitled to
the money must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another Person and all liability
of the Trustee and Paying Agent with respect to such money shall cease.
SECTION 8.05. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money, U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01 by reason
of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though
no deposit had occurred pursuant to Section 8.01 until such time as
the Trustee or Paying Agent is permitted to apply all such money, U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01;
provided, however, that if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money, U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Notes without notice to
or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not, in the opinion of the Trustee,
adversely affect the rights of any Holder in any material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(4) to make any other change that does not adversely affect in any
material respect the rights of any Noteholders hereunder; or
(5) to provide for issuance of the Exchange Notes, which will have
terms substantially identical in all material respects to the Initial
Notes (except that the transfer restrictions contained in the Initial
Notes will be modified or eliminated, as appropriate), and which
will be treated together with any outstanding Initial Notes, as a single
issue of securities;
provided, that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder
or Holders of at least a majority in aggregate principal amount of the
outstanding Notes, may amend or supplement this Indenture or the Notes, without
notice to any other Holders. Subject to Section 6.07, the Holder or Holders of
a majority in aggregate principal amount of the outstanding Notes may waive
compliance by the Company with any
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provision of this Indenture or the Notes without notice to any other
Noteholder. No amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, shall, without the consent of each
Holder of each Note affected thereby:
(1) change the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver of any provision of this Indenture
or the Notes;
(2) reduce the rate or extend the time for payment of interest on
any Note;
(3) reduce the principal amount of any Note;
(4) change the Maturity Date of any Note, or alter the optional
redemption provisions contained in Article Three of this Indenture and in
Paragraph 5 of the Notes in a manner adverse to any Holder;
(5) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Notes or the rights of
Holders to recover the principal of, interest on, or optional redemption
payments with respect to, any Note; or
(6) make the principal of, or the interest on, any Note payable with
anything or in any manner other than as provided for in this Indenture
and the Notes.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
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SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to his Note or portion of his Note by notice to the
Trustee or the Company received before the date on which the Trustee receives
an Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have consented (and not theretofore revoked such consent) to
the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Noteholder, unless it makes a change described in any of clauses (1)
through (6) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt
as the consenting Holder's Note; provided that any such waiver shall not impair
or affect the right of any Holder to receive payment of principal of and
interest on a Note, on or after the respective due dates expressed in such
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates without the consent of such Holder.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return
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it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue, and the Trustee
shall authenticate, a new Note that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects
the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Indenture. Such Opinion of
Counsel shall not be an expense of the Trustee.
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.
Each Subsidiary Guarantor, if any, hereby unconditionally guarantees in
accordance with the provisions of Section 4.18, to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, that: (i) the principal of and interest on the Notes
will be promptly paid in full when due, subject to any applicable grace period,
whether at maturity, by acceleration or otherwise and interest on the overdue
principal, if any, and interest on any interest, to the extent lawful, of the
Notes to the Holders or the Trustee will be promptly paid in full or performed,
all in accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Notes, the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration or otherwise, subject, however, in the case of
clauses (i) and (ii) above, to the limitations set forth in Section 10.03.
Each Subsidiary Guarantor, if any, hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any
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action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, and action to enforce the same or any
other circumstance that might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Subsidiary Guarantor, if any,
hereby waives diligence, presentment, demand for payment, filing of
claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that its
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Notes, this Indenture and in its Subsidiary
Guarantee. If any Noteholder or the Trustee is required by any court or
otherwise to return to the Company, any Subsidiary Guarantor or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or any such Subsidiary Guarantor, any amount paid by the Company or any such
Subsidiary Guarantor to the Trustee or such Noteholder, each Subsidiary
Guarantee to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Subsidiary Guarantor further agrees that,
as between it and all other Subsidiary Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity
of the obligations guaranteed hereby may be accelerated as provided
in Article Six for the purposes of a Subsidiary Guarantee notwithstanding
any stay, injunction or other prohibition preventing such acceleration
in respect of the obligations guaranteed hereby, and (y) in the event
of any acceleration of such obligations as provided in Article Six,
such obligations (whether or not due and payable) shall forthwith become due
and payable by the Subsidiary Guarantors for the purpose of the Subsidiary
Guarantees.
SECTION 10.02. Severability.
In case any provision of this Article Ten shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. Limitation of Liability.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by each Subsidiary Guarantor pursuant to its Subsidiary Guarantee not
constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform
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Fraudulent Transfer Act or any similar Federal or state law. To effectuate
the foregoing intention, the Holders and each Subsidiary Guarantor hereby
irrevocably agree that the obligations of each Subsidiary Guarantor under
its Subsidiary Guarantee shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor and after giving effect to any collections
from or payments made by or on behalf of any of the other Subsidiary
Guarantors in respect of the obligations of such other Subsidiary
Guarantors under the other Subsidiary Guarantees or pursuant to Section
10.05, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
(a) Nothing contained in this Indenture or in the Notes shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into the Company or
another Subsidiary Guarantor or shall prevent any sale of assets or conveyance
of the property of a Subsidiary Guarantor as an entirety or substantially as an
entirety, to the Company or another Subsidiary Guarantor. Upon any such
consolidation, merger, sale or conveyance, the Subsidiary Guarantee given by
such Subsidiary Guarantor shall no longer have any force or effect.
(b) Upon the sale or disposition as an entirety (whether by merger, stock
purchase, asset sale or otherwise) of a Subsidiary Guarantor (or all or
substantially all its assets) to a Person that is not a Subsidiary of the
Company and which sale or disposition is otherwise in compliance with Section
4.18 and the other terms of this Indenture, such Subsidiary Guarantor shall be
deemed released from all obligations under this Article Ten without any further
action required on the part of the Trustee or any Holder.
The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by Officers'
Certificates and Opinions of Counsel certifying as to the compliance with this
Section 10.04. Any Subsidiary Guarantor not so released remains liable for the
full amount of principal of and interest on the Securities as provided in this
Article Ten.
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SECTION 10.05. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under any of the Subsidiary Guarantees, such Funding
Guarantor shall be entitled to a contribution from all other Subsidiary
Guarantors in a pro rata amount based on the Adjusted Net Assets (as defined
below) of each of the Subsidiary Guarantors (including the Funding Guarantor)
for all payments, damages and expenses incurred by that funding Guarantor in
discharging the Company's obligations with respect to the Notes or any
obligations of any of the other Subsidiary Guarantors with respect to any of
the Subsidiary Guarantees or based on such other determination as may be
mutually agreed upon between or among each such Subsidiary Guarantor.
"Adjusted Net Assets" of any Person at any date shall mean the lesser
of the amount by which (x) the fair value of the property of such Person
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
a Subsidiary Guarantee of such person at such date and (y) the present fair
salable value of the assets of such Person at such date exceeds the amount that
will be required to pay the probable liability of such Person on its debts
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date), excluding debt in respect of the Subsidiary Guarantee of
such Person, as they become absolute and matured.
SECTION 10.06. Waiver of Subrogation.
Until all Obligations under each of the Subsidiary Guarantees, the Notes
and this Indenture are paid in full, each of the Subsidiary Guarantors hereby
irrevocably waives any claims or other rights that it may now or hereafter
acquire against the Company that arise from the existence, payment, performance
or enforcement of its obligations under its Subsidiary Guarantee and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification and any right to participate in any
claim or remedy of any Holder of Notes against the Company, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or
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other rights. If any amount shall be paid to any of the Subsidiary Guarantors
in violation of the preceding sentence and the Notes shall not have been
paid in full, such amount shall have been deemed to have been paid to such
Person for the benefit of, and held in trust for the benefit of, the Holders
of the Notes, and shall, forthwith be paid to the Trustee for the benefit
of such Holders to be credited and applied upon the Notes, whether matured
or unmatured, in accordance with the terms of this Indenture. Each of the
Subsidiary Guarantors acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and
that the waiver set forth in this Section 10.06 is knowingly made in
contemplation of such benefits.
SECTION 10.07. Execution of Guarantee.
To evidence their guarantee to the Noteholders set forth in this Article
Ten, each Subsidiary Guarantor hereby agrees to execute a Subsidiary Guarantee
in substantially the form of Exhibit E to this Indenture, which shall be
endorsed on each Note ordered to be authenticated and delivered by the Trustee.
Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth
in this Article Ten shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of a Subsidiary Guarantee. A
Subsidiary Guarantee shall be signed on behalf of a Subsidiary Guarantor by two
Officers, or an Officer and an Assistant Secretary, or one Officer shall sign
and one Officer or an Assistant Secretary (each of whom shall, in each case,
have been duly authorized by all requisite corporate or partnership actions)
shall attest to the Subsidiary Guarantee prior to the authentication of the
Note on which it is endorsed, and the delivery of such Note by the Trustee,
after the authentication thereof hereunder, shall constitute due delivery of
the Subsidiary Guarantee on behalf of such Subsidiary Guarantor. Such
signatures upon a Subsidiary Guarantee may be by manual or facsimile signature
of such officers and may be imprinted or otherwise reproduced on the Subsidiary
Guarantee and in case any such officer who shall have signed a Subsidiary
Guarantee shall cease to be such officer before the Note on which the
Subsidiary Guarantee is endorsed shall have authenticated and delivered by the
Trustee or disposed of by the Company, such Note nevertheless may be
authenticated and delivered or disposed of as though the Person who signed the
Subsidiary Guarantee had not ceased to be such officer of the Subsidiary
Guarantor. At any time after a Subsidiary Guarantee is terminated pursuant to
the terms of this Indenture, the Trustee shall upon written notice from the
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Company (and delivery of an Officer's Certificate) remove any such endorsement
which relates to such Subsidiary Guarantee.
SECTION 10.08. Waiver of Stay, Extension or Usury Laws.
Each Subsidiary Guarantor, if any, covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive such
Subsidiary Guarantor from performing a Subsidiary Guarantee as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performances of this Indenture; and (to the
extent that it may lawfully do so) each Subsidiary Guarantor, if any,
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
commercial courier service, by telex, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company:
Gaylord Container Corporation
500 Lake Cook Road, Suite 400
Deerfield, Illinois 60015
Attention: Thomas M. Steffen
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with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Alan G. Berkshire, Esq.
if to the Trustee:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Each of the Company and the Trustee by written notice to each other such
Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when receipt is confirmed if delivered by commercial courier; when
answered back, if telexed; when receipt is acknowledged, if faxed; and five (5)
calendar days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders
with Other Holders.
Noteholders may communicate pursuant to TIA Sec. 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Sec. 312(c).
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SECTION 11.04. Certificate and Opinion as
to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee upon
request:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 4.07, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a
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meeting of Noteholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 11.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment is a
Saturday, a Sunday or a day on which banking institutions in New York, New
York, Hartford, Connecticut, Boston, Massachusetts or at such place of payment
are not required to be open. If a payment date is a Legal Holiday at such
place, payment may be made at such place on the next succeeding day that is not
a Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 11.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
the Company shall not have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creations. Each Noteholder by accepting a
Note waives and releases all such liability. Such waiver and release are part
of the consideration for the issuance of the Notes.
SECTION 11.11. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
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SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together shall represent the same
agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed, all
as of the date first written above.
GAYLORD CONTAINER CORPORATION
By: /s/ Thomas M. Steffen
---------------------------
Name: Thomas M. Steffen
Title: Assistant Treasurer
FLEET NATIONAL BANK, as Trustee
By: /s/ Mark A. Forgetta
----------------------------
Name:Mark A. Forgetta
Title: Vice President
<PAGE> 97
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION,
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF
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<PAGE> 98
THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE
DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
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<PAGE> 99
CUSIP No.: 368145AK4
GAYLORD CONTAINER CORPORATION
9 3/4% Senior Note due 2007, Series A
No. 1 $225,000,000
GAYLORD CONTAINER CORPORATION, a Delaware corporation (the "Company,"
which term includes any successor entity), for value received promises to pay
to Cede & Co. or registered assigns, the principal sum of TWO HUNDRED AND
TWENTY FIVE MILLION Dollars, on June 15, 2007.
Interest Payment Dates: June 15 and December 15, commencing December 15,
1997
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
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<PAGE> 100
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Dated: June 12, 1997
GAYLORD CONTAINER CORPORATION
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
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<PAGE> 101
This is one of the Notes described in the within-mentioned Indenture.
FLEET NATIONAL BANK, as Trustee
By ______________________________________
Authorized Signatory
Dated: June 12, 1997
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<PAGE> 102
(REVERSE OF SECURITY)
GAYLORD CONTAINER CORPORATION
9 3/4% Senior Note due 2007, Series A
1. Interest.
GAYLORD CONTAINER CORPORATION, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from the
Issue Date. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing December 15, 1997. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate of 10 3/4% per annum; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the rate of 10 3/4% per annum.
2. Method of Payment.
The Company shall pay interest on the Notes (except defaulted interest) to
the Persons who are the registered Holders at the close of business on the
Record Date immediately preceding the Interest Payment Date even if the Notes
are cancelled on registration of transfer or registration of exchange after
such Record Date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts ("U.S. Legal Tender"). However, the Company may pay
principal and interest by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee") will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the
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Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of June 12, 1997
(the "Indenture"), between the Company and the Trustee. This Note is one of a
duly authorized issue of Notes of the Company designated as its 9 3/4% Senior
Notes due 2007, Series A (the "Notes"), limited (except as otherwise provided
in the Indenture) in aggregate principal amount to $225,000,000, which may be
issued under the Indenture. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Sec.Sec. 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture. Notwithstanding anything to
the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the TIA for a statement of them. The
Notes are general unsecured obligations of the Company.
5. Optional Redemption.
The Notes may not be redeemed at the option of the Company prior to June
15, 2002. Thereafter, the Company may redeem all or any of the Notes at any
time at redemption prices (expressed in percentages of the principal amount),
set forth below plus accrued interest, if any, to the Redemption Date if
redeemed during the 12-month period beginning on June 15 in the years indicated
below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2002............... 104.875%
2003............... 103.250%
2004............... 101.625%
2005 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 15, 2000, the
Company may redeem up to 33% of the aggregate principal amount of Notes with
the net proceeds from one or more Equity Offerings of the Company at a
redemption price equal to 109.75% of the principal amount thereof, plus accrued
and unpaid interest, if any, thereon to the date of redemption; provided,
however, that, after giving effect to any such
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redemption, at least $100,000,000 aggregate principal amount of the Notes
originally issued remain outstanding. Any such redemption must occur on or
prior to 120 days after the receipt of such net proceeds.
In addition, upon the occurrence of a Change of Control prior to June 15,
2002, the Company, at its option, may redeem all, but not less than all, of the
outstanding Notes at a redemption price equal to 100% of the principal amount
thereof plus the applicable Make-Whole Premium (a "Change of Control
Redemption"). The Company shall give not less than 30 nor more than 60 days
notice of such redemption within 30 days following a Change of Control.
"Make-Whole Premium" with respect to a Note means an amount equal to the
greater of (i) 1.0% of the outstanding principal amount of such Note and (ii)
the excess of (a) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on June 15,
2002 computed using a discount rate equal to the Treasury Rate plus 62.5 basis
points, over (b) the outstanding principal amount of such Note.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Notes to be redeemed at such
Holder's registered address. Notes in denominations larger than $1,000 may be
redeemed in part.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such Redemption Date, then,
unless the Company defaults in the payment of such Redemption Price, the Notes
called for redemption will cease to bear interest and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price.
7. Change of Control Offer.
In the event of a Change of Control, upon the satisfaction of the
conditions set forth in the Indenture, the Company shall be required to offer
to purchase all of the then outstanding Notes pursuant to a Change of Control
Offer at a purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of
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<PAGE> 105
purchase. Holders of Notes which are the subject of such an offer to
repurchase shall receive an offer to repurchase and may elect to have
such Notes repurchased pursuant to and in accordance with the terms of
the Indenture.
8. Limitation on Disposition of Assets.
Under certain circumstances the Company is required to apply the net
proceeds from Asset Sales to offer to repurchase Notes at a price equal to 100%
of the aggregate principal amount thereof, plus accrued interest to the date of
purchase.
9. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer
of or exchange Notes in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Notes or portions
thereof selected for redemption.
10. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of it for
all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, the Trustee and the Paying Agents will pay the money back to the
Company. After that, all liability of the Trustee and such Paying Agents with
respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits with the Trustee U.S. Legal Tender or
U.S. Government Obligations sufficient to pay the principal of and interest on
the Notes to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Notes (including certain covenants, but
excluding its obligation to pay the principal of and interest on the Notes).
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<PAGE> 106
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of at least a majority
in aggregate principal amount of the Notes then outstanding, and any existing
Default or Event of Default or compliance with any provision may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or
comply with Article Five of the Indenture or make any other change that does
not adversely affect in any material respect the rights of any Holder of a
Note.
14. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Subsidiaries to, among other things, incur additional Indebtedness,
make payments in respect of its Capital Stock or certain Indebtedness, enter
into transactions with Affiliates, create dividend or other payment
restrictions affecting Subsidiaries, merge or consolidate with any other
Person, incur liens, sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its assets or adopt a plan of liquidation. Such
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
15. Successors.
When a successor assumes, in accordance with the Indenture, all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor will be released from those obligations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount, of Notes then
outstanding may declare all the Notes to be due and payable in the manner, at
the time and with the effect provided in the Indenture. Holders of Notes may
not enforce the Indenture
A-10
<PAGE> 107
or the Notes except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Notes unless it has received
indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Notes
notice of any continuing Default or Event of Default (except a Default in
payment of principal or interest) if it determines that withholding notice is
in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Notes and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
19. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on this Note.
20. Governing Law.
The Laws of the State of New York shall govern this Note and the
Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
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<PAGE> 108
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform Note
Identification Procedures, the Company will cause CUSIP numbers to be printed
on the Notes as a convenience to the Holders of the Notes. No representation
is made as to the accuracy of such numbers as printed on the Notes and reliance
may be placed only on the other identification numbers printed hereon.
23. Registration Rights.
Pursuant to the Registration Rights Agreement, the Company will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Series A Note for the Company's 9 3/4% Senior Notes due 2007, Series B,
which have been registered under the Securities Act, in like principal amount
at maturity and having terms identical in all material respects as the Series A
Securities. The Holders shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
24. Indenture.
Each Holder, by accepting a Note, agrees to be bound by all of the terms
and provisions of the Indenture, as the same may be amended from time to time.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: GAYLORD CONTAINER CORPORATION, 500
Lake Cook Road, Suite 400, Deerfield, Illinois 60015, Attn: Secretary.
A-12
<PAGE> 109
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
________________________________
_______________________________________________________________
(please print or type name and address)
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_______________________________________________________________
attorney to transfer the Note on the books of the Issuer with full power of
substitution in the premises.
Dated:________________________ ________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) , the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
A-13
<PAGE> 110
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule
144A under the Securities Act; or
(3) __ to an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) that has
furnished to the Trustee a signed letter
containing certain representations and
agreements (the form of which letter can
be obtained from the Trustee); or
(4) __ outside the United states to a "foreign
person" in compliance with Rule 904 of
Regulation S under the Securities Act; or
(5) __ pursuant to the exemption from
registration provided by Rule 144 under
the Securities Act; or
(6) __ pursuant to an effective registration
statement under the Securities Act; or
(7) __ pursuant to another available exemption
from the registration requirements of the
Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than
the registered Holder thereof; provided, that if box (3), (4), (5) or (7) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Notes, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall
have been satisfied.
A-14
<PAGE> 111
Dated: _______________________ Signed: ______________________________________
(Sign exactly as name appears on the
other side of this Security)
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: _____________________________ _________________________________________
NOTICE: To be executed by
an executive officer
A-15
<PAGE> 112
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated:________________________ ________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
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<PAGE> 113
EXHIBIT B
CUSIP No.:
GAYLORD CONTAINER CORPORATION
9 3/4% Senior Note due 2007, Series B
No. 2 $225,000,000
GAYLORD CONTAINER CORPORATION, a Delaware corporation (the "Company,"
which term includes any successor entity), for value received promises to pay
to Cede & Co. or registered assigns, the principal sum of TWO HUNDRED AND
TWENTY FIVE MILLION Dollars, on June 15, 2007.
Interest Payment Dates: June 15 and December 15,
commencing December 15, 1997
Record Dates: June 1 and December 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Dated: , 1997
GAYLORD CONTAINER CORPORATION
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
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<PAGE> 114
This is one of the Notes described in the within-mentioned Indenture.
FLEET NATIONAL BANK, as Trustee
By: _____________________________________
Authorized Signatory
Dated: , 1997
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<PAGE> 115
(REVERSE OF SECURITY)
GAYLORD CONTAINER CORPORATION
9 3/4% Senior Note due 2007, Series B
1. Interest.
GAYLORD CONTAINER CORPORATION, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid, from the
Issue Date. The Company will pay interest semi-annually in arrears on each
Interest Payment Date, commencing December 15, 1997. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate of 10 3/4% per annum; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the rate of 10 3/4% per annum.
2. Method of Payment.
The Company shall pay interest on the Notes (except defaulted interest) to
the Persons who are the registered Holders at the close of business on the
Record Date immediately preceding the Interest Payment Date even if the Notes
are cancelled on registration of transfer or registration of exchange after
such Record Date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts ("U.S. Legal Tender"). However, the Company may pay
principal and interest by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Fleet National Bank (the "Trustee") will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject
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<PAGE> 116
to certain exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an indenture, dated as of June 12, 1997
(the "Indenture"), between the Company and the Trustee. This Note is one of a
duly authorized issue of Notes of the Company designated as its 9 3/4% Senior
Notes due 2007 (the "Notes"), limited (except as otherwise provided in the
Indenture) in aggregate principal amount to $225,000,000, which may be issued
under the Indenture. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Sec.Sec. 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture. Notwithstanding anything to
the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and said Act for a statement of them. The
Notes are general unsecured obligations of the Company.
5. Optional Redemption.
The Notes may not be redeemed at the option of the Company prior to June
15, 2002. Thereafter, the Company may redeem all or any of the Notes at any
time at redemption prices (expressed in percentages of the principal amount),
set forth below plus accrued interest, if any, to the Redemption Date if
redeemed during the 12-month period beginning on June 15 in the years indicated
below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2002............... 104.875%
2003............... 103.250%
2004............... 101.625%
2005 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 15, 2000, the
Company may redeem up to 33% of the aggregate principal amount of Notes with
the net proceeds from one or more Equity Offerings of the Company at the
redemption price equal to 109.75% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the date of redemption;
provided, however, that, after giving effect to any such redemption, at least
$100,000,000 aggregate principal amount of
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<PAGE> 117
the Notes originally issued remain outstanding. Any such redemption must
occur on or prior to 120 days after the receipt of such net proceeds.
In addition, upon the occurrence of a Change of Control prior to June 15,
2002, the Company, at its option, may redeem all, but not less than all, of the
outstanding Notes at a redemption price equal to 100% of the principal amount
thereof plus the applicable Make-Whole Premium (a "Change of Control
Redemption"). The Company shall give not less than 30 nor more than 60 days
notice of such redemption within 30 days following a Change of Control.
"Make-Whole Premium" with respect to a Note means an amount equal to the
greater of (i) 1.0% of the outstanding principal amount of such Note and (ii)
the excess of (a) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on June 15,
2002 computed using a discount rate equal to the Treasury Rate plus 62.5 basis
points, over (b) the outstanding principal amount of such Note.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Notes to be redeemed at such
Holder's registered address. Notes in denominations larger than $1,000 may be
redeemed in part.
Except as set forth in the Indenture, from and after any Redemption Date,
if monies for the redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such Redemption Date, then,
unless the Company defaults in the payment of such Redemption Price, the Notes
called for redemption will cease to bear interest and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price.
7. Change of Control Offer.
In the event of a Change of Control, upon the satisfaction of the
conditions set forth in the Indenture, the Company shall be required to offer
to purchase all of the then outstanding Notes pursuant to a Change of Control
Offer at a purchase price equal to 101% of the principal amount thereof plus
accrued interest, if any, to the date of purchase Holders of the Notes which
are the subject of such an offer to
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<PAGE> 118
repurchase shall receive an offer to repurchase and may elect to have such
Notes repurchased pursuant to and in accordance with the terms of the Indenture.
8. Limitation on Disposition of Assets.
Under certain circumstances the Company is required to apply the net
proceeds from Asset Sales to offer to repurchase Notes at a price equal to 100%
of the aggregate principal amount thereof, plus accrued interest to the date of
purchase.
9. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall register the transfer
of or exchange Notes in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Notes or portions
thereof selected for redemption.
10. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of it for
all purposes.
11. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
one year, the Trustee and the Paying Agents will pay the money back to the
Company. After that, all liability of the Trustee and such Paying Agents with
respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits with the Trustee U.S. Legal Tender or
U.S. Government Obligations sufficient to pay the principal of and interest on
the Notes to redemption or maturity and complies with the other provisions of
the Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Notes (including certain covenants, but
excluding its obligation to pay the principal of and interest on the Notes).
B-6
<PAGE> 119
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of at least a majority
in aggregate principal amount of the Notes then outstanding, and any existing
Default or Event of Default or compliance with any provision may be waived with
the consent of the Holders of a majority in aggregate principal amount of the
Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or
comply with Article Five of the Indenture or make any other change that does
not adversely affect in any material respect the rights of any Holder of a
Note.
14. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Subsidiaries to, among other things, incur additional Indebtedness,
make payments in respect of its Capital Stock or certain Indebtedness, enter
into transactions with Affiliates, create dividend or other payment
restrictions affecting Subsidiaries, merge or consolidate with any other
Person, incur liens, sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its assets or adopt a plan of liquidation. Such
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
15. Successors.
When a successor assumes, in accordance with the Indenture, all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor will be released from those obligations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount, of Notes then
outstanding may declare all the Notes to be due and payable in the manner, at
the time and with the effect provided in the Indenture. Holders of Notes may
not enforce the Indenture
B-7
<PAGE> 120
or the Notes except as provided in the Indenture.
The Trustee is not obligated to enforce the Indenture or the Notes unless it
has received indemnity satisfactory to it. The Indenture permits, subject to
certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Notes then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of Notes
notice of any continuing Default or Event of Default (except a Default in
payment of principal or interest) if it determines that withholding notice is
in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Notes and may otherwise deal with the
Company, its Subsidiaries or their respective Affiliates as if it were not the
Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
19. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on this Note.
20. Governing Law.
The Laws of the State of New York shall govern this Note and the
Indenture, without regard to principles of conflict of laws.
21 Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Note or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
B-8
<PAGE> 121
22 CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform Note
Identification Procedures, the Company will cause CUSIP numbers to be printed
on the Notes as a convenience to the Holders of the Notes. No representation
is made as to the accuracy of such numbers as printed on the Notes and reliance
may be placed only on the other identification numbers printed hereon.
23 Indenture.
Each Holder, by accepting a Note, agrees to be bound by all of the terms
and provisions of the Indenture, as the same may be amended from time to time.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: GAYLORD CONTAINER CORPORATION, 500 Lake
Cook Road, Suite 400, Deerfield, Illinois 60015, Attn: Secretary.
B-9
<PAGE> 122
[FORM OF ASSIGNMENT]
I or we assign to
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
________________________________
_______________________________________________________________
(please print or type name and address)
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_______________________________________________________________
attorney to transfer the Note on the books of the Issuer with full power of
substitution in the premises.
Dated:________________________ _______________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
B-10
<PAGE> 123
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated:________________________ _______________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
B-11
<PAGE> 124
Exhibit C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Re: Gaylord Container Corporation
9 3/4% Senior Notes due 2007
Ladies and Gentlemen:
In connection with our proposed purchase of 9 3/4% Senior Notes due 2007
(the "Notes") of Gaylord Container Corporation (the "Company"), we confirm
that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated June 5, 1997 relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages
(i)-(ii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is subject to
certain restrictions and conditions set forth in the Indenture relating to the
Notes (as described in the Offering Memorandum) and the undersigned agrees to
be bound by, and not to resell, pledge or otherwise transfer the Notes except
in compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes prior to the
date which is two years after the original
C-1
<PAGE> 125
issuance of the Notes, we will do so only (i) to the Company or any of its
subsidiaries, (ii) inside the United States in accordance with Rule 144A
under the Securities Act to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act), (iii) inside the
United States to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf
by a U.S. broker-dealer) to the Trustee (as defined in the Indenture relating
to the Notes), a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Notes, (iv) outside
the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (vi) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing any of the Notes from us a notice advising
such purchaser that resales of the Notes are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974), except as permitted in
the section entitled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any Notes, we will be
required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our account or for one
or more accounts (each of which is an institutional "accredited investor") as
to each of which we exercise sole investment discretion.
C-2
<PAGE> 126
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
By: _____________________________________
Name:
Title:
C-3
<PAGE> 127
Exhibit D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
______________, ____
Attention:
Re: Gaylord Container Corporation (the "Company")
9 3/4% % Senior Notes due 2007
(the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to
and in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
D-1
<PAGE> 128
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ______________________________________
Authorized Signature
D-2
<PAGE> 129
Exhibit E
SUBSIDIARY GUARANTEE
The undersigned hereby unconditionally guarantees on a senior unsecured
basis to the Holder of this Note the payments of principal of and interest on
this Notes in the amounts and at the time when due and interest on the overdue
principal and interest, if any, of this Note, if lawful, and the payment or
performance of all other obligations of the Company under the Indenture or the
Notes, to the Holder of this Note and the Trustee, all in accordance with and
subject to the terms and limitations of this Note, Article Ten of the Indenture
and this Subsidiary Guarantee. This Subsidiary Guarantee will become effective
in accordance with Article Ten of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Subsidiary Guarantee
shall not be affected by the fact that it is not affixed to any particular
Note.
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article Ten of the Indenture and reference is hereby made to the
Indenture for the precise terms of this Subsidiary Guarantee and all of the
other provisions of the Indenture to which this Subsidiary Guarantee relates.
The internal laws of the State of New York shall govern this Subsidiary
Guarantee without regard to principles of conflict of laws.
[ ]
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
E-1
<PAGE> 130
ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to the Senior Note Securities Purchase Agreement, dated
as of March 25, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Note Purchase Agreement"), among Global Telesystems Holdings
Ltd. (the "Issuer"), and the Purchasers named therein (the "Purchasers"),
and the Preference Share Securities Purchase Agreement, dated as of March 25,
1997 (as amended, supplemented or otherwise modified from time, the "Preferred
Purchase Agreement", and, together with the Note Purchase Agreement, the
"Purchase Agreements"), among the Issuer and the Purchasers named therein.
Unless otherwise defined herein, terms defined in the Note Purchase Agreement
and used herein shall have the meanings given to them in the Note Purchase
Agreement.
CIBC Wood Gundy Securities Corp. ("CIBC Securities"), CIBC Wood Gundy
Capital (SFC) Inc. ("CIBC Capital" and, together with CIBC Securities, the
"Assignors") and the Assignee identified on Schedule 1 hereto (the
"Assignee") agree as follows:
1. CIBC Securities hereby irrevocably sells and assigns to the Assignee
without recourse to CIBC Securities, and the Assignee hereby irrevocably
purchases and assumes from CIBC Securities without recourse to CIBC Securities,
as of the Effective Date (as defined below), the interest in CIBC Securities'
Senior Note Commitment described in Schedule 1 hereto (the "Assigned Note
Interest") and CIBC Securities' rights and obligations under the Note Purchase
Agreement with respect to the Senior Note Commitment under the Note Purchase
Agreement.
2. CIBC Securities hereby irrevocably sells and assigns to the Assignee
without recourse to CIBC Securities, and the Assignee hereby irrevocably
purchases and assumes from CIBC Securities without recourse to CIBC Securities,
as of the Effective Date, the interest in CIBC Securities' Commitment (as
Defined in the Preferred Purchase Agreement) described in Schedule 1 hereto, or
if the Preference Shares (as defined in the Preferred Purchase Agreement) are
already outstanding, such Preference Shares (the "Assigned Preference Share
Interest") and CIBC Securities' rights and obligations under the Preferred
Purchase Agreement with respect to the Commitment under the Preferred Purchase
Agreement.
3. CIBC Capital hereby irrevocably assigns to the Assignee, as of the
Effective Date, the number of shares of
<PAGE> 131
Class A Common Stock of GT Parent Holdings LDC set forth on Schedule I (the
"Class A Common Stock").
4. The Assignors (a) make no representation or warranty and assume no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Purchase Agreements or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Purchase Agreements, any other Transaction Document or any other
instrument or document furnished pursuant thereto, except that each Assignor
represents that it has not created any adverse claim upon the interests being
assigned by it hereunder and that such interests are free and clear of any such
adverse claim, lien or encumbrance and, to the best of CIBC Securities'
knowledge, the obligations of the Issuer under the Purchase Agreements are not
subject to any defense, right of setoff, subordination, preference action,
recoupment, counterclaim, or claim of any other kind; and (b) make no
representation or warranty and assume no responsibility with respect to the
financial condition of the Issuer, any of its Subsidiaries or any other obligor
or the performance or observance by the Issuer, any of its Subsidiaries or any
other obligor of any of their respective obligations under the Purchase
Agreements or any other Transaction Document or any other instrument or
document furnished pursuant hereto or thereto, other than that, to CIBC
Securities' best knowledge, no default, Event of Default or event which with
the giving of notice and/or the passage of time would constitute a default or
an Event of Default has occurred under the Purchase Agreements.
5. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Assumption Agreement; (b) confirms
that it has received a copy of each of the Purchase Agreements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption Agreement;
(c) agrees that it will, independently and without reliance upon the Assignors,
or any Purchaser and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Purchase Agreement or any other instrument or
document furnished pursuant hereto or thereto; and (d) agrees that it will be
bound by the provisions of the Purchase Agreements and will perform in
accordance with its terms all the obligations which by the terms of the
Purchase Agreements are required to be performed by it as a Purchaser.
<PAGE> 132
6. The effective date of this Assignment and Assumption Agreement shall be
the Effective Date of Assignment described in Schedule 1 hereto (the "Effective
Date").
7. From and after the Effective Date, (a) the Assignee shall be a party to
the Purchase Agreements and, to the extent provided in this Assignment and
Assumption Agreement, have the rights and obligations of a Purchaser thereunder
and shall be bound by the provisions thereof and (b) CIBC Securities shall, to
the extent provided in this Assignment and Assumption Agreement, relinquish its
rights and be released from its obligations under the Purchase Agreements.
8. This Assignment and Assumption Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of law principles.
9. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed as of the Effective Date by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE> 133
Schedule 1
to Assignment and Assumption Agreement
Name of Assignee:
---------------------------------------------------------------
Effective Date of Assignment:
---------------------------------------------------
Principal Amount of the Senior Note Commitment Assigned
$
----------------------
Preference Share Commitment or Preference Shares Assigned
$ Liquidation Preference plus $
---------------------- ----------------------
accrued dividends, for total consideration of $
------------------------------
Number of Shares of Common Stock
- -----------------------
Assignee:
By:
---------------------------------
Title:
CIBC Wood Gundy Securities Corp.
By:
---------------------------------
Title:
CIBC Wood Gundy Capital (SFC) Inc.
By:
---------------------------------
Title:
<PAGE> 1
EXHIBIT 4.5
THIRD AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Third Amendment to Amended and Restated Credit Agreement (this
"Amendment"), dated as of May 20, 1997, is by and among Gaylord Container
Corporation, a Delaware corporation (the "Borrower"), the undersigned financial
institutions in their capacities as lenders (collectively, the "Banks"), and
Bankers Trust Company, as agent (the "Agent") for the Banks.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of November 17, 1986 and amended
and restated as of June 30, 1995, and as further amended as of May 30, 1996 and
as of July 19, 1996 (as amended, restated, supplemented or otherwise modified
and in effect from time to time, the "Credit Agreement"), pursuant to which the
Banks have provided to the Borrower credit facilities and other financial
accommodations; and
WHEREAS, the Borrower has requested that the Agent and the Banks amend the
Credit Agreement in certain respects as set forth herein and the Banks and the
Agent are agreeable to the same, subject to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms. Terms capitalized herein and not otherwise defined herein
are used with the meanings ascribed to such terms in the Credit Agreement.
2. Amendments to Credit Agreement. The Credit Agreement is, as of the
Effective Date (as defined below), hereby amended as follows:
(a) Section 5.1(j) of the Credit Agreement is hereby amended by deleting
such Section in its entirety and replacing it with the following:
"(j)Adjusted Consolidated Net Worth. The Borrower's Adjusted
Consolidated Net Worth as of the end of each Fiscal Quarter ending
on or after the Fiscal Quarter ended in June, 1996 as specified
below shall not be less than the applicable amount set forth in
the table below:
<PAGE> 2
Minimum Adjusted
Fiscal Quarter Ended Consolidated Net Worth
-------------------- ----------------------
Fiscal Quarter ended in June, 1996 $ 100,000,000
Fiscal Quarter ended in September, $ 94,000,000
1996
Fiscal Quarter ended in December, $ 80,000,000
1996
Fiscal Quarter ended in March, 1997 $ 68,000,000
Fiscal Quarter ended in June, 1997 $ 58,000,000
Fiscal Quarter ended in September, $ 48,000,000
1997
Fiscal Quarter ended in December, $ 37,000,000
1997
Fiscal Quarter ended in March, 1998 $ 30,000,000
Fiscal Quarter ended in June, 1998 $ 26,000,000
Fiscal Quarter ended in September, $ 24,000,000
1998
Fiscal Quarter ended in December, $ 25,000,000
1998
Fiscal Quarter ended in March, 1999 $ 27,000,000
Fiscal Quarter ended in June, 1999 $ 38,000,000
Fiscal Quarter ended in September, $ 50,000,000"
1999 and each Fiscal Quarter ended
thereafter
(b) Section 5.1(l) of the Credit Agreement is hereby amended by deleting
subsection (i) thereof in its entirety and replacing it with the following:
"(i) Maintain for each Fiscal Quarter, a ratio (the "Interest
Coverage Ratio") of (A) EBITDA for the four preceding Fiscal
Quarters ending on the last day of the Fiscal Quarter set forth
below to (B) Interest Expense of the Borrower for the same four
Fiscal Quarters, which is equal to or greater than those set forth
below:
-2-
<PAGE> 3
Fiscal Quarter Interest Coverage Ratio
-------------- -----------------------
ending June 30, 1996 2.27 to 1.00
ending September 30, 1996 1.80 to 1.00
ending December 31, 1996 1.07 to 1.00
ending March 31, 1997 0.81 to 1.00
ending June 30, 1997 0.50 to 1.00
ending September 30, 1997 0.35 to 1.00
ending December 31, 1997 0.30 to 1.00
ending March 31, 1998 0.40 to 1.00
ending June 30, 1998 0.70 to 1.00
ending September 30, 1998 1.00 to 1.00
ending December 31, 1998 1.20 to 1.00
ending March 31, 1999 1.40 to 1.00
ending June 30, 1999 1.65 to 1.00
ending September 30, 1999 1.95 to 1.00"
and each Fiscal Quarter ending
thereafter
3. Amendment Fee. In consideration of the execution of this Amendment by
the Agent and the Banks, the Borrower hereby agrees to pay each Bank which
executes this Amendment on or prior to May 20, 1997 a fee (the "Amendment Fee")
in an amount equal to such Bank's Maximum Commitment multiplied by one-eighth
of one percent (1/8 of 1%).
4. Borrower's Representations and Warranties. In order to induce the Agent
and the Banks to enter into this Amendment, the Borrower hereby represents and
nwarrants to the Agent and the Banks that:
(i) the Borrower has the right, power and capacity and has
been duly authorized and empowered by all requisite corporate and
shareholder action to enter into, execute, deliver and perform this
Amendment and all agreements, documents and instruments executed
and delivered pursuant to this Amendment;
(ii) this Amendment constitutes the Borrower's legal, valid
and binding obligation, enforceable against it, except as
enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or
-3-
<PAGE> 4
similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law or otherwise);
(iii) the Borrower's execution, delivery and performance of
this Amendment do not and will not violate its Certificate of
Incorporation or By-laws, any law, rule, regulation, order, writ,
judgment, decree or award applicable to it or any contractual
provision to which it is a party or to which it or any of its
property is subject;
(iv) no authorization or approval or other action by, and no
notice to or filing or registration with, any governmental
authority or regulatory body (other than those which have been
obtained and are in force and effect) is required in connection
with its execution, delivery and performance of this Amendment and
all agreements, documents and instruments executed and delivered
pursuant to this Amendment; and
(v) no Event of Default or Unmatured Event of Default exists
under the Credit Agreement or would exist after giving effect to
the transactions contemplated by this Amendment.
5. Conditions to Effectiveness of Amendment. This Amendment shall become
effective on the date (the "Effective Date") each of the following conditions
precedent is satisfied:
(a) Execution and Delivery. The Borrower, the Agent, and the Required
Banks shall have executed and delivered this Amendment.
(b) No Defaults. No Unmatured Event of Default or Event of Default under
the Credit Agreement (as amended hereby) shall have occurred and be continuing.
(c) Representations and Warranties. The representations and warranties of
the Borrower contained in this Amendment and in the Credit Agreement (as
amended hereby) shall be true and correct in all material respects as of the
Effective Date, with the same effect as though made on such date, except to the
extent that any such representation or warranty relates to an earlier date, in
which case such representation or warranty shall be true and correct in all
material respects as of such earlier date.
(d) Payment of Amendment Fee. The Borrower shall have paid in full to the
Agent, for ratable distribution to those Banks that have signed this Amendment
on or prior to May 20, 1997, an amount equal to the Amendment Fee; provided,
however, that the Amendment Fee shall be payable only in the event that this
Amendment has been executed by the Agent and the Required Banks.
(e) Deliveries. The Borrower shall have duly executed and delivered to the
Agent a certificate of a Responsible Officer of the Borrower dated as of the
Effective Date certifying as to the conditions precedent set forth in Sections
5(b) and (c) of this Amendment.
-4-
<PAGE> 5
6. Miscellaneous. The parties hereto hereby further agree as follows:
(a) Costs, Expenses and Taxes. The Borrower hereby agrees to pay all
reasonable fees, costs and expenses of the Agent incurred in connection with
the negotiation, preparation and execution of this Amendment and the
transactions contemplated hereby, including, without limitation, the reasonable
fees and expenses of Winston & Strawn, counsel to the Agent.
(b) Counterparts. This Amendment may be executed in one or more
counterparts, each of which, when executed and delivered, shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same document with the same force and effect as if the signatures
of all of the parties were on a single counterpart, and it shall not be
necessary in making proof of this Amendment to produce more than one (1) such
counterpart.
(c) Headings. Headings used in this Amendment are for convenience of
reference only and shall not affect the construction of this Amendment.
(d) Integration. This Amendment and the Credit Agreement (as amended
hereby) constitute the entire agreement among the parties hereto with respect
to the subject matter hereof.
(e) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Amendment shall be binding upon and inure to
the benefit of and be enforceable by the Borrower, the Agent and the Banks and
their respective successors and assigns. Except as expressly set forth to the
contrary herein, this Amendment shall not be construed so as to confer any
right or benefit upon any Person other than the Borrower, the Agent and the
Banks and their respective successors and permitted assigns.
(g) Amendment; Waiver. The parties hereto agree and acknowledge that
nothing contained in this Amendment in any manner or respect limits or
terminates any of the provisions of the Credit Agreement or any of the other
Basic Agreements other than as expressly set forth herein and further agree and
acknowledge that the Credit Agreement (as amended hereby) and each of the other
Basic Agreements remain and continue in full force and effect and are hereby
ratified and confirmed. Except to the extent expressly set forth herein, the
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any rights, power or remedy of the Banks or the Agent under the
Credit Agreement or any other Basic Agreement, nor constitute a waiver of any
provision of the Credit Agreement or any other Basic Agreement. No delay on
the part of any Bank or the Agent in exercising any of their respective rights,
remedies, powers and privileges under the Credit Agreement or any of the Basic
Agreements or partial or single exercise thereof, shall constitute a waiver
thereof. None of the terms and conditions of this Amendment may be changed,
waived, modified or varied in any manner, whatsoever, except in accordance with
Section 9.1 of the Credit Agreement.
[signature page follows]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
GAYLORD CONTAINER CORPORATION
By: Thomas M. Steffen
------------------------
Name: Thomas M. Steffen
------------------------
Title: Assistant Treasurer
------------------------
BANKERS TRUST COMPANY, in its individual
capacity and as Agent
By: Mary Jo Jolly
------------------------
Name: Mary Jo Jolly
------------------------
Title: Assistant Vice President
------------------------
THE BANK OF NEW YORK
By: John C. Lambert
------------------------
Name: John C. Lambert
------------------------
Title: Vice President
------------------------
-6-
<PAGE> 7
BANKERS TRUST (DELAWARE)
By: James H. Scallcamp
------------------------
Name: James H. Scallcamp
------------------------
Title: President
------------------------
CAISSE NATIONAL DE CREDIT AGRICOLE
By: Dean Balice
------------------------
Name: Dean Balice
------------------------
Title: Senior Vice President
Branch Manager
------------------------
HARRIS TRUST AND SAVINGS BANK
By: D.R. Casper
------------------------
Name: D.R. Casper
------------------------
Title: SVP
------------------------
NATIONSBANK, N.A.
By: Michael Short
------------------------
Name: Michael Short
------------------------
Title: Senior Vice President
------------------------
CHRISTIANIA BANK
By: Carl Petter Svendsen
------------------------
Name: Carl Petter Svendsen
------------------------
Title: First Vice President
------------------------
-7-
<PAGE> 8
HELLER FINANCIAL, INC.
By: Salvatore Salzillo
------------------------
Name: Salvatore Salzillo
------------------------
Title: AVP
------------------------
TRANSAMERICA BUSINESS CREDIT CORP.
By: Perry Vavoules
------------------------
Name: Perry Vavoules
------------------------
Title: Senior Vice President
------------------------
NATIONAL BANK OF CANADA
By: William W. Mucker
------------------------
Name: William W. Mucker
------------------------
Title: Assistant Vice President
------------------------
By: Leroy A. Irvin
------------------------
Name: Leroy A. Irvin
------------------------
Title: Vice President
------------------------
-8-
<PAGE> 1
EXHIBIT 4.6
FOURTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Fourth Amendment to Amended and Restated Credit Agreement (this
"Amendment"), dated as of June 6, 1997, is by and among Gaylord Container
Corporation, a Delaware corporation (the "Borrower"), the undersigned financial
institutions in their capacities as lenders (collectively, the "Banks"), and
Bankers Trust Company, as agent (the "Agent") for the Banks.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of November 17, 1986 and amended
and restated as of June 30, 1995, and as further amended as of May 30, 1996, as
of July 19, 1996 and as of May 20, 1997 (as amended, restated, supplemented or
otherwise modified and in effect from time to time, the "Credit Agreement"),
pursuant to which the Banks have provided to the Borrower credit facilities and
other financial accommodations; and
WHEREAS, the Borrower has requested that the Agent and the Banks amend the
Credit Agreement in certain respects as set forth herein and the Banks and the
Agent are agreeable to the same, subject to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms. Terms capitalized herein and not otherwise defined
herein are used with the meanings ascribed to such terms in the Credit
Agreement.
2. Amendments to Credit Agreement. The Credit Agreement is, as of the
Effective Date (as defined below), hereby amended as follows:
(a) The definition of "Adjusted Consolidated Net Worth" appearing in
Section 1.1 of the Credit Agreement is hereby amended by inserting at the end
thereof but before the period, the following:
"; and provided further that Consolidated Net Worth
shall be calculated without giving effect to any
extraordinary charges from the early extinguishment of
indebtedness resulting from the redemption of the 11-
1/2% Senior Notes pursuant to Section 5.1(t)"
(b) The definition of "Public Debt Indentures" appearing in Section
1.1 of the Credit Agreement is hereby amended by deleting such definition in
its entirety and replacing it with the following:
<PAGE> 2
""Public Debt Indentures" means, collectively, the
12-3/4% Indenture, the 11-1/2% Indenture and the New
Senior Notes Indenture."
(c) The definition of "Public Notes" appearing in Section 1.1 of the
Credit Agreement is hereby amended by deleting such definition in its entirety
and replacing it with the following:
""Public Notes" means, collectively, the 12-3/4%
Senior Subordinated Discount Debentures, the 11-1/2%
Senior Notes and the New Senior Notes."
(d) Section 1.1 of the Credit Agreement is hereby further amended
by adding the following new definitions in their appropriate alphabetical
order:
""New Senior Notes" means the 9-3/4% Senior Notes due 2007 of the
Borrower in an aggregate principal amount not to exceed $225
million and issued pursuant to the New Senior Notes Indenture (and
including the issuance of Senior Notes (which will have terms
substantially identical in all material respects to the initially
issued Senior Notes) in exchange for the initially issued Senior
Notes pursuant to a registration rights agreement entered into by
the Borrower in connection with the initial issuance of such Senior
Notes), as the same may be amended, modified or supplemented from
time to time in accordance with the terms of this Agreement.
"New Senior Notes Indenture" means the Indenture entered into by
the Borrower pursuant to which the New Senior Notes are issued, on
substantially the terms and conditions set forth on Exhibit CC
hereto and in form and substance reasonably satisfactory to the
Agent, as the same may be amended, modified or supplemented from
time to time in accordance with the terms of this Agreement."
(e) Section 5.1 of the Credit Agreement is hereby amended by adding
a new clause (t) at the end thereof as follows:
"(t) Redemption of 11-1/2% Senior Notes. Upon receipt of the net
cash proceeds from the sale and issuance of the New Senior
Notes, cause such net cash proceeds to be used to redeem in full
all of the 11-1/2% Senior Notes at par (plus stated premium, if
any), together with accrued and unpaid interest thereon, by giving
irrevocable notice of redemption to the trustee under the 11-1/2%
Indenture and depositing with such trustee funds sufficient to
redeem in full all of the 11-1/2% Senior Notes at par (plus stated
premium, if any), together with accrued interest through the date
of redemption, which redemption shall occur on or prior to July 30,
1997, and cause any remaining net proceeds to be used for general
corporate purposes permitted hereunder."
-2-
<PAGE> 3
(f) Section 5.2(i) of the Credit Agreement is hereby amended by
(i) deleting the word "and" appearing at the end of clause
(i)(E) of such Section and (ii) inserting a new subclause (G) immediately
after subclause (F) of clause (i) of such Section as follows:
", and (G) the redemption of the 11-1/2% Senior Notes at par (plus
stated premium) with the proceeds of the New Senior Notes:"
(g) The Credit Agreement is hereby further amended by adding Exhibit
CC thereto in the form of Exhibit CC attached to this Amendment.
(h) Section 5.2(v) of the Credit Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the following:
"(v) Certain Matters Relating to the Public Debt Indentures
and Public Notes.
(i) Change in Control. Take any action (or permit any Person
within the Borrower's control to take any action) which would
result in a "Change in Control" under (i) Section 4.15 of either
the 12-3/4% Indenture or the 11-1/2% Indenture, or (ii) Section
4.15 of the New Senior Notes Indenture.
(ii) Asset Sales. Take any action which would require the
Borrower to repurchase any Public Notes pursuant to the provisions
of (i) Section 4.16 of either the 12-3/4% Indenture or the 11-1/2%
Indenture, or (ii) Section 4.16 of the New Senior Notes Indenture."
(i) Section 7.1(n) of the Credit Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the following:
"(n) (i) The Borrower makes a payment or acquisition in
violation of (A) Section 10.02(a) of the 12-3/4% Indenture; or (ii)
the Borrower becomes obligated to purchase or redeem any Public
Notes pursuant to the provisions of (A) Section 4.15 or 4.16 of
either the 12-3/4% Indenture or the 11-1/2% Indenture, or (B)
Section 4.15 or 4.16 of the New Senior Notes Indenture; or"
3. Borrower's Representations and Warranties. In order to induce the Agent
and the Banks to enter into this Amendment, the Borrower hereby represents and
warrants to the Agent and the Banks that:
(i) the Borrower has the right, power and capacity and has
been duly authorized and empowered by all requisite corporate and
shareholder action to enter into, execute, deliver and perform this
Amendment and all agreements, documents and instruments executed
and delivered pursuant to this Amendment;
-3-
<PAGE> 4
(ii) this Amendment constitutes the Borrower's legal, valid
and binding obligation, enforceable against it, except as
enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of
equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law or otherwise);
(iii) the Borrower's execution, delivery and performance of
this Amendment do not and will not violate its Certificate of
Incorporation or By-laws, any law, rule, regulation, order, writ,
judgment, decree or award applicable to it or any contractual
provision to which it is a party or to which it or any of its
property is subject;
(iv) no authorization or approval or other action by, and no
notice to or filing or registration with, any governmental
authority or regulatory body (other than those which have been
obtained and are in force and effect) is required in connection
with its execution, delivery and performance of this Amendment and
all agreements, documents and instruments executed and delivered
pursuant to this Amendment; and
(v) no Event of Default or Unmatured Event of Default exists
under the Credit Agreement or would exist after giving effect to
the transactions contemplated by this Amendment.
4. Conditions to Effectiveness of Amendment. This Amendment shall become
effective on the date (the "Effective Date") each of the following conditions
precedent are satisfied:
(a) Execution and Delivery. The Borrower, the Agent, and the
Required Banks shall have executed and delivered this Amendment.
(b) No Defaults. No Unmatured Event of Default or Event of Default
under the Credit Agreement (as amended hereby) shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and
warranties of the Borrower contained in this Amendment and in the Credit
Agreement (as amended hereby) shall be true and correct in all material
respects as of the Effective Date, with the same effect as though made on such
date, except to the extent that any such representation or warranty relates to
an earlier date, in which case such representation or warranty shall be true
and correct in all material respects as of such earlier date.
(d) Deliveries. The Borrower shall have duly executed and
delivered to the Agent a certificate of a Responsible Officer of the Borrower
dated as of the Effective Date certifying as to the conditions precedent set
forth in Sections 4(b) and (c) of this Amendment.
5. Miscellaneous. The parties hereto hereby further agree as follows:
-4-
<PAGE> 5
(a) Costs, Expenses and Taxes. The Borrower hereby agrees to pay all
reasonable fees, costs and expenses of the Agent incurred in connection with
the negotiation, preparation and execution of this Amendment and the
transactions contemplated hereby, including, without limitation, the reasonable
fees and expenses of Winston & Strawn, counsel to the Agent.
(b) Counterparts. This Amendment may be executed in one or more
counterparts, each of which, when executed and delivered, shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same document with the same force and effect as if the signatures
of all of the parties were on a single counterpart, and it shall not be
necessary in making proof of this Amendment to produce more than one (1) such
counterpart.
(c) Headings. Headings used in this Amendment are for convenience of
reference only and shall not affect the construction of this Amendment.
(d) Integration. This Amendment and the Credit Agreement (as amended
hereby) constitute the entire agreement among the parties hereto with respect
to the subject matter hereof.
(e) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Amendment shall be binding upon and inure to the
benefit of and be enforceable by the Borrower, the Agent and the Banks and
their respective successors and assigns. Except as expressly set forth to the
contrary herein, this Amendment shall not be construed so as to confer any
right or benefit upon any Person other than the Borrower, the Agent and the
Banks and their respective successors and permitted assigns.
(g) Amendment; Waiver. The parties hereto agree and acknowledge that
nothing contained in this Amendment in any manner or respect limits or
terminates any of the provisions of the Credit Agreement or any of the other
Basic Agreements other than as expressly set forth herein and further agree and
acknowledge that the Credit Agreement (as amended hereby) and each of the other
Basic Agreements remain and continue in full force and effect and are hereby
ratified and confirmed. Except to the extent expressly set forth herein, the
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any rights, power or remedy of the Banks or the Agent under the
Credit Agreement or any other Basic Agreement, nor constitute a waiver of any
provision of the Credit Agreement or any other Basic Agreement. No delay on
the part of any Bank or the Agent in exercising any of their respective rights,
remedies, powers and privileges under the Credit Agreement or any of the Basic
Agreements or partial or single exercise thereof, shall constitute a waiver
thereof. None of the terms and conditions of this Amendment may be changed,
waived, modified or varied in any manner, whatsoever, except in accordance with
Section 9.1 of the Credit Agreement.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
GAYLORD CONTAINER CORPORATION
By: Thomas M. Steffen
--------------------------------------
Name: THOMAS M. STEFFEN
------------------------------------
Title: Assistant Treasurer
-----------------------------------
BANKERS TRUST COMPANY, in its individual
capacity and as Agent
By: Mary Jo Jolly
--------------------------------------
Name: MARY JO JOLLY
------------------------------------
Title: Assistant Vice President
-----------------------------------
THE BANK OF NEW YORK
By: John C. Lambert
--------------------------------------
Name: JOHN C. LAMBERT
------------------------------------
Title: Vice President
-----------------------------------
-6-
<PAGE> 7
BANKERS TRUST (DELAWARE)
By: James H. Stallkamp
--------------------------------------
Name: JAMES H. STALLKAMP
--------------------------------------
Title: President
--------------------------------------
CAISSE NATIONALE DE CREDIT AGRICOLE
By: Dean Balice
--------------------------------------
Name: DEAN BALICE
--------------------------------------
Title: Senior Vice President Branch Manager
--------------------------------------
HARRIS TRUST AND SAVINGS BANK
By: Richard R. Bott
--------------------------------------
Name: RICHARD R. BOTT
--------------------------------------
Title: Vice President
--------------------------------------
NATIONSBANK, N.A.
By: Michael Short
--------------------------------------
Name: MICHAEL SHORT
--------------------------------------
Title: Senior Vice President
--------------------------------------
CHRISTIANIA BANK
By: Carl-Petter Svendsen
--------------------------------------
Name: CARL-PETTER SVENDSEN
--------------------------------------
Title: First Vice President
--------------------------------------
-7-
<PAGE> 8
HELLER FINANCIAL, INC.
By: Salvatore Salzillo
--------------------------------------
Name: SALVATORE SALZILLO
------------------------------------
Title: Assistant Vice President
-----------------------------------
TRANSAMERICA BUSINESS CREDIT CORP.
By: Perry Vavoules
--------------------------------------
Name: PERRY VAVOULES
------------------------------------
Title: Sr. Vice President
-----------------------------------
NATIONAL BANK OF CANADA
By: C.F. (Boot) Martin, Jr.
--------------------------------------
Name: C.F. (BOOT) MARTIN, JR.
------------------------------------
Title: Vice President & Manager
-----------------------------------
By: Bruce K. Waldersen
--------------------------------------
Name: BRUCE K. WALDERSEN
------------------------------------
Title: Vice President
-----------------------------------
-8-
<PAGE> 9
Exhibit CC
DESCRIPTION OF NOTES
The 9-3/4% Senior Notes due 2007 will be issued under an indenture (the
"Indenture") to be dated as of June 12, 1997 by and between the Company and
Fleet National Bank, as trustee (the "Trustee"). The following summary of
certain provisions of the Indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions
of the Indenture (copies of which can be obtained from the Company upon
request), including the definitions of certain terms therein and those terms
made a part of the Indenture by reference to the TIA as in effect on the date
of the Indenture. The definitions of certain capitalized terms used in the
following summary are set forth under "Certain Definitions."
The Notes will be unsecured obligations of the Company and will rank pari
passu in right of payment to all senior indebtedness of the Company, including
all obligations of the Company under the Credit Agreement. The Notes will rank
senior in right of payment to the obligations of the Company under the
12-3/4% Debentures.
The Notes will be issued in fully registered form only, without coupons,
in denominations of $1,000 and integral multiples thereof. Initially, the
Trustee will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders.
The Company will pay principal (and premium, if any) on the Notes at the
Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the Trustee's corporate trust office or by check
mailed to the registered address of holders. Any Notes that remain outstanding
after the completion of the Exchange Offer, together with the Exchange Notes
issued in connection with the Exchange Offer, will be treated as a single
class of securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $225,000,000 and
will mature on June 15, 2007. Interest on the Notes will accrue at the rate of
9-3/4% per annum and will be payable semi-annually on each June 15 and December
15, commencing on December 15, 1997, to the persons who are registered holders
at the close of business on each June 1 and December 1 immediately preceding
the applicable interest payment date. Interest on the Notes will accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from and including the date of issuance. The Company shall pay
interest on overdue principal from time to time on demand at the rate of 10-3/4%
per annum; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the
rate of 10-3/4% per annum. Interest will be computed on the basis of a 360-day
year comprising twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any
time or in part from time to time, on or after June 15, 2002 at the following
redemption prices (expressed as percentages of the principal amount) if
redeemed during the twelve-month period commencing on June 15 of the year set
forth below, plus, in each case, accrued and unpaid interest, if any, thereon
to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 .............................. 104.875%
2003 .............................. 103.250%
2004 .............................. 101.625%
2005 and thereafter ............... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 15, 2000, the
Company may redeem up to 33% of the aggregate principal amount of Notes with
the net proceeds from one or more Equity Offerings of the
35
<PAGE> 10
Company at a redemption price equal to 109.75% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the date of
redemption; provided, however, that, after giving effect to any such
redemption, at least $100.0 million aggregate principal amount of the Notes
originally issued remain outstanding. Any such redemption must occur on or
prior to 120 days after the receipt of such net proceeds.
In addition, upon the occurrence of a Change of Control prior to June 15,
2002, the Company, at is option, may redeem all, but not less than all, of the
outstanding Notes at a redemption price equal to 100% of the principal amount
thereof plus the applicable Make-Whole Premium (a "Change of Control
Redemption"). The Company shall give not less than 30 nor more than 60 days
notice of such redemption within 30 days following a Change of Control.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants.
Limitation on Restricted Payments. The Indenture shall provide that the
Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any
distribution (other than dividends or distributions payable in Qualified
Capital Stock of the Company) on shares of the Company's Capital Stock to
holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock,
other than the exchange of such Capital Stock for Qualified Capital Stock, (c)
make any principal payment on, purchase, defease, redeem, prepay, decrease or
otherwise acquire or retire for value, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, any Indebtedness of the
Company or its Restricted Subsidiaries that is subordinate or junior in right
of payment to the Notes or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), (c)
and (d) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default
or an Event of Default shall have occurred and be continuing, (ii) the Company
is not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant or (iii) the aggregate amount of Restricted
Payments made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, shall be the fair market value of such
property as determined by the Board of Directors of the Company in good faith)
shall exceed the sum, without duplication, of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned during the period
beginning on the first day of the fiscal year of the Company commencing after
the Issue Date and ending on the last day of the most recent fiscal quarter
ending at least 45 days prior to the date the Restricted Payment occurs
(treating such period as a single accounting period); (x) 100% of the
aggregate net proceeds, including the fair market value of property other than
cash as determined by the Board of Directors of the Company in good faith,
received by the Company from any Person (other than a Restricted Subsidiary of
the Company) from the issuance and sale subsequent to the Issue Date of
Qualified Capital Stock of the Company or of debt securities of the Company
that have been converted into Qualified Capital Stock (excluding (A) Qualified
Capital Stock made as a distribution on any Capital Stock or as interest on
any Indebtedness and (B) any net proceeds from issuances and sales of
Qualified Capital Stock financed directly or indirectly using funds borrowed
from the Company or any Restricted Subsidiary of the Company, until and to the
extent such borrowing is repaid), (y) $50 million and (z) the amount of the
net reduction in Investments made as Restricted Payments in accordance with
this sentence in Unrestricted Subsidiaries resulting from (1) the payment of
cash dividends or the repayment in cash of the principal of loans or the cash
return on any Investment, in each case to the extent received by the Company
or any wholly owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries, (2) to the extent that any Investment in an Unrestricted
Subsidiary that was made after the date of this Indenture is sold for cash or
otherwise liquidated or repaid for cash, the after-tax cash return of capital
with respect to such Investment (less the cost of disposition, if any) or (3)
the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries, such
aggregate amount of the net reduction in such Investments not to exceed, in
the case of any Unrestricted Subsidiary, the amount of such Investments made
as Restricted Payments previously made by the Company
36
<PAGE> 11
or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount
was included in the calculation of the amount of Restricted Payments.
Notwithstanding the foregoing, these provisions do not prohibit: (1)
the payment of any dividend, making of any distribution or consummation of
irrevocable redemption within 60 days after the date of declaration of such
dividend, making of such distribution or giving of such notice if the
dividend, distribution or redemption would have been permitted on the date of
declaration; (2) the acquisition of Capital Stock or Indebtedness of the
Company that is subordinate or junior in right of payment to the Notes,
either (i) in exchange for shares of Qualified Capital Stock or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Restricted Subsidiary of the Company) of shares of Qualified
Capital Stock; (3) the acquisition of Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes, either (i) in exchange
for Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes, at least to the extent that the Indebtedness being
acquired is subordinated to the Notes, and has no scheduled principal
prepayment dates prior to the earlier of (a) at least one year after the
scheduled final maturity date of the Notes or (b) the scheduled final maturity
date of the Indebtedness being exchanged, (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Restricted Subsidiary of the Company) of Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes, at least to the extent
that the Indebtedness being acquired is subordinated to the Notes, and has no
scheduled principal prepayment dates prior to the earlier of (a) the scheduled
final maturity date of the Notes or (b) the scheduled final maturity date of
the Indebtedness being refinanced or (iii) any combination of clauses (i) and
(ii) above; (4) the elimination of fractional shares or warrants; (5) the
purchase for value of shares of Capital Stock of the Company (x) held by
directors, officers or employees upon death, disability, retirement,
termination of employment or (y) to fund capital stock-based, long-term
incentive programs, not to exceed $4 million in the aggregate; (6) the
repurchase of any 12-3/4% Debentures in accordance with (i) the "Limitation on
Asset Sales" and "Change of Control" covenants hereunder and (ii) Sections
4.15 and 4.16 of the 12-3/4% Debenture Indenture; (7) the redemption or
repurchase by the Company of up to $200 million aggregate principal amount of
12-3/4% Debentures through the application of (a) up to $200 million of net
cash proceeds of a substantially concurrent sale or incurrence (other than to
or from a Restricted Subsidiary of the Company) of secured or unsecured
Indebtedness of the Company that ranks pari passu with the Notes as to
payment, (b) up to $100 million of cash from operations of the Company or (c)
any combination of (a) and (b), (8) Restricted Payments for the redemption,
repurchase or other acquisition of shares of Capital Stock of the Company in
satisfaction of indemnification or other claims arising under any merger,
consolidation, asset purchase or investment or similar acquisition agreement
permitted under the Indenture, pursuant to which such shares of Capital Stock
were issued and (9) repurchases of Capital Stock deemed to occur upon exercise
of employee or director stock options; provided that in the case of clauses
(2), (3), (4), (5), (6), (7) and (8), no Default or Event of Default shall
have occurred or be continuing at the time of such payment or as a result
thereof. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date, amounts expended pursuant to clauses (1),
(2), (4), (5), (6), 7(b) and (8) shall be included in such calculation;
provided that amounts expended pursuant to clause (2) shall constitute
Restricted Payments only to the extent any amounts are credited pursuant to
clause (iii) (x) of the next preceding paragraph.
Limitation on Incurrence of Additional Indebtedness. The Indenture shall
provide that the Company shall not, and shall not permit any of its Restricted
Subsidiaries to, after the Issue Date, directly or indirectly, create, incur,
assume, guarantee, acquire or become liable, contingently or otherwise, or
otherwise become responsible for the payment of any Indebtedness other than
Permitted Indebtedness. Notwithstanding the foregoing limitations, the Company
and, subject to compliance with the covenant "Guarantees by Restricted
Subsidiaries." Restricted Subsidiaries may incur Indebtedness if (i) no
Default or Event of Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of such Indebtedness and (ii) the
Consolidated Fixed Charge Coverage Ratio of the Company, measured on the date
of the incurrence of such Indebtedness, is greater than 2.0:1. No Indebtedness
incurred pursuant to the next preceding sentence shall be included in
calculating any limitation set forth in the definition of Permitted
Indebtedness. Upon the repayment of Indebtedness which may have been incurred
pursuant to more than one provision of this
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<PAGE> 12
Indenture, the Company may in its sole discretion designate which provision
such Indebtedness shall have been incurred under.
Guarantees by Restricted Subsidiaries. The Indenture shall provide that
the Company will cause any Borrowing Restricted Subsidiary to become a
Subsidiary Guarantor by executing a guarantee (the "Guarantee") of payment of
the Notes by such Borrowing Restricted Subsidiary (1) if, at the time the
Restricted Subsidiary first becomes a Borrowing Restricted Subsidiary, the
total Investment of the Company and the Restricted Subsidiaries in such
Borrowing Restricted Subsidiary and in all other Borrowing Restricted
Subsidiaries that are not Subsidiary Guarantors, is more than 15% of Total
Tangible Assets (the "15% Investment Threshold"), or (2) if, at the time a
Borrowing Restricted Subsidiary increases the amount of Restricted Subsidiary
Indebtedness (excluding for this purpose, incurrences of indebtedness under a
revolving credit facility that do not exceed the maximum committed borrowings
thereunder), the 15% Investment Threshold is met, or (3) if, at the time the
Company or any Restricted Subsidiary makes a capital contribution or other
equity investment in excess of $1 million during any six-month period in any
Borrowing Restricted Subsidiary, the 15% Investment Threshold is met. If any
such incurrence of liability of such Restricted Subsidiary is provided in
respect of Indebtedness that is expressly subordinated to the Notes, the
guarantee or other instrument provided by such Restricted Subsidiary in
respect of such subordinated Indebtedness shall be subordinated to the
Guarantee pursuant to subordination provisions no less favorable to holders of
the Notes than those contained in the 12-3/4% Indenture. A Borrowing Restricted
Subsidiary shall be released as a Subsidiary Guarantor (i) at such time as it
ceases to be a Borrowing Restricted Subsidiary or (ii) upon the election of
the Company, if, after giving effect to such election, the 15% Investment
Threshold is not met.
Limitations on Transactions with Affiliates. The Indenture shall provide
that the Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with or for the
benefit of, an Affiliate of the Company or any Restricted Subsidiary (other
than transactions between the Company and a wholly owned Restricted Subsidiary
of the Company) (an "Affiliate Transaction"), other than Affiliate
Transactions on terms that are no less favorable in the aggregate than those
that might reasonably have been obtained or are obtainable in a comparable
transaction on an arm's-length basis from a person that is not an Affiliate;
provided that neither the Company nor any of its Restricted Subsidiaries shall
enter into an Affiliate Transaction or series of related Affiliate
Transactions involving or having a value of $10 million or more, unless a
majority of disinterested members of the Board of Directors of the Company
determines in good faith as evidenced by a board resolution that the terms are
no less favorable in the aggregate to the Company than those that might
reasonably have been obtained in a comparable transaction on an arm's-length
basis from a Person that is not an Affiliate; provided, however, that (i) any
employment agreement or stock option agreement entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of business, (ii)
transactions permitted under the covenant described above under "Certain
Covenants--Limitation on Restricted Payments," (iii) the payment of
reasonable fees and expenses to directors of the Company or its Restricted
Subsidiaries, (iv) any issuance of securities or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of
employment arrangements, stock options and stock ownership plans of the
Company entered into in the ordinary course of business and (v) transactions
pursuant to agreements existing on the Issue Date or any amendment thereto or
any transactions contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto, so long as any such amendment
or replacement is not more disadvantageous to the holders in any material
respect than the original agreement as in effect on the Issue Date, in each
case, shall not be deemed Affiliate Transactions.
Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Indenture shall provide that the Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or permit to exist or become effective
any encumbrance or restriction on the ability of any Restricted Subsidiary to
(a) pay dividends or make any other distributions on its Capital Stock, (b)
make loans or advances or to pay any Indebtedness or other obligation owed to
the Company or a Restricted Subsidiary of the Company or (c) transfer any of
its property or assets to the Company, except for
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<PAGE> 13
such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) the Indenture; (3) customary nonassignment provisions of
any lease governing a leasehold interest of the Company or any Restricted
Subsidiary of the Company; (4) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to the Company or any
Restricted Subsidiary of the Company, or the properties or assets of the
Company or any Restricted Subsidiary of the Company, other than the Person,
the properties or assets so acquired; (5) agreements existing on the Issue
Date; (6) any Trade Receivable Facility; (7) customary nonassignment
provisions in contracts entered into in the ordinary course of business, (8)
Indebtedness of a Restricted Subsidiary permitted to be incurred under the
Indenture or (9) an agreement effecting a refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension,
substitution, supplement, reissuance or resale of Indebtedness issued, assumed
or incurred pursuant to an agreement referred to in clause (2), (4), (5), (6) or
(8) above; provided, however, that the provisions relating to such encumbrance
or restriction contained in any such refinancing, replacement or substitution
agreement are not less favorable to the Company or Restricted Subsidiary, as
the case may be, in any material respect in the reasonable judgment of the
Board of Directors of the Company than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (4), (5), (6) or (8).
Limitation on Asset Sales. The Indenture shall provide that the Company
will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless (a) the Company or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by the Board of Directors
of the Company, (b) at least 75% of the consideration received by the Company
or the Restricted Subsidiary, as the case may be, from such Asset Sale shall
be cash or Cash Equivalents and is received at the time of such disposition;
provided, however, that this condition shall not apply to a transaction
whereby the Company or any Restricted Subsidiary effects an Asset Sale by the
exchange of assets or property for Productive Assets or to the sale or other
disposition of all or any portion of the Company's East Mill assets located in
Antioch, California, provided, further, that the amount of (A) any liabilities
of the Company or any Restricted Subsidiary (other than liabilities that are
by their terms subordinated in right of payment to the Notes) that are assumed
by the transferee of any such assets shall be deemed to be cash for purposes
of this provision and (B) any notes or other obligations received by the
Company or such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash
(to the extent of the cash received) shall be deemed to be cash for purposes
of this provision, and (c) the Company shall (i) apply, or cause such
Restricted Subsidiary to apply, such Net Cash Proceeds of such Asset Sale
within 270 days of the consummation of such Asset Sale (A) to prepay
indebtedness ranking pari passu with the Notes, senior indebtedness of a
Subsidiary Guarantor or debt of a Restricted Subsidiary that is not a
Subsidiary Guarantor or, in the case of any debt under a revolving credit
facility, effect a reduction in the committed availability under any such
revolving credit facility or (B) to make an offer to purchase the Notes and,
to the extent required by the documentation governing such indebtedness and on
a pro rata basis, indebtedness ranking pari passu with the Notes, at a price
equal to 100% of the principal amount of the Notes plus accrued interest
thereon to the date of purchase pursuant to an offer to purchase made by the
Company as set forth below (a "Net Proceeds Offer"), or (ii)(A) commit, or
cause such Restricted Subsidiary to commit (such commitments to include
amounts anticipated to be expended pursuant to the Company's capital
investment plan (x) as adopted by the Board of Directors of the Company and
(y) evidenced by the filing of an officer's certificate with the Trustee
stating that the total amount of the Net Cash Proceeds of such Asset Sale is
less than the aggregate amount contemplated to be expended pursuant to such
capital investment plan within 24 months of the consummation of such Asset
Sale) within 270 days of the consummation of such Asset Sale, to apply the Net
Cash Proceeds of such Asset Sale to reinvest in Productive Assets and (B)
apply, or cause such Restricted Subsidiary to apply, pursuant to such
commitment (which includes amounts actually expended under the capital
investment plan authorized by the Board of Directors of the Company), such Net
Cash Proceeds of such Asset Sale within 24 months of the consummation of such
Asset Sale; provided that if any commitment under this clause (ii) is
terminated or rescinded after the 225th day after the consummation of such
Asset Sale, the Company or such Restricted Subsidiary, as the case may be,
shall have 45 days after such termination or rescission to (1) apply such
Net Cash Proceeds pursuant to clause (c) (i) above or (2) to commit, or cause
such Restricted Subsidiary to commit, to apply the Net Cash Proceeds of such
Asset Sale to
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<PAGE> 14
reinvest in Productive Assets; provided that in any such case, such proceeds
must be applied pursuant to clause (c)(i) or such commitment, as the case may
be, no later than 24 months after the consummation of such Asset Sale or (iii)
any combination of the foregoing; provided, further, that if at time any
non-cash consideration received by the Company or any Restricted Subsidiary
of the Company, as the case may be, in connection with any Asset Sale is
converted into or sold or otherwise disposed of for cash, then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the
Net Cash Proceeds thereof shall be applied in accordance with clause (c)
above; and provided, further, that the Company may defer making a Net Proceeds
Offer until the aggregate Net Cash Proceeds from Asset Sales to be applied
equals or exceeds $10 million. Pending the final application of any such Net
Cash Proceeds the Company or such Restricted Subsidiary may temporarily reduce
Indebtedness under a revolving credit facility, if any.
Each Net Proceeds Offer will be mailed to holders of Notes as shown on
the register of holders of Notes within 270 days, will specify the purchase
date (which will be no earlier than 30 days nor later than 45 days from the
date such notice is mailed) and will otherwise comply with the procedures set
forth in the Indenture. Upon receiving notice of a Net Proceeds Offer, holders
of Notes may elect to tender their Notes in whole or in part in integral
multiples of $1,000. To the extent holders of the Notes properly tender Notes
in an amount exceeding the applicable Net Proceeds Offer, such Notes of
tendering holders will be repurchased on a pro rata basis (based upon the
principal amount tendered).
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer.
Limitation on Liens. The Indenture shall provide that the Company will
not, and will not permit any of its Restricted Subsidiaries to, create, incur,
assume or suffer to exist any Liens upon their respective assets, except for
(a) Liens securing Indebtedness under the Credit Agreement, (b) Permitted
Liens, (c) Liens securing Acquired Indebtedness, (d) Liens existing on the
Issue Date, (e) Liens securing Indebtedness to the extent incurred to
refinance, replace, renew or refund secured Indebtedness existing on the Issue
Date or Acquired Indebtedness, (f) Liens securing pollution control bonds and
industrial revenue bonds, (g) Liens securing Indebtedness permitted to be
incurred pursuant to clauses (viii) or (ix) of the definition of Permitted
Indebtedness, (h) Liens securing Indebtedness pursuant to clauses (vii) or
(xi) of the definition of Permitted Indebtedness; provided, however, that if
such Indebtedness is incurred to finance the cost of the property subject to a
Lien securing such Indebtedness, the principal amount of the Indebtedness
secured by such Lien shall not exceed 100% of the cost of the property subject
thereto plus related financing costs, (i) Liens in favor of the Trustee and
the trustee in respect of any other outstanding indebtedness of the Company,
(j) Liens granted in connection with the redemption of the Old Notes, or (k)
any replacement, extension, renewal, amendment or modification, in whole or in
part, of any Lien described above; provided that to the extent any such clause
limits the amount secured or the assets subject to such Liens, no extension or
renewal will increase the amount or assets secured by or subject to such
Liens.
Merger, Consolidation and Sale of Assets. The Indenture shall provide
that the Company may not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its assets to, another Person or adopt a plan of liquidation, unless (a)
either the Company shall be the survivor of such merger or consolidation or
the surviving Person is a corporation, partnership, limited liability company
or trust organized and existing under the laws of the United States, any state
thereof or the District of Columbia and such surviving Person shall expressly
assume, by a supplemental indenture, all the obligations of the Company under
the Notes and the related Indenture; (b) immediately after giving effect to
such transaction (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the Company
or the surviving Person is able to incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Limitation on
Incurrence of Additional Indebtedness" covenant, (c) immediately after giving
effect to such transaction and the assumption of the obligations set forth in
clause (a) above and the incurrence of any Indebtedness to be incurred in
connection therewith, no Default or Event of Default shall have occurred and
be continuing and (d) the Company has delivered to the Trustee an Officers'
Certificate and Opinion of Counsel, each stating that such consolidation,
merger, or
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<PAGE> 15
transfer or adoption and such supplemental indenture comply with the Indenture,
that the surviving Person (if other than the Company) agrees to be bound
thereby and that all conditions precedent in the Indenture relating to such
transaction have been satisfied. Notwithstanding the foregoing clauses
(b), (c) and (d), any Restricted Subsidiary of the Company may consolidate
with, merge into or transfer all or part of its properties and assets to the
Company. For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company, shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Company.
Limitation on Incurrence of Subordinated Indebtedness. The Indenture
shall prohibit the Company from incurring Indebtedness that is subordinated by
written agreement in right of payment to any other Indebtedness of the
Company, unless the Indebtedness to be incurred is subordinated to the Notes
to substantially the same extent as it is subordinated to such other
Indebtedness pursuant to such written agreement.
CHANGE OF CONTROL
The Indenture shall provide that upon the occurrence of a Change of
Control, each holder will have the right to require that the Company
repurchase all or a portion of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer"), at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of repurchase.
Within 30 days following the date upon which the Change of Control
occurred, the Company will send, by first class mail, a notice to each holder,
with a copy to the Trustee, which notice shall govern the terms of the Change
of Control Offer. Such notice shall state, among other things, the purchase
date, which must be no earlier than 30 days nor later than 45 days from the
date such notice is mailed, other than as may be required by law (the "Change
of Control Payment Date"). Holders electing to have a Note purchased pursuant
to a Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the business day prior to the Change of Control
Payment Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default";
(a) the failure to pay interest on any Notes for a period of 30 days after
such interest becomes due and payable (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture), (b) the failure
to pay the principal on any Notes when such principal becomes due and payable,
at maturity, upon acceleration or redemption or pursuant to an offer to
purchase required by the Indenture (whether or not such payment shall be
prohibited by the subordination provisions of the Indenture); (c) a default in
the observance or performance of any other covenant or agreement contained in
the Indenture, which default continues for a period of 30 days after the
Company receives written notice of the default by the Trustee or holders of at
least 25% in principal amount of the Notes; (d) the failure to pay at stated
maturity the principal amount of any Indebtedness of the Company or any
Restricted Subsidiary of the Company, or the acceleration of the stated
maturity of any such Indebtedness, if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at stated maturity or
that has been accelerated, aggregates $20 million or more at any time; (e) one
or more judgments in an aggregate amount in excess of $20 million shall have
been rendered against the Company or any of its Restricted Subsidiaries and
such judgments remain undischarged or unstayed for a period of 60 days after
such judgment or judgments become final and non-appealable and (f) certain
events of bankruptcy, insolvency or reorganization affecting the Company or
any of its Restricted Subsidiaries.
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Upon the occurrence of any Event of Default specified in the Indenture,
the Trustee or the holders of at least 25% in principal amount of
outstanding Notes may declare the principal of and accrued interest on all the
Notes to be due and payable by written notice to the Company. Upon any such
declaration, such amount shall be immediately due and payable. If an Event of
Default with respect to bankruptcy, insolvency or reorganization proceedings
occurs and is continuing, then such amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of any of the Trustee or any holder of Notes.
The Indenture will provide that, at any time after a declaration of
acceleration with respect to Notes as described in the preceding paragraph,
the holders of a majority in principal amount of the outstanding Notes may
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (iii) if, to the
extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iv) if the Company
has paid the Trustee its reasonable compensation and reimbursed the Trustee
for its expenses, disbursements and advances and (v) if, in the event of the
cure or waiver of a Default or Event of Default of the type described in
clause (f) of the description above of Events of Default, the Trustee shall
have received an Officers' Certificate and an Opinion of Counsel that such
Default has been cured or waived. The holders of a majority in principal
amount of the Notes may waive any existing Default or Event of Default under
the Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of such Notes.
SATISFACTION AND DISCHARGE OF INDENTURES; DEFEASANCE
The Company may terminate its obligations under the Indenture at any time
by delivering all outstanding Notes to the Trustee for cancellation. The
Company, at its option, (i) will be discharged from any and all obligations
with respect to the Notes (except for certain obligations of the Company to
register the transfer or exchange of such Notes, replace stolen, lost or
mutilated Notes, maintain paying agencies and hold moneys for payment in
trust) or (ii) need not comply with certain of the restrictive covenants with
respect to the Indenture if the Company deposits with the Trustee, in trust,
money, U.S. Legal Tender or U.S. Government Obligations that, through the
payment of interest thereon and principal thereof in accordance with their
terms, will provide money in an amount sufficient to pay all the principal of
and interest on the Notes on the dates such payments are due in accordance
with the terms of such Notes as well as the Trustee's fees and expenses. To
exercise any such option, the Company is required to deliver to the Trustee
(A) an Opinion of Counsel to the effect that the holders of such Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of the deposit and related defeasance and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such option had not been exercised and, in the case of a
discharge pursuant to clause (i) above, accompanied by a ruling to such effect
received from or published by the IRS, and (B) an Officers' Certificate and an
Opinion of Counsel to the effect that all conditions precedent to the
defeasance have been satisfied. Notwithstanding the foregoing, the Opinion of
Counsel required by clause (A) above need not be delivered if all Notes not
theretofore delivered to the Trustee for cancellation (i) have become due and
payable, (ii) will become due and payable on the maturity date within one year
or (iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
REPORTS TO HOLDERS
The Company shall file with the Trustee, within 15 days after filing with
the Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) that the Company files with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the
event the Company is no longer subject to these periodic reporting
requirements of the Exchange Act, it will nonetheless continue to file reports
with the Commission and the Trustee as if it were subject to such periodic
reporting requirements.
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<PAGE> 17
Regardless of whether the Company is required to furnish such reports to its
stockholders pursuant to the Exchange Act, the Company shall cause its
consolidated financial statements, comparable to that which would have been
required to appear in annual or quarterly reports, to be delivered to the
holders of the Notes.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee without the consent of the
holders of the Notes may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies so long as such
change does not, in the opinion of the Trustee, adversely affect the rights of
any of the holders in any material respect. In formulating its opinion on such
matters, the Trustee will be entitled to rely on such evidence as it deems
appropriate, including, without limitation, solely on an Opinion of Counsel.
Other modifications and amendments of the Indenture may be made with the
consent of the holders of a majority in principal amount of the then
outstanding Notes, except that, without the consent of each holder of the
Notes affected thereby, no amendment may (i) change the principal amount of
Notes whose holders must consent to an amendment, supplement or waiver of any
provision of the indenture, (ii) reduce the rate or extend the time for
payment of interest on any Notes, (iii) reduce the principal amount of any
Notes, (iv) change the maturity date of any Notes or alter the optional
redemption provisions in the Indenture or the Notes in a manner adverse to any
holder, (v) make any changes in the provisions concerning waivers of Defaults
or Events of Default by holders or the rights of holders to recover the
principal of, interest on or optional redemption payment with respect to any
Notes or (vi) make the principal of, or interest on, any Notes payable with
anything or in any manner other than as provided for in the Indenture and the
Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or assumed in connection with the acquisition of assets from
such Person and not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company or such acquisition.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling" and "controlled"
have meanings correlative to the foregoing. Notwithstanding the foregoing, any
Person established in connection with any Trade Receivable Facility shall not
be deemed an Affiliate. For purposes of the covenant "Limitation on
Transactions with Affiliates," the term "Affiliate" shall include any Person
who, as a result of any transaction described in the "Limitation on
Transactions with Affiliates" covenant, would become an Affiliate.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or shall be
merged with the Company or any Restricted Subsidiary of the Company or (ii)
the acquisition by the Company or any Restricted Subsidiary of the Company of
assets of any Person or any division or line of business of such Person.
"Asset Sale" means the sale, lease (other than an operating lease),
assignment or other disposition (including, without limitation, dispositions
pursuant to Sale and Leaseback Transactions) by the Company or one of its
Restricted Subsidiaries to any Person other than the Company or one of its
Restricted Subsidiaries of (i) any capital stock of any Restricted Subsidiary,
(ii) all or substantially all of the properties and assets of any division or
line of business of the Company or any Restricted Subsidiary of the Company or
(iii) any other assets of the Company or any of its Restricted Subsidiaries
greater than $5 million individually, other than those assets sold in the
ordinary course of business of the Company or such Restricted Subsidiary,
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respectively. For the purposes of this definition, the term "Asset Sale" shall
not include (i) Capital Stock of the Company, (ii) any transfer of trade
receivables or related assets pursuant to any Trade Receivable Facility, (iii)
any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions set forth under the
"Merger, Consolidation and Sale of Assets" covenant, (iv) an issuance of
Capital Stock by a Restricted Subsidiary to the Company or to a wholly owned
Restricted Subsidiary, (v) a disposition consisting of a Permitted Investment
or Restricted Payment permitted by the "Limitation on Restricted Payments"
covenant, (vi) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind, (vii) the
grant in the ordinary course of business of any license of patents,
trademarks, registrations thereof and other similar intellectual property,
(viii) the sale or discount, in each case without recourse, of accounts
receivables arising in the ordinary course of business, but only in connection
with the compromise or collection thereof, (ix) the sale for cash or exchange
of specific items of equipment, so long as the purpose of each such sale or
exchange is to acquire (and results within 90 days of such sale or exchange in
the acquisition of) replacement items of equipment which are the functional
equivalent of the item of equipment so sold or exchanged and (x) disposals or
replacements of obsolete equipment in the ordinary course of business.
"Borrowing Restricted Subsidiary" shall mean any Restricted Subsidiary
that incurs, or otherwise becomes liable for, in excess of $5.0 million of
Restricted Subsidiary Indebtedness.
"Capital Stock" means (i) with respect to any Person, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, including each class of common stock and
preferred stock of such Person and (ii) with respect to the Company or any
other Person formed other than as a corporation, any and all partnership,
membership or other equity interests of the Company or such other Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof,
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, (iii) commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, (iv) certificates of deposit or bankers' acceptances
maturing within one year from the date of acquisition thereof issued by any
commercial bank organized under the laws of the United States of America or
any state thereof or the District of Columbia or any U.S. branch of a foreign
bank having at the date of acquisition thereof combined capital and surplus of
not less than $250 million, (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in
clause (iv) above and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Change of Control" means if at any time any Person or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) acquires, in
one or more transactions, (i) beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of 50% or more of the voting power represented by
all voting securities of the Company or (ii) the power to elect a majority of
the Board of Directors of the Company; provided, however, that voting securities
beneficially owned by or voting power controlled by such Person or group will
not be deemed to include common stock beneficially owned or voting power
controlled so long as it is beneficially owned or controlled directly or
indirectly by Mid-America Group, Ltd. (but only so long as MAG is controlled by
Mr. Marvin A. Pomerantz and/or his spouse or their respective heirs or lineal
44
<PAGE> 19
descendants), or Mr. Marvin A. Pomerantz or Mr. Warren J. Hayford, their
respective spouses or their respective heirs or lineal descendants.
"Commodity Agreements" means without limitation any commodity futures
contract, commodity option agreement or other similar agreement or arrangement
entered into by the Company designed to protect the Company against
fluctuations in the prices of commodities used in the ordinary course of
business and not entered into for any other purpose.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income, (ii) to
the extent Consolidated Net Income has been reduced thereby, all income taxes
of such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses), Consolidated Interest
Expense, amortization expense (including write-off of deferred financing
costs) and depreciation expense and (iii) other non-cash items other than
non-cash interest reducing Consolidated Net Income (other than such items
incurred in the ordinary course of business consistent with past practice)
less other non-cash items increasing Consolidated Net Income (other than such
items incurred in the ordinary course of business consistent with past
practice), all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four most
recent full fiscal quarters for which financial information is available (the
"Four Quarter Period") ending not more than 135 days prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such
Person for the Four Quarter Period. In addition to and without limitation of
the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the Four Quarter Period to (1) the incurrence or repayment
of any Indebtedness of such Person or any of its Restricted Subsidiaries at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such incurrence or repayment, as the case may
be (and the application of the proceeds thereof), occurred on the first day of
the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA
associated with such Asset Acquisition) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period
and on or prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for any such
Indebtedness or Acquired Indebtedness) occurred on the first day of the Four
Quarter Period. If such Person or any of its Restricted Subsidiaries directly
or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness
as if such Person or any Restricted Subsidiary of such Person had directly
incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges," (1) interest on Indebtedness
determined on a fluctuating basis as of the Transaction Date and that will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date, (2) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four Quarter
Period, (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
Interest Rate Agreements, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such Interest Rate
Agreements and (4) the permanent retirement of any Indebtedness during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date shall be given effect
as if it occurred at the beginning of such Four Quarter Period.
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<PAGE> 20
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
preferred stock of such Person (except dividends for such period which are
accrued but unpaid) times (y) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective consolidated
federal, state and local tax rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of all cash and non-cash interest expense (minus
amortization or write-off of deferred financing costs included in cash or
non-cash interest expense and minus interest income and capitalized interest)
with respect to all outstanding Indebtedness of such Person and its Restricted
Subsidiaries, including the net costs associated with Interest Rate
Agreements, for such period determined on a consolidated basis in conformity
with GAAP. Consolidated Interest Expense of the Company shall not include any
prepayment premiums or amortization of original issue discount or deferred
financing costs.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from
Asset Sales (without regard to the $5 million limitation set forth in the
definition thereof) or abandonments or reserves relating thereto, (b) items
classified as extraordinary, nonrecurring or unusual gains and losses, and the
related tax effects, (c) the net income (or loss) of any Person acquired in a
pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary, (d) the net income of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by
contract, operation of law or otherwise and (e) for the purpose of calculating
Consolidated Net Income for clause (iii)(w) of the first paragraph of the
covenant "Limitation on Restricted Payments," the net income (or loss) of any
Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions (net of tax, if applicable) paid to the Company or
a Restricted Subsidiary of the Company by such Person.
"Credit Agreement" means the Credit Agreement dated as of November 17,
1986, and amended and restated as of June 30, 1995, among the Company, the
financial institutions party thereto in their capacities as lenders
thereunder, and Bankers Trust Company as agent for the banks, as the same may
be amended from time to time, and any agreement evidencing the refinancing,
modification, replacement, renewal, restatement, refunding, deferral,
extension, substitution, supplement, reissuance or resale thereof, whether
including any additional obligors or with the same or any different agent or
group of lenders.
"Currency Agreements" means without limitation any foreign exchange
contract, currency swap agreement, cross currency agreement, currency option
agreement, forward currency agreement, or other similar agreement or
arrangement entered into by the Company designed to protect the Company
against fluctuations in foreign exchange rates and not entered into for any
other purpose.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Disqualified Capital Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part,
on or prior to the final maturity date of the Notes.
"Equity Offering" means an offering of Common Stock of the Company
resulting in net proceeds to the Company in excess of $20 million.
"Indebtedness" means with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) all indebtedness of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv)
all indebtedness of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all indebtedness under
any title retention agreement, (v) all indebtedness of such Person for the
reimbursement
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of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations and (vii) all
indebtedness of any other Person of the type referred to in clauses (i)
through (vi) that is secured by any first Lien on any property or asset of
such Person, the amount of such indebtedness being deemed to be the lesser of
the value of such property or asset or the amount of the indebtedness so
secured, but excluding trade accounts payable arising in the ordinary course
of business that are not overdue in excess of 90 days or the subject of a good
faith dispute.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement entered into by the Company designed to protect the
Company against fluctuations in interest rates and not entered into for any
other purpose.
"Investment" means any transfer or delivery of cash, stock or other
property of value in exchange for indebtedness, stock or other security or
ownership interest by way of loan, advance (excluding any advances to officers
and employees in the ordinary course of business) or capital contribution.
The amount of any non-cash Investment (other than a Permitted Investment) or
any Investment in an Unrestricted Subsidiary shall be the fair market value of
such Investment, as determined in good faith by management of the Company
unless the fair market value of such Investment exceeds $10 million, in which
case such fair market value shall also be determined in good faith by the
Board of Directors or other equivalent governing body of the Company at the
time such Investment is made. For purposes of the covenant "Limitations on
Restricted Payments," (i) "Investment" in a Subsidiary shall include the
portion (proportionate to the Companys Capital Stock in such Subsidiary) of
the fair market value (as determined in good faith by the Board of Directors)
of such Subsidiary at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided that upon a redesignation of such Subsidiary
as a Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the
time of such redesignation less (y) the portion (proportionate to the
Company's Capital Stock in such Subsidiary) of the fair market value (as
determined in good faith by the Board of Directors) of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case determined in good
faith by the Board of Directors.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Make-Whole Premium" with respect to a Note means an amount equal to the
greater of (i) 1.0% of the outstanding principal amount of such Note and
(ii) the excess of (a) the present value of the remaining interest, premium
and principal payments due on such Note as if such Note were redeemed on June
15, 2002, computed using a discount rate equal to the Treasury Rate plus 62.5
basis points, over (b) the outstanding principal amount of such Note.
"Net Cash Proceeds" means, (i) with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be
actually payable as a result of any disposition of property within two years
of the date of disposition and (2) after taking into account any reduction in
tax liability due to available tax credits or deductions and any tax sharing
arrangements), (c) a reasonable reserve for the after-tax cost of any
indemnification obligations (fixed and/or contingent) attributable to seller's
indemnities to the purchaser undertaken by the Company or any of its
Restricted Subsidiaries in connection with such Asset Sale and (d) repayment
of Indebtedness that is required to be repaid in connection with such Asset
Sale or (ii) with respect to the sale of Capital Stock by any Person, the
aggregate net proceeds received by such Person after payment of expenses,
commissions, underwriting discounts and other similar charges incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market
47
<PAGE> 22
value thereof, as determined in good faith by the Board of Directors or other
equivalent governing body of such Person, at the time of receipt, whose
determination shall be evidenced by a board resolution).
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Indebtedness" means, without duplication, (i) the Notes and
any Guarantees thereof, (ii) Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon (other than permanent reductions as a result of
any refinancing thereof permitted hereunder), (iii) Indebtedness of the
Company and its Restricted Subsidiaries incurred pursuant to the Credit
Agreement in an aggregate principal amount not to exceed $225 million, (iv)
Indebtedness of the Company and its Restricted Subsidiaries incurred pursuant
to Interest Rate Agreements, (v) intercompany Indebtedness by and among the
Company and/or its wholly owned Restricted Subsidiaries, (vi) Indebtedness of
the Company and its Restricted Subsidiaries (including Acquired Indebtedness)
pursuant to pollution control bonds and industrial revenue bonds not to exceed
the sum of the aggregate amount thereof outstanding on the Issue Date plus $25
million, (vii) Indebtedness of the Company and its Restricted Subsidiaries
(including Acquired Indebtedness) evidenced by purchase money obligations and
Capitalized Lease Obligations not to exceed $25 million in any fiscal year,
provided that any portion of the $25 million that is not incurred in any
fiscal year may be carried over to successive fiscal years; provided, further,
that the maximum amount that may be incurred in any one fiscal year shall not
exceed $50 million, (viii) additional Indebtedness of the Company and its
Restricted Subsidiaries (including Acquired Indebtedness) incurred for any
purpose not to exceed, at any time outstanding, $200 million (that may be, but
need not be, incurred in whole or in part under the Credit Agreement), (ix)
Indebtedness incurred pursuant to the Trade Receivable Facility, (x)
Indebtedness of the Company or its Restricted Subsidiaries incurred under one
or more instruments in connection with any refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension,
substitution, supplement, reissuance or resale (a "refinancing") of existing
or future Indebtedness of such entity; provided that any such incurrence and
related refinancing, together, shall not (1) result in an increase in the
aggregate principal amount of such Indebtedness (except to the extent such
increase is a result of an incurrence or refinancing of additional
Indebtedness otherwise permitted by the Indenture or such increase does not
exceed the amount of premiums, fees and expenses (including underwriting
discounts) relating to such refinancing, modification, replacement, renewal,
restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale of such existing or future Indebtedness) of the Company
and its Restricted Subsidiaries and (2) create Indebtedness where the Weighted
Average Life to Maturity at the time of such refunded, refinanced, modified,
replaced, renewed, restated, deferred, extended, substituted, supplemented,
reissued or resold Indebtedness is incurred is less than the Weighted Average
Life to Maturity of the Indebtedness being refunded, refinanced, modified,
replaced, renewed, restated, deferred, extended, substituted, supplemented,
reissued or resold; and provided, further, that with respect to the
refinancing of Indebtedness incurred pursuant to clauses (v), (vi), (vii),
(xvi) and (xvii), such Indebtedness may only be refinanced with Indebtedness
permitted to be incurred under such respective clause, (xi) Indebtedness of
the Company and its Restricted Subsidiaries arising in connection with the
acquisition or refinancing of property so long as recourse with respect to
such Indebtedness is limited only to the property being acquired or refinanced
or any amendment, restatement, deferral, extension, modification, refinancing,
refunding, renewal, replacement, substitution, supplement, reissuance or
resale thereof so long as recourse is limited to the property being
refinanced, (xii) Indebtedness of the Company and its Restricted Subsidiaries
incurred after the Issue Date relating to letters of credit available or
outstanding under the Credit Agreement (or any successor thereto), (xiii)
surety obligations of the Company and its Restricted Subsidiaries entered into
in the ordinary course of business, (xiv) Indebtedness of the Company and its
Restricted Subsidiaries incurred to finance the purchase of insurance in the
ordinary course of business, (xv) Indebtedness of the Company and its
Restricted Subsidiaries incurred arising from the honoring by a bank or other
financial institution of a check or draft inadvertently drawn against
insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within two business days of notice of any such
incurrence, (xvi) Indebtedness of the Company and its Restricted Subsidiaries
arising from guarantees of loans and advances by third parties to employees
and officers of the Company or its subsidiaries, not to exceed $1 million
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in the aggregate, (xvii) Indebtedness of the Company and its Restricted
Subsidiaries arising from the repurchase of Common Stock not to exceed $4
million (xviii) Indebtedness of the Company and its Restricted Subsidiaries
arising from Currency Agreements and Commodity Agreements, (xix) the 12-3/4%
Debentures and (xx) the Old Notes.
"Permitted Investments" means in the case of the Company or its Restricted
Subsidiaries, (i) an Investment related to the business of the Company and its
Restricted Subsidiaries as it is conducted on the Issue Date, including, but not
limited to, subsidiaries, joint ventures or other business alliances formed in
the ordinary course of business, (ii) Investments in the Company by any
Restricted Subsidiary or Investments by the Company or any Restricted
Subsidiary (including acquisitions) in any other Person, if after giving
effect of any such investment, such Person would be a wholly owned Restricted
Subsidiary of the Company, (iii) Investments in cash and Cash Equivalents,
(iv) Investments in Productive Assets, (v) Investments in any Person in
connection with the Trade Receivable Facility, (vi) Investments existing on
the date of this Indenture, (vii) loans and advances to employees and officers
of the Company and its Restricted Subsidiaries not in excess of $1 million at
any one time outstanding, (viii) accounts receivable created or acquired in
the ordinary course of business, (ix) Interest Rate Agreements, Currency
Agreements and Commodity Agreements entered into in the ordinary course of the
Company's business and otherwise in compliance with this Indenture, (x)
Investments in Unrestricted Subsidiaries in an amount at any one time
outstanding not to exceed $25 million, (xi) guarantees by the Company of
Indebtedness otherwise permitted to be incurred by Restricted Subsidiaries of
the Company under this Indenture and (xii) Investments received by the Company
or its Restricted Subsidiaries as consideration for asset sales, including
Asset Sales; provided in the case of an Asset Sale, such Asset Sale is
effected in compliance with the covenant described above under "Certain
Covenants--Limitation on Asset Sales."
"Permitted Liens" means (i) Liens for taxes, assessments and governmental
charges to the extent not required to be paid, (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other like Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
an appropriate process of law, and for which a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made, (iii)
pledges or deposits in the ordinary course of business to secure lease
obligations or nondelinquent obligations under workers' compensation,
unemployment insurance or similar legislation, (iv) Liens to secure the
performance of public statutory obligations that are not delinquent, appeal
bonds, performance bonds or other obligations of a like nature (other than for
borrowed money), (v) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any of
its Subsidiaries, (vi) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other goods
in the ordinary course of business, (vii) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents and
other property relating to such letters of credit and the products and
proceeds thereof, (viii) Liens in favor of custom and revenue authorities
arising as a matter of law to secure payment of nondelinquent customs duties
in connection with the importation of goods, (ix) judgment and attachment
Liens not giving rise to a Default or Event of Default, (x) leases or
subleases granted to others not interfering in any material respect with the
business of the Company or any Subsidiary, (xi) Liens encumbering customary
initial deposits and margin deposits, and other Liens incurred in the ordinary
course of business that are within the general parameters customary in the
industry, in each case securing Indebtedness under Interest Rate Agreements,
Currency Agreements, Commodity Agreements and forward contracts, option
futures contracts, futures options or similar agreements or arrangements
designed to protect the Company or any Subsidiary from fluctuations in the
price of commodities, (xii) Liens encumbering deposits made in the ordinary
course of business to secure nondelinquent obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or its
Subsidiaries for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made, (xiii) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Company or any Subsidiary in the ordinary course of business in accordance
with industry practice, (xiv) any interest or title of a lessor in the
property subject to any lease, whether characterized as capitalized
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<PAGE> 24
or operating, other than any such interest or title resulting from or arising
out of default by the Company or any Subsidiary of its obligations under such
lease, (xv) Liens arising from filing UCC financing statements for
precautionary purposes in the connection with true leases of personal property
that are otherwise permitted under this Indenture and under which the Company
or any Subsidiary is lessee, (xvi) Liens on property of a Person existing at
the time such Person is acquired by, merged into or consolidated with the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such merger or consolidation
and do not extend to any assets other than those of the Person merged into or
consolidated with the Company or such Restricted Subsidiary; (xvii) Liens to
secure the payment of all or a part of the purchase price of property or
assets acquired or constructed in the ordinary course of business on or after
the date of this Indenture, provided that (a) such property or assets are used
in the same or similar line of business as the Company was engaged in on the
Issue Date, (b) at the time of incurrence of any such Lien, the aggregate
principal amount of the obligations secured by such Lien shall not exceed the
lesser of the cost or fair market value of the assets or property (or portions
thereof) so acquired or constructed, (c) each such Lien shall encumber only
the assets or property (or portions thereof) so acquired or constructed and
shall be attached to such property within 180 days of the purchase or
construction thereof and (d) and Indebtedness secured by such Lien shall have
been permitted to be incurred under the covenant "Limitation on Incurrence of
Additional Indebtedness," and (xviii) Liens of landlords or of mortgagees of
landlords arising by operation of law, provided that the rental payments
secured thereby are not yet due and payable; (xix) Liens incurred in the
ordinary course of business of the Company or any Restricted Subsidiary of the
Company with respect to obligations that (a) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the
aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Productive Assets" means assets (including Capital Stock) of a kind used
or usable in the business of the Company and its Restricted Subsidiaries as it
is conducted on the Issue Date.
"Qualified Capital Stock" means any stock that is not Disqualified Capital
Stock.
"Restricted Subsidiary" means any direct or indirect Subsidiary of any
Person that is not an Unrestricted Subsidiary of such Person.
"Restricted Subsidiary Indebtedness" means (a) Indebtedness (other than
Indebtedness under any Trade Receivable Facility, intercompany Indebtedness or
Indebtedness outstanding on the Issue Date, including any refinancing of
Indebtedness outstanding on the Issue Date to the extent it does not increase
the principal amount of such Indebtedness) incurred by a Restricted Subsidiary
(other than a Subsidiary Guarantor), or (b) the direct or indirect assumption,
guarantee (other than a Guarantee) or other obligation of any Restricted
Subsidiary (other than a Subsidiary Guarantor) for any Indebtedness of the
Company or any other Restricted Subsidiary by way of the pledge of any
intercompany note or otherwise, or (c) the total amount of committed
borrowings under revolving credit facilities under which the Restricted
Subsidiary (other than a Subsidiary Guarantor) is a borrower or guarantor, but
"Restricted Subsidiary Indebtedness" shall not include any Indebtedness of the
Restricted Subsidiary evidenced by purchase money obligations or Capitalized
Lease Obligations provided for under clause (vii) and Indebtedness provided
for under clause (xi) of the definition of Permitted Indebtedness in an
aggregate amount not to exceed $75 million for all Restricted Subsidiaries.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of
50
<PAGE> 25
which at least a majority of the voting interest to elect the governing body
or Persons thereof under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
"Subsidiary Guarantor" means each of the Company's Restricted Subsidiaries
that becomes a guarantor of the Notes by executing a supplemental indenture in
which such Restricted Subsidiary agrees to be bound by the terms of the
Indenture; provided that any person constituting a Subsidiary Guarantor as
described above shall cease to constitute a Subsidiary Guarantor when its
respective Subsidiary Guarantee is released in accordance with the terms
thereof.
"Total Tangible Assets" means the Company's total consolidated assets
minus all intangible assets, determined in accordance with GAAP.
"Trade Receivable Facility" means the arrangements that have been or may
be entered into by the Company or one or more of its Restricted Subsidiaries
pursuant to which the Company or one or more of its Restricted Subsidiaries may
either transfer to any other Person or grant a security interest in any trade
receivables (whether now existing or arising in the future) and any assets
related to such trade receivables including, without limitation, all
collateral securing such trade receivables and all material contracts and all
guarantees or other Obligations in respect of such trade receivables of the
Company or one or more of its Restricted Subsidiaries.
"Unrestricted Subsidiary" means any Subsidiary of the Company, whether
existing, newly formed or newly acquired, designated as an Unrestricted
Subsidiary by the Board of Directors of the Company and any Subsidiary of an
Unrestricted Subsidiary; provided, however, that at the time of such
designation (i) no Default or Event of Default shall have occurred and be
continuing, (ii) no portion of any Indebtedness or any other obligation
(contingent or otherwise) of such Subsidiary (a) is guaranteed by, or is
otherwise the subject of credit support provided by the Company or any of its
Restricted Subsidiaries, (b) is recourse to or obligates the Company or any of
its Restricted Subsidiaries in any way or (c) subjects any property or asset
of the Company or any of its Restricted Subsidiaries directly or indirectly,
contingently or otherwise, to the satisfaction of such Indebtedness or other
obligation, (iii) neither the Company nor any of its Restricted Subsidiaries
has any contract, or agreement, arrangement or understanding with such
Subsidiary other than on terms as favorable to the Company or such Restricted
Subsidiary as those that might be obtained at the time from Persons that are
not Affiliates of the Company and (iv) neither the Company nor any of its
Restricted Subsidiaries has any obligations (a) to subscribe for additional
shares of Capital Stock of such Subsidiary or (b) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary achieve certain
levels of operating results. Any such designation by the Company's Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified certificate stating that such designation complies with the
foregoing conditions. The Company's Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing, including, without limitation,
under the covenants described above under the caption "Limitations on
Incurrence of Indebtedness" assuming the incurrence by the Company and its
Restricted Subsidiaries at the time of such designation of all existing
Indebtedness of the Unrestricted Subsidiary to be so designated as a
Restricted Subsidiary. In the event of any disposition involving the Company
in which the Company is not the Surviving Person, the Board of Directors of
the Surviving Person may (x) prior to such disposition, designate any of its
Subsidiaries, and any of the Company's Subsidiaries being acquired pursuant to
such disposition that are not Restricted Subsidiaries, as Unrestricted
Subsidiaries, and (y) after such disposition, designate any of its direct or
indirect Subsidiaries as an Unrestricted Subsidiary under the same conditions
and in the same manner as the Company under the terms of the Indenture.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
total of the product obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
51
<PAGE> 26
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which all of the outstanding voting securities or other equity ownership
interest (other than directors qualifying or similar shares required to be
held by third parties in accordance with applicable law, not in any event to
exceed 5 percent of the total outstanding voting securities) are owned by the
Company or any wholly owned Restricted Subsidiary of the Company.
52
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
Dated as of June 12, 1997
By and Among
GAYLORD CONTAINER CORPORATION
as Issuer
and
BT SECURITIES CORPORATION,
BEAR, STEARNS & CO. INC.
and
SALOMON BROTHERS INC
as Initial Purchasers
9-3/4% Senior Notes due 2007
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions......................................... 1
2. Exchange Offer...................................... 5
3. Shelf Registration.................................. 9
4. Additional Interest................................. 11
5. Registration Procedures............................. 13
6. Registration Expenses............................... 25
7. Indemnification..................................... 26
8. Rule 144A........................................... 30
9. Underwritten Registrations.......................... 31
10. Miscellaneous....................................... 31
(a) No Inconsistent Agreements...................... 31
(b) Adjustments Affecting Registrable Notes......... 31
(c) Amendments and Waivers.......................... 31
(d) Notices......................................... 32
(e) Successors and Assigns.......................... 33
(f) Counterparts.................................... 33
(g) Headings........................................ 33
(h) Governing Law................................... 33
(i) Severability.................................... 33
(j) Securities Held by the Issuer or its Affiliates. 34
(k) Third Party Beneficiaries....................... 34
(l) Entire Agreement................................ 34
(m) Information Supplied by the Participants........ 34
</TABLE>
--i--
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Aqreement") is dated as of
June 12, 1997, by and among GAYLORD CONTAINER CORPORATION, a Delaware
corporation (the "Issuer"), as issuer, and BT SECURITIES CORPORATION, BEAR,
STEARNS & CO. INC. and SALOMON BROTHERS INC, as initial purchasers (the
"Initial Purchasers").
This Agreement is entered into in connection with the Purchase Agreement,
dated as of June 5, 1997, by and among the Issuer, and the Initial Purchasers
(the "Purchase Agreement"), which provides for the sale by the Issuer to the
Initial Purchasers of $225,000,000 aggregate principal amount of the Issuer's
9-3/4% Senior Notes due 2007 (the "Notes") . In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Issuer has agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchasers and any subsequent holder or holders of the Notes. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: See Section 4 hereof.
Advice: See Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
Effectiveness Date: The 150th day after the Issue Date.
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
--i--
<PAGE> 4
--2--
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Filing Date: The 60th day after the Issue Date.
Guarantors: See the introductory paragraphs hereto.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of June 12, 1997, by and among
the Issuer and Fleet National Bank, as trustee, pursuant to which the Notes are
being issued, as the same may be amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(o) hereof.
Issue Date: June 12, 1997, the date of original issuance of the
Notes.
Issuer: See the introductory paragraphs hereto.
NASD: See Section 5(t) hereof.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, trustee, corporation, partnership, joint
stock company, trust, unincorporated association, union, business association,
firm or other legal entity.
Private Exchange: See Section 2 hereof.
<PAGE> 5
--3--
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule
430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(o) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement (unless
such Note could have been tendered for exchange by the Holder thereof under
applicable law and currently prevailing interpretations of the staff of the SEC
and such Note was not tendered for exchange by the Holder thereof), (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under state and federal
securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the
case may be, ceases to be outstanding for purposes of the Indenture or (iv) such
Note, Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the Issuer
that covers any of the Notes, the Exchange Notes or the Private Exchange Notes
filed with the SEC under the Securities Act, including the Prospectus,
amendments and
<PAGE> 6
--4--
supplements to such registration statement, including posteffective
amendments, all exhibits, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A)
or regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee under any
indenture (if any) governing the Exchange Notes and Private Exchange
Notes.
Underwritten registration or underwritten offering: A registration in
which securities of the Issuer are sold to an underwriter for reoffering to
the public.
<PAGE> 7
--5--
2. Exchange Offer
(a) The Issuer shall file with the SEC, no later than the Filing Date, a
Registration Statement (the "Exchange Offer Registration Statements") on an
appropriate registration form with respect to a registered offer (the
"Exchange offer") to exchange any and all of the Registrable Notes for a like
aggregate principal amount of notes (the "Exchange Notes") of the Issuer that
are identical in all material respects to the Notes (other than such changes
to the Indenture or any such identical trust indenture as are necessary to
comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) except that the Exchange Notes shall
contain no restrictive legend thereon. The Exchange Offer shall comply with
all applicable tender offer rules and regulations under the Exchange Act and
other applicable law. The Issuer shall use its best efforts to (x) cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange
Offer open for at least 30 days (or longer if required by applicable law)
after the date that notice of the Exchange Offer is mailed to Holders; and (z)
consummate the Exchange Offer on or prior to the 180th day following the Issue
Date.
Each Holder that participates in the Exchange Offer will be required, as
a condition to its participation in the Exchange Offer, to represent to the
Issuer in writing (which may be contained in the applicable letter of
transmittal) that any Exchange Notes to be received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of
the Exchange Offer such Holder will have no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes in
violation of the provisions of the Securities Act, and that such Holder is
not an affiliate of the Issuer within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this Section
2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange
Notes held by Participating Broker-Dealers (as defined), and the Issuer shall
have no further obligation to register Registrable Notes (other than Private
Exchange Notes and other than in respect of any Exchange Notes as to which
clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
<PAGE> 8
--6--
No securities other than the Exchange Notes shall be included in the
Exchange Offer Registration Statement.
(b) The Issuer shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Holders, which shall contain a summary statement of
the positions taken or policies made by the staff of the SEC with respect to the
potential "underwriters status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by
such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"),
whether such positions or policies have been publicly disseminated by the staff
of the SEC or such positions or policies represent the prevailing views of the
staff of the SEC. Such "Plan of Distributions section shall also expressly
permit, to the extent permitted by applicable policies and regulations of the
SEC, the use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including, to the extent permitted by
applicable policies and regulations of the SEC, all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes in compliance with
the Securities Act.
The Issuer shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with
applicable law in connection with any resale of the Exchange Notes covered
thereby; provided, however, that such period shall not exceed 180 days after
such Exchange Offer Registration Statement is declared effective (or such
longer period if extended pursuant to the last paragraph of Section 5 hereof)
(the applicable period.).
If, prior to consummation of the Exchange Offer, any Holder holds any
Notes acquired by it that have, or that are reasonably likely to be determined
to have, the status of an unsold allotment in an initial distribution, or any
Holder is not entitled to participate in the Exchange Offer (other than due
solely to the status of such Holder as an affiliate of the Issuer within the
meaning of the Securities Act), the Issuer upon the request of any such Holder
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to any such Holder, in exchange (the "Private
<PAGE> 9
--7--
Exchange") for such Notes held by any such Holder, a like principal amount of
notes (the "Private Exchange Notes") of the Issuer that are identical in all
material respects to the Exchange Notes. The Private Exchange Notes shall be
issued pursuant to the same indenture as the Exchange Notes and bear the same
CUSIP number as the Exchange Notes.
In connection with the Exchange Offer, the Issuer shall:
(1) mail, or cause to be mailed, to each Holder entitled to participate in
the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer
Registration Statement, together with an appropriate letter of transmittal and
related documents;
(2) keep the Exchange Offer open for not less than 30 days after the date
that notice of the Exchange Offer is mailed to Holders (or longer if required by
applicable law);
(3) utilize the services of a depositary for the Exchange Offer with an
address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the Exchange
Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable laws,
rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Issuer shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the Exchange Offer and the Private Exchange, if
any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each Holder
of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in
<PAGE> 10
--8--
principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to any
conditions, other than that (i) the Exchange Offer or Private Exchange, as the
case may be, does not violate applicable law or any applicable interpretation
of the staff of the SEC, (ii) no action or proceeding shall have been
instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuer to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Issuer and
(iii) all governmental approvals shall have been obtained, which approvals the
Issuer deems necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to
the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such other indenture shall provide that the Exchange Notes,
the Private Exchange Notes and the Notes shall vote and consent together on
all matters as one class and that none of the Exchange Notes, the Private
Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuer is not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days
of the Issue Date, (iii) any holder of Private Exchange Notes so requests in
writing to the Issuer within 60 days after the consummation of the Exchange
Offer, or (iv) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of the
Issuer within the meaning of the Securities Act), then in the case of each of
clauses (i) through (iv) of this sentence, the Issuer shall promptly deliver to
the Holders and the Trustee written notice thereof (the "Shelf Notice") and
shall file a Shelf Registration pursuant to Section 3 hereof.
<PAGE> 11
--9--
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by Section 2(c)
hereof, then:
(a) Shelf Registration. The Issuer shall file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Registrable Notes not exchanged in the Exchange Offer,
Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registrations"). The Issuer shall use its
reasonable best efforts to file with the SEC the Initial Shelf Registration on
or before the applicable Filing Date. The Initial Shelf Registration shall be on
Form S-l or another appropriate form permitting registration of such Registrable
Notes for resale by Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The Issuer
shall not permit any securities other than the Registrable Notes to be included
in the Initial Shelf Registration or any Subsequent Shelf Registration (as
defined below).
The Issuer shall use its reasonable best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
Effectiveness Date, subject to extension pursuant to the last paragraph of
Section 5 hereof (the "Effectiveness Periods"), or such shorter period ending
when (i) all Registrable Notes covered by the Initial Shelf Registration have
been sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes covered by and not sold under the Initial Shelf Registration
or an earlier Subsequent Shelf Registration has been declared effective under
the Securities Act; provided, however, that the Effectiveness Period in respect
of the Initial Shelf Registration shall be extended to the extent required to
permit dealers to comply with the appliccable prospectus delivery requirements
of Rule 174 under the Securities Act and as otherwise provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Issuer shall use its reasonable best efforts to obtain the
prompt withdrawal of any
<PAGE> 12
--10--
order suspending the effectiveness thereof, and in any event shall within 30
days of such cessation of effectiveness amend the Initial Shelf Registration
in a manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Notes covered by and not sold under the
Initial Shelf Registration or an earlier Subsequent Shelf Registration (each,
a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is
filed, the Issuer shall use its reasonable best efforts to cause the
Subsequent Shelf Registration to be declared effective under the Securities
Act as soon as practicable after such filing and to keep such subsequent Shelf
Registration continuously effective for a period equal to the number of days
in the Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuer shall promptly supplement and
amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
4. Additional Interest
(a) The Issuer and the Initial Purchasers agree that the Holders will
suffer damages if the Issuer fails to fulfill its obligations under Section 2 or
Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Issuer agrees to pay, as
liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the Filing Date or
(B) notwithstanding that the Issuer has consummated or will consummate the
Exchange Offer, the Issuer is required to file a Shelf Registration and
such Shelf Registration is not filed on or prior to the Filing Date
applicable thereto, then, commencing on the day after the Filing
<PAGE> 13
--11--
Date, Additional Interest shall accrue on the principal amount of the Notes
at a rate of 0.50% per annum for the first 90 days immediately following
the Filing Date, and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the Effectiveness Date or (B) notwithstanding that the Issuer has
consummated or will consummate the Exchange Offer, the Issuer is required
to file a Shelf Registration and such Shelf Registration is not declared
effective by the SEC on or prior to the Effectiveness Date, then,
commencing on the day after such Effectiveness Date, Additional Interest
shall accrue on the principal amount of the Notes at a rate of 0.50% per
annum for the first 90 days immediately following the day after the
Effectiveness Date, and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Issuer has not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 180th day after the Issue Date or (B) if
applicable, a Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the first
90 days commencing on the (x) 180th day after such Issue Date, in the
case of (A) above, or (y) the day such Shelf Registration ceases to be
effective in the case of (B) above, and such Additional Interest rate
shall increase by an additional 0.50% per annum at the beginning of each
such subsequent 90-day period (it being understood and agreed that,
notwithstanding any provision to the contrary, so long as any Note which
is the subject of the Shelf Notice is then covered by an effective Shelf
Registration Statement, no Additional Interest shall accrue on such
Note);
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 2.0% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the
<PAGE> 14
--12--
effectiveness of the Exchange Offer Registration Statement or the applicable
Shelf Registration Statement as required hereunder (in the case of clause (ii)
of this Section 4), or (3) upon the exchange of the applicable Exchange Notes
for all Notes validly tendered (in the case of clause (iii)(A) of this Section
4), or upon the effectiveness of the applicable Shelf Registration Statement
which had ceased to remain effective (in the case of (iii)(B) of this Section
4), Additional Interest on the Notes in respect of which such events relate as
a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
(b) The Issuer shall notify the Trustee within three business days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semiannually on each June 15 and December 15 (to the holders of
record on the June 1 and December 1 immediately preceding such dates),
commencing with the first such date occurring after any such Additional Interest
commences to accrue. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed), and the
denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant to
Sections 2 or 3 hereof, the Issuer shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuer hereunder the
Issuer shall:
(a) Prepare and file with the SEC prior to the applicable Filing Date,
a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that, if (1) such filing is pursuant to Section
3 hereof, or (2) a
<PAGE> 15
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Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period relating thereto, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Issuer
shall furnish to and afford the Holders of the Registrable Notes covered by
such Registration Statement or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (in each case at least five days prior to such filing, or
such later date as is reasonable under the circumstances). The Issuer shall
not file any Registration Statement or Prospectus or any amendments or
supplements thereto if the Holders of a majority in aggregate principal amount
of the Registrable Notes covered by such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the
Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any Prospectus supplement required by applicable law, and as
so supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act applicable to each of
them with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented
and with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. The Issuer shall
be deemed not to have used its best efforts to keep a Registration Statement
effective during the Effective Period or the Applicable Period, as the case
may be, relating thereto if the Issuer voluntarily takes any action that
directly results in selling Holders of the Registrable Notes covered thereby
or Participating Broker-Dealers seeking to sell Exchange Notes not being able
to
<PAGE> 16
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sell such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or permitted by this Agreement,
including, without limitation, the provisions of paragraph 5(k) hereof and
the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period relating thereto from whom the Issuer has received
written notice that it will be a Participating Broker-Dealer in the Exchange
Offer, notify the selling Holders of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any event within one day), and
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective under the Securities Act (including in such notice a written
statement that any Holder may, upon request, obtain, at the sole expense of
the Issuer, one conformed copy of such Registration Statement or post-effective
amendment including financial statements and schedules, documents incorporated
or deemed to be incorporated by reference and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation of any proceedings for that purpose, (iii) if at
any time when a prospectus is required by the Securities Act to be delivered
in connection with sales of the Registrable Notes or resales of Exchange Notes
by Participating Broker-Dealers the representations and warranties of the
Issuer contained in any agreement (including any underwriting agreement)
contemplated by Section 5(m) hereof cease to be true and correct in all
material respects, (iv) of the receipt by the Issuer of any notification with
respect to the suspension of the qualification or exemption from qualification
of a Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition or
any
<PAGE> 17
--15--
information becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and (vi) of the Issuer's determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use its best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for
sale in any jurisdiction, and, if any such order is issued, to use its best
efforts to obtain the withdrawal of any such order at the earliest possible
moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders of
a majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering or any Participating
Broker-Dealer, (i) as promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them reasonably request to be included
therein, (ii) make all required filings of such prospectus supplement or such
<PAGE> 18
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post-effective amendment as soon as practicable after the Issuer has received
notification of the matters to be incorporated in such prospectus supplement
or post-effective amendment, and (iii) supplement or make amendments to such
Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes and
to each such Participating Broker-Dealer who so requests and to their
respective counsel and each managing underwriter, if any, at the sole expense
of the Issuer, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) If (l) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable Notes, or
each such Participating Broker-Dealer, as the case may be, their respective
counsel, and the underwriters, if any, at the sole expense of the Issuer, as
many copies of the Prospectus or Prospectuses (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuer
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers (if any), in connection with the offering and sale
of the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.
<PAGE> 19
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(h) Prior to any public offering of Registrable Notes or any delivery of
a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use their best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter
or underwriters reasonably request in writing; provided, however, that where
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, upon the request of such
persons, the Issuer agrees to cause its counsel to perform Blue Sky
investigations and file registrations and qualifications required to be filed
pursuant to this Section 5(h), use its best efforts to process such
registrations or qualifications to effectiveness, keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; provided, however, that the Issuer shall not be required to (A)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where they are not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such
<PAGE> 20
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names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use its best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Issuer will cooperate in all reasonable respects
with the filing of such Registration Statement and the granting of such
approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and
(subject to Section 5(a) hereof) file with the SEC, at the sole expense of the
Issuer, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Notes being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the Issuer shall not be
required to amend or supplement a Registration Statement, any related
Prospectus or any document incorporated therein by reference, in the event
that, and for a period not to exceed an aggregate of 30 days in any calendar
year if, (i) an event occurs and is continuing as a result of which the Shelf
Registration would, in the Issuer's good faith judgment, contain an untrue
statement of a material fact or of 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, and
<PAGE> 21
--19--
(ii) (a) the Issuer determines in its good faith judgment that the disclosure of
such event at such time would have a material adverse effect on the business,
operations or prospects of the Issuer or (b) the disclosure otherwise relates to
a pending material business transaction that has not yet been publicly
disclosed.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes in
form and substance reasonably satisfactory to the Issuer and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or the
disposition of such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters with
respect to the business of the Issuer (including any acquired business,
properties or entity, if applicable) and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to the
Notes, and confirm the same in writing if and when requested in form and
substance reasonably satisfactory to the Issuer; (ii) obtain the written
opinions of counsel to the Issuer and written updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions reasonably requested in underwritten offerings and such
other matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) use its best efforts to obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent auditors of the
Issuer (and, if necessary, any other independent auditors of the Issuer or of
any business acquired by the Issuer for which financial statements and
financial data are, or are required to be, included or incorporated
<PAGE> 22
--20--
by reference in the Registration Statement), addressed to each of the
underwriters, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such other
matters as reasonably requested by the managing underwriter or underwriters as
permitted by the Statement on Auditing Standards No. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the sellers and underwriters,
if any, than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount
of Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents, if any). The above shall be done at
each closing under such underwriting agreement, or as and to the extent
required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder of
such Registrable Notes being sold, or each such Participating Broker-Dealer,
as the case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating Broker-Dealer,
as the case may be, or underwriter (collectively, the "Inspectors"), offices
where normally kept, during reasonable business hours, all financial
and other records, pertinent corporate documents and instruments of the Issuer
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise any applicable due diligence responsibilities, and cause the
officers, directors and employees of the Issuer to supply all information
reasonably requested by any such Inspector in connection with such
Registration Statement and Prospectus. Each Inspector shall agree in writing
that it will keep the Records confidential and that it will not disclose any
of the Records that the Issuer determines, in good faith, to be confidential
and notifies the Inspectors in writing are confidential unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or material omission in
<PAGE> 23
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such Registration Statement or Prospectus, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is necessary or advisable,
in the written opinion of counsel for any Inspector, in connection with any
action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon, relating
to, or involving this Agreement or the Purchase Agreement, or any transactions
contemplated hereby or thereby or arising hereunder or thereunder, or (iv) the
information in such Records has been made generally available to the public;
provided, however, that prior notice shall be provided as soon as practicable
to the Issuer of the potential disclosure of any information by such Inspector
pursuant to clauses (i), (ii) or (iii) of this sentence to permit the Issuer
to obtain a protective order (or waive the provisions of this paragraph (n))
and that such Inspector shall take such actions as are reasonably necessary to
protect the confidentiality of such information (if practicable) to the extent
such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used
by it as the basis for any market transactions in the securities of the Issuer
unless and until such information is generally available to the public. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Issuer and allow the Issuer to undertake
appropriate action to prevent disclosure of the Records deemed confidential at
the Issuer's sole expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such indenture as
may be required for such indenture to be so
<PAGE> 24
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qualified in accordance with the terms of the TIA; and execute, and use its best
efforts to cause such trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed with
the SEC to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and make
generally available to its security-holders earnings statements satisfying the
provisions of Section ll(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 60 days
after the end of any fiscal quarter (or 120 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Registrable Notes are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuer after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a Private Exchange, obtain
an opinion of counsel to the Issuer, in a form customary for underwritten
transactions, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private Exchange,
as the case may be, that the Exchange Notes or Private Exchange Notes, as the
case may be, and the related indenture constitute legal, valid and binding
obligations of the Issuer, enforceable against the Issuer in accordance with
its respective terms, subject to customary exceptions and qualifications.
(r) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuer (or to such
other Person as directed by the Issuer) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Issuer shall mark, or
cause to be marked, on such Registrable Notes that such Registrable Notes are
being cancelled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; in no event shall such Registrable Notes be marked
as paid or otherwise satisfied.
<PAGE> 25
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(s) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(t) Use its best efforts to take all other steps reasonably
necessary to effect the registration of the Exchange Notes and/or
Registrable Notes covered by a Registration Statement contemplated
hereby.
The Issuer may require each seller of Registrable Notes as to which any
registration is being effected to furnish to the Issuer such information
regarding such seller and the distribution of such Registrable Notes as the
Issuer may, from time to time, reasonably request. The Issuer may exclude from
such registration the Registrable Notes of any seller so long as such seller
fails to furnish such information within a reasonable time after receiving
such request. Each seller as to which any Shelf Registration is being effected
agrees to furnish promptly to the Issuer all information required to be
disclosed in order to make the information previously furnished to the Issuer
by such seller not materially misleading and to promptly notify the Issuer
following any sale or other transfer of Registrable Notes covered by the Shelf
Registration, which notice shall specify the amount of securities involved and
the market, if any, on which such sale or transfer occurred.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Issuer, then such Holder
shall have the right to require (i) the insertion therein of language, in form
and substance reasonably satisfactory to the Issuer and such Holder, to the
effect that the holding by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment quality of the
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Issuer,
or (ii) in the event that such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force, the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
<PAGE> 26
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Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, that, upon receipt of
any notice from the Issuer of the happening of any event of the kind described
in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such Holder
or Participating Broker-Dealer, as the case may be, until such Holder's or
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof, or until it is advised
in writing (the "Advice") by the Issuer that the use of the applicable
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto. In the event that the Issuer shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice; provided, however, nothing in this paragraph shall be
construed to mean that the Issuer is required to keep a Registration Statement
effective at a time when the Registrable Notes covered thereby may be sold
without restriction under Rule 144.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuer shall be borne by the Issuer whether or not the
Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions (x) where the holders of
Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in
<PAGE> 27
--25--
Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be
sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses, including, without limitation, expenses of printing
certificates for Registrable Notes or Exchange Notes in a form eligible for
deposit with The Depository Trust Company and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate principal
amount of the Registrable Notes included in any Registration Statement or in
respect of Registrable Notes or Exchange Notes to be sold by any Participating
Broker-Dealer during the Applicable Period, as the case may be, (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuer and reasonable fees and disbursements of one special
counsel for all of the sellers of Registrable Notes (exclusive of any counsel
retained pursuant to Section 7 hereof), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(m)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (vi)
Securities Act liability insurance, if the Issuer desires such insurance,
(vii) fees and expenses of all other Persons retained by the Issuer, (viii)
internal expenses of the Issuer (including, without limitation, all salaries
and expenses of officers and employees of the Issuer performing legal or
accounting duties), (ix) the expense of any annual audit, (x) any fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, and the obtaining of a rating of the
securities, in each case, if applicable, and (xi) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, indentures and any other documents necessary in order
to comply with this Agreement.
7. Indemnification
(a) The Issuer agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers, directors, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages, judgments, liabilities and expenses (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim
<PAGE> 28
--26--
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Issuer shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by, arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the case of the
Prospectus in light of the circumstances under which they were made, not
misleading, except (i) insofar as such losses, claims, damages or liabilities
are caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Issuer in writing by such Participant expressly
for use therein and (ii) with respect to any preliminary Prospectus, to the
extent such losses, claims, damages or liabilities arise solely from the fact
that a Participant sold securities to a person to whom there was not sent or
given, on or prior to the written confirmation of such sale, a copy of the Final
Prospectus, as amended and supplemented, if (A) the Issuer shall have previously
furnished copies thereof to such Participant in accordance with this Agreement
and (B) the final Prospectus, as amended or supplemented, would have corrected
any such untrue statement or omission.
(b) Each Participant agrees, severally and not jointly, to indemnify and
hold harmless the Issuer, its directors, officers who sign the Registration
Statement and each Person who controls the Issuer within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent
(but on a several, and not joint, basis) as the foregoing indemnity from the
Issuer to each Participant, but only with reference to information relating to
such Participant furnished to the Issuer in writing by such Participant
expressly for use in any Registration Statement or Prospectus, any amendment or
supplement thereto, or any preliminary prospectus. The liability of any
Participant under this paragraph shall in no event exceed the proceeds received
by such Participant from sales of Registrable Notes or Exchange Notes giving
rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of
the two preceding paragraphs, such Person (the "Indemnified Person") shall
promptly notify the Persons against whom such indemnity
<PAGE> 29
--27--
may be sought (the "Indemnifying Persons") in writing, and the Indemnifying
Persons, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others the Indemnifying Persons may reasonably designate in
such proceeding and shall pay the fees and expenses actually incurred by such
counsel related to such proceeding; provided, however, that the failure to so
notify the Indemnifying Persons shall not relieve any of them of any
obligation or liability which any of them may have hereunder or otherwise. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Persons and the
Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both any Indemnifying Person and the Indemnified Person or any affiliate
thereof and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that, unless there exists a conflict among Indemnified Persons,
the Indemnifying Persons shall not, in connection with such proceeding or
separate but substantially similar related proceedings arising out of the same
general allegations, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified Persons,
and that all such fees and expenses shall be reimbursed promptly as they are
incurred. Any such separate firm for the Participants and such control Persons
of Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Notes and Exchange Notes sold by all such
Participants and shall be reasonably acceptable to the Issuer, and any such
separate firm for the Issuer, its directors, officers and such control Persons
of the Issuer shall be designated in writing by the Issuer and shall be
reasonably acceptable to the Holders holding a majority in interest of
Registrable Notes and Exchange Notes.
The Indemnifying Persons shall not be liable for any settlement of any
proceeding effected without their prior written consent (which consent shall
not be unreasonably withheld or delayed), but if settled with such consent or
if there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to
<PAGE> 30
--28--
indemnify and hold harmless each Indemnified Person from and against any loss
or liability by reason of such settlement or judgment. No Indemnifying Person
shall, without the prior written consent of the Indemnified Persons (which
consent shall not be unreasonably withheld or delayed), effect any settlement
or compromise of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party, or indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A)
includes an unconditional written release of such Indemnified Person, in form
and substance reasonably satisfactory to such Indemnified Person, from all
liability on claims that are the subject matter of such proceeding and (B)
does not include any statement as to an admission of fault, culpability or
failure to act by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person
under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified Person as a
result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other hand from the offering of the Notes or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other in
connection with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative benefits received by the Issuer on the one hand and the Participants
on the other hand shall be deemed to be in the same proportion as the total
proceeds from the offering (net of discounts and commissions but before
deducting expenses) of the Notes received by the Issuer bears to the total
proceeds received by such Participant from the sale of Registrable Notes or
Exchange Notes, as the case may be, in each case as set forth in the table on
the cover page of the Memorandum in respect of the sale of the Notes. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue
<PAGE> 31
--29--
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuer on the one hand
or such Participant or such other Indemnified Person, as the case may be, on
the other hand, the parties relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any
other equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no event
shall a Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of
any damages that such Participant has otherwise been required to pay or has
paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section ll(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuer set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Issuer, its directors, officers, employees or agents or any person
controlling the Issuer, and (ii) any termination of this Agreement.
<PAGE> 32
--30--
(g) The indemnity and contribution agreements contained in this Section
7 will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rule 144A
The Issuer covenants and agrees that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner in accordance
with the requirements of the Securities Act and the Exchange Act and, if at
any time the Issuer is not required to file such reports, the Issuer will,
upon the request of any Holder or beneficial owner of Registrable Notes, make
available such information reasonably necessary to permit sales pursuant to
Rule 144A under the Securities Act. The Issuer further covenants and agrees,
for so long as any Registrable Notes remain outstanding that it will take such
further action as any Holder of Registrable Notes may reasonably request, all
to the extent required from time to time to enable such holder to sell
Registrable Notes without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144A under the Securities
Act, as such Rules may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration are to
be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Issuer.
No Holder may participate in any underwritten registration hereunder
unless such Holder (a) agrees to sell such Holder's Registrable Notes on the
basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
<PAGE> 33
--31--
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuer has not, as of the date
hereof, and the Issuer shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. The rights granted to the Holders hereunder do not
in any way conflict with and are not inconsistent with the rights granted to
the holders of the Issuer's other issued and outstanding securities under any
such agreements. The Issuer has not entered and will not enter into any
agreement with respect to any of its securities which will grant to any Person
piggy-back registration rights with respect to any Registration Statement.
(b) Adjustments Affecting Registrable Notes. The Issuer shall not,
directly or indirectly, take any action with respect to the Registrable Notes
as a class that would adversely affect the ability of the Holders to include
such Registrable Notes in a registration undertaken pursuant to this
Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Issuer and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and
(B) in circumstances that would adversely affect the Participating
Broker-Dealers, the Participating Broker-Dealers holding not less than a
majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and this
Section lO(c) may not be amended, modified or supplemented without the prior
written consent of each Holder and each Participating Broker-Dealer
(including any person who was a Holder or Participating Broker-Dealer of
Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant
to any Registration Statement) affected by any such amendment, modification
or supplement. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively
to the rights of Holders whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect,
impair, limit or compromise the rights of other Holders may be given by
Holders of at least a majority in aggregate principal amount of the
<PAGE> 34
--32--
Registrable Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder or any Participating BrokerDealer, at the
most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of
the registrar under the Indenture.
(ii) if to the Issuer, at the address as follows:
c/o Gaylord Container Corporation
500 Lake Court Road
Suite 400
Deerfield, IL 60015
Facsimile No.: (847) 405-5628
Attention: Chief Financial Officer
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt
is acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto,
the Holders and the Participating Broker-Dealers; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder or Participating Broker-Dealer unless and to
the extent such successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be
<PAGE> 35
--33--
deemed to be an original and all of which taken together shall constitute
one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties hereto shall
use their best efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Issuer or its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuer or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third-Party Beneficiaries. Holders and Participating Broker-Dealers
are intended third- party beneficiaries of this Agreement, and this Agreement
may be enforced by such Persons.
(1) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and
<PAGE> 36
--34--
memoranda between the Holders on the one hand and the Issuer on the other
hand, or between or among any agents, representatives, parents, subsidiaries,
affiliates, predecessors in interest or successors in interest with respect to
the subject matter hereof and thereof are merged herein and replaced hereby.
(m) Information Supplied by the Participants. The statements set forth in
the last paragraph on the front cover page and in the third, sixth and seventh
paragraphs under the heading "Private Placement" in the Memorandum (to the
extent such statements relate to a Participant) constitute the only
information furnished by the Participants to the Issuer for the purposes of
Section 7 hereof.
<PAGE> 37
IN WITNESS WHEREOF, the marshes have executed this Agreement as of the date
first written above.
GAYLORD CONTAINER CORPORATION
By: /s/ Thomas M. Steffen
----------------------
Name: Thomas M. Steffen
Title: Assistant Treasurer
<PAGE> 38
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
BT SECURITIES CORPORATION,
as Initial Purchaser
By: /s/ Charles G. Denison
--------------------------------
Name: Charles G. Denison
Title: Senior Managing Director
BEAR, STEARNS & CO. INC.,
as Initial Purchaser
By: /s/ Tylene J. Elliott
--------------------------------
Name: Tylene J. Elliott
Title: SMD
SALOMON BROTHERS INC,
as Initial Purchaser
By: /s/ John S. Chrysikopous
--------------------------------
Name: John S. Chrysikopous
Title: Director
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of June 1, 1997 by and between Gaylord Container
Corporation, a Delaware corporation ("Gaylord"), and Marvin A. Pomerantz
("Pomerantz").
Gaylord and Pomerantz desire to enter into an Employment Agreement (the
"Agreement"). Accordingly, Gaylord and Pomerantz agree as follows:
ARTICLE 1
Employment
Section 1.01. Effective Date; Position; Term.
This Agreement shall become effective on June 1, 1997 (the "Effective
Date"). Gaylord shall employ Pomerantz as Chief Executive Officer of Gaylord
for a term (the "Employment Period") commencing on the Effective Date and
continuing until December 31, 2000, subject to earlier termination pursuant to
Article 3 hereof.
Section 1.02. Duties.
During the Employment Period, (a) Pomerantz shall have the normal
responsibilities, duties and authorities of a chief executive officer, subject
to the power of the Board of Directors of Gaylord (the "Board") to expand or
limit such duties and to override actions of a chief executive officer, and (b)
Pomerantz shall perform faithfully the executive duties assigned to him by the
Board to the best of his ability and will devote such time and attention to
Gaylord's affairs as is reasonably necessary to accomplish the purposes of this
Agreement. Pomerantz's residence and principal office during the Employment
Period will be located in Des Moines, Iowa.
ARTICLE 2
Compensation
Section 2.01. Basic Compensation.
(a) Base Salary. As compensation for his services hereunder, Gaylord
shall pay to Pomerantz during the Employment Period a base salary at the rate
of at least $750,000 per annum. Such compensation shall be payable in equal
installments in arrears on a semi-monthly basis, or as otherwise may be
mutually agreed upon.
<PAGE> 2
(b) Salary Reviews. While this Agreement remains in effect, the annual
base salary provided in Section 2.01(a), above, may, in the sole discretion of
the Board, be reviewed at any time to ascertain whether such base salary should
be increased or decreased. In the event the board determines that Pomerantz's
base salary should be revised, his base salary payable for the remaining term
of this Agreement pursuant to (a) above shall be such revised amount unless
such amount in turn is increased or decreased on subsequent annual review, in
which event the last such revised amount shall represent Pomerantz's annual
base salary for the then remaining term of this Agreement. Notwithstanding the
above, in no event shall Pomerantz's base salary be less than $750,000 per
anum.
Section 2.02. Shareholder Value Plan.
During the term of this Agreement (subject to earlier termination pursuant
to Article 3 hereof and the Shareholder Value Plan), Pomerantz shall be
entitled to participate in the Shareholder Value Plan, as currently in effect
through December 31, 1997 and as amended and restated effective January 1,
1998, as outlined in Exhibit A to this Agreement.
Section 2.03. Participation in Employee Benefit Plans.
Pomerantz will be entitled to participate in all Gaylord salaried employee
benefit plans and programs, including the Gaylord Container Retirement Plan
(the "Retirement Plan"), subject to the terms and conditions of each such
employee benefit plan or program and to the extent commensurate with his
position as Chief Executive Officer of Gaylord.
Section 2.04. Supplemental Retirement Payments.
(a) Pomerantz will be entitled to receive monthly supplemental retirement
income payments commencing on the effective date of Pomerantz's retirement.
(b) If such monthly supplemental retirement income payments are to be paid
in the form of a single life annuity, the amount of such monthly payments shall
be equal to the excess of (A) 1/24th of his average annualized base salary and
Bonus Accrued for the four highest years of service with Gaylord over (B) the
sum of (i) his monthly benefits under the Gaylord retirement Plan and (ii) his
monthly primary Social Security benefits as determined for purposes of
computing Retirement Plan benefits.
(c) If supplemental retirement income payments are to be paid in a form
other than a single life annuity, the amount of such payments will be reduced
by appropriate actuarial reductions. Supplemental retirement income payments
will be paid under the form of payment that parallels the form Pomerantz elects
under the Retirement Plan, unless otherwise mutually agreed upon.
(d) For purposes of this Section 2.04, "Bonus Accrued" for a year means
(i) with respect to the Shareholder Value Plan, Pomerantz's earned and paid
award through December
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<PAGE> 3
31 of such year and (ii) with respect to bonuses for
years ended prior to January 1, 1993, Pomerantz's bonus awarded for such year.
(e) For purposes of this Section 2.04, Pomerantz's base salary and Bonus
Accrued (and his years of service) shall include such base salary and Bonus
Accrued from Mid America Packaging, Inc. prior to its combination with Gaylord,
including management fees (but not reimbursement of expenses) paid by Gaylord
and Mid America Packaging to Mid America Development Company and/or Mid-America
Group through May 31, 1998. See Exhibit B for Supplemental Retirement Plan pay
history, i.e., "base salary and Bonus Accrued", for Pomerantz.
Section 2.05. Eligibility for Future Option Grants.
Pomerantz agrees that he will not be eligible for any stock option or
restricted stock grants under Gaylord's stock option plans until January 1,
1998.
Section 2.06. Withholding.
Gaylord shall be entitled, if necessary or desirable, to withhold (or
secure payment from Pomerantz or his personal representative or beneficiary, in
lieu of withholding), the amount of any withholding or other tax due from
Gaylord with respect to any amount payable or paid or any shares issuable or
issued to Pomerantz (or his personal representative or beneficiary) pursuant to
this Agreement.
Section 2.07. Nontransferability.
Pomerantz's interest in the Shareholder Value Plan may not be transferred
other than by (a) will or the laws of descent and distribution, (b) to any
member of Pomerantz's family, or (c) to any trust or partnership for the
benefit of any member of Pomerantz's family, and, during this lifetime, is
payable only to Pomerantz or to any transferee permitted by this Section 2.07.
ARTICLE 3
Involuntary Termination of Employment
Section 3.01. Events of Termination.
(a) In the event that during the Employment Period (i) Pomerantz should
become Totally and Permanently Disabled or (ii) Pomerantz should commit Serious
Misconduct (as defined in Section 3.02 below), Gaylord (acting by resolution of
the Board) may elect to terminate the Employment Period by written notice to
Pomerantz. In the case of termination pursuant to item (i) Pomerantz shall be
entitled to receive full compensation pursuant to Section 2.01 at his then base
salary rate for a period of 12 months following the date of such notice.
-3-
<PAGE> 4
(b) In the event the Employment Period terminates because of Pomerantz's
death, his personal representative shall be entitled to receive base salary
which is accrued and unpaid as of the date of his death.
(c) The Gaylord Board of Directors will have the right to terminate the
Employment Period and remove and/or replace Pomerantz as Chief Executive
Officer at any time. In the event that Gaylord's Board elects to terminate the
Employment Period for any reason other than Pomerantz's death, total and
permanent disability, or Serious Misconduct or if Pomerantz resigns for Good
Reason, he shall be entitled to receive his full compensation pursuant to
Section 2.01 at this then base salary rate through December 31, 2000, without
regard to such early termination.
(d) The Shareholder Value Plan describes Pomerantz's rights under that
plan, in case of early termination. In the case of any conflict or discrepancy
between the terms hereof and the Shareholder Value Plan, the Shareholder Value
Plan shall control.
Section 3.02. Definition of Certain Terms.
(a) "Totally and Permanently Disabled" means such physical or mental
condition of Pomerantz as is determined by the Board in its sole discretion to
be expected to continue indefinitely and which renders him incapable of
performing any substantial portion of the services contemplated hereby (as
confirmed by competent medical evidence).
(b) "Serious Misconduct" means embezzlement or misappropriation of
corporate funds, other acts of dishonesty, commission of a felony, willful
refusal to perform or substantial disregard of the duties properly assigned
pursuant to Article 1, significant violation of any statutory or common law
duty of loyalty to Gaylord, repeated acts tending to bring Gaylord into public
disgrace or disrepute, including, but not limited to, alcohol, drug or other
substance abuse, or a material violation of Section 4.02 or Section 4.03
(below).
(c) "Good Reason" means Pomerantz's resignation as a direct result of (i)
a substantial diminution of his responsibilities, duties, or authorities as
Gaylord's chief executive officer as compared to his responsibilities, duties
and authorities prior to such diminution, (ii) a reduction of his perquisites
(including the office facilities provided to him), (iii) a change in the
location of his principal office, or (iv) a material breach of this Agreement
by Gaylord, which diminution, reduction, change or breach is not cured within
15 days after written notice by Pomerantz to Gaylord.
ARTICLE 4
Miscellaneous
Section 4.01. Assignment and Succession.
(a) The rights and obligations of Gaylord under this Agreement shall inure
to the benefit of and be binding upon its respective successors and assigns,
and Pomerantz's rights
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<PAGE> 5
and obligations hereunder shall inure to the benefit of and be binding upon his
legal representatives.
(b) Pomerantz acknowledges that the services to be rendered by him
hereunder are unique and personal. Accordingly, Pomerantz may not pledge or
assign any of his rights or delegate any of his duties or obligations under
this Agreement without the express prior written consent of Gaylord.
(c) Gaylord may not assign its interest in or obligations under this
Agreement without the prior written consent of Pomerantz.
Section 4.02. Confidential Information.
Pomerantz acknowledges that the information, observations and data
obtained by him during the course of his performance under this Agreement
concerning the business or affairs of Gaylord is the property of Gaylord.
Therefore, Pomerantz agrees that he will not at any time disclose to any
unauthorized person or use for his own account any of such information,
observations or data without the Board's written consent unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Pomerantz's acts or omissions
to act, or unless compelled to make such disclosure by order of a court of law.
Pomerantz agrees to deliver to Gaylord at the termination of his employment,
or at any other time upon reasonable request by Gaylord, all memoranda, notes,
plans, records, reports and other documents relating to the business of Gaylord
which he may then possess or have under his control.
Section 4.03. Covenant Not to Compete.
(a) Pomerantz agrees that during the term of this Agreement, without
regard to any early termination, and for one year thereafter, he will neither
directly nor indirectly engage in, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or invest or participate in, a business competing with
any of the business then conducted (or, to the knowledge of Pomerantz, planned
to be conducted within one year) by Gaylord or any of its successors or then
subsidiaries.
(b) Nothing contained in this Section 4.03 shall prevent Pomerantz from
owning up to a 5% interest in any corporation or entity having one or more
classes of its securities listed on a national securities exchange or publicly
traded in the over-the-counter market, provided Pomerantz is not actively
involved in the operation or management of such corporation or entity.
(c) If under the circumstances existing at the time of enforcement of this
Section 4.03, the period, scope or area described in this Section 4.03 shall be
found or held to be unreasonable, the parties hereto agree that the maximum
period, scope or area reasonable under the circumstances shall be substituted
for the stated period, scope or area.
-5-
<PAGE> 6
(d) The parties hereto agree that in the event of the breach of this
Section 4.03 by Pomerantz, monetary damages alone would not be an adequate
remedy to Gaylord for the injury that would result from such breach, and that
Gaylord shall be entitled, at any time after such breach, to immediately obtain
injunctive relief prohibiting any further breach of this Agreement. Pomerantz
further agrees that any such injunctive relief obtained by Gaylord shall be in
addition to monetary damages.
(e) For purposes of this paragraph 4.03, Pomerantz includes Mid America
Group, Ltd. and each entity controlled by Pomerantz, his wife and children, and
trusts or entities for their benefits.
(f) In the event it is judicially determined, in a final non-appeal
judgement by a court of competent jurisdiction, that Pomerantz has materially
violated this covenant not to compete, the parties hereto agree that Gaylord's
exclusive remedy for monetary damages against Pomerantz shall be limited to a
forfeiture by Pomerantz of any (i) salary payable hereunder after the date of
violation as determined in such final judgement and (ii) deferred awards earned
under the Gaylord Shareholder Value Plan which are payable after the date of
violation as determined in such final judgement.
Section 4.04. Expenses.
Gaylord shall reimburse Pomerantz for travel, transportation, office and
other expenses he incurs in connection with his duties as Chief Executive
Officer, including, without limitation, expenses of his Des Moines office and
travel to and from his Des Moines office on Gaylord business.
Section 4.05. Entire Agreement.
This Agreement represents the entire agreement between the parties
relating to the subject matters covered thereby (and upon the Effective Date
shall supersede any prior agreement as to such matters) and shall not be
amended or waived except in writing signed by the parties hereto.
Section 4.06. Notices.
Any notice or request required or permitted to be given hereunder shall be
sufficient if in writing and delivered personally or sent by certified or
registered mail, return receipt requested, to the addresses below:
to Gaylord: Gaylord Container Corporation
500 Lake Cook Road, Suite 400
Deerfield, Illinois 60015
Attn: David F. Tanaka, Secretary
-6-
<PAGE> 7
to Pomerantz: Marvin A. Pomerantz
Regency West - 4
4700 Westown Parkway, Suite 303
West Des Moines, Iowa 50265
with a copy to: Marvin A. Pomerantz
c/o Gaylord Container Corporation
500 Lake Cook Road, Suite 400
Deerfield, Illinois 60015
Such notice shall be deemed to have been given upon the personal delivery
or such mailing thereof, as the case may be.
Either party shall have the right from time to time to change the address
to which notices shall be sent by a written instruction to the other party.
Section 4.07. Applicable Law.
This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Illinois.
Section 4.08. Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
IN WITNESS WHEREOF, Gaylord has caused this Agreement to be signed by its
duly authorized officer and Pomerantz has signed this Agreement as of the date
first written above.
GAYLORD CONTAINER CORPORATION
By: Daniel P. Casey
-------------------------
Its: Executive Vice President
------------------------
/s/ Marvin A. Pomerantz
------------------------
Marvin A. Pomerantz
-7-
<PAGE> 8
EXHIBIT A
GAYLORD CONTAINER CORPORATION
SHAREHOLDER VALUE PLAN
(as amended and restated effective January 1, 1998)
TERM: Eight years commencing January 1, 1993 through December
31, 2000.
PURPOSE: To focus actions and decision-making on increasing
shareholder value.
PARTICIPANTS: Marvin A. Pomerantz - Chairman and Chief Executive Officer
MEASUREMENT: Measure year-to-year increase in shareholder value - The
base or beginning share value under the Plan is $3.375
per share.
The increase in value for a given calendar year shall be
determined as follows:
1) Multiply the beginning of year share value ($3.375
for calendar 1993 and, for each subsequent calendar year, the
average closing price for the first ten trading days in January
of such calendar year and the last ten trading days in the prior
calendar year, but in no event less than the highest year-end
share value for any prior calendar year with respect to which an
award was earned hereunder) by 53,365,378 (regardless of the
number of Gaylord shares actually outstanding).
2) Multiply the end of year share value (the average
closing price for the last ten trading days in December of such
calendar year and the first ten trading days in the subsequent
calendar year) by 53,365,378 (regardless of the number of
Gaylord shares actually outstanding).
3) Subtract the result in (1) from the result in (2) -
This represents the increase in share value upon which awards
will be made.
Increased stock price for valuation establishes a new base for a given
calendar year; reduced stock price does establish a new base for a given
calendar year, i.e., award cannot be duplicated.
All calculations hereunder (including share values and number of shares)
will be equitably adjusted by Gaylord's Board of Directors in the event of any
stock split, stock
<PAGE> 9
dividend, reverse stock split, consolidation or other recapitalization of
Gaylord's capital stock, so that the awards intended to be granted hereunder
will not be affected thereby.
ACQUISITION
OF GAYLORD: In the event of an acquisition of Gaylord prior to December 31,
2000, the transaction price will establish the final valuation
under this plan. Upon an acquisition of Gaylord, final
payments including all deferred amounts, if any, which are
earned based on the acquisition price, will be due and payable
at the closing of any such acquisition of Gaylord.
For this purpose, an acquisition of Gaylord means (i) a sale of
substantially all of Gaylord's assets to, or a merger with,
another person for cash and/or property (other than a person
where Gaylord's former shareholders own immediately after such
transaction directly or indirectly stock possessing more than
50% of such person's voting power) or (ii) an acquisition of
Gaylord stock by a person or group (within the meaning of
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) so
that such person or group has acquired stock possessing more
than 50% of Gaylord's voting power (other than a person or
group which includes Pomerantz, Mid America Group, Ltd., or
Warren J. Hayford, or their respective spouses or heirs).
TERMINATION OF
EMPLOYMENT: If Gaylord terminates the employment of Pomerantz or Pomerantz
resigns for Good Reason, before the end of a calendar year
other than because of his death, Total and Permanent
Disability, or Serious Misconduct, Pomerantz shall continue to
participate in this plan for the calendar year in which such
termination occurs and the following calendar year.
If Gaylord terminates Pomerantz for Serious Misconduct or
Pomerantz resigns for other than Good Reason, such participant
shall receive no earned award for the calendar year in which
such termination occurred or any subsequent calendar year.
If it is judicially determined in accordance with 4.03(f) of
the Employment Agreement between Pomerantz and Gaylord that
Pomerantz violated his covenant not to compete, set forth in
4.03 of such Agreement, then Pomerantz shall receive no earned
award for (i) calendar year in which such violation occurs, as
set forth in any such final judicial determination, or (ii) any
subsequent calendar year.
If Pomerantz ceases to be a Gaylord employee because of his
death or Total and Permanent Disability before the end of a
calendar year, (i) the earned award for such calendar year
shall be the amount calculated as set forth in Measurement
above, but using the ten trading days prior to the termination
of
-2-
<PAGE> 10
the participant's employment (including the date of termination
if it is a trading day) and the ten trading days after the
termination of his employment, and (ii) such participant shall
be entitled to no earned award for any subsequent year.
EARNED
AWARD: One percent of the annual increase in shareholder value will be
an earned award.
50% of any earned award will be paid as soon as practical
following the measurement period in which such award is earned.
The remaining 50% of the earned award will be deferred and
subject to vesting as set forth below.
The deferred amount will be paid in twelve equal installments
each of which is payable promptly following the end of any
month for which the AMEX reported closing price of Gaylord
common stock on the last trading day of such month equaled or
exceeded the threshold share value which was originally
required to earn such deferred award; provided that any
deferred amounts not required to be paid with respect to
month-end closing prices prior to January 1, 2001 will be
forfeited. Notwithstanding the foregoing, 1/12th of the
deferred amount of any award earned in year eight will be
payable promptly following the end of any month during calendar
2001 for which the AMEX reported closing price of Gaylord
common stock on the last trading day of such month equaled or
exceeded the threshold share value required to earn such
deferred award. Any deferred amount not required to be paid
with respect to 2001 month-end closing prices will be
forfeited.
Except as otherwise provided above, in no event will any award
be earned, nor will any deferred amount become payable with
respect to any share value reported after termination of
Pomerantz's employment for any reason or after any acquisition
of Gaylord.
All deferred awards outstanding on the date of an acquisition
of Gaylord which are payable, based on a threshold share value
equal to or less than the transaction price, will be payable at
the closing of the acquisition.
All payments shall be in cash.
AMENDMENTS: No modification, waiver or amendment of any provision of this
Plan shall be effective unless approved in writing by the Board
of Directors; provided, however, that in the event such
modification, waiver or amendment would adversely affect a
participant, then the written consent of the participant shall
be required.
-3-
<PAGE> 11
COMPLIANCE
WITH IRC
162(m): This Plan as amended and restated effective January 1, 1998 has
been approved by Gaylord's Compensation Committee and is
subject to approval by Gaylord's shareholders. Gaylord's
Compensation Committee satisfies the requirements of Section
162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as
amended, (the "Code"). No earned award hereunder will be
payable to Pomerantz unless and until this Plan as amended and
restated effective January 1, 1998 has been approved by a
majority of the votes of Gaylord's shareholders, as described
in Section 162(m)(4)(C)(ii) of the Code.
OTHER: All earned awards will be included as "incentive" in the
year paid for purposes of calculating benefits under the
Gaylord Retirement Plan or any Supplemental Retirement
Agreement(s) in effect.
-4-
<PAGE> 12
EXHIBIT B
SUPPLEMENTAL RETIREMENT PLAN
Pay History of
MARVIN A. POMERANTZ
Calendar 1986 $527,500
" 1987 1,212,250
" 1988 988,350
" 1989 600,000
" 1990 600,000
" 1991 480,000
" 1992 480,000
" 1993 600,000
" 1994 1,282,000
" 1995 2,556,816
" 1996 879,546
<PAGE> 1
EXHIBIT 12.1
Historical Computation of Earnings to Fixed Charges
For the Years Ended September 30, 1992, 1993, 1994, 1995
1992 1993 1994 1995
------ ------ ------ ------
Earnings:
Earnings (loss) before
income taxes $ (132.5) $ (70.0) $ (84.0) $ 110.0
Capitalized interest (0.5) (0.5) (0.9) (2.3)
Fixed charges 113.8 71.6 83.9 90.0
----- ----- ----- -----
Total $ (19.2) $ 1.1 $ (1.0) $ 197.7
===== ===== ===== =====
Fixed Charges:
Interest expense $ 110.8 $ 68.2 $ 80.3 $ 86.1
Rent Expense 3.0 3.4 3.6 3.9
Total ----- ----- ----- -----
$ 113.8 71.6 83.9 90.0
===== ===== ===== =====
Ratio of earnings to
fixed charges NM NM NM 2.2
===== ===== ===== =====
Deficit of earnings
to fixed charges $ 133.0 $ 70.5 $ 84.9 NM
===== ===== ===== =====
"Earnings" consist of earnings before income taxes and fixed charges.
"Fixed Charges" consist of interest expense, amortization of debt discount and
debt issuance expense and one-third of rental expense.
<PAGE> 2
Historical and Pro Forma Computation of Earnings to Fixed Charges
For the Year Ended September 30, 1996
Refinancing Pro Forma for
Historical Adjustment Refinancing
---------- ----------- --------------
Earnings:
Earnings before
income taxes $ 20.1 $ (1.2) $ 18.9
Capitalized interest (0.8) - (0.8)
Fixed charges 82.1 1.2 83.3
----- ---- -----
Total $ 101.4 - $ 101.4
===== ==== =====
Fixed Charges:
Interest expense $ 78.3 $ 1.2 79.5
Rent expense 3.8 - 3.8
----- ---- -----
Total $ 82.1 1.2 83.3
===== ==== =====
Ration of earnings to
fixed charges 1.2 1.2
===== =====
"Earnings" consist of earnings before income taxes and fixed charges.
"Fixed Charges" consist of interest expense, amortization of debt discount and
debt issuance expense and one-third of rental expense.
<PAGE> 3
Historical and Pro Forma Computation of Earnings to Fixed Charges
For the Six Months Ended March 31, 1997
Refinancing Pro Forma for
Historical Adjustment Refinancing
---------- ----------- -------------
Earnings:
Loss before income
taxes $ (46.4) $ (0.6) $ (47.0)
Capitalized interest (0.5) - (0.5)
Fixed charges 41.3 0.6 41.9
----- ---- -----
Total $ (5.6) $ - $ (5.6)
===== ==== =====
Fixed Charges:
Interest expense $ 39.4 $ 0.6 $ 40.0
Rent expense 1.9 - 1.9
----- ---- -----
Total $ 41.3 0.6 41.9
===== ==== =====
Ratio of earnings to
fixed charges NM NM
===== =====
Deficit of earnings
to fixed charges $ (46.9) $ (47.5)
===== =====
"Earnings" consist of earnings before income taxes and fixed charges.
"Fixed Charges" consist of interest expense, amortization of debt discount and
debt issuance expense and one-third of rental expense.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Gaylord Container Corporation on Form S-4 of our report dated November 4, 1996,
included in the Annual Report on Form 10-K of Gaylord Container Corporation,
and to the use of our report dated November 4, 1996, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Chicago, Illinois
June 26, 1997
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Marvin A. Pomerantz and Daniel P. Casey, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as director and/or officer of
Gaylord Container Corporation), to sign the Registration Statement on Form S-4
(or other applicable form) and any or all amendments (including post-effective
amendments) to such Registration Statement, and to file the same, with all
exhibits thereto, and other 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 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 substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements to the Securities Act of 1933, this power of
attorney has been executed by the undersigned on June 27, 1997.
Signature Title
- --------- -----
/s/ Marvin A. Pomerantz Chairman, Chief Executive Officer
- --------------------------------- and Director
Marvin A. Pomerantz
/s/ Daniel P. Casey Executive Vice President
- --------------------------------- (Principal Financial Officer)
Daniel P. Casey
/s/ Jeffrey B. Park Vice President-Corporate Controller
- --------------------------------- (Principal Accounting Officer)
Jeffrey B. Park
/s/ Mary Sue Coleman Director
- ---------------------------------
Mary Sue Coleman
/s/ Harve A. Ferrill Director
- ---------------------------------
Harve A. Ferrill
/s/ John E. Goodenow Director
- ---------------------------------
John E. Goodenow
/s/ David B. Hawkins Director
- -------------------------------
David B. Hawkins
/s/ John Hawkinson Director
- ---------------------------------
John Hawkinson
/s/ Warren J. Hayford Director
- ---------------------------------
Warren J. Hayford
/s/ Richard S. Levitt Director
- ---------------------------------
Richard S. Levitt
/s/ Ralph L. MacDonald, Jr. Director
- ---------------------------------
Ralph L. MacDonald, Jr.
/s/ Thomas H. Stoner Director
- ---------------------------------
Thomas H. Stoner
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
to Tender for Exchange
9 3/4% Senior Notes due 2007, Series A
of
GAYLORD CONTAINER CORPORATION
Pursuant to the Prospectus Dated , 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
<TABLE>
<C> <C>
By Mail: Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway Two International Plaza
Concourse Level, Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (617)
664-5590, OR BY FACSIMILE AT (617) 664-5739.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of Gaylord Container Corporation, a
Delaware corporation ("Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its 9 3/4% Senior Notes due
2007, Series B (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement, for each $1,000 in principal amount of its outstanding
9 3/4% Senior Notes due 2007, Series A (the "Initial Notes"), of which
$225,000,000 aggregate principal amount is outstanding. Capitalized terms used
but not defined herein have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Initial Notes described in Box 1 below
(the "Tendered Initial Notes") pursuant to the terms and conditions described in
the Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Initial Notes and the undersigned represents that it
has received from each beneficial owner of the Tendered Initial Notes
("Beneficial Owners") a duly completed and executed form of "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" accompanying this Letter of Transmittal, instructing the
undersigned to take the action described in this Letter of Transmittal.
<PAGE> 2
Subject to, and effective upon, the acceptance for exchange of the Tendered
Initial Notes, the undersigned hereby exchanges, assigns and transfers to, or
upon the order of, the Company all right, title, and interest in, to and under
the Tendered Initial Notes.
Please issue the Exchange Notes exchanged for Tendered Initial Notes in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Initial Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Initial Notes to the Company or cause
ownership of the Tendered Initial Notes to be transferred to, or upon the order
of, the Company, on the books of the registrar for the Initial Notes and deliver
all accompanying evidences of transfer and authenticity to, or upon the order
of, the Company upon receipt by the Exchange Agent, as the undersigned's agent,
of the Exchange Notes to which the undersigned is entitled upon acceptance by
the Company of the Tendered Initial Notes pursuant to the Exchange Offer, and
(ii) receive all benefits and otherwise exercise all rights of beneficial
ownership of the Tendered Initial Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned understands that tenders of Initial Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owner(s) hereunder shall
be binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Initial Notes and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances, and
adverse claims when the Tendered Initial Notes are acquired by the Company as
contemplated herein. The undersigned and each Beneficial Owner will, upon
request, execute and deliver any additional documents reasonably requested by
the Company or the Exchange Agent as necessary or desirable to complete and give
effect to the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company,
and (iv) the undersigned and each Beneficial Owner acknowledge and agree that
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), in connection with a secondary resale of the Exchange Notes acquired by
such person and cannot rely on the position of the Staff of the Securities and
Exchange Commission (the "Commission") set forth in the no-action letters that
are discussed in the section of the Prospectus entitled "The Exchange Offer." In
addition, by accepting the Exchange Offer, the undersigned hereby (i) represents
and warrants that, if the undersigned or any Beneficial Owner of the Initial
Notes is a Participating Broker-Dealer, such Participating
<PAGE> 3
Broker-Dealer acquired the Initial Notes for its own account as a result of
market-making activities or other trading activities and has not entered into
any arrangement or understanding with the Company or any "affiliate" of the
Company (within the meaning of Rule 405 under the Securities Act) to distribute
the Exchange Notes to be received in the Exchange Offer, and (ii) acknowledges
that, by receiving Exchange Notes for its own account in exchange for Initial
Notes, where such Initial Notes were acquired as a result of market-making
activities or other trading activities, such Participating Broker-Dealer will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4).
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW
(Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------
BOX 1
DESCRIPTION OF INITIAL NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- -----------------------------------------------------------
AGGREGATE
PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S), CERTIFICATE AMOUNT AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) ON INITIAL NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) INITIAL NOTES* CERTIFICATE(S) TENDERED**
- --------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
TOTAL
- -----------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Initial Notes. All other tenders must be in
integral multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the principal
amount of all Initial Note Certificates identified in this Box 1 or delivered to the Exchange Agent herewith
shall be deemed tendered. See Instruction 4.
- -----------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------------------------
<S> <C>
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED INITIAL NOTES
BENEFICIAL OWNER OF TENDERED INITIAL NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
==================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES AND/OR UNTENDERED INITIAL NOTES ARE TO
BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN
ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Initial Notes to:
Name(s):
------------------------------------------------------------------------------
(please print)
Address:
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.:
- --------------------------------------------------------------------------------
<PAGE> 5
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF INITIAL NOTES ARE BEING TENDERED BY MEANS OF A NOTICE
OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
-----------------------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------------------------
Name of Institution which Guaranteed Delivery:
------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED INITIAL NOTES IS TO BE MADE BY
BOOK-ENTRY TRANSFER.
Name of Tendering Institution:
--------------------------------------------------------------
Account Number:
------------------------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------------------------------------------
X Signature Guarantee
----------------------------------------------- (If required by Instruction 5)
X
-------------------------------------------------
(Signature of Registered Holder(s) or Authorized Signature
Authorized Signatory)
Note: The above lines must be signed by the X
registered holder(s) of Initial Notes as their ----------------------------------------------------
name(s) appear(s) on the Initial Notes or by
persons(s) authorized to become registered holder(s) Name:
(evidence of such authorization must be transmitted -------------------------------------------------
with this Letter of Transmittal). If signature is by (please print)
a trustee, executor, administrator, guardian,
attorney-in-fact, officer, or other person acting in Title:
a fiduciary or representative capacity, such person -----------------------------------------------
must set forth his or her full title below. See
Instruction 5. Name of Firm:
-----------------------------------------
(Must be an Eligible Institution
as defined in Instruction 2)
Address:
Name(s): --------------------------------------------
-----------------------------------------
--------------------------------------------
----------------------------------------- (include Zip Code)
Capacity:
----------------------------------------- Area Code and Telephone Number:
Street Address: ---------------------------------------------
----------------------------------- Dated:
------------------------------------------------
-----------------------------------
(include Zip Code)
Area Code and Telephone Number:
-----------------------------------
Tax Identification or Social Security Number:
------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
- --------------------------------------------------------------------------------
BOX 7
BROKER-DEALER STATUS
- --------------------------------------------------------------------------------
[ ] Check this box if the Beneficial Owner of the Initial Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer acquired
the Initial Notes for its own account as a result of market-making
activities or other trading activities. IF THIS BOX IS CHECKED, A COPY OF
THIS LETTER OF TRANSMITTAL MUST BE RECEIVED WITHIN FIVE BUSINESS DAYS
AFTER THE EXPIRATION DATE BY GAYLORD CONTAINER CORPORATION, ATTENTION
DAVID F. TANAKA, FACSIMILE (770) 405-5586.
- --------------------------------------------------------------------------------
<PAGE> 8
PAYORS' NAMES: GAYLORD CONTAINER CORPORATION
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or entity whose number
you enter in Part 1 below. See instructions if your name has changed.)
-------------------------------------------------------------------------------------------
Address
-------------------------------------------------------------------------------------------
City, State and ZIP Code
-------------------------------------------------------------------------------------------
SUBSTITUTE List account number(s) here (optional)
FORM W-9
Department of the -------------------------------------------------------------------------------------------
Treasury PART 1--PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER Social Security Number
Internal Revenue ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING or TIN
Service BELOW
-------------------------------------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup withholding under the provisions of
section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified
that you are subject to backup withholding as a result of failure to report all interest
or dividends or (2) the Internal Revenue Service has notified you that you are no longer
subject to backup withholding. [ ]
-------------------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT PART 3--
THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND
COMPLETE. Awaiting TIN [ ]
SIGNATURE DATE
------------------------------ --------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 9
GAYLORD CONTAINER CORPORATION
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND INITIAL NOTES. A properly
completed and duly executed copy of this Letter of Transmittal, including
Substitute Form W-9, and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for Tendered Initial Notes must be received by
the Exchange Agent at its address set forth herein or such Tendered Initial
Notes must be transferred pursuant to the procedures for book-entry transfer
described in the Prospectus under the caption "Exchange Offer -- Procedures for
Tendering" (and a confirmation of such transfer received by the Exchange Agent),
in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The
method of delivery of certificates for Tendered Initial Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the tendering holder and the delivery will be deemed made
only when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.
Instead of delivery by mail, it is recommended that the Holder use an overnight
or hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. No Letter of Transmittal or Initial Notes should be sent
to the Company. Neither the Company nor the registrar is under any obligation to
notify any tendering holder of the Company's acceptance of Tendered Initial
Notes prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Initial
Notes but whose Initial Notes are not immediately available, and who cannot
deliver their Initial Notes, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date must tender
their Initial Notes according to the guaranteed delivery procedures set forth
below, including completion of Box 4. Pursuant to such procedures: (i) such
tender must be made by or through a firm which is a member of a recognized
Medallion Program approved by the Securities Transfer Association Inc. (an
"Eligible Institution") and the Notice of Guaranteed Delivery must be signed by
the holder; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail, hand delivery or facsimile
transmission) setting forth the name and address of the holder, the certificate
number(s) of the Tendered Initial Notes and the principal amount of Tendered
Initial Notes, stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal together with the certificate(s) representing
the Initial Notes and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all Tendered
Initial Notes in proper form for transfer, must be received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date. Any holder who wishes to tender Initial Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent receives
the Notice of Guaranteed Delivery relating to such Initial Notes prior to 5:00
p.m., New York City time, on the Expiration Date. Failure to complete the
guaranteed delivery procedures outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by an Eligible Holder who attempted to use the guaranteed
delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Initial Notes are registered on the books of the registrar
(or the legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered
Initial Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Initial Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Initial Notes held by the holder is tendered, the
<PAGE> 10
tendering holder should fill in the principal amount tendered in the column
labeled "Aggregate Principal Amount Tendered" of the box entitled "Description
of Initial Notes Tendered" (Box 1) above. The entire principal amount of Initial
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Initial Notes
held by the holder is not tendered, then Initial Notes for the principal amount
of Initial Notes not tendered and Exchange Notes issued in exchange for any
Initial Notes tendered and accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Initial Notes, the signature must
correspond with the name(s) as written on the face of the Tendered Initial Notes
without alteration, enlargement or any change whatsoever.
If any of the Tendered Initial Notes are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal. If any
Tendered Initial Notes are held in different names, it will be necessary to
complete, sign and submit as many separate copies of the Letter of Transmittal
as there are different names in which Tendered Initial Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Initial Notes, and Exchange Notes issued in exchange therefor are to be
issued (and any untendered principal amount of Initial Notes is to be reissued)
in the name of the registered holder(s), then such registered holder(s) need not
and should not endorse any Tendered Initial Notes, nor provide a separate bond
power. In any other case, such registered holder(s) must either properly endorse
the Tendered Initial Notes or transmit a properly completed separate bond power
with this Letter of Transmittal, with the signature(s) on the endorsement or
bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Initial Notes, such Tendered Initial Notes
must be endorsed or accompanied by appropriate bond powers, in each case, signed
as the name(s) of the registered holder(s) appear(s) on the Tendered Initial
Notes, with the signature(s) on the endorsement or bond power guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any Tendered Initial Notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on Tendered Initial Notes or signatures on bond powers
required by this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Initial Notes are tendered (i) by a registered
holder who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the Exchange Notes and/or
substitute Initial Notes for principal amounts not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the taxpayer identification or social security number of the person named must
also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Initial Notes pursuant to the Exchange
Offer. If, however, a transfer tax is imposed for any reason other than the
transfer and exchange of Tendered Initial Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or on any other person) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is
<PAGE> 11
not submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Initial Notes listed in this
Letter of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Initial Notes which are accepted for exchange must
provide the Company (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Company is not provided with the correct TIN, the
Holder may be subject to backup withholding and a $50 penalty imposed by the
Internal Revenue Service. (If withholding results in an over-payment of taxes, a
refund may be obtained.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
To prevent backup withholding, each holder of Tendered Initial Notes must
provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
is awaiting a TIN), and that (i) the holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified the holder that such holder is no longer subject to
backup withholding. If the Tendered Initial Notes are registered in more than
one name or are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Initial Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the right to reject any and all
Initial Notes not validly tendered or any Initial Notes the Company's acceptance
of which would, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Initial Notes as to any ineligibility of
any holder who seeks to tender Initial Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) by the Company shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Initial Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Initial Notes, nor shall any of them incur any
liability for failure to give such notification. Tenders of Initial Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Initial Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Initial Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Initial Notes or transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
Initial Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
<PAGE> 12
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED INITIAL NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF INITIAL NOTES. Subject to the terms and conditions of the Exchange
Offer, the Company will accept for exchange all validly Tendered Initial Notes
as soon as practicable after the Expiration Date and will issue Exchange Notes
therefor as soon as practicable thereafter. For purposes of the Exchange Offer,
the Company shall be deemed to have accepted Tendered Initial Notes when, as and
if the Company has given written or oral notice (immediately followed in
writing) thereof to the Exchange Agent. If any Tendered Initial Notes are not
exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Initial Notes will be returned, without expense, to the undersigned at the
address shown in Box 1 or at a different address as may be indicated herein
under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer."
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
9 3/4% SENIOR NOTES DUE 2007, SERIES A
of
GAYLORD CONTAINER CORPORATION
Pursuant to the Prospectus Dated , 1997
This form must be used by a holder of 9 3/4% Senior Notes due 2007, Series
A (the "Initial Notes") of Gaylord Container Corporation, a Delaware corporation
(the "Company"), who wishes to tender Initial Notes to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange Offer
- --Guaranteed Delivery Procedures" of the Company's Prospectus, dated
, 1997 (the "Prospectus") and in Instruction 2 to the related Letter of
Transmittal. Any holder who wishes to tender Initial Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives this
Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms used but not defined herein have the meanings ascribed
to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
State Street Bank and Trust Company
(the "Exchange Agent")
<TABLE>
<S> <C>
By Mail: Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company
61 Broadway Two International Plaza
Concourse Level, Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
Facsimile Transmission: Confirm by Telephone:
(617) 664-5739 (617) 664-5590
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Initial Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the related Letter of
Transmittal.
The undersigned hereby tenders the Initial Notes listed below:
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF INITIAL NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S><C>
- ------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ------------------------------------------------------------------------------------------------------------------
Signatures of Registered Holder(s) or
Authorized Signatory: Date: , 1997
-------------------------------- ----------------
----------------------------------------------------- Address:
-------------------------------------------
----------------------------------------------------- ----------------------------------------------------
Name(s) of Registered Holder(s):
--------------------- Area Code and Telephone No.:
-----------------------
-----------------------------------------------------
-----------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Initial Notes or on a security
position listing as the owner of Initial Notes, or by person(s) authorized to
become Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
------------------------------------------------------------
Capacity:
------------------------------------------------------------
Address(es):
---------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<S><C>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange
Agent of the Letter of Transmittal (or facsimile thereof), together with the Initial Notes tendered hereby
in proper form for transfer (or confirmation of the book-entry transfer of such Initial Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility described in the prospectus under the caption
"The Exchange Offer - Guaranteed Delivery Procedures" and in the Letter of Transmittal) and any other
required documents, all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange trading day
following the Expiration Date.
-------------------------------------- -----------------------------------------
NAME OF FIRM (AUTHORIZED SIGNATURE)
- --------------------------------------- Name
Address ------------------------------------
(PLEASE PRINT)
- ---------------------------------------
(INCLUDE ZIP CODE) Title
-----------------------------------
Area Code and Tel. No. Dated , 1997
---------------- ------------------------------
</TABLE>
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
<PAGE> 5
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
related Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Initial Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Initial Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Initial Notes, the signature must correspond with
the name shown on the security position listing as the owner of the Initial
Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Initial Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Initial Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
<PAGE> 1
EXHIBIT 99.3
INSTRUCTIONS
TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
GAYLORD CONTAINER CORPORATION
9 3/4% SENIOR NOTES DUE 2007, SERIES A
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
, 1997 (the "Prospectus") of Gaylord Container Corporation, a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Notes") held by you for the account of the undersigned.
The aggregate face amount of the Initial Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$ of the 9 3/4% Senior Subordinated Notes due 2007, Series A
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Initial Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF INITIAL NOTES TO BE
TENDERED, IF ANY): $
[ ] NOT TO TENDER any Initial Notes held by you for the account of the
undersigned.
If the undersigned instruct you to tender the Initial Notes held by you for
the account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that the
undersigned's principal residence is in the state of (FILL IN STATE) ,
(i) the undersigned is acquiring the Exchange Notes in the ordinary course of
business of the undersigned, (ii) the undersigned is not participating, does not
participate, and has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iii) the undersigned
acknowledges that any person participating comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Act"), in connection with a secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer --
Resale of the Exchange Notes," and the undersigned is not an "affiliate," as
defined in Rule 405 under the Act, of the Company; to agree, on behalf of the
undersigned, as set forth in the Prospectus or the Letter of Transmittal to
effect the valid tender of such Initial Notes.
[ ] Check this box if the Beneficial Owner of the Initial Notes is a
Participating Broker-Dealer and such Participating Broker-Dealer acquired
the Initial Notes for its own account as a result of market-making
activities or other trading activities. IF THIS BOX IS CHECKED, A COPY OF
THESE INSTRUCTIONS MUST BE RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE
EXPIRATION DATE BY GAYLORD CONTAINER CORPORATION, ATTENTION DAVID F. TANAKA,
FACSIMILE (847) 405-5586.
<PAGE> 2
SIGN HERE
Name of beneficial owner(s):
--------------------------------------------------
Signature(s):
----------------------------------------------------------------
Name (please print):
----------------------------------------------------------
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Telephone number:
------------------------------------------------------------
Taxpayer Identification or Social Security Number:
----------------------------
Date:
------------------------------------------------------------------------
