<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1998.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
GAYLORD CONTAINER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
2653
(Primary Standard Industrial
Classification Number)
36-3472452
(I.R.S. Employer
Identification No.)
-------------------------
500 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
TELEPHONE: (847) 405-5500
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
-------------------------
DANIEL P. CASEY
500 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
TELEPHONE: (847) 405-5500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------------
Copy to:
WILLIAM S. KIRSCH, P.C.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any 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. [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/8% Senior Notes due
2007, Series B $200,000,000 100% $200,000,000 $59,000
- ---------------------------------------------------------------------------------------------------------------------
9 7/8% Senior
Subordinated Notes due
2008, Series B $250,000,000 100% $250,000,000 $73,750
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)
-------------------------
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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<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED MARCH 24, 1998
PRELIMINARY PROSPECTUS
, 1998
GAYLORD CONTAINER CORPORATION
OFFER TO EXCHANGE ITS 9 3/8% SENIOR NOTES DUE 2007, SERIES B FOR ANY AND ALL OF
ITS OUTSTANDING 9 3/8% SENIOR NOTES DUE 2007, SERIES A AND ITS 9 7/8% SENIOR
SUBORDINATED NOTES DUE 2008, SERIES B FOR ANY AND ALL OF ITS OUTSTANDING 9 7/8%
SENIOR SUBORDINATED NOTES DUE 2008, SERIES A.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, 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: (i) $1,000 principal amount of its 9 3/8%
Senior Notes due 2007, Series B (the "Senior Exchange Notes"), which will have
been 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 3/8% Senior Notes due
2007, Series A (the "Old Senior Notes"), of which $200,000,000 principal amount
is outstanding and (ii) $1,000 principal amount of its 9 7/8% Senior
Subordinated Notes due 2008, Series B (the "Senior Subordinated Exchange Notes"
and, together with the Senior Exchange Notes, the "Exchange Notes"), which will
have been registered under 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 7/8% Senior Subordinated Notes due 2008, Series A (the "Old
Senior Subordinated Notes" and, together with the Old Senior Notes, the "Old
Notes") of which $250,000,000 principal amount is outstanding. The form and
terms of the Exchange Notes are the same as the form and term of the Old Notes
except that (i) the Exchange Notes will bear a Series B designation, (ii) the
Exchange Notes will have been registered under the Securities Act and,
therefore, 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 Old Notes under the Registration Rights Agreements (as defined). The Senior
Exchange Notes will evidence the same debt as the Old Senior Notes (which they
replace) and will be issued under and be entitled to the benefits of the
Indenture dated as of February 23, 1998 (the "Senior Note Indenture") by and
among the Company and State Street Bank and Trust Company, as trustee, governing
the Senior Notes. The Senior Subordinated Exchange Notes will evidence the same
debt as the Old Senior Subordinated Notes (which they replace) and will be
issued under and be entitled to the benefits of the Indenture dated as of
February 23, 1998 (the "Senior Subordinated Note Indenture" and, together with
the Senior Note Indenture, the "Indentures") by and among the Company and Chase
Bank of Texas, National Association, as trustee, governing the Senior
Subordinated Notes. See "The Exchange Offer" and "Description of Notes." The Old
Senior Notes and the Senior Exchange Notes are sometimes referred to herein
collectively as the "Senior Notes," the Old Senior Subordinated Notes and the
Senior Subordinated Exchange Notes are sometimes referred to herein collectively
as the "Senior Subordinated Notes" and the Senior Notes and the Senior
Subordinated Notes are sometimes referred to herein collectively as the "Notes."
The proceeds of the Initial Offering (as defined) were used to redeem (the
"Redemption") all of the Company's 12 3/4% Senior Discount Debentures due 2005
(the "Old Debentures"). The Initial Offering and the Redemption are collectively
referred to herein as the "Refinancing." See "The Refinancing."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on , 1998,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old 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 Senior Notes will accrue from their date of original
issuance and will be payable semiannually in arrears on June 15 and December 15
of each year, commencing June 15, 1998, at the rate of 9 3/8% per annum. The
Senior Notes will mature on June 15, 2007. The Senior 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 Senior
Notes originally issued with the net cash proceeds of one or more Equity
Offerings (as defined) at a redemption price equal to 109.375% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption; provided that at least $100 million of the aggregate principal
amount of the Senior Notes originally issued remain outstanding following such
redemption.
(Cover page continued on following page)
-------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS
TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
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.
<PAGE> 3
(Cover page continued)
Interest on the Senior Subordinated Notes will accrue from the date of
original issuance and will be payable semiannually in arrears on February 15 and
August 15 of each year, commencing August 15, 1998, at the rate of 9 7/8% per
annum. The Senior Subordinated Notes will mature on February 15, 2008. The
Senior Subordinated Notes are redeemable, in whole or in part, at the option of
the Company on or after February 15, 2003, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption. In
addition, prior to February 15, 2001, the Company, at its option, may redeem up
to 33% of the aggregate principal amount of the Senior Subordinated Notes
originally issued with the net cash proceeds of one or more Equity Offerings at
a redemption price equal to 109.875% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of redemption; provided that at
least $125 million of the aggregate principal amount of the Senior Subordinated
Notes originally issued remain outstanding following such redemption.
The Senior 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 (as defined) and the 9 3/4%
Senior Notes (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 Senior Subordinated Notes. The Senior
Subordinated Notes will be general unsecured obligations of the Company, will be
subordinate in right of payment to all Senior Debt (as defined) of the Company,
including indebtedness under the Credit Agreement, the 9 3/4% Senior Notes and
the Senior Notes, 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 pari passu in right of payment to
all existing and future senior subordinated indebtedness of the Company. There
are currently no Subsidiary Guarantors of the Notes. All indebtedness under the
Credit Agreement is secured by substantially all of the assets of the Company.
At December 31, 1997, there was $64 million of indebtedness outstanding under
the Credit Agreement (and there was approximately $93 million of credit
available under the revolving portion of the Credit Agreement as well as undrawn
letters of credit of approximately $12 million) and the total outstanding
indebtedness under the Trade Receivable Facility was $54 million (no additional
amounts of credit were available under the Trade Receivable Facility). See
"Description of Notes."
Upon a Change of Control (as defined), each holder of the Notes will have
the right to require the Company to repurchase such holder's 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 Senior Notes at a redemption price equal to 100% of
the principal amount thereof, plus the applicable Make-Whole Premium (as
defined). Upon the occurrence of a Change of Control prior to February 15, 2003,
the Company, at its option, may redeem all, but not less than all, of the
outstanding Senior Subordinated Notes at a redemption price equal to 100% of the
principal amount thereof, plus the applicable Make-Whole Premium. 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 the date
of repurchase in the event of certain asset sales. See "Description of Notes."
The Old Notes were sold by the Company on February 23, 1998 (the "Issue
Date") to BT Alex. Brown Incorporated, Donaldson Lufkin & Jenrette Securities
Corporation, Bear Stearns & Co. Inc., Salomon Brothers Inc and NationsBanc
Montgomery Securities LLC (the "Initial Purchasers") in a transaction not
registered under the Securities Act in reliance upon an exemption under the
Securities Act (the "Initial Offering"). The Initial Purchasers subsequently
placed the Old Notes with (i) qualified institutional buyers in reliance upon
Rule 144A under the Securities Act and (ii) qualified buyers outside the United
States in reliance upon Regulation S under the Securities Act. Accordingly, the
Old Notes may not be reoffered, resold or otherwise transferred in the United
States unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy the
obligations of the Company under the Registration Rights Agreements entered into
by the Company and the Initial Purchasers in connection with the Initial
Offering (the "Registration Rights Agreements"). See "The Exchange Offer."
<PAGE> 4
(Cover page continued)
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 Old 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 Old Notes wishing to accept the Exchange Offer must represent
to the Company, as required by the Registration Rights Agreements, 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 Old Notes where such Old 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.
There has not previously been any public market for the Old 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 Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
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 Global Notes (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 Notes
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 Notes, notes in certificated form will be issued
in exchange for the Global Notes only under limited circumstances as set forth
in the indenture. See "Book-Entry; Delivery and Form."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD 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.
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.
<PAGE> 5
MARKET DATA
MARKET DATA USED THROUGHOUT THIS OFFERING MEMORANDUM 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
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 OR
INFORMATION TECHNOLOGY 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
Offer contemplated 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 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, and inspected at the Commission's regional offices at 7 World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite 1400,
500 West Madison Street, Chicago, Illinois 60601. 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
i
<PAGE> 6
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 it were required to file such reports. In addition, for so
long as any of the Notes remain outstanding, the Company has agreed to make
available to any prospective purchaser of the Notes or beneficial owner of the
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 the state of
Delaware, has its principal executive office located at 500 Lake Cook Road,
Suite 400, Deerfield, Illinois; telephone number is (847) 405-5500.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed with the Commission pursuant to
the Exchange Act (File No. 1-9915) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1997.
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 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 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
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 , 1998 (FIVE BUSINESS DAYS
PRIOR TO THE EXPIRATION DATE).
ii
<PAGE> 7
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. Reference is made to "Risk Factors" which
contains certain factors that investors should consider prior to tendering Old
Notes in exchange for Exchange Notes. 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 20
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, 1997, the
Company was the ninth 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
1
<PAGE> 8
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.
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 1997, the Company converted the equivalent
of approximately 82% of its linerboard production and converted or sold to its
grocery bag joint venture approximately 71% 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.
The net proceeds of the Initial Offering were used to defease the
outstanding Old Debentures in accordance with the terms of the Old Debenture
Indenture (as defined). Upon consummation of the Offering, the Company deposited
with the Old Debenture Trustee U.S. Treasury securities having a maturity of May
14, 1998, and a future value sufficient to redeem the Old Debentures, and pay
the call premium and accrued and unpaid interest through May 14, 1998. The Old
Debentures will be redeemed by the Old Debenture Trustee on May 15, 1998.
2
<PAGE> 9
THE INITIAL OFFERING
Old Notes..................... The Old Notes were sold by the Company on
February 23, 1998 to the Initial Purchasers
pursuant to a Purchase Agreement dated February
13, 1998 (the "Purchase Agreement"). The
Initial Purchasers subsequently resold the Old
Notes to (i) qualified institutional buyers
pursuant to Rule 144A under the Securities Act
and (ii) qualified buyers outside the United
States in reliance upon Regulation S under the
Securities Act.
Registration Rights
Agreements.................... Pursuant to the Purchase Agreement, the Company
and the Initial Purchasers entered into the
Registration Rights Agreements each dated as of
February 23, 1998 and each of which grant the
holders of the Old 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 Agreements to
register Old 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 Old Notes" and "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer."
THE EXCHANGE OFFER
Securities Offered............ $200,000,000 aggregate principal amount of
9 3/8% Senior Notes due 2007, Series B (the
"Senior Exchange Notes"), and $250,000,000
aggregate principal amount 9 7/8% Senior
Subordinated Notes due 2008, Series B (the
"Senior Subordinated Exchange Notes" and,
together with the Senior Exchange Notes, the
"Exchange Notes").
The Exchange Offer............ $1,000 principal amount of Senior Exchange
Notes in exchange for each $1,000 principal
amount of Old Senior Notes. As of the date
hereof, $200,000,000 aggregate principal amount
of Old Senior Notes are outstanding. $1,000
principal amount of Senior Subordinated
Exchange Notes in exchange for each $1,000
principal amount of Old Senior Subordinated
Notes. As of the date hereof, $250,000,000
aggregate principal amount of Old Senior
Subordinated 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 Old 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.
3
<PAGE> 10
Any Participating Broker-Dealer that
acquired Old Notes for its own account as a
result of market-making 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 Old
Notes where such Old 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 can 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
, 1998 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 Old Notes..... Each Exchange Note will bear interest from
its issuance date. Holders of Old 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
(June 15, 1998 in the case of the Senior
Exchange Notes and August 15, 1998 in the
case of the Senior Subordinated Exchange
Notes). Interest on the Old Notes accepted
for exchange will cease to accrue upon
issuance of the Exchange Notes.
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."
Procedures for Tendering Old Notes Each holder of Old 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
4
<PAGE> 11
Letter of Transmittal, or such facsimile,
together with the Old Notes and any other
required documentation to the Exchange Agent
(as defined) at 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 Old Notes.......... Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange rights
and such Old Notes will continue to be subject
to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
Consequences of Failure to
Exchange.................... The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old 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 Old
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 Old Notes.
Shelf Registration
Statement..................... If any holder of the Old Notes (other than any
such holder which is an "affiliate" of the
Company 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 has
satisfied certain conditions relating to the
provision of information to the Company for use
therein, the Company has agreed to register the
Old 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 Old Notes held by any such
holders.
5
<PAGE> 12
Special Procedures for
Beneficial
Owners...................... Any beneficial owner whose Old 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
Old Notes, either make appropriate arrangements
to register ownership of the Old 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 Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old 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
Old 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 Old Notes and
Delivery of Exchange Notes.... The Company will accept for exchange any and
all Old 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 is serving
as Exchange Agent in connection with the
exchange offer of Senior Exchange Notes for Old
Senior Notes. Chase Bank of Texas, National
Association is serving as Exchange Agent in
connection with the exchange offer for Senior
Subordinated Exchange Notes for Old Senior
Subordinated Notes. State Street Bank and Trust
Company and Chase Bank of Texas, National
Association are collectively referred to herein
as the "Exchange Agent."
THE EXCHANGE NOTES
General....................... The form and terms of the Exchange Notes are
the same as the form and terms of the Old Notes
(which they replace) except that (i) the
Exchange Notes bear a Series B designation,
(ii) the Exchange Notes have been registered
under the Securities Act and, therefore, will
not bear legends restricting the transfer
thereof,
6
<PAGE> 13
and (iii) the holders of Exchange Notes will
not be entitled to certain rights under the
Registration Rights Agreements, including the
provisions providing for an increase in the
interest rate on the Old 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 Old Notes and
will be entitled to the benefits of the
Indentures. See "Description of Notes."
THE SENIOR EXCHANGE NOTES
Maturity Date................. June 15, 2007.
Interest Rate and Payment
Dates......................... The Senior Exchange Notes will bear interest at
a rate of 9 3/8% per annum. Interest on the
Senior Exchange Notes will accrue from the date
of issuance and is payable semi-annually on
each June 15 and December 15, commencing June
15, 1998.
Ranking....................... The Senior Exchange Notes will be, as the Old
Senior Notes (which they replace) are, 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 and the
9 3/4% Senior Notes, 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 Senior Subordinated
Notes. All indebtedness under the Credit
Agreement is secured by substantially all of
the assets of the Company. At December 31,
1997, there was $64 million of indebtedness
outstanding under the Credit Agreement (and
there was approximately $93 million of credit
available under the revolving portion of the
Credit Agreement as well as undrawn letters of
credit of approximately $12 million) and the
total outstanding indebtedness under the Trade
Receivable Facility was $54 million (no
additional amounts of credit were 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 Notes."
Optional Redemption........... The Senior 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 Senior Notes originally
issued with the net cash proceeds of one or
more Equity Offerings at a redemption price
equal to 109.375% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the date of redemption; provided that
at least $100 million aggregate principal
amount of the Senior Notes remain outstanding
after any such redemption. See "Description of
Notes -- Certain Terms of the Senior Notes --
Optional Redemption."
7
<PAGE> 14
Change of Control............. Upon a Change of Control, each holder of the
Senior Notes will have the right to require the
Company to repurchase all or a portion of such
holder's Senior Notes at a price equal to 101%
of their principal amount, plus accrued and
unpaid interest, if any, to the date of
repurchase. 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 Senior Notes
at a redemption price equal to 100% of the
principal amount thereof plus the applicable
Make-Whole Premium. See "Description of Notes
-- Certain Terms of the Senior Notes -- Change
of Control." 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 Senior 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 additional voting power to certain
affiliates or significant corporate
transactions not involving transfers of voting
power in excess of certain levels.
Offers to Purchase............ In the event of certain asset sales, the
Company will be required to offer to repurchase
the Senior 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.
Certain Covenants............. The Senior Note 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. These restrictions are subject to a
number of important qualifications and
exceptions.
THE SENIOR SUBORDINATED EXCHANGE NOTES
Maturity Date................. February 15, 2008.
Interest Rate and Payment
Dates......................... The Senior Subordinated Exchange Notes will
bear interest at a rate of 9 7/8% per annum.
Interest on the Senior Subordinated Exchange
Notes will accrue from the date of issuance and
is payable semi-annually on each February 15
and August 15, commencing August 15, 1998.
Ranking....................... The Senior Subordinated Exchange Notes will be,
as the Old Senior Subordinated Notes (which
they replace) are, general unsecured
obligations of the Company, will be subordinate
in right of payment to all Senior Debt (as
defined) of the Company including indebtedness
under the Credit Agreement, the 9 3/4% Senior
Notes and the Senior Notes, will be
structurally subordinated to all indebtedness
of the subsidiaries of the Company that
8
<PAGE> 15
do not become Subsidiary Guarantors, including
the Trade Receivable Facility, and will rank
pari passu in right of payment to the existing
and future senior subordinated indebtedness of
the Company. All indebtedness under the Credit
Agreement is secured by substantially all of
the assets of the Company. At December 31,
1997, there was $64 million of indebtedness
outstanding under the Credit Agreement (and
there was approximately $93 million of credit
available under the revolving portion of the
Credit Agreement as well as undrawn letters of
credit of approximately $12 million) and the
total outstanding indebtedness under the Trade
Receivable Facility was $54 million (no
additional amounts of credit were 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 Notes."
Optional Redemption........... The Senior Subordinated Notes are redeemable,
in whole or in part at the option of the
Company on or after February 15, 2003, at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, to the
date of redemption. In addition, prior to
February 15, 2001, the Company, at its option,
may redeem up to 33% of the aggregate principal
amount of the Senior Subordinated Notes
originally issued with the net cash proceeds of
one or more Equity Offerings at a redemption
price equal to 109.875% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the date of redemption; provided that
at least $125 million aggregate principal
amount of the Senior Subordinated Notes remain
outstanding after any such redemption. See
"Description of Notes -- Certain Terms of the
Senior Subordinated Notes -- Optional
Redemption."
Change of Control............. Upon a Change of Control, each holder of the
Senior Subordinated Notes will have the right
to require the Company to repurchase all or a
portion of such holder's Senior Subordinated
Notes at a price equal to 101% of their
principal amount, plus accrued and unpaid
interest, if any, to the date of repurchase. In
addition, upon the occurrence of a Change of
Control prior to February 15, 2003, the
Company, at its option, may redeem all, but not
less than all, of the outstanding Senior
Subordinated Notes at a redemption price equal
to 100% of the principal amount thereof plus
the applicable Make-Whole Premium. See
"Description of Notes -- Certain Terms of the
Senior Subordinated Notes -- Change of
Control." 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 Senior Subordinated
Notes or that the Company will be permitted to
do so under the Credit Agreement, the Senior
Notes, the 9 3/4% Senior Notes 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 additional voting
power to certain affiliates or significant
corporate transactions not involving transfers
of voting power in excess of certain levels.
9
<PAGE> 16
Offers to Purchase............ In the event of certain asset sales, the
Company will be required to offer to repurchase
the Senior Subordinated 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.
Certain Covenants............. The Senior Subordinated Note Indenture imposes
certain limitations on the ability of the
Company and its Restricted Subsidiaries to,
among other things, incur additional
indebtedness, including indebtedness which is
subordinate to rights of payment to any Senior
Debt and senior in right of payment to the
Senior Subordinated Notes, 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. These restrictions are subject to a
number of important qualifications and
exceptions.
For additional information regarding the Notes, see "Description of Notes."
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 Debentures pursuant to the Redemption. See "Use of Proceeds."
RISK FACTORS
See "Risk Factors" beginning on page 13 for a discussion of certain factors
that should be considered before tendering Old Notes in exchange for Exchange
Notes. These risk factors are generally applicable to the Old Notes as well as
the Exchange Notes.
10
<PAGE> 17
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical consolidated financial data of the Company
for the years ended September 30, 1993, 1994, 1995, 1996 and 1997 (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 December 31, 1997 and for the three months
ended December 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, 1996. The "As
Adjusted" balance sheet data have been prepared to give effect to the
Refinancing as if such transaction occurred on December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30,(1) ENDED DECEMBER 31,
---------------------------------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1996 1997 1997(2) 1996 1997 1997(2)
---- ---- ---- ---- ---- --------- ---- ---- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................... $ 733.5 $ 784.4 $1,051.4 $ 922.0 $ 759.3 $759.3 $195.6 $197.6 $197.6
Gross margin................... 81.4 93.0 296.4 205.8 42.0 42.0 21.4 11.5 11.5
Selling and administrative
costs........................ (73.8) (81.0) (95.5) (99.1) (81.1) (81.1) (20.5) (20.6) (20.6)
Non-recurring charges.......... (9.9) (15.5) (5.4) (8.1) -- -- -- -- --
Operating earnings (loss)...... (2.3) (3.5) 195.5 98.6 (39.1) (39.1) 0.9 (9.1) (9.1)
Interest expense -- net........ (68.2) (80.3) (86.1) (78.3) (80.7) (72.9) (19.4) (21.1) (19.1)
Income (loss) before income
taxes........................ (70.0) (84.0) 110.0 20.1 (121.4) (113.6) (17.7) (30.4) (28.4)
Income tax benefit (expense)... -- -- 24.2 (8.3) 47.1 44.1 8.0 11.6 10.9
Income (loss) before
extraordinary item and
accounting change............ (70.0) (84.0) 134.2 11.8 (74.3) (69.5) (9.7) (18.8) (17.5)
Extraordinary item and
accounting change............ 200.2 -- -- (3.2) (7.7) (7.7) -- -- --
Net income (loss).............. 130.2 (84.0) 134.2 8.6 (82.0) (77.2) (9.7) (18.8) (17.5)
Earnings per share(3):
Basic:
Income (loss) before
extraordinary item and
accounting change........ (1.40) (1.57) 2.49 0.22 (1.40) (1.31) (0.18) (0.35) (0.33)
Extraordinary item and
accounting change........ 4.01 -- -- (0.06) (0.15) (0.15) -- -- --
Net income (loss).......... 2.61 (1.57) 2.49 0.16 (1.55) (1.46) (0.18) (0.35) (0.33)
Diluted:
Income before extraordinary
item and accounting
change................... -- -- 2.44 0.22 -- -- -- -- --
Extraordinary item and
accounting change........ -- -- -- (0.06) -- -- -- -- --
Net income................. -- -- 2.44 0.16 -- -- -- -- --
Cash dividends per share....... -- -- -- -- -- -- -- -- --
Ratio of earnings to fixed
charges(4)................... -- -- 2.2x 1.2x -- -- -- -- --
Deficit of earnings to fixed
charges(4)................... $ 70.5 $ 84.9 -- -- $ 122.2 $114.4 $ 17.9 $ 30.7 $ 28.7
OTHER DATA:
Net cash provided by (used for)
operations................... $ 13.0 $ 29.7 $ 194.2 $ 164.4 $ (66.5) $(38.2) $(54.0)
Net cash used for
investments.................. (29.3) (34.9) (61.3) (53.5) (33.7) (8.2) (14.7)
Net cash provided by (used for)
financing.................... (20.6) (5.0) (117.8) (104.2) 67.1 10.7 68.2
Depreciation and
amortization(5).............. 61.1 61.2 64.8 64.5 65.1 16.3 16.6
Capital expenditures........... 23.7 40.4 58.9 54.8 31.1 8.4 14.6
EBITDA(5)...................... 63.9 69.6 260.4 167.9 22.9 16.4 6.7
Ratio of EBITDA to interest
expense -- net............... 0.9x 0.9x 3.0x 2.1x 0.3x 0.8x 0.3x
OPERATING DATA:
Production:
Containerboard (thousand
tons)...................... 1,151.9 1,194.9 1,200.5 1,243.3 1,263.2 301.5 298.5
Unbleached kraft paper
(thousand tons)............ 241.1 250.7 263.9 256.9 278.6 62.0 72.4
Shipments:
Corrugated containers
(billion square feet)...... 11.9 12.7 12.3 13.3 13.6 3.3 3.3
Multiwall bags (thousand
tons)...................... 48.7 51.5 52.4 51.9 57.0 14.1 14.9
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
SEPTEMBER 30, -----------------------
------------------------------------------ AS
1993 1994 1995 1996 1997 ACTUAL ADJUSTED
---- ---- ---- ---- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $ 99.9 $ 71.6 $156.4 $ 69.8 $ 36.9 $ 81.0 $ 87.3
Property -- net....................................... 611.1 592.9 640.0 612.3 586.1 592.2 592.2
Total assets.......................................... 860.1 843.1 988.0 933.0 929.9 954.8 975.6
Long-term debt........................................ 670.1 696.8 671.5 623.1 701.7 780.0 835.4
Stockholders' equity (deficit)........................ 53.6 (23.8) 113.2 114.5 34.6 16.1 (12.2)
</TABLE>
11
<PAGE> 18
(1) The Company operates on a 52/53 week fiscal year. Fiscal 1993 through fiscal
1995 and fiscal 1997, were 52-week years and fiscal 1996 was a 53-week year.
Certain information under Other Data has been reclassified to conform with
the current year presentation.
(2) The summary unaudited pro forma consolidated income statement and other data
have been prepared to give effect to the issuance of $200 million principal
amount of the Company's 9 3/8% Senior Notes due 2007 and $250 million
principal amount of the Company's 9 7/8% Senior Subordinated Notes due 2008,
and the redemption of $404.3 million principal amount of the Company's
12 3/4% Senior Subordinated Discount Debentures due 2005 as if such
transaction occurred on October 1, 1996. Pro forma interest expense for the
year ended September 30, 1997 and the three months ended December 31, 1997
has been increased by the interest expense relating to the Notes ($44.5
million and $11.1 million, respectively, including the amortization of
related deferred financing costs) and reduced by the interest expense
relating to the Old Debentures ($52.3 million and $13.1 million,
respectively, including the amortization of related deferred financing
costs). The redemption premium (approximately $25.8 million) and write-off
of deferred financing fees associated with the Old Debentures, together with
certain other items, are expected to result in an extraordinary loss of
approximately $28.3 million which is net of an income tax benefit of $17.5
million. The extraordinary loss is not reflected in the pro forma income
statement data.
(3) Earnings per share amounts have been restated for the fiscal years ended
September 30, 1993, 1994, 1995, 1996 and 1997 to reflect the adoption of
Financial Accounting Standard No. 128, "Earnings Per Share" effective
October 1, 1997. Diluted earnings per share is not presented in periods were
the effect is antidilutive (that is, results in increased earnings per share
or decreased net loss per share).
(4) 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.
For the fiscal years ended September 30, 1993, 1994 and 1997 and the three
months ended December 31, 1996 and 1997, earnings before fixed charges were
insufficient to cover fixed charges by $70.5 million, $84.9 million, $122.2
million, $17.9 million and $30.7 million, respectively. On a pro forma basis
for the fiscal year ended September 30, 1997 and the three months ended
December 31, 1997, earnings before fixed charges were insufficient to cover
fixed charges by $114.4 million and $28.7 million, respectively.
(5) "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. The amounts
shown for depreciation and amortization include $4.8 million, $3.6 million,
$5.3 million, $3.3 million, $3.1 million, $0.8 million and $0.8 million of
amortization of deferred financing costs included in interest expense for
the fiscal years ended September 30, 1993, 1994, 1995, 1996 and 1997 and the
three months ended December 31, 1996 and 1997, respectively. EBITDA is not a
measure of financial performance under generally accepted accounting
principles, should not be construed as an alternative to operating income or
to cash flows from operating activities (as determined in accordance with
generally accepted accounting principles), and does not necessarily indicate
that cash flow will be sufficient to fund cash requirements. The Company
understands that certain investors believe that EBITDA provides useful
information regarding the Company's ability to service debt and to utilize
cash for other purposes. EBITDA should not be considered in isolation or as
a substitute for net income, cash flows from operations, or other income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's operating performance,
profitability or liquidity. In addition, EBITDA may not be comparable to
other similarly titled measures of other companies.
12
<PAGE> 19
RISK FACTORS
In addition to the other information set forth in this Prospectus, holders
of the Old Notes should carefully consider the following risk factors before
tendering Old Notes in exchange for Exchange Notes. The risk factors set forth
below are generally applicable to the Old Notes as well as the Exchange Notes.
LEVERAGE
At December 31, 1997, the Company had $794.6 million of total debt,
including $401.9 million of Senior Debt (including undrawn letters of credit of
approximately $12 million), $16.1 million of stockholders' equity and
approximately $93 million of credit available under the revolving portion of the
credit facilities. On a pro forma basis as of December 31, 1997, the Refinancing
would have increased total debt by approximately $55.4 million, including $209.7
million of Senior Debt, and decreased stockholders' equity by approximately
$28.3 million. In addition, subject to the restrictions in the Credit Agreement,
the 9 3/4% Senior Note Indenture (as defined), the Senior Note Indenture and the
Senior Subordinated Note 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, 1997 and for the three months ended
December 31, 1997, on a pro forma basis after giving effect to the Refinancing
as if it had occurred on October 1, 1996, the Company's earnings before fixed
charges would have been insufficient to cover fixed charges by $114.4 million
and $28.7 million, respectively.
The level of the Company's indebtedness could have important consequences
to holders of the 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 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 Senior Exchange Notes will be, as the Old Senior Notes (which they
replace) are, 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 and the 9 3/4% Senior Notes. All
indebtedness under the Credit Agreement is secured by substantially all of the
assets of the Company. As of December 31, 1997, there was $64 million of
indebtedness outstanding under the Credit Agreement, and there was approximately
$93 million of credit available under the Credit Agreement. As of December 31,
1997, the Company also had approximately $12 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 Senior Exchange Notes will rank, as the Old Senior Notes
(which they replace), senior in right of payment to the Senior Subordinated
Notes. 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 Senior Notes.
Consequently, there can be no assurances that the Company will have sufficient
funds to make such payments to holders of the Senior Notes. See "Description of
Notes" and "Description of Other Indebtedness and Other Obligations."
13
<PAGE> 20
The Senior Subordinated Exchange Notes will be, as the Old Senior
Subordinated (which they replace), are, general unsecured obligations of the
Company, will be subordinate in right of payment to all Senior Debt of the
Company, including indebtedness under the Credit Agreement, the 9 3/4% Senior
Notes and the Senior Notes, and will rank pari passu in right of payment to all
existing and future senior subordinated indebtedness of the Company. After
giving effect to the Refinancing, at December 31, 1997, the total amount of
outstanding debt that would have been senior to the Senior Subordinated Notes
was approximately $611.6 million, including approximately $12 million of undrawn
letters of credit under the Credit Agreement. 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 debt constituting such Senior Debt occurs, holders of Senior Debt
will be entitled to payment in full from the proceeds of all assets of the
Company prior to any payment of such proceeds to holders of the Senior
Subordinated Notes. Consequently, there can be no assurances that the Company
will have sufficient funds to make such payments to holders of the Senior
Subordinated Notes. See "Description of Notes -- Subordination" and "Description
of Other Indebtedness and Other Obligations."
The Exchange Notes will be, as the Old Notes (which they replace) are,
structurally subordinated to existing and future liabilities of the Company's
subsidiaries, including trade payables and the Trade Receivable Facility, as to
the assets of such subsidiaries except, in the case of the Senior Notes,
subsidiaries that become Subsidiary Guarantors. As of December 31, 1997,
liabilities (including trade payables) of the subsidiaries of the Company were
approximately $57 million, including $54 million under the Trade Receivable
Facility (no additional amounts of credit were 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. While favorable pricing conditions
have resulted in a cumulative increase of $90 per ton in published
containerboard prices (with corresponding increases in corrugated container
prices) since July 1997, unless there is additional significant price
improvement beginning in the spring of 1998, the Company will be required to
seek modifications to certain financial covenants in the Credit Agreement. There
can be no assurance that current industry conditions will continue to improve or
will not deteriorate. 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 producers 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 containerboard prices
increase. In addition, the Company's average cost of wood chips has been
increasing due to greater demand for wood chips in the timberlands of the
Southern United States. There can be no assurance that wood chip costs will not
increase further. See "Business -- Raw Materials."
14
<PAGE> 21
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 35% of the Company's pulpwood and wood chip requirements
in fiscal 1997.
In contrast to paper mills which manufacture containerboard and unbleached
kraft paper, converting facilities which produce corrugated products and
multiwall bags have 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 Indentures 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 (in the case of the Senior Note Indenture), impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company and incur certain 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 9 3/4% Senior Note 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 liens, incur certain indebtedness,
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 $1 million, $4 million and $5 million in fiscal 1997, fiscal 1996
and fiscal 1995, 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
15
<PAGE> 22
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 Old 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 has not been any public market for the Old Notes. The Old 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. The holders of
Old 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 Old Notes. The Exchange Notes will constitute new issues 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 Old Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Company of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old 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 Old
Notes for exchange. Old 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 Agreements will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the
16
<PAGE> 23
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 Old Notes, where such Old
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 Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
PURCHASE OF THE 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), each
holder of the Notes will have the right to require that the Company offer to
purchase all or a portion of such holder's 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 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 Notes -- Change of
Control."
17
<PAGE> 24
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 20
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, 1997, the
Company was the ninth 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 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.
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.
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<PAGE> 25
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 1997, the Company converted the
equivalent of approximately 82% of its linerboard production and converted or
sold to its grocery bag joint venture approximately 71% 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.
The net proceeds of the Initial Offering were used to defease the
outstanding Old Debentures in accordance with the terms of the Old Debenture
Indenture. Upon consummation of the Offering, the Company deposited with the Old
Debenture Trustee U.S. Treasury securities having a maturity of May 14, 1998,
and a future value sufficient to redeem the Old Debentures, and pay the call
premium and accrued and unpaid interest through May 14, 1998. The Old Debentures
will be redeemed by the Old Debenture Trustee on May 15, 1998.
19
<PAGE> 26
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreements.
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 Old 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 Old Notes), except as otherwise
described herein. The Old 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 table.
The net proceeds from the Initial Offering were used to consummate the
Redemption and pay related fees and expenses. The remainder of the funds
necessary to consummate the Redemption were provided by borrowings under the
revolving portions of the Company's credit facilities.
20
<PAGE> 27
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of December 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>
DECEMBER 31, 1997
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN MILLIONS)
<S> <C> <C>
Current maturities of long-term debt....................... $ 14.6 $ 14.6
------- -------
Long-term debt (less current maturities):
Credit Agreement and Trade Receivable Facility debt(1)... 118.0 127.7
Other senior debt........................................ 32.7 32.7
9 3/4% Senior Notes due 2007............................. 225.0 225.0
9 3/8% Senior Notes due 2007............................. -- 200.0
12 3/4% Senior Subordinated Discount Debentures due 2005. 404.3 --
9 7/8% Senior Subordinated Notes due 2008................ -- 250.0
------- -------
Total long-term debt................................ 780.0 835.4
------- -------
Stockholders' equity:
Class A Common Stock..................................... -- --
Capital in excess of par value........................... 175.8 175.8
Retained deficit(2)...................................... (146.9) (175.2)
Common stock in treasury-at cost......................... (11.3) (11.3)
Recognition of minimum pension liability................. (1.5) (1.5)
------- -------
Total stockholders' equity (deficit)................ 16.1 (12.2)
------- -------
Total capitalization................................ $ 810.7 $ 837.8
======= =======
</TABLE>
- -------------------------
(1) At December 31, 1997, the Company had approximately $12 million of undrawn
letters of credit issued under the Credit Agreement and approximately $93
million of credit available under the revolving portions of the credit
facilities.
(2) As of December 31, 1997, the Refinancing would have resulted in an
extraordinary loss of approximately $28.3 million, net of an income tax
benefit of $17.5 million.
21
<PAGE> 28
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical consolidated financial data of the Company
for the years ended September 30, 1993, 1994, 1995, 1996 and 1997 (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 December 31, 1997 and for the three months
ended December 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, 1996. The "As
Adjusted" balance sheet data have been prepared to give effect to the
Refinancing as if such transaction occurred on December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30,(1) ENDED DECEMBER 31,
---------------------------------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1996 1997 1997(2) 1996 1997 1997(2)
---- ---- ---- ---- ---- --------- ---- ---- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................... $ 733.5 $ 784.4 $1,051.4 $ 922.0 $ 759.3 $759.3 $195.6 $197.6 $197.6
Gross margin................... 81.4 93.0 296.4 205.8 42.0 42.0 21.4 11.5 11.5
Selling and administrative
costs........................ (73.8) (81.0) (95.5) (99.1) (81.1) (81.1) (20.5) (20.6) (20.6)
Non-recurring charges.......... (9.9) (15.5) (5.4) (8.1) -- -- -- -- --
Operating earnings (loss)...... (2.3) (3.5) 195.5 98.6 (39.1) (39.1) 0.9 (9.1) (9.1)
Interest expense -- net........ (68.2) (80.3) (86.1) (78.3) (80.7) (72.9) (19.4) (21.1) (19.1)
Income (loss) before income
taxes........................ (70.0) (84.0) 110.0 20.1 (121.4) (113.6) (17.7) (30.4) (28.4)
Income tax benefit (expense)... -- -- 24.2 (8.3) 47.1 44.1 8.0 11.6 10.9
Income (loss) before
extraordinary item and
accounting change............ (70.0) (84.0) 134.2 11.8 (74.3) (69.5) (9.7) (18.8) (17.5)
Extraordinary item and
accounting change............ 200.2 -- -- (3.2) (7.7) (7.7) -- -- --
Net income (loss).............. 130.2 (84.0) 134.2 8.6 (82.0) (77.2) (9.7) (18.8) (17.5)
Earnings per share(3):
Basic:
Income (loss) before
extraordinary item and
accounting change........ (1.40) (1.57) 2.49 0.22 (1.40) (1.31) (0.18) (0.35) (0.33)
Extraordinary item and
accounting change........ 4.01 -- -- (0.06) (0.15) (0.15) -- -- --
Net income (loss).......... 2.61 (1.57) 2.49 0.16 (1.55) (1.46) (0.18) (0.35) (0.33)
Fully diluted:...............
Income before extraordinary
item and accounting
change................... -- -- 2.44 0.22 -- -- -- -- --
Extraordinary item and
accounting change........ -- -- -- (0.06) -- -- -- -- --
Net income................. -- -- 2.44 0.16 -- -- -- -- --
Cash dividends per share....... -- -- -- -- -- -- -- -- --
Ratio of earnings to fixed
charges(4)................... -- -- 2.2x 1.2x -- -- -- -- --
Deficit of earnings to fixed
charges(4)................... $ 70.5 $ 84.9 -- -- $ 122.2 $114.4 $ 17.9 $ 30.7 $ 28.7
OTHER DATA:
Net cash provided by (used for)
operations................... $ 13.0 $ 29.7 $ 194.2 $ 164.4 $ (66.5) $(38.2) $(54.0)
Net cash used for
investments.................. (29.3) (34.9) (61.3) (53.5) (33.7) (8.2) (14.7)
Net cash provided by (used for)
financing.................... (20.6) (5.0) (117.8) (104.2) 67.1 10.7 68.2
Depreciation and
amortization(5).............. 61.1 61.2 64.8 64.5 65.1 16.3 16.6
Capital expenditures........... 23.7 40.4 58.9 54.8 31.1 8.4 14.6
EBITDA(5)...................... 63.9 69.6 260.4 167.9 22.9 16.4 6.7
Ratio of EBITDA to interest
expense -- net............... 0.9x 0.9x 3.0x 2.1x 0.3x 0.8x 0.3x
OPERATING DATA:
Production:
Containerboard (thousand
tons)...................... 1,151.9 1,194.9 1,200.5 1,243.3 1,263.2 301.5 298.5
Unbleached kraft paper
(thousand tons)............ 241.1 250.7 263.9 256.9 278.6 62.0 72.4
Shipments:
Corrugated containers
(billion square feet)...... 11.9 12.7 12.3 13.3 13.6 3.3 3.3
Multiwall bags (thousand
tons)...................... 48.7 51.5 52.4 51.9 57.0 14.1 14.9
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, 1997
------------------------------------------ --------------------------
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED
---- ---- ---- ---- ---- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................................... $ 99.9 $ 71.6 $156.4 $ 69.8 $ 36.9 $ 81.0 87.3
Property -- net...................................... 611.1 592.9 640.0 612.3 586.1 592.2 592.2
Total assets......................................... 860.1 843.1 988.0 933.0 929.9 954.8 975.6
Long-term debt....................................... 670.1 696.8 671.5 623.1 701.7 780.0 835.4
Stockholders' equity (deficit)....................... 53.6 (23.8) 113.2 114.5 34.6 16.1 (12.2)
</TABLE>
22
<PAGE> 29
(1) The Company operates on a 52/53 week fiscal year. Fiscal 1993 through fiscal
1995 and fiscal 1997, were 52-week years and fiscal 1996 was a 53-week year.
Certain information under Other Data has been reclassified to conform with
the current year presentation.
(2) The summary unaudited pro forma consolidated income statement and other data
have been prepared to give effect to the issuance of $200 million principal
amount of the Company's 9 3/8% Senior Notes due 2007 and $250 million
principal amount of the Company's 9 7/8% Senior Subordinated Notes due 2008,
and the redemption of $404.3 million principal amount of the Company's
12 3/4% Senior Subordinated Discount Debentures due 2005 as if such
transaction occurred on October 1, 1996. Pro forma interest expense for the
year ended September 30, 1997 and the three months ended December 31, 1997
has been increased by the interest expense relating to the Notes ($44.5
million and $11.1 million, respectively, including the amortization of
related deferred financing costs) and reduced by the interest expense
relating to the Old Debentures ($52.3 million and $13.1 million,
respectively, including the amortization of related deferred financing
costs). The redemption premium (approximately $25.8 million) and write-off
of deferred financing fees associated with the Old Debentures, together with
certain other items, are expected to result in an extraordinary loss of
approximately $28.3 million which is net of an income tax benefit of $17.5
million. The extraordinary loss is not reflected in the pro forma income
statement data.
(3) Earnings per share amounts have been restated for the fiscal years ended
September 30, 1993, 1994, 1995, 1996 and 1997 to reflect the adoption of
Financial Accounting Standard No. 128, "Earnings Per Share" effective
October 1, 1997. Diluted earnings per share is not presented for periods
where the effect is antidilutive (that is, results in increased earnings per
share or decreased net loss per share).
(4) 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.
For the fiscal years ended September 30, 1993, 1994 and 1997 and the three
months ended December 31, 1996 and 1997, earnings before fixed charges were
insufficient to cover fixed charges by $70.5 million, $84.9 million, $122.2
million, $17.9 million and $30.7 million, respectively. On a pro forma basis
for the fiscal year ended September 30, 1997 and the three months ended
December 31, 1997, earnings before fixed charges were insufficient to cover
fixed charges by $114.4 million and $28.7 million, respectively.
(5) "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. The amounts
shown for depreciation and amortization include $4.8 million, $3.6 million,
$5.3 million, $3.3 million, $3.1 million, $0.8 million and $0.8 million of
amortization of deferred financing costs included in interest expense for
the fiscal years ended September 30, 1993, 1994, 1995, 1996 and 1997 and the
three months ended December 31, 1996 and 1997, respectively. EBITDA is not a
measure of financial performance under generally accepted accounting
principles, should not be construed as an alternative to operating income or
to cash flows from operating activities (as determined in accordance with
generally accepted accounting principles), and does not necessarily indicate
that cash flow will be sufficient to fund cash requirements. The Company
understands that certain investors believe that EBITDA provides useful
information regarding the Company's ability to service debt and to utilize
cash for other purposes. EBITDA should not be considered in isolation or as
a substitute for net income, cash flows from operations, or other income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's operating performance,
profitability or liquidity. In addition, EBITDA may not be comparable to
other similarly titled measures of other companies.
23
<PAGE> 30
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.
From the fall of 1989 through the fall of 1993, published linerboard and
grocery sack paper transaction prices declined approximately 27 percent and 34
percent, respectively. Published prices for linerboard and grocery sack paper
recovered significantly throughout fiscal 1994 and fiscal 1995, increasing
approximately 80 percent and 84 percent, respectively, and reaching record
highs. Increases in industry containerboard capacity and softening demand for
corrugated containers contributed to an approximately 35 percent decrease in
published prices for linerboard between September 1995 and September 1996.
Between September 1996 and July 1997 published industry prices for linerboard
decreased an additional 10 percent before recovering in the fourth quarter of
fiscal 1997. At September 1997, published prices for linerboard were essentially
unchanged from September 1996 levels. Due to year-over-year growth in corrugated
product shipments, strong export demand for linerboard and reduced
containerboard mill operating rates to control inventories, October 1997
published industry prices for linerboard had increased approximately 15 percent
from September 1997 and more than 25 percent from their low point in fiscal
1997.
FIRST QUARTER OF FISCAL 1998 COMPARED WITH FIRST QUARTER OF FISCAL 1997
Net sales for the first quarter of fiscal 1998 were $197.6 million compared
with net sales of $195.6 million for the first quarter of fiscal 1997. The
operating loss for the current quarter was $9.1 million compared with operating
earnings of $0.9 million for the year-ago quarter. The net loss for the current
quarter totaled $18.8 million, or $0.35 per common share, compared with a net
loss of $9.7 million, or $0.18 per common share, for the year-ago quarter.
Sales in the first quarter of fiscal 1998 were favorably affected by higher
unbleached kraft paper production which increased net sales by approximately $2
million. Quarter-over-quarter, total mill production increased to 4,076 tons per
day (TPD, calculated on the basis of the number of days in the period) from
3,997 TPD. Unbleached kraft paper production in the current quarter increased
approximately 17 percent to 796 TPD from 681 TPD in the prior-year quarter.
Containerboard production in the first quarter of fiscal 1998 was 3,280 TPD
compared with production of 3,316 TPD in the prior-year quarter.
Corrugated shipments totaled approximately 3.3 billion square feet in both
the first quarter of fiscal 1998 and fiscal 1997. Multiwall bag shipments
increased to 14.9 thousand tons in the current quarter compared with shipments
of 14.1 thousand tons in the first quarter of fiscal 1997.
Average selling prices for the Company's corrugated products decreased
approximately 2 percent in the current quarter compared with the prior-year
quarter. Average selling prices for the Company's domestic linerboard increased
approximately 18 percent in the first quarter of fiscal 1998 compared with the
prior-year
24
<PAGE> 31
quarter while average selling prices for export linerboard were essentially
unchanged. Average selling prices for the Company's unbleached kraft paper
increased approximately 9 percent in the current quarter compared with the
prior-year quarter while average selling prices for multiwall bags increased
less than one percent.
Gross margin for the first quarter of fiscal 1998 decreased to $11.5
million from $21.4 million in the prior-year quarter primarily due to higher
fiber costs ($9 million). The increase in fiber costs is primarily due to higher
prices for both wood chips and old corrugated containers ("OCC"). The average
delivered cost of wood chips and OCC increased approximately 24 percent and 18
percent, respectively, in the first quarter of fiscal 1998 compared to the first
quarter of fiscal 1997.
Selling and administrative costs were $20.6 million for the current quarter
compared with selling and administrative costs of $20.5 million in the
prior-year quarter.
Net interest expense of $21.1 million in the first quarter of fiscal 1998
increased from the prior-year quarter by $1.7 million primarily as a result of
higher average debt levels.
In the first quarter of fiscal 1998, the Company recorded a tax benefit of
$11.6 million which corresponds to an effective tax rate of approximately 38
percent. In the first quarter of fiscal 1997, the Company recorded a tax benefit
of $8.0 million which corresponds to an effective rate of approximately 45
percent.
YEAR ENDED SEPTEMBER 30, 1997 (FISCAL 1997) COMPARED WITH YEAR ENDED SEPTEMBER
30, 1996 (FISCAL 1996)
Net sales for fiscal 1997 were $759.3 million, a decrease of approximately
18 percent compared with net sales of $922.0 million for fiscal 1996. The
operating loss for fiscal 1997 was $39.1 million compared with operating
earnings of $98.6 million for fiscal 1996 after non-recurring operating charges
of $8.1 million. The net loss was $82.0 million, or $1.55 per diluted share,
after a $7.7 million extraordinary loss ($0.15 per diluted share) on the early
retirement of debt, versus net income in fiscal 1996 of $8.6 million, or $0.16
per diluted share, after a $3.2 million extraordinary loss ($0.06 per diluted
share) on the early retirement of debt.
Sales and earnings in fiscal 1997 were adversely affected by declining
product prices which resulted in significantly lower average selling prices for
the Company's products compared with fiscal 1996. Lower average selling prices
decreased net sales by approximately $132 million versus the prior fiscal year.
In addition, net sales were lower by $57 million as a result of the exchange of
the Company's grocery bag manufacturing assets for a 35 percent equity interest
in S&G Packaging Company, L.L.C.( "S&G Packaging"), a joint venture with Stone
Container Corporation, in the fourth quarter of fiscal 1996. Average selling
prices for the Company's domestic linerboard, export linerboard and corrugated
products decreased approximately 20 percent, 16 percent and 19 percent,
respectively, in fiscal 1997 compared with fiscal 1996. Average selling prices
for the Company's unbleached kraft paper and multiwall bags decreased
approximately 13 percent and 5 percent, respectively, in fiscal 1997 versus the
prior year.
Sales in fiscal 1997 benefited from record mill production. Increased
volume had a favorable effect on net sales of approximately $26 million. Total
mill production increased approximately 3 percent in fiscal 1997 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 increased
approximately 5 percent in fiscal 1997. In fiscal 1997, production of linerboard
increased approximately 4 percent to 3,470 TPD from 3,351 TPD while production
of unbleached kraft paper increased approximately 10 percent to 765 TPD from 693
TPD in the prior year.
Corrugated shipments were a record 13.6 billion square feet in fiscal 1997,
an increase of more than 2 percent from fiscal 1996. Adjusting for the extra
week in fiscal 1996, corrugated shipments increased approximately 4 percent.
Multiwall bag shipments were a record 57,000 tons in fiscal 1997, an increase of
approximately 10 percent from fiscal 1996.
Gross margin for fiscal 1997 decreased to $42.0 million from $205.8 million
in the prior-year period primarily due to lower selling prices for the Company's
products. Lower average net selling prices, including the effect of higher
containerboard and unbleached kraft paper costs on the Company's converting
facilities
25
<PAGE> 32
($16 million) reduced gross margin by approximately $148 million. In addition,
gross margin was adversely affected by higher costs for fiber ($24 million),
energy ($7 million) and labor ($2 million). These unfavorable variances were
partially offset by higher volume which increased gross margin by approximately
$17 million.
Selling and administrative costs for fiscal 1997 were $18.0 million lower
than fiscal 1996. The decrease is primarily the result of the exchange of the
Company's grocery bag and sack manufacturing net assets for its interest in S&G
Packaging and a decrease in incentive compensation as a result of reduced
profitability.
Net interest expense increased to $80.7 million in fiscal 1997 from $78.3
million in fiscal 1996, primarily due to higher average debt levels.
During the third quarter of fiscal 1997, the Company issued $225 million
principal amount of 9 3/4% Senior Notes due 2007 and used the proceeds to redeem
and retire all its outstanding 11 1/2% Senior Notes due 2001 ($179.7 million
principal amount) and to repay borrowings under the revolving portion of its
credit agreements. In conjunction with the redemption, approximately $2.8
million of deferred financing fees were written off. The early retirement of
debt resulted in an extraordinary loss of $7.7 million, net of an income tax
benefit of $5.0 million.
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, 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 percent 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 diluted share,
after a $3.2 million extraordinary loss ($0.06 per diluted share) on the early
retirement of debt, versus net income in fiscal 1995 of $134.2 million, or $2.44
diluted per share, including a $24.2 million income tax benefit.
Sales 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 net
sales by approximately $181 million versus the prior fiscal year. Average
selling prices for the Company's domestic linerboard, export linerboard and
corrugated products decreased approximately 19 percent, 33 percent and 10
percent, respectively, in fiscal 1996 compared with fiscal 1995. Average selling
prices for the Company's unbleached kraft paper and multiwall bags decreased
approximately 25 percent and 1 percent, 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 net sales of approximately $49
million. Total mill production increased approximately 2 percent 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 percent to 3,351 TPD from 3,298 TPD while production
of unbleached kraft paper decreased approximately 4 percent 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 percent from fiscal 1995. Adjusting for the extra
week, corrugated shipments increased approximately 6 percent due to 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 in July 1996, the Company shipped 88,200
tons of grocery bags and sacks (for the 9 1/2-month period) versus 105,000 tons
in fiscal 1995.
26
<PAGE> 33
Gross margin for fiscal 1996 decreased to $205.8 million from $296.4
million in the prior year primarily due to lower selling prices for the
Company's products. Lower average net selling prices, net of the effect of lower
container board and unbleached kraft paper costs on the Company's converting
operations ($30 million), reduced gross margin by approximately $151 million.
The effect of lower selling prices was partially offset by reduced fiber costs
(primarily the cost of OCC) and increased volume which favorably affected gross
margin by approximately $72 million and $8 million, respectively.
In the fourth quarter of fiscal 1996, the Company recorded a $8.1 million
pre-tax charge for costs associated with a staff reduction program. The staff
reductions, 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 was designed to reduce future unit labor costs.
Selling and administrative costs for fiscal 1996 were $3.6 million higher
than fiscal 1995. The increase was 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.
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 used for operations for the first quarter of fiscal 1998 was $54.0
million, compared with net cash used for operations of $38.2 million for the
year-ago period. The unfavorable comparison to the prior-year period was
primarily due to reduced operating earnings and increased working capital.
Capital expenditures of $14.6 million in the first quarter of fiscal 1998
increased by $6.2 million from $8.4 million in the first quarter of fiscal 1997.
Capital expenditures of $31.1 million in fiscal 1997 decreased $23.7 million
from fiscal 1996. In addition to the capital spending, the Company acquired $2.4
million and $5.6 million of equipment financed by capital leases or debt
obligations secured by the assets acquired in fiscal 1997 and fiscal 1996,
respectively. 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 percent of the 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. The Company is currently in the
process of significantly expanding one converting plant and opened a new
converting facility early in fiscal 1998. The Company currently anticipates that
its capital spending for fiscal 1998 and beyond will approximate its annual
depreciation and amortization expense. Capital spending, however, will be
adjusted from time to time as market conditions and available cash flows
dictate.
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. The Company believed,
and continues to believe, that the most likely outcome will be the sale of
individual assets and the subsequent demolition of the remaining structures on
the mill site. In the first quarter of fiscal 1998 the Company incurred
approximately $0.8 million of costs for demolition and maintenance of the East
Mill, such costs are net of proceeds from scrap sales. Demolition of the
remaining structures on the mill site will require the Company to incur costs
for
27
<PAGE> 34
asbestos removal. The Company has deferred incurring substantial expenditures
for demolition and asbestos removal until all uncertainties regarding
disposition of the mill assets have been resolved. At December 31, 1997, balance
sheet accruals for demolition and asbestos removal were approximately $6.4
million, and the net book value of the East Mill was $3.6 million.
At December 31, 1997, the Company had cash and equivalents of $5.6 million,
a decrease of $0.5 million from September 30, 1997, as cash used for operations
and investments were largely offset by cash provided by financing. Total debt
increased by $78.5 million to $794.6 million at December 31, 1997 from $716.1
million at September 30, 1997 primarily as a result of increased revolver
borrowings. The increase in revolver borrowings was primarily due to semi-annual
interest payments on the Company's public debt securities ($37 million), capital
expenditures ($15 million) and seasonal increases in primary working capital
($17 million). At December 31, 1997, the Company had $118 million of borrowings
outstanding and approximately $93 million of credit available under the
revolving portions of its credit agreements.
At December 31, 1997, the Company had primary working capital of $129.7
million compared to $112.8 million at September 30, 1997 primarily due to higher
inventories and lower trade payables. The increased inventory is primarily the
result of seasonally higher inventory levels at the Company's mills and
converting facilities.
Strengthening industry fundamentals, including year-over-year growth in
corrugated product shipments and strong export demand for linerboard, resulted
in a $50 per ton increase in published industry prices for containerboard in
October 1997 (and subsequent increases in converted product prices).
During the first quarter of fiscal 1998, the Company's average wood chip
prices increased approximately 24 percent compared with the first quarter of
fiscal 1997 as a result of higher demand and unusually wet weather in the
timberlands of the southern United States. In addition, the Company's average
delivered price for OCC increased approximately 18 percent in the first quarter
of fiscal 1998 compared with the first quarter of fiscal 1997. OCC prices in the
first quarter of fiscal 1998, however, were more than 16 percent lower than
average prices for the fourth quarter of fiscal 1997. The fiber markets,
however, are difficult to predict, and there can be no assurance of the future
direction of wood chip and OCC prices.
Assuming current selling prices, fiber costs and maintenance levels of
capital spending, 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. Unless there is significant product price improvement beginning
in the spring of this year, however, the Company will be required to seek
covenant modifications to its credit agreement to maintain continued access to
its liquidity.
OTHER
The Company is conducting a review of its computer systems to identify
those areas that could be affected by the "Year 2000" issue and is developing a
plan to resolve the issue. The Company believes that, by modifying existing
software, and/or converting to new software, the Year 2000 issue can be resolved
without significant operational difficulties. The financial impact of this issue
is not anticipated to be material to the Company's results of operations,
financial position or cash flows. In addition, the Company believes that many of
its customers, suppliers and financial institutions are also impacted by the
Year 2000 issue which could affect the Company. The review being conducted
includes an assessment of the compliance efforts of the Company's major
customers, suppliers and financial institutions. At this time, the Company is
unable to determine the impact of these third party compliance efforts, if any,
on the Company's results of operations, financial position or cash flow.
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
28
<PAGE> 35
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 OR
INFORMATION TECHNOLOGY MALFUNCTIONS AND PENDING LITIGATION.
PENDING ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" which
establishes standards for reporting and display of comprehensive income and its
components in financial statements. The statement is effective for fiscal years
beginning after December 15, 1997. The statement will be adopted in fiscal 1999
and will not impact the results of operations, financial position or cash flows
of the Company.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which changes the way public companies
report information about segments of their business. The statement is effective
for fiscal years beginning after December 15, 1997. The Company has not yet
completed its analysis of on which operating segments, if any, it will report.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and other Postretirement Benefits" which standardizes the disclosure
requirements for pensions and other postretirement benefits. The Statement is
effective for fiscal years beginning after December 15, 1997. The Statement will
be adopted in fiscal 1999 and will not impact the results of operations,
financial position or cash flows of the Company.
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BUSINESS
DEVELOPMENT
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, four 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 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 percent 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. The Company is currently in the process of
significantly expanding one converting plant and opened a new converting
facility early in fiscal 1998. The Company currently anticipates that capital
spending for fiscal 1998 and beyond will approximate its annual depreciation and
amortization expense. Capital spending, however, will be adjusted from time to
time as market conditions and available cash flows dictate.
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 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 (U.S.).
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, 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.
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Cellulose fiber, produced from wood chips, 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 1996, industry trade associations estimated U.S. corrugated
product sales and multiwall bag sales to be $20.8 billion and $1.3 billion,
respectively. It has also been estimated that virgin containerboard and
unbleached kraft paper capacity utilization rates in the U.S. averaged 93
percent and 76 percent, respectively, in calendar 1996 and 96 percent and 74
percent, respectively, for the first nine months of calendar 1997.
Industry trade publications estimated that calendar 1997 U.S.
containerboard and unbleached kraft paper annual capacities were 36.9 million
tons and 2.6 million tons, respectively. This represents an increase in
containerboard capacity of approximately 4 percent, while unbleached kraft
paperboard capacity was unchanged, 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 80 percent of the Company's net sales while
the remaining 20 percent primarily consists of containerboard and unbleached
kraft paper 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 percent of net sales in fiscal 1997 and
16 percent and 13 percent, respectively, in fiscal 1996 and fiscal 1995. The
Company's largest customer accounted for approximately 3 percent of the
Company's net sales in fiscal 1997 and approximately 4 percent and 3 percent,
respectively, in fiscal 1996 and fiscal 1995. Corrugated containers are
generally produced to customer order for delivery from one to ten days after
receipt of the order. As a result, the Company's backlog generally does not
exceed 3 percent 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, 1997 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 $66.4 million,
$71.5 million and $113.9 million in fiscal 1997, fiscal 1996 and fiscal 1995,
respectively. Fluctuations in export sales are primarily the result of changes
in selling prices for linerboard.
PRODUCTS
CORRUGATED PRODUCTS. The Company produces many varieties of corrugated
containers and sells the majority of its production to manufacturing end users.
The Company also produces corrugated sheets which are subsequently converted
into corrugated containers by independent manufacturers. Corrugated shipments
were a record 13.6 billion square feet in fiscal 1997, an increase of more than
2 percent 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 4 percent. From fiscal 1995 to fiscal 1996, corrugated
shipments increased approximately 6 percent adjusting for the extra week in
fiscal 1996, due to shipments from a new sheet feeder plant and capacity
additions related to the capital investment program.
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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 to a record 1,263,200 tons in
fiscal 1997 from 1,243,300 tons in the prior year despite the extra week in
fiscal 1996. Adjusting for the extra week in fiscal 1996, the Company's
production of containerboard increased approximately 2 percent from 1,200,500
tons in fiscal 1995. 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 1997, fiscal
1996 and fiscal 1995, the Company's corrugated plants consumed the equivalent of
approximately 82 percent, 80 percent and 78 percent, 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 increased approximately 10
percent in fiscal 1997 to 57,000 tons from 51,900 tons in fiscal 1996. The
Company's multiwall bag shipments were essentially flat in fiscal 1996 compared
to fiscal 1995.
UNBLEACHED KRAFT PAPER. The Company is a supplier of unbleached kraft paper
to independent multiwall bag and grocery bag and sack converters. During fiscal
1997, the Company produced 278,600 tons of unbleached kraft paper. This compares
with 256,900 tons and 263,900 tons in fiscal 1996 and fiscal 1995, respectively.
The Company has an agreement to supply S&G Packaging Company, L.L.C. (S&G
Packaging), a joint venture with Stone Container Corporation, with approximately
130,000 tons of unbleached kraft paper per year. During fiscal 1997 and fiscal
1996, the Company's multiwall bag plants consumed or the Company sold pursuant
to its paper supply agreement approximately 71 percent and 59 percent,
respectively, of its unbleached kraft paper production. During fiscal 1995, the
Company's multiwall bag and grocery bag and sack plants consumed the equivalent
of approximately 54 percent of the Company's unbleached kraft paper production
and purchase commitments.
SPECIALTY CHEMICALS. Gaylord Chemical Corporation, 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 Corporation is the sole
domestic producer of DMSO and estimates that Gaylord Chemical Corporation
produces 35 to 40 percent of the world's supply of DMSO. Sales of these products
for fiscal 1997, fiscal 1996 and fiscal 1995 were $19.6 million, $18.2 million
and $16.7 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.
The Company is engaged in the production and sale of grocery bags and sacks
through its 35 percent ownership interest in S&G Packaging.
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 $7.5 million in fiscal 1997 and $6.6
million in each of fiscal 1996 and fiscal 1995.
RAW MATERIALS
The Bogalusa, Louisiana mill uses approximately 75 percent pulpwood and
wood chips in the manufacture of containerboard and unbleached kraft paper, of
which approximately 40 to 45 percent was supplied by Weyerhaeuser Company
(Weyerhaeuser), successor in interest to Hanson Natural Resources Company, in
each of the last three fiscal years. The remainder was purchased on the open
market. The Company has
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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. Recycled fiber
accounts for the remainder of the mill's fiber requirements.
The Antioch, California mill uses 100 percent recycled fiber. During fiscal
1997, approximately 80 percent of the old corrugated containers (OCC) used as a
source of recycled fiber at the Antioch mill were 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 was purchased on the open market.
The Pine Bluff, Arkansas mill uses approximately 75 percent wood chips, of
which approximately 31 percent, 32 percent and 23 percent was purchased from
Weyerhaeuser, pursuant to a supply contract, in fiscal 1997, fiscal 1996 and
fiscal 1995, 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, 1999, at which time the Company anticipates it will be
renegotiated. Recycled fiber accounts for the remainder of the mill's fiber
requirements.
During fiscal 1997, the Company's financial results were adversely effected
by higher fiber costs. Average delivered prices for OCC increased $11 per ton,
or approximately 12 percent from $93 per ton in fiscal 1996, due to an increase
in domestic demand. In addition, average wood chip prices in fiscal 1997
increased approximately 10 percent as a result of higher demand and unusually
wet weather in the southern U.S. The fiber market is difficult to predict and
there can be no assurance of the future direction of OCC and wood chip prices.
In fiscal 1997, fiber represented approximately 40 percent 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 2003 pursuant to
which Weyerhaeuser will provide hog fuel (which consists of bark and other
residual fiber from trees) at stated prices. The remainder of the hog fuel used
by the Bogalusa mill is either purchased on the open market or is generated at
several chip mills with which the Company has long-term supply agreements. In
fiscal 1997, the Bogalusa mill produced all of its steam and generated
approximately 65 percent of its electricity requirements. During the same
period, the Antioch mill produced all of its steam and approximately 94 percent
of its electricity. The Antioch mill has a contract to sell electricity from its
cogeneration facility to a public utility through 2013. See "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 1997, energy costs accounted for approximately 10 percent of the
Company's containerboard and unbleached kraft paper production costs and future
increases in energy prices would adversely affect the Company's profitability.
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
35 percent of the Company's pulpwood and wood chip requirements in fiscal 1997.
In contrast to paper mills which manufacture containerboard and unbleached
kraft paper, converting facilities, which produce corrugated products and
multiwall bags, have comparatively low barriers to entry.
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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 and waste disposal, is a
significant factor in the Company's business. The Company made capital
expenditures for environmental purposes of approximately $1 million, $4 million
and $5 million in fiscal 1997, fiscal 1996 and fiscal 1995, respectively. The
Company believes that it is in compliance in all material respects with
applicable federal, state and local environmental regulations.
In November 1997, the Environmental Protection Agency promulgated new air
standards for pulping processes together with new water quality discharge
limitations into what are commonly referred to as the "Cluster Rule" regulations
for pulp and paper mills. Phase I of the Cluster Rule as it relates to air
quality is applicable to kraft, soda, sulfite, or semi-chemical pulping
processes, mechanical pulping processes, and processes using secondary or
non-wood fibers. New effluent (water) guidelines contained in the Cluster Rule
are applicable to bleached paper grade kraft, soda, and paper grade sulfite
mills only. Effluent guidelines for non-bleached paper mills, the segment in
which the Company participates, (i.e., unbleached kraft, semi-chemical,
dissolving kraft, dissolving sulfite, and non-wood chemical pulp) are yet to be
promulgated. The Company continues to evaluate the potential impact of the
proposed rules on its operations and capital expenditures. 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 certainty and will depend on
several factors including the actual requirements imposed under the final rules,
new developments in process control technology and the impact of inflation.
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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
Tipton, Indiana............. Corrugated sheets 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 "-- 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, 1997, the Company employed approximately 4,000 people.
Approximately 68 percent of the Company's employees are hourly wage employees
who are members of various labor unions. The
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Company's labor agreements covering its employees at its Bogalusa, Antioch and
Pine Bluff mills expire in fiscal 2000, fiscal 2001 and fiscal 2002,
respectively. At September 30, 1997, labor contracts covering approximately 3
percent of the Company's union employees had expired, and were subsequently
renegotiated. In addition, labor contacts covering approximately 16 percent of
the Company's union employees are scheduled to expire before the end of fiscal
1998. 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. 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.
LEGAL PROCEEDINGS
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 were 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 the plaintiff appealed. On September 29, 1997, the Illinois Court
of Appeals affirmed, in all respects, dismissal of the complaint. Plaintiff's
petition for leave to appeal that decision to the Illinois Supreme Court was
denied on February 4, 1998.
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 discovery stage. The Company believes that,
after investigation of the facts, 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, which seek
unspecified damages, 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
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<PAGE> 43
Corporation, the Company and twenty-one other defendants. In the Consolidated
Master Petition all claims against individual defendants (including the officers
of Gaylord Chemical Corporation and the Company) were dropped. 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 with
several new members. On June 20, 1997, a second CMO was entered by the court.
Pursuant to this second CMO, a Second Consolidated Amended Master Petition
(SCAMP) was filed on June 20, 1997. The SCAMP includes substantially all the
claims and theories asserted in the original Consolidated Master Petition. No
officers of Gaylord Chemical Corporation or the Company are named as defendants
in the SCAMP.
Pursuant to the second CMO, the status of all lawsuits pending before the
filing of the SCAMP, some of which name officers of Gaylord Chemical Corporation
or the Company as defendants, will be determined by the trial court after class
certification. The trial court certified a class on November 10, 1997. The class
consists of allegedly injured parties in the city of Bogalusa, parts of
Washington Parish, Louisiana, and parts of Marion, Walthall and Pike Counties in
Mississippi. Defendants have filed supervisory writs with the Court of Appeal
challenging the trial court's class certification ruling. Those writs are
currently pending.
In addition, the Company, Gaylord Chemical Corporation and numerous other
third party companies have been named as defendants in twelve actions brought by
plaintiffs in Mississippi state court, who claim injury as a result of the
October 23, 1995 accident at the Bogalusa facility. These cases, which purported
to be on behalf of over 11,000 individuals, were not filed as a class action but
rather have all been consolidated before a single judge in Hinds County,
Mississippi. All of these cases allege claims similar to those in Louisiana
State Court. To date, discovery in the consolidated cases has been coordinated
with the ongoing discovery in the Louisiana class action. Following several
rulings by the Mississippi Trial Court judge, over 7,400 individuals' claims in
these consolidated actions have been either: (1) dismissed for failure to comply
with outstanding discovery orders or (2) voluntarily withdrawn. As with the
Louisiana class action, the Company and Gaylord Chemical Corporation are
vigorously contesting all claims in Mississippi arising out of the October 23,
1995 explosion. In addition, the Company and Gaylord Chemical Corporation have
filed cross-claims for indemnity and contribution against co-defendants in both
of the Mississippi and Louisiana actions.
The Company and Gaylord Chemical Corporation maintain insurance and have
filed separate suits seeking 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 before the same judge who is hearing the liability class action. The
carrier with the first layer of coverage under the general liability policy has
agreed to pay the Company's and Gaylord Chemical Corporation's defense costs
under reservation of rights. The primary carrier and the nine excess level
insurers moved for summary judgment before the trial court claiming that
coverage for the accident is excluded because of pollution exclusions contained
in these policies. On November 20, 1997, the trial court denied all of the
motions, and the insurers have filed supervisory writs with the Court of Appeal
contesting that ruling. Those writs are pending.
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.
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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.
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 December 31, 1997, the aggregate
standby letter of credit commitment was approximately $3.8 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
38
<PAGE> 45
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.
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
The Company entered into certain amendments to the Credit Agreement to
permit the Refinancing.
OLD DEBENTURES
As of December 31, 1997, the Company had outstanding $404,327,000 aggregate
principal amount of the 12 3/4% Old Debentures. The Company issued $434,222,000
in aggregate principal amount (discounted to $299,999,638 at the issue date) of
the Old Debentures under an Indenture dated as of May 18, 1993 (the "Old
Debenture Indenture"), between the Company and Chase Bank of Texas N.A. as
Successor Trustee (the "Old Debenture Trustee"). In fiscal 1996, the Company
repurchased on the open market and retired approximately $29.9 million principal
amount of the Old Debentures. The Old Debentures are unsecured obligations of
the Company and are subordinated in right of payment to all Senior Debt (as
defined in the Old Debenture Indenture) of the Company which term includes the
Credit Agreement, the 9 3/4% Notes and the Senior Notes offered hereby. The Old
Debentures are redeemable at the option of the Company, in whole or
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<PAGE> 46
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. Under the terms of the
Old Debenture Indenture, notice of a redemption of the Old Debentures must be
delivered at least 30 days but not more than 60 days before the date of any such
redemption.
9 3/4% SENIOR NOTES
As of December 31, 1997, the Company had outstanding $225,000,000 aggregate
principal amount of the 9 3/4% Senior Notes. The 9 3/4% Senior Notes were issued
under an Indenture dated as of June 12, 1997, between the Company and State
Street Bank and Trust Company, as Trustee (the "9 3/4% Senior Note Indenture").
The 9 3/4% Senior Notes are senior unsecured obligations of the Company and will
rank pari passu with the Senior Notes. The 9 3/4% Senior Notes will mature on
June 15, 2007. The 9 3/4% Senior Notes are redeemable at the Company's option,
in whole or in part, at any time on or after June 15, 2002, initially at
104.875% of their principal amount, plus accrued interest, declining to 100% of
their principal amount, plus accrued interest on or after June 15, 2005. Under
the terms of the 9 3/4% Senior Note Indenture, notice of a redemption of the
9 3/4% Senior Notes must be delivered at least 30 days but not more than 60 days
before the date of any such redemption. The 9 3/4% Senior Note Indenture
contains certain restrictive covenants that among other things, limit the
ability of the Company and its subsidiaries to incur indebtedness, incur liens,
pay dividends or make other restricted payments or restricted investments,
consummate certain asset sales, enter into transactions with affiliates, impose
restrictions on the ability of a subsidiary to pay dividends or make certain
payments to the Company or restricted subsidiaries, engage in mergers and
consolidations or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the Company's assets.
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 July, 2000. 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 0.5 percent per
annum. Interest is payable monthly. GRC is obligated to pay a commitment fee of
0.375 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 December 31, 1997, $54 million was
outstanding under the Trade Receivable Facility and no additional credit was
available to GRC pursuant to the borrowing base formula. The highest outstanding
principal balance under the Trade Receivable Facility during fiscal 1997 was
$54.0 million and the weighted average interest rate was 6.5 percent. At
December 31, 1997 and 1996, the Company's consolidated balance sheet included
$90.1 million and $86.1 million, respectively, of accounts receivable sold to
GRC.
DESCRIPTION OF NOTES
The Senior Exchange Notes offered hereby will be issued as a separate
series under the Senior Note Indenture dated as of February 23, 1998 by and
between the Company and State Street Bank and Trust Company, as trustee (the
"Senior Note Trustee"). The Senior Subordinated Exchange Notes, will be issued
as a separate series under an the Senior Subordinated Note Indenture dated as of
February 23, 1998 by and between the Company and Chase Bank of Texas, National
Association, as trustee (the "Senior Subordinated Note Trustee"). The form and
terms of the New Notes are the same as the form and terms of the Old Notes
40
<PAGE> 47
(which they replace) except that (i) the New Notes bear a Series B designation,
(ii) the New Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof, and (iii) the holders of
New Notes will not be entitled to certain rights under the Registration Rights
Agreements, including the provisions providing for an increase in the interest
rate on the Old 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 Indentures 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 Indentures (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 Indentures by reference to the TIA as in
effect on the date of the Indentures. The definitions of certain capitalized
terms used in the following summary are set forth under "Certain Definitions."
For purposes of this section, references to the "Company" include only Gaylord
Container Corporation and not its subsidiaries.
The Senior Notes are general unsecured obligations of the Company and rank
pari passu in right of payment to all senior indebtedness of the Company,
including all obligations of the Company under the Credit Agreement and the
9 3/4% Senior Notes. The Senior Notes rank senior in right of payment to the
obligations of the Company under the Senior Subordinated Notes.
The Senior Subordinated Notes are general unsecured obligations of the
Company, subordinate in right of payment to all Senior Debt of the Company,
including indebtedness under the Credit Agreement, the 9 3/4% Senior Notes and
the Senior Notes, and rank pari passu in right of payment to all existing and
future senior subordinated indebtedness of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Senior
Note Trustee will act as Paying Agent and Registrar for the Senior Notes and the
Senior Subordinated Trustee will act as Paying Agent and Registrar for the
Senior Subordinated Notes. The Notes may be presented for registration or
transfer and exchange at the offices of the respective Registrar. 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 respective
Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the respective 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 Senior Note Indenture and the Senior
Subordinated Note Indenture, respectively.
CERTAIN TERMS OF THE SENIOR NOTES
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are limited in aggregate principal amount to $200,000,000
and will mature on June 15, 2007. Interest on the Senior Notes will accrue at
the rate of 9 3/8% per annum and will be payable semi-annually on each June 15
and December 15, commencing on June 15, 1998, 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 Senior 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 3/8% 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 3/8% per annum. Interest will be computed on the basis of a
360-day year comprising twelve 30-day months.
OPTIONAL REDEMPTION
The Senior 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> 48
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........................................................ 104.688%
2003........................................................ 103.125%
2004........................................................ 101.563%
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 Senior Notes
with the net proceeds from one or more Equity Offerings of the Company at a
redemption price equal to 109.375% 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 million
aggregate principal amount of the Senior 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 Senior 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. See
"-- Change of Control."
CERTAIN TERMS OF THE SENIOR SUBORDINATED NOTES
PRINCIPAL, MATURITY AND INTEREST
The Senior Subordinated Notes are limited in aggregate principal amount to
$250,000,000 and will mature on February 15, 2008. Interest on the Senior
Subordinated Notes will accrue at the rate of 9 7/8% per annum and will be
payable semi-annually on each February 15 and August 15, commencing on August
15, 1998, to the persons who are registered holders at the close of business on
each February 1 and August 1 immediately preceding the applicable interest
payment date. Interest on the Senior Subordinated 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 7/8% 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 7/8% per
annum. Interest will be computed on the basis of a 360-day year comprising
twelve 30-day months.
OPTIONAL REDEMPTION
The Senior Subordinated Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on or after February 15, 2003
at the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on February 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>
2003........................................................ 105.063%
2004........................................................ 103.375%
2005........................................................ 101.688%
2006 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 15, 2001, the
Company may redeem up to 33% of the aggregate principal amount of Senior
Subordinated Notes with the net proceeds from one or more Equity Offerings of
the Company at a redemption price equal to 109.875% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the date of
redemption; provided, however, that, after
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<PAGE> 49
giving effect to any such redemption, $125 million of the aggregate principal
amount of the Senior Subordinated 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 February
15, 2003, the Company, at its option, may redeem all, but not less than all, of
the outstanding Senior Subordinated Notes at a redemption price equal to 100% of
the principal amount thereof plus the applicable Make-Whole Premium. 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. See "--Change of Control."
SUBORDINATION
The payment of all Obligations on the Senior Subordinated Notes is
subordinated in right of payment to the prior payment in full in cash or cash
equivalents of all obligations on Senior Debt. Upon any payment or distribution
of assets to creditors upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company whether voluntary or involuntary or
in bankruptcy, insolvency, receivership or other proceedings, all obligations
due or to become due upon all Senior Debt shall first be paid in full in cash or
cash equivalents, or such payment duly provided for, before any payment or
distribution is made on account of any obligations on the Senior Subordinated
Notes, or for the acquisition of any of the Senior Subordinated Notes for cash
or property or otherwise. If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or otherwise,
of any principal of or interest on any Senior Debt, no payment shall be made by
or on behalf of the Company or any other Person on its or their behalf with
respect to any obligations on the Senior Subordinated Notes or to acquire any of
the Senior Subordinated Notes for cash or property or otherwise. In addition, if
any other event of default occurs and is continuing (or if such an event of
default would occur upon any payment with respect to the Senior Subordinated
Notes) with respect to any Designated Senior Debt, as such event of default is
defined in the instrument creating or evidencing such Designated Senior Debt
permitting the holders of such Designated Senior Debt then outstanding to
accelerate the maturity thereof and if the representative for the respective
issue of Designated Senior Debt gives written notice of the event of default to
the Senior Subordinated Note Trustee (a "Default Notice"), then, unless and
until all events of default have been cured or waived or have ceased to exist or
the Senior Subordinated Trustee, receives notice from the representative for the
respective issue of Designated Senior Debt terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other Person on its behalf
shall (x) make any payment with respect to any obligations on the Senior
Subordinated Notes or (y) acquire any of the Senior Subordinated Notes for cash
or property or otherwise. Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 180 days from the date of delivery of
a Default Notice and only one such Blockage Period may be commenced within any
360 consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Debt whether or
not within a period of 360 consecutive days, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the holders of the Senior Subordinated Notes, may recover less, ratably, than
holders of Senior Debt.
Giving effect to the issuance of the Notes and the application of the
proceeds therefrom, at December 31, 1997, the total amount of outstanding debt
that would have been senior to the Senior Subordinated Notes was approximately
$611.6 million, including approximately $12 million of undrawn letters of credit
under the Credit Agreement.
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<PAGE> 50
CERTAIN COVENANTS
EACH OF THE INDENTURES CONTAINS, AMONG OTHERS, THE FOLLOWING COVENANTS.
EXCEPT AS OTHERWISE SPECIFIED, ALL OF THE COVENANTS DESCRIBED BELOW APPEAR IN
EACH OF THE INDENTURES.
Limitation on Restricted Payments. The Indentures 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 Senior
Notes or the Senior Subordinated Notes, as the case may be, 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 quarter 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 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
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<PAGE> 51
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 Senior Notes or the Senior
Subordinated Notes, as the case may be, either (i) in exchange for Indebtedness
of the Company that is subordinate or junior in right of payment to the Senior
Notes or the Senior Subordinated Notes, as the case may be, at least to the
extent that the Indebtedness being acquired is subordinated to the Senior Notes
or the Senior Subordinated Notes, as the case may be, 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 Senior Notes or the Senior Subordinated
Notes, as the case may be, 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 Senior Notes or the Senior Subordinated Notes, as the
case may be, at least to the extent that the Indebtedness being acquired is
subordinated to the Senior Notes or the Senior Subordinated Notes, as the case
may be, and has no scheduled principal prepayment dates prior to the earlier of
(a) the scheduled final maturity date of the Senior Notes or the Senior
Subordinated Notes, as the case may be, 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) in the case of the Senior Note
Indenture, the repurchase of any Senior Subordinated Notes in accordance with
(i) the "Limitation on Asset Sales" and "Change of Control" covenants hereunder
and under the Senior Subordinated Note Indenture; (7) in the case of the Senior
Note Indenture, the redemption or repurchase by the Company of up to $200
million aggregate principal amount of Old 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
9 3/4% Senior 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 Indentures 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 the Indentures, the Company may, in its sole discretion designate
which provision such Indebtedness shall have been incurred under.
Guarantees by Restricted Subsidiaries. The Senior Note Indenture provides
that the Company will cause any Borrowing Restricted Subsidiary to become a
Subsidiary Guarantor by executing a guarantee (the "Senior Note Guarantee") of
payment of the Senior Notes by such Borrowing Restricted Subsidiary and the
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Senior Subordinated Note Indenture provides that the Company will cause any
Borrowing Restricted Subsidiary to become a Subsidiary Guarantor by executing a
guarantee (the "Senior Subordinated Note Guarantee," and together with the
Senior Note Guarantee the "Guarantees"), (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. The Senior Subordinated Note Guarantee will
be subordinate to the Senior Note Guarantee to the same extent that the Senior
Subordinated Notes are subordinated to the Senior Notes. If any such incurrence
of liability of such Restricted Subsidiary is provided in respect of
Indebtedness that is expressly subordinated to the Senior Notes, the guarantee
or other instrument provided by such Restricted Subsidiary in respect of such
subordinated Indebtedness shall be subordinated to the Guarantees pursuant to
subordination provisions no less favorable to holders of the Senior Notes than
those contained in the Senior Subordinated Note 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 Indentures 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 Indentures 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 such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture;
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(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 Indentures 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 Indentures 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 Senior 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, in the case of the Senior Notes, or Senior Debt, in the case of the
Senior Subordinated Notes or (B) to make an offer to purchase the Senior Notes
and, to the extent required by the documentation governing such indebtedness and
on a pro rata basis, indebtedness ranking pari passu with the Senior Notes, and,
in the event the holders of the Senior Notes and holders of other indebtedness
ranking pari passu with the Senior Notes tender an amount of such indebtedness
less than the total available Net Cash Proceeds offered to such holders, to
purchase Senior Subordinated Notes, at a price equal to 100% of the principal
amount of such 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
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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) above 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 except, in the case of the Senior
Subordinated Notes for so long as the Senior Notes and 9 3/4% Senior Notes are
outstanding, 330 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 Indentures. 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 Senior Notes or Senior Subordinated Notes, as the case may be,
properly tender Notes in an amount exceeding the applicable Net Proceeds Offer,
such Senior Notes or Senior Subordinated Notes, as the case may be, 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.
Merger, Consolidation and Sale of Assets. The Indentures 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
Indentures; (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 Indentures, that the surviving
Person (if other than the Company) agrees to be bound thereby and that all
conditions precedent in the Indentures 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.
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THE SENIOR NOTE INDENTURE CONTAINS THE FOLLOWING ADDITIONAL COVENANTS
Limitation on Liens. The Senior Note 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 Debentures, 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.
Limitation on Incurrence of Subordinated Indebtedness. The Senior Note
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 Senior
Notes to substantially the same extent as it is subordinated to such other
indebtedness pursuant to such written agreement.
THE SENIOR SUBORDINATED NOTE INDENTURE CONTAINS THE FOLLOWING ADDITIONAL
COVENANT
Prohibition on Incurrence of Senior Subordinated Debt. The Senior
Subordinated Note Indenture prohibits the Company from incurring or suffering to
exist Indebtedness which constitutes Senior Debt with respect to the Senior
Subordinated Note but is subordinated by written agreement in right of payment
to any other Senior Debt of the Company.
CHANGE OF CONTROL
The Indentures 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. The Senior Subordinated Indenture shall provide that, prior to the
repurchase of Senior Subordinated Notes the Company covenants to (i) repay in
full all Senior Debt the terms of which require repayment upon a Change of
Control or offer to repay in full all such Indebtedness and to repay the
Indebtedness owed to each holder of such Indebtedness which has accepted such
offer, or (ii) obtain the requisite consents under all Senior Debt to permit the
repurchase of the Senior Subordinated Notes as provided below. The Company shall
first comply with the covenant in the preceding sentence before it shall be
required to repurchase Senior Subordinated Notes pursuant to the provisions
described below.
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"); provided that the Change of Control Payment Date for the Senior
Subordinated Notes shall be a date subsequent to the Change of Control Payment
Date established by the Company for repurchase of the Senior Notes. 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
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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.
Because the Indentures provide that, upon the occurrence of a Change of
Control, the Company will establish a Change of Control Payment Date with
respect to the Senior Subordinated Notes on a date subsequent to the Change of
Control Payment Date established by the Company with respect to the Senior
Notes, the subordination provisions relating to the Senior Subordinated Notes
will prohibit the Company from repurchasing any tendered Senior Subordinated
Notes upon a Change of Control unless and until all of the Senior Notes tendered
for repurchase are first repurchased.
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 Indentures as "Events of Default":
(a) the failure to pay interest on any Senior Notes or Senior Subordinated
Notes, as the case may be, 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 Senior Notes or Senior Subordinated Notes, as the case may be, when such
principal becomes due and payable, at maturity, upon acceleration or redemption
or pursuant to an offer to purchase required by the applicable Indenture
(whether or not such payment shall be prohibited by the subordination provisions
of the applicable Indenture); (c) a default in the observance or performance of
any other covenant or agreement contained in the Senior Note Indenture or the
Senior Subordinated Note Indenture, as the case may be, which default continues
for a period of 30 days after the Company receives written notice of the default
by the applicable Trustee or holders of at least 25% in principal amount of the
Senior Notes or Senior Subordinated Notes, as the case may be; (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.
Upon the occurrence of any Event of Default specified in the Senior Note
Indenture, the Senior Note Trustee or the holders of at least 25% in principal
amount of outstanding Senior Notes may declare the principal of and accrued
interest on all the Senior Notes to be due and payable by written notice to the
Company. Upon any such declaration, such amount shall be immediately due and
payable. Upon the occurrence of an Event of Default specified in the Senior
Subordinated Note Indenture, the Senior Subordinated Note Trustee or the holders
of at least 25% in principal amount of outstanding Senior Subordinated Notes may
declare the principal amount and accrued interest on all Senior Subordinated
Notes to be 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 either Trustee or any holder of Notes.
The Indentures provide that, at any time after a declaration of
acceleration with respect to any issue of the Notes as described in the
preceding paragraph, the holders of a majority in principal amount of the such
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
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Company has paid the Senior Note Trustee or the Senior Subordinated Note
Trustee, as the case may be, its reasonable compensation and reimbursed the
Senior Note Trustee or the Senior Subordinated Note Trustee, as the case may be,
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) the description above of Events of Default, the Senior Note Trustee or the
Senior Subordinated Note Trustee, as the case may be, 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 applicable issue
of Notes may waive any existing Default or Event of Default under the applicable
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 Indentures at any time
by delivering all outstanding Senior Notes or Senior Subordinated Notes, as the
case may be, to the appropriate Trustee for cancellation. The Company, at its
option, (i) will be discharged from any and all obligations with respect to the
Senior Notes or Senior Subordinated Notes, as the case may be (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 applicable 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 Senior Notes or Senior Subordinated
Notes, as the case may be, on the dates such payments are due in accordance with
the terms of such Senior Notes or Senior Subordinated Notes as well as the
applicable Trustee's fees and expenses. To exercise any such option, the Company
is required to deliver to the Senior Note Trustee or the Senior Subordinated
Note Trustee, as the case may be, (A) an Opinion of Counsel to the effect that
the holders of such Senior Notes or Senior Subordinated Notes, as the case may
be, 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 of the
applicable issue not theretofore delivered to the applicable 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 applicable Trustee in the name, and at the expense,
of the Company.
REPORTS TO HOLDERS
The Company shall file with the Senior Note Trustee and the Senior
Subordinated Note 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 Senior
Note Trustee and the Senior Subordinated Note 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.
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MODIFICATION OF THE INDENTURE
From time to time, the Company and the Senior Note Trustee and the Senior
Subordinated Note Trustee, as the case may be, without the consent of the
holders of the Senior Notes and the Senior Subordinated Notes may amend the
applicable Indenture for certain specified purposes, including curing
ambiguities, defects or inconsistencies so long as such change does not, in the
opinion of the applicable Trustee, adversely affect the rights of any of the
holders in any material respect. In formulating its opinion on such matters, the
applicable 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 Indentures may be made with the
consent of the holders of a majority in principal amount of the then outstanding
Notes issued under such Indenture, 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 Indentures, (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 Indentures 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, (vi)
make the principal of, or interest on, any Notes payable with anything or in any
manner other than as provided for in the Indentures and the Notes or (vii) with
respect to the Senior Subordinated Notes, make any change in the subordination
provisions that adversely effect the holders of the Senior Subordinated Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indentures. Reference is made to the Indentures 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
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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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"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.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement, (ii) the Senior Notes, (iii) the 9 3/4% Senior Notes and (iv)
any other Indebtedness constituting Senior Debt which, at the time of
designation, has an aggregate principal amount of at least $50 million and is
specifically designated in the instrument evidencing such Senior Debt as
"Designated Senior Debt" by the Company.
"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.
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"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 Old 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, in the case of the Senior Notes, and February 15, 2003, in the case of the
Senior Subordinated Notes, 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
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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).
"9 3/4% Senior Notes" means the Company's $225,000,000 aggregate principal
amount of 9 3/4% Senior Notes due 2007.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Old Debentures" means the Company's 12 3/4% Senior Subordinated Discount
Debentures due 2005.
"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 $50 million in fiscal year 1998 and $25 million in any
subsequent fiscal year; provided that any portion of the $25 million ($50
million in the case of fiscal 1998) 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,
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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 Subsidiaries arising from Currency Agreements and
Commodity Agreements, (xix) the 9 3/4% Senior Notes and (xx) the Old Debentures.
"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 the Indentures 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
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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 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 the
Indentures, 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"
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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.
"Senior Debt," for purposes of the Senior Subordinated Notes, means the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition in bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Senior Subordinated Notes. Without limiting the generality of the foregoing,
"Senior Debt" shall include the monetary obligations of the Company under or
with respect to: (a) the Credit Agreement (including any post-petition interest
in any proceeding pursuant to the Bankruptcy Laws, whether or not allowed, at
the applicable rate under such agreement),(b) the Senior Notes and (c) the
9 3/4% Senior Notes. Notwithstanding the foregoing, Senior Debt shall not
include (i) any Indebtedness, if the instrument creating or evidencing the same
or the assumption or guarantee thereof expressly provides that such Indebtedness
shall not be senior in right of payment to the Senior Subordinated Notes, (ii)
the Senior Subordinated Notes, (iii) any Indebtedness of the Company to a
Subsidiary of the Company, (iv) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of the Company or any Subsidiary
(including, without limitation, amounts owed for compensation), (v) Indebtedness
to trade creditors and other amounts incurred in connection with obtaining
goods, materials or services, (vi) Indebtedness represented by Disqualified
Capital Stock, (vii) Indebtedness incurred in violation of the provisions set
forth under "Limitation on Incurrence of Additional Indebtedness," as such
covenant may be amended from time to time, (viii) Indebtedness incurred in
violation of the provisions set forth under "Prohibition on Incurrence of Senior
Subordinated Debt," as such covenant may be amended from time to time and (ix)
the Old Debentures.
"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
Indentures; 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.
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"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 each
Trustee by filing with such 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 Additional 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.
"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
Each of the Senior Exchange Notes and the Senior Subordinated Exchange
Notes initially will be represented by permanent global certificates in
definitive, fully registered form (collectively, the "Global Notes"). The Global
Notes will be deposited on their date of issuance with, or on behalf of DTC and
registered in the name of a nominee of DTC.
The Global Notes. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, 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
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persons who have accounts with such depositary and (ii) ownership of beneficial
interests in the Global Notes 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 Notes 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
Notes 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 Notes for all purposes
under the Indentures. No beneficial owner of an interest in any of the Global
Notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indentures with respect
to the Notes.
Payments of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of 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 Notes or for maintaining, supervising or
reviewing any records relating 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 Notes, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Notes 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 Notes 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 Certificated 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 Notes, in accordance with the normal procedures of DTC and with
the procedures set forth in the Indentures.
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 Notes 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 Notes
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 Notes among participants of DTC, it is
under no obligation to perform such procedures, and such
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procedures may be discontinued at any time. Neither the Company nor either
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 Notes and a successor depositary is not appointed
by the Company within 90 days, Certificated Notes will be issued in exchange for
the Global Notes.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on February 23, 1998 to
the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes to qualified institutional buyers
in reliance on Rule 144A under the Securities Act and to qualified buyers
outside the United States in reliance upon Regulation S under the Securities
Act. As a condition of the Purchase Agreement, the Company entered into the
Registration Rights Agreements with the Initial Purchasers pursuant to which the
Company has agreed, for the benefit of the holders of the Old Notes, at the
Company's expense, to use its best efforts to (i) file the Exchange Offer
Registration Statement within 60 days after the date of the original issue of
the Old Notes with the Commission with respect to the Exchange Offer for the New
Notes; (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 date of the original issuance of the Old Notes and (iii) use its best
efforts to consummate the Exchange Offer within 180 days after the date of the
original issuance of the Old Notes. Upon the Exchange Offer Registration
Statement being declared effective, the Company will offer the New Notes in
exchange for surrender of the Old 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 on which notice of the Exchange Offer is mailed
to the holders of the Old Notes. For each Old Note surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Note will receive a New
Note having a principal amount equal to that of the surrendered Old Note.
Interest on each Old Note will accrue from the last interest payment date on
which interest was paid on the Old Note surrendered in exchange therefor or, if
no interest has been paid on such Old Note, from the date of its original issue.
Interest on each New Note will accrue from the date of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes will in general be
freely tradeable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Old Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the New Notes (i) will not be able to rely on the interpretation of
the staff of the Commission, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreements, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New 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 New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
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 any other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
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 Old Notes must acknowledge that it (i) acquired the Old Notes
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for its own account as a result of market-making activities or other trading
activities, (ii) 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 New Notes to be received in the Exchange
Offer and (iii) will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. For a
description of the procedures for resales by Participant Broker-Dealers, see
"Plan of Distribution."
In the event that changes in the law or the 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 of the date of the original issuance of the Old Notes, the Company will
(i) file the Shelf Registration Statement covering resales of the Old Notes;
(ii) use its best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act and (iii) use its best efforts to
keep effective the Shelf Registration Statement until the earlier of two years
after its effective date and such time as all of the applicable Notes have been
sold thereunder. The Company will, in the event of the filing of the Shelf
Registration Statement, provide to each applicable holder of the Old Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resale of the Old Notes. A holder of Old Notes that sells such Old Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling security holder 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 Agreements which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Old Notes will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the applicable Registration Rights Agreement in order to have their Old Notes
included in the Shelf Registration Statement and to benefit from the provisions
set forth in the following paragraph.
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 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 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 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 Old 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 second anniversary of the
Issue Date (unless all the Notes have been sold thereunder), then
Additional Interest shall accrue on the 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 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
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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 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 clause
(ii) above), or (3) upon the exchange of Exchange Notes for all Old 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 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 Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Notes multiplied by a fraction, the numerator of which is the number of days
such Additional Interest rate was applicable during such period (determined in
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
Holders of Old Notes will be required to make certain representations to
the Company (as described in the Registration Rights Agreements) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreements in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreements does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreements,
copies of which are filed as exhibits to the Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old 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 Old 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 Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old 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 Old Notes except that (i) the Exchange Notes bear a Series B designation
and a different CUSIP Number from the Old Notes, (ii) the Exchange Notes have
been registered under the Securities Act and hence 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 Agreements,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange Offer,
all of which rights will terminate when the Exchange Offer is consummated. The
Exchange Notes will evidence the same debt as the Old Notes and will be entitled
to the benefits of the Indentures.
As of the date of this Prospectus, $200,000,000 aggregate principal amount
of Old Senior Notes and $250,000,000 aggregate principal amount of Old Senior
Subordinated Notes were outstanding. The Company
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has fixed the close of business on , 1998 as the record date
for the Exchange Offer for purposes of determining the persons to whom this
Prospectus and the Letter of Transmittal will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, or the Indentures 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 Old 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 Old 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 Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old 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 Old 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."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1998, 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 Old 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 Old Senior Notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
Senior Exchange Notes. Such interest will be paid with the first interest
payment on the Senior Exchange Notes on June 15, 1998. Holders of Old Senior
Subordinated Notes that are accepted for exchange will receive, in cash accrued
interest thereon to, but not including, the date of issuance of the Senior
Subordinated Exchange Notes. Such interest will be paid with the first interest
payment on the Senior Subordinated Exchange Notes on August 15, 1998. Interest
on the Old Notes accepted for exchange will cease to accrue upon issuance of the
Exchange Notes.
Interest on the Senior Exchange Notes is payable semi-annually on each June
15 and December 15, commencing on June 15, 1998. Interest on the Senior
Subordinated Exchange Notes is payable semiannually on each February 15 and
August 15, commencing on August 15, 1998.
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<PAGE> 73
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old 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 or submit an Agent's Message
in connection with a book-entry transfer, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Old 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 Old Notes,
Letter of Transmittal or Agent's Message 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 Old 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.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Old Notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and (iii)
that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal or Agent's Message, 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 or Agent's Message.
THE METHOD OF DELIVERY OF OLD 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 OLD 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.
Any beneficial owner whose Old 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 Old 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 Old Notes listed therein, such Old 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 Old Notes
with the signature thereon guaranteed by an Eligible Institution.
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<PAGE> 74
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices 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 Old Notes at the book-entry transfer facility, The Depository Trust Company
(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 Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility, unless an Agent's Message is received by the Exchange Agent
in compliance with ATOP, 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 Old Notes and withdrawal of tendered Old 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 Old Notes not properly tendered or any Old 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 their sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old 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 Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old 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.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available; (ii) who cannot deliver their Old 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 Old Notes and the principal amount of Old 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) (or, in the case of a book-entry
transfer, an Agent's Message) together with the certificate(s) representing
the Old 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
68
<PAGE> 75
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 (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), together with a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message) and all other documents required by the Letter of Transmittal are
received by the Exchange Agent upon 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 Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old 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 Old 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 Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old 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 Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Old 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 Old 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 Old Notes so withdrawn are validly retendered. Any Old 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 Old
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
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<PAGE> 76
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 Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old 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 Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer
and retain all Old Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Old Notes (see "--
Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect
to the Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn.
SENIOR NOTES EXCHANGE AGENT
The State Street Bank and Trust Company has been appointed as Exchange
Agent for the exchange of Senior Exchange Notes for Old Senior Notes pursuant to
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>
<S> <C>
By Mail: Overnight Courier:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Sandra Szczsponik Attention: Sandra Szczsponik
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 Place
Concourse Level, Corporate Trust Window Fourth Floor, Corporate Trust Department
New York, New York 10006 Boston, Massachusetts 02110
Facsimile Transmission: Confirm by Telephone:
(For Eligible Institutions Only) (617) 664-5314
(617) 664-5739
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
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<PAGE> 77
SENIOR SUBORDINATED NOTES EXCHANGE AGENT
Chase Bank of Texas, National Association has been appointed as Exchange
Agent for the exchange of Senior Subordinated Exchange Notes for Old Senior
Subordinated Notes pursuant to the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or the Letter of
Transmittal and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery Service:
Chase Bank of Texas, National Association Chase Bank of Texas, National Association
Corporate Trust Services Corporate Trust Services
P.O. Box 2320 1201 Main Street, 18th Floor
Dallas, Texas 75221-2320 Dallas, Texas 75202
Attention: Frank Ivina Attention: Frank Ivina
Facsimile Transmissions: Confirm by Telephone:
(For Eligible Institutions Only) (For Eligible Institutions Only)
(214) 672-5746 (214) 672-5125 or
(800) 275-2048
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
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 cash expenses to be 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 Old
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 Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old 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.
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<PAGE> 78
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 Old 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 Old Notes, where such Old
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.
As contemplated by these no-action letters and the Registration Rights
Agreements, 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 Exchange Notes
for its own account in exchange for Old 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."
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes (which they replace) except that (i) the Exchange Notes bear a
Series B designation, (ii) the Exchange Notes have been registered under the
Securities Act and, therefore, 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 Agreements, including the provisions
providing for an increase in the interest rate on the Old Notes in certain
circumstances relating to the timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated.
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
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<PAGE> 79
consult such holder's own tax advisor as to the particular tax consequences of
exchanging such holder's Old Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
The Company believes that the exchange of Old 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 Old Notes. Rather, the Exchange Notes
received by a holder will be treated as a continuation of the Old Notes in the
hands of such holder. As a result, there will be no federal income tax
consequences to holders exchanging Old 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 Old Notes where such Old 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
, 1998 (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 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, 1997 and 1996 and
for each of the three years in the period ended September 30, 1997 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 in reliance upon
the reports of such firm given 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 (a partnership including
professional corporations), Chicago, Illinois.
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<PAGE> 80
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets at September 30, 1997 and
1996...................................................... F-3
Consolidated Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995......................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1997, 1996 and 1995............. F-5
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Condensed Consolidated Balance Sheets at December
31, 1997 and September 30, 1996........................... F-30
Unaudited Consolidated Statements of Operations for the
three months ended December 31, 1997 and 1996............. F-31
Unaudited Consolidated Statements of Cash Flows for the
three months ended December 31, 1997 and 1996............. F-32
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-33
</TABLE>
F-1
<PAGE> 81
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, 1997
and 1996 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, 1997. 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,
1997 and 1996 and the results of its operations and its cash flows for each of
the three years in the period ended September 30, 1997 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
October 30, 1997 (February 13, 1998 as to Note 19)
F-2
<PAGE> 82
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 6.1 $ 39.2
Trade receivables (less allowances of $5.5 and $6.9,
respectively) (Note 9)................................. 100.6 111.0
Inventories (Note 5)...................................... 77.4 70.4
Prepaid expenses.......................................... 5.4 2.2
Deferred income taxes (Note 8)............................ 4.7 5.1
Other..................................................... 10.0 8.2
------ ------
Total current assets................................... 204.2 236.1
Property -- net (Notes 6 and 14)............................ 586.1 612.3
Other assets:
Deferred charges (Note 7)................................. 18.0 18.6
Deferred income taxes (Note 8)............................ 71.2 16.8
Other (Notes 4 and 9)..................................... 50.4 49.2
------ ------
Total.................................................. $929.9 $933.0
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 9)............. $ 14.4 $ 11.3
Trade payables............................................ 65.2 60.8
Accrued interest payable.................................. 26.3 27.3
Accrued and other liabilities (Note 10)................... 61.4 66.9
------ ------
Total current liabilities.............................. 167.3 166.3
------ ------
Long-term debt (Note 9)..................................... 701.7 623.1
Other long-term liabilities (Note 10)....................... 26.3 29.1
Commitments and contingencies (Note 16)..................... -- --
Stockholders' equity (Notes 11, 12 and 13)
Class A common stock...................................... -- --
Capital in excess of par value............................ 175.6 173.5
Retained deficit (Note 9)................................. (128.1) (46.1)
Common stock in treasury -- at cost....................... (11.4) (11.7)
Recognition of minimum pension liability (Note 15)........ (1.5) (1.2)
------ ------
Total stockholders's equity............................ 34.6 114.5
------ ------
Total................................................ $929.9 $933.0
====== ======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 83
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
-------------------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales................................................... $ 759.3 $922.0 $1,051.4
Cost of goods sold.......................................... 717.3 716.2 755.0
------- ------ --------
Gross margin................................................ 42.0 205.8 296.4
Selling and administrative costs............................ (81.1) (99.1) (95.5)
Non-recurring operating charges (Note 2).................... -- (8.1) (5.4)
------- ------ --------
Operating earnings (loss).............................. (39.1) 98.6 195.5
Interest expense -- net (Note 9)............................ (80.7) (78.3) (86.1)
Other income (expense) -- net............................... (1.6) (0.2) 0.6
------- ------ --------
Income (loss) before income taxes........................... (121.4) 20.1 110.0
Income tax (provision) benefit (Note 8)..................... 47.1 (8.3) 24.2
------- ------ --------
Income (loss) before extraordinary item..................... (74.3) 11.8 134.2
Extraordinary loss (Note 3)................................. (7.7) (3.2) --
------- ------ --------
Net income (loss)...................................... $ (82.0) $ 8.6 $ 134.2
======= ====== ========
Earnings (loss) per share (Note 19):
Basic:
Income (loss) before extraordinary item................... $ (1.40) $ 0.22 $ 2.49
Extraordinary loss (Note 3)............................... (0.15) (0.06) --
------- ------ --------
Net income (loss)......................................... $ (1.55) $ 0.16 $ 2.49
======= ====== ========
Diluted(1):
Income before extraordinary item.......................... $ -- $ 0.22 $ 2.44
Extraordinary loss (Note 3)............................... -- (0.06) --
------- ------ --------
Net income................................................ $ -- $ 0.16 $ 2.44
======= ====== ========
</TABLE>
- ---------------
(1) Not presented where the effect of potential shares is antidilutive.
See notes to consolidated financial statements.
F-4
<PAGE> 84
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, 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)
Net income....................... -- -- -- -- -- (82.0) -- --
Options exercised................ 244,953 -- -- -- 1.8 -- -- --
Restricted stock -- net.......... 58,200 -- -- -- -- -- -- --
Adjustment of minimum pension
liability...................... -- -- -- -- -- -- -- --
Other............................ -- -- -- -- 0.3 -- (35,575) 0.3
---------- --- ---------- --- ------ ------- --------- ------
Balance at September 30, 1997.... 54,573,164 $-- -- $-- $175.6 $(128.1) 1,546,203 $(11.4)
========== === ========== === ====== ======= ========= ======
<CAPTION>
TOTAL
MINIMUM STOCKHOLDERS'
PENSION EQUITY
LIABILITY (DEFICIT)
--------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
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
Net income....................... -- (82.0)
Options exercised................ -- 1.8
Restricted stock -- net.......... -- --
Adjustment of minimum pension
liability...................... (0.3) (0.3)
Other............................ -- 0.6
----- ------
Balance at September 30, 1997.... $(1.5) $ 34.6
===== ======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 85
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
---------------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income (loss)........................................... $ (82.0) $ 8.6 $ 134.2
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operations:
Extraordinary loss........................................ 7.7 3.2 --
Depreciation and amortization............................. 65.1 64.5 64.8
Non-cash interest expense................................. -- 31.2 46.7
Deferred income taxes..................................... (48.9) 1.8 (28.0)
Non-recurring charges..................................... -- 8.1 5.4
Acquisition restructuring expenditures.................... (0.4) (0.7) (1.0)
Change in current assets and liabilities, excluding
acquisitions and dispositions:
Receivables............................................ 12.0 29.4 (18.2)
Inventories............................................ (6.7) (1.7) (13.5)
Prepaid expenses and other current assets.............. (4.9) 0.5 (3.2)
Accounts payable and other accrued liabilities......... (7.5) 21.3 8.2
Other -- net.............................................. (0.9) (1.8) (1.2)
------- ------- -------
Net cash provided by (used for) operations.................. (66.5) 164.4 194.2
------- ------- -------
CASH FLOWS FROM INVESTMENTS:
Capital expenditures...................................... (31.1) (54.8) (58.9)
Capitalized interest...................................... (0.8) (0.8) (2.3)
Proceeds from asset sales................................. 1.9 2.6 3.5
Other investments -- net.................................. (3.7) -- (3.6)
------- ------- -------
Net cash used for investments............................... (33.7) (53.0) (61.3)
------- ------- -------
CASH FLOWS FROM FINANCING:
Treasury stock purchases.................................. -- (11.6) --
Early extinguishment of debt (Notes 3 and 9).............. (189.7) (77.7) (89.9)
Issuance of senior notes (Notes 3 and 9).................. 225.0 -- --
Senior debt repayments.................................... (10.4) (15.6) (25.8)
Debt issuance costs....................................... (5.6) (0.5) (3.4)
Revolving credit agreement borrowings -- net.............. 47.0 -- --
Other financing -- net.................................... 0.8 0.7 1.3
------- ------- -------
Net cash provided by (used for) financing................... 67.1 (104.7) (117.8)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS............. (33.1) 6.7 15.1
Cash and equivalents, beginning of year..................... 39.2 32.5 17.4
------- ------- -------
Cash and equivalents, end of year........................... $ 6.1 $ 39.2 $ 32.5
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 86
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 80 percent of the Company's net sales while the
remaining 20 percent primarily consists of containerboard and unbleached kraft
paper 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,
four 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, 1997 and 1996 and for the years ended September 30, 1997 (Fiscal
1997), September 30, 1996 (Fiscal 1996) and September 30, 1995 (Fiscal 1995)
include all the accounts of the Company after elimination of intercompany
transactions and balances. The Company operates on a 52/53-week fiscal year.
Fiscal 1997 and Fiscal 1995 were 52-week fiscal years, while Fiscal 1996 was a
53-week fiscal year. Certain amounts for Fiscal 1996 and Fiscal 1995 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 which the Company has 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 a
contractual right of offset does not exist.
Cash and Equivalents -- The Company considers all highly liquid debt
instruments, including time deposits, bank repurchase agreements and commercial
paper, with an original or purchased 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> 87
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.
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 Company's 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" in the
Company's statement of operations. 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" (see Note 8).
Business Segment -- The Company is an integrated manufacturer of paper
packaging products including corrugated containers, corrugated sheets,
preprinted linerboard, containerboard, unbleached kraft paper and multiwall
bags.
Earnings (Loss) Per Share -- Amounts previously reported have been restated
upon the adoption of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (see Note 19).
2. NON-RECURRING OPERATING CHARGES
In the fourth quarter of Fiscal 1996, the Company recorded a $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 was designed to reduce future unit labor
costs.
3. EXTRAORDINARY ITEMS
During Fiscal 1997, the Company issued $225 million principal amount of
9 3/4% Senior Notes due 2007 (the New Notes) and used the proceeds to redeem and
retire all its outstanding 11 1/2% Senior Notes ($179.7 million principal
amount) due 2001 (the Old Notes) and to repay borrowings under the revolving
portion of its credit agreements. In conjunction with the redemption,
approximately $2.8 million of deferred financing fees were written off. The
early retirement of debt resulted in an extraordinary loss of $7.7 million, net
of an income tax benefit of $5.0 million.
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.
4. INVESTMENT IN AFFILIATES
On July 12, 1996, the Company contributed grocery bag manufacturing net
assets with a carrying value of approximately $32.3 million (of which
Property -- net accounted for approximately $25.1 million), to S&G Packaging
Company, L.L.C. (S&G Packaging), a joint venture with Stone Container
Corporation, in
F-8
<PAGE> 88
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exchange for a 35 percent equity interest in the new company. The Company has
the option to increase its ownership interest by an additional 15 percent before
July 2001. 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 1997 and Fiscal 1996 were approximately $38.4 million and $6.8
million, respectively.
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 1997, Fiscal 1996 and Fiscal 1995 were
approximately $30.8 million, $38.2 million and $62.0 million, respectively.
The Company has a 50 percent ownership interest in two corporations that,
through wholly owned subsidiaries, produce corrugated sheets and corrugated
containers in Mexico. Product sales to these companies during Fiscal 1997,
Fiscal 1996, and Fiscal 1995 were approximately $4.9 million, $6.4 million and
$4.1 million, respectively.
5. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Finished products........................................... $22.5 $16.3
In process.................................................. 39.3 31.3
Raw materials............................................... 9.2 8.5
Supplies.................................................... 15.0 14.3
----- -----
86.0 70.4
LIFO valuation adjustment................................... (8.6) --
----- -----
Total.................................................. $77.4 $70.4
===== =====
</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.
6. PROPERTY -- NET
Property consists of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Land.................................................... $ 17.6 $ 15.5
Buildings and improvements.............................. 142.7 127.4
Machinery and equipment................................. 884.4 848.5
Construction-in-progress................................ 16.8 41.9
-------- --------
1,061.5 1,033.3
Accumulated depreciation................................ (475.4) (421.0)
-------- --------
Total.............................................. $ 586.1 $ 612.3
======== ========
</TABLE>
F-9
<PAGE> 89
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. DEFERRED CHARGES
Deferred charges consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Deferred financing costs................................... $ 39.0 $ 40.1
Intangibles................................................ 4.2 4.2
------ ------
43.2 44.3
Accumulated amortization................................... (25.2) (25.7)
------ ------
Total................................................. $ 18.0 $ 18.6
====== ======
</TABLE>
Amortization of deferred charges during Fiscal 1997, Fiscal 1996 and Fiscal
1995 was approximately $3.6 million, $4.3 million and $7.4 million,
respectively. During Fiscal 1997, the Company wrote off approximately $2.8
million of deferred financing fees related to the refinancing of the Old Notes,
and deferred approximately $5.5 million of financing fees related to the New
Notes. 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).
8. INCOME TAXES
The components of the deferred income tax liabilities and assets, current
and non-current, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Current
Deferred tax assets:
Inventory valuation...................................... $ 4.7 $ 5.1
------ ------
Deferred tax asset......................................... $ 4.7 $ 5.1
====== ======
Non-Current
Deferred tax assets:
Net operating loss....................................... $137.2 $ 83.7
Original issue discount.................................. 58.6 59.2
Asset write-down......................................... 41.9 41.0
Debt restructuring expenses.............................. 1.7 2.4
Other long-term liabilities.............................. 3.0 5.6
Deferred compensation.................................... 9.5 5.5
Other.................................................... 12.7 11.8
------ ------
Sub-total............................................. 264.6 209.2
------ ------
Deferred tax liabilities:
Depreciation............................................. 179.1 178.6
Capitalized interest..................................... 12.5 12.2
Other.................................................... 1.8 1.6
------ ------
Sub-total............................................. 193.4 192.4
------ ------
Net non-current deferred tax asset......................... $ 71.2 $ 16.8
====== ======
</TABLE>
The current income tax provision for Fiscal 1997, Fiscal 1996 and Fiscal
1995, principally for state income taxes and Alternative Minimum Tax (AMT), was
$1.9 million, $4.2 million and $3.8 million,
F-10
<PAGE> 90
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respectively. The deferred income tax benefit for Fiscal 1997 and Fiscal 1995
was $54.0 million and $28.0 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). Deferred income taxes result
from temporary differences in the period of reporting revenues, expenses and
credits in the financial statements and income tax return. Such temporary
differences for Fiscal 1997, Fiscal 1996 and Fiscal 1995 and their related
deferred income tax provision (benefit) follow:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Depreciation expense.................................. $ 0.5 $ 1.4 $ 5.8
Original issue discount............................... 0.6 (18.1) --
Asset write-down...................................... (0.9) 8.0 (0.6)
Restructuring fees.................................... 0.7 0.9 0.9
Inventory differences................................. 0.4 1.7 (0.8)
Net operating loss.................................... (53.5) 11.6 45.6
Change in valuation allowance......................... -- -- (75.3)
Other -- net.......................................... (1.8) (3.7) (3.6)
------ ------ ------
Total deferred income tax provision (benefit)....... $(54.0) $ 1.8 $(28.0)
====== ====== ======
</TABLE>
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 a previously recorded valuation allowance to zero.
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, 1997.
At September 30, 1997, the Company had cumulative regular net operating
loss carryforwards of approximately $350 million, which may be carried forward
and expire at various dates through the year 2012. At September 30, 1997, AMT
net operating losses of approximately $131 million are available to be carried
back or carried forward. It is estimated that approximately $26 million of the
AMT net operating loss will be carried back to Fiscal 1996. The remaining AMT
net operating loss of $105 million may be carried forward through the year 2012.
At September 30, 1997, AMT credits of approximately $5 million for tax purposes
are expected to be refunded (during fiscal 1998) as a result of the AMT net
operating loss carry back and approximately $4 million may be carried forward
indefinitely to be applied against regular tax.
F-11
<PAGE> 91
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 (Dollars in millions):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- -----------------------
PERCENTAGE OF PERCENTAGE OF
PERCENTAGE OF INCOME INCOME
LOSS BEFORE BEFORE BEFORE
AMOUNT INCOME TAXES AMOUNT INCOME TAXES AMOUNT INCOME TAXES
------ ------------- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory income tax..... $(42.5) (35)% $ 7.0 35% $ 38.5 35%
State income taxes -- net of
Federal benefit................ (4.6) (4) 1.4 7 6.6 6
Reduction in valuation
allowance...................... -- -- -- -- (75.3) (68)
Other............................ -- -- (0.1) -- 6.0 5
------ --- ----- -- ------ ---
Total income tax provision
(benefit)................. $(47.1) (39)% $ 8.3 42% $(24.2) (22)%
====== === ===== == ====== ===
</TABLE>
9. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Revolving Credit Facility (a)............................... $ -- $ --
Trade Receivables Facility (b).............................. 47.0 --
Senior Notes, 9.75%, due June 2007 (c)...................... 225.0 --
Senior Notes, 11.5%, due May 2001 (d)....................... -- 179.7
Pollution control and industrial revenue bonds, interest at
5.7% to 8.3%, due at various dates to 2008 (e)............ 11.6 11.6
Capital lease obligations, interest at 7.6% to 11.8%, due at
various dates to 2002 (f)................................. 12.6 16.2
Other senior debt, interest at 6.5% to 9.0%, due at various
dates to 1999............................................. 15.6 22.6
------ ------
Total senior debt 311.8 230.1
Senior Subordinated Discount Debentures, 12.75%, due May
2005 (g).................................................. 404.3 404.3
------ ------
Total debt............................................. 716.1 634.4
Less current maturities..................................... (14.4) (11.3)
------ ------
Total.................................................. $701.7 $623.1
====== ======
</TABLE>
Scheduled aggregate annual principal payments due on long-term debt during
each of the next five years are (in millions) $14.4, $8.7, $5.8, $4.1 and $0.1,
respectively.
(a) At September 30, 1997, the Company's bank credit agreement (the Bank
Credit Agreement) was comprised of a $175 million revolving credit facility due
in June 2000 (the Revolving Credit Facility) and a $3.8 million standby letter
of credit facility maturing in April 1999 (the L/C Facility). In Fiscal 1997,
the Bank Credit Agreement was amended to permit the refinancing of the Old Notes
(see Note 3) and to modify certain financial covenants allowing the Company
greater financial flexibility. 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. The level of the Company's
annual capital expenditures is also limited by the Bank Credit Agreement.
F-12
<PAGE> 92
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $30 million of letters of credit, which reduce the
facility by a like amount, may be issued under this agreement. At September 30,
1997, no amounts were outstanding under the Revolving Credit Facility, $158.9
million of credit was available and $6.1 million of letters of credit were
outstanding. The highest outstanding principal balance under the facility during
Fiscal 1997 was $18.0 million, and the weighted average interest rate was 8.8
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. 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 July, 2000. By mutual
agreement with the lenders, the Company has the ability annually to extend the
term by one year. 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 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, 1997, $47.0 million
was outstanding under the Trade Receivable Facility and $5.6 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
1997 was $54.0 million and the weighted average interest rate was 6.5 percent.
At September 30, 1997 and 1996, the Company's consolidated balance sheet
included $85.2 million and $91.8 million, respectively, of accounts receivable
sold to GRC.
F-13
<PAGE> 93
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) In June 1997, the Company issued $225.0 million aggregate principal
amount of 9 3/4% Senior Notes Due 2007 (the New Notes). The New Notes are
general unsecured obligations of the Company and rank pari passu in right of
payment to all senior indebtedness of the Company, including indebtedness under
the Bank Credit Agreement, and rank senior in right of payment to the
Subordinated Discount Debentures (as defined below). Indebtedness under the Bank
Credit Agreement, however, is secured by liens on substantially all of the
assets of the Company. Interest on the New Notes is payable semiannually on June
15 and December 15. The New Notes will mature on June 15, 2007 and are subject
to redemption on or after June 15, 2002 at the option of the Company, in whole
or in part, at declining redemption prices commencing at 104.875 percent of the
principal amount and declining to 100 percent of the principal amount at June
15, 2005 and thereafter, plus accrued interest to the date of redemption. In
addition, prior to June 15, 2000, the Company, at its option, may redeem up to
33 percent of the aggregate principal amount of the New Notes originally issued
with the net cash proceeds of one or more equity offerings (as defined) at the
redemption prices described above, plus accrued and unpaid interest, if any, to
the date of redemption, provided that at least $100.0 million aggregate
principal amount of the New Notes remain outstanding after any such redemption.
Upon the occurrence of a change of control (as defined) each holder of the
New Notes has the right to require the Company to repurchase such holder's New
Notes at a price equal to 101 percent of the principal amount, plus accrued
interest to the date of the repurchase. In addition, the Company will be
required to make an offer to repurchase the New Notes at 100 percent of the
principal amount, plus accrued interest to the date of repurchase, in the event
of certain asset sales.
(d) In June 1997, the Company redeemed all of the outstanding 11 1/2%
Senior Notes Due 2001 pursuant to their terms (see Note 3).
(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, 1997 and 1996, such note
receivable was approximately $9.7 million and $11.6 million, respectively, and
was classified as "Other assets."
(f) Commencing in Fiscal 1995, in conjunction with the $250 million capital
expenditure program, the Company entered into various capital leases with a
cumulative aggregate value of approximately $31.3 million to finance equipment
at its converting facilities. The capital leases had initial 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.
(g) 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
market and retired approximately $29.9 million principal amount of the
Subordinated Discount Debentures (see Note 3).
F-14
<PAGE> 94
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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), (c) and (g) 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,
-----------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Current
Accrued salaries and wages.................................. $24.6 $27.0
Other....................................................... 36.8 39.9
----- -----
Total current............................................. 61.4 66.9
----- -----
Long-term
Accrued acquisition restructuring costs..................... 0.9 1.3
Accrued pension expense..................................... 18.9 17.3
Casualty insurance liabilities.............................. 1.3 3.4
Other....................................................... 5.2 7.1
----- -----
Total long-term........................................... 26.3 29.1
----- -----
Total..................................................... $87.7 $96.0
===== =====
</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, 1997 and 1996, 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 54,573,164 shares and 54,270,011 shares were issued,
respectively, and 53,026,961 shares and 52,688,233 shares were outstanding,
respectively.
At September 30, 1997 and 1996, 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
F-15
<PAGE> 95
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Company's Board of Directors adopted a stockholder 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 Company's Board of Directors
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. No shares were repurchased in Fiscal 1997.
Shares repurchased under the program are held as treasury stock. At September
30, 1997, and 1996, 1,546,203 shares and 1,581,778 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 1997, Fiscal 1996 and Fiscal 1995 the Company issued
35,575 shares, 35,725 shares and 35,975 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 1997, Fiscal 1996 or Fiscal 1995. 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
September 30, 1997, the Company was prohibited from declaring or paying cash
dividends on its Common Stock, except under certain limited circumstances (see
Note 9).
F-16
<PAGE> 96
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. STOCK OPTION PLANS
The Company maintained three stock-based plans during Fiscal 1997 pursuant
to which stock options may be granted: (i) the 1989 Long-Term Incentive Plan
(the 1989 Plan), (ii) the 1987 Key Employee Stock Option Plan (the 1987 Plan)
and (iii) the 1997 Long-Term Incentive Plan (the 1997 Plan).
The Company has adopted the disclosure-only provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-based Compensation" (FAS No.
123). FAS No. 123 requires pro forma recognition of compensation expense for
stock options based on the fair value of the options at the date of grant. Pro
forma compensation expense for stock options granted in Fiscal 1997 and Fiscal
1996, computed in a manner consistent with the provisions of FAS No. 123, would
have reduced the Company's net earnings and earnings per share by de minimus
amounts (less than $0.01 per share).
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in Fiscal 1997 and Fiscal 1996: expected volatility
of 55 percent; risk-free interest rate of 6.0 percent; and expected lives of 5.0
years.
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, 1997, the Company was authorized to issue 2,279,833
shares of Class A Common Stock, and had outstanding nonqualified stock options
covering 1,275,308 shares of Class A Common Stock at exercise prices from $2.56
per share to $11.63 per share. During Fiscal 1997, the Company granted
nonqualified stock options under the 1989 Plan covering 325,000 shares of Class
A Common Stock (32,000 of which have been forfeited) at exercise prices ranging
from $5.88 per share to $9.63 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, 1997, options to purchase 890,143 shares of Class A Common
Stock at exercise prices ranging from $2.56 per share to $11.63 per share were
exercisable, 383,782 options had been exercised and 51,718 shares were available
for future grants under the 1989 Plan.
At September 30, 1997, the Company had granted 627,200 restricted shares of
Class A Common Stock (58,175 of which have been forfeited) 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 1997, the Company awarded 63,000
restricted shares of Class A Common Stock (none of which have been forfeited).
As to the restricted shares granted during Fiscal 1997, 5,000 shares, 25,000
shares, 13,000 shares, and 20,000 shares will become 100 percent vested in
fiscal 1998, fiscal 1999, fiscal 2000, and fiscal 2002 respectively. As to
506,025 restricted shares granted prior to Fiscal 1997, 459,425 shares were 100
percent vested at September 30, 1997 and 15,600 shares, 21,000 shares and 10,000
shares will become 100 percent vested in fiscal 1998, fiscal 1999 and fiscal
2001, 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 1987 Plan was terminated according to its terms in Fiscal 1997.
The Company has reserved 854,467 shares of Class A Common Stock in connection
with grants under the 1987 Plan. At September 30, 1997, the
F-17
<PAGE> 97
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company had outstanding nonqualified stock options under the 1987 Plan covering
395,657 shares of Class A Common Stock at exercise prices ranging from $3.63 per
share to $8.94 per share. During Fiscal 1997, the Company granted nonqualified
stock options under the 1987 Plan covering 15,000 shares of Class A Common Stock
(none of which have been forfeited) at exercise prices ranging from $6.13 per
share to $8.94 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.
At September 30, 1997, options to purchase 365,657 shares of Class A Common
Stock at exercise prices ranging from $3.63 to $8.38 per share were exercisable
and 13,332, 11,669 and 4,999 options will become exercisable in fiscal 1998,
fiscal 1999 and fiscal 2000, respectively. At September 30, 1997, options for
457,132 shares had been exercised.
1997 Plan -- The 1997 Plan provides for grants of stock options, stock
appreciation rights in tandem with options, restricted stock, performance awards
and any combination of the foregoing to certain directors, officers and key
employees of the Company and its subsidiaries.
The Company has reserved 2,000,000 shares of Class A Common Stock for
issuance pursuant to the 1997 Plan. At September 30, 1997, no stock options had
been granted under the 1997 Plan.
Director Option Plan -- An Outside Director Option Plan (the Director
Option Plan) authorized grants of stock options to each director who was not an
employee of the Company 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, 1997, options to purchase 59,000 shares of Class A Common
Stock at exercise prices of $3.50 and $12.50 per share were outstanding and
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 1997, Fiscal 1996 and Fiscal 1995:
<TABLE>
<CAPTION>
STOCK OPTIONS EXERCISE PRICE
------------- --------------
<S> <C> <C>
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
Grants during Fiscal 1997........................ 340,000 $5.88 - $ 9.63
Exercises........................................ (244,953) $1.24 - $ 5.25
Cancellations.................................... (73,835) $2.56 - $11.63
---------
Balance at September 30, 1997...................... 1,729,965 $2.56 - $12.50
=========
</TABLE>
F-18
<PAGE> 98
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Additional information regarding options outstanding as of September 30,
1997 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- --------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.56 - $ 3.75 1,089,599 4.04 $ 3.43 1,089,599 $ 3.43
$4.00 - $ 5.88 33,000 7.04 $ 5.12 23,000 $ 4.79
$6.13 - $ 8.38 316,000 9.04 $ 7.02 20,001 $ 7.95
$8.63 - $12.50 291,366 7.44 $10.51 182,200 $10.73
--------- ---- ------ --------- ------
$2.56 - $12.50 1,729,965 5.59 $ 5.31 1,314,800 $ 4.54
========= ==== ====== ========= ======
</TABLE>
The following table details restricted stock activity for Fiscal 1997,
Fiscal 1996 and Fiscal 1995:
<TABLE>
<CAPTION>
RESTRICTED STOCK
----------------
<S> <C>
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
Issued during Fiscal 1997................................. 63,100
Cancellations............................................. (4,800)
-------
Balance at September 30, 1997............................... 569,125
=======
</TABLE>
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 assets are capitalized based on the lease
contract provisions. Capitalized amounts are amortized over either the term of
the lease or the normal depreciable lives of the assets. All other leases are
defined as operating leases. Lease payments related to operating leases are
charged to expense as incurred.
Future minimum lease payments at September 30, 1997 are as follows (in
millions):
<TABLE>
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
- ----------- --------- -------
<S> <C> <C>
1998........................................................ $11.2 $5.0
1999........................................................ 8.6 4.8
2000........................................................ 7.1 3.3
2001........................................................ 5.9 1.7
2002........................................................ 5.6 --
2003 and thereafter......................................... 23.2 --
----- -----
Total future minimum lease payments....................... $61.6 14.8
=====
Less interest.......................................... 2.2
-----
Present value of future minimum lease payments............ $12.6
=====
</TABLE>
F-19
<PAGE> 99
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense for Fiscal 1997, Fiscal 1996 and Fiscal 1995 was $13.8
million, $11.4 million and $11.7 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 certain designated employees of the Company whose earned pension
benefits would otherwise be restricted by maximum benefit limitations imposed by
Internal Revenue Service regulations.
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). 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 which was
designed to reduce future unit labor costs.
The components of net periodic pension cost follow:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost........................................... $ 4.1 $ 4.5 $ 3.6
Interest cost.......................................... 10.5 9.8 8.5
Return on plan assets.................................. (35.9) (19.7) (17.9)
Net amortization and deferral.......................... 25.6 10.5 9.7
Staff reduction program................................ -- 5.2 --
Antioch mill early retirement.......................... -- -- 5.4
------ ------ -----
Net pension cost.................................. $ 4.3 $ 10.3 $ 9.3
====== ====== =====
</TABLE>
Assumptions used to develop the net periodic pension costs were:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 7.5% 7.5% 8.0%
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>
F-20
<PAGE> 100
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The status of the pension plan follows:
<TABLE>
<CAPTION>
SEPTEMBER
--------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................. $ 125.2 $ 121.3
Nonvested............................................... 7.1 8.9
------- -------
Accumulated benefit obligation.......................... 132.3 130.2
Effect of salary progression............................ 14.0 9.8
------- -------
Projected benefit obligation............................ 146.3 140.0
Plan assets at market value (primarily government
securities, corporate bonds and common stocks).......... (154.1) (126.7)
------- -------
Plan assets less than (in excess of) projected benefit
obligation.............................................. (7.8) 13.3
Unrecognized net gain..................................... 27.6 2.1
Prior service benefit not yet recognized in net periodic
pension cost............................................ (2.7) (2.6)
------- -------
Accrued pension liability.......................... $ 17.1 $ 12.8
======= =======
</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 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 current or
retired 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, 1997 and 1996, the actuarial present value of projected
benefit obligations for the supplemental retirement income payments described
above was approximately $11.5 million and $10.2 million, respectively. At
September 30, 1997, 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 $3.0 million
and a corresponding reduction to stockholders' equity of $1.5 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.
F-21
<PAGE> 101
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net periodic pension cost for the supplemental retirement
income payments follow:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
--------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................ $0.6 $0.5 $0.2
Interest cost............................................... 0.8 0.6 0.4
Net amortization and deferral............................... 0.2 0.2 0.2
---- ---- ----
Net pension cost....................................... $1.6 $1.3 $0.8
==== ==== ====
</TABLE>
Assumptions used to develop the net periodic pension costs were:
<TABLE>
<S> <C> <C> <C>
Discount rate............................................... 7.5% 7.5% 8.0%
Expected rate of salary increases........................... 5.0% 5.0% 5.0%
</TABLE>
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 1997, Fiscal 1996 and
Fiscal 1995 was $0.4 million, $1.6 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 (see Note 2). The Company funds benefit costs on a pay-as-you-go basis,
and, for Fiscal 1997, Fiscal 1996 and Fiscal 1995, the Company made benefit
payments of approximately $0.5 million, $0.7 million and $0.5 million,
respectively.
The following table sets forth the plan's funded status, reconciled with
amounts recognized in the Company's balance sheets:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of post-retirement benefits:
Retirees.................................................. $ 3.3 $ 3.2
Fully eligible active plan participants................... 0.7 1.3
Other active plan participants............................ 0.4 0.3
----- -----
Accumulated post-retirement benefit obligation......... 4.4 4.8
Plan assets at market value............................... -- --
----- -----
Accumulated post-retirement benefit obligation......... 4.4 4.8
Unrecognized net loss..................................... (1.0) (1.2)
----- -----
Accrued post-retirement benefit obligation................ $ 3.4 $ 3.6
===== =====
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
post-retirement benefit obligation at September 30, 1997 was 7.0 percent in 1998
declining 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, 1996 was 8.0 percent in 1997 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, 1997 and 1996
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, 1997 would be increased by
F-22
<PAGE> 102
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $0.2 million or 5 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 1 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 1997, Fiscal 1996 and Fiscal
1995, the Company's cost relating to the Section 401K Plan was $1.6 million,
$5.1 million and $1.6 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 $6.8 million
could be imposed.
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 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 the plaintiff has appealed. On September 29, 1997,
the Illinois Court of Appeals affirmed, in all respects, dismissal of the
complaint. Plaintiff's appeal of that decision to the Illinois Supreme Court is
pending. 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 the decision on appeal.
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
F-23
<PAGE> 103
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company's stockholder Rights Agreement (as defined), 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 discovery stage. The Company believes that, after investigation of the
facts, 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 against individual defendants
(including the officers of Gaylord Chemical Corporation and the Company) were
dropped. 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 with
several new members. On June 20, 1997, a second CMO was entered by the court.
Pursuant to this second CMO, a Second Consolidated Amended Master Petition
(SCAMP) was filed on June 20, 1997. The SCAMP includes substantially all the
claims and theories asserted in the original Consolidated Master Petition. No
officers of Gaylord Chemical Corporation or the Company are named as defendants
in the SCAMP. Pursuant to the second CMO, the status of all lawsuits pending
before the filing of the SCAMP, some of which name officers of Gaylord Chemical
Corporation or the Company as defendants, will be determined by the trial court
after class certification. Following a hearing
F-24
<PAGE> 104
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
held in July, August and September, 1997 the trial court certified a class on
November 10, 1997. The class consists of allegedly injured parties in the City
of Bogalusa, parts of Washington Parish, Louisiana, and parts of Marion,
Walthall and Pike Counties in Mississippi. Defendants have filed supervisory
writs with the Court of Appeal challenging the trial court's class certification
ruling. Those writs are currently pending.
In addition, the Company, Gaylord Chemical Corporation 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 eleven actions which purport to be on behalf of over 11,000 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 Gaylord Chemical Corporation are
vigorously contesting these claims.
The Company and Gaylord Chemical Corporation 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
Gaylord Chemical Corporation's defense costs under a reservation of rights. The
primary carrier and 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. On November 20,
1997, the trial court denied all of the 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.
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 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, 1997, and 1996 are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
--------------------- ---------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Assets
Cash and equivalents.................... $ 6.1 $ 6.1 $ 39.2 $ 39.2
Trade receivables....................... 100.6 100.6 111.0 111.0
Long-term notes receivable.............. 9.9 10.3 11.9 12.5
Liabilities
Trade payables.......................... 65.2 65.2 60.8 60.8
Senior and subordinated notes........... 629.3 666.3 584.0 642.4
Capital lease obligations............... 12.6 12.6 16.2 16.2
Other senior debt....................... 74.2 74.7 34.2 34.7
</TABLE>
F-25
<PAGE> 105
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 were based on pertinent
information available to the Company at September 30, 1997 and 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,
-----------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Cash paid for interest expense........................... $79.5 $28.6 $35.5
Cash paid for income taxes............................... 1.9 5.6 2.5
Supplemental schedule of non-cash investing and financing
activities:
Property additions..................................... 2.4 5.6 45.1
Increase in total debt................................. 0.8 5.6 45.1
Increase in accrued and other liabilities.............. 1.6 -- --
Write-off of deferred financing fees................... 2.8 1.5 --
</TABLE>
F-26
<PAGE> 106
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. EARNINGS PER SHARE
Effective October 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (FAS No. 128). FAS No. 128
requires the presentation of both basic earnings per share and diluted earnings
per share. Diluted earnings per share will not be presented in periods where the
effect is antidilutive (that is, results in increased earnings per share or
decreased net loss per share). The following table sets forth the computation of
basic and diluted earnings per share.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Numerator:
Income (loss) before extraordinary item............... $(74.3) $ 11.8 $134.2
Extraordinary loss.................................... (7.7) (3.2) --
------ ------ ------
Net income (loss)..................................... $(82.0) $ 8.6 $134.2
====== ====== ======
Denominator:
Basic:
Weighted average common shares outstanding......... 52.8 54.0 53.9
Diluted:
Effect of dilutive securities:
Employee and director incentive stock options...... 0.7 0.7 1.2
------ ------ ------
Weighted average outstanding and potential common
shares................................................ 53.5 54.7 55.1
====== ====== ======
Earnings (loss) per share:
Basic:
Income (loss) before extraordinary item............ $(1.40) $ 0.22 $ 2.49
Extraordinary item................................. (0.15) (0.06) --
------ ------ ------
Net income (loss).................................. $(1.55) $ 0.16 $ 2.49
====== ====== ======
Diluted(1):
Income before extraordinary item................... -- $ 0.22 $ 2.44
Extraordinary item................................. -- (0.06) --
------ ------
Net income......................................... -- $ 0.16 $ 2.44
====== ======
</TABLE>
- ---------------
(1) Not presented where the effect of potential shares is antidilutive.
F-27
<PAGE> 107
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
FISCAL 1997
Net sales....................... $195.6 $192.4 $189.4 $181.9 $ 759.3
Gross margin.................... 21.4 12.3 9.4 (1.1) 42.0
Loss before extraordinary
item.......................... (9.7) (18.5) (19.9) (26.2) (74.3)
Extraordinary loss.............. -- -- (7.7) -- (7.7)
Net loss........................ (9.7) (18.5) (27.6) (26.2) (82.0)
Earnings per share(1):
Basic:
Loss before extraordinary
item..................... (0.18) (0.35) (0.38) (0.49) (1.40)
Extraordinary loss......... -- -- (0.15) -- (0.15)
Net loss................... (0.18) (0.35) (0.53) (0.49) (1.55)
Weighted average common shares
outstanding................... 52.7 52.8 52.8 53.0 52.8
Common stock price (AMEX)
High.......................... 8 7/16 7 1/4 8 5/8 10 1/8 10 1/8
Low........................... 6 1/8 6 1/16 5 1/2 7 9/16 5 1/2
Warrant price (AMEX)
High.......................... 8 1/4 7 1/4 8 3/8 9 3/4 9 3/4
Low........................... 6 1/8 6 1/8 5 5/8 8 5 5/8
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 share(1):
Basic:
Income (loss) before
extraordinary item....... 0.35 0.02 0.00 (0.16) 0.22
Extraordinary loss......... (0.05) -- -- (0.01) (0.06)
Net income (loss).......... 0.30 0.02 0.00 (0.17) 0.16
Diluted:
Income before extraordinary
item..................... 0.35 0.02 0.00 -- 0.22
Extraordinary loss......... (0.05) -- -- -- (0.06)
Net income................. 0.30 0.02 0.00 -- 0.16
Weighted average shares
outstanding:
Basic......................... 54.1 54.1 54.2 53.6 54.0
Diluted....................... 55.0 55.1 55.1 54.3 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
</TABLE>
F-28
<PAGE> 108
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
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
Earnings per share(1):
Basic......................... 0.22 0.51 0.73 1.03 2.49
Diluted....................... 0.21 0.51 0.72 1.00 2.44
Weighted average shares
outstanding:
Basic......................... 53.7 53.9 54.0 54.1 53.9
Diluted....................... 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
</TABLE>
- ---------------
(1) Diluted earnings per share is not presented for periods where effect of
potential shares of antidilutive.
F-29
<PAGE> 109
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents...................................... $ 5.6 $ 6.1
Trade receivables (less allowances of $6.0 million and
$5.5 million, respectively)............................ 101.2 100.6
Inventories (Note 2)...................................... 88.2 77.4
Deferred income taxes..................................... 4.7 4.7
Other current assets...................................... 13.6 15.4
-------- --------
Total current assets................................... 213.3 204.2
-------- --------
Property, plant and equipment:
Property, plant and equipment, at cost.................... 1,080.5 1,061.5
Less accumulated depreciation............................. 488.3 475.4
-------- --------
Property -- net........................................ 592.2 586.1
-------- --------
Deferred income taxes 81.1 71.2
Other assets................................................ 68.2 68.4
-------- --------
Total.................................................. $ 954.8 $ 929.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 14.6 $ 14.4
Trade payables............................................ 59.7 65.2
Accrued interest payable.................................. 8.2 26.3
Accrued and other liabilities............................. 49.8 61.4
-------- --------
Total current liabilities.............................. 132.3 167.3
-------- --------
Long-term debt.............................................. 780.0 701.7
Other long-term liabilities................................. 26.4 26.3
Commitments and contingencies (Note 3)...................... -- --
Stockholders' equity:
Class A common stock -- par value, $.0001 per share;
authorized 125,000,000 shares; issued 54,595,513 shares
and 54,573,164 shares, respectively, and outstanding
53,057,425 shares and 53,026,961 shares, respectively -- --
Capital in excess of par value............................ 175.8 175.6
Retained deficit.......................................... (146.9) (128.1)
Common stock in treasury -- at cost; 1,538,088 shares and
1,546,203 shares, respectively......................... (11.3) (11.4)
Recognition of minimum pension liability.................. (1.5) (1.5)
-------- --------
Total stockholders' equity............................. 16.1 34.6
-------- --------
Total.................................................. $ 954.8 $ 929.9
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-30
<PAGE> 110
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------
1997 1996
---- ----
(IN MILLIONS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net sales................................................... $ 197.6 $195.6
Cost of goods sold.......................................... 186.1 174.2
------- ------
Gross margin................................................ 11.5 21.4
Selling and administrative costs............................ (20.6) (20.5)
------- ------
Operating earnings (loss)................................... (9.1) 0.9
Interest expense -- net..................................... (21.1) (19.4)
Other income (expense) -- net............................... (0.2) 0.8
------- ------
Loss before taxes........................................... (30.4) (17.7)
Income taxes................................................ (11.6) (8.0)
------- ------
Net loss.................................................... (18.8) $ (9.7)
======
Retained deficit:
Beginning of period....................................... (128.1)
-------
End of period............................................. $(146.9)
=======
Loss per common share:(A)................................... $ (0.35) $(0.18)
======= ======
Average number of common shares outstanding:(A)............. 53.0 52.7
======= ======
</TABLE>
- ---------------
(A) Diluted loss per share and corresponding average potential shares
outstanding have not been presented because of their antidilutive nature
(see Note 4).
See notes to unaudited condensed consolidated financial statements.
F-31
<PAGE> 111
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------
1997 1996
---- ----
(IN MILLIONS)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net loss................................................. $(18.8) $ (9.7)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization......................... 16.6 16.3
Deferred tax provision................................ (9.9) (6.4)
Change in current assets and liabilities, excluding
acquisitions and dispositions....................... (41.8) (36.3)
Other -- net.......................................... (0.1) (2.1)
------ ------
Net cash used for operations............................... (54.0) (38.2)
------ ------
CASH FLOWS FROM INVESTMENTS:
Capital expenditures..................................... (14.6) (8.4)
Capitalized interest..................................... (0.3) (0.2)
Other investments -- net................................. 0.2 0.4
------ ------
Net cash used for investments.............................. (14.7) (8.2)
------ ------
CASH FLOWS FROM FINANCING:
Senior debt -- repayments................................ (3.0) (2.1)
Debt issuance costs...................................... -- 0.1
Revolving credit agreement borrowings -- net............. 71.0 12.5
Other financing -- net................................... 0.2 0.2
------ ------
Net cash provided by financing............................. 68.2 10.7
------ ------
NET DECREASE IN CASH AND EQUIVALENTS....................... (0.5) (35.7)
Cash and equivalents, beginning of period.................. 6.1 39.2
------ ------
Cash and equivalents, end of period........................ $ 5.6 $ 3.5
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid (refunded) for:
Interest.............................................. $ 38.7 $ 37.3
====== ======
Income taxes.......................................... $ (0.2) $ --
====== ======
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Property additions....................................... $ 8.9 $ --
====== ======
Increase in total debt................................... $ 10.5 $ --
====== ======
Decrease in accrued and other liabilities................ $ 1.6 $ --
====== ======
</TABLE>
See notes to unaudited condensed consolidated financial statements.
F-32
<PAGE> 112
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 December
31, 1997 and the results of operations and cash flows for the three months ended
December 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, 1997. Certain amounts in the consolidated statement of cash
flows have been reclassified to conform to the current year presentation.
2. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(IN MILLIONS)
<S> <C> <C>
Inventories consist of:
Finished products.................................. $20.5 $22.5
In process......................................... 48.8 39.3
Raw materials...................................... 12.2 9.2
Supplies........................................... 14.6 15.0
----- -----
96.1 86.0
LIFO valuation adjustment.......................... (7.9) (8.6)
----- -----
Total......................................... $88.2 $77.4
===== =====
</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 the plaintiff appealed. On September 29, 1997, the
Illinois Court of Appeals affirmed, in all respects, dismissal of the complaint.
Plaintiff's appeal of that decision to the Illinois Supreme Court is pending. 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 the decision on appeal.
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
(as defined), 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
F-33
<PAGE> 113
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 discovery stage. The Company believes
that, after investigation of the facts, 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, which seek
unspecified damages, 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 against individual defendants
(including the officers of Gaylord Chemical Corporation and the Company) were
dropped. 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 with
several new members. On June 20, 1997, a second CMO was entered by the court.
Pursuant to this second CMO, a Second Consolidated Amended Master Petition
(SCAMP) was filed on June 20, 1997. The SCAMP includes substantially all the
claims and theories asserted in the original Consolidated Master Petition. No
officers of Gaylord Chemical Corporation or the Company are named as defendants
in the SCAMP.
Pursuant to the second CMO, the status of all lawsuits pending before the
filing of the SCAMP, some of which name officers of Gaylord Chemical Corporation
or the Company as defendants, will be determined by the trial court after class
certification. The trial court certified a class on November 10, 1997. The class
consists of allegedly injured parties in the city of Bogalusa, parts of
Washington Parish, Louisiana, and parts of
F-34
<PAGE> 114
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --
(CONCLUDED)
Marion, Walthall and Pike Counties in Mississippi. Defendants have filed
supervisory writs with the Court of Appeal challenging the trial court's class
certification ruling. Those writs are currently pending.
In addition, the Company, Gaylord Chemical Corporation and numerous other
third party companies have been named as defendants in twelve actions brought by
plaintiffs in Mississippi state court, who claim injury as a result of the
October 23, 1995 accident at the Bogalusa facility. These cases, which purported
to be on behalf of over 11,000 individuals, were not filed as a class action but
rather have all been consolidated before a single judge in Hinds County,
Mississippi. All of these cases allege claims similar to those in Louisiana
State Court. To date, discovery in the consolidated cases has been coordinated
with the ongoing discovery in the Louisiana class action. Following several
rulings by the Mississippi Trial Court judge, over 7,400 individuals' claims in
these consolidated actions have been either: (1) dismissed for failure to comply
with outstanding discovery orders or (2) voluntarily withdrawn. As with the
Louisiana class action, the Company and Gaylord Chemical Corporation are
vigorously contesting all claims in Mississippi arising out of the October 23,
1995 explosion. In addition, the Company and Gaylord Chemical Corporation have
filed cross-claims for indemnity and contribution against co-defendants in both
of the Mississippi and Louisiana actions.
The Company and Gaylord Chemical Corporation 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 before the same judge who is hearing the liability class action. The
carrier with the first layer of coverage under the general liability policy has
agreed to pay the Company's and Gaylord Chemical Corporation's defense costs
under a reservation of rights. The primary carrier and the nine excess level
insurers moved for summary judgment before the trial court claiming that
coverage for the accident is excluded because of pollution exclusions contained
in these policies. On November 20, 1997, the trial court denied all of the
motions, and the insurers have filed supervisory writs with the Court of Appeal
contesting that ruling. Those writs are pending.
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. ADOPTION OF NEW ACCOUNTING STANDARD
Effective October 1, 1997, the Company has adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (FAS No. 128). FAS No. 128
requires the presentation of both basic earnings per share and diluted earnings
per share. Diluted earnings per share will not be presented in periods where the
effect is antidilutive (that is, results in increased earnings per share or
decreased net loss per share).
F-35
<PAGE> 115
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAIN
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. 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Market Data............................................ i
Forward-Looking Statements............................. i
Available Information.................................. i
Incorporation of Certain Information by Reference...... ii
Prospectus Summary..................................... 1
Risk Factors........................................... 13
The Company............................................ 18
The Refinancing........................................ 19
Use of Proceeds........................................ 20
Capitalization......................................... 21
Selected Historical and Pro Forma Financial Data....... 22
Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 24
Business............................................... 30
Description of Other Indebtedness and Other
Obligations........................................... 38
Description of Notes................................... 40
Book-Entry; Delivery and Form.......................... 61
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Exchange Offer..................................... 63
Certain Federal Income Tax Consequences................ 72
Plan of Distribution................................... 73
Experts................................................ 73
Legal Matters.......................................... 73
Index to Financial Statements.......................... F-1
</TABLE>
======================================================
======================================================
------------------------
PROSPECTUS
------------------------
[GAYLORD LOGO]
GAYLORD
CONTAINER
CORPORATION
OFFER TO EXCHANGE ITS
9 3/8% SENIOR NOTES
DUE 2007, SERIES B,
FOR ANY AND ALL OF ITS OUTSTANDING
9 3/8% SENIOR NOTES
DUE 2007, SERIES A AND
TO EXCHANGE ITS
9 7/8% SENIOR SUBORDINATED NOTES
DUE 2008, SERIES B,
FOR ANY AND ALL OF ITS OUTSTANDING
9 7/8% SENIOR SUBORDINATED NOTES
DUE 2008, SERIES A
MARCH , 1998
======================================================
<PAGE> 116
PART II: INFORMATION NOT REQUIRED IN THE 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 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
II-1
<PAGE> 117
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.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the
Registrant, as of July 21, 1995, incorporated by reference
to Exhibit 3.1 of the Registrant'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)
3.2 Amended and Restated Bylaws of the Registrant, as amended,
incorporated by reference to Exhibit 3.1 of the Registrant'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), incorporated by reference
to Exhibit 4.1 of the Company's Registration Statement on
Form S-4 (No. 333-30423) filed under the Securities Act of
1933, as amended (the 1997 Debt Registration Statement)
4.2 Amended and Restated Credit Agreement dated as of June 30,
1995 by and between the Registrant, 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
</TABLE>
II-2
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.3 First Amendment to Amended and Restated Credit Agreement
dated as of May 30, 1996 by and between the Registrant, 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 Registrant'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 Registrant, the
financial institutions signatory thereto, and 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, and Bankers Trust
Company, as agent, incorporated by reference to Exhibit 4.5
of the 1997 Debt Registration Statement
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, and Bankers Trust
Company, as agent, incorporated by reference to Exhibit 4.6
of the 1997 Debt Registration Statement
4.7 Fifth Amendment to Amended and Restated Credit Agreement
dated as of September 30, 1997 by and between the Company,
the financial institutions signatory thereto and Bankers
Trust Company, as agent, incorporated by reference to
Exhibit 4.7 of the Registrant's Annual Report on Form 10-K
(No. 1-9515) for the year ended September 30, 1997 filed
under the Securities Exchange Act of 1934, as amended (the
1997 Form 10-K)
4.8 Registration Rights Agreement dated as of June 5, 1997 among
the Company, BT Securities Corporation, Bear, Stearns & Co.
Inc. and Solomon Brothers Inc, incorporated by reference to
Exhibit 4.7 of the 1997 Debt Registration Statement
4.9 Credit agreement dated as of October 31, 1989 between the
Registrant and the Export-Import Bank of the United States
incorporated by reference to Exhibit 4.21 of the
Registrant'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
4.10 Specimen Certificate for the Class A Common Stock, par value
$.0001 per share, of the Registrant, incorporated by
reference to Exhibit 4.5 of the Registrant'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)
4.11 Warrant Agreement between the Registrant and Harris Trust
and Savings Bank, as Warrant Agent, relating to the
Registrant's Redeemable Exchangeable Warrants, incorporated
by reference to Exhibit 4.3 of the October 30, 1992 Form 8-K
4.12 Specimen Certificate for the Redeemable Exchangeable
Warrants of the Registrant, incorporated by reference to
Exhibit 4.6 of the October 30, 1992 Form 8-K
4.13 Trust Agreement between the Registrant 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
4.14 Rights Agreement, dated June 12, 1995, between the
Registrant 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
4.15 Form of Indenture between the Registrant and Ameritrust
Texas, National Association as Trustee, relating to the
Registrant's 12 3/4% Senior Subordinated Discount Debentures
Due 2005, incorporated by reference to Exhibit 4(c) of the
Registrant'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)
4.16 Specimen Certificate of the Registrant's 12 3/4% Senior
Subordinated Discount Debentures Due 2005, incorporated by
reference to Exhibit 4(d) of the 1993 Debt Registration
Statement
</TABLE>
II-3
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.17 Subscription and Stockholder Agreement dated as of September
24, 1993 between the Registrant and Gaylord Receivables
Corporation, incorporated by reference to Exhibit 4.13 of
the Registrant'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)
4.18 Receivables Purchase Agreement dated as of September 24,
1993 between the Registrant and Gaylord Receivables
Corporation, incorporated by reference to Exhibit 4.14 of
the 1993 Form 10-K
4.19 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 3.16 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)
4.20 Gaylord Receivables Master Pooling and Servicing Agreement
dated as of September 24, 1993 between the Registrant and
Gaylord Receivables Corporation, incorporated by reference
to Exhibit 4.15 of the 1993 Form 10-K
4.21 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
4.22 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
4.23 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
4.24 Series 1993-1 A-RI Supplemental Issuance Agreement dated as
of September 24, 1993 by and between the Registrant, Gaylord
Receivables Corporation and Manufacturers and Traders Trust
Company, as Trustee, incorporated by reference to Exhibit
4.1 of the Registrant'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
4.25 Extension of Credit Agreement dated as of September 2, 1997
between Gaylord Receivables Corporation, the financial
institutions signatory thereto and Harris Trust and Savings
Bank as Facility Agent, incorporated by reference to Exhibit
4.25 of the 1997 Form 10-K
4.26 Sixth Amendment to Amended and Restated Credit Agreement
dated as of February 13, 1998 by and between the Company,
the financial institutions signatory thereto, and Bankers
Trust Company, as agent
4.27 Securities Purchase Agreement, dated as of February 13,
1998, among the Company and BT Alex. Brown Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Bear
Stearns & Co. Inc., Salomon Brothers Inc, and NationsBanc
Montgomery Securities LLC, as Initial Purchasers
4.28 Indenture, dated as of February 23, 1998, among the Company
and State Street Bank and Trust Company with respect to the
9 3/8% Senior Notes due 2007 (including the forms of Series
A and Series B 9 3/8% Senior Notes due 2007)
4.29 Registration Rights Agreement, dated as of February 23,
1998, among the Company and BT Alex. Brown Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Bear,
Stearns & Co. Inc., Salomon Brothers Inc, and NationsBanc
Montgomery Securities LLC with respect to the 9 3/8% Senior
Notes due 2007
4.30 Indenture, dated as of February 23, 1998, among the Company
and Chase Bank of Texas National Association with respect to
the 9 7/8% Senior Subordinated Notes due 2008 (including the
forms of Series A and Series B 9 7/8% Senior Subordinated
Notes due 2008)
4.31 Registration Rights Agreement, dated as of February 23,
1998, among the Company and BT Alex. Brown Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Bear
Stearns & Co. Inc., Salomon Brothers Inc, and NationsBanc
Montgomery Securities LLC with respect to the 9 7/8% Senior
Subordinated Notes due 2008
</TABLE>
II-4
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
5.1 Opinion and Consent of Kirkland & Ellis
10.1 Bogalusa Hog Fuel Supply Agreement by and between the
Registrant and Cavenham Forest Industries, Inc. dated as of
March 28, 1986, incorporated by reference to Exhibit 10.8 of
the Registrant'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 Registrant 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 Registrant 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 Registrant
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
Registrant 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 Registrant 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 Registrant and the
Persons listed on the signature pages thereto dated as of
June 1, 1988, incorporated by reference to Exhibit 10.22 of
the Registrant'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 Registrant 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
10.10 Bogalusa Roundwood Supply and Cutting Rights Agreement by
and between the Registrant 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
Registrant 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 Registrant'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
Registrant 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
Registrant 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 Registrant,
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
</TABLE>
II-5
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.16 Employment Agreement by and between the Registrant 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
Registrant and Marvin A. Pomerantz dated February 8, 1989,
incorporated by reference to Exhibit 10.25 of the
Registrant'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 Registrant and
Marvin A. Pomerantz dated January 1, 1993, incorporated by
reference to Exhibit 10.20 of the 1993 Form 10-K
10.19 Employment Agreement by and between the Company and Marvin
A. Pomerantz dated June 1, 1997, incorporated by reference
to Exhibit 10.18 of the 1997 Debt Registration Statement
10.20 Employment Agreement by and between the Registrant and
Warren J. Hayford dated as of May 18, 1988, incorporated by
reference to Exhibit 10.2 of the 1988 Debt Registration
Statement
10.21 Amendment No. 1 to Employment Agreement between the
Registrant and Warren J. Hayford dated February 8, 1989,
incorporated by reference to Exhibit 10.26 of the 1989 Debt
Registration Statement
10.22 Employment Letter Agreement by and between the Registrant
and Dale E. Stahl, dated as of November 22, 1993,
incorporated by reference to Exhibit 10.25 of the 1993 Form
10-K
10.23 Employment Letter Agreement by and between the Registrant
and Daniel P. Casey, dated as of November 22, 1993,
incorporated by reference to Exhibit 10.27 of the 1993 Form
10-K
10.24 Employment Letter Agreement by and between the Registrant
and Lawrence G. Rogna, dated as of November 22, 1993,
incorporated by reference to Exhibit 10.29 of the 1993 Form
10-K
10.25 Stock Retention Agreement dated June 25, 1992 between the
Registrant and Mid-America Group, Ltd., incorporated by
reference to Exhibit 10(nn) of the 1991 Proxy Statement --
Prospectus
10.26 Stock Retention Agreement dated June 25, 1992 between the
Registrant and Warren J. Hayford, incorporated by reference
to Exhibit 10(pp) of the 1991 Proxy Statement -- Prospectus
10.27 S&G Packaging Company, L.L.C. Joint Venture Agreement dated
as of July 12, 1996 by and between the Registrant and Stone
Container Corporation incorporated by reference to Exhibit
10.1 of the June 1996 Form 10-Q
10.28 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 30, 1996 Form 10-Q
10.29 Gaylord Container Corporation 1987 Key Employee Stock Option
Plan, incorporated by reference to Exhibit 28 of the
Registrant's Registration Statement on Form S-8 (No.
33-25675) filed under the Securities Act of 1933, as amended
10.30 Gaylord Container Corporation 1989 Long-Term Incentive Plan,
incorporated by reference to Exhibit 28.1 of the
Registrant's Registration Statement on Form S-8 (No.
33-33977) filed under the Securities Act of 1933, as amended
10.31 Gaylord Container Corporation Outside Director Stock Option
Plan, incorporated by reference to Exhibit 28 of the
Registrant's Registration Statement on Form S-8 (No.
33-33871) filed under the Securities Act of 1933, as amended
10.32 Gaylord Container Corporation 1997 Long-Term Incentive Plan,
incorporated by reference to Exhibit 28.1 of the
Registrant's Registration Statement on Form S-8 (No.
333-39809) filed under the Securities Act of 1933, as
amended
10.33 Description of Gaylord Container Corporation Management
Incentive Plan, incorporated by reference to Exhibit 10.31
of Amendment No. 3 to the Company's Registration Statement
on Form S-4 (No. 333-30423) Filed under the Securities Act
of 1933, as amended (Amendment No. 3 to the 1997 Debt
Registration Statement
10.34 Gaylord Container Corporation Shareholder Value Plan,
incorporated by reference to Exhibit A of the Company's
Proxy Statement for its 1994 Annual Meeting filed December
10, 1993
10.35 Gaylord Container Corporation Supplemental Retirement Plan,
incorporated by reference to Exhibit 10.33 of Amendment No.
3 to the 1997 Debt Registration Statement
</TABLE>
II-6
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.36 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
10.37 Gaylord Container Corporation Shareholder Value Plan
Amendment, incorporated by reference to the Company's Proxy
Statement for its 1998 Annual Meeting filed December 22,
1997.
12.1 Statement Regarding Computation of Earnings to Fixed Charges
21.1 Subsidiaries of the Registrant, incorporated by reference to
Exhibit 21.1 of the Amendment No. 1 to the Company's
Registration Statement on Form S-4 (No. 333-30423) filed
under the Securities Act of 1933, as amended
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 Senior Note Trustee
25.2 Statement of Eligibility of Senior Subordinated Note Trustee
27.1 Financial Data Schedule for the year ended September 30,
1997, incorporated by reference to Exhibit 27.1 of the 1997
Form 10-K
27.2 Financial Data Schedule for the quarter ended December 31,
1997, incorporated by reference to Exhibit 27.1 of the
Company's Quarterly Report on Form 10-Q (File No. 1-9915)
filed under the Securities Exchange Act of 1934, as amended
99.1 Form of Letter of Transmittal for the Old Senior Notes
99.2 Form of Notice of Guaranteed Delivery for the Old Senior
Notes
99.3 Form of Tender Instructions for the Old Senior Notes
99.4 Form of Letter of Transmittal for the Old Senior
Subordinated Notes
99.5 Form of Guaranteed Delivery for the Old Senior Subordinated
Notes
99.6 Form of Tender Instructions for the Old Senior Subordinated
Notes
</TABLE>
II-7
<PAGE> 123
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.
(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 is 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-8
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
duly caused this Registration Statement on Form S-4 to be signed on its behalf
by the undersigned, thereunto duly authorized, in City of Deerfield, State of
Illinois, on the 23rd day of March, 1998.
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, as amended,
this registration statement has been signed below by the following persons in
the capacities indicated on the 23rd day of March, 1998.
<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
- -----------------------------------------------------
Warren J. Hayford
* Director
- -----------------------------------------------------
Charles S. Johnson
* 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-9
<PAGE> 1
EXHIBIT 4.26
SIXTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Sixth Amendment to Amended and Restated Credit Agreement (this
"Amendment"), dated as of February 13, 1998, 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, July 19, 1996, May 20, 1997, June 6, 1997 and September 30, 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 deleting the proviso
appearing at the end thereof and substituting therefor 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)
and the redemption or defeasance of the 12-3/4% Senior Subordinated
Discount Debentures pursuant to Section 5.1(u)."
<PAGE> 2
(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:
""Public Debt Indentures" means, collectively, the 12-3/4%
Indenture, the 11-1/2% Indenture, the New Senior Notes Indenture,
the New Additional Senior Notes Indenture and the New Senior
Subordinated 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, the New Senior Notes,
the New Additional Senior Notes and the New Senior Subordinated
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 Additional Senior Notes" means the senior unsecured notes due
no earlier than 2006 of the Borrower bearing a market rate of
interest for comparable instruments at the time of issuance in an
aggregate principal amount not to exceed $200 million and issued
pursuant to the New Additional Senior Notes Indenture (and including
the issuance of senior unsecured notes (which will have terms
substantially identical in all material respects to the initially
issued New Additional Senior Notes) in exchange for the initially
issued New Additional Senior Notes pursuant to a registration rights
agreement entered into by the Borrower in connection with the
initial issuance of such New Additional Senior Notes), as the same
may be amended, modified or supplemented from time to time in
accordance with the terms of this Agreement; provided, however, in
no event shall the aggregate outstanding principal amount of the New
Additional Senior Notes and the New Senior Subordinated Notes exceed
$475 million.
"New Additional Senior Notes Indenture" means the Indenture entered
into by the Borrower pursuant to which the New Additional Senior
Notes are issued, on substantially the same terms and conditions as
set forth in the New Senior Notes Indenture 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."
"New Senior Subordinated Notes" means the senior subordinated
unsecured notes due no earlier than 2008 of the Borrower bearing a
market rate of interest for comparable instruments at the time of
issuance in an initial aggregate principal
- 2 -
<PAGE> 3
amount not less than $250 million at the time of issuance and issued
pursuant to the New Senior Subordinated Notes Indenture (and
including the issuance of senior subordinated unsecured notes (which
will have terms substantially identical in all material respects to
the initially issued New Senior Subordinated Notes) in exchange for
the initially issued New Senior Subordinated Notes pursuant to a
registration rights agreement entered into by the Borrower in
connection with the initial issuance of such New Senior Subordinated
Notes), as the same may be amended, modified or supplemented from
time to time in accordance with the terms of this Agreement;
provided, however, in no event shall the aggregate outstanding
principal amount of the New Additional Senior Notes and the New
Senior Subordinated Notes exceed $475 million.
"New Senior Subordinated Notes Indenture" means the Indenture
entered into by the Borrower pursuant to which the New Senior
Subordinated Notes are issued, on substantially the same terms and
conditions as, or on terms not more burdensome or restrictive with
respect to the Borrower and its Subsidiaries or the Agent and the
Banks than, the terms and conditions set forth in the 12-3/4%
Indenture 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 (u) at the end thereof as follows:
"(u) Redemption or Defeasance of 12-3/4% Senior Subordinated
Discount Debentures and Repayment of Revolving Loans. Upon receipt
of the net cash proceeds from the sale and issuance of the New
Additional Senior Notes and the New Senior Subordinated Notes, cause
such net cash proceeds to be used to redeem or defease in full all
of the 12-3/4% Senior Subordinated Discount Debentures at par (plus
stated premium, if any), together with accrued and unpaid interest
thereon, by giving irrevocable notice of redemption or defeasance to
the trustee under the 12-3/4% Indenture and depositing with such
trustee funds sufficient to redeem or defease in full all of the
12-3/4% Senior Subordinated Discount Debentures at par (plus stated
premium, if any), together with accrued interest through the date of
redemption or defeasance, which redemption or defeasance shall occur
on or prior to April 30, 1998, and cause any remaining net proceeds
to be used to repay Revolving Loans hereunder."
(f) Section 5.2(i) of the Credit Agreement is hereby amended by
deleting clause (i)(G) of such Section in its entirety and substituting therefor
the following:
"(G) the redemption of the 11-1/2% Senior Notes at par (plus stated
premium) with the proceeds of the New Senior Notes and the
redemption or defeasance of the 12-3/4% Senior Subordinated Discount
Debentures at par (plus stated premium) with the
- 3 -
<PAGE> 4
proceeds of the New Additional Senior Notes and the New Senior
Subordinated Notes;"
(g) 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, (ii) Section 4.15 of the
New Senior Notes Indenture, or (iii) any similar section or
provision of the New Additional Senior Notes Indenture or the New
Senior Subordinated 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, (ii) Section 4.16 of the New Senior Notes Indenture or
(iii) any similar section or provision of the New Additional Senior
Notes Indenture or the New Senior Subordinated Notes Indenture."
(h) 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, (B) Section
4.15 or 4.16 of the New Senior Notes Indenture, or (C) and similar
section or provision of the New Additional Senior Notes Indenture or
the New Senior Subordinated 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;
(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
- 4 -
<PAGE> 5
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:
(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,
- 5 -
<PAGE> 6
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.
- 6 -
<PAGE> 7
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: /s/ Thomas M. Steffen
-------------------------------------------
Name: Thomas M. Steffen
-----------------------------------------
Title: Assistant Treasurer
----------------------------------------
BANKERS TRUST COMPANY, in its individual
capacity and as Agent
By: /s/ Robert R. Telesca
-------------------------------------------
Name: Robert R. Telesca
-----------------------------------------
Title: Assistant Vice President
----------------------------------------
THE BANK OF NEW YORK
By: /s/ John C. Lambert
-------------------------------------------
Name: John C. Lambert
-----------------------------------------
Title: Vice President
----------------------------------------
- 7 -
<PAGE> 8
BANKERS TRUST (DELAWARE)
By: /s/ Donna G. Mitchell
-------------------------------------------
Name: Donna G. Mitchell
-----------------------------------------
Title: Vice President
----------------------------------------
CREDIT AGRICOLE INDOSUEZ
By: /s/ W. Leroy Startz
-------------------------------------------
Name: W. Leroy Startz
-----------------------------------------
Title: First Vice President
----------------------------------------
By: /s/ Dean Balice
-------------------------------------------
Name: Dean Balice
-----------------------------------------
Title: Senior Vice President & Branch Manager
----------------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ Adam Balbach
-------------------------------------------
Name: Adam Balbach
-----------------------------------------
Title: Vice President
----------------------------------------
NATIONSBANK, N.A.
By: /s/ Michael L. Short
-------------------------------------------
Name: Michael L. Short
-----------------------------------------
Title: Senior Vice President
----------------------------------------
CHRISTIANIA BANK
By: /s/ Carl-Petter Svendsen
-------------------------------------------
Name: Carl-Petter Svendsen
-----------------------------------------
Title: First Vice President
----------------------------------------
- 8 -
<PAGE> 9
HELLER FINANCIAL, INC.
By: /s/ Stephan M. Metivier
-------------------------------------------
Name: Stephan M. Metivier
-----------------------------------------
Title: Assistant Vice President
----------------------------------------
TRANSAMERICA BUSINESS CREDIT CORP.
By: /s/ Perry Vavoules
-------------------------------------------
Name: Perry Vavoules
-----------------------------------------
Title: Senior Vice President
----------------------------------------
NATIONAL BANK OF CANADA
By: /s/ William W. Mucker
-------------------------------------------
Name: William W. Mucker
-----------------------------------------
Title: Assistant Vice President
----------------------------------------
By: /s/ C.F. Martin, Jr.
-------------------------------------------
Name: C.F. Martin, Jr.
-----------------------------------------
Title: Vice President & Branch Manager
----------------------------------------
- 9 -
<PAGE> 1
EXHIBIT 4.27
Gaylord Container Corporation
$200,000,000
9 3/8 % Senior Notes due 2007
$250,000,000
9 7/8 % Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
February 13, 1998
BT ALEX. BROWN INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o BT Alex. Brown Incorporated
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 $200,000,000 aggregate principal amount of its 9 3/8 % Senior Notes
due 2007, Series A (the "Senior Notes"), and $250,000,000 aggregate principal
amount of its 9 7/8 % Senior Subordinated Notes due 2008, Series A (the "Senior
Subordinated Notes" and, together with the Senior Notes, the "Notes"). The
Senior Notes are to be issued under an indenture (the "Senior Note Indenture")
to be dated as of February 23, 1998 by and between the Company and State Street
Bank and Trust Company, as trustee (the "Senior Note Trustee"). The Senior
Subordinated Notes are to be issued under an indenture (the "Senior
Subordinated Note Indenture"; the Senior Note Indenture and Senior Subordinated
Note Indenture, each an "Indenture"
<PAGE> 2
-2-
and collectively, the "Indentures") to be dated as of February 23, 1998 by and
between the Company and Chase Bank of Texas, National Association, as trustee
(the "Senior Subordinated Note Trustee"; the Senior Note Trustee and Senior
Subordinated Note Trustee, each a "Trustee" and collectively, the "Trustees").
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 February 13, 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 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 Senior Notes and the Senior Subordinated Notes will be
entitled to the benefits of Registration Rights Agreements, substantially in
the form attached hereto as Exhibit A-1 and Exhibit A-2 (the "Registration
Rights Agreements"), respectively, 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 3/8 % Senior Notes due 2007, Series B, and 9 7/8 % Senior
Subordinated Notes due 2008, Series B (collectively, 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
<PAGE> 3
-3-
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, 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.
<PAGE> 4
-4-
(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 Agreements, 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
applicable 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 applicable Trustee in
accordance with the provisions of the applicable Indenture and, in the
case of 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 Indentures 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 each Indenture; each of the Indentures has been duly
authorized by the Company and, when executed and delivered by the
Company (assuming the due authorization, execution and delivery by the
applicable 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,
<PAGE> 5
-5-
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 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 each of the Registration Rights Agreements.
Each of Registration Rights Agreements 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 Indentures and the Registration Rights
Agreements 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,
<PAGE> 6
-6-
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 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
<PAGE> 7
-7-
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.
(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,
<PAGE> 8
-8-
paid or otherwise made any dividend or distribution of any kind on its
capital stock.
(n) Except as disclosed in the Memorandum, neither 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 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 that 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.
<PAGE> 9
-9-
(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 described 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
<PAGE> 10
-10-
and will be outstanding and duly in force on the Closing Date, except
as disclosed in the Memorandum.
(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 Indentures)
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 Indentures and the Registration Rights Agreements 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
<PAGE> 11
-11-
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.
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 Indentures 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 (i) the
Senior Notes in the respective amounts set forth in Schedule I hereto at 98
1/4% of their principal amount and (ii) the Senior Subordinated Notes in the
respective amounts set forth in Schedule I hereto at 98% 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
<PAGE> 12
-12-
specify prior to the Closing Date, or by such means as the parties hereto shall
agree prior to the Closing Date. Such delivery of and payment for the Notes
shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New
York, New York 10005, at 9:00 A.M., New York City time, on February 23, 1998,
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 Alex.
Brown Incorporated in New York, New York, or at such other place as BT Alex.
Brown Incorporated 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.
(h) None of the Company or any of its Affiliates will
sell, offer for sale or solicit offers to buy or otherwise
<PAGE> 14
-14-
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
National Association of Securities Dealers, Inc. 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 Trustees 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 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
<PAGE> 15
-15-
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 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
<PAGE> 16
-16-
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.
(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
<PAGE> 17
-17-
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) To the knowledge of such officers', 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 each of the Registration Rights Agreements executed by
the Company and such agreements 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 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
<PAGE> 18
-18-
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.
(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
<PAGE> 19
-19-
(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 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:
<PAGE> 20
-20-
(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 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.
<PAGE> 21
-21-
(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 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
<PAGE> 22
-22-
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 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
<PAGE> 23
-23-
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,
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,
<PAGE> 24
-24-
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 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
<PAGE> 25
-25-
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 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.
<PAGE> 26
-26-
12. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph on the front cover page and in the
seventh 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.
Tanaka, Esq., with a copy to Kirkland & Ellis, 200 East Randolph Drive,
Chicago, Illinois 60601, Attention: John A. Schoenfeld, 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
<PAGE> 27
-27-
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 ALEX. BROWN INCORPORATED
By: /s/ Charles G. Denison
---------------------------
Name: Charles G. Denison
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Gordon Paterson
-----------------------------
Name: Gordon Paterson
Title: Senior Vice President
BEAR, STEARNS & CO. INC.
By: /s/ Larry Alletto
--------------------------------
Name: Larry Alletto
Title: Senior Managing Director
<PAGE> 29
-29-
SALOMON BROTHERS INC
By: /s/ John S. Chrysikopoulis
-----------------------------
Name: John S. Chrysikopoulis
Title: Director
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Mark T. Wilson
---------------------------
Name: Mark T. Wilson
Title: Managing Director
<PAGE> 30
SCHEDULE 1
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount of Senior Notes
- ------------------ --------------------------------
<S> <C>
BT Alex. Brown Incorporated $ 90,000,000
Donaldson, Lufkin & Jenrette 60,000,000
Securities Corporation
Bear, Stearns & Co. Inc. 20,000,000
Salomon Brothers Inc 20,000,000
NationsBanc Montgomery 10,000,000
------------
Securities LLC
Total $200,000,000
============
</TABLE>
<TABLE>
<CAPTION>
Principal Amount of
-------------------
Initial Purchasers Senior Subordinated Notes
- ------------------ -------------------------
<S> <C>
BT Alex. Brown Incorporated $112,500,000
Donaldson, Lufkin & Jenrette 75,000,000
Securities Corporation
Bear, Stearns & Co. Inc. 25,000,000
Salomon Brothers Inc 25,000,000
NationsBanc Montgomery 12,500,000
------------
Securities LLC
Total $250,000,000
============
</TABLE>
<PAGE> 31
EXHIBIT A-1
[SENIOR NOTES REGISTRATION RIGHTS AGREEMENT]
<PAGE> 32
EXHIBIT A-2
[SENIOR SUBORDINATED NOTES REGISTRATION
RIGHTS AGREEMENT]
<PAGE> 33
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 December 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 Indentures and the Registration Rights Agreements.
(vi) Each of this Agreement, the Indentures and the
Registration Rights Agreements 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.
(vii) The Notes have been duly executed and delivered by the
Issuer and, when paid for by the Initial Purchasers
<PAGE> 34
-2-
in accordance with the terms of this Agreement (assuming the due
authorization, execution and delivery of each Indenture by the
applicable 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 applicable 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 each
Indenture by the applicable Trustee and due authentication and delivery
of the Exchange Notes by the applicable Trustee in accordance with the
applicable Indenture), the Exchange Notes will constitute the valid and
binding obligations of the Issuer, entitled to the benefits of the
applicable 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 Agreements and the Indentures, 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 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
<PAGE> 35
-3-
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 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, neither Indenture is required
<PAGE> 36
-4-
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 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 the light of the circumstances
<PAGE> 37
-5-
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
EXHIBIT 4.28
GAYLORD CONTAINER CORPORATION,
as Issuer
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
----------------------------------
INDENTURE
Dated as of February 23, 1998
----------------------------------
$200,000,000
9-3/8% Senior Notes due 2007, Series A
and
9-3/8% 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>
-i-
<PAGE> 3
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
-ii-
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions................................................. 1
SECTION 1.02. Incorporation by Reference of TIA........................... 29
SECTION 1.03. Rules of Construction....................................... 29
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating............................................. 30
SECTION 2.02. Execution and Authentication................................ 31
SECTION 2.03. Registrar and Paying Agent.................................. 32
SECTION 2.04. Paying Agent To Hold Assets in Trust........................ 33
SECTION 2.05. Noteholder Lists............................................ 34
SECTION 2.06. Transfer and Exchange....................................... 34
SECTION 2.07. Replacement Notes........................................... 35
SECTION 2.08. Outstanding Notes........................................... 36
SECTION 2.09. Treasury Notes.............................................. 36
SECTION 2.10. Temporary Notes............................................. 37
SECTION 2.11. Cancellation................................................ 37
SECTION 2.12. Defaulted Interest.......................................... 38
SECTION 2.13. CUSIP Number................................................ 38
SECTION 2.14. Deposit of Moneys........................................... 38
SECTION 2.15. Restrictive Legends......................................... 39
SECTION 2.16. Book-Entry Provisions for Global Note....................... 41
SECTION 2.17. Special Transfer Provisions................................. 43
SECTION 2.18. Designation................................................. 45
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.......................................... 46
SECTION 3.02. Selection of Notes To Be Redeemed........................... 46
SECTION 3.03. Notice of Redemption........................................ 47
SECTION 3.04. Effect of Notice of Redemption.............................. 48
SECTION 3.05. Deposit of Redemption Price................................. 48
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.06. Notes Redeemed in Part...................................... 48
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes............................................ 49
SECTION 4.02. Maintenance of Office or Agency............................. 49
SECTION 4.03. Limitation on Restricted Payments........................... 50
SECTION 4.04. Corporate Existence......................................... 52
SECTION 4.05. Payment of Taxes and Other Claims........................... 53
SECTION 4.06. Maintenance of Properties and Insurance..................... 53
SECTION 4.07. Compliance Certificate; Notice of Default................... 54
SECTION 4.08. Compliance with Laws........................................ 56
SECTION 4.09. SEC Reports................................................. 56
SECTION 4.10. Waiver of Stay, Extension or Usury Laws..................... 57
SECTION 4.11. Limitation on Transactions with Affiliates.................. 57
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness......... 58
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................... 59
SECTION 4.14. Limitation on Liens......................................... 59
SECTION 4.15. Change of Control........................................... 60
SECTION 4.16. Limitation on Asset Sales................................... 62
SECTION 4.17. Limitation on Incurrence of Subordinated Debt............... 67
SECTION 4.18. Guarantees by Restricted Subsidiaries....................... 67
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc................................. 68
SECTION 5.02. Successor Corporation Substituted........................... 69
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................... 70
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.02. Acceleration................................................ 72
SECTION 6.03. Other Remedies.............................................. 73
SECTION 6.04. Waiver of Past Defaults..................................... 73
SECTION 6.05. Control by Majority......................................... 74
SECTION 6.06. Limitation on Suits......................................... 74
SECTION 6.07. Rights of Holders To Receive Payment........................ 75
SECTION 6.08. Collection Suit by Trustee.................................. 75
SECTION 6.09. Trustee May File Proofs of Claim............................ 75
SECTION 6.10. Priorities.................................................. 76
SECTION 6.11. Undertaking for Costs....................................... 77
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................... 77
SECTION 7.02. Rights of Trustee........................................... 79
SECTION 7.03. Individual Rights of Trustee................................ 80
SECTION 7.04. Trustee's Disclaimer........................................ 81
SECTION 7.05. Notice of Default........................................... 81
SECTION 7.06. Reports by Trustee to Holders............................... 81
SECTION 7.07. Compensation and Indemnity.................................. 82
SECTION 7.08. Replacement of Trustee...................................... 83
SECTION 7.09. Successor Trustee by Merger, Etc............................ 84
SECTION 7.10. Eligibility; Disqualification............................... 84
SECTION 7.11. Preferential Collection of Claims Against Company........... 85
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations........................ 85
SECTION 8.02. Acknowledgment of Discharge by Trustee...................... 87
SECTION 8.03. Application of Trust Money.................................. 88
SECTION 8.04. Repayment to the Company.................................... 88
SECTION 8.05. Reinstatement............................................... 88
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders................................. 89
SECTION 9.02. With Consent of Holders.................................... 90
SECTION 9.03. Compliance with TIA........................................ 91
SECTION 9.04. Revocation and Effect of Consents.......................... 91
SECTION 9.05. Notation on or Exchange of Notes........................... 92
SECTION 9.06. Trustee To Sign Amendments, Etc............................ 93
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.................................... 93
SECTION 10.02. Severability............................................... 94
SECTION 10.03. Limitation of Liability.................................... 95
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain
Terms.................................................... 95
SECTION 10.05. Contribution............................................... 96
SECTION 10.06. Waiver of Subrogation...................................... 97
SECTION 10.07. Execution of Guarantee..................................... 97
SECTION 10.08. Waiver of Stay, Extension or Usury Laws.................... 98
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls............................................... 99
SECTION 11.02. Notices.................................................... 99
SECTION 11.03. Communications by Holders with Other Holders............... 101
SECTION 11.04. Certificate and Opinion as to Conditions Precedent......... 101
SECTION 11.05. Statements Required in Certificate or Opinion.............. 101
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.................. 102
SECTION 11.07. Legal Holidays............................................. 102
SECTION 11.08. Governing Law.............................................. 102
SECTION 11.09. No Adverse Interpretation of Other Agreements.............. 103
SECTION 11.10. No Recourse Against Others................................. 103
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 11.11. Successors................................................. 103
SECTION 11.12. Duplicate Originals........................................ 103
SECTION 11.13. Severability............................................... 103
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
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
-vii-
<PAGE> 9
INDENTURE, dated as of February 23, 1998, between Gaylord
Container Corporation, a Delaware corporation (the "Company"), and State Street
Bank and Trust Company, a Massachusetts chartered trust company, as Trustee (the
"Trustee").
The Company has duly authorized the creation of an issue of
9-3/8% Senior Notes due 2007, Series A (the "Initial Notes"), and 9-3/8% 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
<PAGE> 10
-2-
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 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
<PAGE> 11
-3-
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 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
<PAGE> 12
-4-
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.
"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
<PAGE> 13
-5-
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.
"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
<PAGE> 14
-6-
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 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,
<PAGE> 15
-7-
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 (i) 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
<PAGE> 16
-8-
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
<PAGE> 17
-9-
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.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
<PAGE> 18
-10-
"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 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 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.
"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
<PAGE> 19
-11-
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.
"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
<PAGE> 20
-12-
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 Alex. Brown Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc.,
Salomon Brothers Inc and NationsBanc Montgomery Securities LLC.
"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 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.
<PAGE> 21
-13-
"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> 22
-14-
"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 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,
<PAGE> 23
-15-
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).
"Net Proceeds Offer" has the meaning provided in Section 4.16.
"9 3/4% Notes" means $225,000,000 aggregate principal amount
of 9 3/4% Notes due 2007 of the Company, as amended or supplemented from time to
time in accordance with the terms thereof.
"9 3/4% Note Indenture" means the indenture dated as of June
12, 1997 between the Company and Fleet National Bank, as trustee, relating to
the 9 3/4% Notes, as amended or supplemented from time to time in accordance
with the terms thereof.
"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 3/8% 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
February 13, 1998, 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,
<PAGE> 24
-16-
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 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 12 3/4% Senior Subordinated Discount
Debentures 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.
"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, the Senior Subordinated Notes, 9 3/4% 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
<PAGE> 25
-17-
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 $50 million in fiscal year 1998 and $25 million in any subsequent fiscal
year; provided that any portion of the $25 million ($50 million in the case of
fiscal year 1998) that is not incurred in any fiscal year may be carried over to
successive fiscal years thereafter; 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
<PAGE> 26
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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 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
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Subsidiaries arising from Currency Agreements and Commodity Agreements and (xix)
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
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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
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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
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
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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, 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.
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"Proceeds Purchase Date" shall have the meaning provided in
Section 4.16.
"Productive Assets" means assets (including Capital Stock) of
a kind used or useable 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 February 23, 1998 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.
"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.
<PAGE> 32
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"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 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.
<PAGE> 33
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"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Senior Subordinated Indenture" means the indenture dated as
of February 23, 1998 between the Company and Chase Bank of Texas, National
Association, as trustee relating to the Senior Subordinated Notes, as amended or
supplemented from time to time in accordance with the terms thereof.
"Senior Subordinated Notes" means $250,000,000 aggregate
principal amount of 9 7/8% Senior Subordinated Notes due 2008 of the Company, as
amended or supplemented from time to time in accordance with the terms thereof.
"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.
"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 Guarantor
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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.
Sections 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.
<PAGE> 35
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"Trust Officer" means any officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"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
<PAGE> 36
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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 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
<PAGE> 37
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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.
"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;
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(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 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,
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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.
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.
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The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount of up to $200,000,000 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 $200,000,000, 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 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
<PAGE> 41
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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
<PAGE> 42
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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 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
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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 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.
If, after the delivery of such replacement Note, a bona fide
purchaser of the original Note in lieu of which such replacement Note was issued
presents for payment or registration such original Note, the Trustee shall be
entitled to recover such replacement Note from the Person to whom it was
delivered or any Person taking therefrom, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor to
the extent of any loss, damage, cost or expense incurred by the Company or the
Trustee in connection therewith.
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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.
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
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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 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.
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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.
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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
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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.
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.
<PAGE> 49
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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.
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
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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 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.
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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
February 15, 2000 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,
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.
<PAGE> 52
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(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 Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or
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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 Senior Subordinated 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 Senior Subordinated Notes.
<PAGE> 54
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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.
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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 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
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principal amount 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.
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.
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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 3/8% 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 3/8% 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.
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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 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 quarter 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
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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 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
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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 Senior Subordinated Notes 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 Senior Subordinated
Indenture; (7) the redemption or repurchase by the Company of up to $200 million
aggregate principal amount of Old Notes 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
9 3/4% 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.
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
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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, with respect to itself, any material right or
franchise and, with respect to any of its Restricted Subsidiaries, any such
existence, 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 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
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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, 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
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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 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 Section
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,
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comparable to that which would have been required to appear in annual or
quarterly reports, to be delivered to the holders of the Notes.
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
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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 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.
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SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall 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 properties or assets to the Company,
except for such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) the Indenture, the Senior Subordinated Indenture or the 9
3/4% Note 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
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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.
SECTION 4.15. Change of Control.
(a) In the event 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") requiring the Company to make a
Change of Control Offer pursuant to this Section 4.15, 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:
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(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 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;
(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.
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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 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
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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
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
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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) above 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 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
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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;
(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,
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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 that 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
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securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.16 by virtue thereof.
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 Senior Subordinated Indenture. The Guarantee will
rank pari passu with any guarantee issued under the 9 3/4% Note 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
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of the Company, if, after giving effect to such election, the 15% Investment
Threshold is not met.
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
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(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.
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.
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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;
(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 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;
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(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 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
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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 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
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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.
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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 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
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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.
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.
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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.
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 of which the Trustee
has notice or knowledge hereunder 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
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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.
(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, 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.
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(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
attorney or 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.
(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
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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.
(g) The Trustee is not required to take notice or deemed to
have notice of any Default or Event of Default hereunder, except a
Default or Event of Default under Sections 6.01(a) and 6.01(b), unless
a Trust Officer has actual knowledge of or has received notice in
writing of such Default or Event of Default from the Company, any
Subsidiary, or from the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes, and in the absence of any such notice,
the Trustee may conclusively assume that no Default or Event of Default
exists.
(h) The Trustee is not required to give any bond or surety
with respect to the performance of its duties or the exercise of its
powers under this Indenture.
(i) Except for the information provided by the Trustee
concerning the Trustee, the Trustee shall have no responsibility for
compliance with any state or federal securities laws in connection with
the Notes.
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.
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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 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 Section 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 Section 313(a). The Trustee also shall
comply with TIA Sections 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.
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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
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
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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
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
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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 Sections 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 a bank
holding company system, the Trustee, independently of such bank holding company,
shall meet the capital requirements of TIA Section 310(a)(2). The Trustee shall
comply with TIA
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Section 310(b); provided, however, that there shall be excluded from the
operation of TIA ss. 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 Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 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
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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 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
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(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 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
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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
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
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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.
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
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(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 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;
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(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.
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
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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 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.
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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
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unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any 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
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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 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)
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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.
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
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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 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
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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 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
<PAGE> 107
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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
Telecopier: (847) 405-5586
Attention: Thomas M. Steffen
<PAGE> 108
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with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopier: (312) 861-2200
Attention: John A. Schoenfeld, Esq.
if to the Trustee:
State Street Bank and Trust Company
225 Asylum Street, 23rd Floor
Hartford, CT 06103
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 upon
receipt if sent by registered or certified mail, postage prepaid.
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.
<PAGE> 109
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SECTION 11.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 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 Section 312(c).
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;
<PAGE> 110
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(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 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.
<PAGE> 111
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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 or the Trustee 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.
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.
<PAGE> 112
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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
STATE STREET BANK AND TRUST
COMPANY,
as Trustee
By: /s/ Mark A. Forgetta
-----------------------------------
Name: Mark A. Forgetta
Title: Vice President
<PAGE> 113
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
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<PAGE> 114
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 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> 115
CUSIP No.:
GAYLORD CONTAINER CORPORATION
9 3/8% Senior Note due 2007, Series A
No. 1 $
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
Dollars, on June 15, 2007.
Interest Payment Dates: June 15 and December 15, commencing
June 15, 1998
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> 116
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Dated: February 23, 1998
GAYLORD CONTAINER CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
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<PAGE> 117
This is one of the Notes described in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By
-------------------------------------
Authorized Signatory
Dated: February 23, 1998
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<PAGE> 118
(REVERSE OF SECURITY)
GAYLORD CONTAINER CORPORATION
9 3/8% 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 June 15, 1998. 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 3/8% 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 3/8% 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.
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<PAGE> 119
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (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 to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of
February 23, 1998 (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 3/8% Senior Notes due 2007, Series A (the "Notes"), limited (except as
otherwise provided in the Indenture) in aggregate principal amount to
$200,000,000, 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
Sections 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:
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<PAGE> 120
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002................................. 104.688%
2003................................. 103.125%
2004................................. 101.563%
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 109.375% 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 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.
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<PAGE> 121
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 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
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<PAGE> 122
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).
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
A-10
<PAGE> 123
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 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
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<PAGE> 124
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> 125
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 3/8% 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
Notes. 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.
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<PAGE> 126
[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
A-14
<PAGE> 127
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-15
<PAGE> 128
[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.
A-16
<PAGE> 129
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.
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-17
<PAGE> 130
[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.
A-18
<PAGE> 131
EXHIBIT B
CUSIP No.:
GAYLORD CONTAINER CORPORATION
9 3/8% Senior Note due 2007, Series B
No. 2 $
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
Dollars, on June 15, 2007.
Interest Payment Dates: June 15 and December 15, commencing
June 15, 1998
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: ,
GAYLORD CONTAINER CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
B-1
<PAGE> 132
This is one of the Notes described in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST
COMPANY,
as Trustee
By:
-------------------------------------
Authorized Signatory
Dated: ,
B-2
<PAGE> 133
(REVERSE OF SECURITY)
GAYLORD CONTAINER CORPORATION
9 3/8% 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 June 15, 1998. 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 3/8% 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 3/8% 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.
B-3
<PAGE> 134
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (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 to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an indenture, dated as of
February 23, 1998 (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 3/8% Senior Notes due 2007 (the "Notes"), limited (except as otherwise
provided in the Indenture) in aggregate principal amount to $200,000,000, 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 Sections 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:
B-4
<PAGE> 135
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002........................................ 104.688%
2003........................................ 103.125%
2004........................................ 101.563%
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 109.375% 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 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.
B-5
<PAGE> 136
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 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
B-6
<PAGE> 137
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).
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
B-7
<PAGE> 138
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 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
B-8
<PAGE> 139
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-9
<PAGE> 140
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-10
<PAGE> 141
[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-11
<PAGE> 142
[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-12
<PAGE> 143
Exhibit C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
,
-------------- ----
State Street Bank and Trust Company
225 Asylum Street
23rd Floor
Hartford, CT 06103
Attention: Corporate Trust Administration
Re: Gaylord Container Corporation
9 3/8% Senior Notes due 2007
Ladies and Gentlemen:
In connection with our proposed purchase of 9 3/8% 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 February 13, 1998 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").
C-1
<PAGE> 144
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 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.
C-2
<PAGE> 145
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.
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> 146
Exhibit D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
,
-------------- ----
Attention:
Re: Gaylord Container Corporation (the "Company")
9 3/8% % 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;
D-1
<PAGE> 147
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(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> 148
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> 1
EXHIBIT 4.29
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of February 23, 1998
By and Among
GAYLORD CONTAINER CORPORATION
as Issuer
and
BT ALEX. BROWN INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
and
NATIONSBANC MONTGOMERY SECURITIES LLC,
as Initial Purchasers
9 3/8% Senior Notes due 2007
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions...............................................................1
2. Exchange Offer............................................................5
3. Shelf Registration.......................................................10
4. Additional Interest......................................................12
5. Registration Procedures..................................................14
6. Registration Expenses....................................................28
7. Indemnification..........................................................35
8. Rule 144A................................................................36
9. Underwritten Registrations...............................................36
10. Miscellaneous............................................................36
(a) No Inconsistent Agreements.......................................36
(b) Adjustments Affecting Registrable Notes..........................36
(c) Amendments and Waivers...........................................37
(d) Notices..........................................................37
(e) Successors and Assigns...........................................38
(f) Counterparts.....................................................38
(g) Headings.........................................................38
(h) Governing Law....................................................38
(i) Severability.....................................................39
(j) Securities Held by the Issuer or its Affiliates..................39
(k) Third-Party Beneficiaries........................................39
(l) Entire Agreement.................................................39
(m) Information Supplied by the Participants.........................40
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of February 23, 1998, by and among GAYLORD CONTAINER CORPORATION, a Delaware
corporation (the "Issuer"), as issuer, and BT ALEX. BROWN INCORPORATED,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, BEAR, STEARNS & CO. INC.,
SALOMON BROTHERS INC and NATIONSBANC MONTGOMERY SECURITIES LLC, as initial
purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of February 13, 1998, 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 $200,000,000 aggregate principal amount
of the Issuer's 9 3/8% Senior Notes due 2007 (the "Notes") and $250,000,000
aggregate principal amount of the Issuer's 9 7/8% Senior Subordinated 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.
<PAGE> 4
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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.
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 February 23, 1998, by
and among the Issuer and State Street Bank and Trust Company, 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.
<PAGE> 5
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Issue Date: February 23, 1998, 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.
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
<PAGE> 6
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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 supplements to such registration statement, including
post-effective 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
<PAGE> 7
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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.
2. Exchange Offer
(a) The Issuer shall file with the SEC, no later than the
Filing Date, a Registration Statement (the "Exchange Offer Registration
Statement") 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
<PAGE> 8
-6-
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.
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
<PAGE> 9
-7-
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 "underwriter" 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
Distribution" 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
<PAGE> 10
-8-
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 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:
<PAGE> 11
-9-
(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 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.
<PAGE> 12
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(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.
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 Registration"). 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-1 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
<PAGE> 13
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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 Period"),
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 applicable
prospectus delivery requirements of Rule 174 under the Securities Act and as
otherwise provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent 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 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
<PAGE> 14
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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 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
<PAGE> 15
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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 1.0% 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
<PAGE> 16
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the case of clause (i) above of this Section 4), (2) upon the 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
<PAGE> 17
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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 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
<PAGE> 18
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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 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
<PAGE> 19
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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 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.
<PAGE> 20
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(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 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
<PAGE> 21
-19-
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 herein by reference
and all exhibits.
(g) 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, 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.
(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
<PAGE> 22
-20-
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
<PAGE> 23
-21-
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 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
<PAGE> 24
-22-
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 omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (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
<PAGE> 25
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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 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
<PAGE> 26
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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"), at the 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 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
<PAGE> 27
-25-
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 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
<PAGE> 28
-26-
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 securityholders earnings
statements satisfying the provisions of Section 11(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> 29
-27-
(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
<PAGE> 30
-28-
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.
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
<PAGE> 31
-29-
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 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
<PAGE> 32
-30-
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
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
<PAGE> 33
-31-
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 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
<PAGE> 34
-32-
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 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
<PAGE> 35
-33-
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 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
<PAGE> 36
-34-
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 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 11(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
<PAGE> 37
-35-
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.
(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.
<PAGE> 38
-36-
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.
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.
<PAGE> 39
-37-
(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
10(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 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 Broker-Dealer, 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:
<PAGE> 40
-38-
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 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
<PAGE> 41
-39-
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.
(l) 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 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
<PAGE> 42
-40-
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> 43
IN WITNESS WHEREOF, the parties 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> 44
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED
as Initial Purchaser
By: /s/ Charles G. Denison
---------------------------------
Name: Charles G. Denison
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Initial Purchaser
By: /s/ Gordon Paterson
---------------------------------
Name: Gordon Paterson
Title: Senior Vice President
BEAR, STEARNS & CO. INC.
as Initial Purchaser
By: /s/ Larry Alletto
---------------------------------
Name: Larry Alletto
Title: Senior Managing Director
SALOMON BROTHERS INC
as Initial Purchaser
By: /s/ John S. Chrysikopoulos
---------------------------------
Name: John S. Chrysikopoulos
Title: Director
NATIONSBANC MONTGOMERY SECURITIES LLC
as Initial Purchaser
By: /s/ Mark T. Wilson
---------------------------------
Name: Mark T. Wilson
Title: Managing Director
<PAGE> 1
EXHBIT 4.30
================================================================================
GAYLORD CONTAINER CORPORATION,
as Issuer
------------------------------
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
------------------------------
as Trustee
INDENTURE
Dated as of February 23, 1998
================================================================================
$250,000,000
9 7/8% Senior Subordinated Notes due 2008, Series A
9 7/8% Senior Subordinated Notes due 2008, Series B
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ----------
<S> <C> <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
(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; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . 2.09
</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
<PAGE> 3
<TABLE>
<S> <C> <C>
(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
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA. . . . . . . . . . . . . . 28
SECTION 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . 28
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.02. Execution and Authentication. . . . . . . . . . . . . . . . . 30
SECTION 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . 31
SECTION 2.04. Paying Agent To Hold Assets in Trust. . . . . . . . . . . . . 32
SECTION 2.05. Noteholder Lists. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . . 33
SECTION 2.07. Replacement Notes. . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.08. Outstanding Notes. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.09. Treasury Notes. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.10. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.13. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.14. Deposit of Moneys. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.15. Restrictive Legends. . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.16. Book-Entry Provisions for Global Note. . . . . . . . . . . . 40
SECTION 2.17. Special Transfer Provisions. . . . . . . . . . . . . . . . . 42
SECTION 2.18. Designation. . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3.02. Selection of Notes To Be Redeemed. . . . . . . . . . . . . . 45
SECTION 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
-i-
<PAGE> 5
<TABLE>
<S> <C>
SECTION 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . . . 47
SECTION 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . . 47
SECTION 3.06. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . . . 47
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . 48
SECTION 4.03. Limitation on Restricted Payments. . . . . . . . . . . . . . 49
SECTION 4.04. Corporate Existence. . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.05. Payment of Taxes and Other Claims. . . . . . . . . . . . . . 52
SECTION 4.06. Maintenance of Properties and Insurance. . . . . . . . . . . 52
SECTION 4.07. Compliance Certificate; Notice of Default. . . . . . . . . . 53
SECTION 4.08. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.09. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.10. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . 55
SECTION 4.11. Limitation on Transactions with Affiliates. . . . . . . . . . 56
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. . . . . 57
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. . . . . . . . . . . . . . 57
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated Debt. . . . 58
SECTION 4.15. Change of Control. . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.16. Limitation on Asset Sales. . . . . . . . . . . . . . . . . . 61
SECTION 4.17. Guarantees by Restricted Subsidiaries. . . . . . . . . . . . 65
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. . . . . . . . . . . . . . . . . 66
SECTION 5.02. Successor Corporation Substituted. . . . . . . . . . . . . . 68
</TABLE>
-ii-
<PAGE> 6
<TABLE>
<S> <C>
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . 72
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.07. Rights of Holders To Receive Payment. . . . . . . . . . . . . 73
SECTION 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . . . 73
SECTION 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . 74
SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . 75
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . 75
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . 77
SECTION 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . 79
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . 79
SECTION 7.05. Notice of Default. . . . . . . . . . . . . . . . . . . . . . 79
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . . . 80
SECTION 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . . . 80
SECTION 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . 81
SECTION 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . 82
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . . 83
SECTION 7.11. Preferential Collection of Claims Against Company. . . . . . 83
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations. . . . . . . . . . . . . 83
SECTION 8.02. Acknowledgment of Discharge by Trustee. . . . . . . . . . . . 86
SECTION 8.03. Application of Trust Money. . . . . . . . . . . . . . . . . . 86
SECTION 8.04. Repayment to the Company. . . . . . . . . . . . . . . . . . . 86
SECTION 8.05. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . 87
</TABLE>
-iii-
<PAGE> 7
<TABLE>
<S> <C>
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . 88
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . . . 88
SECTION 9.03. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.04. Revocation and Effect of Consents. . . . . . . . . . . . . . 90
SECTION 9.05. Notation on or Exchange of Notes. . . . . . . . . . . . . . . 91
SECTION 9.06. Trustee To Sign Amendments, Etc. . . . . . . . . . . . . . . 91
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt. . . . . . . . . . . . . . 92
SECTION 10.02. No Payment on Notes in Certain Circumstances. . . . . . . . 92
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc. . . . . . . 94
SECTION 10.04. Payments May Be Paid Prior to Dissolution. . . . . . . . . . 96
SECTION 10.05. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 10.06. Obligations of the Company Unconditional. . . . . . . . . . 97
SECTION 10.07. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . 98
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating
Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 10.09. Trustee's Relation to Senior Debt. . . . . . . . . . . . . . 99
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Debt. . . . . . . . . . . 99
SECTION 10.11. Noteholders Authorize Trustee to Effectuate Subordination
of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 100
SECTION 10.12. This Article Ten Not to Prevent Events of Default. . . . . . 101
SECTION 10.13. Trustee's Compensation Not Prejudiced. . . . . . . . . . . . 101
</TABLE>
-iv-
<PAGE> 8
<TABLE>
<S> <C>
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee. . . . . . . . . . . . . . . . . . . 101
SECTION 11.02. Severability. . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 11.03. Limitation of Liability. . . . . . . . . . . . . . . . . . . 103
SECTION 11.04. Subsidiary Guarantors May Consolidate, etc., on Certain
Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 11.05. Contribution. . . . . . . . . . . . . . . . . . . . . . . . 104
SECTION 11.06. Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . 105
SECTION 11.07. Execution of Guarantee. . . . . . . . . . . . . . . . . . . 105
SECTION 11.08. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . . 106
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls. . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 12.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 12.03. Communications by Holders with Other Holders. . . . . . . . 109
SECTION 12.04. Certificate and Opinion as to Conditions Precedent. . . . . 109
SECTION 12.05. Statements Required in Certificate or
Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . . . . 110
SECTION 12.07. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 12.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 110
SECTION 12.09. No Adverse Interpretation of Other Agreements. . . . . . . . 111
SECTION 12.10. No Recourse Against Others. . . . . . . . . . . . . . . . . 111
SECTION 12.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 12.12. Duplicate Originals. . . . . . . . . . . . . . . . . . . . . 111
SECTION 12.13. Severability. . . . . . . . . . . . . . . . . . . . . . . . 111
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Exhibit A - Form of Note . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Form of Exchange Note . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C> <C>
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
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
-vi-
<PAGE> 10
INDENTURE, dated as of February 23, 1998, between Gaylord
Container Corporation, a Delaware corporation (the "Company"), and Chase Bank
of Texas, National Association, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 9
7/8% Senior Subordinated Notes due 2008, Series A (the "Initial Notes"), and 9
7/8% Senior Subordinated Notes due 2008, 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
<PAGE> 11
-2-
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 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
<PAGE> 12
-3-
the Company, (ii) any transfer of trade receivable 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 receivable 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
<PAGE> 13
-4-
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.
"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
<PAGE> 14
-5-
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.
"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
<PAGE> 15
-6-
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 non-recurring 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,
<PAGE> 16
-7-
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 (i) 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,
<PAGE> 17
-8-
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
<PAGE> 18
-9-
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 Section 4.03, 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.
<PAGE> 19
-10-
"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.
"Designated Senior Debt" means (i) Indebtedness under or in
respect of the Credit Agreement, (ii) the Senior Notes, (iii) the 9 3/4%
Notes, and (iv) any other Indebtedness constituting Senior Debt that, at the
time of designation, has an aggregate principal amount of at least $50 million
and is specifically designated in the instrument evidencing such Senior Debt as
"Designated Senior Debt" by the Company.
"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 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 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.
"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.
<PAGE> 20
-11-
"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.
"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
<PAGE> 21
-12-
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 Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc., Salomon
Brothers Inc and NationsBanc Montgomery Securities LLC.
"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 receive from time to time periodic
payments calculated by applying
<PAGE> 22
-13-
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
<PAGE> 23
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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.
"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 February
15, 2003, 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 February 23, 2008.
"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),
<PAGE> 24
-15-
(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).
"Net Proceeds Offer" has the meaning provided in Section 4.16.
"9 3/4% Notes" means $225,000,000 aggregate principal amount of 9
3/4% Notes due 2007 of the Company, as amended or supplemented from time to
time in accordance with the terms thereof.
"9 3/4% Note Indenture" means the indenture dated as of June 12,
1997 between the Company and Fleet National Bank, as Trustee relating to the 9
3/4% Notes, as amended or supplemented from time to time in accordance with the
terms thereof.
"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 7/8% Senior Subordinated Notes due
2008, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
<PAGE> 25
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"Offering Memorandum" means the Offering Memorandum dated
February 13, 1998, 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 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 12 3/4% Senior Subordinated Discount
Debentures Due 2005.
"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.
"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, the Senior Notes, the 9 3/4% Notes and any Guarantees thereof, (ii)
Indebtedness of the Company and its Restricted Subsidiaries outstanding on the
Issue Date reduced by
<PAGE> 26
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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 $ 50 million in fiscal year 1998
and $25 million in any subsequent fiscal year; provided that any portion of the
$25 million ($50 million in the case of fiscal year 1998) 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
<PAGE> 27
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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
<PAGE> 28
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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 and
(xix) 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.
<PAGE> 29
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"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, 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 useable in the business of the Company and its Restricted
Subsidiaries as it is conducted on the Issue Date.
<PAGE> 30
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"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 February 23, 1998 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.
"Regulation S" means Regulation S under the Securities Act.
"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Debt; provided that
if, and for so long as, any Designated Senior Debt lacks such a representative,
then the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"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.
<PAGE> 31
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"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 Subsidiary of any property, whether owned
by the Company or any 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 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.
<PAGE> 32
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"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and
accrued and unpaid interest (including any interest accruing subsequent to the
filing of a petition in bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on any Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Notes. Without limiting the generality of the foregoing, "Senior Debt" shall
include the monetary obligations of the Company under or with respect to: (a)
the Credit Agreement (including any post-petition interest in any proceeding
pursuant to the Bankruptcy Laws, whether or not allowed, at the applicable rate
under such agreement), (b) the Senior Notes and (c) the 9 3/4% Notes.
Notwithstanding the foregoing, Senior Debt shall not include (i) any
Indebtedness, if the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes, (ii) the Notes, (iii) any
Indebtedness of the Company to a Subsidiary of the Company, (iv) Indebtedness
to, or guaranteed on behalf of, any shareholder, director, officer or employee
of the Company or any Subsidiary (including, without limitation, amounts owed
for compensation), (v) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or services, (vi)
Indebtedness represented by Disqualified Capital Stock, (vii) Indebtedness
incurred in violation of Section 4.12, as such covenant may be amended from
time to time, (viii) Indebtedness incurred in violation of Section 4.14, as
such covenant may be amended from time to time and (ix) the Old Notes.
<PAGE> 33
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"Senior Note Indenture" means the indenture dated as of February
23, 1998 between the Company and State Street Bank and Trust, as Trustee,
relating to the Senior Notes as in effect on the Issue Date, as amended or
supplemented from time to time in accordance with the terms thereof.
"Senior Notes" means the $200,000,000 in aggregate principal
amount of 9 3/8% Senior Notes due 2007 of the Company, as amended or
supplemented from time to time in accordance with the terms thereof.
"Significant Restricted Subsidiary" means any 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.
"Subsidiary" of 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 4.17.
"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 Guarantor when its respective Subsidiary
Guarantee is released in accordance with the terms thereof; provided, further,
that such Subsidiary Guarantee hereunder will be subordinated to senior
indebtedness of such Subsidiary Guarantor to the same extent as the Notes are
subordinated to Senior Debt.
<PAGE> 34
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"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
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 receivable and (whether now existing or arising in the
future) any assets related to such trade receivable including, without
limitation, all collateral securing such trade receivable and all material
contracts and all guarantees or other Obligations in respect of such trade
receivable 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, 2003; provided, however, that if the period from the Change of Control
Redemption Date to June 15, 2003 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, 2003 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.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the
<PAGE> 35
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provisions of this Indenture and thereafter means such successor.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"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
<PAGE> 36
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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
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)
<PAGE> 37
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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.
"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;
<PAGE> 38
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(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 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
<PAGE> 39
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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.
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.
<PAGE> 40
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The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount of up to $250,000,000 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 $250,000,000, 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 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
<PAGE> 41
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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
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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 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
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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 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.
If, after the delivery of such replacement Note, a bona fide
purchaser of the original Note in lieu of which such replacement Note was
issued presents for payment or registration such original Note, the Trustee
shall be entitled to recover such replacement Note from the Person to whom it
was delivered or any Person taking therefrom, except a bona fide purchaser, and
shall be entitled to recover upon the security or indemnity provided therefor
to the extent of any loss, damage, cost or expense incurred by the Company or
the Trustee in connection therewith.
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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.
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
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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
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.
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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> 47
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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
<PAGE> 48
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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.
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.
<PAGE> 49
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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.
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
<PAGE> 50
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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 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.
<PAGE> 51
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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 February 15, 2000 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,
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
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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
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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 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 Notes shall rank pari passu for all purposes with the Old
Notes.
<PAGE> 54
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 6 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.
<PAGE> 55
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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 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
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amount 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.
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 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.
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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 7/8% 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 7/8% 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 10.02.
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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 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 quarter 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
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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 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
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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 Old Notes 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 indenture under which the Old Notes were issued; (7) 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 (8) 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) and (7), 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) and 7 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 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, with
respect to itself, any material right or franchise and, with respect to any of
its
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Restricted Subsidiaries, any such existence, 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 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
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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, 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.
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(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.
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
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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 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 Section
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.
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
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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 the 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
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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.
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 shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any
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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 pay any Indebtedness or other obligation owed to the
Company or a Restricted Subsidiary of the Company or (c) transfer any of its
properties or assets to the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Indenture, the Senior Note Indenture or the 9 3/4% Note Indenture, (iii)
customary nonassignment provisions of any lease governing a leasehold interest
of the Company or any Restricted Subsidiary of the Company, (iv) 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, (v)
agreements existing on the Issue Date, (vi) the Trade Receivable Facility,
(vii) customary nonassignment provisions in contracts entered into in the
ordinary course of business, (viii) Indebtedness of a Restricted Subsidiary
permitted to be incurred under the Indenture; or (ix) 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 (ii), (iv), (v), (vi) or (viii) 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 (ii), (iv), (v), (vi) or (viii).
SECTION 4.14. Prohibition on Incurrence of Senior Subordinated Debt.
The Company shall not incur or suffer to exist Indebtedness that
constitutes Senior Debt with respect to the
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Notes but is subordinated by written agreement in right of payment to any other
Senior Debt of the Company.
SECTION 4.15. Change of Control.
(a) In the event of a Change of Control, each Holder will have
the right to require the Company to repurchase all or a portion of such
Holder's Notes pursuant to an 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. Prior to the repurchase of the Notes, the Company shall (i) repay
in full all Senior Debt the terms of which require repayment upon a Change of
Control or offer to repay in full all such Indebtedness and to repay the
Indebtedness owed to each holder of such Indebtedness which has accepted such
offer, or (ii) obtain the requisite consents under such Senior Debt to permit
the repurchase of the Notes as provided below. The Company shall first comply
with the covenant in the preceding sentence before it shall be required to
repurchase Securities pursuant to the provisions described in this Section
4.15.
(b) Within 30 days following the date upon which the Change of
Control occurred (the "Change of Control Date") requiring the Company to make a
Change of Control Offer pursuant to this Section 4.15, 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
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law) (the "Change of Control Payment Date"); provided that the Change of
Control Payment Date for the Notes shall be a date subsequent to the
Change of Control Payment Date (as set forth in the Senior Note
Indenture) established by the Company for repurchase of the Senior
Notes;
(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 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;
(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
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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 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.
(a) 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
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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 Senior
Debt or (B) to the extent the holders of Senior Debt tender an amount of such
indebtedness less than the available Net Cash Proceeds offered to such holders,
to make an offer to purchase 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
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
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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) above 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.
(b) Notice of a Net Proceeds Offer pursuant to this Section 4.16
shall be mailed or cause to be mailed, by first class mail, by the Company
within 270 days, or so long as the Senior Notes and the 9 3/4% Notes are
outstanding, 330 days, after the relevant Asset Sale to all Holders at their
last registered addresses as of a date within 15 days of the mailing of such
notice, with a copy to the Trustee. 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
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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;
(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
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(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 that are to be purchased in accordance with item (b)(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.
SECTION 4.17. 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
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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. The Guarantee will be subordinate to each guarantee issued
under the 9 3/4% Note Indenture and the Senior Note Indenture to the same
extent that the Notes are subordinate to the 9 3/4% Notes and the Senior Notes.
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.
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,
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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.
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.
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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 (whether or not such payment shall be prohibited
by Article Ten);
(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 (whether or not such payment shall be
prohibited by Article Ten);
(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;
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(4) there shall be a 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 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 substantially all of its property or (C) order the
winding-up or liquidation of its
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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
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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
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 that 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.
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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.
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;
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(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 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.
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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.
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
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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.
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 of which the Trustee has
notice or knowledge hereunder has occurred and is
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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.
(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.
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(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, 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
attorney or agent appointed with due care.
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(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.
(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.
(g) The Trustee is not required to take notice or deemed to have
notice of any Default or Event of Default hereunder, except a Default or
Event of Default under Sections 6.01(a) and 6.01(b), unless a Trust
Officer has actual knowledge of or has received notice in writing of
such Default or Event of Default from the Company, any Subsidiary, or
from the Holders of at least 25% in aggregate principal amount of the
Outstanding Notes, and in the absence of any such notice, the Trustee
may conclusively assume that no Default or Event of Default exists.
(h) The Trustee is not required to give any bond or surety with
respect to the performance of its duties or the exercise of its powers
under this Indenture.
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(i) Except for the information provided by the Trustee
concerning the Trustee, the Trustee shall have no responsibility for
compliance with any state or federal securities laws in connection with
the Notes.
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 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.
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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 Section 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 Section 313(a). The Trustee also
shall comply with TIA Sections 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
asserted against the Trustee for which it may seek indemnity.
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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.
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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 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
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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 Sections 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 a bank
holding company system, the Trustee, independently of such bank holding
company, shall meet the capital requirements of TIA Section 310(a)(2). The
Trustee shall comply with TIA Section 310(b); provided, however, that there
shall be excluded from the operation of TIA Section 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 Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 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)
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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 4.17 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 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;
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(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 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
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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
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,
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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
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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 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;
(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; or
(7) make any change in Article Ten or the definitions used in
Article Ten that adversely affects the holders of the Notes.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of
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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.
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
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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 (8) 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 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.
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ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt.
The Company covenants and agrees and the Trustee and each Holder
of the Notes, by its acceptance thereof, likewise covenants and agrees, that
all Notes shall be issued subject to the provisions of this Article Ten; and
the Trustee and each Person holding any Note, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees that the
payment of all Obligations on the Notes by the Company shall, to the extent and
in the manner herein set forth, be subordinated and junior in right of payment
to the prior payment in full in cash or Cash Equivalents of all Obligations on
Senior Debt; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Debt, and that each holder of
Senior Debt whether now outstanding or hereafter created, incurred, assumed or
guaranteed shall be deemed to have acquired Senior Debt in reliance upon the
covenants and provisions contained in this Indenture and the Notes.
SECTION 10.02. No Payment on Notes in Certain Circumstances.
(a) If any default in the payment of any principal of or
interest on any Senior Debt, when due and payable, whether at maturity, upon
any redemption, by declaration or otherwise, occurs and is continuing, no
payment shall be made by, or on behalf of, the Company or any other Person on
its behalf with respect to any Obligations on the Notes, or to acquire any of
the Notes for cash or property or otherwise. In addition, if any other event
of default occurs and is continuing (or if such an event of default would occur
upon any payment with respect to the Notes or would arise upon the passage of
time as a result of such payment) with respect to any Designated Senior Debt,
as such event of default is defined in the instrument creating or evidencing
such Designated Senior Debt, permitting the holders of such Designated Senior
Debt then
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outstanding to accelerate the maturity thereof and if the Representative for
the respective issue of Designated Senior Debt gives written notice of the
event of default to the Trustee (a "Default Notice"), then, unless and until
all events of default have been cured or waived or have ceased to exist or the
Trustee receives notice from the Representative for the respective issue of
Designated Senior Debt terminating the Blockage Period (as defined below),
during the 180 days after the delivery of such Default Notice (the "Blockage
Period"), neither the Company nor any other Person on its behalf shall (x) make
any payment with respect to any Obligations on the Notes or (y) acquire any of
the Notes for cash or property or otherwise. Notwithstanding anything herein
to the contrary, in no event will a Blockage Period extend beyond 180 days from
the date of delivery of a Default Notice. Only one such Blockage Period may be
commenced within any 360 consecutive days. For all purposes of this Section
10.02(a), no event of default which existed or was continuing on the date of
the commencement of any Blockage Period with respect to the Designated Senior
Debt initiating such Blockage Period shall be, or be made, the basis for the
commencement of a second Blockage Period by the Representative of such
Designated Senior Debt, whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of
not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
(pro rata to such holders on the basis of the respective amount of Senior Debt
held by such holders) or their respective Representatives, as their respective
interests may appear. The Trustee shall be entitled to rely on information
regarding amounts then due and owing on the Senior Debt, if any, received from
the holders of Senior Debt (or their Representatives) or, if such information
is not received from such holders or their Representatives, from the Company
and only amounts included in the information
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provided to the Trustee shall be paid to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Senior Debt thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment with respect to Obligations on the
Notes.
SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all Obligations due
or to become due upon all Senior Debt shall first be paid in full in cash or
Cash Equivalents, or such payment duly provided for, before any payment or
distribution is made on account of any Obligations on the Notes, or for the
acquisition of any of the Notes for cash or property or otherwise. Upon any
such dissolution, winding-up, liquidation or reorganization, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the Notes or the Trustee
under this Indenture would be entitled, except for the provisions hereof, shall
be paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Holders of the Notes or by the Trustee under this Indenture if received by
them, directly to the holders of Senior Debt (pro rata to such holders on the
basis of the respective amounts of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining
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unpaid until all such Senior Debt has been paid in full in cash or Cash
Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person, the Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated
and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 10.03(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of such Senior Debt.
(d) For purposes of this Article Ten, the words "cash, property
or securities" shall not be deemed to include securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment
which are subordinated, to at least the same extent as the Notes, to the
payment of all Senior Debt and to the payment of all securities issued
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in exchange therefor to the holders of Senior Debt at the time outstanding;
provided that with respect to securities of any other corporation, such
securities shall only be excluded from the operation of this Article Ten if the
plan of reorganization or readjustment has been approved by at least a majority
in principal amount of the Indebtedness then outstanding under the Credit
Agreement and at least a majority in principal amount of any other Designated
Senior Debt then outstanding. The consolidation of the Company with, or the
merger of the Company with or into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of all or
substantially all of its assets, to another corporation upon the terms and
conditions provided in Article Five hereof and as long as permitted under the
terms of the Senior Debt shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section if such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, assume the Company's obligations hereunder in accordance with Article
Five hereof.
SECTION 10.04. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Ten or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Sections 10.02 and 10.03, from making payments at any time for the purpose
of making payments of principal of and interest on the Notes, or from
depositing with the Trustee any moneys for such payments, or (ii) in the
absence of actual knowledge by the Trustee that a given payment would be
prohibited by Section 10.02 or 10.03, the application by the Trustee of any
moneys deposited with it for the purpose of making such payments of principal
of and interest on the Notes, to the Holders entitled thereto unless at least
one Business Day prior to the date upon which such payment would otherwise
become due and payable, the Trustee shall have received the written notice
provided for in Section 10.02(a) or in Section 10.07. The Company shall give
prompt written notice to the Trustee of any dissolution, winding-up,
liquidation or reorganization of the Company.
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SECTION 10.05. Subrogation.
Subject to the payment in full of all Senior Debt, the Holders of
the Notes shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Debt until the Notes shall be paid in full;
and, for the purposes of such subrogation, no such payments or distributions to
the holders of the Senior Debt by or on behalf of the Company or by or on
behalf of the Holders by virtue of this Article Ten which otherwise would have
been made to the Holders shall, as between the Company and the Holders of the
Notes, be deemed to be a payment by the Company to or on account of the Senior
Debt, it being understood that the provisions of this Article Ten are and are
intended solely for the purpose of defining the relative rights of the Holders
of the Notes, on the one hand, and the holders of the Senior Debt, on the other
hand.
SECTION 10.06. Obligations of the Company Unconditional.
Nothing contained in this Article Ten or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Debt, and the Holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders of the Notes the principal of and any interest on the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders of
the Notes and creditors of the Company other than the holders of the Senior
Debt, nor shall anything herein or therein prevent the Holder of any Note or
the Trustee on its behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, in respect of cash, property or securities of the Company received upon
the exercise of any such remedy.
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SECTION 10.07. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume (in the absence of actual knowledge to
the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article Ten, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver,
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trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or the holders of the Notes,
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Debt, the distribution may be made and the notice
given to their Representative, if any.
SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture,
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regardless of any knowledge thereof that any such holder may have or otherwise
be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt, or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee to Effectuate Subordination of
Notes.
Each Holder of Notes by his acceptance of them authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Notes, the subordination provided in this Article Ten, and
appoints the Trustee his attorney-in-fact for such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of the
Company, the filing of a claim for the unpaid balance of its or his Notes and
accrued interest in the form required in those proceedings.
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SECTION 10.12. This Article Ten Not to Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Notes by reason of any provision of this Article Ten will not
be construed as preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation Not Prejudiced.
Nothing in this Article Ten will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. 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 11.03.
Each Subsidiary Guarantor, if any, hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
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enforceability of the Notes or this Indenture, the absence of any 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 11.02. Severability.
In case any provision of this Article Eleven 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.
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SECTION 11.03. 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 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 11.05, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.04. 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
<PAGE> 113
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Guarantor shall be deemed released from all obligations under this
Article Eleven 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 11.04. 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 Eleven.
SECTION 11.05. 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
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in respect of the Subsidiary Guarantee of such Person, as they become absolute
and matured.
SECTION 11.06. 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 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 11.06 is knowingly made in
contemplation of such benefits.
SECTION 11.07. Execution of Guarantee.
To evidence their guarantee to the Noteholders set forth in this
Article Eleven, 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
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Trustee. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee
set forth in this Article Eleven 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 Company (and delivery of an Officer's Certificate)
remove any such endorsement which relates to such Subsidiary Guarantee.
SECTION 11.08. 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
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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 TWELVE
MISCELLANEOUS
SECTION 12.01. 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 12.02. 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
Telecopier: (847) 405-5586
Attention: Thomas M. Steffen
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopier: (312) 861-2200
Attention: John A. Schoenfeld, Esq.
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if to the Trustee:
(1) For payment, registration, transfer, exchange and tender of the Notes:
By Hand: By Mail:
Chase Bank of Texas, National Chase Bank of Texas, National
Association Association
Attention: Registered Bond Events Attention: Registered Bond
One Main Place Events
1201 Main Street, 18th Floor P.O. Box 2320
Dallas, Texas 75202 Dallas, Texas 75221-2320
Telephone: (214) 871-9393 or (800) 275-2048
(2) For all other communications relating to the Notes:
Chase Bank of Texas, National Association
Global Trust Services
600 Travis Street, Suite 1150
Houston, Texas 77002
Telephone: (713) 216-6686
Telecopier: (713) 216-5476
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 upon receipt if sent by registered or certified mail, postage
prepaid.
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
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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 12.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 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 Section 312(c).
SECTION 12.04. 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 12.05. 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:
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(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 12.06. 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 meeting of Noteholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.07. 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, Houston, Texas 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 12.08. 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.
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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 12.09. 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 12.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as
such, of the Company or the Trustee 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 12.11. 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.
SECTION 12.12. 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 12.13. 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
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affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
<PAGE> 122
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above.
GAYLORD CONTAINER CORPORATION
By: /s/ Thomas M. Steffan
----------------------------
Name: Thomas M. Steffan
Title: Assistant Treasurer
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Mauri Cowen
----------------------------
Name: Mauri Cowen
Title: Vice President and
Trust Officer
<PAGE> 123
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
A-1
<PAGE> 124
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 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.
A-2
<PAGE> 125
CUSIP No.:
GAYLORD CONTAINER CORPORATION
9 7/8% Senior Subordinated Note due 2008, Series A
No. 1 $
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
Dollars, on February 15, 2008.
Interest Payment Dates: February 15 and August 15, commencing
August 15, 1998
Record Dates: February 1 and August 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.
A-3
<PAGE> 126
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: February 23, 1998
GAYLORD CONTAINER CORPORATION
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
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<PAGE> 127
This is one of the Notes referred to in the within-mentioned
Indenture.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By:
--------------------------------
Authorized Signatory
Dated: February 23, 1998
A-5
<PAGE> 128
(REVERSE OF SECURITY)
GAYLORD CONTAINER CORPORATION
9 7/8% Senior Subordinated Note due 2008, 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 August 15, 1998. 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 7/8% 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 7/8% 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.
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<PAGE> 129
3. Paying Agent and Registrar.
Initially, Chase Bank of Texas, National Association (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 to certain exceptions, act as
Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of
February 23, 1998 (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 7/8% Senior Subordinated Notes due 2008, Series A (the "Notes"), limited
(except as otherwise provided in the Indenture) in aggregate principal amount
to $250,000,000, 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 Sections 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. Subordination.
The Notes are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
or Cash Equivalents of all Senior Debt of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the
A-7
<PAGE> 130
Indenture and appoints the Trustee his attorney-in-fact for such purposes.
6. Optional Redemption.
The Notes may not be redeemed at the option of the Company prior
to February 15, 2003. 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 February 15
in the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003. . . . . . . . . . . . . . . 105.063%
2004. . . . . . . . . . . . . . . 103.375%
2005. . . . . . . . . . . . . . . 101.688%
2006 and thereafter . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 15,
2001, 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 109.875% 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
$125,000,000 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
February 15, 2003, 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.
A-8
<PAGE> 131
"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 February
15, 2003 computed using a discount rate equal to the Treasury Rate plus 62.5
basis points, over (b) the outstanding principal amount of such Note.
7. 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.
8. 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 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.
A-9
<PAGE> 132
9. 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.
10. 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.
11. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of
it for all purposes.
12. 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.
13. 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
A-10
<PAGE> 133
covenants, but excluding its obligation to pay the principal of and interest on
the Notes).
14. 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.
15. 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, 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.
16. 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.
A-11
<PAGE> 134
17. 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 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.
18. 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.
19. 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.
A-12
<PAGE> 135
20. Authentication.
This Note shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Note.
21. 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.
22. 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).
23. 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.
24. 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 7/8% Senior Subordinated Notes
due 2008, 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 Notes. The Holders shall be entitled to receive
certain additional interest
A-13
<PAGE> 136
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.
25. 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-14
<PAGE> 137
[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
A-15
<PAGE> 138
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-16
<PAGE> 139
[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.
A-17
<PAGE> 140
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.
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-18
<PAGE> 141
[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.
A-19
<PAGE> 142
EXHIBIT B
CUSIP No.:
GAYLORD CONTAINER CORPORATION
9 7/8% Senior Subordinated Note due 2008, Series B
No. 2 $
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 Dollars, on February
15, 2008.
Interest Payment Dates: February 15 and August 15, commencing August 15,
1998
Record Dates: February 1 and August 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: ,
GAYLORD CONTAINER CORPORATION
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
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<PAGE> 143
This is one of the Notes referred to in the within-mentioned Indenture.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By:
----------------------------
Authorized Signatory
Dated: ,
B-2
<PAGE> 144
(REVERSE OF SECURITY)
GAYLORD CONTAINER CORPORATION
9 7/8% Senior Subordinated Note due 2008, 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 August 15, 1998. 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 7/8% 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 7/8% 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.
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<PAGE> 145
3. Paying Agent and Registrar.
Initially, Chase Bank of Texas, National Association (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 to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an indenture, dated as of February 23,
1998 (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 7/8%
Senior Subordinated Notes due 2008 (the "Notes"), limited (except as otherwise
provided in the Indenture) in aggregate principal amount to $250,000,000, 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
Sections 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. Subordination.
The Notes are subordinated in right of payment, in the manner and to the
extent set forth in the Indenture, to the prior payment in full in cash or Cash
Equivalents of all Senior Debt of the Company, whether outstanding on the date
of the Indenture or thereafter created, incurred, assumed or guaranteed. Each
Holder by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on his behalf, to take such
action as may be necessary or appropriate to effectuate the subordination
provided for in the
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<PAGE> 146
Indenture and appoints the Trustee his attorney-in-fact for such purposes.
6. Optional Redemption.
The Notes may not be redeemed at the option of the Company prior to
February 15, 2003. 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>
2003. . . . . . . . . . . . . . . . . . . . . . 105.063%
2004. . . . . . . . . . . . . . . . . . . . . . 103.375%
2005. . . . . . . . . . . . . . . . . . . . . . 101.688%
2006 and thereafter . . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to February 15, 2001, 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 109.875% 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
$125,000,000 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 February
15, 2003, 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.
B-5
<PAGE> 147
"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 February
15, 2003 computed using a discount rate equal to the Treasury Rate plus 62.5
basis points, over (b) the outstanding principal amount of such Note.
7. 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.
8. 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 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.
B-6
<PAGE> 148
9. 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.
10. 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.
11. Persons Deemed Owners.
The registered Holder of a Note shall be treated as the owner of it for
all purposes.
12. 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.
13. 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
B-7
<PAGE> 149
covenants, but excluding its obligation to pay the principal of and interest on
the Notes).
14. 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.
15. 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, 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.
16. 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.
B-8
<PAGE> 150
17. 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 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.
18. 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.
19. 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.
B-9
<PAGE> 151
20. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on this Note.
21. 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.
22 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).
23 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.
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.
B-10
<PAGE> 152
[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-11
<PAGE> 153
[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-12
<PAGE> 154
Exhibit C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
Chase Bank of Texas, National Association
600 Trans
Suite 1150
Houston, Texas 77002
Attention: Corporate Trust Administration
Re: Gaylord Container Corporation
9 7/8% Senior Subordinated Notes due 2008
Ladies and Gentlemen:
In connection with our proposed purchase of 9 7/8% Senior Subordinated
Notes due 2008 (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 February 13, 1998 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
C-1
<PAGE> 155
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 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
C-2
<PAGE> 156
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.
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> 157
Exhibit D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S_____
______________, ____
Attention:
Re: Gaylord Container Corporation (the "Company")
9 7/8% % Senior Subordinated Notes due 2008
(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;
D-1
<PAGE> 158
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(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> 159
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 Eleven of the
Indenture and this Subsidiary Guarantee. This Subsidiary Guarantee will become
effective in accordance with Article Eleven 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 Eleven 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> 1
EXHIBIT 4.31
REGISTRATION RIGHTS AGREEMENT
Dated as of February 23, 1998
By and Among
GAYLORD CONTAINER CORPORATION
as Issuer
and
BT ALEX. BROWN INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
SALOMON BROTHERS INC
and
NATIONSBANC MONTGOMERY SECURITIES LLC
as Initial Purchasers
9 7/8% Senior Subordinated Notes due 2008
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . 14
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 28
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8. Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . 36
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . 36
(b) Adjustments Affecting Registrable Notes . . . . . . . . . . . . 36
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 37
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . 38
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 38
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 38
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 38
(j) Securities Held by the Issuer or its Affiliates . . . . . . . . 39
(k) Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . 39
(l) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 39
(m) Information Supplied by the Participants . . . . . . . . . . . 40
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of February 23, 1998, by and among GAYLORD CONTAINER CORPORATION, a Delaware
corporation (the "Issuer"), as issuer, and BT ALEX. BROWN INCORPORATED,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, BEAR, STEARNS & CO. INC.,
SALOMON BROTHERS INC and NATIONSBANC MONTGOMERY SECURITIES LLC, as initial
purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of February 13, 1998, 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 $250,000,000 aggregate principal amount
of the Issuer's 9 7/8% Senior Subordinated Notes due 2008 (the "Notes") and
$200,000,000 aggregate principal amount of the Issuer's 9 3/8% Senior Notes due
2007. 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.
<PAGE> 4
-2-
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.
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 February 23, 1998, by
and among the Issuer and Chase Bank of Texas, National Association, 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.
<PAGE> 5
-3-
Issue Date: February 23, 1998, 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.
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
<PAGE> 6
-4-
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 supplements to such registration statement, including
post-effective 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
<PAGE> 7
-5-
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.
2. Exchange Offer
(a) The Issuer shall file with the SEC, no later than the
Filing Date, a Registration Statement (the "Exchange Offer Registration
Statement") 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
<PAGE> 8
-6-
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.
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
<PAGE> 9
-7-
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 "underwriter" 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
Distribution" 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
<PAGE> 10
-8-
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 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:
<PAGE> 11
-9-
(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 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.
<PAGE> 12
-10-
(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.
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 Registration"). 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-1 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
<PAGE> 13
-11-
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 Period"), 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 applicable prospectus delivery requirements of Rule 174
under the Securities Act and as otherwise provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent 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 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
<PAGE> 14
-12-
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 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
<PAGE> 15
-13-
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 1.0% 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
<PAGE> 16
-14-
(in the case of clause (i) above of this Section 4), (2) upon the 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
<PAGE> 17
-15-
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 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
<PAGE> 18
-16-
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 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
<PAGE> 19
-17-
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
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.
<PAGE> 20
-18-
(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 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
<PAGE> 21
-19-
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 herein by
reference and all exhibits.
(g) 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, 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.
(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
<PAGE> 22
-20-
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
<PAGE> 23
-21-
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 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
<PAGE> 24
-22-
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 omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (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
<PAGE> 25
-23-
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 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
<PAGE> 26
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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"), at the
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 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
<PAGE> 27
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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 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
<PAGE> 28
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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 securityholders earnings
statements satisfying the provisions of Section 11(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> 29
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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
<PAGE> 30
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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.
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
<PAGE> 31
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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 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
<PAGE> 32
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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
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
<PAGE> 33
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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 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
<PAGE> 34
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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
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
<PAGE> 35
-33-
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
<PAGE> 36
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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
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 11(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
<PAGE> 37
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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.
(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.
<PAGE> 38
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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.
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.
<PAGE> 39
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(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 10(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 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 Broker-Dealer, 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.
<PAGE> 40
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(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 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
<PAGE> 41
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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.
(l) 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 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
<PAGE> 42
-40-
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> 43
IN WITNESS WHEREOF, the parties 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> 44
The foregoing Agreement is hereby confirmed and accepted as of the
date first above written.
BT ALEX. BROWN INCORPORATED
as Initial Purchaser
By: /s/ Charles G. Denison
---------------------------
Name: Charles G. Denison
Title: Managing Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Initial Purchaser
By: /s/ Gordon Paterson
---------------------------
Name: Gordon Paterson
Title: Senior Vice President
BEAR, STEARNS & CO. INC.
as Initial Purchaser
By: /s/ Larry Alletto
---------------------------
Name: Larry Alletto
Title: Senior Managing Director
SALOMON BROTHERS INC.
as Initial Purchaser
By: /s/ John S. Chrysikopoulos
---------------------------
Name: John S. Chrysikopoulos
Title: Director
<PAGE> 45
NATIONSBANC MONTGOMERY SECURITIES LLC
as Initial Purchaser
By: Mark T. Wilson
-------------------------
Name: Mark T. Wilson
Title: Managing Director
<PAGE> 1
EXHIBIT 5.1
[Kirkland & Ellis Letterhead]
To Call Writer Direct:
312 861-2000
March 23, 1998
Gaylord Container Corporation
500 Lake Cook Road, Suite 400
Deerfield, IL 60015
Re: Gaylord Container Corporation 9 3/8% Senior Notes due 2007,
Series B and 97/8% Senior Subordinated Notes due 2008, Series
B
Ladies and Gentlemen:
We are acting as special counsel to Gaylord Container Corporation, a
Delaware corporation (the "Company"), in connection with the proposed
registration by the Company of up to $200,000,000 in aggregate principal amount
of its 9 3/8% Senior Notes due 2007, Series B (the "Senior Exchange Notes") and
up to $250,000,000 in aggregate principal amount of its 9 7/8% Senior
Subordinated Notes due 2008, Series B (the "Senior Subordinated Exchange Notes"
and, together with the Senior Exchange Notes, the "Exchange Notes"), pursuant to
a Registration Statement on Form S-4 filed with the Securities and Exchange
Commission (the "Commission") on March __, 1998 under the Securities Act of
1933, as amended (the "Securities Act") (such Registration Statement, as amended
or supplemented, is hereinafter referred to as the "Registration Statement"),
for the purpose of effecting an exchange offer (the "Exchange Offer") for its
9 3/8% Senior Notes due 2007, Series A (the "Old Senior Notes") and its 9 7/8%
Senior Subordinated Notes due 2008, Series A (the "Old Senior Subordinated
Notes" and, together with the Old Senior Notes, the "Old Notes").
The Senior Exchange Notes are to be issued pursuant to the Indenture
(the "Senior Indenture"), dated February 23, 1998, by and among the Company and
State Street Bank and Trust Company (the "Senior Note Trustee"), in exchange for
and in replacement of the Company's outstanding Old Senior Notes, of which
$200,000,000 in aggregate principal amount is outstanding. The Senior
Subordinated Exchange Notes are to be issued pursuant to the Indenture (the
"Senior Subordinated Note Indenture" and, together with the Senior Note
Indenture, the "Indentures") dated February 23, 1998, by and among the Company
and Chase Bank of Texas, National Association (the "Senior Subordinated Note
Trustee" and, together with the Senior Note Trustee, the "Trustees"), in
exchange for and in replacement of the Company's outstanding Old Senior
Subordinated Notes, of which $250,000,000 in aggregate principal amount is
outstanding.
<PAGE> 2
Gaylord Container Corporation
March 23, 1998
Page 2
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the Company
(ii) minutes and records of the corporate proceedings of the Company with
respect to the issuance of the Exchange Notes, (iii) the Registration Statement
and exhibits thereto and (iv) the Registration Rights Agreements, dated February
23, 1998, by and among the Company and BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co., Inc., Salomon
Brothers Inc and NationsBanc Montgomery Securities LLC.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company and the due authorization, execution and
delivery of all documents by the parties thereto other than the Company. As to
any facts material to the opinions expressed herein which we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) The Company is a corporation existing and in good standing under
the General Corporation law of the State of Delaware.
(2) The sale and issuance of the Exchange Notes has been validly
authorized by the Company.
(3) When, as and if (i) the Registration Statement becomes effective
pursuant to the provisions of the Securities Act, (ii) the Indentures have been
qualified pursuant to the provisions of the Trust Indenture Act of 1939, as
amended, (iii) the Old Notes have been validly tendered to the Company, (iv) the
Exchange Notes have been issued in the form and containing the terms described
in the Registration Statement, the Indentures, the resolutions of the Company's
Board of Directors (or authorized committee thereof) and any legally required
consents, approvals, authorizations and other order of the Commission and any
other regulatory authorities to be obtained
<PAGE> 3
Gaylord Container Corporation
March 23, 1998
Page 3
and (v) the Exchange Notes have been authenticated by the Trustees, the
Exchange Notes when issued pursuant to the Exchange Offer will be legally
issued, fully paid and nonassessable and will constitute valid and binding
obligations of the Company.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York and
the General Corporation Law of the State of Delaware. We advise you that issues
addressed by this letter may be governed in whole or in part by other laws, but
we express no opinion as to whether any relevant difference exists between the
laws upon which our opinions are based and any other laws which may actually
govern. For purposes of the opinions in paragraph 1, we have relied exclusively
upon certificates issued by the Delaware Secretary of State and such opinions
are not intended to provide any conclusion or assurance beyond that conveyed by
such certificates. We have assumed without investigation that there has been no
relevant change or development between the respective dates of such certificates
and the date of this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of the rules and regulations of
the Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of Delaware or New York be changed by legislative action,
judicial decision or otherwise.
<PAGE> 4
Gaylord Container Corporation
March 23, 1998
Page 4
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Yours very truly,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE> 1
Exhibit 12.1
Historical Computation of Earnings to Fixed Charges
For the Years Ended September 30, 1993, 1994, 1995, 1996
<TABLE>
<CAPTION>
1993 1994 1995 1996
---- ---- ---- ----
Earnings:
<S> <C> <C> <C> <C>
Earnings (loss) before income taxes $ (70.0) $ (84.0) $ 110.0 $ 20.1
Capitalized interest (0.5) (0.9) (2.3) (0.8)
Fixed Charges 72.1 84.8 92.3 82.9
---------- --------- -------- --------
Total $ 1.6 (0.1) $ 200.0 $ 102.2
========== ========= ======== ========
Fixed Charges
Interest expense $ 68.2 $ 80.3 $ 86.1 $ 78.3
Rent expense 3.4 3.6 3.9 3.8
Capitalized interest 0.5 0.9 2.3 0.8
---------- --------- -------- --------
Total $ 72.1 $ 84.8 $ 92.3 $ 82.9
========== ========= ======== ========
Ratio of earnings to fixed charges - - 2.2 1.2
========== ========= ======== ========
Deficit of earnings to fixed charges $ 70.5 $ 84.9 - -
========== ========= ======== ========
</TABLE>
"Earnings" consist of earnings before income taxes and fixed charges.
"Fixed charges" consist of interest incurred, amortization of debt discount
and debt issuance expenses and one-third of rental expense.
<PAGE> 2
Historical Computation of Earnings to Fixed Charges
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
Refinancing Pro Forma for
Historical Adjustment (1) Refinancing
---------- -------------- -----------
Earnings:
<S> <C> <C> <C>
Earnings (loss) before income taxes $ (121.4) $ 7.8 $ (113.6)
Capitalized interest (0.8) - (0.8)
Fixed Charges 86.1 (7.8) 78.3
---------- --------- ---------
Total $ (36.1) $ - $ (36.1)
========== ========= =========
Fixed Charges
Interest expense $ 80.7 $ (7.8) $ 72.9
Rent expense 4.6 - 4.6
Capitalized interest 0.8 - 0.8
---------- --------- ---------
Total $ 86.1 $ (7.8) $ 78.3
========== ========= =========
Deficit of earnings to fixed charges $ 122.2 $ 114.4
========== =========
</TABLE>
"Earnings" consist of earnings before income taxes and fixed charges.
"Fixed charges" consist of interest incurred, amortization of debt discount
and debt issuance expenses and one-third of rental expense.
(1) The pro forma computation of the ratio of earnings to fixed
charges has been prepared to give effect to the issuance of $200 million of
9 3/8% Senior Notes due 2007 and the issuance of $225 million of 9 7/8%
Senior Subordinated Notes due 2008, and the redemption of $404.3 million
principal amount of the Company's 12 3/4% Senior Senior Subordinated
Discount Debentures due 2005 (together with an approximately $25.8 million
redemption premium) as if such transaction occurred on October 1, 1997. Pro
forma interest expense for the year ended September 30, 1997 has been
increased by the interest expense relating to the Notes ($44.5 million
including the amortization of related deferred financing costs) and reduced
by the interest expense relating to the Old Debentures ($52.3 million
including amortization of deferred financing costs)
<PAGE> 3
Historical and Pro Forma Computation of Earnings to Fixed Charges
For the Three Months Ended December 31, 1997
<TABLE>
<CAPTION>
Refinancing Pro Forma for
Historical Adjustment (1) Refinancing
---------- -------------- -----------
Earnings:
<S> <C> <C> <C>
Earnings (loss) before income taxes $ (30.4) $ 2.0 $ (28.4)
Capitalized interest (0.3) - (0.3)
Fixed Charges 22.5 (2.0) 20.5
---------- -------- ---------
Total $ (8.2) $ - $ (8.2)
========== ======== =========
Fixed Charges
Interest expense $ 21.1 $ (2.0) $ 19.1
Rent expense 1.1 - 1.1
Capitalized interest 0.3 - 0.3
---------- -------- ---------
Total $ 22.5 $ (2.0) $ 20.5
========== ======== =========
Deficit of earnings to fixed charges $ 30.7 $ 28.7
========== ========
</TABLE>
"Earnings" consist of earnings before income taxes and fixed charges.
"Fixed charges" consist of interest incurred, amortization of debt discount
and debt issuance expenses and one-third of rental expense.
(1) The pro forma computation of the ratio of earnings to fixed charges has
been prepared to give effect to the issuance of $200 million of 9 3/8%
Senior Notes due 2007 and the issuance of $225 million of 9 7/8% Senior
Subordinated Notes due 2008, and the redemption of $404.3 million principal
amount of the Company's 12 3/4% Senior Senior Subordinated Discount
Debentures due 2005 (together with an approximately $25.8 million
redemption premium) as if such transaction occurred on October 1, 1997.
Pro forma interest expense for the three months ended December 31, 1997
has been increased by the interest expense relating to the Notes ($11.1
million including the amortization of related deferred financing costs) and
reduced by the interest expense relating to the Old Debentures ($13.1
million including amortization of deferred financing costs)
<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 October 30, 1997,
included in the Annual Report on Form 10-K of Gaylord Container Corporation,
and to the use of our report dated October 30, 1997 (February 13, 1998 as to
Note 19), 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
March 23, 1998
<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 March 16, 1998.
Signature Title
- --------- -----
Chairman, Chief Executive Officer
- ----------------------------------- and Director
Marvin A. Pomerantz
Executive Vice President
- ----------------------------------- (Principal Financial Officer)
Daniel P. Casey
Vice President-Corporate Controller
- ------------------------------------ (Principal Financial 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/ Warren J. Hayford Director
- -----------------------------------
Warren J. Hayford
/s/ Charles S. Johnson Director
- -----------------------------------
Charles S. Johnson
/s/ Ralph L. MacDonald, Jr. Director
- -----------------------------------
Ralph L. MacDonald, Jr.
/s/ Thomas H. Stoner Director
- -----------------------------------
Thomas H. Stoner
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Assistant Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
---------------------
GAYLORD CONTAINER CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 36-3472452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 LAKE COOK ROAD, SUITE 400
DEERFIELD, IL 60015
(Address of principal executive offices) (Zip Code)
--------------------
GAYLORD CONTAINER CORPORATION 9-3/8% SENIOR NOTES DUE 2007
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 5th day of March, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
---------------------------------
Kathy A. Larimore
Assistant Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Gaylord
Container Corporation of its GAYLORD CONTAINER CORPORATION 9-3/8% SENIOR NOTES
DUE 2007, we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
-------------------------------
Kathy A. Larimore
Assistant Vice President
Dated: March 5, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business June 30, 1997, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act and in accordance with a
call made by the Commissioner of Banks under General Laws, Chapter 172, Section
22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 1,842,337
Interest-bearing balances ......................................... 8,771,397
Securities.................................................................. 10,596,119
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ................ 5,953,036
Loans and lease financing receivables:
Loans and leases, net of unearned income ...........5,769,090
Allowance for loan and lease losses ................ 74,031
Allocated transfer risk reserve..................... 0
Loans and leases, net of unearned income and allowances ........... 5,695,059
Assets held in trading accounts ............................................ 916,608
Premises and fixed assets .................................................. 374,999
Other real estate owned .................................................... 755
Investments in unconsolidated subsidiaries ................................. 28,992
Customers' liability to this bank on acceptances outstanding ............... 99,209
Intangible assets .......................................................... 29,412
Other assets................................................................ 1,589,526
----------
Total assets................................................................ 36,097,449
==========
LIABILITIES
Deposits:
In domestic offices ............................................... 11,082,135
Noninterest-bearing .......................8,932,019
Interest-bearing ..........................2,150,116
In foreign offices and Edge subsidiary ............................ 13,811,677
Noninterest-bearing ....................... 112,281
Interest-bearing .........................13,699,396
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 6,785,263
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 755,676
Other borrowed money ....................................................... 716,013
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 99,605
Other liabilities........................................................... 841,566
Total liabilities........................................................... 34,091,935
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................... 0
Common stock ............................................................... 29,931
Surplus .................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains
(losses) ................................................................... 1,542,695
Cumulative foreign currency translation adjustments ....................... (4,295)
Total equity capital ....................................................... 2,005,514
----------
Total liabilities and equity capital ....................................... 36,097,449
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Assistant Vice President and Comptroller of the above
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE> 1
EXHIBIT 25.2
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
----
--------------
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer Identification Number)
712 MAIN STREET, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip code)
LEE BOOCKER, 712 MAIN STREET, 26TH FLOOR
HOUSTON, TEXAS 77002 (713) 216-2448
(Name, address and telephone number of agent for service)
GAYLORD CONTAINER CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 36-3472452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 LAKE COOK ROAD
CHICAGO, ILLINOIS 60015
(Address of principal executive offices) (Zip code)
9-7/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
(Title of indenture securities)
===============================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
The obligor is not an affiliate of the trustee. (See Note on
Page 7.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING
SECURITIES OF THE TRUSTEE.
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
Not applicable by virtue of Form T-1 General Instruction B
and response to Item 13.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER
WHICH ANY OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY
OTHER SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING
INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH
OTHER INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B
and response to Item 13.
1
<PAGE> 3
ITEM 4. (CONTINUED)
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR
THE CLAIM THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF
SECTION 310(B)(1) OF THE ACT ARISES AS A RESULT OF THE
TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE, INCLUDING A
STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS
COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER
INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICER OF
THE TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR
REPRESENTATIVE OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY
EACH SUCH PERSON HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH
CONNECTION.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES
OF THE TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ ------------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
2
<PAGE> 4
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES
OF THE TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ -----------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO THE SECURITIES OF THE
OBLIGOR OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN
DEFAULT BY THE TRUSTEE.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
WHETHER THE BENEFICIALLY OR PERCENT OF
SECURITIES HELD AS COLLATERAL CLASS
ARE VOTING SECURITY FOR REPRESENTED BY
OR NONVOTING OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT IN COL. C
-------------- ---------- ------- --------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
3
<PAGE> 5
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL
SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE
OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF
SUCH UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
-------------- ----------- ------------------ ---------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES
OF CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL
SECURITY FOR OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE
KNOWLEDGE OF THE TRUSTEE (1) OWNS 10% OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
-------------- ----------- ------------------ ---------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
4
<PAGE> 6
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF
A PERSON OWNING 50% OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL
SECURITY FOR OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE
KNOWLEDGE OF THE TRUSTEE, OWNS 50% OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR, FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OR
SUCH PERSON ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
-------------- ----------- ------------------ ---------------
<S> <C> <C> <C>
</TABLE>
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
COL. A COL. B COL. C
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not, nor has there been, a default with respect to the
securities under this indenture. (See Note on Page 7.)
5
<PAGE> 7
ITEM 13. (CONTINUED)
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There has not been a default under any such indenture or series. (See Note
on Page 7.)
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE
EACH SUCH AFFILIATION.
Not applicable by virtue of Form T-1 General Instruction B and response to
Item 13.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN
TRUSTEE IS AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE
QUALIFIED UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
- 1. A copy of the articles of association of the trustee now in
effect.
- 2. A copy of the certificate of authority of the trustee to
commence business.
- 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors of
the Federal Reserve System under date of January 21, 1948.
- 4. A copy of the existing bylaws of the trustee.
5. Not applicable.
6. The consent of United States institutional trustees required by
Section 321(b) of the Act.
6
<PAGE> 8
[ ] 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising or
examining authority.
8. Not applicable.
9. Not applicable.
NOTE REGARDING INCORPORATED EXHIBITS
Effective January 20, 1998, the name of the Trustee was changed from
Texas Commerce Bank National Association to Chase Bank of Texas, National
Association. The exhibits incorporated herein by reference, including Exhibit 7,
the Trustee's Consolidated Reports of Condition and Income for the fourth
quarter of 1997, were filed under the former name of the Trustee.
- Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to
the Form S-3 File No. 33-56195.
- Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to
the Form S-3 File No. 33-42814.
- Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to
the Form S-11 File No. 33-25132.
- Incorporated by reference to exhibit bearing the same designation and
previously filed with the Securities and Exchange Commission as exhibits to
the Form S-3 File No. 33-65055.
[ ] Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as exhibits
to the Form S-4 File No. 333-47745.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13,
the answers to said Items are based on incomplete information. Such Items
may, however, be considered as correct unless amended by an amendment to
this Form T-1.
7
<PAGE> 9
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE
TRUSTEE, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, A NATIONAL BANKING
ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF
AMERICA, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF
HOUSTON, AND STATE OF TEXAS, ON THE 23rd DAY OF MARCH, 1998.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Trustee)
By: /s/ Mauri J. Cowen
----------------------------------
Mauri J. Cowen
Vice President and Trust Officer
8
<PAGE> 10
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
The undersigned is trustee under an Indenture dated as of February 23,
1998, between Gaylord Container Corporation (the "Company") and Chase Bank of
Texas, National Association, as Trustee, entered into in connection with the
issuance of the Company's 9-7/8% Senior Subordinated Notes due 2008, Series B.
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned hereby consents that reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Mauri J. Cowen
----------------------------
Mauri J. Cowen
Vice President and Trust Officer
<PAGE> 1
LETTER OF TRANSMITTAL
To Tender for Exchange
9 3/8% Senior Notes due 2007
of
GAYLORD CONTAINER CORPORATION
Pursuant to the Prospectus Dated March , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON 1998, UNLESS EXTENDED.
TO: 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
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Sandra Szczsponik Attention: Sandra Szczsponik
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 Place
Concourse Level, Corporate Trust Window Fourth Floor, Corporate Trust
New York, New York 10006 Boston, Massachusetts 02110
Facsimile Transmission: Confirm by Telephone
(For Eligible Institutions Only) (617) 664-5314
(617) 664-5739
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus, dated March ,
1998 (the "Prospectus") of Gaylord Container Corporation (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000 principal
amount of its 93/8% 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
principal amount of its outstanding 93/8% Senior Notes due 2007, Series A (the
"Notes"), of which $200,000,000 principal amount is outstanding. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended. The term "Holder" with respect to the
Exchange Offer means any person in whose name Notes are registered on the books
of the Company or any other person who has obtained a properly completed bond
power from the registered holder. Capitalized terms used but not defined herein
have the respective meanings set forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer
<PAGE> 2
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer -- Procedures for Tendering" by any financial
institution that is a participant in the Book-Entry Transfer Facility and whose
name appears on a security position listing as the owner of Notes to the extent
provided herein or (iii) tender of the Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
Notwithstanding the foregoing, valid acceptance of the terms of the
Exchange Offer may be effected by a participant in the Book-Entry Transfer
Facility tendering Notes through the Book-Entry Transfer Facility's Automated
Tender Offer Program ("ATOP") where the Exchange Agent receives an Agent's
Message prior to the Expiration Date. Accordingly, such participant must
electronically transmit its acceptance to the Book-Entry Transfer Facility
through ATOP, and then the Book-Entry Transfer Facility will edit and verify the
acceptance, execute a book-entry delivery to the Exchange Agent's account at the
Book-Entry Transfer Facility and send an Agent's Message to the Exchange Agent
for its acceptance. By tendering through ATOP, participants in the Book-Entry
Transfer Facility will expressly acknowledge receipt of this Letter of
Transmittal and agree to be bound by its terms and the Company will be able to
enforce such agreement against such Book-Entry Transfer Facility participants.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete this
letter in its entirety.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------
Account Number:
---------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------
Principal Amount of Tendered Notes:
-------------------------------------------
If Holders desire to tender Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing
Notes, an Agent's Message or other required documents to reach the Exchange
Agent prior to the Expiration Date, or (ii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures." See Instruction 2 below.
[ ]CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s):
-----------------------------
Window Ticket No. (if any):
---------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Name of Eligible Institution that Guaranteed Delivery:
------------------------
If Delivered by Book-Entry Transfer, the Account Number:
----------------------
Transaction Code Number:
------------------------------------------------------
2
<PAGE> 3
[ ]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Attention:
----------------------------------------------------------------------
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal amount
of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF NOTES
- --------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT
PRINCIPAL TENDERED (MUST
AMOUNT BE AN INTEGRAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED MULTIPLE OF
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY CERTIFICATE(S) $1,000)**
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TOTAL
- -----------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Notes will be
deemed to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the
certificate numbers and principal amounts on a separate signed schedule and affix the list to this Letter
of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Notes. All other tenders must be in integral
multiples of $1,000.
- -----------------------------------------------------
</TABLE>
3
<PAGE> 4
BOX 2
SPECIAL REGISTRATION
INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Notes accepted for exchange,
are to be issued in a name other than the name appearing in Box 1 above.
Issue Certificate(s) to:
Name:
-----------------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------------
- ----------------------------------------------------------------
(INCLUDE ZIP CODE)
- ----------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
BOX 3
SPECIAL DELIVERY
INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Notes accepted for exchange,
are to be sent to an address other than the address appearing in Box 1 above, or
if Box 2 is filled in, to an address other than the address appearing in Box 2.
Deliver certificate(s) to:
Name:
-----------------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------------
- ----------------------------------------------------------------
(INCLUDE ZIP CODE)
- ----------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
BOX 4
BROKER-DEALER STATUS
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the 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, VIA FACSIMILE
(847) 405-5586.
4
<PAGE> 5
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (iii) present such Notes for transfer on the books
of the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims, when the same are acquired by the Company.
The undersigned hereby further represents that any Exchange Notes acquired in
exchange for Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, that neither the undersigned nor any other such
person has any arrangement or understanding with any person to participate in
the distribution of such Exchange Notes and that neither the undersigned nor any
such other person is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company. In addition, the undersigned and any such person
acknowledge that (a) any person participating in the Exchange Offer for the
purpose of distributing the Exchange Notes must, in the absence of an exemption
therefrom, comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale of the Exchange Notes
and cannot rely on the position of the staff of the Securities and Exchange
Commission enunciated in no-action letters and (b) failure to comply with such
requirements in such instance could result in the undersigned or such person
incurring liability under the Securities Act for which the undersigned or such
person is not indemnified by the Company. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the assignment, transfer and
purchase of the Notes tendered hereby. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in and does not
intend to engage in, a distribution of Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a Prospectus in
connection with any resale of such Exchange Notes, however, by so acknowledging
and by delivering a Prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Unless
otherwise notified in accordance with the instructions set forth herein in Box 4
under "Broker-Dealer Status," the Company will assume that the undersigned is
not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given notice
thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Notes
will be returned, without expense, to the undersigned at the address shown below
or to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
5
<PAGE> 6
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" 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."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Notes accepted for exchange and any certificates for
Notes not tendered or not exchanged, in the name(s) of the registered holder of
the Notes appearing in Box 1 above. Similarly, unless otherwise indicated in Box
3 under "Special Delivery Instructions," please send the certificates, if any,
representing the Exchange Notes issued in exchange for the Notes accepted for
exchange and any certificates for Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below in the undersigned's signature(s). In the event that the box entitled
"Special Registration Instructions" and the box entitled "Special Delivery
Instructions" both are completed, please issue the certificates representing the
Exchange Notes issued in exchange for the Notes accepted for exchange in the
name(s) of, and return any certificates for Notes not tendered or not exchanged
to, the person(s) so indicated. The undersigned understands that the Company has
no obligation pursuant to the "Special Registration Instructions" and "Special
Delivery Instructions" to transfer any Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Notes
so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, an Agent's Message,
this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date, may tender their Notes according to
the guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2.
6
<PAGE> 7
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by person(s) authorized to become registered
holder(s) by a properly completed bond power from the registered holder(s), a
copy of which must be transmitted with this Letter of Transmittal. If Notes to
which this Letter of Transmittal relate are held of record by two or more joint
holders, then all such holders must sign this Letter of Transmittal.
SIGNATURES
X
----------------------------------------- --------------------------------
Date
X
----------------------------------------- --------------------------------
Date
Area Code and Telephone Number:
---------------------------------------------
If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person
acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) submit evidence
satisfactory to the Company of such person's authority so to act. See
Instruction 5.
Name(s):
-------------------------------------------------------------------
(Please Print)
Capacity:
------------------------------------------------------------------
Address:
-------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution:
-----------------------
(Authorized Signature)
--------------------------------------------------------------------------
(Title)
--------------------------------------------------------------------------
(Name of Firm)
--------------------------------------------------------------------------
(Address, Include Zip Code)
--------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated
--------------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly completed
and duly executed copy of this Letter of Transmittal (or, in the case of a book-
entry transfer, an Agent's Message), a 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 prior to the Expiration Date. The
method of delivery of certificates for Notes and all other required documents is
at the election and sole risk of the tendering holder and 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 holder may wish to use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. Neither the Company nor the Exchange Agent is
under an obligation to notify any tendering holder of the Company's acceptance
of tendered Notes prior to the completion of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other documents
required by the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Notes according to the guaranteed delivery
procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(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 facsimile transmission,
mail, or hand delivery) setting forth the name and address of the holder,
the certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and 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)
(or, in the case of a book-entry transfer, an Agent's Message), together
with the tendered Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account with the Book-Entry Transfer
Facility) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account with the Book-Entry Transfer Facility),
together with this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in
the case of a book-entry transfer, an Agent's Message) and all other
documents required by the Letter of Transmittal must be received by the
Exchange Agent within five New York Stock Exchange trading days after 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 a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a registered holder of Notes may tender such
Notes in the Exchange Offer. Any beneficial owner of Notes who is not the
registered holder and who wishes to tender should arrange with such Holder to
execute and deliver this Letter of Transmittal on such owner's behalf or must,
prior to completing and executing this Letter of Transmittal and delivering such
Notes, either make appropriate arrangements to register ownership of the Notes
in such owner's name or obtain a properly completed bond power from the
registered holder.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill
8
<PAGE> 9
in the principal amount tendered in the column labeled "Principal Amount
Tendered" of the box entitled "Description of Notes" (Box 1) above. The entire
principal amount of Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated. If the entire principal amount of
Notes is not tendered, Notes for the principal amount of Notes not tendered and
Exchange Notes exchanged for any Notes tendered 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;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by the
registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes without
alteration, enlargement, or any change whatsoever.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of Transmittal
documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Notes are to be reissued or returned to the registered holder, then,
the registered holder need not and should not endorse any tendered Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (executed exactly as the
name(s) of the registered holder(s) appear(s) on such Notes), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any 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 this Letter of Transmittal.
No medallion signature guarantee is required if this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith and the
Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) and neither the "Special Registration
Instructions" (Box 2) nor the "Special Delivery Instructions" (Box 3) has been
completed. In all other cases, all signatures on this Letter of Transmittal must
be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Notes for principal amounts not tendered or not accepted
for exchange are to be sent, if different from the name and address or account
of the person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification number or social security number of
the person named must also be indicated and the tendering holders should
complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Notes.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to the
Exchange Offer. If, however, a transfer tax is imposed for any reason other than
the transfer and sale of Notes to the Company or its order 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 from
taxes therefrom is not submitted with this Letter of Transmittal, the amount of
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 Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any 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
9
<PAGE> 10
the Company is not provided with the correct TIN, the Holder may be subject to a
$50 penalty imposed by Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained.) Certain holders (including,
among other, 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 tendering holder 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 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 Notes are registered in more than one name or are not in the name of the
actual owner, see the enclosed "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), and acceptance of tendered 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 Notes not validly
tendered or any 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 Notes as to any ineligibility of any holder who seeks to tender 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 Notes must be cured
within such time as the Company shall determine. The Company will use reasonable
efforts to give notification of defects or irregularities with respect to
tenders of Notes, but shall not incur any liability for failure to give such
notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for information
and for additional copies of the Prospectus may be directed to the Exchange
Agent at the address set forth on the first page of this Letter of Transmittal.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered 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 Notes when, as and if the Company has given
notice thereof to the Exchange Agent. If any tendered Notes are not exchanged
pursuant to the Exchange Offer for any reason, such unexchanged Notes will be
returned, without expense, to the undersigned at the address shown above or at a
different address as may be indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
10
<PAGE> 11
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: GAYLORD CONTAINER CORPORATION
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TAXPAYER Social Security Number
FORM W-9 IDENTIFICATION NUMBER ("TIN") IN THE BOX AT or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW ____/____/____
----------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY, Part 2 -- Check the box if you are NOT subject to backup withholding under the
INTERNAL REVENUE SERVICE provisions of section 3408(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. [ ]
----------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I
IDENTIFICATION NUMBER (TIN) CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE. Part 3 --
Awaiting
SIGNATURE ----------------------------------------- TIN [ ]
DATE ------------------------------------------------
----------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below. See instructions if your name has
changed.)
----------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------------
City, State and ZIP Code
----------------------------------------------------------------------------------
List account number(s) here (optional)
- ----------------------------------------------------------------------------------------------------------------------
</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.
11
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
With Respect to
GAYLORD CONTAINER CORPORATION
9 3/8% Senior Notes due 2007
This form must be used by a holder of 9 3/8% Senior Notes due 2007 (the
"Notes") of Gaylord Container Corporation (the "Company"), who wishes to tender
Notes to the Exchange Agent pursuant to the guaranteed delivery procedures
described in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures," and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender 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 not defined herein have the meanings ascribed to them
in the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: 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
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Sandra Szczsponik Attention: Sandra Szczsponik
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 Place
Concourse Level, Corporate Trust Window Fourth Floor, Corporate Trust Department
New York, New York 10006 Boston, Massachusetts 02110
Facsimile Transmission: Confirm by Telephone
(For Eligible Institutions Only) (617) 664-5314
(617) 664-5739
</TABLE>
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
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
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES
OR ACCOUNT AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ------------------------------------------------------------------------------------------------------------
Signatures of Registered Holder(s) or Date: ________ , 1998
Authorized Signatory:
------------------------------------------- Address:
------------------------------------------- ------------------------------------------------
Name of Registered Holder(s): Area Code and Telephone No.:
------------------------------------------ ----------------------------
------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Notes or on a security
position listing as the owner of 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):
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 3
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 that either the Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at Book-Entry Transfer Facility as described in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures"), together with a properly completed Letter of Transmittal (or
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message) and any other required documents will be received by the Exchange Agent
by 5:00 p.m., New York City time, on the third New York Stock Exchange trading
day following the Expiration Date.
<TABLE>
<S> <C>
Name of Firm: ---------------------------------------------
- ------------------------------------- Authorized Signature
Address: Name:
- -------------------------------------------- ---------------------------------------------
Title:
- --------------------------------------------- ---------------------------------------------
Area Code and Telephone No.: Date:
- -------------------- ---------------------------------------- ,
1998
</TABLE>
- --------------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED
LETTER OF TRANSMITTAL.
3
<PAGE> 4
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
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 Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the 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 Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any 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 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. Requests for information
and additional copies of the Prospectus may be directed to the Exchange Agent at
the address set forth on the first page of this Notice of Guaranteed Delivery.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
INSTRUCTIONS TO REGISTERED HOLDER
AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
GAYLORD CONTAINER CORPORATION
9 3/8% Senior Subordinated Notes due 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated March
,1998 (the "Prospectus"), of Gaylord Container Corporation (the "Company"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 9 3/8% Senior Subordinated Notes due 2007, Series
B (the "Exchange Notes"), for each $1,000 principal amount of its outstanding
9 3/8% Senior Subordinated Notes due 2007, Series A (the "Notes"). 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 the action to be taken by you relating to the
Exchange Offer with respect to the Notes held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 9 3/8% Senior Subordinated Notes due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED):
$
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the 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 representations 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 (i) the
undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (iii) the undersigned 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, (iv) the undersigned acknowledges that any person participating in the
Exchange Offer 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 (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 (v) the undersigned is
not an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and (c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Notes.
<PAGE> 2
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the 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, VIA FACSIMILE (847)
405-5586.
SIGN HERE
Name of beneficial owner(s):
----------------------------------------------------------------------------
Signature(s):
----------------------------------------------------------------------------
Name(please print):
----------------------------------------------------------------------------
Address:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Telephone number:
----------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
---------------------------------------------------------------
Date:
----------------------------------------------------------------------------
2
<PAGE> 1
LETTER OF TRANSMITTAL
To Tender for Exchange
9 7/8% Senior Subordinated Notes due 2008
of
GAYLORD CONTAINER CORPORATION
Pursuant to the Prospectus Dated March , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery Service:
Chase Bank of Texas, National Association Chase Bank of Texas, National Association
Corporate Trust Services Corporate Trust Services
P.O. Box 2320 1201 Main Street, 18th Floor
Dallas, Texas 75221-2320 Dallas, Texas 7520
Attention: Frank Ivina Attention: Frank Ivina
Facsimile Transmission: Confirm by Telephone
(For Eligible Institutions Only) (For Eligible Institutions Only)
(214) 672-5746 (214) 672-5125 or
(800) 275-2048
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus, dated March ,
1998 (the "Prospectus") of Gaylord Container Corporation (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000 principal
amount of its 9 7/8% Senior Subordinated Notes due 2008, 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
principal amount of its outstanding 9 7/8% Senior Subordinated Notes due 2008,
Series A (the "Notes"), of which $250,000,000 principal amount is outstanding.
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended. The term "Holder" with respect to the
Exchange Offer means any person in whose name Notes are registered on the books
of the Company or any other person who has obtained a properly completed bond
power from the registered holder. Capitalized terms used but not defined herein
have the respective meanings set forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering" by
any financial institution that is a participant in the Book-Entry Transfer
Facility and whose name appears on a security position listing as the owner of
Notes to the extent provided herein or (iii) tender of the Notes is to be made
according to the guaranteed delivery procedures described in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2.
<PAGE> 2
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
Notwithstanding the foregoing, valid acceptance of the terms of the
Exchange Offer may be effected by a participant in the Book-Entry Transfer
Facility tendering Notes through the Book-Entry Transfer Facility's Automated
Tender Offer Program ("ATOP") where the Exchange Agent receives an Agent's
Message prior to the Expiration Date. Accordingly, such participant must
electronically transmit its acceptance to the Book-Entry Transfer Facility
through ATOP, and then the Book- Entry Transfer Facility will edit and verify
the acceptance, execute a book-entry delivery to the Exchange Agent's account at
the Book-Entry Transfer Facility and send an Agent's Message to the Exchange
Agent for its acceptance. By tendering through ATOP, participants in the
Book-Entry Transfer Facility will expressly acknowledge receipt of this Letter
of Transmittal and agree to be bound by its terms and the Company will be able
to enforce such agreement against such Book- Entry Transfer Facility
participants.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete this
letter in its entirety.
[ ] CHECK HERE IF TENDERED 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 THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------
Account Number:
---------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------
Principal Amount of Tendered Notes:
-------------------------------------
If Holders desire to tender Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing
Notes, an Agent's Message or other required documents to reach the Exchange
Agent prior to the Expiration Date, or (ii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such Holders may
effect a tender of such Notes in accordance with the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures." See Instruction 2 below.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s):
-------------------------------------
Window Ticket No. (if any):
--------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Name of Eligible Institution:
-------------------------------------------------
Guaranteed Delivery:
----------------------------------------------------------
If Delivered by Book-Entry Transfer,
the Account Number:
----------------------------------------------------------
Transaction Code Number:
------------------------------------------------------
2
<PAGE> 3
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES.
Name:
-----------------------------------------------------------------------
Address:
---------------------------------------------------------------------
-----------------------------------------------------------------------------
Attention:
------------------------------------------------------------------
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal amount
of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE
LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF NOTES
- ------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL TENDERED (MUST BE
REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED AN INTEGRAL MULTIPLE
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY CERTIFICATE(S) OF $1,000)**
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Notes
will be deemed to have tendered the entire aggregate principal amount represented by the column
labeled "Aggregate Principal Amount Represented by Certificate(s)." If the space provided above is
inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix
the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Notes. All other tenders must be in
integral multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
BOX 2
SPECIAL REGISTRATION
INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Notes accepted for exchange,
are to be issued in a name other than the name appearing in Box 1 above.
Issue certificates to:
Name
-------------------------------------------------------------
(Please print)
Address
--------------------------------------------------------
--------------------------------------------------------
(Include zip code)
- ---------------------------------------------------------
(Taxpayer Identification or Social Security Number)
BOX 3
SPECIAL DELIVERY
INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Notes in a principal amount net
tendered, or Exchange Notes issued in exchange for Notes accepted for exchange,
are to be sent to an address other than the address appearing in Box 1 above, or
if Box 2 is filled in, to an address other than the address appearing in Box 2.
Deliver certificate(s) to:
Name
------------------------------------------------------------
(Please print)
Address
--------------------------------------------------------
--------------------------------------------------------
(Include zip code)
- ---------------------------------------------------------
(Taxpayer Identification or Social Security Number)
- --------------------------------------------------------------------------------
BOX 4
BROKER-DEALER STATUS
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the 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
4
RECEIVED WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE BY GAYLORD
CONTAINER CORPORATION, ATTENTION DAVID F. TANAKA, VIA FACSIMILE (847)
405-5586.
- --------------------------------------------------------------------------------
5
<PAGE> 5
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (iii) present such Notes for transfer on the books
of the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims, when the same are acquired by the Company.
The undersigned hereby further represents that any Exchange Notes acquired in
exchange for Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, that neither the undersigned nor any other such
person has any arrangement or understanding with any person to participate in
the distribution of such Exchange Notes and that neither the undersigned nor any
such other person is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company. In addition, the undersigned and any such person
acknowledge that (a) any person participating in the Exchange Offer for the
purpose of distributing the Exchange Notes must, in the absence of an exemption
therefrom, comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale of the Exchange Notes
and cannot rely on the position of the staff of the Securities and Exchange
Commission enunciated in no-action letters and (b) failure to comply with such
requirements in such instance could result in the undersigned or such person
incurring liability under the Securities Act for which the undersigned or such
person is not indemnified by the Company. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the assignment, transfer and
purchase of the Notes tendered hereby. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in and does not
intend to engage in, a distribution of Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a Prospectus in
connection with any resale of such Exchange Notes, however, by so acknowledging
and by delivering a Prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Unless
otherwise notified in accordance with the instructions set forth herein in Box 4
under "Broker-Dealer Status," the Company will assume that the undersigned is
not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given notice
thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Notes
will be returned, without expense, to the undersigned at the address shown below
or to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
5
<PAGE> 6
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" 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."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Notes accepted for exchange and any certificates for
Notes not tendered or not exchanged, in the name(s) of the registered holder of
the Notes appearing in Box 1 above. Similarly, unless otherwise indicated in Box
3 under "Special Delivery Instructions," please send the certificates, if any,
representing the Exchange Notes issued in exchange for the Notes accepted for
exchange and any certificates for Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below in the undersigned's signature(s). In the event that the box entitled
"Special Registration Instructions" and the box entitled "Special Delivery
Instructions" both are completed, please issue the certificates representing the
Exchange Notes issued in exchange for the Notes accepted for exchange in the
name(s) of, and return any certificates for Notes not tendered or not exchanged
to, the person(s) so indicated. The undersigned understands that the Company has
no obligation pursuant to the "Special Registration Instructions" and "Special
Delivery Instructions" to transfer any Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Notes
so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, an Agent's Message,
this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date, may tender their Notes according to
the guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2.
6
<PAGE> 7
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by person(s) authorized to become registered
holder(s) by a properly completed bond power from the registered holder(s), a
copy of which must be transmitted with this Letter of Transmittal. If Notes to
which this Letter of Transmittal relate are held of record by two or more joint
holders, then all such holders must sign this Letter of Transmittal.
- --------------------------------------------------------------------------------
SIGNATURES
X
---------------------------------------------- ---------------------------
Date
X
---------------------------------------------- ---------------------------
Date
Area Code and Telephone Number:
------------------------------------------
If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person
acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) submit evidence
satisfactory to the Company of such person's authority so to act. See
Instruction 5.
Name(s):
--------------------------------------------------------------------------
(Please Print)
Capacity:
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution:
--------------------------
(Authorized Signature)
--------------------------------------------------------------------------
(Title)
--------------------------------------------------------------------------
(Name of Firm)
--------------------------------------------------------------------------
(Address, Include Zip Code)
--------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly completed
and duly executed copy of this Letter of Transmittal (or, in the case of a book-
entry transfer, an Agent's Message), a 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 prior to the Expiration Date. The
method of delivery of certificates for Notes and all other required documents is
at the election and sole risk of the tendering holder and 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 holder may wish to use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. Neither the Company nor the Exchange Agent is
under an obligation to notify any tendering holder of the Company's acceptance
of tendered Notes prior to the completion of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other documents
required by the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Notes according to the guaranteed delivery
procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(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 facsimile transmission,
mail, or hand delivery) setting forth the name and address of the holder,
the certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and 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)
(or, in the case of a book-entry transfer, an Agent's Message), together
with the tendered Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account with the Book-Entry Transfer
Facility) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account with the Book-Entry Transfer Facility),
together with this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in
the case of a book-entry transfer, an Agent's Message) and all other
documents required by the Letter of Transmittal must be received by the
Exchange Agent within five New York Stock Exchange trading days after 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 a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a registered holder of Notes may tender such
Notes in the Exchange Offer. Any beneficial owner of Notes who is not the
registered holder and who wishes to tender should arrange with such Holder to
execute and deliver this Letter of Transmittal on such owner's behalf or must,
prior to completing and executing this Letter of Transmittal and delivering such
Notes, either make appropriate arrangements to register ownership of the Notes
in such owner's name or obtain a properly completed bond power from the
registered holder.
8
<PAGE> 9
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Principal Amount Tendered" of the box
entitled "Description of Notes" (Box 1) above. The entire principal amount of
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of Notes is not
tendered, Notes for the principal amount of Notes not tendered and Exchange
Notes exchanged for any Notes tendered 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;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by the
registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes without
alteration, enlargement, or any change whatsoever.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of Transmittal
documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Notes are to be reissued or returned to the registered holder, then,
the registered holder need not and should not endorse any tendered Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (executed exactly as the
name(s) of the registered holder(s) appear(s) on such Notes), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any 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 this Letter of Transmittal.
No medallion signature guarantee is required if this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith and the
Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) and neither the "Special Registration
Instructions" (Box 2) nor the "Special Delivery Instructions" (Box 3) has been
completed. In all other cases, all signatures on this Letter of Transmittal must
be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Notes for principal amounts not tendered or not accepted
for exchange are to be sent, if different from the name and address or account
of the person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification number or social security number of
the person named must also be indicated and the tendering holders should
complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Notes.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to the
Exchange Offer. If, however, a transfer tax is imposed for any reason other than
the transfer and sale of Notes to the Company or its order 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 from
taxes therefrom is not submitted with this Letter of Transmittal, the amount of
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 Notes listed in this Letter of
Transmittal.
9
<PAGE> 10
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any 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 a $50
penalty imposed by Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained.) Certain holders (including,
among other, 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 tendering holder 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 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 Notes are registered in more than one name or are not in the name of the
actual owner, see the enclosed "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), and acceptance of tendered 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 Notes not validly
tendered or any 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 Notes as to any ineligibility of any holder who seeks to tender 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 Notes must be cured
within such time as the Company shall determine. The Company will use reasonable
efforts to give notification of defects or irregularities with respect to
tenders of Notes, but shall not incur any liability for failure to give such
notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for information
and for additional copies of the Prospectus may be directed to the Exchange
Agent at the address set forth on the first page of this Letter of Transmittal.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered 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 Notes when, as and if the Company has given
notice thereof to the Exchange Agent. If any tendered Notes are not exchanged
pursuant to the Exchange Offer for any reason, such unexchanged Notes will be
returned, without expense, to the undersigned at the address shown above or at a
different address as may be indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
10
<PAGE> 11
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: GAYLORD CONTAINER CORPORATION
- -----------------------------------------------------------------------------------------------------------------------
<C> <S>
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TAXPAYER Social Security Number
FORM W-9 IDENTIFICATION NUMBER ("TIN") IN THE BOX AT or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW ____/____/____
----------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY, Part 2 -- Check the box if you are NOT subject to backup withholding under the
INTERNAL REVENUE SERVICE provisions of section 3408(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. [ ]
----------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I
IDENTIFICATION NUMBER (TIN) CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE. Part 3 --
Awaiting
SIGNATURE ----------------------------------------- TIN [ ]
DATE ------------------------------------------------
----------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below. See instructions if your name has
changed.)
----------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------------
City, State and ZIP Code
----------------------------------------------------------------------------------
List account number(s) here (optional)
- ----------------------------------------------------------------------------------------------------------------------
</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.
11
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
With Respect to
GAYLORD CONTAINER CORPORATION
9 7/8% Senior Subordinated Notes due 2008
This form must be used by a holder of 9 7/8% Senior Subordinated Notes due
2008 (the "Notes") of Gaylord Container Corporation (the "Company"), who wishes
to tender Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures," and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender 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 not defined herein have the meanings ascribed to them
in the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(THE "EXCHANGE AGENT")
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery Service
Chase Bank of Texas, National Association Chase Bank of Texas, National Association
Corporate Trust Services Corporate Trust Services
P.O. Box 2320 1201 Main Street, 18th Floor
Dallas, Texas 75221-2320 Dallas, Texas 7520
Attention: Frank Ivina Attention: Frank Ivina
Facsimile Transmission: Confirm by Telephone
(For Eligible Institutions Only) (For Eligible Institutions Only)
(214) 672-5746 (214) 672-5125 or
(800) 275-2048
</TABLE>
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
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
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES
OR ACCOUNT AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ------------------------------------------------------------------------------------------------------------------
Signatures of Registered Holder(s) or Date: ________ , 1998
Authorized Signatory: Address:
----------------------------------------------------- ---------------------------------------------
----------------------------------------------------- Area Code and Telephone No.:
----------------------------------------------------- ------------------------
Name of Registered Holder(s):
------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Notes or on a security
position listing as the owner of 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):
------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 3
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 that either the Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at Book-Entry Transfer Facility as described in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures"), together with a properly completed Letter of Transmittal (or
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message) and any other required documents will be received by the Exchange Agent
by 5:00 p.m., New York City time, on the third New York Stock Exchange trading
day following the Expiration Date.
<TABLE>
<S> <C>
Name of Firm: ---------------------------------------------
------------------------------- Authorized Signature
Address: Name:
- -------------------------------------------- ---------------------------------------
Title:
- --------------------------------------------- ---------------------------------------
Area Code and Telephone No.: Date:
---------------- ---------------------------------- ,
1998
</TABLE>
- --------------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED
LETTER OF TRANSMITTAL.
3
<PAGE> 4
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
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 Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the 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 Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any 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 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. Requests for information
and additional copies of the Prospectus may be directed to the Exchange Agent at
the address set forth on the first page of this Notice of Guaranteed Delivery.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
INSTRUCTIONS TO REGISTERED HOLDER
and/or Book-Entry Transfer Facility Participant from Beneficial Owner
of
GAYLORD CONTAINER CORPORATION
9 7/8% Senior Subordinated Notes due 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated March
,1998 (the "Prospectus"), of Gaylord Container Corporation (the "Company"),
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 9 7/8% Senior Subordinated Notes due 2008, Series
B (the "Exchange Notes"), for each $1,000 principal amount of its outstanding
9 3/8% Senior Subordinated Notes due 2008, Series A (the "Notes"). 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 the action to be taken by you relating to the
Exchange Offer with respect to the Notes held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 9 7/8% Senior Subordinated Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED):
$
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instructs you to tender the 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 representations 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 (i) the
undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (iii) the undersigned 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, (iv) the undersigned acknowledges that any person participating in the
Exchange Offer 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 (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 (v) the undersigned is
not an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and (c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Notes.
<PAGE> 2
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES.
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the 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, VIA FACSIMILE (847)
405-5586.
SIGN HERE
Name of beneficial owner(s):
------------------------------------------------
Signature(s):
---------------------------------------------------------------
Name(please print):
---------------------------------------------------------
Address:
-------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Telephone number:
-----------------------------------------------------------
Taxpayer Identification or Social Security Number:
--------------------------
Date:
-----------------------------------------------------------------------
2
