<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BUCKEYE CELLULOSE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1518973 2611
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION OF IDENTIFICATION NO.) INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
1001 TILLMAN STREET
MEMPHIS, TENNESSEE 38108
TELEPHONE: 901-320-8100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DAVID B. FERRARO
1001 TILLMAN STREET
MEMPHIS, TENNESSEE 38108
TELEPHONE: 901-320-8100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WILLIAM S. KIRSCH, P.C. GEORGE W. BILICIC, JR.
ALAN G. BERKSHIRE CRAVATH, SWAINE & MOORE
KIRKLAND & ELLIS WORLDWIDE PLAZA
200 EAST RANDOLPH DRIVE 825 EIGHTH AVENUE
CHICAGO, ILLINOIS 60601 NEW YORK, NEW YORK 10019
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 3,045,157 $26,448
$0.01 per share(3).............. Shares $25.1875 $76,699,892
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</TABLE>
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(1) Includes 200,000 shares that the Underwriters have the option to purchase
from the Selling Stockholder to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee based
upon the average of the high and low prices reported for the shares on the
New York Stock Exchange on May 30, 1996.
(3) Includes associated preferred share purchase rights.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
JUNE 4, 1996
PROSPECTUS
2,845,157 SHARES
BUCKEYE CELLULOSE CORPORATION
COMMON STOCK
($.01 PAR VALUE) LOGO
All of the 2,845,157 shares of Common Stock, $.01 par value per share (the
"Common Stock"), of Buckeye Cellulose Corporation (the "Company") being offered
hereby (this "Offering") are being sold by the Selling Stockholder. The Company
will not receive any of the proceeds from the sale of shares by the Selling
Stockholder.
At the request of the Company, the Underwriters (as defined) have reserved
approximately 980,000 shares of Common Stock for sale at the public offering
price to directors, executives and other officers, employees and business
associates of the Company.
The Common Stock is listed for trading on the New York Stock Exchange under the
symbol "BKI." On June 3, 1996, the last reported sale price of the Common Stock
was $25.625 per share. See "Price Range of Common Stock and Dividend Policy."
Concurrent with this Offering, the Company is offering (the "Notes Offering")
$100 million aggregate principal amount of its % Senior Subordinated Notes
due 2008 (the "New Notes").
The Offering is contingent upon the consummation of the other Stock
Transactions (as defined) and the availability to the Company of debt financing
in an amount sufficient to consummate the Company Stock Repurchase (as
defined), which financing is currently expected to be provided by the Notes
Offering.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT SELLING STOCKHOLDER(1)
<S> <C> <C> <C>
Per Share...................... $ $ $
Total (2)...................... $ $ $
</TABLE>
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(1) Before deducting expenses payable by the Company estimated at $ .
(2) The Selling Stockholder has granted the Underwriters a 30-day option to
purchase up to an additional 200,000 shares of Common Stock, exercisable
solely to cover over-allotments, if any. If the Underwriters exercise such
option in full, the total Price to Public, Underwriting Discount and
Proceeds to Selling Stockholder will be $ , $ and
$ , respectively. See "Underwriting."
The Common Stock is offered subject to receipt and acceptance by the
Underwriters, to prior sales and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the certificates representing the Common Stock
will be made at the office of Salomon Brothers Inc, Seven World Trade Center,
New York, New York, or through the facilities of The Depository Trust Company,
on or about , 1996.
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
The date of this Prospectus is , 1996.
<PAGE>
END-USE APPLICATIONS OF BUCKEYE CELLULOSE CORPORATION PRODUCTS
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus or incorporated by reference herein. The
Company reports on a June 30 fiscal year. Unless otherwise indicated, (i) all
information in this Prospectus assumes the Underwriters' over-allotment option
is not exercised, (ii) certain information in this Prospectus has been adjusted
to give effect to the recapitalization and stock split of the Common Stock
effected in connection with the initial public offering of the Common Stock in
November 1995 and (iii) all references in this Prospectus to the "Company" or
"Buckeye" refer to Buckeye Cellulose Corporation, its direct and indirect
subsidiaries and the Predecessor (as defined).
THE COMPANY
The Company is a leading manufacturer and worldwide marketer of high-quality,
value-added specialty cellulose pulps. The Company focuses on a wide array of
technically demanding niche markets in which its proprietary products and
commitment to customer technical service give it a competitive advantage.
Buckeye is the world's only manufacturer of both wood-based and cotton linter-
based specialty cellulose pulps and, as such, produces the broadest range of
specialty pulps in the industry. The Company believes that it has a leading
position in most of the high-end niche markets in which it competes. Buckeye's
focus on niche specialty pulp markets has enabled it to maintain consistently
strong operating margins, even during downturns in the commodity pulp markets.
From fiscal 1994 to fiscal 1995, net sales increased 10% to $408.6 million,
while operating income increased 42% to $79.2 million and net income increased
67% to $21.7 million. For the nine months ended March 31, 1996, net sales
increased 12% to $338.8 million, while operating income increased 52% to $83.2
million and income before extraordinary loss increased 129% to $33.2 million
over the comparable period of the prior year. In fiscal 1995, on a pro forma
basis, the Company's operating income and net income were approximately $88.0
million and $32.9 million, respectively. For the nine months ended March 31,
1996, on a pro forma basis, operating income and income before extraordinary
loss were approximately $86.3 million and $38.9 million, respectively.
The cellulose pulp market generally can be divided into two categories:
commodity pulps and specialty cellulose pulps. The Company participates
exclusively in the estimated $7 billion annual specialty cellulose pulp market,
which accounts for approximately 3% of the total cellulose pulp market.
Specialty cellulose pulps are used to impart unique chemical or physical
characteristics to a broad and diverse range of specialty end products.
Specialty cellulose pulps generally command higher prices and tend to be less
cyclical than commodity pulps. The more demanding performance requirements for
specialty cellulose pulps limit customers' ability to substitute other
products.
The Company has manufactured specialty cellulose pulps for nearly 75 years.
The Company's specialty pulps can be broadly grouped into three categories:
chemical cellulose pulps, absorbent pulps and customized paper pulps. Chemical
cellulose pulps (41% of fiscal 1995 sales) are used to impart purity, strength,
transparency, and viscosity in the manufacture of diversified products such as
food casings, rayon filament, photographic film, transparent tape, acetate
plastics, and thickeners for food, cosmetics, and pharmaceuticals. Absorbent
pulps (39% of fiscal 1995 sales) are used to increase absorbency and fluid
transport in products such as disposable diapers, feminine hygiene products,
and adult incontinence products. Customized paper pulps (20% of fiscal 1995
sales) are used to provide porosity, color permanence, and tear resistance in
automotive air and oil filters, premium letterhead, currency paper, stock
certificates, and personal stationery.
The Company's commitment to research and development focuses on introducing
new specialty cellulose pulps, improving the performance of its existing
cellulose pulps, and creating new applications for its products. Buckeye
developed one of the earliest commercial processes to purify cotton linters for
conversion into cellulose acetate for use in photographic film. Buckeye was
also the first to develop a new application that enabled fluff pulp to be used
as the absorbent core of disposable diapers. Today, the Company's research and
development
3
<PAGE>
scientists are working on the next generation of specialty cellulose pulps for
both new and current applications such as thin diapers, high-performance
automotive filters and cellulose ethers.
The Company manufactures approximately 600,000 metric tons of specialty pulp
annually at its three plants in the United States and Germany. Since 1983,
Buckeye has invested over $400.0 million in its two U.S. plants and believes
that both are state-of-the-art manufacturing facilities. The Company's plant
located near Perry, Florida (the "Foley Plant") has an annual capacity of
approximately 450,000 metric tons. The Company's plant located in Memphis,
Tennessee (the "Memphis Plant") has an annual capacity of approximately 100,000
metric tons. In addition, in May 1996 the Company acquired the specialty
cellulose pulp business (the "Temming Business") of Peter Temming AG, a German
company (the "Temming Acquisition"), which has an annual capacity of
approximately 50,000 metric tons at its plant in Gluckstadt, Germany (the
"Gluckstadt Plant").
The Company's customer base is broadly diversified both geographically and by
end-use markets. The Company's fiscal 1995 sales reflect this geographic
diversity, with 30% of sales in the United States, 30% in Europe, 26% in Asia
and 14% in other regions. Buckeye works closely with customers through all
stages of product development and manufacture in order to tailor products to
meet each customer's specific requirements. The Company's commitment to product
quality, dedication to customer technical service, and responsiveness to
changing customer needs have enabled the Company to develop and strengthen
long-term alliances with its customers. Over 70% of fiscal 1995 sales were to
firms who have been customers of Buckeye for over 30 years. The Procter &
Gamble Company and its affiliates ("Procter & Gamble"), the world's largest
diaper manufacturer, purchase virtually all of the Company's current annual
production of absorbent pulps pursuant to a long-term, take-or-pay contract
(the "Pulp Supply Agreement"). Procter & Gamble is the Company's largest
customer, accounting for approximately 39% of the Company's fiscal 1995 net
sales. The Company's other large customers include Akzo Nobel N.V. (rayon
filament and cellulose ethers), A. Ahlstrom Corporation (automotive filter
paper), Hercules Incorporated (cellulose ethers) and Eastman Chemical Company
(cellulose acetate).
The Company's strategy is to continue to strengthen its position as a leading
worldwide supplier of specialty cellulose pulps. The Company believes it can
continue to expand its market share, increase its profitability, and decrease
its exposure to cyclical downturns by pursuing the following key strategic
objectives: (i) focus on technically demanding niche markets; (ii) develop
proprietary product innovations; (iii) strengthen long-term alliances with
customers; and (iv) expand capacity internally and through acquisitions to
support growing demand for its products.
As part of its growth strategy, the Company recently completed the Temming
Acquisition and has entered into a definitive stock purchase agreement, dated
April 26, 1996 (the "Alpha Agreement"), to acquire Alpha Cellulose Holdings,
Inc. (together with its wholly owned subsidiary, Alpha Cellulose Corporation,
"Alpha"). Such acquisition is herein referred to as the "Alpha Acquisition."
The Alpha Acquisition, if consummated, will increase the Company's annual
capacity by approximately 50,000 metric tons, expand the Company's range of
products in the customized paper pulp market and provide synergies in operating
costs, product development and customer service. Subject to the satisfaction of
certain conditions and the expiration or other termination of the applicable
waiting period (including any extensions thereof) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), the consummation of the
Alpha Acquisition is expected to occur in early fiscal 1997. The Alpha
Agreement provides each of the parties thereto with an option to terminate the
agreement if the closing of the Alpha Acquisition has not occurred on or before
July 25, 1996. The Company is also considering other acquisition and joint
venture opportunities to expand its production capacity, although it has not
yet entered into any agreements to do so.
COMPANY HISTORY
In March 1993, an investor group consisting of Madison Dearborn Capital
Partners, L.P. (the "Selling Stockholder" or "MDCP") and members of the
Company's current management organized the Company to acquire from the
Cellulose & Specialties Division (the "C&S Division") of The Procter & Gamble
Cellulose Company ("Procter & Gamble Cellulose"), a wholly owned subsidiary of
Procter & Gamble, substantially all
4
<PAGE>
of the assets of the Memphis Plant, as well as certain other assets of the C&S
Division, including the headquarters building, research and development
laboratories, pilot plants and real property adjacent to the Memphis Plant. At
the same time, MDCP and members of current management also organized Buckeye
Florida Corporation to serve as the sole general partner of Buckeye Florida,
Limited Partnership ("Buckeye Florida Partners"), which simultaneously acquired
from Procter & Gamble Cellulose substantially all of the assets of the Foley
Plant. Procter & Gamble Cellulose retained a 50% interest in this facility as
the sole limited partner of Buckeye Florida Partners and granted Buckeye
Florida Corporation an option to purchase all of Procter & Gamble Cellulose's
limited partnership interest in Buckeye Florida Partners (the "P&G Call
Option"). The business operations of Procter & Gamble Cellulose so acquired are
hereinafter referred to collectively as the "Predecessor," and the acquisitions
of such assets are hereinafter referred to collectively as the "P&G
Acquisitions."
In November 1995, the ownership of the Memphis Plant, the Foley Plant and
related assets was combined into a single corporate ownership structure,
Buckeye Florida Corporation became a wholly owned subsidiary of the Company,
and the Company acquired Procter & Gamble Cellulose's remaining equity interest
in Buckeye Florida Partners for approximately $62.1 million pursuant to the P&G
Call Option. Concurrently, the Company and MDCP made an initial public offering
of the Common Stock, and the Company refinanced substantially all of its
outstanding indebtedness (including all indebtedness to Procter & Gamble
Cellulose) through a public offering of $150.0 million aggregate principal
amount of 8 1/2% Senior Subordinated Notes due 2005 (the "Existing Senior
Subordinated Notes") and through the establishment of a new senior bank credit
facility providing for aggregate lending commitments of up to $135.0 million
(as amended, the "Bank Credit Facility"). The Company also completed an offer
to repurchase, and a related amendment to the terms of, a majority of its
outstanding 10 1/4% Senior Notes due 2001 (the "Existing Senior Notes" and,
together with the Existing Senior Subordinated Notes, the "Existing Notes").
Such transactions are collectively referred to herein as the "1995 Business
Combination Transactions."
THE COMPANY STOCK REPURCHASE AND THE RELATED TRANSACTIONS
In early 1996, the Company's management and MDCP began discussions regarding
the possible disposition by MDCP of its remaining equity ownership interest in
the Company. On June 3, 1996, BKI Investment Corp., a newly formed, wholly
owned subsidiary of the Company ("BKI Investment"), agreed to purchase
2,259,887 shares of Common Stock from MDCP for $22.125 per share (the "Company
Stock Repurchase"), subject, among other things, to the approval by each of the
Company's and BKI Investment's board of directors, the completion on or before
August 15, 1996 of the Company Stock Repurchase and related transactions, and
the availability to the Company of debt financing in an amount sufficient to
consummate the Company Stock Repurchase, on terms satisfactory to the Company,
which debt financing is currently anticipated to be provided by the Notes
Offering (together with the Offering, the "Offerings"). The aggregate amount of
the purchase price to be paid in the Company Stock Repurchase is approximately
equal to the maximum amount currently permitted to be used for stock
repurchases under the terms of the Existing Notes Indentures (as defined).
Additionally, on June 3, 1996, MDCP agreed to sell, and certain individuals
employed by the Company agreed to purchase in an exempt transaction under the
Securities Act of 1933, as amended (the "Securities Act"), an aggregate of
1,385,269 shares of Common Stock for $22.125 per share (the "Individuals' Stock
Purchase") concurrently with the Company Stock Repurchase. The purchase price
for the Company Stock Repurchase and the Individuals' Stock Purchase reflects
the prevailing market price when the parties decided to pursue definitive
agreements and seek board approval. On June 3, 1996, the board of directors of
each of the Company and BKI Investment approved the Company Stock Repurchase.
Each of this Offering, the Company Stock Repurchase and the Individuals'
Stock Purchase (collectively, the "Stock Transactions") is subject, among other
things, to the concurrent completion on or before August 15, 1996 of each of
the other Stock Transactions and the availability to the Company of debt
financing in an amount sufficient to consummate the Company Stock Repurchase,
which debt financing is currently anticipated to be provided by the Notes
Offering. Upon completion of the Stock Transactions, the Company will have
19,147,336 shares of Common Stock outstanding, and MDCP's equity ownership
interest in the Company will be reduced to less than 5% of the outstanding
Common Stock.
5
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Selling
Stockholder................................ 2,845,157 shares
Common Stock to be outstanding after the
Offering and the Company Stock Repurchase.. 19,147,336 shares (a)
Use of Proceeds ............................ All of the shares of Common Stock
being offered in the Offering are
being sold by the Selling
Stockholder. The Company will not
receive any of the proceeds from
the sale of shares in the
Offering. See "Use of Proceeds."
New York Stock Exchange Symbol.............. BKI
Notes Offering.............................. Concurrently with this Offering,
the Company is offering $100.0
million aggregate principal
amount of New Notes to the public
by means of a separate
prospectus. The Notes Offering is
contingent upon the consummation
of the Stock Transactions.
</TABLE>
- --------
(a) Does not include an aggregate of up to 2,450,000 shares of Common Stock
reserved for issuance upon exercise of outstanding stock options or
available for grant under the Company's stock option plans.
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider the
factors set forth in "Risk Factors," as well as the other information set forth
in this Prospectus, before making an investment in the Common Stock.
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary financial data with respect to (a) the
Predecessor for the fiscal years ended June 30, 1991 and 1992 and for the
period July 1, 1992 through March 15, 1993 and (b) the Company for the period
March 16, 1993 through June 30, 1993, for the fiscal years ended June 30, 1994
and 1995 and for the nine months ended March 31, 1995 and 1996. The summary
financial data for the fiscal years ended June 30, 1991 and 1992 are derived
from the unaudited Combined Statement of Net Assets and Combined Statement of
Operating Income of the Predecessor. The summary financial data of the
Predecessor for the period July 1, 1992 through March 15, 1993 are derived from
the unaudited Combined Statement of Net Assets and the audited Combined
Statement of Operating Income of the Predecessor appearing elsewhere in this
Prospectus. The summary financial data for the period March 16, 1993 through
June 30, 1993 and for the fiscal years ended June 30, 1994 and 1995 (except pro
forma amounts) are derived from the audited financial statements of the Company
appearing elsewhere in this Prospectus. The summary financial data for the nine
months ended March 31, 1995 and 1996 are derived from the unaudited financial
statements of the Company appearing elsewhere in this Prospectus. In the
opinion of management such nine month data include all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation of the
information included therein. The results of operations for the nine months
ended March 31, 1996 are not necessarily indicative of the results for the
entire fiscal year or any other interim period. The data set forth in the
following table should be read in conjunction with the Combined Statement of
Operating Income of the Predecessor and notes thereto, and the combined
consolidated financial statements of the Company and notes thereto, appearing
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PREDECESSOR (A) COMPANY (B)
----------------------------- -----------------------------------------------------
JULY 1, MARCH 16,
1992 1993 NINE MONTHS ENDED
YEAR ENDED JUNE 30, THROUGH THROUGH YEAR ENDED JUNE 30, MARCH 31,
------------------- MARCH 15, JUNE 30, -------------------- --------------------
1991 1992 1993 1993 1994 1995 1995 1996
--------- --------- --------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $ 390,690 $ 357,493 $233,460 $113,074 $371,526 $ 408,587 $301,318 $ 338,825
Cost of goods sold (a).. 300,331 293,344 189,808 86,047 291,833 305,150 230,247 237,149
--------- --------- -------- -------- -------- ---------- -------- ----------
Gross margin............ 90,359 64,149 43,652 27,027 79,693 103,437 71,071 101,676
Selling, research and
administrative
expenses:
Company................ -- -- -- 5,996 24,004 24,265 16,446 18,497
C&S Division
allocations (a)....... 25,034 21,357 17,522 -- -- -- -- --
Procter & Gamble
corporate allocations
(a)................... 1,614 6,096 4,764 -- -- -- -- --
--------- --------- -------- -------- -------- ---------- -------- ----------
Operating income........ 63,711 36,696 21,366 21,031 55,689 79,172 54,625 83,179
Net interest and
amortization of debt
costs (c).............. -- -- -- (10,209) (26,545) (21,152) (16,510) (12,784)
Other expense........... -- -- -- (184) (632) (615) (462) (372)
Minority interest (d)... -- -- -- (3,083) (8,291) (23,223) (14,881) (16,628)
Secondary offering
costs.................. -- -- -- -- -- -- -- (1,335)
--------- --------- -------- -------- -------- ---------- -------- ----------
Income before income
taxes and extraordinary
loss................... 63,711 36,696 21,366 7,555 20,221 34,182 22,772 52,060
Income taxes (e)........ -- -- -- 2,851 7,253 12,470 8,308 18,908
--------- --------- -------- -------- -------- ---------- -------- ----------
Income before
extraordinary loss..... 63,711 36,696 21,366 4,704 12,968 21,712 14,464 33,152
Extraordinary loss, net
of tax benefit......... -- -- -- -- -- -- -- 3,949
--------- --------- -------- -------- -------- ---------- -------- ----------
Net income.............. $ 63,711 $ 36,696 $ 21,366 $ 4,704 $ 12,968 $ 21,712 $ 14,464 $ 29,203
========= ========= ======== ======== ======== ========== ======== ==========
Income per share before
extraordinary loss (f). $ 1.58
Extraordinary loss, net
of tax benefit (g)..... (.19)
----------
Net income per share $ 1.39
(f).................... ==========
Weighted average shares
outstanding............ 21,014,032
PRO FORMA DATA (H):
Income before
extraordinary loss..... $ 32,856 $ 38,939
Income per share before
extraordinary loss..... 1.72 2.03
Weighted average shares
outstanding............ 19,147,336 19,147,336
EBITDA (i).............. $ 118,745 $ 109,340
OTHER DATA:
Depreciation and
amortization........... $ 24,993 $ 25,795 $ 19,262 $ 7,436 $ 27,415 $ 26,080 $ 19,566 $ 19,117
Capital expenditures.... 45,960 29,832 17,761 4,898 15,725 24,922 20,713 22,334
EBITDA (i).............. 88,704 62,491 40,628 28,185 81,879 104,088 73,313 102,073
Shipments (thousand
metric tons)........... 493 515 342 161 565 555 423 383
</TABLE>
(continued on following page)
7
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------
PRO
ACTUAL FORMA(H)
-------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................. $101,027 $132,622
Total assets................................................. 408,365 522,619
Long-term debt less current portion.......................... 197,364 351,848
Equity....................................................... 127,608 76,928
</TABLE>
- --------
(a) The Predecessor was historically operated as two of the four pulp mills
that comprised the C&S Division of Procter & Gamble. The Predecessor was
allocated certain expenses for services provided by the C&S Division and
Procter & Gamble, including sales services, product supply services,
general management services, information system services, research
services, treasury services, financial audit and reporting services, tax
administration services and employee benefits and insurance administration
services. Costs and expenses of the C&S Division were allocated using
formulas, primarily based on estimates of efforts expended and sales.
Procter & Gamble corporate expenses were allocated primarily based on
sales.
(b) On March 16, 1993, the Company acquired from Procter & Gamble Cellulose the
assets of the Predecessor.
(c) The debt obligations of Procter & Gamble were not specifically identifiable
with individual operating units; accordingly, interest charges are not
reflected in the financial data of the Predecessor.
(d) The minority interest represents Procter & Gamble Cellulose's 50% limited
partnership interest in Buckeye Florida Partners, which ceased on November
28, 1995.
(e) The Predecessor's results of operations were historically included in the
consolidated income tax returns of Procter & Gamble. Procter & Gamble had
no tax sharing agreement for allocating income taxes to operating units.
Accordingly, income tax expense or benefit is not reflected in the
financial data of the Predecessor.
(f) Historical net income per share has not been presented as it is not
considered relevant for periods prior to June 30, 1995, due to the P&G
Acquisitions and the 1995 Business Combination Transactions.
(g) An extraordinary loss of $3,949, net of tax benefit, was recognized on the
early retirement of a majority of the Existing Senior Notes in the second
and third quarters of fiscal 1996.
(h) See "Unaudited Pro Forma Consolidated Financial Data."
(i) EBITDA represents earnings before secondary offering costs, interest,
taxes, minority interest, extraordinary loss, depreciation, depletion,
amortization and other non-cash charges and is intended to facilitate a
more complete analysis of the Company's ability to meet its debt service
requirements. This data should not be considered in isolation and is not
intended to be a substitute for income statement data as a measure of the
Company's profitability.
8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors in the Common Stock offered hereby should carefully
consider the following risk factors before making an investment in the Common
Stock.
INDUSTRY CYCLICALITY
The markets for cellulose pulps are cyclical, being characterized by periods
of supply imbalance and sensitivity to changes in industry capacity. The
general economic conditions of global markets are the primary determinants of
the demand for cellulose pulp, as consumption correlates with economic
activity. The factors affecting such conditions are beyond the Company's
control. The production of cellulose pulp is a capital-intensive process with
relatively long lead times to bring new capacity to the market and significant
exit costs associated with capacity reductions. Prices of cellulose pulps can
fluctuate significantly when supply and demand become imbalanced. The
Company's financial performance is influenced by these pricing fluctuations
and the cyclicality of the cellulose pulp market. There can be no assurance
that current price levels will be maintained, that any additional price
increases will be achieved or that the industry will not add new capacity.
Prices for the Company's products may fluctuate substantially in the future.
Any downturn in such prices could have a material adverse effect on the
Company's business, results of operations and financial condition.
DEPENDENCE ON SIGNIFICANT CUSTOMER
Virtually all of the Company's absorbent pulp sales (approximately 39% of
fiscal 1995 net sales) are made to Procter & Gamble pursuant to the Pulp
Supply Agreement between the Company and Procter & Gamble. The Pulp Supply
Agreement provides that Procter & Gamble will purchase, under a take-or-pay
arrangement, a specified tonnage (currently substantially all of the Company's
output) of absorbent pulp annually at a formula price through calendar year
1998, at the higher of the formula price or market price in 1999 and 2000, and
at market price in 2001 and 2002. During fiscal 1994, the formula price paid
for absorbent pulp pursuant to the Pulp Supply Agreement was significantly in
excess of the market prices for absorbent pulp, while in fiscal 1995 the price
paid was slightly in excess of market price. As a result of such formula
pricing, the Company will be partially protected in periods of lower market
prices; however, it may not realize all of the benefits of increasing market
prices. Currently, the formula price paid by Procter & Gamble pursuant to the
Pulp Supply Agreement exceeds the market price for absorbent pulp. In the
event that Procter & Gamble fails to perform under the Pulp Supply Agreement
for any reason or fails to renew it upon terms favorable to the Company, the
Company's business, results of operations and financial condition could be
materially and adversely affected under certain market conditions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales and Customers."
COST OF RAW MATERIALS
Amounts paid by the Company for timber and cotton linters represent the
largest component of the Company's variable costs of pulp production. The cost
of these materials is subject to market fluctuations caused by factors beyond
the Company's control. Significant increases in the cost of timber or cotton
linters, to the extent not reflected in prices for the Company's products,
could materially and adversely affect the Company's business, results of
operations and financial condition. See "Business--Raw Materials."
COMPETITION
The markets for the Company's products are competitive, and the Company
faces competition from a number of sources in most of its product lines. Some
of the Company's competitors have financial and other resources greater than
those of the Company and are also well established as suppliers to the markets
that the
9
<PAGE>
Company serves. Quality, performance, service and price are generally the
prime competitive factors. There can be no assurance that the Company's
markets will not attract additional competitors. See "Business--Competition."
ENVIRONMENTAL REGULATIONS AND LIABILITIES
The Company's facilities and operations are subject to extensive general and
industry-specific federal, state, local and foreign environmental laws and
regulations. The Company devotes significant resources to maintaining
compliance with such requirements and believes that its facilities and
operations are in substantial compliance with all such requirements. The
Company expects that, due to the nature of its operations, it will be subject
to increasingly stringent environmental requirements (including anticipated
standards applicable to waste water discharges and air emissions) and will
continue to incur substantial costs to comply with such requirements. Based
upon its understanding of current and anticipated requirements, the Company
believes that continued compliance with environmental requirements will not
have a material adverse effect on its business, results of operations or
financial condition and will not adversely affect the Company's competitive
position. However, given the uncertainties associated with predicting the
scope of future requirements, there can be no assurance that the Company will
not in the future incur material environmental compliance costs or
liabilities.
The Foley Plant discharges treated waste water into the Fenholloway River.
The Fenholloway River is currently classified under Florida statutes as a
Class 5 (industrial) stream. Under the federal Clean Water Act, the State of
Florida is required to perform an analysis every three years of the
feasibility of reclassifying the river to Class 3 ("fishable/swimmable")
status. Such an analysis recommending reclassification was completed in early
1994 and approved by the Florida Department of Environmental Protection
("DEP") at an administrative hearing in December 1994. At this administrative
hearing, the Company and the State of Florida reached agreement on a plan to
attain Class 3 objectives, which relies primarily on the laying of extensive
pipeline by the Company to relocate the Foley Plant's waste water discharge
point. The plan also includes process changes in the Foley Plant designed to
reduce the coloration of its waste water discharge, provide oxygen enrichment
of the effluent prior to discharge and restore certain wetlands areas. The
reclassification will not become effective until December 1997 (with a final
compliance deadline of December 1999) to allow the Company to obtain all the
necessary permits for implementation of the approved plan and complete
construction of the pipeline and the treatment upgrades. The Company estimates
that implementation of the approved plan will result in approximately $39.0
million of capital expenditures, the majority of which will likely be expended
during fiscal 1998 and fiscal 1999.
In 1993, the U.S. Environmental Protection Agency ("EPA") issued a set of
proposed regulations for the pulp and paper industry addressing the emissions
of "hazardous air pollutants" under the Clean Air Act and waste water
discharges under the Clean Water Act, commonly known as the "cluster rules."
The Company is examining and evaluating the potential impact of the cluster
rules, as proposed, on its operations and capital expenditures over the next
several years. The Company believes that the proposed cluster rules will
likely be amended significantly prior to their promulgation, which is
anticipated to occur in 1997, with compliance to be phased in between 1999 and
2002. Although the Company anticipates that significant capital expenditures
for environmental control equipment and related costs will be required to
comply with the cluster rules when promulgated (which the Company currently
projects will be approximately $14.0 million through fiscal 2000), such
expenditures are not likely to have a material adverse effect on the Company's
business, results of operations or financial condition.
The Foley Plant is on the EPA CERCLIS (as defined) list of potential
hazardous substance release sites prepared pursuant to CERCLA (as defined).
The EPA conducted a site investigation in early 1995. Although the Company
considers it unlikely that the Foley Plant will be listed on the CERCLA
National Priorities List and hence require remedial action, the possibility of
such listing cannot be ruled out. If the site were to be placed on the
National Priorities List, the costs associated with conducting a CERCLA
remedial action could be material.
As of March 31, 1996, the Company had established reserves of $4.2 million
to address certain environmental matters. Because an environmental reserve is
not established until a liability is determined to be
10
<PAGE>
probable and reasonably estimable, not all potential future environmental
liabilities are covered by the Company's reserves. Accordingly, there can be
no assurance that the Company's environmental reserves will be sufficient to
meet the Company's obligations, and additional charges to earnings are
possible. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Environmental Matters" and "Business--Environmental
Matters."
SIGNIFICANT LEVERAGE
The Company has significant debt service obligations. As of March 31, 1996,
on a pro forma basis after giving effect to the Company Stock Repurchase, the
Notes Offering and the Temming Acquisition and Alpha Acquisition
(collectively, the "1996 Acquisitions"), the Company would have had total
outstanding long-term indebtedness of $351.8 million and equity of $76.9
million. Furthermore, the Company may incur additional indebtedness in the
future, subject to certain limitations contained in the instruments governing
its indebtedness. The degree to which the Company is leveraged could have
important consequences to holders of Common Stock, including: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may
be impaired in the future; (ii) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of principal of and
interest on the borrowings under the Bank Credit Facility and interest on the
Existing Notes and the New Notes, thereby reducing the funds available to the
Company for its operations and other purposes; (iii) certain of the Company's
borrowings are and will continue to be at variable rates of interest, which
exposes the Company to the risk of increased interest rates; (iv) the Company
may be substantially more leveraged than certain of its competitors, which may
place the Company at a relative competitive disadvantage; (v) the Bank Credit
Facility, the Existing Notes Indentures and the New Notes Indenture (as
defined) will contain financial and restrictive covenants, the failure to
comply with which may result in an event of default, which, if not cured or
waived, could have a material adverse effect on the Company; and (vi) the
Company may be unable to adjust to rapidly changing market conditions and
could be vulnerable in the event of a downturn in general economic conditions
or its business. See "The Company Stock Repurchase and Related Transactions,"
"Capitalization," "Unaudited Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Description of Certain Indebtedness."
CONCENTRATION OF STOCK OWNERSHIP
After giving effect to the Company Stock Repurchase and the Individuals'
Stock Purchase, Robert E. Cannon (and trusts related to Mr. Cannon), Chairman
and Chief Executive Officer, and David B. Ferraro (and a trust related to Mr.
Ferraro), President and Chief Operating Officer, will own 26.0% and 6.4%,
respectively, of the outstanding Common Stock. In addition, such persons may
purchase additional shares in the Offering. Through their respective voting
power, each of Mr. Cannon and Mr. Ferraro will have the ability to influence
significantly the business and affairs of the Company. See "Principal and
Selling Stockholders." Messrs. Cannon and Ferraro may purchase, from time to
time, additional Common Stock, thus increasing their respective stock
ownership.
CERTAIN CHARTER, BY-LAWS AND STATUTORY PROVISIONS; RIGHTS AGREEMENT
The Company's Amended and Restated Certificate of Incorporation and By-laws
provide for a classified Board of Directors, restrict the ability of
stockholders to call special meetings or take stockholder action by written
consent, and contain advance notice requirements for stockholder proposals and
nominations and special voting requirements for the amendment of the Company's
Amended and Restated Certificate of Incorporation and By-laws. These
provisions could delay or hinder the removal of incumbent directors and could
discourage or make more difficult a proposed merger, tender offer or proxy
contest involving the Company or may otherwise have an adverse effect on the
market price of the Common Stock. The Company also is subject to provisions of
Delaware corporate law that restricts the Company from engaging in certain
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the Company's Common Stock (an "Interested
Stockholder") for three years after the person becomes an Interested
Stockholder, unless certain conditions are met or the business combination is
approved by the Company's Board of Directors, and/or its stockholders in a
11
<PAGE>
prescribed manner. These provisions also could render more difficult or
discourage a merger, tender offer or other similar transaction. The Company's
Board of Directors has approved any acquisition of shares by Mr. Cannon and
certain related affiliates that would otherwise result in Mr. Cannon's
becoming an Interested Stockholder. See "Description of Capital Stock--Certain
Provisions of the Amended and Restated Certificate of Incorporation and By-
laws and Statutory Provisions."
The Company's Board of Directors has declared a dividend of one preferred
share purchase right (a "Right") for each share of Common Stock outstanding. A
Right will also be attached to each share of Common Stock subsequently issued.
The Rights will have certain anti-takeover effects. If triggered, the Rights
would cause substantial dilution to a person or group of persons (other than
certain exempt persons) that acquires more than 15% of the Common Stock on
terms not approved by the Company's Board of Directors. The Rights could
discourage or make more difficult a merger, tender offer or other similar
transaction. See "Description of Capital Stock--Rights Agreement."
Pursuant to the Amended and Restated Certificate of Incorporation, shares of
preferred stock may be issued in the future without stockholder approval and
upon such terms and conditions, and having such rights, privileges and
preferences, as the Board of Directors may determine in the exercise of its
business judgment. The rights of the holders of Common Stock are subject to,
and may be adversely affected by, any preferred stock that may be issued in
the future. The issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions, financings and other
corporate transactions, could have the effect of discouraging, or making more
difficult, a third party's acquisition of a majority of the Company's
outstanding voting stock. The Company has no present plans to issue any shares
of preferred stock. See "Description of Capital Stock--Preferred Stock."
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Prospectus contains various forward-looking statements and information
which is based on management's beliefs as well as assumptions made by and
information currently available to management. Statements in this Prospectus
which are not historical statements are forward-looking statements. Such
forward-looking statements are subject to certain risks and uncertainties,
including those identified above. Should one or more of these risks
materialize, or should underlying assumptions prove incorrect, actual results
may differ materially from those anticipated, estimated or projected.
12
<PAGE>
COMPANY HISTORY
The Company has participated in the specialty cellulose pulp market for
nearly 75 years and has developed uses for both wood-based and cotton linter-
based pulps for many specialty pulp applications. In March 1993, an investor
group consisting of MDCP and members of the Company's current management
organized the Company to acquire from the C&S Division of Procter & Gamble
Cellulose substantially all of the assets of the Memphis Plant, as well as
certain other assets of the C&S Division. At the same time, MDCP and members
of current management also organized Buckeye Florida Corporation to serve as
the sole general partner of Buckeye Florida Partners, which simultaneously
acquired from Procter & Gamble Cellulose substantially all of the assets of
the Foley Plant. Procter & Gamble Cellulose retained a 50% interest in this
facility as the sole limited partner of Buckeye Florida Partners and granted
Buckeye Florida Corporation an option to purchase all of Procter & Gamble
Cellulose's limited partnership interest in Buckeye Florida Partners.
In November 1995, the ownership of the Memphis Plant, the Foley Plant and
related assets was combined into a single corporate ownership structure,
Buckeye Florida Corporation became a wholly owned subsidiary of the Company,
and the Company acquired Procter & Gamble Cellulose's remaining equity
interest in Buckeye Florida Partners for approximately $62.1 million pursuant
to the P&G Call Option. Concurrently, the Company and MDCP made an initial
public offering of the Common Stock, and the Company refinanced substantially
all of its outstanding indebtedness (including all indebtedness to Procter &
Gamble Cellulose) through a public offering of $150.0 million aggregate
principal amount of Existing Senior Subordinated Notes and the establishment
of the Bank Credit Facility. The Company also completed an offer to
repurchase, and a related amendment to the terms of, a majority of its
outstanding Existing Senior Notes. As a result of these transactions, Procter
& Gamble Cellulose ceased to have any interest as an equity owner or lender to
Buckeye Florida Partners, a single capital structure for the Company's
businesses was established, MDCP's equity ownership of the Company was reduced
to approximately 34% and the Common Stock was listed for trading on the New
York Stock Exchange.
The Company is incorporated in Delaware and its executive offices are
located at 1001 Tillman Street, Memphis, Tennessee. Its telephone number is
(901) 320-8100.
THE 1996 ACQUISITIONS
TEMMING ACQUISITION
On May 1, 1996, pursuant to the terms of the Umbrella Agreement dated
January 18, 1996 by and among Peter Temming AG, Steinbeis Temming Papier GmbH
and Steinbeis Temming Papier GmbH & Co., the Company completed the acquisition
of the Temming Business. The Temming Acquisition increased the Company's
annual specialty pulp capacity by approximately 50,000 metric tons, expanded
the Company's product lines and strengthened its ability to serve specialty
cellulose pulp customers in Europe. See "Unaudited Pro Forma Consolidated
Financial Data."
ALPHA ACQUISITION
On April 26, 1996, the Company entered into the Alpha Agreement. Alpha is a
leading worldwide specialty pulp producer serving the market for high-quality
custom paper applications. Subject to the satisfaction of certain conditions
and the expiration or other termination of the applicable waiting period
(including any extensions thereof) under the HSR Act, the transaction is
scheduled to be consummated in early fiscal 1997. The Alpha Agreement provides
each of the parties thereto with an option to terminate the agreement if the
closing of the Alpha Acquistion has not occurred on or before July 25, 1996.
The purchase price to be paid by the Company will be based on the amounts of
certain of Alpha's assets and liabilities as of the closing of the acquisition
and is currently estimated to be approximately $65.0 million, assuming a
closing during July 1996. The Company intends to finance a substantial portion
of the Alpha Acquisition with a portion of the proceeds of the Notes
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<PAGE>
Offering or, if such proceeds are applied to reduce borrowings under the Bank
Credit Facility pending completion of the Alpha Acquisition, with borrowings
under the Bank Credit Facility. The Alpha Acquisition, if consummated, will
increase the Company's annual specialty pulp capacity by approximately 50,000
metric tons through the addition of Alpha's Lumberton, North Carolina
facility. Alpha manufactures and markets customized paper pulps, which provide
attributes such as color permanence and tear resistance in premium letterhead,
currency paper, stock certificates and many other highly specialized paper
applications in the U.S. and abroad. There is no assurance that the Alpha
Acquisition will be consummated or will be consummated on the currently
contemplated terms.
THE COMPANY STOCK REPURCHASE AND THE RELATED TRANSACTIONS
THE COMPANY STOCK REPURCHASE AND THE INDIVIDUALS' STOCK PURCHASE
In early 1996, the Company's management and MDCP began discussions regarding
the possible disposition by MDCP of its remaining equity ownership interest in
the Company. On June 3, 1996, BKI Investment, a newly formed, wholly owned
subsidiary of the Company, agreed to purchase 2,259,887 shares of Common Stock
from MDCP for $22.125 per share, subject, among other things, to the approval
by each of the Company's and BKI Investment's board of directors of the
repurchase and the completion on or before August 15, 1996 of the Company
Stock Repurchase and related transactions, and the availability to the Company
of debt financing in an amount sufficient to consummate the Company Stock
Repurchase, on terms satisfactory to the Company, which debt financing is
currently anticipated to be provided by the Notes Offering. The aggregate
amount of the purchase price to be paid in the Company Stock Repurchase is
approximately equal to the maximum amount permitted under the terms of the
Existing Notes Indentures. Additionally, on June 3, 1996, MDCP agreed to sell,
and certain individuals employed by the Company agreed to purchase in an
exempt transaction under the Securities Act, an aggregate of 1,385,269 shares
of Common Stock for $22.125 per share concurrently with the Company Stock
Repurchase pursuant to separate stock purchase agreements with such persons.
The purchase price for the Company Stock Repurchase and the Individuals' Stock
Purchase reflects the prevailing market price when the parties decided to
pursue definitive agreements and seek board approval. On June 3, 1996, the
board of directors of each of the Company and BKI Investment approved the
Company Stock Repurchase.
Each of the Stock Transactions is subject, among other things, to the
concurrent completion on or before August 15, 1996 of the other Stock
Transactions and the availability to the Company of debt financing in an
amount sufficient to consummate the Company Stock Repurchase, which debt
financing is currently anticipated to be provided by the Notes Offering. Upon
completion of the Stock Transactions, the Company will have 19,147,336 shares
of Common Stock outstanding, and MDCP's equity ownership interest in the
Company will be reduced to less than 5% of the outstanding Common Stock. The
Company believes that the Company Stock Repurchase is an attractive investment
opportunity for the Company and that the consummation of the Stock
Transactions will increase the depth of the trading market for the Common
Stock and will increase earnings per share. In connection with its
consideration of the Company Stock Repurchase, the Company's board of
directors received an opinion from Salomon Brothers Inc regarding the fairness
from a financial point of view of the price to be paid in the Company Stock
Repurchase.
THE NOTES OFFERING
Concurrently with the closing of the sale of the shares of Common Stock in
the Offering, the Company will issue and sell $100.0 million principal amount
of New Notes in the Notes Offering. The Notes Offering is conditioned upon the
concurrent consummation of the Stock Transactions. See "Description of Certain
Indebtedness."
EFFECTS OF THE STOCK TRANSACTIONS
Upon completion of the Stock Transactions, MDCP's equity ownership interest
in the Company will be reduced to less than 5% of the outstanding Common
Stock, and the officers of the Company will have increased
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<PAGE>
their respective equity ownership in the Company. See "Principal and Selling
Stockholders." Concurrently with the Stock Transactions and the Notes Offering,
the Bank Credit Facility will be amended to permit the transactions
contemplated by the Company Stock Repurchase and the Notes Offering. As a
result of the Company Stock Repurchase and the Notes Offering, the percentage
of the Company's total capitalization represented by indebtedness will
increase. See "Risk Factors--Significant Leverage," "Capitalization," and
"Unaudited Pro Forma Consolidated Financial Data."
SOURCES AND USES OF FUNDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholder in this Offering. The net proceeds to the Company from
the Notes Offering are estimated to be $ , after payment of estimated
fees and expenses (including underwriting discount). An aggregate of $50.0
million of the net proceeds from the Notes Offering will be contributed by the
Company to BKI Investment to fund the Company Stock Repurchase, and the
remainder will be used to finance a substantial portion of the Alpha
Acquisition or, pending completion of the Alpha Acquisition, to repay
outstanding borrowings under the Bank Credit Facility. See "The 1996
Acquisitions--Alpha Acquisition."
USE OF PROCEEDS
All of the shares of Common Stock being sold in the Offering are being sold
by the Selling Stockholder. The Company will not receive any proceeds from the
sale of shares of Common Stock by the Selling Stockholder in the Offering.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The following table sets forth the high and low sales information for the
Common Stock for the calendar quarters since the initial public offering of the
Common Stock on November 21, 1995. Prior to the initial public offering, there
was no established trading market for the Common Stock.
<TABLE>
<CAPTION>
CALENDAR 1995 HIGH LOW
------------- ------ ------
<S> <C> <C>
Fourth Quarter (from November 21, 1995).................... $23.00 $19.00
CALENDAR 1996
-------------
First Quarter.............................................. 24.00 21.25
Second Quarter (through June 3, 1996)...................... 27.00 21.88
</TABLE>
The Company has not declared or paid any cash or other dividends on the
Common Stock and intends for the foreseeable future to retain its earnings to
finance the development of its business and for repayment of debt. The
declaration and payment of dividends by the Company are subject to the
discretion of the Board of Directors of the Company. Any future determination
to pay dividends will depend on the Company's results of operations, financial
condition, capital requirements, contractual restrictions and other factors
deemed relevant by the Board of Directors. In addition, each of the Bank Credit
Facility, the New Notes Indenture and the Existing Notes Indentures contains
restrictions on the Company's ability to declare and pay dividends. See
"Description of Certain Indebtedness."
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996 on a pro forma basis to reflect the Temming Acquisition and as
adjusted to reflect the Alpha Acquisition, the Notes Offering and the Company
Stock Repurchase. This table should be read in conjunction with the unaudited
pro forma financial data and the combined consolidated financial statements of
the Company and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------
PRO FORMA FOR PRO FORMA
TEMMING ACQUISITION AS ADJUSTED
------------------- -----------
(IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Existing Senior Notes........................ $ 6,913 $ 6,913
Existing Senior Subordinated Notes........... 149,451 149,451
Bank Credit Facility(a)...................... 69,512 95,484
New Notes.................................... -- 100,000
-------- --------
Total long-term debt....................... 225,876 351,848
-------- --------
EQUITY:
Preferred stock, par value $.01 per share,
5,000,000 shares authorized, no shares
issued and outstanding...................... -- --
Common stock, par value $.01 per share;
60,000,000 shares authorized, 21,407,223
shares issued and outstanding, actual;
19,147,336 shares issued and outstanding as
adjusted(b)................................. 214 214
Additional paid-in capital................... 58,807 58,807
Retained earnings(c)......................... 68,587 67,907
Treasury stock............................... -- (50,000)
-------- --------
Total equity............................... 127,608 76,928
-------- --------
Total capitalization..................... $353,484 $428,776
======== ========
</TABLE>
- --------
(a) As adjusted data include (1) a reduction in the outstanding borrowings
under the Bank Credit Facility of $45,750,000 as a result of the
application of a portion of the proceeds of the Notes Offering pending
completion of the Alpha Acquisition and (2) an increase in borrowings
outstanding under the Bank Credit Facility of $71,722,000 assuming the
Alpha Acquisition occurred as of March 31, 1996 (based on the amount of
assets and liabilities on such date). The purchase price to be paid by the
Company will be based on the amounts of certain of Alpha's assets and
liabilities as of the closing of the Alpha Acquisition and is currently
estimated to be approximately $65,000,000, assuming a closing during July
1996.
(b) Does not include an aggregate of up to 2,450,000 shares of Common Stock
reserved for issuance upon exercise of outstanding stock options or
available for grant under the Company's stock option plans.
(c) The reduction in retained earnings reflects an estimated $680,000 in
secondary offering costs to be incurred by the Company in connection with
the offering of Common Stock by the Selling Stockholder.
16
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial statements give
effect to the Company Stock Repurchase, the Notes Offering, the 1995 Business
Combination Transactions, the Temming Acquisition and the Alpha Acquisition.
There is no assurance that the Alpha Acquisition will be consummated or will
be consummated on the currently contemplated terms.
The pro forma consolidated balance sheet as of March 31, 1996 has been
prepared to give effect to the Company Stock Repurchase, the Notes Offering,
the Temming Acquisition and the Alpha Acquisition as if they had occurred on
that date. The effect of the 1995 Business Combination Transactions is
included in the consolidated balance sheet of the Company at March 31, 1996.
The pro forma consolidated statements of income for the year ended June 30,
1995 and the nine months ended March 31, 1996 have been prepared to give
effect to the 1995 Business Combination Transactions, the Company Stock
Repurchase, the Notes Offering, the Temming Acquisition and the Alpha
Acquisition as if they had occurred on July 1, 1994, except that the
amortization of goodwill has been based on the adjustment to goodwill in the
pro forma consolidated balance sheet as of March 31, 1996. The extraordinary
loss, net of related tax benefit, of $3.9 million recognized on the retirement
of $57.8 million in principal amount of the Existing Senior Notes in the
second and third quarters of fiscal 1996 as well as the $680,000 in estimated
secondary offering costs to be incurred by the Company in connection with the
Offering have not been included in the pro forma consolidated statements of
income.
The financial statements of the Temming Business included in these unaudited
pro forma consolidated financial statements of the Company have been derived
from financial statements prepared in accordance with accounting principles
generally accepted in the Federal Republic of Germany and stated in Deutsche
marks. These financial statements have been conformed to comply with
accounting principles generally accepted in the United States and have been
translated to United States dollars. Such translations should not be construed
as a representation that the Deutsche mark amounts represent, or have been, or
could be converted into, United States dollars at that or any other rate.
THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION IS NOT NECESSARILY
INDICATIVE OF THE RESULTS THAT WOULD HAVE BEEN OBTAINED HAD THE COMPANY STOCK
REPURCHASE, THE 1995 BUSINESS COMBINATION TRANSACTIONS, THE NOTES OFFERING,
THE TEMMING ACQUISITION AND THE ALPHA ACQUISITION BEEN COMPLETED AS OF THE
DATES PRESENTED OR FOR ANY FUTURE PERIOD. PRO FORMA ADJUSTMENTS ARE BASED UPON
PRELIMINARY ESTIMATES, AVAILABLE INFORMATION AND CERTAIN ASSUMPTIONS THAT
MANAGEMENT DEEMS APPROPRIATE. THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
DATA SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S COMBINED CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
17
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------------------- ---------------------------------------------
BUCKEYE ALPHA COMPANY STOCK
CELLULOSE CELLULOSE REPURCHASE
CORPORATION TEMMING HOLDINGS, TEMMING AND NOTES ALPHA PRO FORMA
AND AFFILIATES BUSINESS (A) INC. ACQUISITION (B) OFFERING (C) ACQUISITION (D) CONSOLIDATED
-------------- ------------ --------- --------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term
investments........... $ 2,900 $ 640 $ 111 $ (317) $ -- $ -- $ 3,334
Accounts receivable--
net................... 48,900 7,891 6,737 (7,891) -- -- 55,637
Inventories............ 90,581 12,889 16,609 (374) -- -- 119,705
Deferred income taxes.. 8,466 -- 780 -- -- -- 9,246
Prepaid expenses and
other................. -- 66 443 (66) -- -- 443
-------- ------- ------- -------- ------- ------- --------
Total current assets. 150,847 21,486 24,680 (8,648) -- -- 188,365
Property, plant &
equipment, net......... 242,589 20,399 27,395 (5,174) -- -- 285,209
Goodwill................ 7,675 -- 3,205 -- -- 21,495 32,375
Deferred debt costs and
other.................. 7,254 -- 1,009 1,443 3,570 3,394 16,670
-------- ------- ------- -------- ------- ------- --------
Total assets............ $408,365 $41,885 $56,289 $(12,379) $ 3,570 $24,889 $522,619
======== ======= ======= ======== ======= ======= ========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable....... $ 18,305 $ 2,038 $ 1,160 $ (2,038) $ -- $ -- $ 19,465
Accrued expenses and
other liabilities..... 31,515 12,665 4,303 (12,205) -- -- 36,278
Current portion of
long-term debt and
notes payable......... -- 4,513 8,962 (4,513) -- (8,962) --
-------- ------- ------- -------- ------- ------- --------
Total current
liabilities......... 49,820 19,216 14,425 (18,756) -- (8,962) 55,743
Long-term debt:
Existing Notes......... 156,364 -- -- -- -- -- 156,364
Bank Credit Facility... 41,000 -- -- 28,512 (45,750) 71,722 95,484
New Notes.............. -- -- -- -- 100,000 -- 100,000
Other notes............ -- 1,535 27,879 (1,535) -- (27,879) --
-------- ------- ------- -------- ------- ------- --------
Total long-term debt.... 197,364 1,535 27,879 26,977 54,250 43,843 351,848
Postretirement benefit
obligation............. 12,802 534 -- -- -- -- 13,336
Deferred income taxes... 16,450 -- 3,993 -- -- -- 20,443
Other liabilities....... 4,321 41 -- (41) -- -- 4,321
Shareholders' equity.... 127,608 20,559 9,992 (20,559) (50,680) (9,992) 76,928
-------- ------- ------- -------- ------- ------- --------
Total liabilities and
shareholders' equity... $408,365 $41,885 $56,289 $(12,379) $ 3,570 $24,889 $522,619
======== ======= ======= ======== ======= ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED JUNE 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------------------- ----------------------------------------
1995
BUSINESS COMPANY
BUCKEYE ALPHA COMBINATION STOCK
CELLULOSE CELLULOSE TRANSACTIONS REPURCHASE
CORPORATION TEMMING HOLDINGS, AND TEMMING AND NOTES ALPHA PRO FORMA
AND AFFILIATES BUSINESS (E) INC. (F) ACQUISITION OFFERING ACQUISITION CONSOLIDATED
-------------- ------------ --------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $408,587 $55,637 $48,679 $ -- $ -- $ -- $ 512,903
Cost of goods sold...... 305,150 44,414 32,478 (738)(g) -- -- 381,304
-------- ------- ------- ------- ------- ------- -----------
Gross margin............ 103,437 11,223 16,201 738 -- -- 131,599
Selling, research and
administrative
expenses............... 24,265 11,812 4,784 716 (h) -- 2,000 (h) 43,577
-------- ------- ------- ------- ------- ------- -----------
Operating income (loss). 79,172 (589) 11,417 22 -- (2,000) 88,022
Other income (expense):
Interest income........ 1,138 4 10 (836)(i) -- -- 316
Interest expense and
amortization of debt
costs................. (22,290) (106) (3,369) (919)(i) (6,939)(j) (1,206)(k) (34,829)
Other.................. (615) -- 126 299 (l) -- (717)(l) (907)
Minority interest...... (23,223) -- -- 23,223 (l) -- -- --
-------- ------- ------- ------- ------- ------- -----------
(44,990) (102) (3,233) 21,767 (6,939) (1,923) (35,420)
-------- ------- ------- ------- ------- ------- -----------
Income (loss) before
income taxes.......... 34,182 (691) 8,184 21,789 (6,939) (3,923) 52,602
Income taxes
(benefit)............. 12,470 -- 3,128 8,003 (m) (2,637)(m) (1,218)(m) 19,746
-------- ------- ------- ------- ------- ------- -----------
Net income (loss).... $ 21,712 $ (691) $ 5,056 $13,786 $(4,302) $(2,705) $ 32,856
======== ======= ======= ======= ======= ======= ===========
Weighted average shares
outstanding (n)........ 19,147,336
Net income per
share (n).............. $ 1.72
===========
Ratio of earnings to
fixed
charges (o)............ 2.49x
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
---------------------------------------------- --------------------------------------
1995
BUSINESS COMPANY
BUCKEYE COMBINATION STOCK
CELLULOSE ALPHA TRANSACTIONS REPURCHASE
CORPORATION TEMMING CELLULOSE AND TEMMING AND NOTES ALPHA PRO FORMA
AND AFFILIATES BUSINESS (E) HOLDINGS, INC. (F) ACQUISITION OFFERING ACQUISITION CONSOLIDATED
-------------- ------------ ------------------ ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $ 338,825 $45,929 $37,480 $ -- $ -- $ -- $ 422,234
Cost of goods sold..... 237,149 40,474 28,765 (945)(g) -- -- 305,443
---------- ------- ------- ------ ------ ------ ----------
Gross margin........... 101,676 5,455 8,715 945 -- -- 116,791
Selling, research and
administrative
expenses.............. 18,497 7,030 2,962 539 (h) -- 1,500 (h) 30,528
---------- ------- ------- ------ ------ ------ ----------
Operating income
(loss)................ 83,179 (1,575) 5,753 406 -- (1,500) 86,263
Other income (expense):
Interest income....... 925 -- 5 (418)(i) -- -- 512
Interest expense and
amortization of debt
costs................ (13,709) (167) (2,385) (1,642)(i) (5,246)(j) (870)(k) (24,019)
Secondary offering
costs................ (1,335) -- -- 1,335 (l) -- -- --
Other................. (372) -- (476) 125 (l) -- (551)(l) (1,274)
Minority interest..... (16,628) -- -- 16,628 (l) -- -- --
---------- ------- ------- ------ ------ ------ ----------
(31,119) (167) (2,856) 16,028 (5,246) (1,421) (24,781)
---------- ------- ------- ------ ------ ------ ----------
Income (loss) before
income taxes and
extraordinary loss... 52,060 (1,742) 2,897 16,434 (5,246) (2,921) 61,482
Income taxes
(benefit)............ 18,908 -- 994 5,535 (m) (1,993)(m) (901)(m) 22,543
---------- ------- ------- ------ ------ ------ ----------
Income (loss) before
extraordinary loss... 33,152 (1,742) 1,903 10,899 (3,253) (2,020) 38,939
========== ======= ======= ====== ====== ====== ==========
Weighted average shares
outstanding (n)....... 21,014,032 19,147,336
Income per share before
extraordinary loss
(n)................... $ 1.58 $ 2.03
========== ==========
Ratio of earnings to
fixed
charges (o)........... 5.92x 3.53x
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(a) Reflects the unaudited balances of the Temming Business at December 31,
1995, derived from the financial statements included elsewhere herein and
translated into United States dollars at the December 31, 1995 exchange
rate (DM 1.4312 to $1). The conversion of the balance sheet from German
generally accepted accounting principles to those generally accepted in
the United States resulted in an increase in property, plant and equipment
of $15,456 due to differences in depreciation methods.
(b) Adjustments to reflect the assets and liabilities acquired and assumed in
the Temming Acquisition, borrowings of $28,512 under the Bank Credit
Facility to finance the acquisition, and the estimated allocation of the
purchase price, assuming such acquisition took place at December 31, 1995.
The allocation of the purchase price is based on preliminary estimates of
the respective fair value of assets and liabilities which may differ from
actual fair values.
(c) Adjustments to reflect the issuance of the New Notes. Underwriting fees
and other expenses related to the New Notes are deferred and amortized
over the term of the New Notes. The proceeds of the New Notes will be used
to finance a portion of the Alpha Acquisition and the Company Stock
Repurchase. If the Alpha Acquisition is not consummated, the net proceeds
of the New Notes will be used to reduce outstanding borrowings under the
Bank Credit Facility. Certain expenses incurred in connection with the
offering of Common Stock by the Selling Stockholder will be paid by the
Company and are reflected as a reduction of equity.
(d) Adjustments to reflect the acquisition of the common stock of Alpha,
refinancing of substantially all of Alpha's existing long-term debt,
borrowings of $71,722 under the Bank Credit Facility, and the estimated
allocation of the purchase price. The allocation of the excess of the
purchase price over the recorded value of net assets is based on
preliminary estimates of the respective fair values of assets and
liabilities which may differ from actual fair values. Goodwill is to be
amortized over 30 years.
(e) Reflects the unaudited statement of operations of the Temming Business for
the twelve months ended June 30, 1995 and the nine months ended December
31, 1995, derived from the historical financial statements and translated
into United States dollars using the average exchange rates for the
periods then ended (DM 1.4802 to $1 for the twelve months ended June 30,
1995 and DM 1.4068 to $1 for the nine months ended December 31, 1995.) The
conversion of the statements of operations from German generally accepted
accounting principles to those generally accepted in the United States
resulted in an increase in depreciation expense of $915 and $830 for the
twelve months ended June 30, 1995 and the nine months ended December 31,
1995, respectively. The operating results of the Temming Business for the
three months ended June 30, 1995 have been included in both the pro forma
statements of income for the twelve months ended June 30, 1995 and the
nine months ended December 31, 1995. Net sales and net loss for the
Temming Business for the three months ended June 30, 1995 were $16,410 and
$573, respectively.
(f) Reflects the historical unaudited statement of operations of Alpha for the
twelve months ended September 30, 1995 and the nine months ended March 31,
1996. The operating results of Alpha for the three months ended September
30, 1995 have been included in both the pro forma statements of income for
the twelve months ended June 30, 1995 and the nine months ended March 31,
1996. Alpha's net sales and net income for the three months ended
September 30, 1995 were $11,903 and $984, respectively.
(g) The purchase price allocation of the 1995 Business Combination
Transactions resulted in an increase in depreciation expense based on the
increase in property, plant and equipment of $10,563 as of the acquisition
date. The estimated purchase price allocation of the Temming Acquisition
results in the reduction of depreciation expense for the decrease in
property, plant and equipment of $5,174 as of the acquisition date.
(h) The estimated purchase price allocation of the Temming Acquisition
includes the additional amortization of a $1,432 non-compete agreement
over a two year period. The estimated purchase price allocation of the
Alpha Acquisition includes the additional amortization of a $4,000 non-
compete agreement over a two year period.
21
<PAGE>
(i) Reflects the 1995 Business Combination Transactions and Temming
Acquisition as if they had occurred on July 1, 1994. A reduction of
interest income reflects the use of approximately $14,000 of cash and
short-term investments to consummate these transactions. Adjustments
reflect the net effects of (1) the decrease in interest expense resulting
from the refinancing of existing indebtedness in the 1995 Business
Combination Transactions, (2) the increase in interest expense related to
borrowings under the Bank Credit Facility to finance the Temming
Acquisition and (3) the net increase in amortization of debt issuance
discount and debt issuance costs relating to the Existing Notes and the
Bank Credit Facility. Borrowings under the Bank Credit Facility are at a
LIBOR based rate, determined as of the date of the respective business
combination. An increase of 1/8% in the LIBOR rate when applied to
outstanding borrowings used for the 1995 Business Combination Transactions
and Temming Acquisition for the year ended June 30, 1995 would decrease
pro forma net income by $94.
(j) Adjustments to reflect the amortization of related debt issuance costs
over the term of the New Notes, and the increase in interest expense on
borrowings under the New Notes, net of the reduction in interest expense
related to the repayment of borrowings under the Bank Credit Facility.
(k) Adjustments to reflect the increase in interest expense for borrowings to
finance the Alpha Acquisition and to refinance substantially all of
Alpha's existing long-term debt. Borrowings under the Bank Credit Facility
are assumed to bear interest at LIBOR plus 1/2%. An increase of 1/8% in
the LIBOR rate when applied to outstanding borrowings used for the Alpha
Acquisition, including the refinancing of existing long-term indebtedness,
for the year ended June 30, 1995 would decrease pro forma net income by
$56.
(l) Adjustments to reflect the reduction in goodwill amortization, secondary
offering costs and minority interest as a result of the 1995 Business
Combination Transactions, and the increase in amortization of goodwill
resulting from the Alpha Acquisition. The purchase price allocation in the
1995 Business Combination Transactions reduced goodwill by $8,971.
Goodwill is assumed to generate no tax benefit, and is amortized over 30
years. Secondary offering costs represent non-recurring expenses paid by
the Company on behalf of the selling stockholder in the 1995 Business
Combination Transactions.
(m) Adjustment to record the income tax effects at the statutory rate of 38%,
except as to the amortization of goodwill which is assumed to generate no
tax benefit.
(n) For purposes of calculating pro forma net income per share and pro forma
income per share before extraordinary loss, weighted average shares
outstanding are calculated assuming the Company Stock Repurchase and 1995
Business Combination Transactions were consummated on July 1, 1994.
(o) For purposes of determining the pro forma ratio of earnings to fixed
charges, earnings are defined as income before extraordinary items,
minority interest, accounting changes, and provisions for income taxes and
before fixed charges. Fixed charges consist of pro forma interest expense
on all indebtedness (including amortization of deferred debt issuance
costs) and the interest component of rent expense.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected financial data with respect to (a)
the Predecessor for the fiscal years ended June 30, 1991 and 1992 and for the
period July 1, 1992 through March 15, 1993 and (b) the Company as of June 30,
1993 and for the period March 16, 1993 through June 30, 1993, for the fiscal
years ended June 30, 1994 and 1995 and for the nine months ended March 31,
1995 and 1996. The selected financial data as of and for the fiscal years
ended June 30, 1991 and 1992 are derived from the unaudited Combined Statement
of Net Assets and Combined Statement of Operating Income of the Predecessor.
The selected financial data of the Predecessor for the period July 1, 1992
through March 15, 1993 are derived from the unaudited Combined Statement of
Net Assets and the audited Combined Statement of Operating Income of the
Predecessor appearing elsewhere in this Prospectus. The selected financial
data for the period March 16, 1993 through June 30, 1993 and for the fiscal
years ended June 30, 1994 and 1995, which appear elsewhere in this Prospectus,
are derived from the audited financial statements of the Company. The selected
financial data for the nine months ended March 31, 1995 and 1996 are derived
from the unaudited financial statements of the Company appearing elsewhere in
this Prospectus. In the opinion of management such nine month data include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the information included therein. The results of operations
for the nine months ended March 31, 1996 are not necessarily indicative of the
results for the entire fiscal year or any other interim period. The data set
forth in the following table should be read in conjunction with the Combined
Statement of Operating Income of the Predecessor and notes thereto, and the
combined consolidated financial statements of the Company and notes thereto,
appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PREDECESSOR (A) COMPANY (B)
--------------------------- ---------------------------------------------------
JULY 1, MARCH 16,
YEAR ENDED 1992 1993 YEAR ENDED NINE MONTHS ENDED
JUNE 30, THROUGH THROUGH JUNE 30, MARCH 31,
----------------- MARCH 15, JUNE 30, ------------------ --------------------
1991 1992 1993 1993 1994 1995 1995 1996
-------- -------- --------- --------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $390,690 $357,493 $233,460 $113,074 $371,526 $408,587 $301,318 $ 338,825
Cost of goods sold (a).. 300,331 293,344 189,808 86,047 291,833 305,150 230,247 237,149
-------- -------- -------- -------- -------- -------- -------- ----------
Gross margin............ 90,359 64,149 43,652 27,027 79,693 103,437 71,071 101,676
Selling, research and
administrative
expenses:
Company................ -- -- -- 5,996 24,004 24,265 16,446 18,497
C&S Division
allocations (a)....... 25,034 21,357 17,522 -- -- -- -- --
Procter & Gamble
corporate allocations
(a)................... 1,614 6,096 4,764 -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ----------
Operating income........ 63,711 36,696 21,366 21,031 55,689 79,172 54,625 83,179
Net interest and
amortization of debt
costs (c).............. -- -- -- (10,209) (26,545) (21,152) (16,510) (12,784)
Other expense........... -- -- -- (184) (632) (615) (462) (372)
Minority interest (d)... -- -- -- (3,083) (8,291) (23,223) (14,881) (16,628)
Secondary offering
costs.................. (1,335)
-------- -------- -------- -------- -------- -------- -------- ----------
Income before income
taxes and extraordinary
loss................... 63,711 36,696 21,366 7,555 20,221 34,182 22,772 52,060
Income taxes (e)........ -- -- -- 2,851 7,253 12,470 8,308 18,908
-------- -------- -------- -------- -------- -------- -------- ----------
Income before
extraordinary loss..... 63,711 36,696 21,366 4,704 12,968 21,712 14,464 33,152
Extraordinary loss, net
of tax benefit......... -- -- -- -- -- -- -- 3,949
-------- -------- -------- -------- -------- -------- -------- ----------
Net income.............. $ 63,711 $ 36,696 $ 21,366 $ 4,704 $ 12,968 $ 21,712 $ 14,464 $ 29,203
======== ======== ======== ======== ======== ======== ======== ==========
Income per share before
extraordinary loss (f). $ 1.58
Extraordinary loss, net
of tax benefit (g)..... (.19)
----------
Net income per share
(f).................... $ 1.39
==========
Weighted average shares
outstanding............ 21,014,032
==========
OTHER DATA:
Depreciation and
amortization........... $ 24,993 $ 25,795 $ 19,262 $ 7,436 $ 27,415 $ 26,080 $ 19,566 $ 19,117
Capital expenditures.... 45,960 29,832 17,761 4,898 15,725 24,922 20,713 22,334
EBITDA (h).............. 88,704 62,491 40,628 28,185 81,879 104,088 73,313 102,073
Ratio of earnings to
fixed charges (i)...... -- -- -- 1.99x 2.05x 3.54x 3.15x 5.92x
BALANCE SHEET DATA:
Working capital (j)..... $132,494 $126,043 $144,419 $ 98,182 $ 69,330 $ 77,107 $ 83,410 $ 101,027
Total assets............ 445,633 445,454 446,732 403,542 374,204 379,056 381,139 408,365
Long-term debt less
current portion........ -- -- -- 278,713 203,482 166,202 189,937 197,364
Minority interest (d)... -- -- -- 28,083 33,479 52,104 45,523 --
Equity.................. -- -- -- 43,260 62,828 84,621 77,372 127,608
</TABLE>
(footnotes on following page)
23
<PAGE>
- --------
(a) The Predecessor was historically operated as two of the four pulp mills
that comprised the C&S Division of Procter & Gamble. The Predecessor was
allocated certain expenses for services provided by the C&S Division and
Procter & Gamble, including sales services, product supply services,
general management services, information system services, research
services, treasury services, financial audit and reporting services, tax
administration services and employee benefits and insurance administration
services. Costs and expenses of the C&S Division were allocated using
formulas, primarily based on estimates of efforts expended and sales.
Procter & Gamble corporate expenses were allocated primarily based on
sales.
(b) On March 16, 1993, the Company acquired from Procter & Gamble Cellulose
all of the assets of the Predecessor.
(c) The debt obligations of Procter & Gamble were not specifically
identifiable with individual operating units; accordingly, interest
charges are not reflected in the financial data of the Predecessor.
(d) The minority interest represents Procter & Gamble Cellulose's 50% limited
partnership interest in Buckeye Florida Partners, which ceased on November
28, 1995.
(e) The Predecessor's results of operations were historically included in the
consolidated income tax returns of Procter & Gamble. Procter & Gamble had
no tax sharing agreement for allocating income taxes to operating units.
Accordingly, income tax expense or benefit is not reflected in the
financial data of the Predecessor.
(f) Historical net income per share has not been presented as it is not
considered relevant for periods prior to June 30, 1995, due to the P&G
Acquisitions and the 1995 Business Combination Transactions.
(g) An extraordinary loss of $3,949, net of tax benefit, was recognized on the
early retirement of a portion of the Existing Senior Notes in the second
and third quarters of fiscal 1996.
(h) EBITDA represents earnings before secondary offering costs, interest,
taxes, minority interest, extraordinary loss, depreciation, depletion,
amortization and other non-cash charges and is intended to facilitate a
more complete analysis of the Company's ability to meet its debt service
requirements. This data should not be considered in isolation and is not
intended to be a substitute for income statement data as a measure of the
Company's profitability.
(i) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes and extraordinary loss,
minority interest and fixed charges. Fixed charges consist of interest
expense on all indebtedness (including amortization of deferred debt
issuance costs) and the interest component of rent expense. Historically,
interest expense was not allocated to the Predecessor by Procter & Gamble.
Accordingly, the historical ratios of earnings to fixed charges for the
Predecessor are not meaningful and therefore have not been presented.
(j) During fiscal 1994, inventories were reduced by $17,700 primarily due to
excess finished goods from the Predecessor being sold to improve
operations and generate cash.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of the Company for each of the fiscal years ended June
30, 1993, 1994 and 1995 and for the nine months ended March 31, 1996. The
Company completed its second full fiscal year of operations under current
ownership on June 30, 1995. Since the Company was acquired from Procter &
Gamble Cellulose on March 16, 1993, the initial fiscal year after such
acquisition encompassed approximately three and one-half months from March 16,
1993 through June 30, 1993. All comparisons to periods prior to March 16, 1993
will include the results of the Predecessor. In general, fiscal years 1995 and
1994 are not necessarily comparable to fiscal year 1993 because of differences
in results due to operations as a stand-alone company versus operations as
part of the C&S Division prior to March 16, 1993. This section should be read
in conjunction with the combined consolidated financial statements of the
Company and the footnotes thereto included elsewhere in this Prospectus.
The merger of Buckeye Florida Corporation and a subsidiary of the Company in
connection with the 1995 Business Combination Transactions was treated for
accounting purposes as a combination of related companies. The Company
accounted for the merger using the historical costs of its and Buckeye Florida
Corporation's assets in a manner similar to a "pooling of interests." All
historical information of the Company set forth in this Prospectus is
presented on such basis. The purchase of Procter & Gamble Cellulose's 50%
interest in Buckeye Florida Partners was accounted for as a purchase and the
allocation of the purchase price was based on an independent appraisal.
OVERVIEW
The Company manufactures and distributes a broad range of specialty pulps to
a variety of customers who require cellulose fibers with chemical or physical
properties that are specifically tailored to their product applications. The
Company's financial results are generally less variable than the results of a
typical producer of commodity cellulose pulp. There are two primary reasons
for this characteristic: (i) the demanding applications for specialty pulps
make substitution of alternative products difficult and expensive, and (ii)
the Pulp Supply Agreement with Procter & Gamble provides a stable volume
demand and an escalating formula-based price for a substantial portion of the
Company's sales (approximately one-third of the Company's sales in fiscal
1995). Nevertheless, specialty pulp pricing is affected by factors influencing
the broader cellulose pulp industry, including price trends for commodity
pulps. Historically, specialty pulp pricing has been more stable and price
changes have tended to lag (on both the upturn and the downturn) price changes
for commodity pulps.
Pricing for cellulose pulp (particularly for commodity pulps) varies with
general economic conditions in worldwide markets as consumption correlates
with economic activity. This variability can be compounded if substantial
additional production capacity is installed at a time when demand is not
growing rapidly enough to absorb the new production. The early 1990s were such
a period of excess capacity, and pulp industry prices reached a cyclical low
in the fourth calendar quarter of 1993. In early 1994, the market began to
recover from this downturn as global economic expansion increased the demand
for cellulose pulps. This recovery continued until late 1995 before the
combination of increased supply and softening demand once again led to lower
pricing.
The Predecessor's financial results for fiscal years 1991 and 1992 and the
first eight and one-half months of fiscal 1993 reflect the declining market
pulp prices characteristic of the pulp industry during this period. As a
result, operating income declined in each period. Operating income in the
final three months of fiscal 1993 and throughout fiscal 1994 began to increase
as the Company's current owners executed a strategy to reduce costs, liquidate
excess inventory, generate cash and pay down debt. The Company began to supply
its major customer, Procter & Gamble, under the pricing formula in the Pulp
Supply Agreement. Unit sales volume was increased substantially by selling to
new customers and competitively pricing products. Management and employees
focused on improving the operating efficiency and productivity of the
Company's manufacturing facilities. Operating and net income in fiscal 1995
improved significantly as a result of higher unit sales prices beginning
25
<PAGE>
in January 1995. The Company's average net prices for fiscal 1995 were 12%
higher than the prior year's average. For the nine months ending March 31,
1996, average net prices were 24% higher than average net prices for the same
period of fiscal 1995.
The Pulp Supply Agreement is a long-term, take-or-pay contract that phases
out in calendar years 2001 and 2002 if it is not extended by mutual consent.
Pricing pursuant to the Pulp Supply Agreement through 1998 is based on an
escalating formula. Pricing for 1999 and 2000 will be at the higher of the
contract formula price or market, and pricing for 2001 and 2002 will be at
market. The formula price has three components: (i) a periodic margin
adjustment, (ii) a general escalation component based on changes in the
Consumer Price Index, and (iii) a provision to adjust for all actual changes
in the price of timber, the major raw material component of the pulp purchased
under the contract. The pricing formula therefore provides considerable
protection against escalating costs. For the fiscal years 1993, 1994 and 1995,
the contract price was, on average, above the market price. The current
contract price is above the market price.
The Company's customer base is broadly diversified both geographically and
by end-use markets. Approximately 70% of fiscal 1995 sales were to customers
outside of the United States, principally in Europe and Asia. Currency
fluctuations do not significantly influence the Company's results of
operations because sales are made, and receivables are paid, in U.S. dollars.
The diversity of the Company's geographic and end-use markets helps to
insulate it from periodic economic downturns in particular areas of the world.
RESULTS OF OPERATIONS
The following table shows, for the periods indicated, various items as a
percentage of net sales.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ --------------------------------------
NINE MONTHS
JULY 1, 1992 MARCH 16, YEAR ENDED ENDED
THROUGH THROUGH JUNE 30, MARCH 31,(A)
MARCH 15, JUNE 30, ------------ --------------
1993(A) 1993(A) 1994 1995 1995 1996
------------ --------- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net sales................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........ 81.3 76.1 78.5 74.7 76.4 70.0
----- ----- ----- ----- ------ ------
Gross margin.............. 18.7 23.9 21.5 25.3 23.6 30.0
Selling, research and
administrative expenses.. (b) 5.3 6.5 5.9 5.5 5.4
----- ----- ----- ------ ------
Operating income.......... (b) 18.6 15.0 19.4 18.1 24.6
Net interest and
amortization............. (b) 9.0 7.1 5.2 5.5 3.8
Other expense............. (b) 0.2 0.2 0.1 0.1 0.1
Minority interest......... (b) 2.7 2.2 5.7 4.9 4.9
Secondary offering costs.. (b) -- -- -- -- 0.4
Income taxes.............. (b) 2.5 2.0 3.1 2.8 5.6
----- ----- ----- ------ ------
Income before
extraordinary loss....... (b) 4.2 3.5 5.3 4.8 9.8
Extraordinary loss, net of
tax benefit.............. (b) -- -- -- -- 1.2
----- ----- ----- ------ ------
Net income................ (b) 4.2% 3.5% 5.3% 4.8% 8.6%
===== ===== ===== ====== ======
</TABLE>
- --------
(a) Results for partial year periods are not necessarily indicative of, and
should not be compared to, full year results.
(b) These items are not directly comparable because the Predecessor operated
as two of the four pulp mills that comprised the C&S Division of Procter &
Gamble Cellulose. See "Selected Consolidated Financial Data" and the
footnotes thereto for a more detailed explanation.
COMPARISON OF NINE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Net Sales. Net sales for the nine month period ending March 31, 1996 were
$338.8 million compared to $301.3 million for the same period in 1995, an
increase of $37.5 million or 12%, due primarily to higher unit sales prices,
averaging 24% above the prior period, partially offset by a 9% decrease in
unit sales volume. The lower unit sales volume versus the prior year was
partially due to softer market demand. Although unit sales volume was below
the prior year, it has been stable throughout the current fiscal year.
26
<PAGE>
Gross Margin. Gross margin for the nine month period ended March 31, 1996
was $101.7 million compared to $71.1 million for the same period in 1995, an
increase of $30.6 million or 43%. The increase was entirely due to higher unit
sales prices in all product lines, partially offset by lower sales volume and
higher raw material costs for wood, cotton linters, and process chemicals.
Selling, Research and Administrative Expenses. Selling, research and
administrative expenses for the nine month period ending March 31, 1996 were
$18.5 million compared to $16.4 million for the same period in 1995, an
increase of $2.1 million or 12%, primarily due to increased employment,
computer costs, transition expenses related to the Temming Acquisition and a
non-cash compensation charge of $0.6 million as the result of vesting employee
stock options.
Net Interest and Amortization. Net interest and amortization expenses for
the nine month period ending March 31, 1996 were $12.8 million compared to
$16.5 million for the same period of the prior year, down $3.7 million or 23%,
as a result of (i) prior to the public offering of the Existing Senior
Subordinated Notes and execution of the Bank Credit Facility in November 1995,
lower average debt balances, and (ii) following the public offering of the
Existing Senior Subordinated Notes and the execution of the Bank Credit
Facility, lower interest rates.
Minority Interest. Minority interest was eliminated as the result of the
purchase of P&G Cellulose's 50% limited partnership interest in Buckeye
Florida Partners on November 28, 1995. Minority interest for the nine month
period ending March 31, 1996 was $16.6 million compared to $14.9 million for
the same period of the prior year, an increase of $1.7 million or 12%,
reflecting the higher income of the limited partnership in fiscal 1996 prior
to the purchase of the 50% interest cited above.
Secondary Offering Costs. Secondary offering costs for the nine months
ending March 31, 1996 were $1.3 million and relate to expenses paid on behalf
of the Selling Stockholder in the November 1995 initial public offering of
Common Stock.
Income Taxes. Income taxes for the nine months ended March 31, 1996 were
$18.9 million compared to $8.3 million for the nine months ended March 31,
1995, an increase of $10.6 million, due to higher earnings. The effective tax
rate for the current period is 36.3%, compared to 36.5% for the prior period.
Extraordinary Loss. The extraordinary loss for the nine months ending March
31, 1996 totaled $3.9 million, net of taxes. These losses resulted from the
retirement of $57.8 million (principal amount) of the Existing Senior Notes
during the nine month period, leaving $6.9 million in principal amount
outstanding as of March 31, 1996.
Net Income. Net income for the nine months ended March 31, 1996 was $29.2
million compared to $14.5 million for the nine months ended March 31, 1995, an
increase of $14.7 million or 101%, primarily as a result of the factors
described above.
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1995 AND JUNE 30, 1994
Net Sales. Net sales for fiscal 1995 were $408.6 million compared to $371.5
million for fiscal 1994, an increase of $37.1 million or 10%. The increase was
due primarily to a 12% average increase in unit selling prices and, to a
lesser extent, by a move to a higher value-added product mix. The sales price
increase reflects strong domestic and international market demand for pulp,
which resulted in sales price increases on the Company's specialty pulps
beginning in January 1995. This increase in unit sales prices was partially
offset by a 2% reduction in unit sales volume. Although the Company operated
at full capacity in both fiscal 1995 and fiscal 1994, inventory reductions in
fiscal 1994 as the Company's new owners reduced surplus inventories built up
by the Predecessor led to a lower sales volume in fiscal 1995.
Gross Margin. Gross margin for fiscal 1995 was $103.4 million compared to
$79.7 million in fiscal 1994, an increase of $23.7 million or 30%. The
increase was entirely attributable to higher unit selling prices in all
product lines, partially offset by higher raw material costs for cotton
linters, timber and process chemicals.
27
<PAGE>
Selling, Research and Administrative Expenses. Selling, research and
administrative expenses for fiscal 1995 were $24.3 million compared to $24.0
million in fiscal 1994, an increase of $0.3 million or 1%.
Net Interest and Amortization. Net interest and amortization of deferred debt
cost for fiscal 1995 was $21.2 million compared to $26.5 million in fiscal
1994, a decrease of $5.3 million or 20%. The decrease was due to substantially
lower debt levels as cash from operations was used to retire $51.4 million in
long-term debt during fiscal 1995.
Minority Interest. Minority interest for fiscal 1995 was $23.2 million
compared to $8.3 million for fiscal 1994, an increase of $14.9 million. The
increase reflects higher net income of Buckeye Florida Partners, in which
Procter & Gamble Cellulose held a 50% limited partnership interest during the
period.
Income Taxes. Income taxes for fiscal 1995 were $12.5 million compared to
$7.3 million for fiscal 1994, an increase of $5.2 million, due to higher
earnings. The effective tax rate was 36.5% for fiscal 1995 compared to 35.9%
for fiscal 1994.
Net Income. Net income for fiscal 1995 was $21.7 million compared to $13.0
million for fiscal 1994, an increase of $8.7 million or 67%, primarily as a
result of the factors described above.
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1994 AND JUNE 30, 1993
Net Sales. Net sales for fiscal 1994 were $371.5 million compared to $346.5
million in fiscal 1993, an increase of $25.0 million or 7%. This increase was
entirely due to a 12% increase in unit sales volume. The volume increase was
the result of prompt action taken by the Company's new owners shortly after the
Acquisitions to reduce excess inventories which had been accumulated by the
Predecessor. This increase in unit sales volume was partially offset by a 4%
average decrease in unit sales prices. The unit sales price decreases reflect a
pulp market with an excess of supply over demand, which resulted in strong
price competition.
Gross Margin. Gross margin for fiscal 1994 was $79.7 million compared to
$70.7 million in fiscal 1993, an increase of $9.0 million or 13%. The increase
was primarily the result of higher unit sales volume. Lower raw material prices
and manufacturing costs were largely offset by the decrease in sales prices.
Selling, Research and Administrative Expenses. Selling, research, and
administrative expenses for fiscal 1994 totalled $24.0 million and are not
directly comparable to the combined expenses of the Company and the Predecessor
for the prior year, as described in the footnotes to "Selected Consolidated
Financial Data."
Net Interest and Amortization. Net interest and amortization of deferred debt
costs for fiscal 1994 were $26.5 million compared to $10.2 million in the
period March 16, 1993 through June 30, 1993. The Predecessor did not assign
interest costs to operating units.
Minority Interest. Minority interest for fiscal 1994 totalled $8.3 million
compared to $3.1 million in the period March 16, 1993 through June 30, 1993.
Income Taxes. Income taxes for fiscal 1994 were $7.3 million compared to $2.9
million in the period March 16, 1993 through June 30, 1993. The Predecessor's
results of operations do not reflect any income tax expense.
Net Income. Net income for fiscal 1994 was $13.0 million compared to $4.7
million for the period March 16, 1993 through June 30, 1993.
LIQUIDITY AND CAPITAL RESOURCES
Since the P&G Acquisitions, cash required for operating expenses, capital
expenditures and debt service obligations has been provided principally by cash
flows from operating activities, the net proceeds from sales of debt and equity
securities, the proceeds of the loans provided by Procter & Gamble Cellulose in
connection with
28
<PAGE>
the P&G Acquisitions, and borrowings under bank credit facilities. Total
indebtedness has been reduced significantly, from $361.9 million at March 16,
1993 to $197.4 million at March 31, 1996, a reduction of $164.5 million.
Cash provided by operating activities was $42.2 million for the nine months
ended March 31, 1996. During this period, inventories increased by $28.6
million as the result of higher lint prices and decreased shipments. Cash
provided by operating activities was $77.8 million for fiscal 1995, $86.4
million for fiscal 1994 and $73.3 million for the period March 16, 1993 to
June 30, 1993, for a cumulative total of $279.7 million since the P&G
Acquisitions. These funds from operations, plus proceeds of $13.1 million from
the sale of Common Stock were used for three primary purposes: (i) to reduce
total indebtedness by $164.5 million, (ii) for capital expenditures totalling
$67.8 million and (iii) to purchase the minority interest of Procter & Gamble
Cellulose in Buckeye Florida Partners for $62.1 million.
Capital expenditures for maintenance, product improvements and cost saving
projects were $22.3 million for the nine months ended March 31, 1996, $24.9
million and $15.7 million for fiscal 1995 and fiscal 1994, respectively, and
$4.9 million for the period March 16, 1993 to June 30, 1993. The Company used
all of the expenditures to purchase, modernize and upgrade production
equipment and to maintain its facilities. Capital expenditures for fiscal 1996
are expected to be approximately $36.0 million. Additionally, the Company
expects to spend over $175.0 million during fiscal 1997 through fiscal 2000 to
maintain facilities, upgrade products and meet environmental capital spending
needs.
At March 31, 1996, the Company's long-term indebtedness was $197.4 million,
including $149.5 million under the Existing Senior Subordinated Notes, $6.9
million under the Existing Senior Notes and $41.0 million under the Bank
Credit Facility, and shareholders' equity was $127.6 million. At such date,
the Company had $2.9 million in short-term investments and $91.1 million of
unused borrowing capacity.
The net proceeds from the Notes Offering will be used for the Company Stock
Repurchase and to finance a substantial portion of the Alpha Acquisition or,
pending completion of the Alpha Acquisition, to reduce outstanding borrowings
under the Bank Credit Facility. The Company's total debt will be approximately
$351.8 million following the Notes Offering and the Alpha Acquisition.
The Company believes that its cash flow from operations, together with
borrowings available under the Bank Credit Facility and the net proceeds from
the Notes Offering, will be sufficient to fund operating expenses, capital
expenditures and debt service requirements for the foreseeable future and to
fund the Company Stock Repurchase and the Alpha Acquisition.
ENVIRONMENTAL MATTERS
The Company has reached an agreement (the "Fenholloway Agreement") with the
Florida Department of Environmental Protection based upon the results of the
recently completed Fenholloway River reclassification analysis. In order to
comply with the Fenholloway Agreement, the Company expects to invest
approximately $39.0 million through fiscal 1999. In addition to capital
spending pursuant to the Fenholloway Agreement, the Company projects that it
will spend approximately $14.0 million in environmental capital expenditure
costs through fiscal 2000, consisting of the estimated costs to comply with
the cluster rule regulations, when promulgated. See "Business--Environmental
Matters."
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations or financial condition during recent periods.
SEASONALITY
The Company's business has generally not been seasonal to any significant
extent.
29
<PAGE>
BUSINESS
GENERAL
The Company is a leading manufacturer and worldwide marketer of high-
quality, value-added specialty cellulose pulps. The Company focuses on a wide
array of technically demanding niche markets in which its proprietary products
and commitment to customer technical service give it a competitive advantage.
Buckeye is the world's only manufacturer of both wood-based and cotton linter-
based specialty cellulose pulps and, as such, produces the broadest range of
specialty pulps in the industry. The Company believes that it has a leading
position in most of the high-end niche markets in which it competes. Buckeye's
focus on niche specialty pulp markets has enabled it to maintain consistently
strong margins, even during downturns in the commodity pulp markets.
The cellulose pulp market generally can be divided into two categories:
commodity pulps and specialty cellulose pulps. The Company participates
exclusively in the estimated $7 billion annual specialty cellulose pulp
market, which accounts for approximately 3% of the total cellulose pulp
market. Specialty cellulose pulps are used to impart unique chemical or
physical characteristics to a broad and diverse range of specialty end
products. Specialty cellulose pulps generally command higher prices and tend
to be less cyclical than commodity pulps. The more demanding performance
requirements for specialty cellulose pulps limit customers' ability to
substitute other products.
The Company has manufactured specialty cellulose pulps for nearly 75 years.
The Company's specialty pulps can be broadly grouped into three categories:
chemical cellulose pulps, absorbent pulps and customized paper pulps. Chemical
cellulose pulps (41% of fiscal 1995 sales) are used to impart purity,
strength, transparency, and viscosity in the manufacture of diversified
products such as food casings, rayon filament, photographic film, transparent
tape, acetate plastics, and thickeners for food, cosmetics, and
pharmaceuticals. Absorbent pulps (39% of fiscal 1995 sales) are used to
increase absorbency and fluid transport in products such as disposable
diapers, feminine hygiene products, and adult incontinence products.
Customized paper pulps (20% of fiscal 1995 sales) are used to provide
porosity, color permanence, and tear resistance in automotive air and oil
filters, premium letterhead, currency paper, stock certificates, and personal
stationery.
The Company's commitment to research and development focuses on introducing
new specialty cellulose pulps, improving the performance of its existing
cellulose pulps, and creating new applications for its products. Buckeye
developed one of the earliest commercial processes to purify cotton linters
for conversion into cellulose acetate for use in photographic film. Buckeye
was also the first to develop a new application that enabled fluff pulp to be
used as the absorbent core of disposable diapers. Today, the Company's
research and development scientists are working on the next generation of
specialty cellulose pulps for both new and current applications such as thin
diapers, high-performance automotive filters and cellulose ethers.
The Company manufactures approximately 600,000 metric tons of specialty pulp
annually at its three plants in the United States and Germany. Since 1983,
Buckeye has invested over $400.0 million in its two U.S. plants and believes
that both are state-of-the-art manufacturing facilities. The Foley Plant has
an annual capacity of approximately 450,000 metric tons. The Memphis Plant has
an annual capacity of approximately 100,000 metric tons. In addition, in May
1996 the Company acquired the Temming Business, which has an annual capacity
of approximately 50,000 metric tons at the Gluckstadt Plant.
The Company's customer base is broadly diversified both geographically and
by end-use markets. The Company's fiscal 1995 sales reflect this geographic
diversity, with 30% of sales in the United States, 30% in Europe, 26% in Asia
and 14% in other regions. Buckeye works closely with customers through all
stages of product development and manufacture in order to tailor products to
meet each customer's specific requirements. The Company's commitment to
product quality, dedication to customer technical service, and responsiveness
to
30
<PAGE>
changing customer needs have enabled the Company to develop and strengthen
long-term alliances with its customers. Over 70% of fiscal 1995 sales were to
firms who have been customers of Buckeye for over 30 years. Procter & Gamble,
the world's largest diaper manufacturer, purchases virtually all of the
Company's current annual production of absorbent pulps pursuant the Pulp
Supply Agreement. Procter & Gamble is the Company's largest customer,
accounting for approximately 39% of the Company's fiscal 1995 net sales. The
Company's other large customers include Akzo Nobel N.V. (rayon filament and
cellulose ethers), A. Ahlstrom Corporation (automotive filter paper), Hercules
Incorporated (cellulose ethers) and Eastman Chemical Company (cellulose
acetate).
INDUSTRY OVERVIEW
Cellulose pulp is a raw material derived from trees and other plants that is
used in the manufacture of paper, tissue products, packaging materials, and a
vast number of other end-use products. The Company estimates that worldwide
cellulose pulp production totalled over 200 million metric tons in 1994.
Cellulose pulp can generally be divided into two categories, commodity pulps
and specialty pulps.
Commodity pulps account for approximately 97% of cellulose pulp products and
are used in ordinary printing and writing paper, tissue products, and
packaging material. End users of commodity pulps typically maintain
manufacturing flexibility to utilize a large range of alternative cellulose
pulps, with substitution made primarily on the basis of price.
The Company estimates that the worldwide specialty pulp market generates
annual sales of approximately $7 billion. Specialty cellulose pulps are
distinguished from commodity pulps by the unique chemical or physical
characteristics that they impart to a broad and diverse range of end-use
products. These important raw materials are used in the production of food
casings, rayon filament, acetate fibers, photographic film, acetate plastics,
thickening agents, disposable diapers, feminine hygiene products, adult
incontinence products, automotive filters, premium letterhead, currency paper,
stock certificates and personal stationery. Specialty pulps are generally
priced higher than commodity pulps, and the specialty pulps manufactured from
cotton linters are generally priced at the top of the specialty pulp price
range because they are the purest form of cellulose.
Due to the fact that specialty cellulose pulps are used in technically
demanding niches, a higher level of cellulose quality, uniformity, and
customer technical support is required. It is therefore significantly more
difficult for a customer to shift from one specialty pulp to another. Only a
relatively small number of producers can meet the demands of the specialty
cellulose pulp market, and consequently they are insulated from the degree of
price competition and cyclicality experienced in the commodity pulp markets.
To the Company's knowledge, no expansion of specialty cellulose pulp capacity
has been announced or is under construction in the high-end applications in
which the Company primarily competes. The Company believes that expansion in
the specialty pulp market through the construction of new facilities would
take at least two to three years to be completed.
COMPANY STRATEGY
The Company's strategy is to continue to strengthen its position as a
leading supplier of specialty cellulose pulps. The Company believes that it
can continue to expand its market share, increase its profitability, and
decrease its exposure to cyclical downturns by pursuing the following key
strategic objectives:
Focus on Technically Demanding Niche Markets
The Company concentrates on high-end, technically demanding specialty pulp
niches in which only a limited number of cellulose pulp producers have the
ability to compete effectively. Buckeye's specialty cellulose pulps generally
command higher prices and tend to be less cyclical than commodity pulps.
Competition in these niches is based on product performance, technical
service, and, to a lesser extent, price. The Company continues to increase the
portion of its business in the most technically demanding (and therefore least
cyclical)
31
<PAGE>
applications, such as filters, ethers and acetate fibers. Consequently,
Buckeye is reducing its participation in the least technically demanding
specialty pulp applications.
Develop Proprietary Product Innovations
The Company focuses on the development of innovative and proprietary
products that are tailored to the specific chemical and physical requirements
of its customers. Buckeye's research and development activities concentrate on
developing new specialty cellulose pulps, enhancing existing pulps, and
creating new applications for its pulps. Company scientists are working on the
next generation of specialty cellulose pulps for both new and current
applications such as thin diapers, high-performance automotive filters, and
cellulose ethers.
The Company has an extensive record of new product development. The Company
developed one of the earliest commercial processes to purify cotton linters
for conversion into cellulose acetate used in making photographic film.
Buckeye was also among the first to employ cold caustic extraction technology
to produce high-purity wood pulps for use in rayon tire cord and food casings.
In addition, the Company was the first to commercialize mercerized southern
softwood pulp as the porosity-building fiber in automotive air and oil filter
applications. It was also the first to develop a new application to enable
fluff pulp to be used as the absorbent core of disposable diapers. Buckeye's
most recent product developments include a higher-purity pulp for food casings
and a high-viscosity ether pulp yielding superior thickening performance.
Strengthen Long-Term Alliances With Customers
The Company builds long-term alliances with customers who are market leaders
in their industries and in the geographic markets that they serve. Buckeye
works closely with customers through all stages of product development and
manufacture in order to tailor products to meet each customer's unique needs,
making substitution of competing products more difficult. The Company's
commitment to product quality, dedication to customer technical service, and
responsiveness to changing customer needs have enabled the Company to develop
and strengthen long-term alliances with its customers. Over 70% of Buckeye's
fiscal 1995 sales were to purchasers who have been customers of Buckeye for
over 30 years.
Expand Capacity To Support Growing Demand
Buckeye plans to expand its capacity and global presence in specialty
cellulose pulp markets through joint ventures with customers who are leaders
in their respective markets and through selective acquisitions. The Company
will also seek to increase capacity at its existing facilities. To further
this goal, the Company acquired the Temming Business in May 1996.
In April 1996, the Company entered into the Alpha Agreement. The addition of
Alpha's Lumberton, North Carolina facility would increase the Company's annual
capacity by approximately 50,000 metric tons. The Alpha Acquisition, if
consummated, will expand the Company's range of products in the customized
paper pulp market, and will provide synergies in operating costs, product
development and customer service. Subject to the satisfaction of certain
conditions and the expiration or other termination of the applicable waiting
period (including any extensions thereof) under the HSR Act, the consummation
of the Alpha Acquisition is expected to occur in early fiscal 1997. The Alpha
Agreement provides each of the parties thereto with an option to terminate the
agreement if the closing of the Alpha Acquisition has not occurred on or
before July 25, 1996. The Company is also considering other acquisition and
joint venture opportunities to expand capacity, although it has not yet
entered into any agreements to do so.
PRODUCTS
The Company believes that it is the only specialty cellulose pulp producer
offering both wood-based and cotton linter-based products and, accordingly,
produces a broader range of specialty pulps than any of its competitors.
Buckeye believes that it has a leading position in most of the high-end niche
markets in which it competes. The Company's specialty pulps can be broadly
grouped into chemical cellulose pulps, absorbent pulps
32
<PAGE>
and customized paper pulps. The following table summarizes the unique product
attributes and end-use applications of Buckeye's specialty cellulose pulps:
<TABLE>
<CAPTION>
PERCENTAGE
OF FISCAL
PRODUCT 1995 GROSS
GROUPS SALES UNIQUE PRODUCT ATTRIBUTES END-USE APPLICATIONS
------- ---------- ------------------------- --------------------
<S> <C> <C> <C>
CHEMICAL
CELLULOSE
PULPS 41%
Food Purity and strength Hot dog and sausage casings
Casings
Rayon Strength and heat stability Coat linings, fashion wear,
Filament and tire, belt, and hose
reinforcement
Ethers High viscosity, purity, and Thickeners for food, cosmetics,
solution clarity pharmaceuticals, and
construction materials
Acetate Permanent transparency High quality plastics,
Fibers, and uniformity transparent tape, photographic
Films, film and fiber
and
Plastics
ABSORBENT 39% Absorbency and fluid transport Disposable diapers, feminine
PULPS hygiene products, and adult
incontinence products
CUSTOMIZED
PAPER
PULPS 20%
Filters High porosity and product life Automotive, laboratory, and
industrial filters
Premium Aesthetics, color permanence, Letterhead, currency, stock
Papers and tear resistance certificates, and personal
stationery
</TABLE>
Chemical Cellulose Pulps
Chemical cellulose pulps, frequently referred to as dissolving pulps, are
dissolved in chemical solutions which modify the molecular properties of the
cellulose before it is regenerated to form an end-use product. Chemical
cellulose pulp, a highly purified material, is the basic ingredient in the
production of food casings, rayon filament, photographic film, transparent
tape, acetate plastics, and thickeners for food, cosmetics, and
pharmaceuticals. Chemical cellulose pulps are selected for these applications
for their chemical and molecular, rather than physical, properties.
The Company is one of the world's largest manufacturers of chemical
cellulose pulp. Buckeye believes that it is well positioned to participate in
the continued steady growth of the chemical cellulose markets in which it
competes.
Absorbent Pulps
Absorbent pulp, frequently referred to as fluff pulp, is used in
applications such as disposable diapers, feminine hygiene products, and adult
incontinence products. Absorbent pulps are selected for these applications for
their special physical properties. The Company believes that the long, thick-
walled slash pine fiber used in the production of the Company's fluff pulp
contributes to its excellent quality in terms of absorbency, fluid transport,
and structural integrity. The performance of Buckeye's fluff pulp allows
reduced quantities to be used in the manufacture of diapers relative to
competitive pulps.
33
<PAGE>
The Company is one of the world's major producers of absorbent pulps. While
the volume of fluff pulp used in disposable diapers is negatively impacted by
a move to thinner diapers, this has been more than offset by the increased use
of disposable diapers in less developed countries, such as China and India, as
well as growth in the use of training pants and adult incontinence products.
The Company's understanding of the technology of absorbent products positions
it to participate in this growth.
Customized Paper Pulps
Customized paper pulps are selected for their special physical properties in
filter and premium paper applications. Automotive air filters require high
porosity so that large volumes of air can flow freely through the filter while
extraneous particles are removed. Cotton linter pulps are used in currency
paper, stock certificates, and wedding invitations, because the papers need to
be long-lived, retain their original color, and resist tearing in use.
Additionally, the Company's customized paper pulps are used in other high-
performance applications, including laboratory and industrial filters, battery
separators, printed circuits, decorative laminates, maps and personal
stationery.
Buckeye is the world's only manufacturer of both wood-based and cotton
linter-based customized paper pulps. The special nature of the Company's
customized paper pulps allows the Company to participate effectively in the
relatively stable markets for these highly technical applications. Customized
paper pulps for automotive air and oil filters demonstrate steady growth
because a large majority of such filters are sold in the after-market and are
therefore less influenced by variations in the market for new cars.
SALES AND CUSTOMERS
The Company continually seeks to enhance its long-term relationships with
customers who are market or technological leaders in their respective
industries in order to further solidify the customer base for the Company's
products. Buckeye's products are marketed and sold through a highly trained
and technically skilled in-house sales force. The Company maintains sales
offices in Memphis, Tennessee and Geneva, Switzerland. The Company's worldwide
sales are diversified by geographic region as well as end-product application.
Buckeye's sales of specialty pulps are distributed to customers worldwide. The
Company's fiscal 1995 sales reflect this geographic diversity, with 30% of
sales in the United States, 30% in Europe, 26% in Asia and 14% in other
regions.
The high-end, technically demanding specialty pulp niches that Buckeye
serves require a higher level of sales and technical service support than do
commodity pulp sales. The Company's technically trained sales and service
engineers have worked for the Company for an average of over 20 years and
typically began their careers in the Company's manufacturing or product
development operations. These professionals work with customers in their
plants to design pulps tailored precisely to their product needs and
manufacturing processes.
Procter & Gamble, the world's largest diaper manufacturer, is the Company's
largest customer, accounting for 39% of the Company's fiscal 1995 net sales.
The Company and Procter & Gamble have entered into a long-term Pulp Supply
Agreement, which requires Procter & Gamble to purchase a specified tonnage
(currently substantially all of the Company's output) of the Company's fluff
pulp through the year 2002, subject to gradual reduction at either party's
option in the final two years of the agreement if it has not been renewed.
Shipments of fluff pulp under the Pulp Supply Agreement are made to Procter &
Gamble affiliates worldwide, as directed by Procter & Gamble. The price of the
fluff pulp sold pursuant to the Pulp Supply Agreement is based in the first
six years of the Pulp Supply Agreement's term on a formula specified in the
Pulp Supply Agreement. Pricing in the years 1999 and 2000 will be at the
higher of the contract formula price or market and pricing in the years 2001
and 2002 will be at market. The formula price has three components: (i) a
periodic margin adjustment, (ii) a general escalation component based on
Consumer Price Index changes, and (iii) a provision to adjust for all actual
changes in the price of timber, the major raw material component of the pulp
purchased under the contract. Buckeye's other large customers include Akzo
Nobel N.V. (rayon filament and cellulose ethers), A. Ahlstrom
34
<PAGE>
Corporation (automotive filter paper), Hercules Incorporated (cellulose
ethers), and Eastman Chemical Company (cellulose acetate).
Substantially all of the Company's worldwide sales are denominated in U.S.
dollars, and such sales are not subject to exchange rate fluctuations. Because
the cost of shipping is borne by the customer, Buckeye's margin on a sale to
any given customer is similar regardless of a customer's location. The
Company's products are shipped by rail, truck and ocean carrier.
RESEARCH AND DEVELOPMENT
The Company's research and development activities focus on developing new
specialty cellulose pulps, improving existing products, and enhancing process
technologies to further reduce costs and respond to environmental needs.
Buckeye has pilot plant facilities in which to produce experimental pulps for
qualification in customers' plants. The Company has a history of innovation in
specialty cellulose pulps. The Company's latest product developments include:
. a higher porosity automotive air filter pulp providing a 50% increase in
air permeability;
. a higher purity pulp for food casings;
. a highly uniform acetate wood pulp;
. a higher viscosity ether pulp yielding superior thickening performance;
and
. a process technology coupled with customized refining providing improved
cotton linter paper pulps.
RAW MATERIALS
Slash pine timber and cotton linters are the principal raw materials used in
the manufacture of the Company's specialty pulps. The region surrounding the
Foley Plant has a high concentration of slash pine timber, which enables
Buckeye to purchase adequate supplies of a species well suited to its products
at an attractive cost. In order to be better assured of a secure source of
wood at reasonable prices, the Company entered into the Timberlands Agreement
and the Timber Purchase Agreement (collectively, the "Timber Supply
Agreements") with Procter & Gamble. Under the terms of the Timberlands
Agreement, the Company agreed to purchase an annual percentage of the slash
pine timber harvest from specified timberlands near the Foley Plant, which
percentage is initially set at 85% and is gradually reduced to 60% by the
final year of the Timberlands Agreement. The purchase price for such timber is
established according to a market-based formula set forth in the Timberlands
Agreement and is annually adjusted to take into account pricing conditions in
the Florida counties in which the covered timberlands are located. In
addition, the Company has a right of first offer on a substantial portion of
slash pine timber located on the timberlands and not initially purchased
pursuant to the Timberlands Agreement. Under the terms of the Timber Purchase
Agreement, Buckeye agreed to purchase from Procter & Gamble Cellulose its
rights to harvest certain third party timber reserves at a purchase price
determined according to a formula provided in the Timber Purchase Agreement.
In fiscal 1995, timber acquired pursuant to the Timber Supply Agreements
accounted for approximately 33% of the Company's total wood purchases. These
Timber Supply Agreements grant easements to both the Company and the
timberland owners with respect to the areas covered by the Timber Supply
Agreements, including the Foley Plant, to access and use the areas as
necessary to conduct the harvesting operations contemplated by the Timber
Supply Agreements. The Timberlands Agreement has an initial term of ten years
and is subject to two renewals at Buckeye's option for five and three years,
respectively, which, if exercised, would result in the Timberlands Agreement's
extension through 2010. The term of the Timber Purchase Agreement expires on
May 29, 2003. As of July 8, 1994, all of Procter & Gamble's interests in the
timberlands subject to the Timber Supply Agreements, together with its rights
and obligations with respect to such Timber Supply Agreements (other than
certain expressly excluded obligations retained by Procter & Gamble), were
assigned to Foley Timberland Company, L.P., a third party unrelated to either
Procter & Gamble or the Company.
35
<PAGE>
The Company purchases cotton linters either directly from cotton seed oil
mills who remove these short, fuzzy linters before processing the seed into
vegetable oil and animal feed or indirectly through agents or brokers.
Generally, the Company purchases substantially all of its requirements of
cotton linters for the Memphis Plant domestically. The Gluckstadt Plant
purchases cotton linters principally from suppliers in the Middle East.
COMPETITION
The competitive environment in which the Company operates is concentrated
among a relatively few specialty pulp producers when compared with the much
larger commodity pulp market. Buckeye's competitors include Alfa Celulosa de
Mexico S.A. (Mexico), Borregaard Industries Ltd. (Norway), Georgia-Pacific
Corporation (U.S.), International Paper Company (U.S.), Louisiana-Pacific
Corporation (U.S.), Rayonier Inc. (U.S.), Sappi Limited (South Africa),
Southern Cellulose Products Inc. (U.S.), Tembec Inc. (Canada), Western Pulp
Limited Partnership (Canada), and Weyerhaeuser Company (U.S.). Competition in
specialty cellulose pulp markets is based on product performance, technical
service, and, to a lesser extent, price. Southern Cellulose Products Inc. was
recently acquired by Archer Daniels Midland, a subsidiary of which supplies
cotton linters to the Company.
The Company produces a broader range of specialty pulps than any of its
competitors and is the only specialty cellulose pulp producer offering both
wood-based and cotton linter-based products. Buckeye is the world's largest
cotton linter pulp producer. The Company believes that the number of specialty
pulp producers is unlikely to increase significantly in the foreseeable future
given the substantial investment and technological expertise required to enter
this market.
INTELLECTUAL PROPERTY
The Company currently holds four U.S. patents, three foreign patents and has
one application in preparation. In addition, it has access to royalty-free
licenses for five U.S. patents and two foreign patents. Buckeye intends to
maintain its patents, file the application in preparation, and file
applications for any future inventions which are deemed to be important to its
business operations. The Company has four trademarks, including the name
Buckeye(R).
PROPERTIES
Corporate Headquarters and Sales Offices. The Company's corporate
headquarters, research and development laboratories, and pilot plants are
located in Memphis, Tennessee. The Company owns the corporate headquarters,
the Memphis Plant, the Foley Plant and the Gluckstadt Plant and leases sales
offices in Geneva, Switzerland and distribution facilities in Savannah,
Georgia.
Memphis Plant. The Memphis Plant is located on a 60-acre site adjacent to
the headquarters complex. The Company believes that the Memphis Plant utilizes
a state-of-the-art continuous pulping process. During fiscal 1996, its
capacity was expanded to approximately 100,000 annual metric tons. The Memphis
Plant is ISO 9002 certified.
Foley Plant. The Foley Plant is located at Perry, Florida, on a 2,900 acre
site. The Company also owns 13,000 acres of real property near the plant site.
The Foley Plant is a state-of-the-art facility with two separate production
lines and has been continuously modernized and expanded to a current capacity
of approximately 450,000 annual metric tons. The Foley Plant has operated at
full capacity for over 30 years. In 1994, the Foley Plant was selected by
Plant Engineering Magazine and the American Institute of Plant Engineers as
the sole winner of the annual North American Maintenance Excellence Award. The
Foley Plant is ISO 9002 certified.
36
<PAGE>
Gluckstadt Plant. The Gluckstadt Plant is located in close proximity to the
Elbe River near Hamburg. The site is adjacent to the paper plant of Steinbeis
Temming Papier GmbH. Some utilities, including steam, power, water and waste
treatment, are shared between the plants pursuant to various utility
agreements. The Gluckstadt Plant is the largest specialty pulp plant based on
cotton linters in Europe. The plant is ISO 9002 certified.
EMPLOYEES
The Company's U.S. work force includes multi-skilled work teams at both its
Memphis and Foley plants. These multi-skilled teams are technically proficient
and are characterized by low turnover and a high commitment to the success of
the Company. Each employee has the opportunity to earn an annual bonus
predicated on Buckeye's success in achieving its business goals. The Company's
U.S. employees have an average tenure of 17 years.
On May 1, 1996, the Company employed approximately 1,400 individuals at its
facilities in Memphis, Tennessee; Perry, Florida; Savannah, Georgia;
Gluckstadt, Germany; and Geneva, Switzerland. Collective bargaining agreements
are in place at the Foley Plant with the United Paper Workers International
Union, AFL-CIO, Local #1192; and at the Memphis Plant with the Pulp and
Processing Workers of the Retail, Wholesale, and Department Store Union, AFL-
CIO, Local #910. The agreement for the Foley Plant covers the period April 1,
1995 to April 1, 1998. The agreement for the Memphis Plant covers the period
March 18, 1994 to March 18, 1997. Approximately 54% of the Company's employees
are members of these two unions. A Works Council provides employee
representation for all non-management workers at the Gluckstadt Plant.
The Foley Plant has not experienced any work stoppages due to labor disputes
in over 30 years, and the Memphis Plant has not experienced any work stoppages
due to labor disputes in over 45 years. The Company believes its relationship
with its employees is very good.
ENVIRONMENTAL MATTERS
Like its competitors in the pulp and paper industry, the Company's
facilities and operations are subject to extensive general and industry-
specific federal, state, local and foreign environmental laws and regulations.
Buckeye devotes significant resources to maintaining compliance with such
requirements and believes that its facilities and operations are in
substantial compliance with all such requirements. The Company expects that,
due to the nature of its operations, it will be subject to increasingly
stringent environmental requirements (including anticipated standards
applicable to waste water discharges and air emissions) and will continue to
incur substantial costs to comply with such requirements. Based upon its
understanding of current and anticipated requirements, the Company believes
that continued compliance with environmental requirements will not have a
material adverse effect on its business, results of operations or financial
condition and will not adversely affect the Company's competitive position,
because the Company's U.S. competitors are subject to similar requirements. In
addition, the nature of Buckeye's cotton linter pulp process historically has
not given rise to significant environmental compliance or liability issues.
However, given the uncertainties associated with predicting the scope of
future requirements and the retroactive nature of certain environmental
liabilities, there can be no assurance that the Company will not in the future
incur material environmental compliance costs or liabilities.
The Foley Plant discharges treated waste water into the Fenholloway River.
The Fenholloway River is currently classified under Florida statutes as a
Class 5 (industrial) stream. Under the federal Clean Water Act, the State of
Florida is required to perform an analysis every three years of the
feasibility of reclassifying the river to Class 3 ("fishable/swimmable")
status. Such an analysis recommending reclassification was completed in early
1994 and approved by the Florida Department of Environmental Protection at an
administrative hearing in December, 1994. At this administrative hearing, the
Company and the State of Florida reached agreement on a plan to attain Class 3
objectives, which relies primarily on the laying of extensive pipeline by the
Company to relocate the Foley Plant's waste water discharge point. The plan
also includes process changes in the Foley Plant
37
<PAGE>
designed to reduce the coloration of its waste water discharge, provide oxygen
enrichment of the effluent prior to discharge and restore certain wetlands
areas. The reclassification will not become effective until December 1997 (with
a final compliance deadline of December 1999) to allow Buckeye to obtain all
the necessary permits for implementation of the approved plan and to complete
construction of the pipeline and the treatment upgrades. The Company estimates
that implementation of the approved plan will result in capital expenditures of
approximately $39.0 million, the majority of which will likely be expended
during fiscal 1998 and fiscal 1999.
Prior to 1992, the Foley Plant discharged waste water to the Fenholloway
River under a federal permit issued in 1987. In June 1992, the EPA issued a
renewal permit imposing more stringent requirements, including the testing for
chronic toxicity and dioxin. Each of the Company and certain environmental
advocacy groups requested an evidentiary hearing before the EPA to contest
portions of the renewal permit. Certain aspects of all such requests were
granted in June 1994, although no date for the hearings has yet been set. The
provisions contested by the Company have been temporarily stayed pending the
hearings, and the Company continues to operate under the 1987 permit and the
uncontested provisions of the 1992 permit. The Company currently expects to
obtain a new permit through DEP's newly delegated NPDES permit program by the
end of 1996 and that issuance of this state permit will render moot the above-
described EPA permit renewal proceeding. The Company does not currently
anticipate any material capital expenditures associated with wastewater
discharge compliance other than those described above with respect to the
Fenholloway River reclassification.
In 1993, the EPA issued a set of proposed regulations for the pulp and paper
industry addressing the emissions of "hazardous air pollutants" under the Clean
Air Act and waste water discharges under the Clean Water Act, commonly known as
the "cluster rules." The Company is examining and evaluating the potential
impact of the cluster rules, as proposed, on its operations and capital
expenditures over the next several years. The Company believes that the
proposed cluster rules will likely be amended significantly prior to their
promulgation, which is currently anticipated to occur in 1997, with compliance
to be phased in between 1999 and 2002. Although the Company anticipates that
significant capital expenditures for environmental control equipment and
related costs will be required to comply with the cluster rules when
promulgated (which the Company currently projects will be approximately $14.0
million through fiscal 2000), such expenditures are not likely to have a
material adverse effect on the Company's business, results of operations or
financial condition.
The Company projects that it will spend approximately $53.0 million in
environmental capital expenditure costs through fiscal 2000, which expenditures
include the costs to implement its river reclassification plan (the $39.0
million expenditure mentioned above) and estimated costs to comply with the
cluster rule regulations, when promulgated.
The Foley Plant is on the EPA Comprehensive Environmental Response,
Compensation and Liability Information System ("CERCLIS") list of potential
hazardous substance release sites prepared pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"). The EPA
conducted a site investigation in early 1995. Although the Company considers it
unlikely that the Foley Plant will be listed on the CERCLA National Priorities
List and hence require remedial action, the possibility of such listing cannot
be ruled out. If the site were to be placed on the National Priorities List,
the costs associated with conducting a CERCLA remedial action could be
material.
The Foley Plant has also been the subject of certain additional environmental
and public health assessments, including a study being conducted by the federal
Agency for Toxic Substance and Disease Registry ("ATSDR"). ATSDR advised the
Company in early 1993 of its interest in conducting a public health assessment
at the Foley Plant. In the spring of 1994, ATSDR orally informed the Company
that its investigation had not identified any significant concerns related to
the Foley Plant or groundwater conditions. To date ATSDR has not issued any
reports.
38
<PAGE>
The Company is aware that Procter & Gamble Cellulose has been named a
potentially responsible party ("PRP") pursuant to CERCLA with respect to
certain disposal sites associated with its operations of the Foley
Plant and the Memphis Plant prior to the P&G Acquisitions. With respect to all
such sites, Procter & Gamble Cellulose has retained all liability and has
agreed to indemnify the Company. Buckeye has received no notices of potential
liability with respect to any site since the P&G Acquisitions.
Four lawsuits are currently pending in U.S. District Court in Tallahassee,
Florida alleging that hazardous substance releases associated with the Foley
Plant have adversely affected groundwater and property values. Previously, the
court had denied a motion seeking class certification and had dismissed a
number of similar lawsuits against the Company for failure to meet a $50,000
damage threshold for federal jurisdiction. The Company believes that the
remaining four lawsuits are without merit and is defending against them
vigorously. There can be no assurance, however, that adverse judgments will
not be rendered in these matters or that the damages associated with such
judgments would not be material.
In connection with the acquisition of the Foley Plant from the C&S Division,
Procter & Gamble Cellulose agreed to provide certain limited environmental
indemnification rights to the Company, which rights apply, among other things,
to all pre-acquisition offsite disposal of waste from the Foley Plant. In
connection with the Company's acquisition of the Memphis Plant, Procter &
Gamble Cellulose agreed to provide a comprehensive environmental
indemnification to Buckeye with respect to environmental liabilities
(including any "Superfund" liabilities for offsite disposal of waste) arising
from the operation of the Memphis Plant prior to such acquisition.
As of March 31, 1996, the Company had established reserves of $4.2 million
to address certain environmental matters. Because an environmental reserve is
not established until a liability is determined to be probable and reasonably
estimable, not all potential future environmental liabilities are covered by
the Company's reserves. Accordingly, there can be no assurance that the
Company's environmental reserves will be sufficient to meet the Company's
obligations, and additional earnings charges are possible.
LEGAL PROCEEDINGS
The Company is a party to various claims, complaints and other legal actions
that have arisen in the normal course of business from time to time. Other
than the lawsuits relating to the Foley Plant discussed in "Environmental
Matters," the Company is not currently involved in any legal proceedings,
which, in the aggregate, could be expected to have a material adverse effect
on its business, results of operations or financial position.
39
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company's directors and executive officers as of May 31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert E. Cannon 66 Chairman of the Board, Chief Executive Officer
and Director
David B. Ferraro 58 President, Chief Operating Officer and Director
Herman P. van Eck 64 Vice President, Sales
George B. Ellis 55 Vice President, Manufacturing
Samuel M. Mencoff 39 Director
Justin S. Huscher 42 Director
Red Cavaney 53 Director
Henry F. Frigon 61 Director
Harry J. Phillips, 66 Director
Sr.
</TABLE>
The Board currently consists of seven directors, who are divided into three
classes as nearly equal in number as possible. At each annual meeting of
stockholders, successors to the class of directors whose term expires at such
meeting will be elected to serve for three-year terms or until their successors
are duly elected and qualified. The Board has the power to appoint the officers
of the Company. Each officer will hold office for such term as may be
prescribed by the Board and until such person's successor is chosen and
qualified or until such person's death, resignation or removal. There are two
committees of the Board: the Compensation Committee and the Audit Committee.
Robert E. Cannon has served as Chairman and Chief Executive Officer of the
Company since the P&G Acquisitions in March 1993. Prior to the P&G
Acquisitions, Mr. Cannon served as Dean of the College of Management, Policy
and International Affairs at Georgia Tech from 1991 through 1992. Mr. Cannon
retired from Procter & Gamble in 1991 as a Senior Vice President of Procter &
Gamble, a position he had occupied since 1989. From 1981 through 1989, Mr.
Cannon served as Group Vice President of Procter & Gamble Industrial Products,
a division which included the operations of the Predecessor. Mr. Cannon also
served as President of the C&S Division from 1971 through 1981 and joined
Procter & Gamble in 1954.
David B. Ferraro has served as President and Chief Operating Officer of the
Company since the P&G Acquisitions in March 1993. Prior to the P&G
Acquisitions, Mr. Ferraro served as Manager of Strategic Planning of Procter &
Gamble from 1991 through 1992. Mr. Ferraro served as the C&S Division's
President from 1989 through 1991, as its Executive Vice President and Manager
of Commercial Operations from 1987 through 1989 and as its Comptroller
beginning in 1973. Mr. Ferraro joined Procter & Gamble in 1964 and held various
management positions.
Herman P. van Eck has served as Vice President, Sales of the Company since
the P&G Acquisitions in March 1993. Mr. van Eck served as Manager of European
Sales of the C&S Division from 1988 until the P&G Acquisitions. Mr. van Eck
joined Procter & Gamble in 1957 and held various sales management positions.
George B. Ellis has served as Vice President, Manufacturing of the Company
since the P&G Acquisitions in March 1993. Prior thereto, Mr. Ellis had served
as Vice President, Product Supply of the C&S Division since 1988. Mr. Ellis
joined Procter & Gamble in 1962 and held various engineering, operations and
manufacturing management positions in the C&S Division.
40
<PAGE>
Samuel M. Mencoff has served as a Director of the Company since the P&G
Acquisitions in March 1993. Mr. Mencoff has been principally employed as a
Vice President of Madison Dearborn Partners, Inc. ("MDP Inc."), the general
partner of Madison Dearborn Partners, L.P. ("MDP"), the general partner of
MDCP, since January 1993. From November 1987 until January 1993, Mr. Mencoff
served as Vice President of First Chicago Venture Capital. Mr. Mencoff is a
member of the operating committees of the general partners of Huntway
Partners, L.P. and Golden Oak Mining Company, L.P., respectively, and a member
of the board of directors of Bay State Paper Holding Company and Riverwood
International Corporation.
Justin S. Huscher has served as a Director of the Company since the P&G
Acquisitions in March 1993. Mr. Huscher has been principally employed as a
Vice President of MDP Inc. since January 1993. From April 1990 until January
1993, Mr. Huscher served as Senior Investment Manager of First Chicago Venture
Capital. Mr. Huscher is a member of the operating committees of the general
partners of Huntway Partners, L.P. and Golden Oak Mining Company, L.P.,
respectively, and a member of the board of directors of Bay State Paper
Holding Company and HomeSide, Inc.
Red Cavaney has served as a Director of the Company since May 1996. Mr.
Cavaney currently acts as President, Chief Executive Officer and a director of
the American Plastics Council, positions he has held since October 1994. Prior
to that time, he served as President of the American Forest & Paper
Association ("AF&PA") since its formation in January 1993 and in a variety of
positions, including as President, of the AF&PA's predecessor, the American
Paper Institute, since March 1983. Mr. Cavaney is also a member of the board
of directors of the U.S. Chamber of Commerce, The National Plastics Center &
Museum, the American Society of Association Executives and the Institute for
Research on the Economics of Taxation.
Henry F. Frigon has served as a Director of the Company since May 1996. Mr.
Frigon served as Executive Vice President--Corporate Development and Strategy
and Chief Financial Officer of Hallmark Cards, Inc., positions he held from
1991 to 1995. Prior to that time, he served as President and Chief Executive
Officer of BATUS Inc. beginning in 1983. Mr Frigon is also a member of the
board of directors of Hallmark Cards, Inc., Crown Media, Inc., H&R Block Inc.,
Dimon Inc., Group Technologies Corp. and The Circle K Corp.
Harry J. Phillips, Sr. has served as a Director of the Company since May
1996. Mr. Phillips currently acts as Chairman of the Executive Committee of
the board of directors of Browning-Ferris Industries, Inc. ("Browning-
Ferris"), a position he has held since 1988. Prior to that time, he served as
Chairman and Chief Executive Officer of Browning-Ferris. Mr. Phillips is also
a member of the board of directors of National Commerce Bancorporation,
National Bank of Commerce and RFS Hotel Investors, Inc.
There are no familial relationships between any of the foregoing persons.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company or its subsidiaries are not
entitled to receive any fees for serving as directors. Non-employee directors
of the Company are currently not entitled to receive any fees for serving as
directors. All directors are reimbursed for out-of-pocket expenses related to
their service as directors. Non-employee directors will be entitled to
participate in a formula stock option plan for non-employee directors covering
an aggregate of 200,000 shares of Common Stock (the "Formula Plan").
Under the Formula Plan, an option to purchase 25,000 shares will be
automatically granted to each non-employee director when he or she is elected
or appointed to the Board. The director's right to exercise 5,000 shares will
vest immediately upon grant. Thereafter, the right to exercise an additional
5,000 shares will vest at each of the four succeeding anniversaries of the
grant to such director. The option price per share of Common Stock under the
Formula Plan will be 100% of the fair market value of the Common Stock at the
date of grant. Each option granted under the Formula Plan will be exercisable
for ten years after the date of grant.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock immediately prior to and immediately following
the Stock Transactions by (i) each person or entity who is known to the
Company to be the beneficial owner of five percent or more of the Common
Stock, (ii) each director of the Company, (iii) the chief executive officer of
the Company and the three other executive officers of the Company, (iv) all
directors and executive officers of the Company as a group and (v) the Selling
Stockholder. To the knowledge of the Company, each of such stockholders has
sole voting and investment power as to the shares shown unless otherwise
noted. Unless otherwise noted, the address of each holder of five percent or
more of the Company's stock is the Company's corporate address.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO STOCK SHARES BENEFICIALLY OWNED
TRANSACTIONS(A) AFTER STOCK TRANSACTIONS(B)
-----------------------------SHARES BEING -----------------------------
NUMBER OF PERCENT OF OFFERED NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL HEREBY SHARES TOTAL
---------------- --------- ------------------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Madison Dearborn Capital
Partners, L.P.(c)...... 7,290,313 34.1 2,845,157 800,000 4.2
Samuel M. Mencoff(d).... 7,290,313 34.1 2,845,157 800,000 4.2
Justin S. Huscher(d).... 7,290,313 34.1 2,845,157 800,000 4.2
Robert E. Cannon(e)..... 3,970,771 18.5 -- 4,987,000 26.0
David B. Ferraro(f)..... 1,097,315 5.1 -- 1,232,909 6.4
Herman P. van Eck(g).... 255,864 1.2 -- 257,864 1.3
George B. Ellis(h)...... 312,958 1.5 -- 362,958 1.9
Red Cavaney(i).......... 5,600 * -- 5,600 *
Henry F. Frigon(i)...... 7,000 * -- 7,000 *
Harry J. Phillips,
Sr.(i)................. 19,500 * -- 19,500 *
All directors and
executive officers as a
group
(9 persons)(j)(k)...... 12,703,457 59.3 2,845,157 7,672,831 40.1
</TABLE>
- --------
*Less than one percent.
(a) Based on 21,407,223 shares of Common Stock outstanding prior to the Stock
Transactions. Options to purchase 15,000 shares of Common Stock will be
exercisable within 60 days of the consummation of the Stock Transactions.
(b) Based on 19,147,336 shares of Common Stock outstanding after the Stock
Transactions.
(c) All of such shares are held of record by MDCP. MDCP is a limited
partnership. MDP is the general partner of MDCP. Investment and voting
control over securities owned by MDCP is shared by a committee of the
limited partners of MDP (the "L.P. Committee"). MDP Inc. is the general
partner of MDP and exercises voting control over securities owned directly
or indirectly by MDP. The address of MDCP is Three First National Plaza,
Suite 1330, Chicago, Illinois 60602.
(d) All of such shares are held of record by MDCP. Messrs. Mencoff and Huscher
are members of the L.P. Committee. Messrs. Mencoff and Huscher may
therefore be deemed to share investment and voting control with respect to
the shares of Common Stock owned by MDCP and may therefore be deemed to
have beneficial ownership of shares of Common Stock owned by MDCP. Each of
Messrs. Mencoff and Huscher expressly disclaims beneficial ownership of
such shares of Common Stock. The business address of such person is c/o
MDP Inc., Three First National Plaza, Suite 1330, Chicago, Illinois 60602.
(e) Includes 1,873,292 shares held by the Robert E. Cannon Grantor Retained
Annuity Trust, Robert Howard Cannon, Trustee, and 1,873,447 shares held by
the Kathryn Gracey Cannon Grantor Retained Annuity Trust, Robert Howard
Cannon, Trustee. Kathryn Gracey Cannon is the wife of, and Robert Howard
Cannon is the son of, Robert E. Cannon. The address of each such trust is
432 East Racquet Club Place, Memphis, Tennessee 38117. Mr. Cannon and such
trusts will purchase an aggregate of 1,016,229 shares of Common Stock in
the Individuals' Stock Purchase and may purchase additional shares in the
Offering.
(f) Includes 442,085 shares held by the David B. Ferraro Grantor Retained
Annuity Trust, Barbara A. Ferraro, Trustee. Barbara A. Ferraro is the wife
of David B. Ferraro. Mr. Ferraro and such trust will purchase an aggregate
of 135,594 shares of Common Stock in the Individuals' Stock Purchase and
may purchase additional shares in the Offering.
(g) Mr. van Eck will purchase 2,000 shares of Common Stock in the Individuals'
Stock Purchase and may purchase additional shares in the Offering.
(h) Mr. Ellis will purchase 50,000 shares of Common Stock in the Individuals'
Stock Purchase and may purchase additional shares in the Offering.
(i) Includes 5,000 shares issuable upon exercise of options granted under the
Formula Plan.
(j) Includes 15,000 shares issuable upon exercise of options granted under the
Formula Plan.
(k) Does not include shares beneficially controlled by other officers of the
Company which represent an aggregate of approximately 7.3% of the Common
Stock after giving effect to the Individuals' Stock Purchase.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the P&G Acquisitions, the Company and MDP entered into a
professional services agreement pursuant to which the Company paid to MDP a
$1.0 million fee as compensation for MDP's commitment to provide financing to
repay certain indebtedness of the Company in the event alternative financing
was not available by a certain date.
The Company was party to a Corporate Services Agreement with Buckeye Florida
Partners from the time of the P&G Acquisitions until the 1995 Business
Combination Transactions pursuant to which the Company provided Buckeye
Florida Partners with certain sales and administrative services. Under this
agreement, the Company performed all of the sales functions for Buckeye
Florida Partners' products and received a sales commission on certain of such
products. During fiscal 1995, commission income recorded by the Company on
Buckeye Florida Partners' sales was approximately $7.5 million. The Company
also provided to Buckeye Florida Partners corporate management, research,
administrative and other services substantially similar to those historically
provided to the Foley Plant by the C&S Division. Buckeye Florida Partners paid
to the Company an allocated cost of such services based upon the tonnage of
pulp shipped by the Foley Plant. During fiscal 1995, costs allocated to
Buckeye Florida Partners for such services were approximately $12.5 million.
All intercompany transactions have been eliminated from the Company's
financial statements.
Messrs. Cannon and Ferraro have each been issued Master Promissory Notes by
Union Planters National Bank (the "Bank"), both dated March 21, 1994, in the
amounts of approximately $2.3 million and $600,000, respectively, or such
lesser amounts as may be periodically requested by each of the respective
noteholders. Each of the notes is secured, pursuant to two security agreements
between the Bank and Buckeye Florida Partners dated the same date as the
notes, by Bank certificates of deposit in the name of Buckeye Florida Partners
in the amounts of approximately $2.3 million and $600,000, respectively. Both
of the notes, which mature on July 1, 1998, bear interest at a per annum rate
equal to 200 basis points in excess of the respective amounts paid by the Bank
on the certificates of deposit used as collateral for the notes. Such rates
are automatically adjusted every six months to correspond with the adjustments
made at such time to the rates payable on the certificates of deposit. As
security for Buckeye Florida Partners' having provided these certificates of
deposit as collateral for the notes issued to Messrs. Cannon and Ferraro,
Buckeye Florida Partners has entered into Pledge and Security Agreements with
each of Messrs. Cannon and Ferraro, both dated March 22, 1994, pursuant to
which such individuals have pledged specified numbers of shares of Common
Stock, together with subsequently acquired shares, dividend and other rights
with respect thereto, to Buckeye Florida Partners. Subsequent to the 1995
Business Combination Transactions, Messrs. Cannon and Ferraro have been
required to maintain only such shares of Common Stock as are necessary to
provide a collateral amount of at least 115% of the amount of the certificates
of deposit securing their respective note obligations. The pledge and security
agreements will terminate upon payment in full of all amounts payable in
connection with the notes.
In connection with the formation of Buckeye Florida Corporation, MDCP
purchased a $4.0 million promissory note dated March 16, 1993. On March 22,
1994, Buckeye Florida Corporation repaid to MDCP approximately $4.0 million of
principal and accrued interest on such note and issued to MDCP a replacement
promissory note of approximately $482,000. This note, together with accrued
interest thereon, was repaid in connection with the 1995 Business Combination
Transactions.
In connection with the Stock Transactions, the Company and MDCP have entered
into an agreement under which BKI Investment will repurchase 2,259,887 shares
of Common Stock held by MDCP pursuant to the Company Stock Repurchase. See
"The Company Stock Repurchase and the Related Transactions."
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DESCRIPTION OF CERTAIN INDEBTEDNESS
BANK CREDIT FACILITY
General. The Company has entered into the Bank Credit Facility with a group
of lenders (the "Lenders"). The following is a summary of the terms governing
the Bank Credit Facility, certain provisions of which will change upon the
execution of proposed amendments to the Bank Credit Facility presently being
negotiated by the Company. The Bank Credit Facility provides for revolving
credit loans to the Company in an aggregate amount not to exceed $135.0
million minus the principal amount of Existing Senior Notes outstanding in
excess of $5.0 million. Upon completion of the Alpha Acquisition, such amount
will be increased to $155.0 million. Up to $45.0 million of the Bank Credit
Facility is available for the issuance of letters of credit on behalf of the
Company. In addition, up to $10.0 million of the Bank Credit Facility is
available for swing line loans. The amount available to the Company under the
Bank Credit Facility will be reduced, and any outstanding loans will be
required to be prepaid, to the extent that the Company receives net asset sale
proceeds in excess of both $3.0 million in any year and $15.0 million in the
aggregate (over and above the permitted $3.0 million per year) and occurring
after November 28, 1995, unless such net proceeds are used to acquire other
assets within 270 days after the date of the transaction giving rise to such
net asset sale proceeds. The Company may repay the Bank Credit Facility in
whole or in part at any time without premium or penalty.
Security. The Bank Credit Facility is unsecured; however, it is guaranteed
by each of the Company's domestic subsidiaries and, under certain
circumstances, the Company is required to pledge up to 65% of the stock of
certain foreign subsidiaries acquired by the Company.
Maturity; Reduction of Commitments. The Bank Credit Facility will mature on
November 27, 2000. Beginning on January 1, 1998, the Bank Credit Facility
commitment will be reduced by $3.75 million per quarter through maturity.
Interest. The interest rate applicable to borrowings (other than swing line
loans) under the Bank Credit Facility is the agent's prime rate minus 1/2% or
LIBOR plus, in the case of LIBOR loans, a margin determined on the basis of
the ratio of the Company's total funded indebtedness to its EBITDA. The margin
applicable to LIBOR loans ranges from 1/2% to 1.0%. The interest rate
applicable to swing line loans is the greater of the agent's (a) prime rate
minus 1/2% or (b) the federal funds rate (as defined in the agreement relating
to the Bank Credit Facility) plus 1/2%. During the continuance of an event of
default, the applicable interest rate will be 2.0% above the interest rate
otherwise in effect. Interest is computed based on actual days elapsed in a
360-day year, payable quarterly in arrears in the case of prime rate loans and
on the last day of each interest period in the case of LIBOR loans.
Covenants. The Bank Credit Facility contains covenants customary for
financings of this type, including, without limitation, minimum consolidated
net worth, maximum ratio of consolidated total debt to consolidated EBITDA,
minimum consolidated EBITDA and limitations on capital expenditures,
incurrence of indebtedness, liens, contingent obligations, assets sales,
dividends and distributions to the Company's stockholders, payments to
affiliates, issuance of stock and distributions by subsidiaries, investments,
guarantees, voluntary prepayment of other indebtedness, loans and advances,
leases, acquisitions, mergers and consolidations and leasing transactions.
Events of Default. The Bank Credit Facility contains events of default
customary for financings of this type, including, without limitation, with
respect to failure to pay principal or interest, materially false
representations or warranties, failure to observe covenants and other terms of
the Bank Credit Facility, cross-default to other indebtedness, bankruptcy,
insolvency, ERISA violation, the incurrence of material judgments, change in
control and environmental issues.
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NEW NOTES
The Company is concurrently offering, by means of a separate prospectus (the
"Notes Prospectus"), the New Notes in an aggregate principal amount of $100.0
million. The New Notes, which are senior subordinated notes, will be issued
under an indenture (the "New Notes Indenture") among the Company and Union
Planters National Bank, as trustee (the "Trustee"), a copy of the form of
which is filed as an exhibit to the Registration Statement of which the Notes
Prospectus is a part. The New Notes Indenture is subject to, and is governed
by, the Trust Indenture Act of 1939, as amended. The following summary of the
material provisions of the New Notes Indenture does not purport to be
complete, and is subject to, and qualified in its entirety by reference to,
all of the provisions of the New Notes Indenture, including the definition of
certain terms therein and those terms made a part of the New Notes Indenture
by the Trust Indenture Act of 1939, as amended.
General. The New Notes will mature on September 15, 2008, will be limited to
$100.0 million aggregate principal amount and will be unsecured obligations of
the Company.
Sinking Fund. The New Notes Indenture will not provide for a sinking fund.
Optional Redemption. The New Notes will be subject to redemption at any time
on or after September 15, 2001, at the option of the Company, in whole or in
part, on not less than 30 nor more than 60 days' prior notice in amounts of
$1,000 or an integral multiple thereof at declining redemption prices set
forth in the New Notes Indenture, together with accrued and unpaid interest to
the redemption date.
In addition, up to $30.0 million aggregate principal amount of the New Notes
will be redeemable on or prior to September 15, 1999, at the option of the
Company, from the net proceeds of issuances in one or more Public Equity
Offerings (as defined in the New Notes Indenture) of Common Stock by the
Company after the date the New Notes are issued, within 60 days thereof at a
redemption price to be set forth in the New Notes Indenture, together with
accrued and unpaid interest, if any, to the redemption date; provided that,
after giving effect to any such redemption, at least $70.0 million aggregate
principal amount of the New Notes remains outstanding.
Change in Control Put. If a Change in Control (as defined in the New Notes
Indenture) shall occur at any time, then each holder of the New Notes shall
have the right to require that the Company purchase such holder's New Notes in
whole or in part in integral multiples of $1,000, at a purchase price in cash
in an amount equal to 101% of the principal amount of such New Notes, plus
accrued and unpaid interest, if any, to the date of purchase.
Subordination. The indebtedness represented by the New Notes will be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined in the New Notes Indenture) of the Company, including
the indebtedness under the Bank Credit Facility and the Existing Senior Notes.
The New Notes will be senior subordinated indebtedness of the Company ranking
pari passu with all other existing and future senior subordinated indebtedness
of the Company, including the Existing Senior Subordinated Notes, and senior
to all existing and future Subordinated Indebtedness (as defined in the New
Notes Indenture) of the Company. The New Notes will also be effectively
subordinated to all indebtedness of the Company's subsidiaries.
Certain Covenants. The New Notes Indenture will contain a number of
covenants restricting the operations of the Company and its subsidiaries,
including covenants with respect to the following matters: (i) limitation on
Indebtedness (as defined in the New Notes Indenture); (ii) limitation on
restricted payments (in the form of the declaration or payment of certain
dividends or distributions, the purchase, redemption or other acquisition of
any capital stock of the Company (or any affiliate thereof), the voluntary
prepayment of subordinated Indebtedness, the incurrence of any guarantee of
Indebtedness of any affiliate of the Company or an investment in any other
person); (iii) limitation on transactions with affiliates; (iv) limitation on
liens; (v) limitation on sale of assets; (vi) limitation on senior
subordinated indebtedness; (vii) limitation on issuances of certain guarantees
of subordinated and pari passu indebtedness; (viii) requirement to repurchase
the New Notes, at the option of the
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holders of the New Notes, upon a Change in Control; (ix) limitation on capital
stock issuances, sales and transfers by subsidiaries; (x) limitation on
dividends and other payment restrictions affecting subsidiaries; (xi)
limitation on investments by the Company and its subsidiaries in Unrestricted
Subsidiaries (as defined in the New Notes Indenture); and (xii) limitations on
consolidations, mergers and sale of substantially all assets.
Event of Default. The events of default ("Events of Default") under the New
Notes Indenture will include provisions that are typical of senior subordinated
debt financings. Upon occurrence of an Event of Default, the Trustee and
holders of not less than 25% in aggregate principal amount of outstanding New
Notes may, and the Trustee at the request of such holders shall, declare all
unpaid principal of, premium, if any, and accrued interest on all New Notes to
be due and payable as provided in the New Notes Indenture.
EXISTING SENIOR SUBORDINATED NOTES
In November 1995, the Company issued and sold $150.0 million principal amount
of the Existing Senior Subordinated Notes pursuant to an indenture dated as of
November 28, 1995 (the "Existing Senior Subordinated Notes Indenture") between
the Company and Union Planters National Bank, as trustee (the "Existing Senior
Subordinated Notes Trustee"), a copy of which is filed as an exhibit to the
Registration Statement. The following summary of the material provisions of the
Existing Senior Subordinated Notes Indenture as currently in effect does not
purport to be complete, and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Existing Senior Subordinated Notes
Indenture.
General. The Existing Senior Subordinated Notes mature on December 15, 2005,
are limited to $150.0 million aggregate principal amount and are unsecured
obligations of the Company. At March 31, 1996, $150.0 million principal amount
of the Existing Senior Subordinated Notes were outstanding.
Sinking Fund. The Existing Senior Subordinated Notes Indenture does not
provide for a sinking fund.
Optional Redemption. The Existing Senior Subordinated Notes are subject to
redemption at any time on or after December 15, 2000, at the option of the
Company, in whole or in part, on not less than 30 nor more than 60 days' prior
notice in amounts of $1,000 or an integral multiple thereof at declining
redemption prices set forth in the Existing Senior Subordinated Notes
Indenture, together with accrued and unpaid interest to the redemption date.
In addition, up to $50.0 million aggregate principal amount of the Existing
Senior Subordinated Notes are redeemable on or prior to December 15, 1998, at
the option of the Company, from the net proceeds of issuances in one or more
Public Equity Offerings (as defined in the Existing Senior Subordinated Notes
Indenture) of Common Stock by the Company after the date the Existing Senior
Subordinated Notes were issued, within 60 days thereof at a redemption price to
be set forth in the Existing Senior Subordinated Notes Indenture, together with
accrued and unpaid interest, if any, to the redemption date; provided that,
after giving effect to any such redemption, at least $90.0 million aggregate
principal amount of the Existing Senior Subordinated Notes remain outstanding.
Change in Control Put. If a Change in Control (as defined in the Existing
Senior Subordinated Notes Indenture) shall occur at any time, then each holder
of the Existing Senior Subordinated Notes shall have the right to require that
the Company purchase such holder's Existing Senior Subordinated Notes in whole
or in part in integral multiples of $1,000, at a purchase price in cash in an
amount equal to 101% of the principal amount of such Existing Senior
Subordinated Notes, plus accrued and unpaid interest, if any, to the date of
the purchase.
Subordination. The indebtedness represented by the Existing Senior
Subordinated Notes is subordinated in right of payment to the prior payment in
full of all Senior Indebtedness (as defined in the Existing Senior Subordinated
Notes Indenture) of the Company, including the indebtedness under the Bank
Credit Facility and the outstanding Existing Senior Notes. The Existing Senior
Subordinated Notes are senior subordinated indebtedness of the Company ranking
pari passu with all other existing and future senior subordinated
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indebtedness of the Company, including the New Notes, and senior to all
existing and future Subordinated Indebtedness (as defined in the Existing
Senior Subordinated Notes Indenture) of the Company. The Existing Senior
Subordinated Notes are also effectively subordinated to all indebtedness of the
Company's subsidiaries.
Certain Covenants. The Existing Senior Subordinated Notes Indenture contains
a number of covenants restricting the operations of the Company and its
subsidiaries, including covenants with respect to the following matters: (i)
limitation on Indebtedness (as defined in the Existing Senior Subordinated
Notes Indenture); (ii) limitation on restricted payments (in the form of the
declaration or payment of certain dividends or distribution, the purchase,
redemption or other acquisition of any capital stock of the Company (or any
affiliate thereof), the voluntary prepayment of subordinated Indebtedness, the
incurrence of any guarantee of Indebtedness of any affiliate of the Company or
an investment in any other person); (iii) limitation on transactions with
affiliates; (iv) limitation on liens; (v) limitation on sale of assets; (vi)
limitation on senior subordinated indebtedness; (vii) limitation on issuances
of certain guarantees of subordinated and pari passu indebtedness; (viii)
requirement to repurchase the Existing Senior Subordinated Notes, at the option
of the holders of the Existing Senior Subordinated Notes, upon a Change in
Control; (ix) limitation on capital stock issuances, sales and transfers by
subsidiaries; (x) limitation on dividends and other payment restrictions
affecting subsidiaries; (xi) limitation on investments by the Company and its
subsidiaries in Unrestricted Subsidiaries (as defined in the Existing Senior
Subordinated Notes Indenture); and (xii) limitations on consolidations, mergers
and sale of substantially all assets.
Events of Default. The events of default ("Existing Senior Subordinated Notes
Events of Default") under the Existing Senior Subordinated Notes Indenture
include provisions that are typical of senior subordinated debt. Upon
occurrence of an Existing Senior Subordinated Notes Event of Default, the
Existing Senior Subordinated Notes Trustee and holders of not less than 25% in
aggregate principal amount of outstanding Existing Senior Subordinated Notes
may, and the Existing Senior Subordinated Notes Trustee at the request of such
holders shall, declare all unpaid principal of, premium, if any, and accrued
interest on all Existing Senior Subordinated Notes to be due and payable as
provided in the Existing Senior Subordinated Notes Indenture.
EXISTING SENIOR NOTES
In May 1993, the Company issued and sold $70.0 million principal amount of
the Existing Senior Notes. Prior to November 1995, the Company repurchased $5.3
million principal amount of Existing Senior Notes in open market transactions.
In November 1995, the Company repurchased $45.6 million aggregate principal
amount of Existing Senior Notes pursuant to a tender offer and amended certain
covenants of the Existing Senior Notes Indenture to conform generally with
similar covenants contained in the Existing Senior Subordinated Notes
Indenture. In January 1996, the Company repurchased $12.2 million aggregate
principal amount of Existing Senior Notes with the net proceeds from the
Company's sale of Common Stock in its November 1995 initial public stock
offering. At March 31, 1996, $6.9 million principal amount of the Existing
Senior Notes was outstanding. A copy of the indenture pursuant to which the
Existing Senior Notes were issued, as amended to date (the "Existing Senior
Notes Indenture" and, together with the Existing Senior Subordinated Notes
Indenture, the "Existing Notes Indentures") is filed as an exhibit to the
Registration Statement.
The Existing Senior Notes mature on May 15, 2001 and are unsecured
obligations of the Company. The Existing Senior Notes are not subordinated in
right of payment to any other indebtedness of the Company. The Existing Senior
Notes Indenture contains a number of covenants restricting the operations of
the Company and its subsidiaries which are generally similar to the covenants
contained in the Existing Senior Subordinated Notes Indenture. The Existing
Senior Notes Indenture also provides for a sinking fund, a change of control
put, the optional redemption of the Existing Senior Notes by the Company at any
time on or after May 15, 1998, and events of default provisions that are
typical of senior debt financings.
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DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The total amount of authorized capital stock of the Company consists of
60,000,000 shares of Common Stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock").
Upon consummation of this Offering and the Company Stock Repurchase,
19,147,336 shares of Common Stock will be issued and outstanding and no shares
of Preferred Stock will be outstanding. The following summary of certain
provisions of the Company's capital stock describes certain material
provisions of, but does not purport to be complete and is subject to, and
qualified in its entirety by, the Amended and Restated Certificate of
Incorporation and the By-laws of the Company that are included as exhibits to
the Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law.
COMMON STOCK
Upon consummation of this Offering and the Company Stock Repurchase, there
will be 19,147,336 shares of Common Stock outstanding held by approximately
holders of record. The issued and outstanding shares of Common Stock are
validly issued, fully paid and nonassessable. Subject to the prior rights of
the holders of any Preferred Stock, the holders of outstanding shares of
Common Stock are entitled to receive dividends out of assets legally available
therefor at such times and in such amounts as the Board may from time to time
determine. See "Price Range of Common Stock and Dividend Policy." The shares
of Common Stock are not redeemable or convertible, and the holders thereof
have no preemptive or subscription rights to purchase any securities of the
Company. Upon liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to receive pro rata the assets of the
Company which are legally available for distribution, after payment of all
debts and other liabilities and subject to the prior rights of any holders of
Preferred Stock then outstanding. Each outstanding share of Common Stock is
entitled to vote on all matters submitted to a vote of stockholders.
The Common Stock is listed for trading on the New York Stock Exchange under
the symbol "BKI."
PREFERRED STOCK
The Board may, without further action by the Company's stockholders, from
time to time, authorize the issuance of shares of Preferred Stock in series
and may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds
available for the payment of dividends on shares of Common Stock. Holders of
shares of Preferred Stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of shares of Common Stock. Under certain
circumstances, the issuance of shares of Preferred Stock may render more
difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Company's securities
or the removal of incumbent management. The Board, without stockholder
approval, may issue shares of Preferred Stock with voting and conversion
rights which could adversely affect the holders of shares of Common Stock.
Currently, there are no shares of Preferred Stock outstanding, and the Company
has no present intention to issue any shares of Preferred Stock.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AND BY-LAWS AND STATUTORY PROVISIONS
The Amended and Restated Certificate of Incorporation provides that the
Board will be divided into three classes, with each class, after a
transitional period, serving for three years, and one class being elected each
year. A majority of the remaining directors then in office, though less than a
quorum, or the sole remaining director, will be empowered to fill any vacancy
on the Board which arises during the term of a director. The provision for a
classified board may be amended, altered or repealed only upon the affirmative
vote of the holders of at least 80% of the outstanding shares of the voting
stock of the Company. The classification of the Board may discourage a third
party from making a tender offer or otherwise attempting to gain control of
the Company and may have the effect of maintaining the incumbency of the
Board. See "Management."
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The Amended and Restated Certificate of Incorporation requires that any
action required or permitted to be taken by the Company's stockholders must be
effected at a duly called annual or special meeting of stockholders and may
not be effected by consent in writing. Additionally, the Amended and Restated
Certificate of Incorporation requires that special meetings of the
stockholders of the Company be called only by a majority of the entire Board
or by certain officers. The Amended and Restated Certificate of Incorporation
provides for cumulative voting.
The By-laws provide that stockholders seeking to bring business before or to
nominate directors at any annual meeting of stockholders must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of
the Company not less than 60 days nor more than 90 days prior to such meeting
or, if less than 70 days' notice was given for the meeting, within 10 days
following the date on which such notice was given. The By-laws also specify
certain requirements for a stockholder's notice to be in proper written form.
These provisions restrict the ability of stockholders to bring matters before
the stockholders or to make nominations for directors at meetings of
stockholders.
The Company is subject to the "business combination" provisions of the
Delaware General Corporation Law. In general, such provisions prohibit a
publicly held Delaware corporation from engaging in various "business
combination" transactions with any "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless (i) the transaction is approved by the Board
of Directors prior to the date the interested stockholder obtained such
status, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested stockholder"
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(iii) on or subsequent to such date the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the "interested stockholder." A "business
combination" is defined to include mergers, asset sales and other transactions
resulting in financial benefit to a stockholder. In general, an "interested
stockholder" is a person who, together with affiliates and associates, owns
(or within three years, did own) 15% or more of a corporation's voting stock.
The statute could prohibit or delay mergers or other takeover or change in
control attempts with respect to the Company and, accordingly, may discourage
attempts to acquire the Company. The Company's Board of Directors has approved
any acquisition of shares by Robert E. Cannon, Chairman of the Board of the
Company, that would otherwise result in Mr. Cannon, his spouse or issue, any
trust of which Mr. Cannon and/or his spouse is the grantor or of which Mr.
Cannon, his spouse, his issue or any charity is a beneficiary, including,
without limitation, the Robert E. Cannon Grantor Retained Annuity Trust or the
Kathryn Gracey Cannon Grantor Retained Annuity Trust (the "Cannon Entities"),
becoming an Interested Stockholder. See "Risk Factors--Certain Charter, By-
Laws and Statutory Provisions."
BOARD OF DIRECTORS
The Company's Board of Directors consists of seven persons comprised of two
individuals nominated by MDCP, two individuals nominated by a majority of the
management members and three independent directors.
RIGHTS AGREEMENT
The Company's Board of Directors has declared a dividend of one Right for
each share of Common Stock outstanding. The holders of any additional Common
Stock subsequently issued before the earliest of the Distribution Date (as
hereinafter defined), the redemption of the Rights, the exchange of the Rights
or the expiration of the Rights also will be entitled to one Right for each
such additional share. Each Right entitles the registered holder under certain
circumstances to purchase from the Company one one-thousandth of a share of
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Junior Participating Preferred Stock, Series A (the "Preferred Stock") at a
price of $60 per one one-thousandth share of Preferred Stock (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in the Rights Agreement.
The Rights will be evidenced by the Common Stock certificates and not by
separate certificates until the earlier of (i) the day following the first
date of public disclosure that a person or group other than an "Exempt Person"
(an "Acquiring Person"), together with persons affiliated or associated with
such Acquiring Person (other than Exempt Persons), has acquired, or obtained
the right to acquire, beneficial ownership of 15% or more of the outstanding
Common Stock (the "Stock Acquisition Date") and (ii) the tenth business day
after the date of commencement or public disclosure of an intention to
commence a tender offer or exchange offer by a person other than an Exempt
Person, the Company and certain related entities if, upon consummation of the
offer, such person or group, together with persons affiliated or associated
with it (other than those that are exempt persons), would acquire beneficial
ownership of 15% or more of the outstanding Common Stock (the earlier of such
dates being called the "Distribution Date"). Until the Distribution Date (or
earlier redemption, exchange or expiration of the Rights), (i) the Rights will
be transferable only with the Common Stock (except with redemption of the
Rights); (ii) Common Stock certificates will contain a notation incorporating
the Rights Agreement by reference; and (iii) the surrender for transfer of any
certificates for Common Stock will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. For purposes
of the Rights Agreement, an "Exempt Person" is defined to include, among other
things, MDCP, so long as MDCP does not become the beneficial owner of 45% or
more of the Common Stock, and the Cannon Entities, without regard to the
beneficial ownership of Common Stock by the Cannon Entities.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date. From and after the Distribution Date, such separate Rights
Certificates alone will evidence the Rights.
The Rights will first become exercisable on or after the Distribution Date
(unless sooner redeemed or exchanged). The Rights will expire at the close of
business on the tenth anniversary of the date of initial issuance (the
"Expiration Date"), unless earlier redeemed or exchanged by the Company as
described below.
The Purchase Price payable and the number of shares of Preferred Stock or
other securities, cash or other property issuable upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend or distribution on, or a subdivision or combination
of, or reclassification of the Preferred Stock, (ii) upon the grant to holders
of the Preferred Stock of certain rights, options, or warrants to subscribe
for Preferred Stock or securities convertible into Preferred Stock at less
than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of other securities, cash
(excluding regular periodic cash dividends), property, evidences of
indebtedness, or assets.
If a person becomes an Acquiring Person, the Rights will "flip-in" and
entitle each holder of a Right, except as provided below, to purchase, upon
exercise at the then-current Purchase Price, that number of shares of Common
Stock having a market value of two times such Purchase Price. In addition,
following a "flip-in," the Board has the option of exchanging all or part of
the Rights, except as provided below, for Common Stock.
In the event that, following a "flip-in," the Company is acquired in a
merger or other business combination in which the Common Stock does not remain
outstanding or is exchanged or 50% or more of its consolidated assets or
earning power is sold, leased, exchanged, mortgaged, pledged or otherwise
transferred or disposed of (in one transaction or a series of related
transactions), the Rights will "flip-over" and entitle each holder (other than
the Acquiring Person and certain related persons or transferees) of a Right to
purchase, upon the exercise of the Right at the then-current Purchase Price,
that number of shares of common stock of the acquiring company (or, in certain
circumstances, one of its affiliates) which at the time of such transaction
would have a market value of two times such Purchase Price.
50
<PAGE>
Any Rights beneficially owned at any time on or after the earlier of the
Distribution Date and the Stock Acquisition Date by an Acquiring Person or an
affiliate or associate (other than an exempt person) of an Acquiring Person
(whether or not such ownership is subsequently transferred) will become null
and void upon the occurrence of a "Triggering Event," and any such holder of
such Rights will have no right to exercise such Rights or have such Rights
exchanged as provided above. A "Triggering Event " will be deemed to occur in
the event that any person becomes an Acquiring Person.
The number of outstanding Rights and the number of one one-thousandths of a
share of Preferred Stock issuable upon exercise of each right and the Purchase
Price are subject to adjustment in the event of a stock dividend on the Common
Stock payable in Common Stock or subdivision or combination of the Common
Stock occurring, in any such case, prior to the Distribution Date.
At any time prior to the earlier of the Stock Acquisition Date and the
Expiration Date, the Company may redeem the Rights.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive the dividends or distributions.
At any time prior to the Stock Acquisition Date, a majority of the
Continuing Directors (as defined in the Rights Agreement) may, without the
approval of any holder of the Rights (except, in certain circumstances, an
Exempt Person), supplement or amend any provision of the Rights Agreement
(including the date on which the Distribution Date will occur after
announcement of commencement of a tender offer). Thereafter, the Rights
Agreement may be amended by a majority of the Continuing Directors without the
approval of any holder of the Rights only to cure ambiguities, to correct
defective or inconsistent provisions, or in ways that do not adversely affect
the Rights holders. Notwithstanding the foregoing, the Rights Agreement may
not be amended to change the Purchase Price, the number of shares of Preferred
Stock, other securities, cash or other property obtainable upon exercise of a
Right, the redemption price or the Expiration Date.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group other than an exempt person that
attempts to acquire the Company on terms not approved by the Board, except
pursuant to an offer conditioned on a substantial number of Rights being
acquired. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors prior to the time a person or
group other than an exempt person has acquired beneficial ownership of 15% or
more of the Common Stock, because until such time the Rights may be redeemed
by the Company at $.01 per Right.
The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement (a copy of
the form of which is filed as an exhibit to the Registration Statement),
including the definitions therein of certain terms.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Amended and Restated Certificate of Incorporation limits the liability
of directors to the fullest extent permitted by the Delaware General
Corporation Law. In addition, the Amended and Restated Certificate of
Incorporation provides that the Company shall indemnify directors and officers
of the Company to the fullest extent permitted by such law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Union Planters
National Bank.
51
<PAGE>
CERTAIN U.S. TAX CONSIDERATIONS APPLICABLE TO
NON-U.S. HOLDERS OF THE COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
person that, for U.S. federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate
or trust (a "non-U.S. holder"). This discussion does not consider specific
facts and circumstances that may be relevant to a particular non-U.S. holder's
tax position, including whether such non-U.S. holder is a U.S. expatriate, and
does not deal with U.S. state and local or non-U.S. tax consequences. This
discussion is based on provisions of the U.S. Internal Revenue Code of 1986,
as amended (the "Code"), existing and proposed regulations promulgated
thereunder, and administrative and judicial interpretations thereof as of the
date hereof, all of which are subject to change, possibly with retroactive
effect. Each prospective non-U.S. holder is urged to consult a tax advisor
with respect to the U.S. federal tax consequences of holding and disposing of
Common Stock, as well as any tax consequences that may arise under the laws of
any U.S. state, municipality or other taxing jurisdiction.
Subject to certain exceptions, an individual will, among other ways, be
deemed to be a resident alien (as opposed to a non-resident alien) with
respect to any calendar year by virtue of being present in the United States
(a) on at least 31 days during such calendar year and (b) on an aggregate of
at least 183 days during the current calendar year and the two preceding
calendar years (counting for such purposes all of the days present in the
current year, one-third of the days present in the immediately preceding year,
and one-sixth of the days present in the second preceding year). Resident
aliens are subject to U.S. federal tax as if they were U.S. citizens.
Dividends. Dividends paid to a non-U.S. holder of Common Stock will
generally be subject to withholding of U.S. federal income tax at a 30% rate
or such lower rate as may be specified in an applicable income tax treaty,
unless the dividends are effectively connected with the conduct of a trade or
business by the non-U.S. holder within the United States. Dividends that are
effectively connected with such holder's conduct of a trade or business in the
United States are subject to U.S. federal income tax on a net income basis at
applicable graduated individual or corporate rates, and are not generally
subject to withholding if the holder complies with certain certification and
disclosure requirements. Any such effectively connected dividends received by
a foreign corporation may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified in an applicable income tax treaty.
Under current law, dividends paid to an address outside the United States
are presumed to be paid to a resident of the country of address (unless the
payer has knowledge to the contrary) for purposes of the withholding discussed
above and for purposes of determining the applicability of a lower tax treaty
withholding rate. Under U.S. Treasury regulations that are proposed to be
effective for distributions after 1997 (the "Proposed Regulations"), however,
a non-U.S. holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
requirements. In addition, under the Proposed Regulations, in the case of
Common Stock held by a foreign partnership, (x) the certification requirement
would generally be applied to the partners of the partnership and (y) the
partnership would be required to provide certain information, including a
United States taxpayer identification number. The Proposed Regulations also
provide look-through rules for tiered partnerships. It is not certain whether,
or in what form, the Proposed Regulations will be adopted as final
regulations.
A non-U.S. holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
U.S. Internal Revenue Service.
Gain on Disposition of Common Stock. A non-U.S. holder generally will not be
subject to U.S. federal income tax in respect of gain recognized on a
disposition of Common Stock unless (i) the gain is effectively connected with
a trade or business of the non-U.S. holder in the United States or, if a tax
treaty applies, is attributable to a permanent establishment maintained by the
non-U.S. holder in the United States, (ii) in the case of a non-U.S. holder
who is an individual and holds the Common Stock as a capital asset, such
holder is present
52
<PAGE>
in the United States for 183 or more days in the taxable year of the sale, or
(iii) the Company is or has been a "U.S. real property holding corporation"
for federal income tax purposes at any time during the five-year period ending
on the date of the disposition. The Company believes that it has not been and
is not a "U.S. real property holding corporation" for U.S. federal income tax
purposes and the Company does not anticipate becoming such a "U.S. real
property holding corporation." If an individual non-U.S. holder falls under
clause (i) above, he or she will be taxed on his or her net gain derived from
the sale at regular graduated U.S. federal income tax rates. If an individual
non-U.S. holder falls under clause (ii) above, he or she will be subject to a
flat 30% tax on the net gain derived from the sale which gain may be offset by
U.S. capital losses. If a non-U.S. holder that is a foreign corporation falls
under clause (i) above, it will be taxed on its gain at regular graduated U.S.
federal income tax rates and may also, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may
be specified in an applicable income tax treaty. If the Company is a "U.S.
real property holding corporation" at any time during the five-year period
ending on the date of the disposition, a non-U.S. holder who has held more
than 5% of the Common Stock at any time during the five-year period ending on
the date of the disposition (taking into account certain attribution rules)
will be taxed on its gain at regular graduated U.S. federal income tax rates.
The U.S. federal income taxation of gains realized by non-U.S. holders is
subject to change and such change, if adopted, could apply to gains on
investments made prior to the change. Proposals to change the basis for taxing
gains of non-U.S. investors have been made from time to time. For example, the
U.S. Senate passed a bill in October, 1995 which would generally have made
non-U.S. investors subject to U.S. capital gains taxes (subject to certain
exceptions) at graduated rates on gains from an investment in the stock of a
U.S. corporation if the non-U.S. investor owned, or was deemed to own, 10
percent or more of the stock of the U.S. corporation during the five-year
period prior to the disposition of the stock. This provision was not included
in the House tax bill and it was not adopted as part of the tax bill
subsequently reported by the House-Senate Conference Committee.
Federal Estate Taxes. Common Stock owned or treated as owned by a non-U.S.
holder at the time of death will be included in such holder's gross estate for
U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise.
U.S. Information Reporting Requirements and Backup Withholding Tax. The
Company must report annually to the Internal Revenue Service and to each non-
U.S. holder the amount of dividends paid to such holder and the tax withheld
with respect to such dividends, regardless of whether withholding was
required. Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in the country
in which the non-U.S. holders resides under the provisions of an applicable
income tax treaty.
Under current law, backup withholding (which generally is a withholding tax
imposed at the rate of 31% on certain payments to, among others, persons that
fail to furnish certain information under the U.S. information reporting
requirements) will generally not apply to dividends paid to a non-U.S. holder
at an address outside the United States unless such non-U.S. holder is engaged
in a trade or business in the United States or unless the payer has knowledge
that the payee is a U.S. person. Under the Proposed Regulations, however,
dividend payments generally will be subject to backup withholding unless
applicable certification requirements are satisfied. See the discussion above
with respect to the rules applicable to foreign partnerships under the
Proposed Regulations.
In general, backup withholding and information reporting will not apply to a
payment of the proceeds of a sale of Common Stock to or through a foreign
office of a broker. If, however, such broker is, for U.S. federal income tax
purposes, a U.S. person, a controlled foreign corporation, or a foreign person
that derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, such payments will not be
subject to backup withholding but will be subject to information reporting,
unless (1) such broker has documentary evidence in its records that the
beneficial owner is a non-U.S. holder and certain other conditions are met, or
(2) the beneficial owner otherwise establishes an exemption.
53
<PAGE>
Payment to or through a U.S. office of a broker of the proceeds of a sale of
Common Stock is generally subject to both backup withholding and information
reporting unless the broker has received from the beneficial owner a
certification made under penalties of perjury that the beneficial owner is a
non-U.S. holder, or the beneficial owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the U.S. Internal Revenue
Service.
The backup withholding and information reporting rules are currently under
review by the U.S. Treasury Department and their application to the Common
Stock could be changed by future regulations.
54
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
among the Company, the Selling Stockholder and Salomon Brothers Inc, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, PaineWebber Incorporated and
Morgan Keegan & Company, Inc., as representatives of the several underwriters
(the "Representatives"), the Selling Stockholder has agreed to sell to the
entities named below (the "Underwriters"), and each of the Underwriters has
severally agreed to purchase from the Selling Stockholder, the aggregate
number of shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Salomon Brothers Inc...........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
PaineWebber Incorporated.......................................
Morgan Keegan & Company, Inc. .................................
---------
Total..................................................... 2,845,157
=========
</TABLE>
The Underwriting Agreement provides that the several Underwriters will be
obligated to purchase all the shares of Common Stock being offered (other than
the shares covered by the over-allotment option described below), if any are
purchased.
The Representatives have advised the Company that they propose initially to
offer the Common Stock directly to the public at the public offering price set
forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $. per share. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of
$. per share on sales to certain other dealers. After the Offering, the
price to public, and concessions to dealers may be changed.
The Selling Stockholder has granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
200,000 additional shares of Common Stock at the price to public less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise this option solely for the purpose of covering over-
allotments, if any, incurred in the sale of shares of Common Stock being
offered hereby. To the extent the Underwriters exercise such option, each of
the Underwriters will be obligated, subject to certain conditions, to purchase
the same proportion of such additional shares as the number of shares set
forth opposite such Underwriter's name in the preceding table bears to the
total number of shares of Common Stock offered by the Underwriters hereby.
At the request of the Company, the Underwriters have initially reserved
approximately 980,000 shares of Common Stock for sale at the public offering
price to directors, officers, employees and business associates of the
Company. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so purchased will be
offered by the Underwriters to the general public on the same basis as the
other shares offered hereby.
The Company, the Selling Stockholder and certain officers and directors of
the Company, have agreed, subject to certain exceptions, including transfers
among existing members of the Company's management and partners of the Selling
Stockholder, not to sell, offer to sell, grant any option for the sale of,
assign, pledge, grant any security interest in, or otherwise dispose of, or
register for sale by others, any shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock without the
prior written consent of Salomon Brothers Inc, on behalf of the Underwriters,
for a period of 90 days after the date of this Prospectus.
The Underwriters (i) have not offered or sold and will not offer or sell any
shares of Common Stock in the United Kingdom by means of any document other
than to persons whose ordinary business it is to buy and sell shares or
debentures (whether as principal or agent) or in circumstances which do not
constitute an offer to the
55
<PAGE>
public within the meaning of the Companies Act 1985; (ii) have complied and
will comply with all applicable provisions of the Financial Services Act 1986
with respect to anything done by them in relation to the shares of Common
Stock in, from or otherwise involving the United Kingdom; and (iii) have only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by them in connection with the issue of the shares of Common
Stock to any person who is of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 or is a person to whom the document may otherwise lawfully be issued or
passed on.
No action has been taken or will be taken in any jurisdiction by the Company
or the Underwriters that would permit a public offering of the shares offered
hereby in any jurisdiction where action for that purpose is required, other
than the United States. Persons who come into possession of this Prospectus
are required by the Company and the Underwriters to inform themselves about
and to observe any restrictions as to the offering of the shares offered
hereby and the distribution of this Prospectus.
Certain of the Underwriters have rendered financial advisory and investment
banking services to the Company and its affiliates from time to time, for
which they have received customary fees. Salomon Brothers Inc is providing
financial advisory services to the Company in connection with the Company
Stock Repurchase and has provided the Company's board of directors with an
opinion regarding the fairness from a financial point of view of the price to
be paid in connection therewith. In addition, certain of the Underwriters are
acting as underwriters in connection with the offering of the New Notes.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain civil liabilities, including certain liabilities
under the Securities Act of 1933, as amended (the "Securities Act"), or
contribute to payments the Underwriters may be required to make in respect
thereof. The Company has agreed to indemnify the Selling Stockholder, under
certain circumstances, in respect of payments made by the Selling Stockholder
pursuant to these agreements.
56
<PAGE>
LEGAL MATTERS
The validity of the Common Stock being offered hereby and certain other
legal matters relating to the Offering will be passed upon for the Company and
the Selling Stockholder by Kirkland & Ellis, Chicago, Illinois. Certain legal
matters will be passed upon for the Underwriters by Cravath, Swaine & Moore,
New York, New York.
EXPERTS
The combined consolidated financial statements of Buckeye Cellulose
Corporation and Affiliates as of and for the years ended June 30, 1994 and
1995 and for the period March 16, 1993 through June 30, 1993 and the combined
statement of operating income of the Predecessor for the period July 1, 1992
through March 15, 1993 included in this Prospectus and in the Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Buckeye Cellulose Corporation as of
and for the years ended June 30, 1994 and 1995 and for the period March 16,
1993 through June 30, 1993 and the combined statement of operating income of
the Memphis Mill Operations of the Procter & Gamble Cellulose Company for the
period July 1, 1992 through March 15, 1993 incorporated by reference in this
Prospectus and in this Registration Statement from the Annual Report on Form
10-K have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing therein, and are included in reliance
upon such reports given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of the Temming Business as of and for the year
ended December 31, 1995 included in this Prospectus have been audited by
Dipl.-Ing. Wolf Gadecke, Wirtschaftsprufer, independent auditor, as set forth
in his report thereon appearing herein and in the Registration Statement, and
are included in reliance upon such report given upon his authority as an
expert in accounting and auditing.
The consolidated financial statements of Alpha Cellulose Holdings, Inc. and
Subsidiaries at December 31, 1995 and for the year then ended included in this
Prospectus and the Registration Statement have been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their report thereon
appearing herein and elsewhere in the Registration Statement, and have been so
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can
be inspected, and copies may be obtained, at the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates, as well as at the following Regional Offices of the Commission: Seven
World Trade Center, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Reports, proxy
statements and other information concerning the Company can also be inspected
at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005, where the Common Stock of the Company is listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (as amended, including exhibits, the "Registration Statement") under the
Securities Act, covering the shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
57
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference.
1. Annual Report on Form 10-K for the fiscal year ended June 30, 1995.
2. Quarterly Reports on Form 10-Q for the fiscal quarters ended September
30, 1995, December 31, 1995 and March 31, 1996.
3. Current Report on Form 8-K dated May 2, 1996, as amended by the Form
8-K/A dated May 10, 1996.
4. The description of Common Stock contained in the Company's
registration statements on Form 8-A dated October 27, 1995 (relating to the
Common Stock) and November 20, 1995 (relating to the Preferred Share
Purchase Rights) and any amendment or report filed for the purpose of
updating such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering made hereunder shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained
herein or 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 or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any or all of the documents which have
been or may be incorporated by reference in this Prospectus, other than
exhibits to such documents not specifically described above. Requests for such
documents should be directed to the Company.
58
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
Report of Independent Auditors........................................... F-2
Combined Consolidated Balance Sheets--June 30, 1994 and 1995 and March
31, 1996 (unaudited).................................................... F-3
Combined Consolidated Statements of Income--For the period March 16, 1993
through June 30, 1993, for years ended June 30, 1994 and June 30, 1995
and for the nine months ended March 31, 1995 (unaudited) and 1996
(unaudited)............................................................. F-4
Combined Consolidated Statements of Equity--For the period March 16, 1993
through June 30, 1993, for the years ended June 30, 1994 and June 30,
1995.................................................................... F-5
Combined Consolidated Statements of Cash Flows--For the period March 16,
1993 through June 30, 1993, for the years ended June 30, 1994 and June
30, 1995 and for the nine months ended March 31, 1995 (unaudited) and
1996 (unaudited)........................................................ F-6
Notes to Combined Consolidated Financial Statements...................... F-7
THE PROCTER & GAMBLE CELLULOSE COMPANY--MEMPHIS PLANT AND FOLEY PLANT
OPERATIONS
Report of Independent Auditors........................................... F-19
Combined Statement of Operating Income--For the period July 1, 1992
through March 15, 1993.................................................. F-20
Notes to Combined Statement of Operating Income--For the period July 1,
1992 through March 15, 1993............................................. F-21
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
Report of Independent Auditors........................................... F-24
Balance Sheet--December 31, 1995......................................... F-25
Income Statement--For the year ended December 31, 1995................... F-27
Notes to Financial Statements............................................ F-28
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Auditors........................................... F-32
Consolidated Balance Sheets--December 31, 1995 and March 31, 1996
(unaudited)............................................................. F-33
Consolidated Statement of Income--for the year ended December 31, 1995
and for the three months ended March 31, 1995 (unaudited) and 1996
(unaudited)............................................................. F-34
Consolidated Statements of Stockholder' Equity--for the year ended
December 31, 1995....................................................... F-35
Consolidated Statements of Cash Flows--for the year ended December 31,
1995 and for the three months ended March 31, 1995 (unaudited) and 1996
(unaudited)............................................................. F-36
Notes to Consolidated Financial Statements............................... F-37
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Buckeye Cellulose Corporation and Affiliated Companies
We have audited the accompanying combined consolidated balance sheets as of
June 30, 1994 and 1995, of Buckeye Cellulose Corporation and affiliates, and
the related combined consolidated statements of income, equity, and cash flows
for the period March 16, 1993 through June 30, 1993 and for the years ended
June 30, 1994 and 1995. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined consolidated financial statements referred to
above present fairly, in all material respects, the combined consolidated
financial position at June 30, 1994 and 1995, of Buckeye Cellulose Corporation
and affiliates, and the combined consolidated results of their operations and
their cash flows for the period March 16, 1993 through June 30, 1993 and for
the years ended June 30, 1994 and 1995 in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Memphis, Tennessee
July 28, 1995
F-2
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
COMBINED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
----------------- MARCH 31,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 7,101 $ 11,789 $ --
Short-term investments......................... 10,775 9,706 2,900
Accounts receivable--trade, net of allowance
for doubtful accounts of $2,494, $1,152 and
$1,028 at June 30, 1994 and 1995 and March 31,
1996, respectively............................ 38,631 43,519 48,427
Accounts receivable--other..................... 727 548 473
Inventories.................................... 65,046 61,947 90,581
Deferred income taxes.......................... 1,206 541 2,666
Prepaid expenses and other..................... 1,222 2,530 5,800
-------- -------- --------
Total current assets......................... 124,708 130,580 150,847
Property, plant and equipment:
Land and land improvements..................... 3,972 3,980 3,990
Buildings...................................... 35,881 36,842 37,687
Machinery and equipment........................ 212,627 232,653 234,068
Construction in progress....................... 6,264 8,696 17,226
-------- -------- --------
258,744 282,171 292,971
Less allowances for depreciation............... 30,853 54,072 50,382
-------- -------- --------
227,891 228,099 242,589
Goodwill......................................... 17,613 16,998 7,675
Other............................................ 3,992 3,379 7,254
-------- -------- --------
Total assets................................. $374,204 $379,056 $408,365
======== ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable......................... $ 9,565 $ 14,908 $ 18,305
Accounts payable--Procter & Gamble............. 3,148 688 --
Accrued expenses............................... 28,411 27,937 30,222
Income taxes payable........................... -- 1,230 1,222
Notes payable.................................. -- 8,500 --
Current portion of long-term debt.............. 14,108 -- --
Other liabilities.............................. 146 210 71
-------- -------- --------
Total current liabilities.................... 55,378 53,473 49,820
Long-term debt................................... 203,482 166,202 197,364
Accrued postretirement benefit obligation........ 12,024 12,400 12,802
Deferred income taxes............................ 2,334 5,848 16,450
Other liabilities................................ 4,679 4,408 4,321
Minority interest................................ 33,479 52,104 --
Equity:
Common stock: Buckeye Cellulose Corporation.... 2 2 214
Common stock: Buckeye Florida Corporation...... 2 2 --
Additional paid-in capital..................... 45,152 45,233 58,807
Retained earnings.............................. 17,672 39,384 68,587
-------- -------- --------
Total equity................................. 62,828 84,621 127,608
-------- -------- --------
Total liabilities and equity................. $374,204 $379,056 $408,365
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 16, 1993 YEAR ENDED JUNE 30, MARCH 31,
THROUGH -------------------- --------------------
JUNE 30, 1993 1994 1995 1995 1996
-------------- --------- --------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $113,074 $ 371,526 $ 408,587 $301,318 $ 338,825
Cost of goods sold...... 86,047 291,833 305,150 230,247 237,149
-------- --------- --------- -------- ----------
Gross margin............ 27,027 79,693 103,437 71,071 101,676
Selling, research and
administrative
expenses............... 5,996 24,004 24,265 16,446 18,497
-------- --------- --------- -------- ----------
Operating income........ 21,031 55,689 79,172 54,625 83,179
Other income (expense):
Interest income......... 351 314 1,138 704 925
Interest expense and
amortization of debt
costs.................. (10,560) (26,859) (22,290) (17,214) (13,709)
Other................... (184) (632) (615) (462) (372)
Minority interest....... (3,083) (8,291) (23,223) (14,881) (16,628)
Secondary offering
costs.................. -- -- -- -- (1,335)
-------- --------- --------- -------- ----------
(13,476) (35,468) (44,990) (31,853) (31,119)
-------- --------- --------- -------- ----------
Income before income
taxes and extraordinary
loss................... 7,555 20,221 34,182 22,772 52,060
Income taxes............ 2,851 7,253 12,470 8,308 18,908
-------- --------- --------- -------- ----------
Income before
extraordinary loss..... 4,704 12,968 21,712 14,464 33,152
Extraordinary loss, net
of tax benefit......... (3,949)
-------- --------- --------- -------- ----------
Net income.............. $ 4,704 $ 12,968 $ 21,712 $ 14,464 $ 29,203
======== ========= ========= ======== ==========
Earnings per share:
Income before extraor-
dinary loss.......... $ 1.58
Extraordinary loss,
net of tax benefit... (0.19)
----------
Net income per share.... $ 1.39
==========
Weighted average shares
outstanding............ 21,014,032
==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
COMBINED CONSOLIDATED STATEMENTS OF EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON
STOCK
----------- ADDITIONAL
CLASS CLASS PAID-IN RETAINED
A B CAPITAL EARNINGS TOTAL
----- ----- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at March 16, 1993.............. $ $ $ $ $
Issuance of 100,000 Class A and
100,000 Class B shares of BCC common
stock............................... 1 1 17,554 -- 17,556
Issuance of 100,000 Class A and
100,000 Class B shares of BFC common
stock............................... 1 1 20,998 -- 21,000
Net income........................... -- -- -- 4,704 4,704
--- --- ------- ------- -------
Balance at June 30, 1993............... 2 2 38,552 4,704 43,260
Issuance of 12,500 Class A and 43,125
Class B shares of BCC common stock.. -- -- 2,552 -- 2,552
Issuance of 12,500 Class A and 43,125
Class B shares of BFC common stock.. -- -- 3,048 -- 3,048
Partners' capital contribution....... -- -- 1,000 -- 1,000
Net income........................... -- -- -- 12,968 12,968
--- --- ------- ------- -------
Balance at June 30, 1994............... 2 2 45,152 17,672 62,828
Issuance of 3,377 Class B shares of
BCC common stock.................... -- -- 38 -- 38
Issuance of 4,287 Class B shares of
BFC common stock.................... -- -- 43 -- 43
Net income........................... -- -- -- 21,712 21,712
--- --- ------- ------- -------
Balance at June 30, 1995............... $ 2 $ 2 $45,233 $39,384 $84,621
=== === ======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE NINE MONTHS
MARCH 16, 1993 30, ENDED MARCH 31,
THROUGH ---------------- -----------------
JUNE 30, 1993 1994 1995 1995 1996
-------------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................ $ 4,704 $12,968 $21,712 $14,464 $ 29,203
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Extraordinary loss, net
of tax benefit......... -- -- -- -- 3,949
Minority interest....... 3,083 8,291 23,223 14,881 16,628
Depreciation............ 6,541 24,613 23,784 17,874 18,127
Amortization of debt
costs and other........ 629 2,009 2,113 1,876 1,625
Interest on Class B
senior secured notes... 210 770 592 592 --
Provision for
postretirement
benefits............... 434 1,611 376 282 402
Deferred income taxes... 287 2,743 4,179 2,828 3,329
Loss on disposal of
equipment.............. 86 202 947 830 241
Changes in operating
assets and liabilities:
Accounts receivable... 27,452 4,702 (4,709) (5,551) (4,833)
Inventories........... 5,974 17,683 3,099 9,542 (28,634)
Prepaid expenses and
other assets......... (1,357) 1,463 (1,124) (1,706) (3,479)
Accounts payable and
other current
liabilities.......... 25,213 9,333 3,595 5,576 5,634
--------- ------- ------- ------- --------
Net cash provided by
operating activities..... 73,256 86,388 77,787 61,488 42,192
INVESTING ACTIVITIES
Purchase of Memphis and
Foley Plants, net of cash
acquired................. (20,676) -- -- -- --
Purchase of minority
interest in Buckeye
Florida Partners......... -- -- -- -- (62,078)
Purchases of property,
plant and equipment...... (4,898) (15,725) (24,922) (20,713) (22,334)
Purchases of short-term
investments.............. -- (14,743) (13,616) (10,186) (2,920)
Proceeds from sales of
short-term investments... -- 3,968 14,685 10,803 9,726
Other..................... (722) 704 (1,074) (1,120) (686)
--------- ------- ------- ------- --------
Net cash used in investing
activities............... (26,296) (25,796) (24,927) (21,216) (78,292)
FINANCING ACTIVITIES
Proceeds from sale of
equity interests......... 38,556 6,600 81 81 13,149
Proceeds from revolving
line of credit and long-
term debt................ 90,444 6,000 8,500 -- 207,439
Payments for debt issuance
costs.................... (3,773) -- -- -- (5,506)
Partners' capital
distributions............ -- (2,895) (4,598) (2,838) (1,590)
Principal payments on
revolving line of credit,
long-term debt and other. (161,000) (74,383) (52,155) (28,245) (189,181)
--------- ------- ------- ------- --------
Net cash (used in)
provided by financing
activities............... (35,773) (64,678) (48,172) (31,002) 24,311
--------- ------- ------- ------- --------
Increase (decrease) in
cash and cash
equivalents.............. 11,187 (4,086) 4,688 9,270 (11,789)
Cash and cash equivalents
at beginning of period... -- 11,187 7,101 7,101 11,789
--------- ------- ------- ------- --------
Cash and cash equivalents
at end of period......... $ 11,187 $ 7,101 $11,789 $16,371 $ --
========= ======= ======= ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Business Description and Basis of Presentation
The combined consolidated financial statements of Buckeye Cellulose
Corporation and affiliates (the "Company") include Buckeye Cellulose
Corporation ("BCC") and subsidiary, Buckeye Florida Corporation ("BFC") and
subsidiary and Buckeye Partners. These entities are under the common ownership
of Madison Dearborn Capital Partners ("MDCP") and management.
Under an agreement dated March 16, 1993, the assets comprising the cotton
linter pulp business and certain assets of the headquarters of the Cellulose
and Specialties Division of The Procter & Gamble Cellulose Company ("Procter &
Gamble Cellulose") were acquired for cash of $19,322,256, the issuance of an
$89,000,000 bridge note (the "Bridge Note"), and other acquisition costs of
approximately $1,583,000 by BCC, a newly incorporated company formed by MDCP.
Under an agreement dated March 16, 1993, BFC, then a wholly-owned subsidiary
of MDCP, and Procter & Gamble Cellulose formed Buckeye Florida, Limited
Partnership ("Buckeye Florida Partners"). BFC contributed cash of $25,000,000
for a 50% general partnership interest in Buckeye Florida Partners, and
Procter & Gamble Cellulose contributed accounts receivable of $25,000,000 for
a 50% limited partnership interest in Buckeye Florida Partners.
Simultaneously, Buckeye Florida Partners acquired all of the assets of the
wood pulp business located in Foley, Florida from Procter & Gamble Cellulose
for cash of $25,000,000, the issuance of notes payable of $266,503,419 and
other acquisition costs of approximately $4,426,000.
The wood pulp assets and cotton linter pulp assets so acquired are
hereinafter referred to collectively as the "Predecessor" and the acquisitions
of such assets are hereinafter referred to collectively as the "Acquisitions."
The Acquisitions were accounted for using the purchase method of accounting.
The Company manufactures and distributes a broad variety of wood and cotton
linter based specialty pulp used in numerous applications including disposable
diapers, engine air and oil filters, food casings, rayon textile filament,
tapes, thickeners, and papers.
Change in Inventory Valuation Method
Buckeye Florida Partners changed its method of allocating manufacturing
overhead costs to inventory to base the allocation upon the proportionate
percentage of total tonnage produced by each respective plant line. The new
method results in a more appropriate cost allocation to products produced on
each plant line. The change was retroactively applied to all periods
presented.
Principles of Consolidation
The consolidated financial statements of BCC include the accounts of its
wholly-owned subsidiary, Buckeye Cellulose S.A. The consolidated financial
statements of BFC include the accounts of Buckeye Florida Partners, in which
BFC has a 50% general partnership interest. BFC has a controlling financial
interest in Buckeye Florida Partners because it has sole voting control. The
limited partner's interest in Buckeye Florida Partners is included in the
combined consolidated financial statements as a minority interest. All
significant intercompany accounts and transactions have been eliminated in
combination and consolidation.
Cash and Cash Equivalents
The Company considers cash equivalents to be temporary cash investments with
a maturity of three months or less when purchased.
F-7
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Short-term Investments
Short-term investments consist primarily of government backed securities and
commercial paper of an investment grade.
Inventories
Pulpwood, raw cotton lint inventories, the lint component of finished linter
pulp, chemicals and storeroom supplies are stated at lower of cost (determined
on the average cost method) or market. The remaining components of finished
pulp, including other raw materials, labor, and overhead are stated at lower
of cost (determined on a first-in, first-out basis) or market.
Property, Plant and Equipment
Property, plant and equipment purchased in the Acquisitions was restated to
its fair market value at the date of the Acquisitions. All property, plant and
equipment purchased since the Acquisitions, is stated at cost. Depreciation is
computed by the straight-line method over the estimated useful lives of the
assets. The cost of maintenance, repairs, and minor renewals and betterments
are expensed as incurred. The cost of major renewals and betterments are
capitalized.
Intangible Assets
Goodwill is amortized by the straight-line method over thirty years.
Deferred debt costs are amortized by the interest method over the life of the
related debt. Goodwill is net of accumulated amortization of $815,438 and
$1,429,561 and deferred debt costs are net of accumulated amortization of
$683,095 and $1,190,706 at June 30, 1994 and 1995, respectively. During the
year ended June 30, 1994, the Company recorded a non-current deferred tax
asset of $511,687 and reduced goodwill by the same amount due to a state tax
credit generated by the purchase of certain assets in connection with the
Acquisitions.
Income Taxes
The Company has provided for income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Accordingly, deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Credit Risk
The Company generally obtains credit insurance or requires the customer to
provide a letter of credit for export sales. Credit limits have been
established for each domestic customer and those foreign customers where
credit insurance is not available. Credit limits are monitored routinely. It
is not the Company's policy to require collateral or other security for
domestic or foreign sales.
Environmental Costs
Liabilities are recorded when environmental assessments are probable, and
the cost can be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or the
Company's commitment to a plan of action based on the then known facts.
Revenue Recognition
Revenues from domestic and export sales are recognized at the time products
are shipped. Net sales is comprised of sales reduced by sales allowances and
distribution costs.
F-8
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Historical Earnings Per Share
Earnings per share has not been presented for periods prior to June 30,
1995, as it is not considered relevant to the historical combined consolidated
financial statements.
Unaudited Interim Financial Statements
The unaudited combined consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended June 30, 1996.
2. INVENTORIES
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.................................... $ 7,513 $ 9,317 $13,867
Finished goods................................... 41,824 36,887 62,244
Storeroom and other supplies..................... 15,709 15,743 14,470
------- ------- -------
$65,046 $61,947 $90,581
======= ======= =======
</TABLE>
3. ACCRUED EXPENSES
The components of accrued expenses are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
---------------
1994 1995
------- -------
<S> <C> <C>
Retirement plans.......................................... $ 9,824 $12,731
Vacation pay.............................................. 3,326 3,003
Shutdown accrual.......................................... 6,720 3,527
Rebate accrual............................................ 1,749 3,154
Other..................................................... 6,792 5,522
------- -------
$28,411 $27,937
======= =======
</TABLE>
4. DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1994 1995
-------- --------
<S> <C> <C>
10 1/4% Senior Notes due May 15, 2001........................ $ 70,000 $ 64,720
10% Class A Senior Secured Notes due March 16, 2000.......... 58,000 26,000
Non-interest Bearing Class B Senior Secured Notes due March
16, 1995 effective interest rate of 9%...................... 8,108 --
12% Subordinated Secured Notes due March 16, 2003............ 75,000 75,000
10% Class D Senior Secured Note (Revolving Line of Credit)... 6,000 --
5.29% Promissory Note due March 22, 1999..................... 482 482
-------- --------
$217,590 $166,202
Less current portion......................................... 14,108 --
-------- --------
$203,482 $166,202
======== ========
</TABLE>
F-9
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The unsecured notes consist of senior notes issued by BCC on May 27, 1993 in
a public offering of debt securities totaling $70,000,000 bearing interest at
10 1/4% with a maturity date of May 15, 2001 (the "Existing Notes"). These
Existing Notes are unsecured senior obligations and are equal (pari passu) in
the right of payment with all existing and future indebtedness of BCC which is
not subordinated indebtedness. During the year ended June 30, 1995, BCC
purchased and retired $5,280,000 of its debt securities.
The Existing Notes are redeemable at the option of BCC, in whole or in part,
at any time on or after May 15, 1998, at the redemption prices (expressed as
percentages of principal amount) set forth below, if redeemed during the 12
month period beginning May 15 of the years indicated below in each case
together with accrued and unpaid interest to the date of redemption.
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
1998.................... 103.875%
1999.................... 101.937
2000 and thereafter..... 100.000
</TABLE>
In addition, up to $14,000,000 aggregate principal amount of the Existing
Notes will be redeemable prior to May 20, 1996, at the option of BCC within
180 days of the consummation of any public offering at 106% of the principal
amount together with accrued and unpaid interest to the date of redemption.
As a mandatory sinking fund for the redemption of the Existing Notes, BCC
will deposit with a trustee on each of May 15, 1999 and May 15, 2000, 33% of
the original aggregate principal plus accrued interest to the redemption date.
If less than all of the Existing Notes are to be redeemed, the trustee shall
select the Existing Notes or portions thereof to be redeemed by lot or by any
other method the trustee shall deem fair and reasonable. BCC may, at its
option, receive a credit against sinking fund obligations equal to 100% of the
aggregate principal amount of Existing Notes acquired by BCC and surrendered
to the trustee for cancellation and of Existing Notes redeemed or called for
redemption otherwise than through operation of the sinking fund that have not
previously been so credited for such purpose by the trustee.
The secured notes issued by Buckeye Florida Partners are secured by land,
buildings, machinery and equipment of the Company and are held by Procter &
Gamble Cellulose under a financing agreement (the "Financing Agreement"). The
Financing Agreement requires Buckeye Florida Partners to maintain certain
financial ratios and limits the amount of annual capital expenditures. In
addition, these notes are subject to mandatory prepayment based on available
cash flow at the end of each fiscal year as defined by the Financing
Agreement. All prepayments made will be applied to the Class A Senior Secured
Notes until the principal amount has been reduced to zero and then to the
Subordinated Secured Notes.
Buckeye Florida Partners has an available line of credit under the Class D
Senior Secured Note agreement which allows for borrowings up to $30,000,000,
provided by Procter & Gamble Cellulose expiring on March 16, 2003. Amounts
outstanding under the revolving credit facility bear interest at a rate of
10%. At June 30, 1995, there were no outstanding borrowings under the line of
credit.
The Financing Agreement restricts partner distributions to those necessary
for the partners to make income tax payments on the partnership's taxable
income.
BCC has a $15,000,000 credit facility which provides for a revolving line of
credit, with interest, at BCC's option, at either the bank's prime rate plus
1.25%, or at the 30-day LIBOR rate plus 2.50%, and letters of credit. BCC is
required, among other things, to pay a commitment fee of 1/2% per annum on the
average unused portion of the revolving credit facility and a letter of credit
fee of 1% per annum of the average daily face amount of outstanding letters of
credit. At June 30, 1994 and 1995, there was no outstanding balance on the
credit facility.
F-10
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At June 30, 1995, there are three letters of credit totaling $1,007,000 for
workers' compensation claims outstanding, which expire in 1996. The unused
portion of the credit facility is $13,993,000 at June 30, 1995. Obligations
under the credit facility, which expires May 27, 1998, are secured by a lien
upon all of BCC's securities and a negative pledge with respect to BCC's other
assets. Pursuant to the terms of the credit facility, BCC is required to
maintain certain financial ratios, is limited in the amount of capital
expenditures, and is prohibited from paying dividends.
Buckeye Florida Partners has a line of credit available for borrowings up to
$10,000,000 with a financial institution expiring on June 30, 1996. Amounts
outstanding under the line of credit bear interest at the bank's floating
prime rate less 1.5% (7.5% at June 30, 1995). Buckeye Florida Partners has the
right to fix any portion of the commitment for periods of 30, 60 or 90 days at
a rate of LIBOR plus 1% (7.125% at June 30, 1995). The line of credit is
secured by a standby letter of credit issued by The Procter & Gamble Company
("Procter & Gamble"). At June 30, 1995, $1,500,000 was available for
additional borrowings under the line of credit.
Total interest paid by the Company for the period March 16, 1993 through
June 30, 1993 and for the years ended June 30, 1994 and 1995 was $8,937,000,
$25,866,000, and $21,755,000, respectively.
5. EQUITY
BCC
BCC has authorized and outstanding Class A and Class B Common Stock, both
with a $.01 par value. Authorized shares of Class A Common Stock are 200,000,
and issued and outstanding shares of Class A Common Stock are 112,500 shares
at June 30, 1994 and 1995. Authorized shares of Class B Common Stock are
300,000, and issued and outstanding are 143,125 shares and 146,502 shares at
June 30, 1994 and 1995, respectively.
During the year ended June 30, 1994, BCC finalized the "1994 Incentive Stock
Option Plan for Management Employees of BCC". Under the provisions of the
plan, options to purchase 25,000 shares of Class B Common Stock at a purchase
price of $11.20 per share were granted. The options are exercisable over three
to five year periods based on achieving certain performance targets. During
the years ended June 30, 1994 and 1995, 5,625 and 3,377 options were
exercised, respectively. At June 30, 1995, 15,998 options were outstanding of
which 5,197 were exercisable.
Holders of Class A Common Stock are entitled to a priority distribution.
Distributions by BCC to holders of Class A and Class B Common Stock shall be
made in the following priority: (1) the aggregate unpaid yield on Class A
Common Stock at 12% per annum calculated quarterly on the sum of the
unreturned yield base of $155.56 and the amount of unpaid yield for all prior
quarters ($5,157,000 at June 30, 1995); (2) the unreturned yield base on Class
A Common Stock; (3) distributions in excess of priority distributions on Class
A Common Stock will be made to holders of Class A and Class B Common Stock
ratably based upon the number of common shares held by each such holder as of
the time of such distribution.
BFC
BFC has authorized and outstanding Class A and Class B Common Stock, both
with a $.01 par value. Authorized shares of Class A Common Stock are 200,000,
and issued and outstanding shares of Class A Common Stock are 112,500 shares
at June 30, 1994 and 1995. Authorized shares of Class B Common Stock are
300,000, and issued and outstanding are 143,125 shares and 147,412 shares at
June 30, 1994 and 1995, respectively.
F-11
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During the year ended June 30, 1994, BFC finalized the "1994 Incentive Stock
Option Plan for Management Employees of BFC". Under the provisions of the
plan, options to purchase 25,000 shares of Class B Common Stock at a purchase
price of $10.00 per share were granted. The options are exercisable over three
to five year periods based on achieving certain performance targets. During
the years ended June 30, 1994 and 1995, 5,625 and 4,287 options were
exercised, respectively. At June 30, 1995, 15,088 options were outstanding, of
which 4,287 were exercisable.
Holders of BFC Class A Common Stock are entitled to a priority distribution.
Distributions by BFC to holders of Class A and Class B Common Stock shall be
made in the following priority: (1) the aggregate unpaid yield on Class A
Common Stock at 13% per annum calculated quarterly on the sum of the
unreturned yield base of $200.00 and the amount of unpaid yield for all prior
quarters ($7,257,000 at June 30, 1995); (2) the unreturned yield base on Class
A Common Stock; (3) distributions in excess of priority distributions on Class
A Common Stock will be made to holders of Class A and Class B Common Stock
ratably based upon the number of common shares held by each such holder as of
the time of such distribution.
At March 16, 1993, BFC and Procter & Gamble Cellulose entered into a Call
Option Agreement (the P&G Call Option) whereby BFC has the irrevocable and
unconditional option to purchase Procter & Gamble Cellulose's limited
partnership interest in Buckeye Florida Partners at any time prior to March
16, 2000. The P&G Call Option may only be exercised if Procter & Gamble
Cellulose and all Procter & Gamble affiliates cease to hold Class A Senior
Secured Notes, Subordinated Secured Notes and Class D Senior Secured Notes
issued by Buckeye Florida Partners on March 16, 1993. If BFC exercises the P&G
Call Option on or before March 16, 1998, the call price will be the sum of
$35,000,000 plus interest thereon at the rate of 23.4% per annum, compounded
annually, calculated from March 16, 1993 until the date the P&G Call Option is
exercised. If BFC exercises the P&G Call Option subsequent to March 16, 1998
and on or before March 16, 2000, the call price shall be the sum of
$100,148,360 plus interest of $41,096 per day for each day from the first day
of the period commencing March 16, 1998 to the date that the P&G Call Option
is exercised.
At March 16, 1993, BFC and Procter & Gamble Cellulose entered into a Put
Agreement (the "Put") whereby BFC has the irrevocable and unconditional option
to require Procter & Gamble Cellulose to purchase BFC's general partnership
interest in Buckeye Florida Partners during the period beginning March 16,
1998 and ending June 16, 1998. The Put may also be exercised in certain
circumstances in which the P&G Loans are accelerated. If the Put is exercised
on or after March 16, 1998, the exercise price will be $25,000,000. If the Put
is exercised prior to March 16, 1998, the exercise price will be $25,000,000,
discounted at a rate of 6% per annum.
Buckeye Partners
Buckeye Partners has outstanding the following partnership units at June 30,
1994 and 1995:
<TABLE>
<CAPTION>
UNITS AMOUNT
------- ----------
<S> <C> <C>
Class A Common Units................................... 112,500 $ 985,000
Class B Common Units................................... 137,500 13,750
Class C Common Units................................... 12,500 625
Class D Common Units................................... 12,500 625
------- ----------
Partners' Capital...................................... 275,000 $1,000,000
======= ==========
</TABLE>
Class A Common Units have a priority distribution equivalent to the amount
outstanding at June 30, 1995. Partners' contributions have been included in
additional paid-in capital.
F-12
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 16, 1993 JUNE 30,
THROUGH --------------
JUNE 30, 1993 1994 1995
-------------- ------ -------
<S> <C> <C> <C>
Current:
Federal................................... $2,202 $4,366 $ 7,256
State and other........................... 362 144 1,035
------ ------ -------
$2,564 $4,510 $ 8,291
Deferred:
Federal................................... 283 2,499 3,652
State..................................... 4 244 527
------ ------ -------
287 2,743 4,179
------ ------ -------
Total................................... $2,851 $7,253 $12,470
====== ====== =======
</TABLE>
Significant components of the Company's deferred tax assets (liabilities)
are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------------------------------------
1994 1995
------------------- ------------------
CURRENT NONCURRENT CURRENT NONCURRENT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Tax over book depreciation............. $ -- $(3,490) $-- $(5,934)
Book income in excess of tax income
from partnership (Buckeye Florida
Partners)............................. -- (3,364) -- (7,454)
Other.................................. (176) (11) (205) (251)
Deferred tax assets:
Postretirement benefit plan obligation. -- 1,353 -- 1,399
Inventory costs capitalized for tax in
excess of book costs.................. 683 -- 359 --
State tax credit carryforward.......... -- 401 -- 452
Alternative minimum tax credit
carryforward.......................... -- 2,777 -- 4,984
Nondeductible reserves................. 466 -- 332 --
Other.................................. 233 -- 55 956
------ ------- ---- -------
Net deferred tax assets
(liabilities)....................... $1,206 $(2,334) $541 $(5,848)
====== ======= ==== =======
</TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate of 35% due to the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 16, 1993 YEAR ENDED JUNE 30,
THROUGH ---------------------
JUNE 30, 1993 1994 1995
-------------- --------- ----------
<S> <C> <C> <C>
Federal tax expense at statutory
rate.............................. $ 2,644 $ 7,077 $ 11,932
State taxes, net of federal tax
benefit........................... 238 426 693
Other, net......................... (31) (250) (155)
------- --------- ----------
$ 2,851 $ 7,253 $ 12,470
======= ========= ==========
</TABLE>
The Company paid income taxes of $7,040,000 and $6,884,000 during the fiscal
years ended June 30, 1994 and 1995, respectively.
The Company has a state tax credit carryforward of approximately $452,000
which expires in 2010 and alternative minimum tax carryforwards of
approximately $4,984,000 which have no expiration date.
F-13
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. EMPLOYEE BENEFIT PLANS
Effective July 1, 1993 the Company has a defined contribution retirement
plan covering substantially all employees. The Company contributes 1% of the
employee's base compensation plus 1/2% for each year of service up to a
maximum of 11% of the employee's base compensation. The plan also provides for
additional contributions by the Company contingent upon the Company's results
of operations. Expense for the years ended June 30, 1994 and 1995 was
$6,336,000 and $7,125,000, respectively.
Effective July 1, 1993, the Company also adopted a profit sharing plan
covering substantially all employees. Under the plan, the Company provides
contributions contingent upon the Company's results of operations and
employees may contribute up to 10% of gross salary. During the period March
16, 1993 through June 30, 1993, contributions were made in accordance with the
Procter & Gamble profit sharing plan. Profit sharing expense under these plans
was $2,017,000, $3,668,000, and $5,625,000, for the period March 16, 1993
through June 30, 1993 and for the years ended June 30, 1994 and 1995,
respectively.
Also, the Company provides medical, dental, and life insurance
postretirement plans covering employees who meet specified age and service
requirements. Certain employees who met specified age and retirement
eligibility requirements on March 15, 1993 are covered by the Procter & Gamble
plans and are not covered by these plans. Service considered for participants
in the Company's plan includes former service with the Predecessor company.
The Company has accounted for its obligation related to these plans in
accordance with Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions.
The Company's current policy is to fund the cost of these benefits as
payments to participants are required. The accrued post retirement benefit
obligation consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
----------------
1994 1995
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Fully eligible active plan participants............... $ 11 $ 115
Retirees.............................................. 17 56
Other active plan participants........................ 12,731 6,476
------- -------
12,759 6,647
Unrecognized prior service cost......................... -- 6,556
Unrecognized net loss................................... (735) (803)
------- -------
Accrued postretirement benefit obligation............... $12,024 $12,400
======= =======
</TABLE>
Net periodic postretirement benefit cost includes the following components
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 16, 1993 JUNE 30,
THROUGH -----------
JUNE 30, 1993 1994 1995
-------------- ------ ----
<S> <C> <C> <C>
Service cost................................. $200 $ 720 $539
Interest cost................................ 234 891 487
Amortization of unrecognized prior service
cost........................................ -- -- (650)
---- ------ ----
Net periodic postretirement benefit cost..... $434 $1,611 $376
==== ====== ====
</TABLE>
The Company amended its postretirement plans effective July 1, 1994. The
amendments changed the plans' eligibility requirements and benefit schedules,
created required retiree contributions, and implemented limits on the
Company's postretirement benefit costs. The effect of the amendments was to
reduce the accumulated postretirement benefit obligation by approximately
$7,206,000 to $5,553,000 at July 1, 1994. The reduction in the accumulated
postretirement benefit obligation is being recognized as a reduction to net
periodic
F-14
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
postretirement benefit cost over approximately eleven years, the average
remaining service of active participants not yet eligible for benefits.
The weighted average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) for the medical plans
is 11% for 1996 and is assumed to decrease gradually to 6% in 2004 and remain
at that level thereafter. Due to the benefit costs limitations in the plan,
the health care cost trend rate assumption does not have a significant effect
on the amounts reported. For example, increasing the assumed health care cost
trend rate by one percentage point would increase the accumulated
postretirement benefit obligation for the medical plans as of June 30, 1995 by
$34,405 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year ended June 30, 1995 by
$6,412.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% at June 30, 1994 and 1995.
8. RELATED PARTY TRANSACTIONS
In connection with the Acquisitions, the Company and Procter & Gamble
entered into a transition agreement pursuant to which Procter & Gamble
provides to the Company, for a period of up to 18 months following the closing
of the Acquisitions, certain of the administration and support services which
were historically provided to the Predecessor by Procter & Gamble and which
are necessary for the operation of the Company's business, including services
relating to communications, payments and collections, human resources, caustic
purchases, technical support and advice and accounting support. The Company
paid for such services at prices equal to those historically charged by
Procter & Gamble to the Predecessor or, with respect to certain services,
either the prices Procter & Gamble charges to its affiliates or the cost to
Procter & Gamble of providing such services. The amount charged to expense for
such services was approximately $417,000 for the period March 16, 1993 through
June 30, 1993 and approximately $374,000 for the year ended June 30, 1994. No
costs were incurred for the year ended June 30, 1995.
The Company and Madison Dearborn Partners, L.P. ("MDP"), the general partner
of MDCP, have entered into a professional services agreement pursuant to which
the Company paid to MDP a $1.0 million fee as compensation for MDP's
commitment to provide financing to repay the Bridge Note in the event
alternative financing was not available prior to June 30, 1993.
Buckeye Florida Partners has entered into an agreement with Procter & Gamble
whereby Procter & Gamble will purchase a specified tonnage (currently
substantially all of the Company's output) of fluff pulp from Buckeye Florida
Partners per year. The agreement expires on December 31, 2002. Shipments of
fluff pulp under the agreement are made to Procter & Gamble affiliates
worldwide, as directed by Procter & Gamble. In accordance with the terms of
the agreement, Procter & Gamble will reimburse Buckeye Florida Partners for
distribution costs related to shipments to Procter & Gamble affiliates. At
June 30, 1994 and 1995, Buckeye Florida Partners has recorded $740,547 and
$1,763,394, respectively, of prepaid expenses representing delivery costs
which will be reimbursed by Procter & Gamble. During the period March 16, 1993
through June 30, 1993 and the years ended June 30, 1994 and 1995, Procter &
Gamble reimbursed Buckeye Florida Partners $7,172,435, $23,567,512 and
$21,669,075, respectively, for distribution costs on shipments to Procter &
Gamble affiliates. Net sales to Procter & Gamble for the period March 16, 1993
through June 30, 1993 and for the years ended June 30, 1994 and 1995 were
$50,801,397, $148,195,746 and $157,901,186, respectively.
On March 16, 1993, Buckeye Florida Partners entered into two agreements with
Procter & Gamble Cellulose relating to the purchase of timber. Under these
agreements, Buckeye Florida Partners was required to purchase certain of the
timber from specified tracts of land available to harvest. Buckeye Florida
Partners purchased $5,123,182 and $18,644,404 of timber from Procter & Gamble
Cellulose during the period March 16, 1993 through
F-15
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
June 30, 1993 and the year ended June 30, 1994, respectively. In July 1994,
Procter & Gamble Cellulose sold the tracts of land and timber rights specified
in these agreements to a non-affiliated company, and Buckeye Florida Partners'
commitment under these agreements was assigned to the acquiror (See note 11).
Included in short-term investments is a $2.9 million certificate of deposit
which Buckeye Florida Partners has pledged as collateral to secure loans
obtained by certain officers of the Company.
9. EXPORT SALES
Gross export sales by geographic areas as a percent of total gross sales are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 16, 1993 JUNE 30,
THROUGH -------------
JUNE 30, 1993 1994 1995
-------------- ----- -----
<S> <C> <C> <C>
Europe..................................... 38% 35% 30%
Asia....................................... 12 22 26
South America.............................. 2 2 4
Other...................................... 13 11 10
--- ----- -----
65% 70% 70%
=== ===== =====
</TABLE>
10. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses of $916,000, $2,960,000 and $3,044,000,
were charged to expense as incurred in the period March 16, 1993 through June
30, 1993 and for the years ended June 30, 1994 and 1995, respectively.
11. PURCHASE COMMITMENTS
BCC has entered into purchase contracts with several vendors for the
purchase of cotton lint. At June 30, 1995, these commitments, which total
approximately $12,460,000, are expected to be fulfilled by October 1995.
At June 30, 1995, under three separate agreements expiring at various dates
through December 31, 2002, Buckeye Florida Partners is required to purchase
certain of the timber from specified tracts of land that is available for
harvest. At the option of Buckeye Florida Partners, certain of these timber
purchase commitments may be extended through December 31, 2010. The contract
price under terms of these agreements is either at the then current market
price or at fixed prices as stated in the contract. The fixed and determinable
purchase obligations related to these contracts, based on contract prices as
of June 30, 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
TIMBER PURCHASE
COMMITMENTS
---------------
<S> <C>
1996..................... $15,674
1997..................... 16,549
1998..................... 13,997
1999..................... 12,740
2000..................... 11,720
Thereafter............... 24,552
-------
Total.................. $95,232
=======
</TABLE>
Purchases under these agreements for the year ended June 30, 1995 were
$21,818,603.
On July 24, 1995, Buckeye Florida Partners entered into an agreement to
purchase certain timber from specified tracts of land that is available for
harvest through fiscal year 2002 at a fixed contract price. Future purchase
commitments under this agreement are $19,200,000 and are estimated to be
spread equally over the contract term.
F-16
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. CONTINGENCIES
Procter & Gamble has been named as a defendant in 21 lawsuits involving
approximately 188 individual plaintiffs claiming unspecified compensatory and
punitive damages, costs and legal fees for alleged diminished property value
and fear of illness asserting that the Foley Plant discharged toxic pollutants
into the nearby Fenholloway River and into treatment ponds from which the
pollutants entered and allegedly contaminated the underground water. Buckeye
Florida Partners assumed the obligation for any costs related to this matter
on the date of the acquisition of the Foley Plant on March 16, 1993. Buckeye
Florida Partners intends to vigorously defend these suits and contends that
the discharge from the Foley Plant is in compliance with federal and state
permits.
Additionally, the Company is subject to various state and federal
environmental laws and regulations. Buckeye Florida Partners has reached an
agreement (the "Fenholloway Agreement") with the Florida Department of
Environmental Regulation based upon the results of an environmental study of
Buckeye Florida Partners' operations. Compliance with the Fenholloway
Agreement will require Buckeye Florida Partners to invest up to $39,000,000
through 1999 to modify its facilities. In addition to the cost of compliance
with the Fenholloway Agreement, the cost of future compliance with other
environmental regulations will depend on environmental regulations which are
subject to change and the subsequent definition of the necessary technology to
meet the changing regulations. Therefore, it is difficult to determine the
total amount of expenditures that may be required in the future. However,
Buckeye Florida Partners estimates that capital spending for environmental
compliance based on certain regulations expected to be promulgated in addition
to compliance with the Fenholloway Agreement could be up to $14,000,000
through the year 2000.
As of June 30, 1995, the Company has established reserves of $4,300,000 to
address certain environmental matters. Based on current information and
requirements, the Company believes that such reserves are adequate. Because an
environmental reserve is not established until a liability is determined to be
probable and reasonably estimable, not all potential future environmental
liabilities are covered by the Company's reserves. Accordingly, there can be
no assurance that the Company's environmental reserves will be sufficient to
meet the Company's obligations, and additional earnings charges are possible.
The Foley Plant is on the EPA CERCLIS list of potential hazardous substance
release sites prepared pursuant to CERCLA. The EPA conducted a site
investigation in early 1995. Although the Company considers it unlikely that
the Foley Plant will be listed on the CERCLA National Priorities List and
hence require remedial action, the possibility of such listing cannot be ruled
out. If the site were to be placed on the National Priorities List, the costs
associated with conducting a CERCLA remedial action could be material.
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. It is the opinion of management that such
litigation and claims will be resolved without material adverse effect on the
Company's financial position or results of operations.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
For certain of the Company's financial instruments, including cash and cash
equivalents, short-term investments, accounts receivable, accounts payable,
other accrued liabilities and notes payable, the carrying amounts approximate
fair value due to their short maturities. The fair value of BCC's long-term
debt is based on an average of the $101 bid and $102 offer price on June 30,
1995. The fair value of Buckeye Florida Partners' long-term debt is estimated
using discounted cash flow analyses, based on Buckeye Florida Partners'
current incremental borrowing rate. The carrying value and fair value of long-
term debt at June 30, 1995, is $169,102,000 and $178,976,000, respectively.
14. SUBSEQUENT EVENTS (UNAUDITED)
Effective May 1, 1996, Buckeye Cellulose GmbH, a wholly owned subsidiary of
the Company, purchased the property, plant, equipment and inventories of the
specialty pulp business of Peter Temming AG for approximately $29 million. The
acquisition will be accounted for as a purchase.
F-17
<PAGE>
BUCKEYE CELLULOSE CORPORATION AND AFFILIATES
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On April 30, 1996, the Company entered into a definitive agreement to
purchase all of the common stock of Alpha Cellulose Holdings, Inc. ("Alpha")
of Lumberton, North Carolina. Subject to the fulfillment of certain conditions
and regulatory approval, the acquisition is expected to be completed in early
fiscal 1997.
In November 1995, shareholders of Buckeye Florida Corporation exchanged all
of their outstanding common stock for common stock of Buckeye Cellulose
Corporation and Buckeye Florida Corporation became a wholly-owned subsidiary
of Buckeye Cellulose Corporation. All prior interim periods presented have
been restated to reflect this combination of equity interests. Concurrently,
the Company exercised an option to acquire Procter & Gamble Cellulose's 50%
limited partnership interest in Buckeye Florida Partners, of which Buckeye
Florida Corporation is the general partner, for $62.1 million in cash, plus
assumed liabilities. This acquisition has been recorded using the purchase
method of accounting. The allocation of the purchase price is based on the
respective fair value of assets and liabilities at the date of acquisition
based on an independent appraisal and resulted in an increase to property,
plant and equipment of $10.6 million and a reduction in goodwill of $9.0
million. The purchase included at fair value current assets of $45.6 million,
property, plant and equipment of $93.8 million, and the assumption of current
liabilities of $17.3 million, non-current liabilities of $6.5 million and
long-term debt of $46.9 million. The operations of Buckeye Florida Partners
are consolidated in the accompanying financial statements and the 50% limited
partnership interest is recorded as minority interest prior to the date of
acquisition. The charge to minority interest was discontinued at the date of
acquisition of the Procter & Gamble Cellulose 50% limited partnership
interest.
The following pro forma results of operations assume the acquisition of the
Procter & Gamble Cellulose limited partnership interest in Buckeye Florida
Partners and the combination of equity interests of Buckeye Florida
Corporation with the Company occurred as of the beginning of the periods
presented and excludes the impact on interest expense and certain other costs,
which in the aggregate is not material:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-----------------
1995 1996
-------- --------
(IN THOUSANDS,
EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net sales.............................................. $301,318 $338,825
Operating income....................................... 54,625 83,179
Income before extraordinary loss....................... 23,917 43,741
Net income............................................. 23,917 39,792
Earnings per common share:
Income before extraordinary loss..................... -- 2.08
Net income........................................... -- 1.89
</TABLE>
The pro forma information is presented for information purposes only and is
not necessarily indicative of the operating results that would have occurred
had the acquisition and combination been consummated as of the above dates,
nor is it necessarily indicative of future operating results.
During November 1995, the Company completed a public offering of $150
million principal amount of 8 1/2% Senior Subordinated Notes due December 15,
2005, which were sold for 99.626% of their principal amount, and 747,500
shares of common stock were sold through an underwriten public offering. The
Company also entered into a new credit facility providing for borrowings of up
to $135 million of which $56 million was borrowed at closing of the
transactions described above. The new credit facility matures November 28,
2000, and beginning in 1998 availability reduces by $3.75 million per quarter.
Borrowings under the new credit facility bear interest at the lender's prime,
LIBOR plus a spread, or a money market based rate, at the option of the
Company. Under the terms of both the notes and new credit facility, the
Company is required to comply with certain covenants including minimum net
worth, interest coverage ratio and limitations on levels of indebtedness.
The proceeds from the notes and bank credit facility were used to repay $90
million of outstanding loans from Procter & Gamble, purchase Procter & Gamble
Cellulose's interest in Buckeye Florida Partners, finance a tender offer for
the Company's outstanding 10 1/4% Senior Notes due 2001, repay $482,000 of
Madison Dearborn Capital Partners debt and pay fees and expenses incurred in
connection with these transactions. In the quarter ended March 31, 1996, an
additional $12.2 million of 10 1/4% Senior Notes were retired using the
proceeds to the Company from its initial public stock offering.
F-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Boards of Directors
Buckeye Cellulose Corporation and Affiliated Companies
We have audited the accompanying combined statement of operating income of
the Memphis operations and the Foley operations (the "Plants") of The Procter
& Gamble Cellulose Company ("Procter & Gamble Cellulose"), a subsidiary of The
Procter & Gamble Company ("Procter & Gamble") for the period July 1, 1992
through March 15, 1993. This combined statement of operating income is the
responsibility of the management of the Memphis Plant and Foley Plant. Our
responsibility is to express an opinion on this combined statement of
operating income based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined statement of operating
income is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the combined
statement of operating income. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined statement of operating income presentation. We
believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, the accompanying combined statement of operating
income includes the revenues and expenses which are specifically identifiable
with the Plants, as well as certain allocated expenses. This combined
statement of operating income may not necessarily reflect the results of
operations of the Plants had they been operated as stand-alone entities. Under
agreements dated March 16, 1993, the Memphis Plant was purchased from Procter
& Gamble Cellulose by Buckeye Cellulose Corporation ("BCC") and the Foley
Plant was purchased from Procter & Gamble Cellulose by Buckeye Florida,
Limited Partnership ("Buckeye Florida Partners").
In our opinion, the combined statement of operating income referred to above
presents fairly, in all material respects, the combined results of operations
of the Plants for the period July 1, 1992 through March 15, 1993, as described
in Note 1, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Memphis, Tennessee
July 28, 1995
F-19
<PAGE>
MEMPHIS PLANT AND FOLEY PLANT OPERATIONS
COMBINED STATEMENT OF OPERATING INCOME
(IN THOUSANDS)
JULY 1, 1992 THROUGH MARCH 15, 1993
<TABLE>
<S> <C>
Net sales............................................................. $233,460
Cost of goods sold.................................................... 189,808
--------
Gross margin.......................................................... 43,652
Selling, research, and administrative expenses:
Procter & Gamble Cellulose division allocations..................... 17,522
Procter & Gamble corporate allocations.............................. 4,764
--------
22,286
--------
Operating income...................................................... $ 21,366
========
</TABLE>
See accompanying notes.
F-20
<PAGE>
MEMPHIS PLANT AND FOLEY PLANT OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
FOR THE PERIOD JULY 1, 1992 THROUGH MARCH 15, 1993
1. ACCOUNTING POLICIES
Business Description and Basis of Presentation
The Memphis Plant and Foley Plant (the "Plants") of Procter & Gamble
Cellulose produce cotton linter pulp and wood pulp, respectively. The Plants
have historically operated as two of several pulp mills comprising the
Cellulose & Specialties Division (the "C&S Division") of Procter & Gamble
Cellulose. Under an agreement dated March 16, 1993, the assets and business
comprising the Memphis Plant and certain
C&S Division headquarters assets were purchased from Procter & Gamble
Cellulose by BCC, a newly-formed company.
Also, under a separate agreement dated March 16, 1993, Buckeye Florida
Partners was formed by Buckeye Florida Corporation and Procter & Gamble
Cellulose. Simultaneously, Buckeye Florida Partners acquired substantially all
of the assets and liabilities of the wood pulp plant located in Foley,
Florida.
BCC and Buckeye Florida Partners are commonly owned by Madison Dearborn
Capital Partners, L.P. ("MDCP") and certain management members of BCC and
Buckeye Florida Partners. The combined statement of operating income (the
"Statement") does not reflect the effects of the purchase transactions.
The accompanying Statement includes the revenues and expenses which are
specifically identifiable with the Plants as well as certain allocated
expenses for services provided by the C&S Division and by Procter & Gamble.
The C&S Division costs are allocated using formulas including estimates of
effort expended and sales. Procter & Gamble corporate expenses are allocated
based primarily on sales. The Statement may not necessarily reflect the
results of operations of the Plants had they been operated as stand-alone
entities.
Procter & Gamble provides a centralized cash management function. Many of
the Plants' disbursements and collections are settled through intercompany
accounts; therefore, no statement of cash flows is presented.
The Plants' results of operations have historically been included in the
consolidated income tax returns of Procter & Gamble. There is no tax sharing
agreement for allocating income taxes to operating units. Accordingly, the
Statement does not reflect any income tax expense or benefit.
The debt obligations of Procter & Gamble are not specifically identifiable
with individual operating units; accordingly, interest charges are not
reflected in the results of operations of the Plants.
Inventories
Raw cotton lint inventories, the lint component of finished pulp, and
storeroom supplies of the Memphis Plant are stated at lower of cost
(determined on the average cost method) or market. The remaining components of
finished pulp costs including other raw materials, labor and overhead are
stated at lower of cost (determined on a first-in, first-out basis) or market.
Inventories of the Foley Plant, other than storeroom supplies and chemicals,
are valued at the lower of cost (first-in, first-out method) or market.
Storeroom supplies and chemicals are stated at lower of cost (determined on
the average cost method) or market.
Revenue Recognition
Revenue is generally recognized at the time products are shipped. Net sales
is comprised of sales reduced by sales allowances and distribution costs.
F-21
<PAGE>
MEMPHIS PLANT AND FOLEY PLANT OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation
Depreciation is computed on the straight-line basis over the estimated
useful lives of the assets.
Environmental Costs
Liabilities are recorded when environmental assessments are probable, and
the cost can be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or the Plants'
commitment to a plan of action based on the then known facts.
2. RELATED PARTY TRANSACTIONS
As discussed in Note 1, certain expenses reflected in the Statement include
allocations of expenses from the C&S Division and from Procter & Gamble. C&S
Division allocations include product supply services of $222 which is included
in the cost of goods sold. C&S Division selling, research and administrative
allocations include administrative costs of general management, information
systems management, costs of operations and maintenance of a C&S Division
airplane, and other miscellaneous services. Selling costs include allocated
costs of domestic and foreign sales offices. Research and development costs
allocated by the C&S Division were $3,923 for the period July 1, 1992 through
March 15, 1993. Allocations related to the C&S Division airplane were $614 for
the period July 1, 1992 through March 15, 1993.
Procter & Gamble corporate allocations include product supply services of
$131 which are included in cost of goods sold. Procter & Gamble corporate
allocations also include costs of general management, treasury, franchise
taxes and tax administration, financial audit, financial reporting, benefits
administration, insurance, public affairs, information systems management, and
other miscellaneous services.
Net sales to Procter & Gamble for the period July 1, 1992 through March 15,
1993 were $101,969, which represents 44% of total net sales for the period.
3. EXPORT SALES
Gross export sales by geographic area as a percent of total gross sales for
the period are as follows:
<TABLE>
<S> <C>
Europe............................... 41%
Asia................................. 11
South America........................ 3
Other................................ 10
---
65%
===
</TABLE>
4. RETIREMENT PLANS
Profit Sharing Plan
Substantially all Plant employees are covered by The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan, an employer-funded, defined
contribution profit sharing plan which provides retirement benefits. Annual
credits to participants' accounts are based on individual base salary and
years of service.
Profit sharing expense allocable to the Plants were $4,980 for the period
July 1, 1992 through March 15, 1993.
F-22
<PAGE>
MEMPHIS PLANT AND FOLEY PLANT OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Other Retiree Benefits
Certain health care and life insurance benefits are provided for retired
employees. The net cost of these benefits is charged to individual operating
units in the year the claims and premiums are paid. The net costs related to
the Plants were $941 for the period July 1, 1992 through March 15, 1993. Under
the terms of the purchase agreements discussed in Note 1, Procter & Gamble
will retain all future costs related to current retirees.
Statement of Financial Accounting Standards No. 106, Accounting for
Postretirement Benefits Other than Pensions, had not been adopted by the
Plants as of March 15, 1993. This statement requires the use of an accrual
basis of accounting to recognize the related expense over the period of active
employment.
5. DEPRECIATION, AMORTIZATION AND CAPITAL EXPENDITURES
Depreciation, amortization, and capital expenditures for the period were as
follows:
<TABLE>
<S> <C>
Depreciation..................... $18,713
Amortization..................... 549
Capital expenditures............. 17,761
</TABLE>
6. CONTINGENCIES
Procter & Gamble has been named as a defendant in 21 lawsuits involving
approximately 188 individual plaintiffs claiming unspecified compensatory and
punitive damages, costs and legal fees for alleged diminished property value
and fear of illness asserting that the Foley Plant discharged toxic pollutants
into the nearby Fenholloway River and into treatment ponds from which the
pollutants entered and allegedly contaminated the underground water. Buckeye
Florida Partners assumed the obligation for any costs at the acquisition (see
Note 1). Buckeye Florida Partners intends to vigorously defend these suits and
contends that the discharge from the Foley Plant is in compliance with federal
and state permits.
The Plants are involved in certain other legal actions and claims arising in
the ordinary course of business. Additionally, the Plants are subject to
various state and federal laws and regulations concerning the protection of
the environment.
7. SUBSEQUENT EVENT
In December 1994, Buckeye Florida Partners reached an agreement in principle
with the State of Florida Department of Environmental Regulation based upon an
environmental study of Buckeye Florida Partners' operations. Compliance with
the agreement (the "Fenholloway Agreement") will require Buckeye Florida
Partners to invest up to $39 million through 1999 to modify its facilities. In
addition to the cost of compliance with the Fenholloway Agreement, the cost of
future compliance with other environmental regulations will depend on
environmental regulations which are subject to change and the subsequent
definition of the necessary technology to meet the changing regulations.
Therefore, it is difficult to determine the total amount of expenditures that
may be required in the future. However, Buckeye Florida Partners estimates
that capital spending for environmental compliance in addition to compliance
with the Fenholloway Agreement could be up to $14 million through the year
2000.
F-23
<PAGE>
REPORT OF DIPL.-ING. WOLF GADECKE, WIRTSCHAFTSPRUFER, INDEPENDENT AUDITOR
Board of Directors
Buckeye Cellulose Corporation
I have audited the accompanying balance sheet of the cotton linter pulp
division of Peter Temming AG (the "Specialty Pulp Business") as of December
31, 1995, and the related statement of income for the year then ended. These
financial statements are the responsibility of the Specialty Pulp Business
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audit in accordance with generally accepted auditing
standards in the Federal Republic of Germany, which in my opinion do not
differ significantly from generally accepted auditing standards in the United
States of America. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. 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. I believe that my audit provides a
reasonable basis for my opinion.
As described in the Accounting and Valuation Method's footnote to the
financial statements, the accompanying financial statements include the
revenues and expenses which are specifically identifiable with the Specialty
Pulp Business, as well as certain allocated expenses. The financial statements
may not necessarily reflect the results of operations of the Specialty Pulp
Business had it been operated as a stand-alone entity.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Specialty Pulp Business
at December 31, 1995 and the results of its operations for the year then ended
in conformity with generally accepted accounting principles of the Federal
Republic of Germany.
Dipl.-Ing. Wolf Gadecke
Wirtschaftsprufer
Hamburg, Germany
April 29, 1996
F-24
<PAGE>
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
BALANCE SHEET AS PER DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
DM DM
------------- -------------
<S> <C> <C>
A. FIXED ASSETS
I.Intangible Assets
Industrial and similar rights, software....... 96.00
II.Tangible Assets
1. Land, land rights and buildings including
buildings on third party land.................. 3,743,152.00
2. Technical equipment and machines............. 2,691,700.00
3. Other equipment, factory and office
equipment...................................... 639,818.00
4. Payments on account and assets under
construction................................... 0.00 7,074,670.00
-------------
III.Financial Assets
Other loans................................... 0.00
B. CURRENT ASSETS
I.Inventories
1. Raw materials and supplies................... 13,518,705.00
2. Work in process.............................. 7,960.00
3. Finished goods............................... 4,920,800.00 18,447,465.00
-------------
II.Receivables and other assets
1. Trade receivables............................ 11,292,865.95
2. Other assets................................. 94,503.00 11,387,368.95
-------------
III.Cash-in-hand, postal giro balances, bank
balances......................................... 916,425.00
-------------
37,826,024.95
=============
</TABLE>
F-25
<PAGE>
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
BALANCE SHEET AS PER DECEMBER 31, 1995
EQUITY AND LIABILITIES
<TABLE>
<CAPTION>
DM DM
------------- -------------
<S> <C> <C>
A.EQUITY AND LIABILITIES
I. Subscribed capital........................... 7,000,000.00
II. Results from ordinary activities............ 303,320.36 7,303,320.36
-------------
B.SPECIAL RESERVES FOR TAX PURPOSES............... 58,701.00
C.ACCRUALS
1. Accruals for pensions and similar
obligations.................................... 610,291.00
2. Other accruals............................... 2,447,197.00 3,057,488.00
-------------
D.LIABILITIES
1. Liabilities to banks......................... 8,655,788.00
2. Trade payables............................... 2,916,838.06
3. Payables to pension fund..................... 154,663.00
4. Other liabilities............................ 15,679,226.53
of which taxes: DM 348,345.60
of which relating to social security
and similar obligations: DM 401,117.00
of which affiliated companies: DM 14,434,359.35 27,406,515.59
------------- -------------
37,826,024.95
=============
</TABLE>
F-26
<PAGE>
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
DM DM
------------- --------------
<S> <C> <C>
1.Sales........................................ 87,015,212.18
2.Increase in finished goods inventories and
work in process............................. 1,926,199.00
3.Production for own plant equipment
capitalized................................. 37,298.00
4.Other operating income....................... 950,599.59
5.Material cost
Cost of raw materials, consumables and
supplies and of purchased merchandise........ (53,445,177.00)
--------------
6.Gross result................................. 36,484,131.77
7.Personnel expenses
a)Wages and salaries.......................... 14,619,679.00
b)Social security and other pension cost, of
which in respect of old age pensions: DM
95,587.00................................. 2,966,859.00 (17,586,538.00)
-------------
8.Depreciation on intangible fixed assets and
tangible assets............................. (1,924,734.00)
9.Other operating expenses..................... (16,388,790.41)
--------------
10.Operational result........................... 584,069.36
11.Income from other investments and long term
loans....................................... 80.00
12.Other interest and similar income............ 13,328.00
13.Interest and similar expenses (mainly for
liabilities to banks)....................... (294,157.00)
-------------
14.Financial result............................. (280,749.00)
--------------
15.Results from ordinary activities............. 303,320.36
==============
</TABLE>
F-27
<PAGE>
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
NOTES TO FINANCIAL STATEMENTS--1995--(CONTINUED)
GENERAL MATTERS
The cotton linter pulp division of Peter Temming Aktiengesellschaft
(hereinafter Peter Temming AG) (the "Specialty Pulp Business") has
historically been operated as one segment of several segments comprising Peter
Temming AG. Under a letter of intention signed in January 1996, the assets and
business comprising the Specialty Pulp Business, including the production
plant in Gluckstadt, Germany, are to be purchased from Peter Temming AG by
Buckeye Cellulose Corporation, Memphis, Tennessee, USA, respectively, by
Buckeye Cellulose GmbH, Kappeln, Germany.
The accompanying financial statements of the Specialty Pulp Business have
been derived from the audited year end financial statements of Peter Temming
AG, with the Specialty Pulp Business to be transferred being treated as a
dependent permanent establishment. The financial statements include the
assets, liabilities, revenues and expenses which are specifically identifiable
with the Specialty Pulp Business as well as certain allocated expenses for
shared services, including cash management activities. The expenses are
allocated using formulas including estimates of effort expended and sales. The
financial statements may not necessarily reflect the results of operations of
the Specialty Pulp Business had it been operated as a standalone entity.
No allocation or calculation of income and asset taxes have been undertaken.
As a result, the income statement ends with the results from ordinary
activities.
ACCOUNTING AND VALUATION METHODS
The annual financial statements of the Specialty Pulp Business were prepared
according to accounting and valuation regulations specified in the Commercial
Code and the Aktiengesetz ("AktG") in the Federal Republic of Germany.
Peter Temming AG provides a centralized cash management function. Many of
the Specialty Pulp Business's disbursements and collections are settled
through intercompany accounts; therefore, no statement of cash flows is
presented.
Intangible assets are capitalized at their acquisition cost reduced by
ordinary amortization.
Tangible fixed assets are recorded at acquisition cost reduced by ordinary
depreciation. For personal computers and accessories a fixed value is
established. The difference between depreciation permissible under the
Commercial Code and under tax law regulations was recorded as special reserves
for tax purposes.
Declining depreciation rates are used for buildings in agreement with German
tax regulations (par. 7 Abs. 5 EStG). The useful life of buildings generally
ranges from 10 to 30 years; 40 years are applied for older buildings.
The declining balance depreciation method is generally used for additions to
technical equipment and machines as well as to other equipment, factory and
office equipment, up to the year in which the straight line method results in
higher depreciation charges.
Depreciation of subsequent acquisition cost is applied using the adequate
useful life.
Movable, low value assets are expensed according to tax law regulations.
Raw materials and supplies are capitalized at the lower of acquisition cost
or current market prices valid at the balance sheet date. The acquisition cost
for raw lint includes also the internal discharging fee.
Work in process is valued at proportional manufacturing cost.
F-28
<PAGE>
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
NOTES TO FINANCIAL STATEMENTS--1995--(CONTINUED)
Finished goods, sorted by product, are valued at the lower of actual
manufacturing cost or net realizable value at the balance sheet date.
Manufacturing costs include direct costs as well as appropriate manufacturing
overhead and administrative expenses in relation to the manufacturing process.
Receivables and other assets are recorded at their nominal value. All
foreseeable valuation risk of trade accounts receivables and other assets are
provided for via adequate specific allowances. The general credit risk is
provided for via a general allowance taking specific conditions of different
countries into account.
The special reserve for tax purposes exclusively includes the difference
between depreciation permissible under the Commercial Code and under tax
regulations and will be released over the useful life of the assets concerned.
The special reserve for tax purposes represents an allowance of fixed assets.
Accruals take into account all recognizable risks. Direct pension payments
are accrued for according to actuarial science principles based on an interest
rate of 6%.
Liabilities are recorded at the repayment value.
Receivables and liabilities in a foreign country (i.e. other than Deutsch
mark) are valued at the exchange rate at year end. Losses resulting from
fluctuations in exchange rates as of the transaction date and as of the
balance sheet date are included in income.
EXPLANATION WITH RESPECT TO THE BALANCE SHEET
Fixed Assets
Intangible assets cover purchased software.
Additions to tangible assets of (000) DM 1,557 reflect generally building
cost for the expansion of the shipment stock, an out-building and other
remodelings at the machine-house, of (000) DM 817 for a Yokogawa control-
system, reconstruction to a scroll-cutter and other technical equipment and
machines and of (000) DM 546 for other factory and office equipment.
Current Assets
Trade accounts receivables have been reduced by allowances of (000) DM 234.
Other assets mainly represent receivables from tax authorities and receivables
from an energy entity.
Subscribed Capital
The capital of the Specialty Pulp Business, derived from Peter Temming AG
balance sheet, amounts to (000) DM 7,000.
Profit on Ordinary Activities
The 1995 profit on ordinary activities for the Specialty Pulp Business as a
dependent permanent establishment amounts to (000) DM 303. Although the item
is allocated as equity (retained earnings), it was assumed that the profits
are to be distributed in full.
Special Reserve for Tax Purposes
The special reserve for tax purposes exclusively reflects depreciation in
accordance with par. 6b EStG (Income tax law) which is in excess of
depreciation under regulations of the Commercial Code.
The release of the reserve will result in income taxes at a rate of 50% as
far as profits will occur.
F-29
<PAGE>
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
NOTES TO FINANCIAL STATEMENTS--1995--(CONTINUED)
Accruals
The accrual for pension includes amounts as high as possible under tax
regulations. A portion of pension obligations are due from a separate pension
entity. Pension obligations are totally funded by assets of the pension entity
and pension accruals.
Other accruals primarily include waste water charges--(000) DM 1,090;
obligations to employees--(000) DM 890; repair and maintenance--(000) DM 141;
and open invoices of (000) DM 306.
Liabilities
Liabilities are made up as follows:
<TABLE>
<CAPTION>
FALLING DUE
-----------------------------
TOTAL AMOUNT LESS THAN 1 1-5 MORE THAN 5
(000) DM YEAR YEARS YEARS
------------ ----------- ----- -----------
<S> <C> <C> <C> <C>
Liabilities to banks............. 8,656 6,459 2,197 --
Trade payable.................... 2,917 2,917 -- --
Payables to pensions fund........ 154 -- -- 154
Other liabilities................ 15,679 15,679 -- --
------ ------ ----- ---
27,406 25,055 2,197 154
====== ====== ===== ===
</TABLE>
Liabilities to banks are secured by mortgages of (000) DM 2,656 on company
real estate.
EXPLANATIONS TO THE INCOME STATEMENT
The income statement was classified applying the total cost method.
Sales
Sales are recorded without VAT. They include Specialty Pulp Business sales
only.
Total sales according to regions are as follows:
<TABLE>
<CAPTION>
FOREIGN COUNTRIES FEDERAL REPUBLIC
(DM) OF GERMANY (DM) TOTAL DM
----------------- ---------------- -------------
<S> <C> <C> <C>
Specialty Pulp Business. 60,345,336.28 26,669,875.90 87,015,212.18
</TABLE>
Other operating income
Other operating income primarily contains income from the reversal of other
accruals of (000) DM 419, the release of the general allowance of (000) DM 200
and the profit on foreign exchange (000) DM 157.
The position includes income amounting to (000) DM 748 relating to another
business year.
Depreciation
Depreciation contains ordinary depreciation on intangible and tangible
assets.
Other operating expenses
Other operating expenses mainly reflect expenses from sideline business
repair and maintenance expenses, waste and waste water charges, administration
and operating expenses as well as rent and lease expenses, other
administrative cost, travel expenses, provisions, freight and insurance
expenses.
F-30
<PAGE>
PETER TEMMING AKTIENGESELLSCHAFT--SPECIALTY PULP BUSINESS
NOTES TO FINANCIAL STATEMENTS--1995--(CONTINUED)
Other Remarks
Average number of employees working for the company during the business year:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Hourly employees................................................ 109 108
Salaried employees.............................................. 49 48
--- ---
158 156
=== ===
</TABLE>
BOARD OF DIRECTORS:
Michael Steinbeis (chairman)
Franz Stimmel
Gerhard Wanko
Gluckstadt, April 18, 1996
F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Alpha Cellulose Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Alpha
Cellulose Holdings, Inc. and subsidiaries (the "Company") as of December 31,
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Alpha Cellulose Holdings, Inc. and
subsidiaries as of December 31, 1995, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
February 29, 1996
F-32
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 186,386 $ 110,891
Receivables:
Trade............................................. 5,675,744 6,660,999
Related parties (Note 8).......................... 60,000 61,000
Other............................................. 6,749 15,429
Inventory (Note 3).................................. 14,910,692 16,608,688
Prepaid expenses and other assets................... 163,500 442,597
Deferred income tax (Note 6)........................ 594,000 780,000
----------- -----------
Total current assets............................ 21,597,071 24,679,604
----------- -----------
Property, plant and equipment, net (Note 4)........... 27,391,460 27,395,557
Intangible assets, net (Note 5)....................... 4,528,386 4,214,100
----------- -----------
Total assets.................................... $53,516,917 $56,289,261
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations (Note 7)... $ 7,122,053 $ 9,236,579
Accounts payable.................................... 1,951,302 1,160,131
Accrued expenses.................................... 2,935,802 3,239,912
Income tax payable.................................. 146,327 562,827
----------- -----------
Total current liabilities....................... 12,155,484 14,199,449
----------- -----------
Long-term obligations (Notes 7 and 8)................. 28,089,544 28,104,556
Deferred income tax (Note 6).......................... 4,135,000 3,993,000
Commitments (Note 9)
Stockholders' equity:
Common stock, $.01 par value, 1,000,000 shares
authorized and outstanding......................... 10,000 10,000
Preferred stock, $.01 par value, 50,000 shares
authorized and outstanding......................... 500 500
Paid-in capital..................................... 3,989,500 3,993,475
Retained earnings................................... 5,136,889 5,988,281
----------- -----------
Total stockholders' equity...................... 9,136,889 9,992,256
----------- -----------
Total liabilities and stockholders' equity...... $53,516,917 $56,289,261
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-33
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER ------------------------
31, 1995 1995 1996
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Sales.................................... $54,850,902 $14,077,753 $14,726,579
Less allowances........................ (4,516,483) (1,176,311) (1,534,007)
----------- ----------- -----------
Net sales............................ 50,334,419 12,901,442 13,192,572
Cost of sales............................ 35,477,777 7,988,781 10,348,757
----------- ----------- -----------
Gross profit......................... 14,856,642 4,912,661 2,843,815
Selling and administrative expenses...... 4,084,565 1,420,703 847,868
----------- ----------- -----------
Operating income..................... 10,772,077 3,491,958 1,995,947
----------- ----------- -----------
Other income (expense):
Interest income (Note 8)............... 7,077 2,435 1,293
Interest expense (Note 8).............. (3,265,474) (807,535) (780,564)
Trucking income, net................... 31,465 16,469 (15,697)
Miscellaneous, net..................... (445,651) 438 (25,605)
----------- ----------- -----------
Total other expense.................. (3,672,583) (788,193) (820,573)
----------- ----------- -----------
Income before income taxes............... 7,099,494 2,703,765 1,175,324
Provision for income taxes (Note 6)...... 2,682,000 1,022,000 323,982
----------- ----------- -----------
Net income............................... $ 4,417,494 $ 1,681,765 $ 851,392
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-34
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON PREFERRED PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995.. $ 9,700 $500 $3,929,800 $ 961,437 $4,901,437
Common stock, 30,000
shares issued.......... 300 59,700 60,000
Dividends............... (242,042) (242,042)
Net income.............. 4,417,494 4,417,494
------- ---- ---------- ---------- ----------
Balance, December 31,
1995..................... $10,000 $500 $3,989,500 $5,136,889 $9,136,889
Net income (unaudited).. 851,392 851,392
Other capital
transactions
(unaudited)............ 3,975 3,975
------- ---- ---------- ---------- ----------
Balance, March 31, 1996
(unaudited).............. $10,000 $500 $3,993,475 $5,988,281 $9,992,256
======= ==== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-35
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------------------
1995 1995 1996
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................. $ 4,417,494 $1,531,266 $851,392
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization........ 2,961,534 722,180 889,611
Deferred income tax.................. 146,000 36,830 (328,000)
Net loss on disposal of assets....... 445,850 -- --
Provision for bad debts.............. 75,000 -- --
Changes in operating assets and
liabilities:
Receivables........................ (970,274) (1,404,853) (994,935)
Inventory.......................... (6,514,711) (930,644) (1,697,996)
Prepaid expenses and other assets.. 174,304 1,556 (279,097)
Accounts payable................... (582,958) (1,389,606) (791,171)
Accrued expenses and income tax
payable........................... 163,238 1,116,010 720,610
----------- ---------- ----------
Net cash provided by (used in)
operating activities.................. 315,477 (317,261) (1,629,586)
----------- ---------- ----------
INVESTING ACTIVITIES:
Proceeds from sale of equipment........ 119,747 -- --
Receipts/Payments related to
acquisition of Alpha Cellulose, Inc... 636,084 (16,800) --
Purchases of equipment................. (2,082,335) (208,354) (579,422)
----------- ---------- ----------
Net cash used in investing activities.. (1,326,504) (225,154) (579,422)
----------- ---------- ----------
FINANCING ACTIVITIES:
Borrowings on line of credit, net...... 2,097,487 -- 2,490,321
Proceeds from issuance of stock........ 60,000 -- --
Principal payments on long-term
obligations........................... (1,449,198) (101,661) (360,783)
Dividends paid to shareholders......... (242,042) -- --
Other capital transactions............. -- -- 3,975
----------- ---------- ----------
Net cash provided by financing
activities............................ 466,247 (101,661) 2,133,513
----------- ---------- ----------
Net decrease in cash and cash
equivalents........................... (544,780) (644,076) (75,495)
Cash and cash equivalents, beginning of
period................................ 731,166 731,166 186,386
----------- ---------- ----------
Cash and cash equivalents, end of
period................................ $ 186,386 $ 87,090 $ 110,891
=========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized). $ 3,736,792
-----------
Income taxes......................... $ 2,401,917
===========
</TABLE>
See notes to consolidated financial statements.
F-36
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
1. BASIS OF PRESENTATION
Alpha Cellulose Holdings, Inc. ("Holdings") was incorporated in the State of
Delaware on July 11, 1994 through the issuance of 50,000 shares of preferred
stock and 970,000 shares of common stock for $2,970,000 in cash, note
receivable of $60,000 and property with a fair value of $910,000.
On August 7, 1994, Holdings acquired all of the outstanding capital stock of
Alpha Cellulose, Inc. ("Alpha") in a business combination for an aggregate
purchase price of $42,352,105 (the "Acquisition"). The Acquisition was funded
as follows:
<TABLE>
<S> <C>
Exchange of stock............................................ $ 3,940,000
Borrowings on revolving line of credit....................... 5,366,940
Borrowings on term loan...................................... 23,000,000
Borrowings on subordinated notes............................. 9,000,000
Noncompete agreement......................................... 1,045,165
-----------
$42,352,105
===========
</TABLE>
The Acquisition has been accounted for in accordance with the purchase
method of accounting and the accompanying consolidated financial statements of
the Company reflect the purchase price allocated to assets acquired and
liabilities assumed based on their fair values as of the acquisition date. The
fair values of assets and liabilities were based on independent appraisals and
estimates by management. The following is a summary of the purchase price
allocation as of the date of acquisition:
<TABLE>
<S> <C>
Current assets............................................... $17,093,737
Property, plant and equipment................................ 28,336,547
Intangible assets............................................ 6,001,005
Liabilities assumed.......................................... (9,079,184)
-----------
Total purchase price..................................... $42,352,105
===========
</TABLE>
All goodwill resulting from the purchase is being amortized over 40 years.
The noncompete asset is being amortized over the three year life of the
agreement.
In 1995, $636,084 was received in settlement of certain contingent
obligations existing at the acquisition date. Accordingly, goodwill has been
reduced by $636,084 to reflect this settlement.
Operations--Alpha is the leading worldwide manufacturer of cotton pulp used
by specialty papermills in the production of a variety of fine writing and
other specialty papers.
2. SIGNIFICANT ACCOUNTING POLICIES:
a. Principles of Consolidation--The consolidated financial statements
include the accounts of Alpha Cellulose Holdings, Inc. and its wholly-owned
subsidiaries Alpha and Alpha Cellulose Exports, Inc. All intercompany balances
and transactions have been eliminated.
b. Unaudited Financial Statements--In the opinion of management, the
Consolidated Statements of Income and the Consolidated Statements of Cash
Flows for the three months ended March 31, 1995 and 1996 and the Consolidated
Balance Sheet as of March 31, 1996 include all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position and Results of Operations and Cash Flows for the period then ended in
accordance with generally accepted accounting principles.
c. Statement of Cash Flows--For the purposes of reporting cash flows, cash
and cash equivalents include cash on hand and amounts due from banks and
investments in money market accounts.
d. Inventory--Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Obsolete and possible
excess quantities are reduced to estimated net realizable value.
F-37
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
e. Property, Plant and Equipment--Additions and improvements are capitalized
at cost. Maintenance and repairs are charged to expense as incurred.
Depreciation is provided on both straight-line and accelerated methods for
financial statement and income tax purposes over the following useful lives:
<TABLE>
<S> <C>
Land improvements........................................... 10-30 years
Leasehold improvements...................................... 5-10 years
Buildings................................................... 10-31.5 years
Machinery and equipment..................................... 3-20 years
</TABLE>
f. Intangible Assets--Intangible assets consist primarily of goodwill
resulting from the purchase of Alpha Cellulose, Inc. and a noncompete
agreement with a former officer of the Company. The goodwill is being
amortized over 40 years and the noncompete agreement over the three year term
of the agreement.
g. Deferred Income Taxes--Deferred income taxes are accounted for in
accordance with Statement of Financial Standards ("SFAS") No. 109, accounting
for income taxes. Deferred income taxes (benefits) are provided on temporary
differences between the financial statement carrying values and the tax bases
of assets and liabilities.
h. Environmental Remediation and Compliance--Environmental remediation costs
are accrued based on estimates of known environmental remediation exposures.
Environmental compliance costs include maintenance and operating costs with
respect to pollution control facilities, costs of ongoing monitoring programs
and similar costs. Such costs are expensed as incurred.
i. Employee Benefit Costs--Alpha has a cash option thrift plan [401(k)]
which covers substantially all employees. The Company matches employee
contributions to the plan up to 5% of the employee's gross compensation.
Thrift plan costs charged to operations were $229,764 for 1995.
j. 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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the recorded amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Supplies......................................... $ 623,055 $ 694,228
Raw materials.................................... 10,823,700 11,563,768
Finished goods................................... 3,463,937 4,350,692
----------- -----------
Total inventory.............................. $14,910,692 $16,608,688
=========== ===========
</TABLE>
F-38
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of the following at December
31, 1995:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Land and improvements........................................ $ 1,298,652
Leasehold improvements....................................... 72,641
Buildings.................................................... 6,058,911
Machinery and equipment...................................... 22,313,951
Construction in progress..................................... 848,282
-----------
30,592,437
Less accumulated depreciation and amortization............... (3,200,977)
-----------
Property, plant and equipment, net........................... $27,391,460
===========
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1995 and are
related to the purchase of Alpha by Holdings on August 7, 1994 (see Note 1).
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Goodwill...................................................... $3,361,117
Noncompete agreement.......................................... 1,045,165
Deferred financing fees....................................... 936,514
Other......................................................... 22,125
----------
5,364,921
Less accumulated amortization................................. (836,535)
----------
Intangible assets, net........................................ $4,528,386
==========
</TABLE>
Amounts are being amortized using straight-line and effective interest
methods over lives ranging from 3 to 40 years.
6. INCOME TAXES
The components of the income tax provision for the year ended December 31,
1995 are as follows:
<TABLE>
<S> <C>
Current:
Federal..................................................... $2,022,000
State....................................................... 514,000
----------
Total current............................................. 2,536,000
----------
Deferred:
Federal..................................................... 116,000
State....................................................... 30,000
----------
Total deferred............................................ 146,000
----------
Total provision for income taxes.......................... $2,682,200
==========
</TABLE>
F-39
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The approximate tax effect on each of the temporary differences that gave
rise to the Company's net deferred income tax liability at December 31, 1995
under SFAS 109 are as follows:
<TABLE>
<S> <C>
Current deferred income tax (assets) liabilities:
Deferred compensation....................................... $ (262,000)
Inventory capitalization.................................... (119,000)
Accrued liabilities......................................... (213,000)
----------
Current deferred income tax asset............................. $ (594,000)
==========
Noncurrent deferred income tax (assets) liabilities:
Depreciation................................................ $ 694,000
Property, plant and equipment purchase price adjustments.... 3,532,000
Amortization of noncompete agreement........................ (136,000)
Other....................................................... 45,000
----------
Noncurrent deferred income tax liability...................... $4,135,000
==========
</TABLE>
A reconciliation between anticipated income taxes, computed at the statutory
federal income tax rate applied to pretax accounting income, and the provision
for income taxes included in the consolidated statements of income for the
year ended December 31, 1995 is as follows:
<TABLE>
<S> <C>
Anticipated income taxes at the statutory federal rate........ $2,414,000
State income taxes, net of federal tax benefit................ 375,000
Amortization of goodwill...................................... 37,000
Meals and entertainment....................................... 8,000
Foreign sales corporation income tax benefit.................. (168,000)
Other, net.................................................... 16,000
----------
Provision for income taxes.................................... $2,682,000
==========
</TABLE>
F-40
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at December 31, 1995:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Term loan; the term loan is with a commercial bank and bears
interest at a variable rate of the greater of the prime
rate (8.5% at December 31, 1995), base CD rate (5.68% at
December 31, 1995) plus 1%, or the federal funds effective
rate (5.38% at December 31, 1995) plus 1.25%. The Company
has the option to convert any term loan exclusive of the
revolving line of credit to a eurodollar loan for three to
six month periods. The interest rate for the applicable
period is the LIBOR plus 2.75%. All eurodollar loans are to
be made net of regularly scheduled debt service payments
that fall within the eurodollar loan period. Payments are
due quarterly in amounts ranging from $250,000 to $375,000
in 1996, plus accrued interest. The loan is secured by all
assets of the Company...................................... $21,970,867
Subordinated notes; the subordinated notes are with
shareholders of the Company and bear interest at 9.25% with
interest payable semi-annually on May 25 and November 25 of
each year. Principal amounts are due in two equal
installments of $4,500,000 on November 25, 2003 and 2004... 9,000,000
Revolving line of credit; the revolving line of credit is
with a commercial bank and allows borrowings of up to
$7,000,000 but not to exceed 80% of eligible receivables
plus 50% of eligible inventory. Borrowings bear interest at
a variable rate based on the greater of the prime rate
(8.5% at December 31, 1995), base CD rate (5.68% at
December 31, 1995) plus 1%, or the federal funds effective
rate (5.38% at December 31, 1995) plus 1.25%. Interest is
payable on the first business day of January, April, July
and October of each year. During 1995, the line of credit
was modified to reflect monthly net cash receipts
(disbursements) as reductions from (additions to) the
outstanding balance. The line of credit expires August 8,
1997....................................................... 3,347,484
Noncompete agreement; the noncompete agreement is with a
former officer of the Company. The agreement requires the
Company to make monthly payments of $33,333 (includes
interest) through January 1998. Interest was imputed at a
rate of 9.2% on the outstanding balance.................... 587,278
Note payable; the note payable was established for the
purchase of a warehouse. The note bears interest at a rate
of 6.5% and is payable in monthly installments of $9,000
through February 1998...................................... 215,968
Note payable--related party; the note payable--related party
was established to revalue certain property and equipment
to its fair value at the acquisition date. The note bears
interest at a rate of 8% and is payable in August 2001..... 90,000
-----------
Total obligation........................................ 35,211,597
Less current portion.................................... 7,122,053
-----------
Total long-term obligations............................. $28,089,544
===========
</TABLE>
F-41
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The term loan and the revolving line of credit are subject to terms and
conditions of a credit agreement, which provides for certain covenants. At
December 31, 1995, the Company was in compliance with, or had obtained waivers
from, all covenants. In addition, the credit agreement provides for a
mandatory prepayment of the loans (including accrued interest) to be made
within 90 days after year-end, contingent upon the results of certain
financial ratios. At December 31, 1995, $1,941,000 was included in the current
portion of long-term obligations relating to such mandatory prepayment.
Principal payments on long-term obligations, excluding deferred compensation
amounts, are due as follows:
<TABLE>
<S> <C>
1996......................... $ 7,122,053
1997......................... 2,579,635
1998......................... 3,265,857
1999......................... 4,250,000
2000......................... 4,500,000
Thereafter................... 13,494,052
-----------
$35,211,597
===========
</TABLE>
8. RELATED-PARTY TRANSACTIONS
At December 31, 1995, there were outstanding notes receivable from a
director and an employee of the Company for $60,000. Interest earned from
these notes receivable during the year ended December 31, 1995 totaled
approximately $5,000.
At December 31, 1995, there was an outstanding note payable to an officer of
the Company for $90,000. Interest expense related to the note payable for the
year ended December 31, 1995 totaled approximately $7,500.
The Company paid management fees to an owner of the Company of approximately
$203,000 for the year ended December 31, 1995.
9. COMMITMENTS
At December 31, 1995, the Company had outstanding purchase commitments of
$8,200,000 to purchase cotton linters and other raw materials.
* * * * * * * * * *
F-42
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. 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 DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
Company History........................................................... 13
The 1996 Acquisitions..................................................... 13
The Company Stock Repurchase and Related Transactions..................... 14
Use of Proceeds........................................................... 15
Price Range of Common Stock and Dividend Policy........................... 15
Capitalization............................................................ 16
Unaudited Pro Forma Consolidated Financial Data........................... 17
Selected Consolidated Financial Data...................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 25
Business.................................................................. 30
Management................................................................ 40
Principal and Selling Stockholders........................................ 42
Certain Relationships and Related Transactions............................ 43
Description of Certain Indebtedness....................................... 44
Description of Capital Stock.............................................. 48
Certain U.S. Tax Considerations Applicable to Non-U.S. Holders of the
Common Stock............................................................. 52
Underwriting.............................................................. 55
Legal Matters............................................................. 57
Experts................................................................... 57
Available Information..................................................... 57
Incorporation of Certain Documents by Reference........................... 58
Index to Financial Statements............................................. F-1
</TABLE>
2,845,157 SHARES
BUCKEYE CELLULOSE CORPORATION
COMMON STOCK
($.01 PAR VALUE)
LOGO
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
MORGAN KEEGAN & COMPANY, INC.
PROSPECTUS
DATED , 1996
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of the expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation, all of which are estimates with the exception of the Securities
and Exchange Commission fee and the National Association of Securities
Dealers, Inc. fee and all of which will be paid by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 26,448
National Association of Securities Dealers, Inc. fee............ 8,170
Blue sky fees and expenses (including attorneys' fees and
expenses)...................................................... *
Printing and engraving expenses................................. *
Transfer agent's fees and expenses.............................. *
Accounting fees and expenses.................................... *
Legal fees and expenses......................................... *
Miscellaneous expenses.......................................... *
--------
Total.......................................................... $ *
========
</TABLE>
- --------
*To be filed by amendment.
ITEM 15. 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 person who is, or is
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person 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 person who is, or is
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation 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.
The Company's Amended and Restated Certificate of Incorporation provides for
the indemnification of directors and officers of the Company to the fullest
extent permitted by Section 145.
In that regard, the Amended and Restated Certificate of Incorporation
provides that the Company shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of such
corporation, or is or was serving at the request of such corporation as a
director, officer or member of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees),
II-1
<PAGE>
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of such corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Indemnification in connection with an action or suit by or in the
right of such corporation to procure a judgment in its favor is limited to
payment of settlement of such an action or suit except that no such
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the indemnifying corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in consideration of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
In the Underwriting Agreement, a proposed form of which is filed as Exhibit
1.1 hereto, the Underwriters will agree to indemnify, under certain
conditions, the Company, its directors, certain of its officers and persons
who control the Company within the meaning of the Securities Act of 1933, as
amended, against certain liabilities.
II-2
<PAGE>
ITEM 16. EXHIBITS.
(a) EXHIBITS:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended through November 20, 1995**
3.2 Amended and Restated By-laws of the Registrant**
4.1 Form of certificate representing Common Stock of the Registrant**
4.2 Form of Rights Agreement**
5.1 Opinion and consent of Kirkland & Ellis*
10.1 Asset Purchase Agreement dated as of March 16, 1993 by and between
the Registrant and The Procter & Gamble Cellulose Company.***
10.2 Management Stock Subscription Agreement and the Addendum thereto
dated March 22, 1994 by and between the Registrant and Robert E.
Cannon.****
10.3 Management Stock Subscription Agreement and the Addendum thereto
dated March 22, 1994 by and between the Registrant and David B.
Ferraro.****
10.4 Management Stock Subscription Agreement and the Addendum thereto
dated March 22, 1994 by and between the Registrant and Herman P. van
Eck.****
10.5 Management Stock Subscription Agreement and the Addendum thereto
dated March 22, 1994 by and between the Registrant and George B.
Ellis.****
10.6 1994 Incentive Stock Option Plan for Management Employees of The
Buckeye Cellulose Corporation dated March 22, 1994.****
10.7 Incentive Stock Option Subscription Agreement dated March 22, 1994
by and between the Registrant and Robert E. Cannon.****
10.8 Incentive Stock Option Subscription Agreement dated March 22, 1994
by and between the Registrant and David B. Ferraro.****
10.9 Incentive Stock Option Subscription Agreement dated March 22, 1994
by and between the Registrant and Herman P. van Eck.****
10.10 Incentive Stock Option Subscription Agreement dated March 22, 1994
by and between the Registrant and George B. Ellis.****
10.11 Stockholder Agreement dated March 22, 1994 by and between the
Registrant, Madison Dearborn Capital Partners L.P. and each of the
named "Executives."****
10.12 Registration Agreement and the Addendum thereto, dated March 22,
1994 by and between the Registrant, Madison Dearborn Capital
Partners L.P. and the named "Executives."****
10.13 Pulp Supply Agreement dated as of March 16, 1993 by and between
Buckeye Florida, Limited Partnership and The Procter & Gamble Paper
Company. Certain portions of the Agreement have been omitted and
filed separately with the Commission pursuant to an Application for
Confidential Treatment dated October 30, 1995, as supplemented on
November 14, 1995 and November 21, 1995.**
10.14 Timberlands Agreement dated as of March 16, 1993 by and between
Buckeye Florida, Limited Partnership and The Procter & Gamble
Company. Certain portions of the Agreement have been omitted and
filed separately with the Commission pursuant to an Application for
Confidential Treatment dated October 30, 1995, as supplemented on
November 14, 1995 and November 21, 1995.**
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.15 Timber Purchase Agreement dated as of March 16, 1993 by and between
Buckeye Florida, Limited Partnership and The Procter & Gamble
Company. Certain portions of the Agreement have been omitted and
filed separately with the Commission pursuant to an Application for
Confidential Treatment dated October 30, 1995, as supplemented on
November 14, 1995 and November 21, 1995.**
10.16 1994 Incentive Stock Option Plan for Management Employees of Buckeye
Florida Corporation.**
10.17 Indenture dated as of May 27, 1993 between the Registrant and
Bankers Trust Company.***
10.18 Amended and Restated Registration Agreement by and among the
Registrant, Madison Dearborn Capital Partners, L.P. and the named
"Executives."**
10.19 Umbrella Agreement dated January 18, 1996 by and among Peter Temming
AG-Specialty Pulp Business, Peter Temming AG, Steinbeis Temming
Papier GmbH and Steinbeis Temming Papier GmbH & Co.*****
10.20 Asset Purchase Agreement dated as of March 16, 1993 between Buckeye
Florida, Limited Partnership and The Procter & Gamble Cellulose
Company. The Registrant agrees to furnish supplementally to the
Commission a copy of any omitted schedule or exhibit to the
Agreement upon request by the Commission.**
10.21 Agreement of Limited Partnership of Buckeye Florida, Limited
Partnership dated as of March 16, 1993 between Buckeye Acquisition
Corporation and The Procter & Gamble Cellulose Company.**
10.22 1995 Management Stock Option Plan of the Registrant.**
10.23 1995 Incentive and Nonqualified Stock Option Plan for Management
Employees of the Registrant.**
10.24 Form of Management Stock Option Subscription Agreement.**
10.25 Form of Stock Option Subscription Agreement.**
10.26 First Supplemental Indenture, dated as of November 21, 1995 between
the Registrant and Bankers Trust Company to Indenture dated as of
May 27, 1993.
10.27 Indenture dated as of November 28, 1995 between the Registrant and
Union Planters National Bank.*
10.28 Credit Agreement dated as of November 28, 1995 among the Registrant,
certain subsidiaries of the Registrant, Fleet Bank of Massachusetts,
N.A., SunTrust Bank, Central Florida N.A. and the other lenders
party thereto.
10.29 Stock Purchase Agreement dated April 26, 1996 among the Registrant,
Stonebridge Partners Equity Fund, L.P., Alpha Cellulose Associates
I, L.P., Alpha Cellulose Associates II, L.P., Stonebridge Partners
Management, L.P., as nominee for P&C Venture Corp. and Dawkes
Corporation, John P. Flanagan, Michael M. Brown, Janice S. Valenta,
John F. Manning, Ken L. Wilcox, Albert A. Bounds, Jr., Ralph Bolin,
Charles P. Oxendine and James R. Israelson.
10.30 The Formula Plan for Non-Employee Directors.
10.31 Amendment No. 1 to Credit Agreement dated as of April 25, 1996 among
the Registrant, certain subsidiaries of the Registrant, Fleet Bank
of Massachusetts, N.A., SunTrust Bank, Central Florida N.A. and the
other lenders party thereto.
10.32 Company Stock Repurchase Agreement dated as of June 3, 1996 between
BKI Investment Corp. and Madison Dearborn Capital Partners, L.P.
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
23.2 Consent of Dipl.-Ing. Wolf Gadecke Wirtschaftsprufer
23.3 Consent of Deloitte & Touche LLP
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
23.4 Consent of Kirkland & Ellis (included in opinion filed as Exhibit
5.1)
24.1 Powers of attorney (included in signature page)
</TABLE>
- --------
*To be filed by amendment
**Incorporated by reference to the Registrant's Registration Statement on Form
S-1, File No. 33-97840, as filed with the Securities and Exchange
Commission on October 6, 1995 and as amended on October 30, 1995 and
November 21, 1995.
***Incorporated by reference to the Registrant's Registration Statement on Form
S-1, File No. 33-60032, as filed with the Securities and Exchange
Commission on March 25, 1993 and as amended on April 7, 1993, May 4, 1993
and May 17, 1993.
****Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended June 30, 1994.
*****Incorporated by reference to the Registrant's Current Report on Form 8-K
dated May 2, 1996.
ITEM 17. UNDERTAKINGS.
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 foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MEMPHIS, STATE OF
TENNESSEE, ON JUNE 4, 1996.
Buckeye Cellulose Corporation
/s/ Robert E. Cannon
By: _________________________________
Robert E. Cannon
Chief Executive Officer, Chairman
of the Board and Director
* * * *
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert E. Cannon, David B. Ferraro, Samuel M.
Mencoff and Justin S. Huscher 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, to sign any
or all amendments (including post-effective amendments) to this registration
statement any subsequent registration statement filed by the Company pursuant
to Rule 462(b) of the Securities Act of 1933, as amended, 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 OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON JUNE 4, 1996, BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED WITH RESPECT TO BUCKEYE CELLULOSE
CORPORATION:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Robert E. Cannon Chief Executive Officer, Chairman of the
___________________________________________ Board and Director (Principal Executive
Robert E. Cannon Officer)
/s/ David B. Ferraro President, Chief Operating Officer and
___________________________________________ Director (Principal Financial Officer)
David B. Ferraro
/s/ David H. Whitcomb Comptroller (Principal Accounting Officer)
___________________________________________
David H. Whitcomb
/s/ Samuel M. Mencoff Director
___________________________________________
Samuel M. Mencoff
/s/ Justin S. Huscher Director
___________________________________________
Justin S. Huscher
/s/ Red Cavaney Director
___________________________________________
Red Cavaney
/s/ Henry Frigon Director
___________________________________________
Henry Frigon
/s/ Harry Phillips Director
___________________________________________
Harry Phillips
</TABLE>
II-6
<PAGE>
GRAPHIC APPENDIX
The inside front cover page of the Prospectus contains a series of multi-
colored pictures of certain end-use applications of specialty cellulose pulps
produced by the Company. The pictures depict: (i) a baby wearing a disposable
diaper which contains a core comprised of absorbent cellulose pulps; (ii) an
automotive air filter manufactured from customized paper pulps; (iii) motion
picture and photographic film manufactured from chemical cellulose pulps; (iv)
an individual writing on stationery produced from customized paper pulps; (v) a
dessert cup of ice cream which contains thickening ethers produced from chemical
cellulose pulps; and (vi) a child eating a hot dog with casing purified and
strengthened by chemical cellulose pulps. Across the top of the inside front
cover page are the words "END-USE APPLICATIONS OF BUCKEYE CELLULOSE CORPORATION
PRODUCTS."
The inside back cover page of the Prospectus contains a series of multi-
colored pictures of the Company's Memphis, Tennessee headquarters building, its
Perry, Florida manufacturing facility and its Memphis, Tennessee manufacturing
facility. First, a ground-level view of the headquarters building is depicted,
with the words "MEMPHIS HEADQUARTERS" beneath. Second, an aerial view of the
Perry manufacturing facility is depicted, with the words "FOLEY PLANT" beneath.
Third, an aerial view of the Memphis manufacturing facility is depicted, with
the words "MEMPHIS PLANT" beneath.
<PAGE>
EXHIBIT 10.26
FIRST SUPPLEMENTAL INDENTURE
between
BUCKEYE CELLULOSE CORPORATION
and
BANKERS TRUST COMPANY, AS TRUSTEE
Dated as of November 9, 1995
---------------------------------
Supplement to:
BUCKEYE CELLULOSE CORPORATION
$70,000,000
10 1/4% Senior Notes
Due 2001
INDENTURE
Dated as of May 27, 1993
BANKERS TRUST COMPANY,
as Trustee
---------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
November 9, 1995, between Buckeye Cellulose Corporation, a Delaware Corporation
(the "Company"), and Bankers Trust Company, a New York banking corporation (the
"Trustee") to the INDENTURE (the "Indenture"), dated as of May 27, 1993 between
the Company and the Trustee. Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Indenture.
WHEREAS, Section 902 of the Indenture authorizes the Company and the
Trustee, from time to time, with the consent of the Holders of not less than a
majority in principal amount of the Outstanding Notes (the "Requisite Consents")
and when authorized by a Board Resolution, to amend the Indenture by
supplemental indenture for the purposes therein set forth.
WHEREAS, the Company, by appropriate corporate action, has determined to
amend the provisions of the Indenture in the manner described below and the
Company has taken all acts and proceedings required by law, by the Indenture,
and by the Articles of Incorporation and Bylaws of the Company necessary to duly
authorize, execute and deliver this Supplemental Indenture and to constitute
this Supplemental Indenture a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with the terms hereof.
WHEREAS, the Company has obtained the Requisite Consents to amend the
Indenture as set forth herein and has delivered such consents to the Trustee.
WHEREAS, the Company desires that the modifications, additions and
amendments contained herein become operative and effective on the date the
Company accepts for purchase and payment Notes validly tendered (and not validly
withdrawn) pursuant to the terms of the Offer to Purchase and Consent
Solicitation Statement dated October 16, 1995, as amended (the "Offer to
Purchase").
NOW, THEREFORE, in consideration of the premises herein, the Company
covenants and agrees with the Trustee, for the equal and proportionate benefit
of the respective Holders from time to time of the Notes, as follows:
SECTION 1 AMENDMENT TO SECTION 101.
The text of Section 101 of the Indenture is hereby amended as follows:
Insert the following as a new definition immediately prior to the
definition of "Acquired Indebtedness":
"Acceptance Date" means the date the Company accepts for purchase and
payment Notes validly tendered (and not validly withdrawn) pursuant to the terms
of the Offer to Purchase and Consent Solicitation Statement dated October 16,
1995, as amended.
<PAGE>
Delete the definition of "Acquired Indebtedness" in its entirety and insert
the following in its place:
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary of the Company or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company or such acquisition, as the case may
be. Acquired Indebtedness shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary of the Company, as the case may be.
1.01 Delete the definition of "Affiliate" in its entirety and insert the
following in its place:
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin; or
(iii) any other Person 5% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
1.02 Delete the definition of "Attributable Debt" in its entirety.
1.03 Delete the definition of "Bank Credit Agreement" in its entirety
and insert the following in its place:
"Bank Credit Facility" means the Bank Credit Agreement, dated as of the
Acceptance Date, among the Company, the Banks, and Fleet Bank of Massachusetts,
N.A., as such agreement, in whole or in part, may be amended, renewed, extended,
substituted, refinanced, restructured, replaced, supplemented or otherwise
modified from time to time (including, without limitation, any successive
renewals, extensions, substitutions, refinancings, restructurings, replacements,
supplementations or other modifications of the foregoing regardless of the
amount of borrowings permitted thereunder, which borrowings were incurred in
accordance with the Indenture).
1.04 Delete the definition of "Banks" and insert the following in its
place:
"Banks" means the lenders from time to time who are parties to the Bank
Credit Facility.
1.05 Delete the definition of "Capitalized Lease Obligation" in its
entirety and insert the following in its place:
2
<PAGE>
"Capitalized Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
1.06 Delete the definition of "Cash Equivalents" in its entirety and
insert the following in its place:
"Cash Equivalents" means (i) any evidence of Indebtedness, maturing not
more than one year after the date of acquisition, issued by the United States of
America, or an instrumentality or agency thereof, and guaranteed fully as to
principal, premium, if any, and interest by the United States of America, (ii)
any money market deposit account, demand deposit account, time deposit or
certificate of deposit, maturing not more than one year after the date of
acquisition, of a commercial banking institution organized under the laws of the
United States, any State thereof, the District of Columbia, or any foreign
country recognized by the United States and which institution has combined
capital and surplus and undivided profits of not less than $200 million, (iii)
any time deposit or certificate of deposit, maturing more than one year after
the date of acquisition, of a commercial banking institution organized under the
laws of the United States of America, any State thereof, the District of
Columbia or any foreign country recognized by the United States of America and
which institution has combined capital and surplus and undivided profits of not
less than $200 million and whose debt has a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's Investor's
Service, Inc. ("Moody's") or any successor rating agency or "A-1" (or higher)
according to Standard & Poor's Corporation ("S&P") or any successor rating
agency, (iv) commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
the Company) organized and existing under the laws of the United States of
America with a rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P
and (v) any money market deposit account, demand deposit account, time deposit
or certificate of deposit of Union Planters National Bank; provided that Union
Planters National Bank has combined capital and surplus and undivided profits of
not less than $100 million.
1.07 Insert the following as a new definition immediately after the
definition of "Commission":
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
1.08 Insert the following as a new definition immediately after the
definition of "Company Request":
"Concurrent Equity Offering" means the offering by the Company of shares of
its common stock, pursuant to a prospectus, dated November __, 1995.
3
<PAGE>
1.09 Delete the definition of "Consolidated Adjusted Net Income" in its
entirety and insert the following immediately after the definition of
"Consolidated Interest Expense":
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Subsidiaries for such
period on a Consolidated basis as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income (or loss), by excluding,
without duplication, (i) all extraordinary gains or losses (less all fees and
expenses relating thereto), (ii) the portion of net income (or loss) of such
Person and its Subsidiaries on a Consolidated basis allocable to minority
interests in unconsolidated Persons to the extent that cash dividends or
distributions have not actually been received by such Person or one of its
Consolidated Subsidiaries, (iii) net income (or loss) of any Person combined
with such Person or any of its Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) net gains (or losses) (less all fees and expenses relating
thereto) in respect of dispositions of assets other than in the ordinary course
of business, (vi) the net income of any Subsidiary of such Person to the extent
that the declaration of dividends or similar distributions by that Subsidiary of
that income is not at the time permitted, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Subsidiary or
its stockholders, (vii) any restoration to income of any contingency reserve,
except to the extent provision for such reserve was made out of income accrued
at any time following the date of the Indenture, or (viii) any gain arising from
the acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness of such Person.
1.10 Delete the definition of "Consolidated Fixed Charge Coverage Ratio"
in its entirety and insert the following in its place:
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss), Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash
Charges deducted in computing Consolidated Net Income (Loss) in each case, for
such period, of such Person and its Subsidiaries on a Consolidated basis, all
determined in accordance with GAAP to (b) the Consolidated Interest Expense for
such period; provided that (i) in making such computation, the Consolidated
Interest Expense attributable to interest on any Indebtedness computed on a pro
forma basis and (A) bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of such Person, a fixed
or floating rate of interest, shall be computed by applying at the option of
such Person either the fixed or floating rate and (ii) in making such
computation, the Consolidated Interest Expense of such Person attributable to
interest on any Indebtedness under a revolving credit facility computed on a pro
forma basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period.
4
<PAGE>
1.11 Delete the definition of "Consolidated Tax Expense" in its entirety
and insert the following immediately after the definition of
"Consolidated Fixed Charge Coverage Ratio":
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Subsidiaries for such period as determined in accordance with
GAAP.
1.12 Delete the definition of "Consolidated Interest Expense" in its
entirety and insert the following in its place:
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Subsidiaries for such period, on a Consolidated basis, including, without
limitation, (i) amortization of debt discount, (ii) the net costs associated
with Interest Rate Agreements, Currency Hedging Agreements and Commodity Price
Protection Agreements (including amortization of discounts), (iii) the interest
portion of any deferred payment obligation and (iv) accrued interest, plus (b)
(i) the interest component of the Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its Subsidiaries
during such period and (ii) all capitalized interest of such Person and its
Subsidiaries plus (c) the interest expense under any Guaranteed Debt of such
Person and its Subsidiaries to the extent not included under clause (a)(iv)
above, plus (d) the aggregate amount during such period of cash or non-cash
dividends paid on any Redeemable Capital Stock or Preferred Stock of the Company
and its Subsidiaries, in each case as determined on a Consolidated basis in
accordance with GAAP.
1.13 Delete the definition of "Consolidated Net Worth" in its entirety
and insert the following in its place:
"Consolidated Net Worth" of any Person, as of a date, means the
Consolidated stockholders' equity (excluding Redeemable Capital Stock and
treasury stock) of such Person and its Subsidiaries, as of such date, as
determined in accordance with GAAP.
1.14 Delete the definition of "Consolidated Non-cash Charges" in its
entirety and insert the following in its place:
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Subsidiaries on a Consolidated basis for such period, as determined in
accordance with GAAP (excluding any non-cash charge which requires an accrual or
reserve for cash charges for any future period).
1.15 Delete the definition of "Consolidated Tangible Assets" in its
entirety and insert the following in its place:
5
<PAGE>
"Consolidated Tangible Assets" of any Person means (a) all amounts that
would be shown as assets on a consolidated balance sheet of such Person and its
Subsidiaries prepared in accordance with GAAP less (b) the amount thereof
constituting goodwill and other intangible assets as calculated in accordance
with GAAP.
1.16 Insert the following as a new definition immediately after the
definition of "Consolidated Tangible Assets":
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its Subsidiaries (other than Unrestricted
Subsidiaries) if and to the extent the accounts of such Person and each of its
Subsidiaries (other than Unrestricted Subsidiaries) would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
1.17 Insert the following as a new definition immediately after the
definition of "Consolidation":
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
1.18 Insert the following as a new definition immediately after the
definition of "Defaulted Interest":
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the Board of Directors who does not have
any material direct or indirect financial interest (other than solely as a
result of equity ownership in the Company) in or with respect to such
transaction or series of related transactions.
1.19 Delete the definition of "Foley Services Agreement" in its entirety.
1.20 Insert the following as a new definition immediately after the
definition of "Event of Default":
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
1.21 Insert the following as a new definition immediately after the
definition of "GAAP":
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
below guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an
6
<PAGE>
agreement (i) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Indebtedness or
to assure the holder of such Indebtedness against loss, (iii) to supply funds
to, or in any other manner invest in, the debtor (including any agreement to pay
for property or services without requiring that such property be received or
such services be rendered), (iv) to maintain working capital or equity capital
of the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor or (v) otherwise to assure a creditor against
loss; provided that the term "guarantee" shall not include endorsements for
collection or deposit, in either case, in the ordinary course of business.
1.22 Delete the definition of "Headquarters Assets" in its entirety.
1.23 Insert the following as a new definition immediately after the
definition of "Interest Payment Date":
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
1.24 Delete the definition of "Investment" in its entirety and insert the
following in its place:
"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP.
1.25 Delete the definition of "License Agreement" in its entirety.
1.26 Delete the definition of "Maturity" in its entirety and insert the
following in its place:
"Maturity" means, when used with respect to the Notes, the date on which
the principal of the Notes becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Purchase Date or the
redemption date and whether by declaration of acceleration, Excess Proceeds
Offer, Change of Control Offer in respect of a Change of Control, call for
redemption or otherwise.
1.27 Delete the definition of "Net Cash Proceeds" in its entirety and
insert the following in its place:
7
<PAGE>
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the proceeds
thereof (as reflected in an Officers' Certificate delivered to the Trustee) in
the form of cash or cash equivalents (including payments in respect of deferred
payment obligations when received in the form of, or Capital Stock or other
assets when disposed of for, cash or cash equivalents), net of (i) brokerage
commissions or underwriting discounts or commissions and other reasonable fees
and expenses (including, without limitation, fees and expenses of counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties that are the subject of such Asset Sale, and (iv) appropriate amounts
to be provided by the recipient of such proceeds or any subsidiary thereof, as
the case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the recipient of such proceeds
or any subsidiary thereof, as the case may be, after such transaction,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale and (b) with
respect to any issuance or sale of Capital Stock or options, warrants or rights
to purchase Capital Stock, or debt securities or Capital Stock that have been
converted into or exchanged for Capital Stock as referred to under Section 1012,
the proceeds of such issuance or sale in the form of cash including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed of for, cash (except to the extent that such
obligations are financed or sold with recourse to the Company or any of its
Subsidiaries), net of attorney's fees, accountant's fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
1.28 Delete the definition of "Permitted Affiliate Transactions" in its
entirety.
1.29 Delete the definition of "Permitted Indebtedness" in its entity and
insert the following in its place:
"Permitted Indebtedness" means:
(i) Indebtedness of the Company under the Bank Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed the greater
of (a) $75 million plus the aggregate principal amount of Notes which are
purchased by the Company pursuant to its Offer to Purchase and Consent
Solicitation Statement dated October 16, 1995 concurrently with or within 60
days of the date of the indenture relating to the Company's Senior Subordinated
Notes due 2005 and (b) 85% of accounts receivable and 50% of inventory of the
Company and its Subsidiaries under a borrowing-based facility based on accounts
receivable and inventory (each as determined in accordance with GAAP);
(ii) Indebtedness of the Company pursuant to the Notes and the
Company's Senior Subordinated Notes due 2005;
(iii) guarantees of any of the Company's Subsidiaries of Indebtedness
of the Company under the Bank Credit Facility;
8
<PAGE>
(iv) Indebtedness of the Company or any of its Subsidiaries
outstanding on the Acceptance Date;
(v) Indebtedness of the Company owing to any of its Subsidiaries;
provided that any Indebtedness of the Company owing to a Subsidiary of the
Company is made pursuant to an intercompany note in the form attached to the
indenture relating to the Company's Senior Subordinated Notes due 2005 and is
subordinated in right of payment from and after such time as the Notes shall
become due and payable (whether at Stated Maturity, acceleration or otherwise)
to the payment and performance of the Company's obligations under the Notes;
provided, further, that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer to a
Subsidiary of the Company) shall be deemed to be an incurrence of such
Indebtedness by the Company not permitted by this clause (v);
(vi) Indebtedness of a Wholly Owned Subsidiary owing to the Company or
another Wholly Owned Subsidiary; provided that any such Indebtedness is made
pursuant to an intercompany note in the form attached to the indenture relating
to the Company's Senior Subordinated Notes due 2005; provided, further, that (a)
any disposition, pledge or transfer of any such Indebtedness to a Person (other
than the Company or a Wholly Owned Subsidiary of the Company) shall be deemed to
be an incurrence of such Indebtedness by the obligor not permitted by this
clause (vi), and (b) any transaction pursuant to which any Wholly Owned
Subsidiary of the Company, which has Indebtedness owing to the Company or any
other Wholly Owned Subsidiary of the Company, ceases to be a Wholly Owned
Subsidiary of the Company shall be deemed to be the incurrence of Indebtedness
by such Wholly Owned Subsidiary that is not permitted by this clause (vi);
(vii) obligations of the Company entered into in the ordinary course
of business (a) pursuant to Interest Rate Agreements designed to protect the
Company or any of its Subsidiaries against fluctuations in interest rates in
respect of Indebtedness of the Company or any of its Subsidiaries as long as
such obligations do not exceed the aggregate principal amount of such
Indebtedness then outstanding, (b) under any Currency Hedging Arrangements,
which if related to Indebtedness do not increase the amount of such Indebtedness
other than as a result of foreign exchange fluctuations, or (c) under any
Commodity Price Protection Agreements, which if related to Indebtedness do not
increase the amount of such Indebtedness other than as a result of foreign
exchange fluctuations;
(viii) Indebtedness of the Company or any of its Subsidiaries
incurred to finance construction of a pipeline and other environmental
expenditures, pursuant to an agreement reached between the Florida Department of
Environmental Protection and the Company, not to exceed $40 million outstanding
at any one time in the aggregate;
(ix) Indebtedness of the Company or any of its Subsidiaries evidenced
by Purchase Money Obligations and Capitalized Lease Obligations not to exceed $5
million outstanding at any one time in the aggregate;
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(x) Indebtedness of the Company or any of its Subsidiaries incurred
after the date of the Indenture relating to letters of credit supporting workers
compensation obligations not to exceed $5 million outstanding at any one time in
the aggregate;
(xi) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness described in
clauses (ii) and (iv) of this definition of "Permitted Indebtedness," including
any successive refinancings so long as the aggregate principal amount of
Indebtedness represented thereby is not increased by such refinancing plus the
lesser of (I) the stated amount of any premium or other payment required to be
paid in connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (II) the amount of premium or other payment
actually paid at such time to refinance the Indebtedness, plus, in either case,
the amount of expenses of the Company incurred in connection with such
refinancing and (A) in the case of any refinancing of Indebtedness that is
Subordinated Indebtedness, such new Indebtedness is made subordinated to the
Notes at least to the same extent as the Indebtedness being refinanced and (B)
in the case of Pari Passu Indebtedness or Subordinated Indebtedness, as the case
may be, such refinancing does not reduce the Average Life or the Stated Maturity
of such Indebtedness; and
(xii) Indebtedness of the Company in addition to that described in
clauses (i) through (xi) above, and any renewals, extensions, substitutions,
refinancings or replacements of such Indebtedness, so long as the aggregate
principal amount of all such Indebtedness shall not exceed $25 million
outstanding at any one time in the aggregate.
1.30 Delete the definition of "Permitted Investments" in its entirety and
insert the following its place:
"Permitted Investment" means (i) Investments in any Wholly Owned Subsidiary
or any Person which, as a result of such Investment, (a) becomes a Wholly Owned
Subsidiary or (b) is merged or consolidated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or any Wholly Owned Subsidiary; (ii) Indebtedness of the Company or a Subsidiary
of the Company described under clauses (v), (vi) and (vii) of the definition of
"Permitted Indebtedness"; (iii) Cash Equivalents; (iv) Investments acquired by
the Company or any Subsidiary of the Company in connection with an Asset Sale
permitted under Section 1016 to the extent such Investments are non-cash
proceeds as permitted under such covenant; (v) Investments in existence on the
Acceptance Date; (vi) loans or advances to employees made in the ordinary course
of business and consistent with past practices of the Company and its
Subsidiaries not to exceed $2 million outstanding at any one time in the
aggregate; (vii) loans made to employees (including guarantees of loans by third
parties to employees) from time to time in an aggregate principal amount at any
one time outstanding not to exceed $1 million, the proceeds of which are used to
purchase Capital Stock of the Company; (viii) sales of goods on trade credit
terms, consistent with the past practices of the Company or any Subsidiary of
the Company or as otherwise consistent with trade credit terms in common use in
the industry; (ix) Investments valued at Fair Market Value at the time made in
Unrestricted Subsidiaries not to exceed $10 million outstanding at any one time
in the aggregate; and (x) in addition to Investments described in clauses (i)
through (ix) of this
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definition of "Permitted Investments," Investments valued at Fair Market Value
at the time made not to exceed $15 million outstanding at any one time in the
aggregate.
1.31 Delete the definition of "Permitted Liens" in its entirety and insert
the following in its place:
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the Acceptance Date;
(b) any Lien securing any Indebtedness incurred under the Bank Credit
Facility;
(c) any Lien (other than any Lien described in (a) or (b) above) created in
connection with Purchase Money Obligations, Capitalized Lease Obligations and
sale-leaseback transactions if, but only if, after giving effect to the
creation, incurrence or assumption of such Indebtedness, the sum of the
aggregate principal amounts secured by all such Liens does not exceed 10% of the
Company's Consolidated Tangible Assets;
(d) any Lien securing Acquired Indebtedness, provided that any such Lien
only extends to the assets that were subject to such Lien prior to the related
acquisition by the Company or its Subsidiaries and was not created, incurred or
assumed in contemplation of such transaction;
(e) easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the ordinary conduct
of the business of the Company or any of its Subsidiaries;
(f) any Lien securing Indebtedness of the Company or any of its
Subsidiaries incurred to finance construction of a pipeline and other
environmental expenditures, pursuant to an agreement reached between the Florida
Department of Environmental Protection and the Company, not to exceed $40
million outstanding at any one time in the aggregate;
(g) any Lien arising by reason of (i) any judgment, decree or order of any
court, so long as such Lien is adequately bonded, any appropriate legal
proceedings that may have been duly initiated for the review of such judgment,
decree or order shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired; (ii) taxes not
yet delinquent or that are being contested in good faith; (iii) security for
payment of workmen's compensation or other insurance; (iv) good faith deposits
in connection with tenders, contracts (other than contracts for the payment of
money) or leases; (v) deposits to secure public or statutory obligations, or in
lieu of surety or appeal bonds; or (vi) operation of law in favor of mechanics,
materialmen, laborers, employees or suppliers, incurred in the ordinary course
of business for sums that are not yet delinquent or are being contested in good
faith by negotiations or by appropriate proceedings that suspend the collection
thereof;
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(h) any Lien securing Indebtedness in an aggregate principal amount of up
to $1 million at any one time outstanding; and
(i) any extension, renewal or replacement, in whole or in part, of any Lien
described in the foregoing clauses (a) through (i).
1.33 Delete the definition of "Permitted Subsidiary Indebtedness" in its
entirety and insert the following in its place:
"Permitted Subsidiary Indebtedness" means (i) Acquired Indebtedness of any
Subsidiary of the Company and (ii) Indebtedness of any Subsidiary of the
Company, provided that the aggregate outstanding principal amount of
Indebtedness of all of the Company's Subsidiaries incurred pursuant to this
clause (ii) shall not at any given time exceed 10% of the Company's Consolidated
Tangible Assets as of the date of determination.
1.34 Delete the definition of "Preferred Stock" in its entirety and insert
the following in its place:
"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
1.35 Delete the definition of "Professional Services Agreement" in its
entirety.
1.36 Insert the following as a new definition immediately after the
definition of "Public Offering":
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company or any of its Subsidiaries and any
additions and accession thereto, which are purchased by the Company or any of
its Subsidiaries at any time after the Notes are issued; provided that (i) the
security agreement or conditional sales or other title retention contract
pursuant to which the Lien on such assets is created (collectively a "Purchase
Money Security Agreement") shall be entered into within 90 days after the
purchase, acquisition or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets so purchased,
acquired or constructed, any additions and accessions thereto and any proceeds
therefrom, (ii) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect of fees
and other obligations in respect of such Indebtedness and (iii) (A) the
aggregate outstanding principal amount of Indebtedness secured thereby
(determined on a per asset basis in the case of any additions and accessions)
shall not at the time such Purchase Money Security Agreement is entered into
exceed 100% of the purchase price to the Company or its Subsidiaries of the
assets subject thereto or (B) the Indebtedness secured thereby shall be with
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recourse solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom.
1.37 Insert the following as a new definition immediately after the
definition of "Purchase Money Obligation":
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
1.38 Delete the definition of "Redeemable Capital Stock" in its entirety
and insert the following in its place:
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Notes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
1.39 Delete the definition of "Subsidiary" in its entirety and insert the
following in its place:
"Subsidiary" means any Person, a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by another
Person or by one or more of such other Person's other Subsidiaries, or by such
other Person and one or more of such other Person's other Subsidiaries; provided
that any Unrestricted Subsidiary shall not be deemed a Subsidiary of the Company
under the Notes.
1.40 Delete the definition of "Unrestricted Subsidiary" in its entirety and
insert the following in its place:
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors, as provided below) and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary if all of the following conditions
apply: (a) neither the Company nor any of its Subsidiaries provides credit
support for Indebtedness of such Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (b) such
Unrestricted Subsidiary is not liable, directly or indirectly, with respect to
any Indebtedness other than Unrestricted Subsidiary Indebtedness, (c) any
Investment in such Unrestricted Subsidiary made as a result of designating such
Subsidiary an Unrestricted Subsidiary shall not violate the provisions of
Section 1019 and such Unrestricted Subsidiary is not party to any agreement,
contract, arrangement or understanding at such time with the Company or any
other Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or
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understanding are no less favorable to the Company or such other Subsidiary than
those that might be obtained at the time from Persons who are not Affiliates of
the Company or, in the event such condition is not satisfied, the value of such
agreement, contract, arrangement or understanding to such Unrestricted
Subsidiary shall be deemed a Restricted Payment; and (d) such Unrestricted
Subsidiary does not own any Capital Stock in any Subsidiary of the Company which
is not simultaneously being designated an Unrestricted Subsidiary. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complies with the
foregoing conditions and shall be deemed a Restricted Payment on the date of
designation in an amount equal to the greater of (1) the net book value of such
Investment or (2) the Fair Market Value of such Investment as determined in good
faith by the Board of Directors. The Board of Directors may designate any
Unrestricted Subsidiary as a Subsidiary of the Company; provided that either (x)
the Unrestricted Subsidiary to be designated a Subsidiary of the Company has
total assets of $1,000 or less at the time of its designation or (y) (i)
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the restrictions under Section 1011 and (ii) all Indebtedness of such
Unrestricted Subsidiary shall be deemed to be incurred on the date such
Unrestricted Subsidiary is designated a Subsidiary of the Company.
1.41 Insert the following as a new definition immediately after the
definition of "Unrestricted Subsidiary":
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary (i) as to which neither the Company
nor any of its Subsidiaries is directly or indirectly liable (by virtue of the
Company or any such Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), except Guaranteed Debt
of the Company or any of its Subsidiaries to any Affiliate, in which case
(unless the incurrence of such Guaranteed Debt resulted in a Restricted Payment
at the time of incurrence) the Company shall be deemed to have made a Restricted
Payment equal to the principal amount of any such Indebtedness to the extent
guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary
and (ii) which, upon the occurrence of a default with respect thereto, does not
result in, or permit any holder of any Indebtedness of the Company or any of its
Subsidiaries to declare, a default on such Indebtedness of the Company or any of
its Subsidiaries or cause the payment thereof to be accelerated or payable prior
to its Stated Maturity.
1.42 Delete the definition of "Voting Stock" in its entirety and insert the
following in its place:
"Voting Stock" means Capital Stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency).
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SECTION 2 AMENDMENT TO SECTION 501
The text of Section 501 of the Indenture is hereby amended as follows:
2.01 Delete all references to "$3 million" in Subsection (a)(5) of Section
501 and insert in their places the phrase "$10 million."
2.02 Delete the reference to "$3 million" in Subsection (a)(6) of Section
501 and insert in its place the phrase "$5 million."
SECTION 3 AMENDMENT TO SECTION 801.
The text of Section 801 of the Indenture is hereby amended by deleting
Subsection (4) in its entirety and renumbering Subsection (5) as Subsection (4).
SECTION 4 AMENDMENT TO SECTION 1011.
The text of Section 1011 of the Indenture is hereby deleted in its
entirety and the following is inserted in its place:
Section 1011. Limitation on Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
create, issue, incur, assume, guarantee or otherwise in any manner become
directly or indirectly liable for the payment of or otherwise incur
(collectively, "incur"), any Indebtedness (including any Acquired Indebtedness)
other than Permitted Indebtedness which may be incurred at any time, except for
(a) Indebtedness of the Company and (b) Permitted Subsidiary Indebtedness;
provided, that, in each case, the Company's Consolidated Fixed Charge Coverage
Ratio for the four full fiscal quarters for which financial results are
available immediately preceding the incurrence of such Indebtedness taken as one
period (and after giving pro forma effect to (i) the incurrence of such
Indebtedness and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness was incurred,
and the application of such proceeds occurred, on the first day of such
applicable period; (ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day of such
applicable period as if such Indebtedness was incurred, repaid or retired at the
beginning of such applicable period (except that, in making such computation,
the amount of Indebtedness under any revolving credit facility shall be computed
based upon the average daily balance of such Indebtedness during such applicable
period); (iii) in the case of Acquired Indebtedness or any acquisition occurring
at the time of the incurrence of such Indebtedness, the related acquisition,
assuming such acquisition had been consummated on the first day of such
applicable period; and (iv) any acquisition or disposition by the Company and
its Subsidiaries of any company or any business or any assets out of the
ordinary course of business, whether by merger, stock purchase or sale or asset
purchase or sale, or any related repayment of Indebtedness, in each case since
the first day of such applicable period,
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assuming such acquisition or disposition had been consummated on the first day
of such applicable period) is at least equal to or greater than 2.0:1.0x.
SECTION 5 AMENDMENT TO SECTION 1012.
The text of Section 1012 of the Indenture is hereby deleted in its
entirety and the following is inserted in its place:
Section 1012. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable solely in its shares of Qualified Capital Stock or
in options, warrants or other rights to acquire shares of such Qualified
Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, the Company's Capital Stock or any Capital Stock of
any Affiliate of the Company (other than Capital Stock of any Wholly Owned
Subsidiary) or options, warrants or other rights to acquire such Capital
Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital
Stock of any Subsidiary of the Company to any Person (other than (a) to the
Company or any Wholly Owned Subsidiary or (b) to all holders of Capital
Stock of such Subsidiary on a pro rata basis);
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate of the Company (other than (a) guarantees of Indebtedness of a
Wholly Owned Subsidiary given by the Company or (b) guarantees of
Indebtedness of the Company given by any Subsidiary of the Company, in each
case in accordance with the terms of the Indenture); or
(vi) make any Investment in any Person (other than any Permitted
Investments)
(any of the foregoing actions described in clauses (i) through (vi), other than
any such action that is a Permitted Payment (as defined below), collectively,
"Restricted Payments") (the amount of any such Restricted Payment, if other than
cash, as determined by the board of directors of the Company, whose
determination shall be conclusive and evidenced by a board resolution), unless
(1) immediately before and immediately after giving effect to such Restricted
Payment on a pro forma
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basis, no Default or Event of Default shall have occurred and be continuing and
such Restricted Payment shall not be an event which is, or after notice or lapse
of time or both, would be, an "event of default" under the terms of any
Indebtedness of the Company or its Subsidiaries; (2) immediately before and
immediately after giving effect to such Restricted Payment on a pro forma basis,
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 1011; and (3) after giving effect to the proposed
Restricted Payment, the aggregate amount of all such Restricted Payments
declared or made after the date of the Indenture, does not exceed the sum of:
(A) $15 million;
(B) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on May 1,
1993 and ending on the last day of the Company's last fiscal quarter ending
prior to the date of the Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss);
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Subsidiaries) of Qualified Capital Stock of the Company or any options,
warrants or rights to purchase such Qualified Capital Stock of the Company
(except, in each case, pursuant to the Concurrent Equity Offering or to the
extent such proceeds are used to purchase, redeem or otherwise retire
Capital Stock or Subordinated Indebtedness as set forth below in clause
(ii) or (iii) of paragraph (b) below);
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options, warrants or rights to purchase Qualified Capital
Stock of the Company;
(E) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the conversion or exchange, if any, of debt
securities or Redeemable Capital Stock of the Company or its Subsidiaries
into or for Qualified Capital Stock of the Company plus, to the extent such
debt securities or Redeemable Capital Stock were issued after the date of
the Indenture, the aggregate Net Cash Proceeds from their original
issuance; and
(F) to the extent not otherwise included in the Company's
Consolidated Net Income, the aggregate payments in cash of interest on
Indebtedness or dividends or other distributions received by the Company or
any of its Subsidiaries after the date of the Indenture from any
Unrestricted Subsidiary (or from redesignation of an Unrestricted
Subsidiary as a Subsidiary of the Company), except to the extent any such
payments are in respect of taxes to be paid by the Company with respect to
the operations of such Unrestricted Subsidiary.
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(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(vii) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (each of clauses
(i) through (iv) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (a) of this Section and such
payment shall have been deemed to have been paid on such date of
declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or retirement
of any shares of any class of Capital Stock of the Company in exchange for
(including any such exchange pursuant to the exercise of a conversion right
or privilege in connection with which cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the Net Cash Proceeds of a
substantially concurrent issue and sale for cash (other than to a
Subsidiary of the Company) of, other shares of Qualified Capital Stock of
the Company; provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are, to the extent so used, excluded from
clause (3)(C) of paragraph (a) of this Section;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or in an amount not in excess of the net
proceeds of, a substantially concurrent issuance and sale for cash (other
than to any Subsidiary of the Company) of any Qualified Capital Stock of
the Company, provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are, to the extent so used, excluded from
clause (3)(C) of paragraph (a) of this Section;
(iv) the repurchase, redemption, defeasance, retirement,
refinancing, acquisition for value or payment of principal of any
Subordinated Indebtedness (other than Redeemable Capital Stock) (a
"refinancing") through the substantially concurrent issuance of new
Subordinated Indebtedness of the Company, provided that any such new
Subordinated Indebtedness (1) shall be in a principal amount that does not
exceed the principal amount so refinanced (or, if such Subordinated
Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration thereof, then such
lesser amount as of the date of determination), plus the lesser of (I) the
stated amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the
Subordinated Indebtedness being refinanced or (II) the amount of premium or
other payment actually paid at such time to refinance the Subordinated
Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing; (2) has an Average Life
greater than the remaining Average Life of the Notes; (3) has a Stated
Maturity for its final scheduled principal payment later than the Stated
Maturity for the final scheduled principal payment
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of the Notes; and (4) is expressly subordinated in right of payment to the
Notes at least to the same extent as the Subordinated Indebtedness to be
refinanced;
(v) the repurchase of any Subordinated Indebtedness of the Company
at a purchase price not greater than 101% of the principal amount of such
Subordinated Indebtedness in the event of a Change of Control pursuant to a
provision similar to Section 1010; provided that prior to or simultaneously
with such repurchase, the Company has made the Change of Control Offer as
provided in such covenant and has repurchased all Notes validly tendered
for payment in connection with such Change of Control Offer;
(vi) the repurchase of any Subordinated Indebtedness of the Company,
at a purchase price not greater than 100% of the principal amount of such
Indebtedness in the event of an Asset Sale pursuant to a provision similar
to Section 1016; provided that prior to such repurchase the Company has
made an Excess Proceeds Offer to purchase the Notes as provided in such
covenant and has repurchased all Notes validly tendered for payment in
connection with such Excess Proceeds Offer; and
(vii) the repurchase of shares of Capital Stock of the Company from
employees of the Company upon termination of employment, death or
retirement pursuant to the terms of an employee benefit plan or employment
agreement; provided that the aggregate amount of all such repurchases in
any 12-month period may not exceed $1 million plus the aggregate amount by
which repurchases in prior years was less than $1 million.
SECTION 6. AMENDMENT TO SECTION 1013.
The text of Section 1013 of the Indenture is hereby deleted in its entirety
and the following is inserted in its place:
Section 1013. Limitation on Issuances and Sales of Subsidiary Stock.
The Company will not permit (a) any Subsidiary of the Company to issue,
sell or transfer any Capital Stock, except for (i) Capital Stock issued or sold
to, held by or transferred to the Company or a Wholly Owned Subsidiary, (ii) the
ownership by directors of directors' qualifying shares or the ownership by
foreign nationals of Capital Stock of any Subsidiary of the Company, to the
extent required by applicable law and (iii) Capital Stock issued by a Person
prior to the time (A) such Person becomes a Subsidiary of the Company, (B) such
Person merges with or into a Subsidiary of the Company or (C) a Subsidiary of
the Company merges with or into such Person; provided that such Capital Stock
was not issued or incurred by such Person in anticipation of the type of
transaction contemplated by subclause (A), (B) or (C) or (b) any Person (other
than the Company or a Wholly Owned Subsidiary) to acquire Capital Stock of any
Subsidiary of the Company from the Company or any Wholly Owned Subsidiary
except, in the case of clause (a) or (b), upon the acquisition of all the
outstanding Capital Stock of such Subsidiary which is not in violation with any
other terms of the Indenture.
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SECTION 7. AMENDMENT TO SECTION 1014.
The text of Section 1014 of the Indenture is hereby deleted in its entirety
and the following is inserted in its place:
Section 1014. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the Company (other
than the Company or a Wholly Owned Subsidiary) unless (a) such transaction or
series of related transactions is in writing and on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than those that
would be available in a comparable transaction in arm's-length dealings with an
unrelated third party, (b) with respect to any transaction or series of related
transactions involving an aggregate value in excess of $1 million, the Company
delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (a) above and
(c) with respect to any transaction or series of related transactions involving
an aggregate value in excess of $5 million, either (i) such transaction or
series of related transactions has been approved by a majority of the
Disinterested Directors of the Company, or in the event there is only one
Disinterested Director, by such Disinterested Director, or (ii) the Company
delivers to the Trustee a written opinion of an investment banking firm of
national standing or other recognized independent expert with experience
appraising the terms and conditions of the type of transaction or series of
related transactions for which an opinion is required stating that the
transactions or series of related transactions is fair to the Company or such
Subsidiary from a financial point of view; provided, however, that this
provision shall not apply to any transaction with an officer or director of the
Company or any of its Subsidiaries entered into in the ordinary course of
business (including compensation and employee benefit arrangements with any
officer, director or employee of the Company or any of its Subsidiaries,
including under any stock option or stock incentive plans).
SECTION 8. AMENDMENT TO SECTION 1017.
The text of Section 1017 of the Indenture is hereby deleted in its
entirety:
SECTION 9. AMENDMENT TO SECTION 1018.
The text of Section 1018 of the Indenture is hereby deleted in its entirety
and the following is inserted in its place:
Section 1018. Limitation on Dividend and other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or
20
<PAGE>
restriction on the ability of any of its Subsidiaries to (i) pay dividends or
make any other distribution on its Capital Stock, (ii) pay any Indebtedness owed
to the Company or any other of its Subsidiaries, (iii) make any Investment in
the Company or any other Subsidiary of the Company or (iv) transfer any of its
properties or assets to the Company or any other of its Subsidiaries, except
for: (a) any agreement in effect on the Acceptance Date; (b) any encumbrance or
restriction, with respect to a Subsidiary of the Company that is not a
Subsidiary of the Company on the Acceptance Date, in existence at the time such
Person becomes a Subsidiary of the Company and not incurred in connection with,
or in contemplation of, such Person becoming a Subsidiary of the Company; (c)
any encumbrance or restriction existing by reason of applicable law; (d) any
encumbrance or restriction existing under any customary non-assignment
provisions of any lease governing a leasehold interest of the Company or any
Subsidiary of the Company; (e) any encumbrance or restriction contained in any
working capital facility of a foreign subsidiary of the Company; and (f) any
encumbrance or restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clauses (a) and (b), or in this clause (f),
provided that the terms and conditions of any such encumbrances or restrictions
are no more restrictive in any material respect than those under or pursuant to
the agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced.
SECTION 10. AMENDMENT TO SECTION 1019.
The text of Section 1019 of the Indenture is hereby deleted in its entirety
and the following is inserted in its place:
Section 1019. Limitation on Unrestricted Subsidiaries.
The Company will not make, and will not permit its Subsidiaries to make,
any Investment in an Unrestricted Subsidiary if, at the time thereof, the amount
of such Investment would exceed the amount of Restricted Payments then permitted
to be made pursuant to Section 1012 plus the amount of Permitted Investments
described in clauses (ix) and (x) of the definition thereof then permitted to be
made pursuant to Section 1012. Any Investment in an Unrestricted Subsidiary
permitted to be made pursuant to this covenant (i) will be treated as a
Restricted Payment (unless such Investment was a Permitted Investment) in
calculating the amount of Restricted Payments made by the Company and (ii) may
be made in cash or property.
SECTION 11. OPERATIVE EFFECT OF AMENDMENTS.
Sections 1 through 10 shall not become operative unless and until the
Company accepts for purchase and payment Notes validly tendered (and not validly
withdrawn) on the Acceptance Date pursuant to the Offer to Purchase, at which
time such Sections shall become operative and shall be in full force and effect.
In the event the Acceptance Date does not occur on or prior to March 31, 1996,
such Sections shall be null and void and of no further effect.
SECTION 12. INSTRUMENT
21
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Except as amended and supplemented by this Supplemental Indenture, the
Indenture shall be and remain in full force and effect.
SECTION 13. GOVERNING LAW.
This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State without
giving effect to such State's principles of conflict of laws.
SECTION 14. COUNTERPARTS.
This Supplemental Indenture may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall, together,
constitute but one and same instrument.
SECTION 15. TRUSTEE'S DISCLAIMER.
The Trustee has no responsibility for the correctness of the recitals of
fact herein contained which shall be taken as statements of the Company and
makes no representations as to, and shall incur no liability with respect to,
the validity or sufficiency of this Supplemental Indenture.
SECTION 16. NO CONFLICT.
If and to the extent that any provision of this Supplemental Indenture
limits, qualifies or conflicts with another provision which is required, or
deemed, to be included herein by the Trust Indenture Act, such required
provision shall control or such provision shall be deemed to be included absent
such limitation, qualification or conflict, as the case may be. Furthermore, to
the extent that any amendment to the provisions of the Indenture contained in
this Supplemental Indenture violates the Trust Indenture Act or the Indenture,
such provision shall be deemed not to be amended or restated for purposes of
this Supplemental Indenture.
* * * * * *
22
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Supplemental
Indenture to be duly executed as of the day and year above written.
BUCKEYE CELLULOSE CORPORATION
By:
----------------------------
[SEAL]
Its:
---------------------------
Attest:
---------------------
BANKERS TRUST COMPANY, as Trustee
By:
----------------------------
[SEAL]
Its:
---------------------------
Attest:
---------------------
S-1
<PAGE>
EXHIBIT 10.28
================================================================================
BUCKEYE CELLULOSE CORPORATION
CREDIT AGREEMENT
Dated as of November 28, 1995
FLEET BANK OF MASSACHUSETTS, N.A., Agent
SUNTRUST BANK, CENTRAL FLORIDA N.A., Co-Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Definitions; Certain Rules of Construction.................................. 1
2. The Credits................................................................. 21
2.1. Revolving Credit.................................................... 21
2.1.1. Revolving Loan............................................. 21
2.1.2. Maximum Amount of Revolving Credit......................... 21
2.1.3. Borrowing Requests......................................... 22
2.1.4. Revolving Loan Account; Revolving Notes.................... 22
2.2. Money Market Rate Credit............................................ 23
2.2.1. Request by the Company..................................... 23
2.2.2. Dissemination of Requests for Bids for Money Market Loans.. 23
2.2.3. Bids for Money Market Loans................................ 24
2.2.4. Acceptance of Bids by the Borrower......................... 24
2.2.5. Funding by the Agent; Money Market Loan Account, etc....... 25
2.2.6. Prepayments in Respect of Money Market Loans............... 26
2.3. Swingline Credit.................................................... 27
2.3.1. Swingline Loan............................................. 27
2.3.2. Borrowing Requests......................................... 27
2.3.3. Swingline Loan Account; Swingline Notes.................... 27
2.3.4. Conversion of Swingline Loan into Revolving Loan........... 28
2.4. Letters of Credit................................................... 28
2.4.1. Issuance of Letters of Credit.............................. 28
2.4.2. Requests for Letters of Credit............................. 29
2.4.3. Form and Expiration of Letters of Credit................... 29
2.4.4. Lenders' Participation in Letters of Credit................ 29
2.4.5. Presentation............................................... 30
2.4.6. Payment of Drafts.......................................... 30
2.4.7. Uniform Customs and Practice............................... 30
2.4.8. Subrogation................................................ 32
2.4.9. Modification, Consent, etc................................. 32
2.5. Application of Proceeds............................................. 32
2.5.1. Revolving Loan............................................. 32
2.5.2. Money Market Loan.......................................... 32
2.5.3. Swingline Loan............................................. 32
2.5.4. Letters of Credit.......................................... 33
2.5.5. Specifically Prohibited Applications....................... 33
2.6. Nature of Obligations of Lenders to Make Extensions of Credit....... 33
2.6.1. Revolving Loans............................................ 33
2.6.2. Money Market Loans......................................... 33
2.6.3. Swingline Loans............................................ 33
</TABLE>
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<CAPTION>
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<S> <C> <C> <C>
3. Interest; LIBOR Pricing Options; Fees................................. 33
3.1. Interest on Revolving Loan.................................... 33
3.2. LIBOR Pricing Options......................................... 34
3.2.1. Election of LIBOR Pricing Options..................... 34
3.2.2. Notice to Lenders and Company......................... 35
3.2.3. Selection of LIBOR Interest Periods................... 35
3.2.4. Additional Interest................................... 35
3.2.5. Violation of Legal Requirements....................... 36
3.2.6. Funding Procedure..................................... 36
3.3. Interest on Money Market Loans and Swingline Loan............. 36
Computations of Interest and Fees............................. 37
3.5. Commitment Fees............................................... 37
3.6. Letter of Credit Fees......................................... 37
3.7. Reserve Requirements, etc..................................... 37
3.8. Taxes......................................................... 38
3.9. Capital Adequacy.............................................. 39
3.10. Regulatory Changes............................................ 39
3.11. Mitigation.................................................... 40
4. Payment............................................................... 40
4.1. Payment at Maturity........................................... 40
4.2. Contingent Required Prepayments............................... 40
4.2.1. Excess Credit Exposure................................ 40
4.2.2. Net Asset Sale Proceeds............................... 40
4.2.3. Excess Letter of Credit Exposure...................... 41
4.3. Voluntary Prepayments......................................... 41
4.4. Letters of Credit............................................. 41
4.5. Reborrowing; Application of Payments, etc..................... 42
4.5.1. Reborrowing........................................... 42
4.5.2. Order of Application.................................. 42
4.5.3. Payments for Lenders.................................. 42
5. Conditions to Extending Credit........................................ 42
5.1. Conditions on Initial Closing Date............................ 42
5.1.1. Notes................................................. 42
5.1.2. Guarantors Contribution Agreement..................... 43
5.1.3. Subsidiary Subordination Agreement.................... 43
5.1.4. Payment of Fees....................................... 43
5.1.5. Legal Opinions........................................ 43
5.1.6. Concurrent Transaction................................ 43
5.1.7. Solvency; Minimum Net Worth........................... 45
5.1.8. Environmental Review.................................. 45
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
5.1.9 Proper Proceedings.................................... 45
5.1.10. General............................................... 45
5.2. Conditions to Each Extension of Credit........................ 45
5.2.1. Officer's Certificate................................. 45
5.2.2. Legality, etc......................................... 46
6. General Covenants..................................................... 46
6.1. Taxes and Other Charges; Accounts Payable..................... 46
6.1.1. Taxes and Other Charges............................... 46
6.1.2. Accounts Payable...................................... 46
6.2. Conduct of Business, etc...................................... 47
6.2.1. Types of Business..................................... 47
6.2.2. Maintenance of Properties............................. 47
6.2.3. Statutory Compliance.................................. 47
6.2.4. Compliance with Material Agreements................... 47
6.3. Insurance..................................................... 47
6.3.1. Business Interruption Insurance....................... 48
6.3.2. Property Insurance.................................... 48
6.3.3. Liability Insurance................................... 48
6.4. Financial Statements and Reports.............................. 48
6.4.1. Annual Reports........................................ 48
6.4.2. Quarterly Reports..................................... 50
6.4.3. Monthly Reports....................................... 51
6.4.4. Other Reports......................................... 51
6.4.5. Notice of Litigation; Notice of Defaults.............. 51
6.4.6. ERISA Reports......................................... 52
6.4.7. Other Information..................................... 52
6.5. Certain Financial Tests....................................... 52
6.5.1. Consolidated Net Worth................................ 53
6.5.2. Consolidated Total Net Debt to Consolidated EBITDA.... 53
6.5.3. Consolidated EBITDA to Consolidated Interest Expense.. 53
6.5.4. Environmental Capital Expenditures.................... 53
6.5.5. Business Capital Expenditures......................... 53
6.6. Indebtedness.................................................. 53
6.7. Guarantees; Letters of Credit................................. 55
6.8. Liens......................................................... 55
6.9. Investments and Acquisitions.................................. 57
6.10. Distributions................................................. 58
6.11. Asset Dispositions and Mergers................................ 59
6.12. Lease Obligations............................................. 60
6.13. Issuance of Stock by Subsidiaries; Subsidiary Distributions... 60
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
6.13.1. Issuance of Stock by Subsidiaries..................... 60
6.13.2. No Restrictions on Subsidiary Distributions........... 60
6.14. Voluntary Prepayments of Other Indebtedness................... 60
6.15. Derivative Contracts.......................................... 61
6.16. Negative Pledge Clauses....................................... 61
6.17. ERISA, etc.................................................... 61
6.18. Transactions with Affiliates.................................. 62
6.19. Environmental Laws............................................ 62
6.19.1. Compliance with Law and Permits....................... 62
6.19.2. Notice of Claims, etc................................. 62
6.20. Interpretation of Covenants................................... 62
7. Representations and Warranties........................................ 62
7.1. Organization and Business..................................... 62
7.1.1. The Company........................................... 62
7.1.2. Subsidiaries.......................................... 63
7.1.3. Qualification......................................... 63
7.1.4. Capitalization........................................ 63
7.2. Financial Statements and Other Information; Material
Agreements.................................................. 64
7.2.1. Financial Statements and Other Information............ 64
7.2.2. Material Agreements................................... 65
7.3. Agreements Relating to Financing Debt, Investments, etc....... 65
7.4. Changes in Condition.......................................... 65
7.5. Title to Assets............................................... 65
7.6. Operations in Conformity With Law, etc........................ 65
7.7. Litigation.................................................... 65
7.8. Authorization and Enforceability.............................. 66
7.9. No Legal Obstacle to Agreements............................... 66
7.10. Defaults...................................................... 67
7.11. Licenses, etc................................................. 67
7.12. Tax Returns................................................... 67
7.13. Certain Business Representations.............................. 67
7.13.1. Labor Relations....................................... 68
7.13.2. Antitrust............................................. 68
7.13.3. Consumer Protection................................... 68
7.13.4. Burdensome Obligations................................ 68
7.13.5. Future Expenditures................................... 68
7.14. Environmental Regulations..................................... 68
7.14.1. Environmental Compliance.............................. 68
7.14.2. Environmental Litigation.............................. 69
7.14.3. Hazardous Material.................................... 69
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
7.14.4. Environmental Condition of Properties................. 69
7.14.5. No Other Representations and Warranties............... 69
7.15. Pension Plans................................................. 70
7.16. Foreign Trade Regulations; Government Regulation; Margin Stock 70
7.16.1. Foreign Trade Regulations............................. 70
7.16.2. Government Regulation................................. 70
7.16.3. Margin Stock.......................................... 70
7.17. Disclosure.................................................... 70
8. Defaults.............................................................. 71
8.1. Events of Default............................................. 71
8.1.1. Payment............................................... 71
8.1.2. Specified Covenants................................... 71
8.1.3. Other Covenants....................................... 71
8.1.4. Representations and Warranties........................ 71
8.1.5. Cross Default, etc.................................... 71
8.1.6. Ownership; Liquidation; etc........................... 72
8.1.7. Enforceability, etc................................... 73
8.1.8. Judgments............................................. 73
8.1.9. ERISA................................................. 73
8.1.10. Bankruptcy, etc....................................... 74
8.1.11. Environmental Matters................................. 74
8.2. Certain Actions Following an Event of Default................. 75
8.2.1. Terminate Obligation to Extend Credit................. 75
8.2.2. Specific Performance; Exercise of Rights.............. 75
8.2.3. Acceleration.......................................... 75
8.2.4. Enforcement of Payment; Setoff........................ 75
8.2.5. Cumulative Remedies................................... 76
8.3. Annulment of Defaults......................................... 76
8.4. Waivers....................................................... 76
9. Guarantees............................................................ 76
9.1. Guarantees of Credit Obligations.............................. 76
9.2. Continuing Obligation......................................... 77
9.3. Waivers with Respect to Credit Obligations.................... 78
9.4. Lenders' Power to Waive, etc.................................. 79
9.5. Information Regarding the Company, etc........................ 80
9.6. Certain Guarantor Representations............................. 80
9.7. Subrogation................................................... 81
9.8. Subordination................................................. 81
9.9. Future Subsidiaries; Further Assurances....................... 81
10. Expenses; Indemnity................................................... 82
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
10.1. Expenses...................................................... 82
10.2. General Indemnity............................................. 82
10.3. Indemnity With Respect to Letters of Credit................... 83
11. Operations; Agent..................................................... 83
11.1. Interests in Revolving Loan................................... 83
11.2. Agent's Authority to Act, etc................................. 83
11.3. Company to Pay Agent, etc..................................... 83
11.4. Lender Operations for Advances, Letters of Credit, etc........ 83
11.4.1. Advances.............................................. 84
11.4.2. Letters of Credit..................................... 84
11.4.3. Agent to Allocate Payments, etc....................... 84
11.4.4. Delinquent Lenders; Nonperforming Lenders............. 85
11.5. Sharing of Payments, etc...................................... 85
11.6. Amendments, Consents, Waivers, etc............................ 86
11.7. Agent's Resignation........................................... 87
11.8. Concerning the Agent.......................................... 87
11.8.1. Action in Good Faith, etc............................. 87
11.8.2. No Implied Duties, etc................................ 88
11.8.3. Validity, etc......................................... 88
11.8.4. Compliance............................................ 88
11.8.5. Employment of Agents and Counsel...................... 88
11.8.6. Reliance on Documents and Counsel..................... 89
11.8.7. Agent's Reimbursement................................. 89
11.8.8. Agent's Fees.......................................... 89
11.9. Rights as a Lender............................................ 89
11.10. Independent Credit Decision................................... 89
11.11. Indemnification............................................... 90
12. Successors and Assigns; Lender Assignments and Participations......... 90
12.1. Assignments by Lenders........................................ 90
12.1.1. Assignees and Assignment Procedures................... 90
12.1.2. Terms of Assignment and Acceptance.................... 91
12.1.3. Register.............................................. 92
12.1.4. Acceptance of Assignment and Assumption............... 93
12.1.5. Federal Reserve Bank.................................. 93
12.1.6. Further Assurances.................................... 93
12.2. Credit Participants........................................... 93
12.3. Replacement of Lender......................................... 94
13. Confidentiality....................................................... 95
14. Foreign Lenders....................................................... 96
15. Notices............................................................... 97
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
16. Course of Dealing; Amendments and Waivers............................. 98
17. Venue; Service of Process............................................. 98
18. WAIVER OF JURY TRIAL.................................................. 98
19. Status for Senior Notes............................................... 99
20. General............................................................... 99
</TABLE>
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EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
1 - Environmental Capital Expenditures
2.1.4 - Revolving Note
2.2.1 - Money Market Loan Bid Request
2.2.2 - Invitation to Bid on Money Market Loan
2.2.3A - Money Market Loan Bid
2.2.3B - List of Money Market Loan Bids
2.2.4A - List of Acceptances and Non-Acceptances of Money Market Loan Bids
2.2.4B - Acceptance of Money Market Loan Bid
2.2.4C - Non-Acceptance of Money Market Loan Bid
2.2.4D - Notice of Money Market Loan
2.2.5 - Money Market Note
2.3.3 - Swingline Note
5.1.2 - Guarantors Contribution Agreement
5.1.3 - Subsidiary Subordination Agreement
5.1.6 - Financial Officer's Certificate as to Concurrent Transactions
5.1.7 - Officer's Certificate as to Solvency and Net Worth
5.2.1 - Officer's Certificate
6.8.14 - Existing Liens
7.1 - Company and its Subsidiaries
7.2.2 - Material Agreements
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
7.3 - Financing Debt, Certain Investments, etc.
7.14 - Environmental Matters
7.15 - Multi-employer and Defined Benefit Plans
9.9 - Pledge Agreement
11.1 - Revolving Loan Percentage Interests
12.1.1 - Assignment and Acceptance
</TABLE>
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<PAGE>
BUCKEYE CELLULOSE CORPORATION
CREDIT AGREEMENT
This Agreement, dated as of November 28, 1995 is among Buckeye Cellulose
Corporation, a Delaware corporation (the "Company"), the Subsidiaries of the
Company from time to time party hereto, the Lenders from time to time party
hereto, Fleet Bank of Massachusetts, N.A., both in its capacity as a Lender and
in its capacity as agent for itself and the other Lenders and SunTrust Bank,
Central Florida N.A., both in its capacity as a Lender and in its capacity as
co-agent for itself and the other Lenders. The parties agree as follows:
1. Definitions; Certain Rules of Construction. This Agreement is a
composite agreement that incorporates Amendment No. 1 to the original Credit
Agreement as signed on November 28, 1995. Certain capitalized terms are used in
this Agreement and in the other Credit Documents with the specific meanings
defined below in this Section 1. Except as otherwise explicitly specified to the
contrary or unless the context clearly requires otherwise, (a) the capitalized
term "Section" refers to sections of this Agreement, (b) the capitalized term
"Exhibit" refers to exhibits to this Agreement, (c) references to a particular
Section include all subsections thereof, (d) the word "including" shall be
construed as "including without limitation", (e) accounting terms not otherwise
defined herein have the meaning provided under GAAP, (f) references to a
particular statute or regulation include all rules and regulations thereunder
and any successor statute, regulation or rules, in each case as from time to
time in effect and (g) references to a particular Person include such Person's
successors and assigns to the extent not prohibited by this Agreement and the
other Credit Documents. References to "the date hereof" mean the date first set
forth above.
1.1. "Accumulated Benefit Obligations" means the actuarial present value
of the accumulated benefit obligations under any Plan, calculated in accordance
with Statement No. 87 of the Financial Accounting Standards Board.
1.2. "Affected Lender" is defined in Section 12.3.
1.3. "Affiliate" means, with respect to the Company (or any other
specified Person), any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the Company, and
shall include (a) any officer or director or general partner of the Company and
(b) any Person of which the Company or any Affiliate (as defined in clause (a)
above) of the Company shall, directly or indirectly, beneficially own either (i)
at least 5% of the outstanding equity securities having the general power to
vote or (ii) at least 5% of all equity interests.
1.4. "Agent" means Fleet in its capacity as agent for the Lenders
hereunder, as well as its successors and assigns in such capacity pursuant to
Section 11.7.
<PAGE>
1.5. "Agreement" means this Agreement as from time to time amended,
modified and in effect.
1.6. "Applicable Margin" means, for any month, the percentage in the table
below set opposite the ratio which (a) Consolidated Total Debt on the last day
of the most recently ended fiscal quarter for which financial statements have
been (or are required to have been) furnished by the Company to the Lenders in
accordance with Section 6.4.1 or 6.4.2, as the case may be, prior to the first
day of such month bore to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters ended on the last day of such fiscal quarter:
<TABLE>
<CAPTION>
Ratio of Consolidated Total Applicable
Debt to Consolidated EBITDA Margin
--------------------------------- ----------
<S> <C>
Greater than or equal to 2.5 1.000%
Greater than or equal to 2.0 but less than 2.5 0.750%
Greater than or equal to 1.75 but less than 2.0 0.625%
Less than 1.75 0.500%
</TABLE>
1.7. "Applicable Rate" means, at any date, the sum of:
(a) (i) with respect to each portion of the Loan subject to a LIBOR
Pricing Option, the sum of the Applicable Margin plus the LIBOR Rate with
respect to such LIBOR Pricing Option;
(ii) with respect to each other portion of the Loan, the Base
Rate;
plus (b) an additional 2% effective on the day the Agent notifies the
Company that the interest rates hereunder are increasing as a result of the
occurrence and continuance of an Event of Default until the earlier of such
time as (i) such Event of Default is no longer continuing or (ii) such
Event of Default is deemed no longer to exist, in each case pursuant to
Section 8.3.
1.8. "Approved Subordinated Debt" means the Company's 8 1/2 % Senior
Subordinated Notes due 2005 in the original principal amount of $150,000,000,
issued pursuant to the indenture dated November 28, 1995 between the Company and
Union Planters National Bank, as trustee, as in effect on the date hereof.
1.9. "Assignee" is defined in Section 12.1.1.
1.10. "Assignment and Acceptance" is defined in Section 12.1.1.
1.11. "Banking Day" means any day other than Saturday, Sunday or a day on
which banks in Boston, Massachusetts are authorized or required by law or other
governmental
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<PAGE>
action to close and, if such term is used with reference to a LIBOR Pricing
Option, any day on which dealings are effected by first-class banks in the
London inter-bank markets in New York, New York.
1.12. "Bankruptcy Code" means Title 11 of the United States Code.
1.13. "Bankruptcy Default" means an Event of Default referred to in Section
8.1.10.
1.14. "Base Rate" means, on any date, the greater of (a) the rate of
interest announced by Fleet at the Boston Office as its prime rate or (b) the
sum of 1/2% plus the Federal Funds Rate.
1.15. "Boston Office" means the principal banking office of Fleet in
Boston, Massachusetts.
1.16. "Business Capital Expenditures" means Capital Expenditures that are
not Environmental Capital Expenditures.
1.17. "By-laws" means all written by-laws, rules, regulations and all other
documents relating to the management, governance or internal regulation of any
Person other than an individual, or interpretive of the Charter of such Person,
all as from time to time in effect.
1.18. "Capital Expenditures" means, for any period, amounts added or
required to be added to the property, plant and equipment or other fixed assets
account on the Consolidated balance sheet of the Company and its Subsidiaries,
prepared in accordance with GAAP, in respect of (a) the acquisition,
construction, improvement or replacement of land, buildings, machinery,
equipment, leaseholds and any other real or personal property (excluding repairs
to any real or personal property made out of the proceeds of a casualty
insurance policy), (b) to the extent not included in clause (a) above,
materials, contract labor and direct labor relating thereto (excluding amounts
properly expensed as repairs and maintenance in accordance with GAAP) and (c)
software development costs to the extent not expensed.
1.19. "Capitalized Lease" means any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
1.20. "Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including Statement Nos.
13 and 98 of the Financial Accounting Standards Board.
1.21. "Cash Equivalents" means:
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(a) negotiable certificates of deposit, time deposits (including sweep
accounts), demand deposits and bankers' acceptances having a maturity of 12
months or less and issued by any United States financial institution having
capital and surplus and undivided profits aggregating at least $100,000,000
and rated at least Prime-1 by Moody's or A-1 by S&P or issued by any Lender
or by Union Planters National Bank so long as it has capital and surplus
and undivided profits aggregating at least $100,000,000 and is rated at
least A2 by Moody's or P2 by S&P or issued by any Lender;
(b) negotiable certificates of deposit, time deposits (including sweep
accounts), demand deposits and bankers' acceptances having a maturity of
nine months or less and issued by any foreign financial institution having
capital and surplus and undivided profits aggregating at least $200,000,000
in the equivalent amount of United States Funds and rated at least Prime-1
by Moody's or A-1 by S&P or issued by any Lender;
(c) corporate obligations having a maturity of 12 months or less and
rated at least Prime-1 by Moody's or A-1 by S&P or issued by any Lender;
(d) any direct obligation of the United States of America or any
agency or instrumentality thereof, or of any state or municipality thereof,
(i) which has a remaining maturity at the time of purchase of not more than
one year or which is subject to a repurchase agreement with any Lender (or
any other financial institution referred to in clause (a) above)
exercisable within one year from the time of purchase and (ii) which, in
the case of obligations of any state or municipality, is rated at least Aa
by Moody's or AA by S&P; and
(e) any mutual fund or other pooled investment vehicle rated at least
Aa by Moody's or AA by S&P which invests principally in obligations
described above.
1.22. "CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
1.23. "CERCLIS" means the federal Comprehensive Environmental Response
Compensation Liability Information System List (or any successor document)
promulgated under CERCLA.
1.24. "Charter" means the articles of organization, certificate of
incorporation, statute, constitution, joint venture agreement, partnership
agreement, trust indenture, limited liability company agreement or other charter
document of any Person other than an individual, each as from time to time in
effect.
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1.25. "Closing Date" means the Initial Closing Date, each other date on
which any extension of credit is made pursuant to Sections 2.1 or 2.4, the Money
Market Loan Closing Dates and the Swingline Loan Closing Dates.
1.26. "Code" means the federal Internal Revenue Code of 1986.
1.27. "Commitment" means, with respect to any Lender, such Lender's
obligations to extend the credits contemplated by Section 2. The original
Commitments are set forth in Section 11.1 and the current Commitments are
recorded from time to time in the Register.
1.28. "Company" means Buckeye Cellulose Corporation, a Delaware
corporation.
1.29. "Computation Covenants" means Sections 6.5, 6.6.7, 6.6.13, 6.6.14,
6.6.15, 6.6.16, 6.7.3, 6.9.5, 6.9.6, 6.9.7, 6.9.9, 6.10.2, 6.11.1, 6.11.4,
6.12.2 and 6.17.
1.30. "Concurrent Transactions" means the transactions described in clauses
(a) through (g) of Section 5.1.6.
1.31. "Consolidated" and "Consolidating", when used with reference to any
term, mean that term as applied to the accounts of the Company (or other
specified Person) and all of its Subsidiaries (or other specified group of
Persons), or such of its Subsidiaries as may be specified, consolidated (or
combined) or consolidating (or combining), as the case may be, in accordance
with GAAP and with appropriate deductions for minority interests in
Subsidiaries.
1.32. "Consolidated EBITDA" means, for any period, the total of (a)
Consolidated Net Income minus (b) to the extent included in computing such
Consolidated Net Income any extraordinary and nonrecurring gains plus (c) all
amounts deducted in computing such Consolidated Net Income in respect of:
(i) depreciation and amortization;
(ii) Consolidated Interest Expense;
(iii) taxes based upon or measured by income; and
(iv) any extraordinary and nonrecurring losses.
1.33. "Consolidated Interest Expense" means, for any period, (a) the
aggregate amount of interest expense, including commitment fees, payments in the
nature of interest under Capitalized Leases and net payments under Interest Rate
Protection Agreements, net of interest income accrued by the Company and its
Subsidiaries in accordance with GAAP on a Consolidated basis, minus (b) to the
extent included in the foregoing clause (a), amortization of Indebtedness
financing costs.
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1.34. "Consolidated Net Income" means, for any period, the net income (or
loss) of the Company and its Subsidiaries, determined in accordance with GAAP on
a Consolidated basis; provided, however, that Consolidated Net Income shall not
include:
(a) the income (or loss) of any Person accrued prior to the date such
Person becomes a Subsidiary or is merged into or consolidated with the
Company or any of its Subsidiaries; provided, however, that in the event of
an acquisition permitted by Section 6.9, for purposes only of calculating
the Applicable Rate and the ratios in Section 6.5 (but not for Section 6.10
or any other Section), the net income (or loss) of any acquired domestic
Person shall be included in Consolidated Net Income for up to four fiscal
quarters prior to the acquisition date, adjusted on a pro forma basis for
specific and quantified reductions in expenses (excluding projected changes
in business conditions, such as projected yield improvement or increased
sales) resulting from the acquisition as agreed between the Company and the
Agent.
(b) the income (or loss) of any Person (other than a Subsidiary) in
which the Company or any of its Subsidiaries has an ownership interest;
provided, however, that (i) Consolidated Net Income shall include amounts
in respect of the income of such Person when actually received in cash by
the Company or such Subsidiary in the form of dividends or similar
Distributions and (ii) Consolidated Net Income shall be reduced by the
aggregate amount of all Investments, regardless of the form thereof, made
by the Company or any of its Subsidiaries in such Person for the purpose of
funding any deficit or loss of such Person;
(c) all amounts included in computing such net income (or loss) in
respect of the write-up of any asset or the retirement of any Indebtedness
or equity at less than face value after June 30, 1995;
(d) the income of any Subsidiary to the extent (i) the payment of such
income in the form of a Distribution or repayment of Indebtedness to the
Company or a Wholly Owned Subsidiary is not permitted, whether on account
of any Charter or By-law restriction, any agreement, instrument, deed or
lease or any law, statute, judgment, decree or governmental order, rule or
regulation applicable to such Subsidiary or (ii) the income of such
Subsidiary does not exceed the tax liability incurred by the Company and
its Subsidiaries resulting from the repatriation of foreign earnings under
the Code caused by the payment of such income in the form of a Distribution
or repayment of Indebtedness to the Company or a Wholly Owned Subsidiary;
and
(e) any after-tax gains or losses attributable to returned surplus
assets of any Plan.
1.35. "Consolidated Net Worth" means, at any date, the total of:
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(a) stockholders' equity of the Company and its Subsidiaries
determined in accordance with GAAP on a Consolidated basis, excluding the
effect of any foreign currency translation adjustments;
minus (b) 75% of the amount by which such stockholders' equity has been
increased after the Initial Closing Date by the issuance and sale by the
Company or any of its Subsidiaries of equity securities in a public
offering.
1.36. "Consolidated Total Debt" means, at any date, all Financing Debt of
the Company and its Subsidiaries on a Consolidated basis.
1.37. "Consolidated Total Net Debt" means, at any date, Consolidated Total
Debt minus cash and Cash Equivalents (other than cash and Cash Equivalents owned
by Foreign Subsidiaries and items described in clause (b) of the definition of
"Cash Equivalents") to the extent such cash and Cash Equivalents exceed
$3,000,000.
1.38. "Credit Documents" means:
(a) this Agreement, the Notes, each Letter of Credit, each draft
presented or accepted under a Letter of Credit, the Subsidiary
Subordination Agreement, any pledge agreement contemplated by Section 9.9
and each Interest Rate Protection Agreement provided by a Lender (or an
Affiliate of a Lender) to the Company or any of its Subsidiaries, each as
from time to time in effect;
(b) all financial statements, reports, notices or certificates
delivered to the Agent or any of the Lenders by the Company, any of its
Subsidiaries or any other Obligor in connection herewith or therewith; and
(c) any other present or future agreement or instrument from time to
time entered into among the Company, any of its Subsidiaries or any other
Obligor, on one hand, and the Agent, any Letter of Credit Issuer or all
the Lenders, on the other hand, relating to, amending or modifying this
Agreement or any other Credit Document referred to above or which is
stated to be a Credit Document, each as from time to time in effect.
1.39. "Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Company, any of its Subsidiaries or any
other Obligor owing to the Agent or any Lender under or in connection with this
Agreement or any other Credit Document, including obligations in respect of
principal, interest, reimbursement obligations under Letters of Credit and
Interest Rate Protection Agreements provided by a Lender (or an Affiliate of a
Lender), commitment fees, Letter of Credit fees, amounts provided for in
Sections 3.2.4, 3.7, 3.8, 3.9, 3.10 and 10 and other fees, charges, indemnities
and expenses from time to time
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owing hereunder or under any other Credit Document (whether accruing before or
after a Bankruptcy Default).
1.40. "Credit Participant" is defined in Section 12.2.
1.41. "Default" means any Event of Default and any event or condition which
with the passage of time or giving of notice, or both, would become an Event of
Default and the filing against the Company, any of its Subsidiaries or any other
Obligor of a petition commencing an involuntary case under the Bankruptcy Code.
1.42. "Delinquency Period" is defined in Section 11.4.4.
1.43. "Delinquent Lender" is defined in Section 11.4.4.
1.44. "Delinquent Payment" is defined in Section 11.4.4.
1.45. "Distribution" means, with respect to the Company (or other specified
Person):
(a) the declaration or payment of any dividend or distribution, including
dividends payable in shares of capital stock of or other equity interests in the
Company (or such specified Person), on or in respect of any shares of any class
of capital stock of or other equity interests in the Company (or such specified
Person);
(b) the purchase, redemption or other retirement of any shares of any class
of capital stock of or other equity interest in the Company (or such specified
Person) or of options, warrants or other rights for the purchase of such shares,
directly, indirectly through a Subsidiary or otherwise;
(c) any other distribution on or in respect of any shares of any class of
capital stock of or equity or other beneficial interest in the Company (or such
specified Person);
(d) any payment of principal or interest with respect to, or any purchase,
redemption or defeasance of, any Indebtedness of the Company (or such specified
Person) which by its terms or the terms of any agreement is subordinated to the
payment of the Credit Obligations; and
(e) any payment, loan or advance by the Company (or such specified Person)
to, or any other Investment by the Company (or such specified Person) in, the
holder of any shares of any class of capital stock of or equity interest in the
Company (or such specified Person), or any Affiliate of such holder;
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provided, however, that the term "Distribution" shall not include (i) dividends
payable in perpetual common stock of or other similar equity interests in the
Company (or such specified Person) or (ii) payments in the ordinary course of
business in respect of (A) reasonable compensation paid to employees, officers
and directors, (B) advances to employees for travel expenses, drawing accounts
and similar expenditures, or (C) rent paid to, or accounts payable for services
rendered or goods sold by, non-Affiliates that own capital stock of or other
equity interests in the Company (or such specified Person).
1.46. "Environmental Capital Expenditures" means Capital Expenditures of
the type contemplated by Exhibit 1.
1.47. "Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including applicable
consent decrees and administrative orders and the Fenholloway River Agreement)
relating to public health and safety and protection of the environment,
including OSHA.
1.48. "ERISA" means the federal Employee Retirement Income Security Act of
1974.
1.49. "ERISA Group Person" means the Company, any Subsidiary of the Company
and any Person which is a member of the controlled group or under common control
with the Company or any Subsidiary within the meaning of section 414 of the Code
or section 4001(a)(14) of ERISA.
1.50. "Event of Default" is defined in Section 8.1.
1.51. "Exchange Act" means the federal Securities Exchange Act of 1934.
1.52. "Federal Funds Rate" means, for any day, the rate equal to the
weighted average (rounded upward to the nearest 1/8%) of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, (a) as such weighted average is published for such day
(or, if such day is not a Banking Day, for the immediately preceding Banking
Day) by the Federal Reserve Bank of New York or (b) if such rate is not so
published for such Banking Day, as determined by the Agent using any reasonable
means of determination. Each determination by the Agent of the Federal Funds
Rate shall, in the absence of manifest error, be conclusive.
1.53. "Fenholloway River Agreement" means the agreement between the State
of Florida Department of Environmental Protection and Buckeye Florida Limited
Partnership dated as of March 29, 1995.
1.54. "Final Maturity Date" means November 27, 2000.
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1.55. "Financial Officer" of the Company (or other specified Person) means
its chief executive officer, chief financial officer, chief operating officer,
chairman, president, treasurer or any of its vice presidents whose primary
responsibility is for its financial affairs, all of whose incumbency and
signatures have been certified to the Agent by the secretary or other
appropriate attesting officer of the Company (or such specified Person).
1.56. "Financing Debt" means each of the items described in clauses (a)
through (f) of the definition of the term "Indebtedness".
1.57. "Fleet" means Fleet Bank of Massachusetts, N.A.
1.58. "Foreign Subsidiary" means each Subsidiary that is organized under
the laws of and conducting its business primarily in a jurisdiction outside of
the United States of America.
1.59. "Foreign Trade Regulations" means (a) any act that prohibits or
restricts, or empowers the President or any executive agency of the United
States of America to prohibit or restrict, exports to or financial transactions
with any foreign country or foreign national, (b) the regulations with respect
to certain prohibited foreign trade transactions set forth at 22 C.F.R. Parts
120-130 and 31 C.F.R. Part 500 and (c) any order, regulation, ruling,
interpretation, direction, instruction or notice relating to any of the
foregoing.
1.60. "Funding Liability" means (a) any deposit which was used (or deemed
by Section 2.2.6 or 3.2.6 to have been used) to fund any portion of a Money
Market Loan or any portion of the Revolving Loan subject to a LIBOR Pricing
Option, and (b) any portion of a Money Market Loan or any portion of the
Revolving Loan subject to a LIBOR Pricing Option funded (or deemed by Section
2.2.6 or 3.2.6 to have been funded) with the proceeds of any such deposit.
1.61. "GAAP" means generally accepted accounting principles as from time to
time in effect, including the statements and interpretations of the United
States Financial Accounting Standards Board; provided, however, that for
purposes of compliance with Section 6 (other than Section 6.4) and the related
definitions, "GAAP" means such principles as in effect on June 30, 1995 as
applied by the Company and its Subsidiaries in the preparation of the audited
financial statements referred to in Section 7.2.1(a), and consistently followed,
without giving effect to any subsequent changes thereto.
1.62. "Guarantee" means, with respect to the Company (or other specified
Person):
(a) any guarantee by the Company (or such specified Person), of the
payment or performance of, or any contingent obligation by the Company (or
such specified Person), in respect of, any Indebtedness or other obligation
of any primary obligor;
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(b) any other arrangement whereby credit is extended to a primary
obligor on the basis of any promise or undertaking of the Company (or such
specified Person), including any binding "comfort letter" or "keep well
agreement" written by the Company (or such specified Person), to a creditor
or prospective creditor of such primary obligor, to (i) pay the
Indebtedness of such primary obligor, (ii) purchase an obligation owed by
such primary obligor, (iii) pay for the purchase or lease of assets or
services regardless of the actual delivery thereof or (iv) maintain the
capital, working capital, solvency or general financial condition of such
primary obligor;
(c) any liability of the Company (or such specified Person), as a
general partner of a partnership in respect of Indebtedness or other
obligations of such partnership;
(d) any liability of the Company (or such specified Person) as a joint
venturer of a joint venture in respect of Indebtedness or other obligations
of such joint venture; and
(e) reimbursement obligations, whether contingent or matured, of the
Company (or such specified Person) with respect to letters of credit,
bankers acceptances, surety bonds, other financial guarantees and Interest
Rate Protection Agreements (without duplication of other Indebtedness
supported or guaranteed thereby),
whether or not any of the foregoing are reflected on the balance sheet of the
Company (or such specified Person) or in a footnote thereto; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The amount of any Guarantee and the
amount of Indebtedness resulting from such Guarantee shall be the maximum amount
that the guarantor may become obligated to pay in respect of the obligations
(whether or not such obligations are outstanding at the time of computation).
1.63. "Guarantor" means each Subsidiary listed on the signature page hereto
or which subsequently becomes party to this Agreement as a Guarantor; provided,
however, that in no event shall a Foreign Subsidiary constitute a Guarantor.
1.64. "Guarantors Contribution Agreement" is defined in Section 5.1.2.
1.65. "Hazardous Material" means any pollutant, toxic or hazardous material
or waste, including any "hazardous substance" or "pollutant" or "contaminant" as
defined in section 101(14) of CERCLA or any other Environmental Law or regulated
as toxic or hazardous under RCRA or any other Environmental Law.
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1.66. "Heller Credit Agreement" means the Credit Agreement dated as of May
27, 1993, as amended, among the Company, Heller Financial, Inc., as agent and as
lender, and Fleet, as lender.
1.67. "Indebtedness" means all obligations, contingent or otherwise, which
in accordance with GAAP are required to be classified upon the balance sheet of
the Company (or other specified Person) as liabilities, but in any event
including (without duplication):
(a) borrowed money;
(b) indebtedness evidenced by notes, debentures or similar
instruments;
(c) Capitalized Lease Obligations;
(d) the deferred purchase price of assets or securities, including
related noncompetition, consulting and stock repurchase obligations (other
than ordinary trade accounts payable within six months after the incurrence
thereof in the ordinary course of business);
(e) mandatory redemption or dividend rights on capital stock (or other
equity);
(f) reimbursement obligations, whether contingent or matured, with
respect to letters of credit, bankers acceptances, surety bonds, other
financial guarantees and Interest Rate Protection Agreements (without
duplication of other Indebtedness supported or guaranteed thereby);
(g) liabilities secured by any Lien existing on property owned or
acquired by the Company (or such specified Person), whether or not the
liability secured thereby shall have been assumed; and
(h) all Guarantees in respect of Indebtedness of others.
1.68. "Indemnified Party" is defined in Section 10.2.
1.69. "Initial Closing Date" means November 28, 1995 or such other date
prior to December 29, 1995 agreed to by the Company and the Agent as the first
Closing Date hereunder.
1.70. "Interest Rate Protection Agreement" means any interest rate swap,
interest rate cap, interest rate hedge or other contractual arrangement that
converts variable interest rates into fixed interest rates, fixed interest rates
into variable interest rates or other similar arrangements.
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1.71. "Investment" means, with respect to the Company (or other specified
Person):
(a) any share of capital stock, partnership or other equity interest,
evidence of Indebtedness or other security issued by any other Person;
(b) any loan, advance or extension of credit to, or contribution to
the capital of, any other Person;
(c) any Guarantee of the Indebtedness of any other Person;
(d) any acquisition of all or any part of the business of any other
Person or the assets comprising such business or part thereof, excluding
Capital Expenditures permitted by Sections 6.5.4 and 6.5.5 and purchases of
inventory and other items in the ordinary course of business; and
(e) any other similar investment.
The investments described in the foregoing clauses (a) through (e) shall be
included in the term "Investment" whether they are made or acquired by purchase,
exchange, issuance of stock or other securities, merger, reorganization or any
other method; provided, however, that the term "Investment" shall not include
(i) current trade and customer accounts receivable for property leased, goods
furnished or services rendered in the ordinary course of business and payable in
accordance with customary trade terms, (ii) deposits, advances and prepayments
to suppliers for property leased, goods furnished and services rendered in the
ordinary course of business, (iii) advances to employees for travel expenses,
drawing accounts and similar expenditures, (iv) stock or other securities
acquired in connection with the satisfaction or enforcement of Indebtedness or
claims due to the Company (or such specified Person) or as security for any such
Indebtedness or claim or (v) demand deposits in banks or similar financial
institutions.
In determining the amount of outstanding Investments:
(A) the amount of any Investment shall be the cost thereof minus any
returns of capital in cash on such Investment (determined in accordance
with GAAP without regard to amounts realized as income on such Investment);
(B) the amount of any Investment in respect of a purchase described in
clause (d) above shall be increased by the amount of any Indebtedness
assumed in connection with such purchase or secured by any asset acquired
in such purchase (whether or not any Financing Debt is assumed) or for
which any Person that becomes a Subsidiary is liable on the date on which
the securities of such Person are acquired and shall be reduced by the
amount of any reductions in such Financing Debt; and
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(C) no Investment shall be increased as the result of an increase in
the undistributed retained earnings of the Person in which the Investment
was made or decreased as a result of an equity interest in the losses of
such Person.
1.72. "Legal Requirement" means any present or future requirement imposed
upon any of the Lenders or the Company and its Subsidiaries by any law, statute,
rule, regulation, directive, order, decree, guideline (or any interpretation
thereof by courts or of administrative bodies) of the United States of America,
or any jurisdiction in which any LIBOR Office is located or any state or
political subdivision of any of the foregoing, or by any board, governmental or
administrative agency, central bank or monetary authority of the United States
of America, any jurisdiction in which any LIBOR Office is located, or any
political subdivision of any of the foregoing, in each case having the force of
law; provided, however, that any such requirement imposed on any of the Lenders
not having the force of law shall be deemed to be a Legal Requirement for
purposes of Sections 3.2.1(a), 3.2.4, 3.7, 3.8, 3.9 and 3.10 if such Lender
reasonably believes that compliance therewith is in the best interest of such
Lender.
1.73. "Lender" means each of the Persons listed as lenders on the signature
page hereto, including the Bank in its capacity as a Lender and such other
Persons who may from time to time own a Percentage Interest in the Credit
Obligations, but the term "Lender" shall not include any Credit Participant in
such capacity.
1.74. "Lending Officer" means such individuals whom the Agent or the
Swingline Lender, as the case may be, may designate by notice to the Company
from time to time as an officer who may receive telephone requests for
borrowings under Sections 2.1.3 or 2.3.1.
1.75. "Letter of Credit" is defined in Section 2.4.1.
1.76. "Letter of Credit Exposure" means, at any date, the sum of (a) the
aggregate face amount of all drafts that may then or thereafter be presented by
beneficiaries under all Letters of Credit then outstanding, plus (b) the
aggregate face amount of all drafts that the Letter of Credit Issuer has
previously accepted under Letters of Credit but has not paid.
1.77. "Letter of Credit Issuer" means, for any Letter of Credit, Fleet, or
in the event Fleet does not for any reason issue a requested Letter of Credit,
another Lender designated by the Agent to issue such Letter of Credit in
accordance with Section 2.4.
1.78. "LIBOR Basic Rate" means, for any LIBOR Interest Period:
(a) the rate of interest at which U.S. dollar deposits are offered in
the London interbank market in an amount approximately equal to the portion
of the Loan subject to the related LIBOR Pricing Option for a period of
time equal to such LIBOR Interest Period that appears on the Telerate Page
3750 as of 11:00 a.m. London time two
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Business Days prior to the Business Day on which such LIBOR Interest Period
begins or
(b) if no such rate appears on the Telerate Page 3750, the rate of
interest determined by the Agent to be the average of up to four interest
rates per annum at which U.S. Dollar deposits are offered in the London
interbank market in an amount approximately equal to the portion of the
Loan subject to the related LIBOR Pricing Option, for a period of time
equal to such LIBOR Interest Period which appear on the Reuter's Screen
LIBO Page as of 11:00 a.m. London time two Business Days prior to the
Business Day on which such LIBOR Interest Period begins if at least two
such offered rates so appear on the Reuter's Screen LIBO Page or
(c) if no such rate appears on the Telerate Page 3750 and fewer than
two offered rates appear on the Reuter's Screen LIBO Page, the rate of
interest at which deposits in an amount comparable to the portion of the
Loan as to which the related LIBOR Pricing Option has been elected and
which have a term corresponding to such LIBOR Interest Period are offered
to the Agent by first class banks in the London inter-bank market for
delivery in immediately available funds at a LIBOR Office on the first day
of such LIBOR Interest Period as determined by the Agent at approximately
10:00 a.m. (Boston time) two Banking Days prior to the date upon which such
LIBOR Interest Period is to commence (which determination by such Reference
Lender shall, in the absence of manifest error, be conclusive).
1.79. "LIBOR Interest Period" means any period, selected as provided in
Section 3.2.1, of one, two, three or six months, commencing on any Banking Day
and ending on the corresponding date in the subsequent calendar month so
indicated (or, if such subsequent calendar month has no corresponding date, on
the last day of such subsequent calendar month); provided, however, that subject
to Section 3.2.3, if any LIBOR Interest Period so selected would otherwise begin
or end on a date which is not a Banking Day, such LIBOR Interest Period shall
instead begin or end, as the case may be, on the immediately preceding or
succeeding Banking Day as determined by the Agent in accordance with the then
current banking practice in the London inter-bank market with respect to
deposits at the applicable LIBOR Office, which determination by the Agent shall,
in the absence of manifest error, be conclusive.
1.80. "LIBOR Office" means such non-United States office or international
banking facility of any Lender as the Lender may from time to time select.
1.81. "LIBOR Pricing Options" means the options granted pursuant to Section
3.2.1 to have the interest on any portion of the Loan computed on the basis of a
LIBOR Rate.
1.82. "LIBOR Rate" for any LIBOR Interest Period means the rate, rounded
upward to the nearest 1/100%, obtained by dividing (a) the LIBOR Basic Rate for
such LIBOR
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Interest Period by (b) an amount equal to 1 minus the LIBOR Reserve Rate;
provided, however, that if at any time during such LIBOR Interest Period the
LIBOR Reserve Rate applicable to any outstanding LIBOR Pricing Option changes,
the LIBOR Rate for such LIBOR Interest Period shall automatically be adjusted to
reflect such change, effective as of the date of such change to the extent
required by the Legal Requirement implementing the change in the LIBOR Reserve
Rate.
1.83. "LIBOR Reserve Rate" means the stated maximum rate (expressed as a
decimal) of all reserves (including any basic, supplemental, marginal or
emergency reserve or any reserve asset), if any, as from time to time in effect,
required by any Legal Requirement to be maintained by any Lender against (a)
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve System applicable to LIBOR Pricing Options, (b)
any other category of liabilities that includes deposits by reference to which
the interest rate on portions of the Loan subject to LIBOR Pricing Options is
determined, (c) the principal amount of or interest on any portion of the Loan
subject to a LIBOR Pricing Option or (d) any other category of extensions of
credit, or other assets, that includes loans subject to a LIBOR Pricing Option
by a non-United States office of any of the Lenders to United States residents.
1.84. "Lien" means, with respect to the Company (or any other specified
Person):
(a) any lien, encumbrance, mortgage, pledge, charge or security
interest of any kind upon any property or assets of the Company (or such
specified Person), whether now owned or hereafter acquired, or upon the
income or profits therefrom;
(b) the acquisition of, or the agreement to acquire, any property or
asset upon conditional sale or subject to any other title retention
agreement, device or arrangement (including a Capitalized Lease);
(c) the sale, assignment, pledge or transfer for security of any
accounts, general intangibles or chattel paper of the Company (or such
specified Person), with recourse; and
(d) the transfer of any tangible property or assets for the purpose of
subjecting such items to the payment of previously outstanding Indebtedness
in priority to payment of the general creditors of the Company (or such
specified Person).
1.85. "Loan" means the Revolving Loan, the Money Market Loan and the Swing
Line Loan, collectively.
1.86. "Loan Accounts" means each of the Revolving Loan Accounts, the Money
Market Loan Accounts and the Swingline Loan Account.
1.87. "Mandatory Borrowing" is defined in Section 2.3.4.
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1.88. "Margin Stock" means "margin stock" within the meaning of Regulations
G, T, U or X of the Board of Governors of the Federal Reserve System.
1.89. "Material Adverse Change" means, since any specified date or from the
circumstances existing immediately prior to the happening of any specified
event, a material adverse change in the business, assets, financial condition or
income of the Company and its Subsidiaries (on a Consolidated basis).
1.90. "Material Agreements" is defined in Section 7.2.2.
1.91. "Maximum Amount of Revolving Credit" is defined in Section 2.1.2.
1.92. "MDCP" means Madison Dearborn Capital Partners, L.P., a Delaware
limited partnership.
1.93. "Money Market Loan" is defined in Section 2.2.
1.94. "Money Market Loan Accounts" is defined in Section 2.2.5.
1.95. "Money Market Loan Closing Date" is defined in Section 2.2.1.
1.96. "Money Market Loan Interest Payment Date" is defined in Section
2.2.1.
1.97. "Money Market Loan Maturity Date" is defined in Section 2.2.1.
1.98. "Money Market Note" is defined in Section 2.2.5.
1.99. "Money Market Rates" is defined in Section 2.2.3.
1.100. "Moody's" means Moody's Investors Service, Inc.
1.101. "Multiemployer Plan" means any Plan that is a "multiemployer plan"
as defined in section 4001(a)(3) of ERISA.
1.102. "Net Asset Sale Proceeds" means the cash proceeds of any sale or
disposition of assets after the Initial Closing Date (including by way of merger
of a Subsidiary) by the Company or any of its Subsidiaries net of (a) any
Indebtedness permitted by Section 7.6.7 (Capitalized Leases and purchase money
indebtedness) secured by assets being sold in such transaction required to be
paid from such proceeds, (b) income taxes that, as estimated by the Company in
good faith, will be required to be paid by the Company or any of its
Subsidiaries in cash as a result of, and within 15 months after, such sale or
disposition and (c) all
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reasonable expenses of the Company or any of its Subsidiaries incurred in
connection with the transaction.
1.103. "Nonperforming Lender" is defined in Section 12.4.4.
1.104. "Notes" means the Revolving Notes, the Money Market Notes and the
Swingline Note.
1.105. "Obligor" means the Company, each Guarantor and each Person
guaranteeing, providing collateral for or subordinating obligations to, the
Credit Obligations.
1.106. "OSHA" means the federal Occupational Health and Safety Act.
1.107. "Overdue Reimbursement Rate" means, on any date, a per annum rate of
interest equal to the highest Applicable Rate then in effect.
1.108. "Payment Date" means the last Banking Day of each March, June,
September and December occurring after the Initial Closing Date.
1.109. "PBGC" means the Pension Benefit Guaranty Corporation or any
successor entity.
1.110. "Percentage Interests" means (a) at all times when no Event of
Default under Section 8.1.1 or a Bankruptcy Default exists, the ratio that the
respective Commitments of the Lenders bear to the total Commitments of all
Lenders and (b) at all other times, the ratio that the respective amounts of the
outstanding Credit Obligations (including Letter of Credit Exposure) owing to
the Lenders in respect of extensions of credit under Section 2 bear to the total
outstanding Credit Obligations owing to all Lenders.
1.111. "Performing Lender" is defined in Section 11.4.4.
1.112. "Permitted Reinvestment" means, with respect to any transaction
resulting in Net Asset Sale Proceeds, the acquisition by the Company or a
domestic Subsidiary of a business or other assets permitted by Section 6.9.5, or
of other assets permitted by Section 6.9, that occurs on the date of, or within
270 days after, such transaction.
1.113. "Permitted Reinvestment Reserve Amount" is defined in Section 4.2.2.
1.114. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company, business trust, trust, organization, business or
government or any governmental agency or political subdivision thereof.
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1.115. "Plan" means, at any date, any pension benefit plan subject to Title
IV of ERISA maintained, or to which contributions have been made or are required
to be made, by any ERISA Group Person within six years prior to such date.
1.116. "Pledge Agreement" is defined in Section 6.9.5.
1.117. "Procter & Gamble Cellulose" means The Procter & Gamble Cellulose
Company, a Delaware corporation, a Wholly Owned Subsidiary of The Procter &
Gamble Company, a Delaware corporation.
1.118. "RCRA" means the federal Resource Conservation and Recovery Act, 42
U.S.C. (S) 690, et seq.
1.119. "Register" is defined in Section 12.1.3.
1.120. "Replacement Lender" is defined in Section 12.3.
1.121. "Request Date" is defined in Section 2.2.1.
1.122. "Required Lenders" means, with respect to any approval, consent,
modification, waiver or other action to be taken by the Agent or the Lenders
under the Credit Documents which require action by the Required Lenders, such
Lenders as own at least 51% of the Percentage Interests (so long as such 51% of
the Percentage Interests comprises the Percentage Interests of at least three
Lenders at any time when the total number of Lenders is at least five);
provided, however, that with respect to any matters referred to in the proviso
to Section 11.6, Required Lenders means such Lenders as own at least the
respective portions of the Percentage Interests required by Section 11.6.
1.123. "Revolving Loan Account" is defined in Section 2.1.4.
1.124. "Revolving Notes" is defined in Section 2.1.4.
1.125. "Securities Act" means the federal Securities Act of 1933.
1.126. "Senior Notes" means the 10 1/4% Senior Notes due 2001 issued by the
Company under the Indenture dated as of May 27, 1993, between the Company and
Bankers Trust Company, as trustee, as now in effect.
1.127. "S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill Corporation.
1.128. "Subsidiary" means any Person of which the Company (or other
specified Person) shall at the time, directly or indirectly through one or more
of its Subsidiaries, (a)
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own at least 50% of the outstanding capital stock (or other shares of beneficial
interest) entitled to vote generally, (b) hold at least 50% of the partnership,
joint venture or similar interests or (c) be a general partner or joint
venturer; provided, however, that "Subsidiary" shall not include any
Unrestricted Affiliate, regardless of the percentage ownership or voting power
of the Company or such Subsidiary in such Unrestricted Affiliate.
1.129. "Subsidiary Subordination Agreement" is defined in Section 5.1.3.
1.130. "Swingline Borrower" means the Company.
1.131. "Swingline Lender" means Fleet, in its capacity as swingline lender
hereunder.
1.132. "Swingline Loan" is defined in Section 2.3.3.
1.133. "Swingline Loan Account" is defined in Section 2.3.3.
1.134. "Swingline Note" is defined in Section 2.3.3.
1.135. "Swingline Rate" means the rate equal to the sum of (a) the
Applicable Rate calculated on the basis of the Base Rate, minus 1/2% per annum,
plus (b) an additional 2% per annum effective on the day the Agent notifies the
Company that the interest rates hereunder are increasing as a result of the
occurrence and continuance of an Event of Default until the earlier of such time
as (i) such Event of Default is no longer continuing or (ii) such Event of
Default is deemed no longer to exist, in each case pursuant to Section 8.3.
1.136. "Tax" means any present or future tax, levy, duty, impost,
deduction, withholding or other charges of whatever nature at any time required
by any Legal Requirement (a) to be paid by any Lender or (b) to be withheld or
deducted from any payment otherwise required hereby to be made to any Lender, in
each case on or with respect to such Lender's obligations hereunder, the Loan,
any payment in respect of the Credit Obligations or any Funding Liability not
included in the foregoing; provided, however, that the term "Tax" shall not
include taxes imposed upon or measured by the net income of such Lender (other
than withholding taxes that are not creditable for the jurisdiction imposing
such withholding taxes against taxes imposed upon or measured by the net income
of such Lender).
1.137. "Uniform Customs and Practice" is defined in Section 2.4.7.
1.138. "United States Funds" means such coin or currency of the United
States of America as at the time shall be legal tender therein for the payment
of public and private debts.
1.139. "Unrestricted Affiliate" means a Person (other than a Subsidiary)
which the Company indicates in writing to the Agent will constitute an
"Unrestricted Affiliate".
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1.140. "Wholly Owned Subsidiary" means any Subsidiary of which all of the
outstanding capital stock (or other shares of beneficial interest) entitled to
vote generally (other than directors' qualifying shares or, in the case of
Foreign Subsidiaries, shares required to be held by foreign nationals)) is owned
by the Company (or other specified Person) directly, or indirectly through one
or more Wholly Owned Subsidiaries.
2. The Credits.
2.1. Revolving Credit.
2.1.1. Revolving Loan. Subject to all the terms and conditions of this
Agreement and so long as no Default exists, from time to time on and after
the Initial Closing Date and prior to the Final Maturity Date the Lenders
will, severally in accordance with their respective Percentage Interests,
make loans to the Company in such amounts as may be requested by the
Company in accordance with Section 2.1.3. The sum of the aggregate
principal amount of loans made under this Section 2.1.1 at any one time
outstanding plus the Money Market Loans plus the Swingline Loan plus the
Letter of Credit Exposure shall in no event exceed the Maximum Amount of
Revolving Credit. In no event will the principal amount of loans made by
any Lender pursuant to this Section 2.1 at any one time outstanding exceed
such Lender's Commitment.
2.1.2. Maximum Amount of Revolving Credit. The term "Maximum Amount of
Revolving Credit" means on any date specified in the table below the lesser
of (a) (i) the amount specified opposite such period in such table:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Prior to January 1, 1998.............................. $135,000,000
From January 1, 1998 through March 31, 1998........... $131,250,000
From April 1, 1998 through June 30, 1998.............. $127,500,000
From July 1, 1998 through September 30, 1998.......... $123,750,000
From October 1, 1998 through December 31, 1998........ $120,000,000
From January 1, 1999 through March 31, 1999........... $116,250,000
From April 1, 1999 through June 30, 1999.............. $112,500,000
From July 1, 1999 through September 30, 1999.......... $108,750,000
From October 1, 1999 through December 31, 1999........ $105,000,000
From January 1, 2000 through March 31, 2000........... $101,250,000
From April 1, 2000 through June 30, 2000.............. $ 97,500,000
From July 1, 2000 through September 30, 2000.......... $ 93,750,000
From October 1, 2000 through the Final Maturity Date.. $ 90,000,000
</TABLE>
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minus (ii) Net Asset Sale Proceeds to the extent (A) such Net Asset Sale
Proceeds exceed both (1) $3,000,000 in any fiscal year and (2) $15,000,000
in the aggregate after the Initial Closing Date minus all amounts allocated
to clause (1) after the Initial Closing Date and (B) the amount of such
excess in the foregoing clause (A) is not allocated to an effective
Permitted Reinvestment Reserve Amount, minus (iii) the outstanding
principal amount of the Senior Notes in excess of $5,000,000; or (b) the
amount (in an integral multiple of $1,000,000) to which the then applicable
amount set forth in such table shall have been irrevocably reduced from
time to time by notice from the Company to the Agent. The Company shall not
give a notice reducing the amount applicable to any period in the table
above unless it shall also reduce the amounts applicable to all subsequent
periods in such table to at least the same specified lower amount, so that
the Maximum Amount of Revolving Credit for any subsequent period shall not
exceed the reduced Maximum Amount of Revolving Credit applicable to any
prior period.
2.1.3. Borrowing Requests. The Company may from time to time request
a loan under Section 2.1.1 by providing to the Agent a notice (which may be
given by a telephone call received by a Lending Officer if promptly
confirmed in writing). Such notice must be not later than noon (Boston
time) on the first Banking Day (third Banking Day if any portion of such
loan will be subject to a LIBOR Pricing Option on the requested Closing
Date) prior to the requested Closing Date for such loan. The notice must
specify (a) the amount of the requested loan (which shall not be less than
$3,000,000 and an integral multiple of $500,000) and (b) the requested
Closing Date therefor (which shall be a Banking Day). Upon receipt of such
notice, the Agent will promptly inform each other Lender (by telephone or
otherwise). Each such loan will be made at the Boston Office by depositing
the amount thereof to the general account of the Company with the Agent. In
connection with each such loan, the Company shall furnish to the Agent a
certificate in substantially the form of Exhibit 5.2.1.
2.1.4. Revolving Loan Account; Revolving Notes. The Agent will
establish on its books a loan account for the Company (the "Revolving Loan
Account") which the Agent shall administer as follows: (a) the Agent shall
add to the Revolving Loan Account, and the Loan Account shall evidence, the
principal amount of all loans from time to time made by the Lenders to the
Company pursuant to Section 2.1.1 and (b) the Agent shall reduce the
Revolving Loan Account by the amount of all payments made on account of the
Indebtedness evidenced by the Revolving Loan Account. The aggregate
principal amount of the Indebtedness evidenced by the Revolving Loan
Account is referred to as the "Revolving Loan". The Revolving Loan shall be
deemed owed to each Lender severally in accordance with such Lender's
Percentage Interest therein, and all payments credited to the Revolving
Loan Account shall be for the account of each Lender in accordance with its
Percentage Interest. The Company's obligations to pay each Lender's
Percentage Interest in the Revolving Loan shall be evidenced by a separate
note of the Company in substantially the form of Exhibit 2.1.4
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(the "Revolving Notes"), payable to each Lender in maximum principal
amount equal to such Lender's Percentage Interest in the Revolving
Loan.
2.2. Money Market Rate Credit. As provided in this Section 2.2, the Company
may request, and one or more Lenders, each acting in its sole and absolute
discretion, may offer to make, loans on a money market basis (each such loan
made by any of the Lenders pursuant to this Section 2.2 being referred to as a
"Money Market Loan"), which the Company may, in its sole and absolute
discretion, agree to accept; provided, however, that in no event shall the sum
of the aggregate Money Market Loans at any one time outstanding plus the
Revolving Loan plus the Swingline Loan plus Letter of Credit Exposure exceed the
Maximum Amount of Revolving Credit.
2.2.1. Request by the Company. Subject to all the terms and conditions
of this Agreement and so long as no Default exists, the Company may, at any
time prior to the Final Maturity Date, by telex or telecopy notice to the
Agent substantially in the form of Exhibit 2.2.1 received not later than
10:00 a.m. (Boston time) on any Banking Day (the "Request Date"), request
bids for loans pursuant to this Section 2.2 to be made on the following
Banking Day (the "Money Market Loan Closing Date"), such request to
specify:
(a) the aggregate amount of the proposed loans, which shall not
be less than $3,000,000 and which shall be in integral multiples of
$500,000,
(b) the proposed maturity dates (each such date a "Money Market
Loan Maturity Date") for such proposed loans (which maturity dates
shall be not later than the earlier of (i) the 180th day following the
applicable Money Market Loan Closing Date and (ii) the Final Maturity
Date) and,
(c) the proposed dates (each such date a "Money Market Loan
Interest Payment Date"), if any, prior to the applicable Money Market
Loan Maturity Date on which accrued but unpaid interest shall be due
and payable on the principal amount of such proposed loans; provided,
however, that in the event the proposed Money Market Loan Maturity
Date is more than 90 days after the proposed Money Market Loan Closing
Date, the Company shall also pay accrued and unpaid interest on the
proposed loans on the 90th day after the proposed Money Market Loan
Closing Date. No more than 10 LIBOR Pricing Options and Money Market
Loans in the aggregate may be outstanding at any one time.
2.2.2. Dissemination of Requests for Bids for Money Market Loans.
Promptly upon receipt of each request submitted by the Company pursuant to
Section 2.2.1, and in any event not later than 2:00 p.m. (Boston time) on
the applicable Request Date, the Agent shall, by telex or telecopy notice
(or by telephonic notice on a
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reasonable efforts basis, promptly confirmed by telex or telecopy) to each
Lender in substantially the form of Exhibit 2.2.2, notify each Lender of
such request, which notice shall constitute an invitation on behalf of the
Company for each Lender to submit bids pertaining to the proposed Money
Market Loans in accordance with Section 2.2.3.
2.2.3. Bids for Money Market Loans. Each Lender may, in its sole and
absolute discretion, respond to such invitation by submitting a bid by
telex or telecopy notice to the Agent no later than 10:00 a.m. (Boston
time) on the proposed Money Market Loan Closing Date. Such notice shall be
in substantially the form of Exhibit 2.2.3A, which notice shall constitute
an offer by such Lender to the Company to make Money Market Loans on the
proposed Money Market Loan Closing Date in the principal amounts specified
in the notice from such Lender, which principal amounts (a) may be for all
or any portion of the proposed Money Market Loans, notwithstanding the
Percentage Interest of such Lender in the Revolving Loan and Letter of
Credit Exposure, (b) may be different principal amounts for different Money
Market Loan Maturity Dates (subject to an over-all maximum) and (c) shall
be an integral multiple of $1,000,000 maturing on the Money Market Loan
Maturity Dates requested by the Company, with accrued and unpaid interest
on the principal amount thereof to be due and payable on the Money Market
Loan Interest Payment Dates, if any, requested by the Company, and on such
Money Market Loan Maturity Dates, such interest to accrue at the rates per
annum (which shall be in integral multiples of 1/100%) specified in such
notice (the "Money Market Rates"). The Agent shall disregard any bid (i)
not submitted by 10:00 a.m. (Boston time) on the proposed Money Market Loan
Closing Date or (ii) not substantially in the form of Exhibit 2.2.3A, or
not complete, or containing qualifying, conditional or similar language, or
terms different from or in addition to those set forth in the pertinent
request, and any late or non-conforming bid shall be deemed not to have
been given for any purpose of this Agreement. The Agent shall promptly, and
in any event not later than 11:00 a.m. (Boston time) on the proposed Money
Market Loan Closing Date, by telephonic notice to the Company, confirmed in
writing, forward to the Company in substantially the form of Exhibit
2.2.3B, all bids submitted in compliance with this Section 2.2.3.
Notwithstanding the foregoing provisions of this Section 2.2.3, the Lender
constituting the Agent, shall submit its own bid, if any, to the Company by
telex or telecopy not later than 9:45 a.m. (Boston time) on the proposed
Money Market Loan Closing Date.
2.2.4. Acceptance of Bids by the Borrower. Not later than Noon
(Boston time) on the applicable Money Market Loan Closing Date, the Company
shall by telex or telecopy notice to the Agent in substantially the form of
Exhibit 2.2.4A, indicate its acceptance or non-acceptance of each offer
submitted pursuant to Section 2.2.3. In the case of acceptance, such notice
shall be irrevocable and shall specify the aggregate principal amount of
each offered Money Market Loan that is accepted. Such notice shall be
deemed to constitute the certification of the Company that the closing
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conditions for such Money Market Loans contained in Section 5.2 (other than
the delivery of an officer's certificate) have been satisfied. The Company
may accept each such offer in whole or in part; provided, however, that (a)
the aggregate principal amount of all Money Market Loans accepted and made
on any Money Market Loan Closing Date may not exceed the applicable amount
set forth in the applicable request, (b) the principal amount of each Money
Market Loan shall be an integral multiple of $1,000,000, and (c) acceptance
of offers for Money Market Loans with the same Money Market Loan Maturity
Date may be made only on the basis of ascending quoted Money Market Rates;
and provided, further, that if offers are made by two or more Lenders
having the same Money Market Rate for a greater aggregate principal amount
than the amount in respect of which offers at such rate are accepted, the
principal amount of such Money Market Loans in respect of which such offers
are accepted at such rate shall be allocated by the Agent among such
Lenders as nearly as possible (in integral multiples of $1,000,000) in
proportion to the aggregate principal amount of such offers. Determinations
by the Agent of the amounts of Money Market Loans pursuant to the
immediately preceding sentence shall be conclusive in the absence of
manifest error. The Agent shall, not later than 1:00 p.m. (Boston time) on
the Money Market Loan Closing Date, notify each Lender who submitted an
offer for the particular loans requested pursuant to Section 2.2.1 whether
any offer has been accepted (substantially in the form of Exhibit 2.2.4B)
or rejected (substantially in the form of Exhibit 2.2.4C) and, if accepted,
in what principal amount and maturity. In the event the Company fails to
provide such notice to the Agent by noon (Boston time) on the Money Market
Loan Closing Date, the Agent may conclusively presume that all such offers
have been rejected by the Company and, in such event, the Agent shall, not
later than 1:00 p.m. (Boston time), so notify each Lender which submitted
an offer. Each time a Money Market Loan is made, the Agent shall send a
notice to the Company and each Lender in substantially the form of Exhibit
2.2.4D specifying the principal amount and maturity date of such Money
Market Loan.
2.2.5. Funding by the Agent; Money Market Loan Account, etc. Each
Money Market Loan by any Lender will be made on the terms offered by such
Lender and accepted by the Company in accordance with this Section 2.2 at
the Boston Office on the applicable Money Market Loan Closing Date by
adding the amount thereof to the applicable Money Market Loan Accounts and
either (a) by crediting the amount thereof to the Revolving Loan Accounts
of the Company for the account of the Lenders in accordance with their
respective Percentage Interests therein or (b) if the Company shall have
specified by written notice to the Agent, by crediting the amount thereof
to the general account of the Company with the Agent at the Boston Office.
In conjunction with each closing under this Section 2.2, the Company shall
furnish to the Agent by telecopy not later than 4:00 p.m. (Boston time) on
the applicable Money Market Loan Closing Date (with a duplicate furnished
promptly by mail) a certificate dated such Money Market Loan Closing Date
in substantially the form of Exhibit 5.2.1
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and signed by the Company, together with any other documents required by Section
5.2.
(a) Money Market Loan Account. The Agent will establish on its books
separate loan accounts (the "Money Market Loan Accounts") for each Lender
extending a Money Market Loan to the Company which the Agent shall administer as
follows: (a) the Agent shall debit to the pertinent Money Market Loan Account,
and the pertinent Money Market Loan Account shall evidence, the principal amount
of all Money Market Loans from time to time made by such Lender to the Company
and (b) the Agent shall credit to the pertinent Money Market Loan Account of the
Company on whose behalf payment is made, all payments made on account of the
principal amount of Indebtedness evidenced by the pertinent Money Market Loan
Account. The Agent shall also maintain records of the Money Market Rate and
Money Market Loan Maturity Date with respect to each Money Market Loan. Upon the
request of any Lender, the Company shall issue a note in substantially the form
of Exhibit 2.2.5 (a "Money Market Note") evidencing the Indebtedness evidenced
by such Lender's Money Market Loan Account.
(b) Maturity Date; Interest; Repayment. The stated maturity date of each
Money Market Loan shall be the applicable Money Market Loan Maturity Date for
such Money Market Loan. The Company will pay interest on the principal amount of
each Money Market Loan at the applicable Money Market Rate (plus an additional
2% per annum effective on the day the Agent notifies the Company that the
interest rates hereunder are increasing as a result of the occurrence and
continuance of an Event of Default under Section 8.1.1 until the earlier of such
time as (a) such Event of Default is no longer continuing or (b) such Event of
Default is deemed pursuant to Section 8.3 no longer to exist) for such Money
Market Loan on each applicable Money Market Loan Interest Payment Date, if any,
and on the applicable Money Market Loan Maturity Date for such Money Market
Loan. Upon the maturity of any Money Market Loan, so long as either (i) no Event
of Default then exists or (ii) the Agent shall have received the consent of all
the Lenders if an Event of Default then exists, the Agent shall debit the
Revolving Loan Accounts of the Company in the principal amount of such Money
Market Loan for the account of the Lenders in accordance with their respective
Revolving Percentage Interests and shall credit the same amount to the pertinent
Money Market Loan Account.
2.2.6. Prepayments in Respect of Money Market Loans. If any Money Market
Loan is prepaid by the Company prior to the applicable Money Market Loan
Maturity Date (including as a result of acceleration), the Company will make the
payment, if any, which would be required by Section 3.2.4 with respect to such
prepayment (such payment to be calculated as if (a) such Money Market Loan
constituted a portion of the Revolving Loan subject to a LIBOR Pricing Option
and (b) the applicable Money Market Rate was the Basic LIBOR Rate). For purposes
of this
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Section 2.2.6, if any portion of a Money Market Loan which was to have been made
pursuant to this Section 2.2 is not outstanding after the close of business on
the applicable Money Market Loan Closing Date other than by reason of a Lender
failing to perform its obligations hereunder, the Company shall be deemed to
have prepaid such portion of the Money Market Loan.
2.3. Swingline Credit.
----------------
2.3.1. Swingline Loan. Subject to all the terms and conditions of this
Agreement and so long as no Default exists, from time to time on and after the
Initial Closing Date and prior to the Final Maturity Date, the Swingline Lender
will make loans to the Company in such amounts as may be requested by the
Company in accordance with Section 2.3.2. The sum of the aggregate principal
amount of loans made under this Section 2.3 at any one time outstanding plus the
Money Market Loans plus the Revolving Loan plus the Letter of Credit Exposure
shall in no event exceed the Maximum Amount of Revolving Credit. In no event
will the principal amount of loans made pursuant to this Section 2.3 at any one
time outstanding exceed $10,000,000.
2.3.2. Borrowing Requests. The Company may from time to time request a
loan under Section 2.3.1 by providing to the Swingline Lender a notice (which
may be given by a telephone call received by a Lending Officer). Such notice
must be not later than 2:00 p.m. (Boston time) on the requested Closing Date
(which must be a Banking Day) for such loan. The notice must specify the amount
of the requested loan (which shall be not less than $100,000 and an integral
multiple of $50,000). Each such loan will be made at the Boston office by
depositing the amount thereof to the general account of the Company with the
Swingline Lender. In connection with each such loan, the Company shall furnish
to the Swingline Lender a certificate in substantially the form of Exhibit
5.2.1.
2.3.3. Swingline Loan Account; Swingline Notes. The Swingline Lender will
establish on its books a loan account for the Company (the "Swingline Loan
Account") which the Swingline Lender shall administer as follows: (a) the
Swingline Lender shall add to the Swingline Loan Account, and the Swingline Loan
Account shall evidence, the principal amount of all loans from time to time made
by the Swingline Lender to the Company pursuant to Section 2.3.1 and (b) the
Swingline Lender shall reduce the Swingline Loan Account by the amount of all
payments made on account of the Indebtedness evidenced by the Swingline Loan
Account. The aggregate principal amount of the Indebtedness evidenced by the
Swingline Loan Account is referred to as the "Swingline Loan". The Company's
obligation to pay the Swingline Loan shall be evidenced by a note of the Company
in substantially the form of Exhibit 2.3.3 (the "Swingline Note"), payable to
the Swingline Lender in maximum principal amount equal to the Swingline Loan.
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2.3.4. Conversion of Swingline Loan into Revolving Loan. On any Banking
Day after the occurrence and during the continuance of an Event of Default, the
Swingline Lender may, in its sole discretion, give notice to the other Lenders
and the Company that the Swingline Loan shall be paid in full with a special
mandatory borrowing under the Revolving Loan (the "Mandatory Borrowing"). Such a
notice of a Mandatory Borrowing shall be deemed to have been automatically given
upon a Bankruptcy Default or upon the exercise of any of the remedies provided
in Section 8.2. Upon the giving of any such notice or deemed notice, a Mandatory
Borrowing under the Revolving Loan in the amount of the Swingline Loan shall be
made on the next Banking Day from all Lenders in accordance with their
respective Percentage Interests in the Revolving Loan, and the proceeds thereof
shall be applied to the Swingline Lender as a repayment of the Swingline Loan.
Each Lender irrevocably agrees to make such loan pursuant to each such Mandatory
Borrowing notice in the amount and in the matter specified above in this Section
2.3.4, notwithstanding (a) whether any conditions specified in Section 5 have
been satisfied, (b) that a Default or an Event of Default has occurred and is
continuing or (c) the date of such Mandatory Borrowing. In the event that any
Mandatory Borrowing cannot for any reason be made on the date required above
(including as a result of the commencement of a proceeding under the Bankruptcy
Code), each Lender shall promptly purchase from the Swingline Lender as of the
date the Mandatory Borrowing otherwise would have occurred such participation in
the Swingline Loan as shall be necessary to cause the Lenders to share in the
Swingline Loan ratably based upon their respective Percentage Interests in the
Revolving Loan. In the event of such participations, all interest payable on the
Swingline Loan shall be for the account of the Swingline Lender until the date
on which the participations are required to be purchased and, to the extent
attributable to the purchased participations, shall be payable to the
participants from and after such date. At the time any such purchase of
participations is actually made, the purchasing Lender shall pay the Swingline
Lender interest on the principal amount of the participation purchased at the
overnight Federal Funds Rate for each day, commencing with the date the
Mandatory Borrowing otherwise would have occurred to the date of payment for
such participation.
2.4. Letters of Credit.
-----------------
2.4.1. Issuance of Letters of Credit. Subject to all the terms and
conditions of this Agreement and so long as no Default exists, from time to time
on and after the Initial Closing Date and prior to the Final Maturity Date, the
Letter of Credit Issuer will issue for the account of the Company one or more
irrevocable documentary or standby letters of credit (the "Letters of Credit").
The sum of Letter of Credit Exposure plus the Revolving Loan plus the Money
Market Loan plus the Swingline Loan shall in no event exceed the Maximum Amount
of Revolving Credit. Letter of Credit Exposure shall in no event exceed
$45,000,000.
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2.4.2. Requests for Letters of Credit. The Company may from time to time
request a Letter of Credit to be issued by providing to the Letter of Credit
Issuer (and the Agent if the Letter of Credit Issuer is not the Agent) a notice
which is actually received not less than five Banking Days prior to the
requested Closing Date for such Letter of Credit specifying (a) the amount of
the requested Letter of Credit, (b) the beneficiary thereof, (c) the requested
Closing Date and (d) the principal terms of the text for such Letter of Credit.
Each Letter of Credit will be issued by forwarding it to the Company or to such
other Person as directed in writing by the Company. In connection with the
issuance of any Letter of Credit, the Company shall furnish to the Letter of
Credit Issuer (and the Agent if the Letter of Credit Issuer is not the Agent) a
certificate in substantially the form of Exhibit 5.2.1 and any customary
application forms required by the Letter of Credit Issuer.
2.4.3. Form and Expiration of Letters of Credit. Each Letter of Credit
issued under this Section 2.5 and each draft accepted or paid under such a
Letter of Credit shall be issued, accepted or paid, as the case may be, by the
Letter of Credit Issuer at its principal office. No Letter of Credit shall
provide for the payment of drafts drawn thereunder, and no draft shall be
payable, at a date which is later than the earlier of (a) the Final Maturity
Date or (b) (i) in the case of any standby Letter of Credit not described in
clause (ii) below, the first anniversary of the date of issuance, (ii) in the
case of any direct-pay Letter of Credit issued in connection with industrial
development bonds permitted by Sections 6.6.13 and 6.6.15, such expiration date
as may be customary in similar transactions and reasonably acceptable to the
Required Lenders (but in any event no earlier than the first anniversary of the
date of issuance) and (iii) in the case of any other Letter of Credit, the date
180 days after the date of issuance. Each Letter of Credit and each draft
accepted under a Letter of Credit shall be in such form and minimum amount, and
shall contain such terms, as the Letter of Credit Issuer and the Company may
agree upon at the time such Letter of Credit is issued, including a requirement
of not less than three Banking Days after presentation of a draft before payment
must be made thereunder.
2.4.4. Lenders' Participation in Letters of Credit. Upon the issuance
of any Letter of Credit, a participation therein, in an amount equal to each
Lender's Percentage Interest, shall automatically be deemed granted by the
Letter of Credit Issuer to each Lender on the date of such issuance and the
Lenders shall automatically be obligated, as set forth in Section 11.5, to
reimburse the Letter of Credit Issuer to the extent of their respective
Percentage Interests for all obligations incurred by the Letter of Credit Issuer
to third parties in respect of such Letter of Credit not reimbursed by the
Company. The Letter of Credit Issuer will send to each Lender (and to the Agent
if the Letter of Credit Issuer is not the Agent) a confirmation regarding the
participations in Letters of Credit outstanding during such month.
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2.4.5. Presentation. The Letter of Credit Issuer may accept or pay
any draft presented to it, regardless of when drawn and whether or not
negotiated, if such draft, the other required documents and any transmittal
advice are presented to the Letter of Credit Issuer and dated on or before
the expiration date of the Letter of Credit under which such draft is
drawn. Except insofar as instructions actually received may be given by the
Company in writing expressly to the contrary with regard to, and prior to,
the Letter of Credit Issuer's issuance of any Letter of Credit for the
account of the Company and such contrary instructions are reflected in such
Letter of Credit, the Letter of Credit Issuer may honor as complying with
the terms of the Letter of Credit and with this Agreement any drafts or
other documents otherwise in order signed or issued by an administrator,
executor, conservator, trustee in bankruptcy, debtor in possession,
assignee for benefit of creditors, liquidator, receiver or other legal
representative of the party authorized under such Letter of Credit to draw
or issue such drafts or other documents.
2.4.6. Payment of Drafts. At such time as a Letter of Credit Issuer
makes any payment on a draft presented or accepted under a Letter of
Credit, the Company will on demand pay to such Letter of Credit Issuer in
immediately available funds the amount of such payment. Unless the Company
shall otherwise pay to the Letter of Credit Issuer the amount required by
the foregoing sentence, such amount shall be considered a loan under
Section 2.1.1 and part of the Revolving Loan as if the Company had paid in
full the amount required with respect to the Letter of Credit by borrowing
such amount under Section 2.1.1.
2.4.7. Uniform Customs and Practice. The Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any subsequent revisions thereof approved by a
Congress of the International Chamber of Commerce and adhered to by the
Letter of Credit Issuer (the "Uniform Customs and Practice"), shall be
binding on the Company and the Letter of Credit Issuer except to the extent
otherwise provided herein, in any Letter of Credit or in any other Credit
Document. Anything in the Uniform Customs and Practice to the contrary
notwithstanding:
(a) Neither the Company nor any beneficiary of any Letter of Credit
shall be deemed an agent of any Letter of Credit Issuer.
(b) With respect to each Letter of Credit, neither the Letter of
Credit Issuer nor its correspondents shall be responsible for or shall have
any duty to ascertain (unless the Letter of Credit Issuer or such
correspondent is grossly negligent or willful in failing so to ascertain):
(i) the genuineness of any signature;
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(ii) the validity, form, sufficiency, accuracy, genuineness or
legal effect of any endorsements;
(iii) delay in giving, or failure to give, notice of arrival,
notice of refusal of documents or of discrepancies in respect of which
any Letter of Credit Issuer refuses the documents or any other notice,
demand or protest;
(iv) the performance by any beneficiary under any Letter of
Credit of such beneficiary's obligations to the Company;
(v) inaccuracy in any notice received by the Letter of Credit
Issuer;
(vi) the validity, form, sufficiency, accuracy, genuineness or
legal effect of any instrument, draft, certificate or other document
required by such Letter of Credit to be presented before payment of a
draft, or the office held by or the authority of any Person signing
any of the same; or
(vii) failure of any instrument to bear any reference or adequate
reference to such Letter of Credit, or failure of any Person to note
the amount of any instrument on the reverse of such Letter of Credit
or to surrender such Letter of Credit or to forward documents in the
manner required by such Letter of Credit.
(c) The occurrence of any of the events referred to in the
Uniform Customs and Practice or in the preceding clauses of this Section
2.4.7 shall not affect or prevent the vesting of any of the Letter of
Credit Issuer's rights or powers hereunder or the Company's obligation to
make reimbursement of amounts paid under any Letter of Credit or any draft
accepted thereunder, unless such occurrence results from the gross
negligence or willful misconduct of the Letter of Credit Issuer.
(d) The Company will promptly examine (i) each Letter of Credit
(and any amendments thereof) sent to it by the Letter of Credit Issuer and
(ii) all instruments and documents delivered to it from time to time by the
Letter of Credit Issuer. The Company will notify the Letter of Credit
Issuer of any claim of noncompliance by notice actually received within
three Banking Days after receipt of any of the foregoing documents, the
Company being conclusively deemed to have waived any such claim against
such Letter of Credit Issuer and its correspondents unless such notice is
given. The Letter of Credit Issuer shall have no obligation or
responsibility to send any such Letter of Credit or any such instrument or
document to the Company.
(e) In the event of any conflict between the provisions of this
Agreement and the Uniform Customs and Practice, the provisions of this
Agreement shall govern.
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2.4.8. Subrogation. Upon any payment by a Letter of Credit Issuer under
any Letter of Credit and until the reimbursement of such Letter of Credit Issuer
by the Company with respect to such payment, the Letter of Credit Issuer shall
be entitled to be subrogated to, and to acquire and retain, the rights which the
Person to whom such payment is made may have against the Company and its
Subsidiaries, all for the benefit of the Lenders. The Company and its
Subsidiaries will take such action as the Letter of Credit Issuer may reasonably
request, including requiring the beneficiary of any Letter of Credit to execute
such documents as the Letter of Credit Issuer may reasonably request, to assure
and confirm to the Letter of Credit Issuer such subrogation and such rights,
including the rights, if any, of the beneficiary to whom such payment is made in
accounts receivable, inventory and other properties and assets of any Obligor.
2.4.9. Modification, Consent, etc. If the Company requests or consents in
writing to any modification or extension of any Letter of Credit, or waives any
failure of any draft, certificate or other document to comply with the terms of
such Letter of Credit, and if the Letter of Credit Issuer consents thereto, the
Letter of Credit Issuer shall be entitled to rely on such request, consent or
waiver. This Agreement shall be binding upon the Company with respect to such
Letter of Credit as so modified or extended, and with respect to any action
taken or omitted by such Letter of Credit Issuer pursuant to any such request,
consent or waiver.
2.5. Application of Proceeds.
-----------------------
2.5.1. Revolving Loan. Subject to Section 2.5.5, the Company will apply
the proceeds of the Revolving Loan to refinance existing debt (including
subsequent repurchases of Senior Notes not tendered in the tender offer
contemplated by Section 5.1.6(g), either in the open market or through private
purchases), for working capital, for acquisitions and for other lawful corporate
purposes of the Company and its Subsidiaries; provided, however, that a portion
of the Maximum Amount of Revolving Credit equal to any then effective Permitted
Reinvestment Reserve Amount may only be borrowed to finance an Investment
permitted by Section 6.9.5.
2.5.2. Money Market Loan. Subject to Section 2.5.5, the Company will
apply the proceeds of the Money Market Loan for working capital and other lawful
purposes.
2.5.3. Swingline Loan. Subject to Section 2.5.5, the Company will apply
the proceeds of the Swingline Loan for working capital and other lawful
corporate purposes.
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2.5.4. Letters of Credit. Letters of Credit shall be issued only for such
lawful corporate purposes as the Company has requested in writing and to which
the Letter of Credit Issuer agrees.
2.5.5. Specifically Prohibited Applications. The Company will not,
directly or indirectly, apply any part of the proceeds of any extension of
credit made pursuant to the Credit Documents (a) to purchase or to carry Margin
Stock in amounts that would result in a violation of Rules G, T, U or X of the
Board of Governors of the Federal Reserve System, or (b) to any transaction
prohibited by the Foreign Trade Regulations, by other Legal Requirements
applicable to the Lenders or by the Credit Documents.
2.6. Nature of Obligations of Lenders to Make Extensions of Credit.
-------------------------------------------------------------
2.6.1. Revolving Loans. The Lenders' obligations to make Revolving Loans
under this Agreement are several and are not joint or joint and several. If on
any Closing Date any Lender shall fail to perform its obligations under this
Agreement, the Lenders that have not failed to perform their obligations to make
the extensions of credit contemplated by Section 2 may, if any such Lender so
desires, assume, in such proportions as such Lenders may agree, the obligations
of any Lender who has so failed and the Percentage Interests shall be
appropriately adjusted. The provisions of this Section 2.6 shall not affect the
rights of the Company against any Lender failing to perform its obligations
hereunder.
2.6.2. Money Market Loans. The obligation to make a Money Market Loan
shall be an obligation solely of the Lenders which offered to make such loan in
accordance with Section 2.2 and whose offers were accepted thereunder.
2.6.3. Swingline Loans. The obligation to make a Swingline Loan shall be
an obligation solely of the Swingline Lender.
2.6.4. Letters of Credit. The obligation to issue a Letter of Credit
shall be an obligation solely of the Letter of Credit Issuer.
3. Interest; LIBOR Pricing Options; Fees.
-------------------------------------
3.1. Interest on Revolving Loan. The Revolving Loan shall accrue and bear
interest at a rate per annum which shall at all times equal the Applicable Rate.
Prior to any stated or accelerated maturity of the Revolving Loan, the Company
will, on each Payment Date, pay the accrued and unpaid interest on the portion
of the Revolving Loan which was not subject to a LIBOR Pricing Option. On the
last day of each LIBOR Interest Period or on any earlier termination of any
LIBOR Pricing Option, the Company will pay the accrued and unpaid interest on
the portion of the Revolving Loan which was subject to the LIBOR Pricing
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Option which expired or terminated on such date. In the case of any LIBOR
Interest Period longer than three months, the Company will also pay the accrued
and unpaid interest on the portion of the Revolving Loan subject to the LIBOR
Pricing Option having such LIBOR Interest Period at three-month intervals, the
first such payment to be made on the last Banking Day of the three-month period
which begins on the first day of such LIBOR Interest Period. On the stated or
any accelerated maturity of the Revolving Loan, the Company will pay all accrued
and unpaid interest on the Revolving Loan, including any accrued and unpaid
interest on any portion of the Revolving Loan which is subject to a LIBOR
Pricing Option. All payments of interest on the Revolving Loan shall be made to
the Agent for the account of each Lender in accordance with such Lender's
Percentage Interest therein.
3.2. LIBOR Pricing Options.
3.2.1. Election of LIBOR Pricing Options. Subject to all of the
terms and conditions hereof and so long as no Default exists, the Company
may from time to time, by irrevocable notice to the Agent actually received
not less than three Banking Days prior to the commencement of the LIBOR
Interest Period selected in such notice, elect to have such portion of the
Revolving Loan as the Company may specify in such notice accrue and bear
interest during the LIBOR Interest Period so selected at the Applicable
Rate computed on the basis of the LIBOR Rate. No such election shall become
effective:
(a) if, prior to the commencement of any such LIBOR Interest Period,
the Agent determines that (i) the electing or granting of the LIBOR Pricing
Option in question would violate a Legal Requirement, (ii) LIBOR deposits
in an amount comparable to the principal amount of the Revolving Loan as to
which such LIBOR Pricing Option has been elected and which have a term
corresponding to the proposed LIBOR Interest Period are not readily
available in the London inter-bank market, or (iii) by reason of
circumstances affecting the London inter-bank market, adequate and
reasonable methods do not exist for ascertaining the interest rate
applicable to such deposits for the proposed LIBOR Interest Period; or
(b) if any Lender shall have advised the Agent by telephone or
otherwise at or prior to noon (Boston time) on the second Banking Day prior
to the commencement of such proposed LIBOR Interest Period (and shall have
subsequently confirmed in writing) that, after reasonable efforts to
determine the availability of such deposits, such Lender reasonably
anticipates that deposits in an amount equal to the Percentage Interest of
such Lender in the portion of the Revolving Loan as to which such LIBOR
Pricing Option has been elected and which have a term corresponding to the
LIBOR Interest Period in question will not be offered in the London inter-
bank market to such Lender at a rate of interest that does not exceed the
anticipated LIBOR Basic Rate. Any such Lender may be replaced by the
Company pursuant to Section 12.3.
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3.2.2. Notice to Lenders and Company. The Agent will promptly inform
each Lender (by telephone or otherwise) of each notice received by it from
the Company pursuant to Section 3.2.1 and of the LIBOR Interest Period
specified in such notice. Upon determination by the Agent of the LIBOR Rate
for such LIBOR Interest Period or in the event such election shall not
become effective, the Agent will promptly notify the Company and each
Lender (by telephone or otherwise) of the LIBOR Rate so determined or why
such election did not become effective, as the case may be.
3.2.3. Selection of LIBOR Interest Periods. LIBOR Interest Periods
shall be selected so that:
(a) the minimum portion of the Revolving Loan subject to any LIBOR
Pricing Option shall be $3,000,000 and an integral multiple of $500,000;
(b) no more than 10 LIBOR Pricing Options and Money Market Options
shall be outstanding at any one time; and
(c) no LIBOR Interest Period with respect to any part of the Revolving
Loan subject to a LIBOR Pricing Option shall expire later than the Final
Maturity Date.
3.2.4. Additional Interest. If any portion of the Revolving Loan
subject to a LIBOR Pricing Option is repaid, or any LIBOR Pricing Option is
terminated for any reason (including acceleration of maturity, but
excluding the failure of any Lender to perform its obligations under this
Agreement), on a date which is prior to the last Banking Day of the LIBOR
Interest Period applicable to such LIBOR Pricing Option, the Company will
pay to the Agent for the account of each Lender in accordance with such
Lender's Percentage Interest, in addition to any amounts of interest
otherwise payable hereunder, an amount equal to the present value
(calculated in accordance with this Section 3.2.4) of interest for the
unexpired portion of such LIBOR Interest Period on the portion of the
Revolving Loan so repaid, or as to which a LIBOR Pricing Option was so
terminated, at a per annum rate equal to the excess, if any, of (a) the
rate applicable to such LIBOR Pricing Option minus (b) the rate of interest
obtainable by the Agent upon the purchase of debt securities customarily
issued by the Treasury of the United States of America which have a
maturity date approximating the last Banking Day of such LIBOR Interest
Period. The present value of such additional interest shall be calculated
by discounting the amount of such interest for each day in the unexpired
portion of such LIBOR Interest Period from such day to the date of such
repayment or termination at a per annum interest rate equal to the interest
rate determined pursuant to clause (b) of the preceding sentence, and by
adding all such amounts for all such days during such period. The
determination by the Agent of such amount of interest shall, in the absence
of manifest error, be conclusive. For purposes of this Section 3.2.4, if
any portion of the Revolving Loan which was to have been subject to a LIBOR
Pricing Option is not outstanding on the first day of the LIBOR
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Interest Period applicable to such LIBOR Pricing Option other than for
reasons described in Section 3.2.1, the Company shall be deemed to have
terminated such LIBOR Pricing Option.
3.2.5. Violation of Legal Requirements. If any Legal Requirement
shall prevent any Lender from funding or maintaining through the purchase
of deposits in the London inter-bank market any portion of the Revolving
Loan subject to a LIBOR Pricing Option or otherwise from giving effect to
such Lender's obligations as contemplated by Section 3.2, (a) the Agent may
by notice to the Company terminate all of the affected LIBOR Pricing
Options to the extent not doing so would violate a Legal Requirement, (b)
the portion of the Revolving Loan subject to such terminated LIBOR Pricing
Options shall immediately bear interest thereafter at the Applicable Rate
computed on the basis of the Base Rate and (c) the Company shall make any
payment required by Section 3.2.4. Any such Lender may be replaced by the
Company pursuant to Section 12.3.
3.2.6. Funding Procedure. The Lenders may fund any portion of the
Revolving Loan subject to a LIBOR Pricing Option out of any funds available
to the Lenders. Regardless of the source of the funds actually used by any
of the Lenders to fund any portion of the Revolving Loan subject to a LIBOR
Pricing Option, however, all amounts payable hereunder, including the
interest rate applicable to any such portion of the Revolving Loan and the
amounts payable under Sections 3.2.4, 3.7, 3.8, 3.9 and 3.10, shall be
computed as if each Lender had actually funded such Lender's Percentage
Interest in such portion of the Revolving Loan through the purchase of
deposits in such amount of the type by which the LIBOR Basic Rate was
determined with a maturity the same as the applicable LIBOR Interest Period
relating thereto and through the transfer of such deposits from an office
of the Lender having the same location as the applicable LIBOR Office to
one of such Lender's offices in the United States of America.
3.3. Interest on Money Market Loans and Swingline Loan. The Company will
pay its portion of the interest on each Money Market Loan at the rate and on the
dates specified in Section 2.2.5(b). The Swingline Loan shall accrue and bear
interest at a rate per annum which shall at all times equal the Swingline Rate.
Interest on the Swingline Loan shall be calculated on a daily basis and on the
basis of a year of 360 days. Prior to any stated or accelerated maturity of the
Swingline Loan, the Swingline Borrower will on each Payment Date, beginning on
the first Payment Date after the Initial Closing Date, pay the accrued and
unpaid interest on such Indebtedness. On any stated or accelerated maturity of
the Swingline Loan all accrued and unpaid interest thereon shall be forthwith
due and payable. All payments of interest hereunder in respect of the Swingline
Loan shall be made by the Swingline Borrower to the Agent for the account of the
Swingline Lender.
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3.4. Computations of Interest and Fees. For purposes of this Agreement,
interest, commitment fees and Letter of Credit fees (and any other amount
expressed as interest or such fees) shall be computed on the basis of a 360-day
year for actual days elapsed. If any payment required by this Agreement becomes
due on any day that is not a Banking Day, such payment shall, except as
otherwise provided in the LIBOR Interest Period, be made on the next succeeding
Banking Day. If the due date for any payment of principal is extended as a
result of the immediately preceding sentence, interest shall be payable for the
time during which payment is extended at the Applicable Rate.
3.5. Commitment Fees. In consideration of the Lenders' Commitments to make
the extensions of credit provided for in Section 2.1, while such Commitments are
outstanding, the Company will pay to the Agent for the account of the Lenders in
accordance with the Lenders' respective Percentage Interests, on each Payment
Date and on the Final Maturity Date (or the date of any earlier termination of
this Agreement), commencing on the first Payment Date after the Initial Closing
Date and ending on the earlier of the Final Maturity Date or any earlier
termination of this Agreement, an amount equal to interest computed at the rate
of 0.25% per annum on the amount by which (a) the average daily Maximum Amount
of Revolving Credit during the three-month period or portion thereof ending on
such Payment Date exceeded (b) the sum of (i) the average daily Revolving Loan
during such period or portion thereof plus (ii) the average daily Letter of
Credit Exposure during such period or portion thereof; provided, however, that
the first such payment shall be for the period beginning on the Initial Closing
Date and ending on the first Payment Date after the Initial Closing Date; and
provided, further, however, that (a) at all times when the Applicable Margin is
0.750%, the commitment fee under this Section 3.5 shall be 0.250% per annum, (b)
at all times when the Applicable Margin is 0.625%, the commitment fee under this
Section 3.5 shall be 0.225% per annum and (c) at all times when the Applicable
Margin is 0.500%, the commitment fee under this Section 3.5 shall be 0.200% per
annum.
3.6. Letter of Credit Fees. The Company will pay to the Agent for the
account of each of the Lenders, in accordance with the Lenders' respective
Percentage Interests, on each Payment Date, a Letter of Credit fee equal to
interest at a per annum rate equal to the Applicable Margin, as from time to
time in effect, on the average daily Letter of Credit Exposure during the three-
month period or portion thereof ending on such Payment Date. The Company will
pay to the Letter of Credit Issuer a facing fee equal to 1/4% of each Letter of
Credit and other customary service charges and expenses for its services in
connection with the Letters of Credit at the times and in the amounts from time
to time in effect in accordance with its general rate structure, including fees
and expenses relating to issuance, amendment, negotiation, cancellation and
similar operations.
3.7. Reserve Requirements, etc. If any Legal Requirement shall, after the
Initial Closing Date, (a) impose, modify, increase or deem applicable any
insurance assessment, reserve, special deposit or similar requirement against
any Funding Liability or the Letters of Credit, (b) impose, modify, increase or
deem applicable any other requirement or condition
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with respect to any Funding Liability or the Letters of Credit, or (c) change
the basis of taxation of Funding Liabilities or payments in respect of any
Letter of Credit (other than changes in taxes imposed on or measured by the net
income of such Lender) and the effect of any of the foregoing shall be to
increase materially the cost to any Lender of issuing, making, funding or
maintaining its respective Percentage Interest in any portion of the Revolving
Loan subject to a LIBOR Pricing Option, any Money Market Loan or any Letter of
Credit, to reduce materially the amounts received or receivable by such Lender
under this Agreement or to require such Lender to make any material payment or
forego any material amounts otherwise payable to such Lender under this
Agreement, then, within 15 days after the receipt by the Company of a
certificate from such Lender setting forth why it is claiming compensation under
this Section 3.7 and computations (in reasonable detail) of the amount thereof,
the Company shall pay to the Agent for the account of such Lender such
additional amounts as are specified by such Lender in such certificate as
sufficient to compensate such Lender for such increased cost or such reduction,
together with interest at the Overdue Reimbursement Rate on such amount from the
15th day after receipt of such certificate until payment in full thereof;
provided, however, that the foregoing provisions shall not apply to any Tax or
to any reserves which are included in computing the LIBOR Reserve Rate. The
good faith determination by such Lender of the amount of such costs shall, in
the absence of manifest error, be conclusive. The Company shall be entitled to
replace any such Lender in accordance with Section 12.3.
3.8. Taxes. All payments of the Credit Obligations shall be made without
set-off or counterclaim and free and clear of any deductions, including
deductions for Taxes, unless the Company is required by law to make such
deductions. If (a) any Lender shall, after the Initial Closing Date, become
subject to any Tax with respect to any payment of the Credit Obligations or its
obligations hereunder or (b) the Company shall, after the Initial Closing Date,
become required to withhold or deduct any Tax on any payment on the Credit
Obligations, within 15 days after the receipt by the Company of a certificate
from such Lender setting forth why it is claiming compensation under this
Section 3.8 and computations (in reasonable detail) of the amount thereof, the
Company shall pay to the Agent for such Lender's account such additional amount
as is necessary to enable such Lender to receive the amount of Tax so imposed on
the Lender's obligations hereunder or the full amount of all payments which it
would have received on the Credit Obligations (including amounts required to be
paid under Sections 3.7, 3.9, 3.10 and this Section 3.8) in the absence of such
Tax, as the case may be, together with interest at the Overdue Reimbursement
Rate on such amount from the 15th day after receipt of such certificate until
payment in full thereof. Whenever Taxes must be withheld by the Company with
respect to any payments of the Credit Obligations, the Company shall promptly
furnish to the Agent for the account of the applicable Lender official receipts
(to the extent that the relevant governmental authority delivers such receipts)
evidencing payment of any such Taxes so withheld. If the Company fails to pay
any such Taxes when due or fails to remit to the Agent for the account of the
applicable Lender the required receipts evidencing payment of any such Taxes so
withheld or deducted, the Company shall indemnify the affected Lender for any
incremental Taxes and interest or
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penalties that may become payable by such Lender as a result of any such
failure. The good faith determination by such Lender of the amount of such Tax
and the basis therefor shall, in the absence of manifest error, be conclusive.
The Company shall be entitled to replace any such Lender in accordance with
Section 12.3. In the event any Lender receives a refund of any taxes for which
it has received payment from the Company under this Section 3.8, such Lender
shall promptly pay the amount of such refund to the Company, together with any
interest thereon actually earned by such Lender.
3.9. Capital Adequacy. If any Lender shall determine in good faith that
compliance by such Lender with any Legal Requirement imposed after the Initial
Closing Date regarding capital adequacy of banks or bank holding companies has
or would have the effect of reducing the rate of return on such Lender's capital
as a consequence of such Lender's commitment to make the extensions of credit
contemplated hereby, or such Lender's maintenance of the extensions of credit
contemplated hereby, to a level below that which such Lender could have achieved
but for such compliance (taking into consideration such Lender's policies with
respect to capital adequacy immediately before such compliance and assuming that
such Lender's capital was fully utilized prior to such compliance) by an amount
deemed by such Lender to be material, then, within 15 days after the receipt by
the Company of a certificate from such Lender setting forth why it is claiming
compensation under this Section 3.9 and computations (in reasonable detail) of
the amount thereof, the Company shall pay to the Agent for the account of such
Lender such additional amounts as shall be sufficient to compensate such Lender
for such reduced return, together with interest at the Overdue Reimbursement
Rate on each such amount from the 15th day after receipt of such certificate
until payment in full thereof. The good faith determination by such Lender of
the amount to be paid to it and the basis for computation thereof shall, in the
absence of manifest error, be conclusive. In determining such amount, such
Lender may use any reasonable averaging, allocation and attribution methods. The
Company shall be entitled to replace any such Lender in accordance with Section
12.3.
3.10. Regulatory Changes. If any Lender shall determine that (a) any
change in any Legal Requirement (including any new Legal Requirement) after the
date hereof shall directly or indirectly (i) reduce the amount of any sum
received or receivable by such Lender with respect to the Loan or the Letters of
Credit or the return to be earned by such Lender on the Loan or the Letters of
Credit, (ii) impose a cost on such Lender or any Affiliate of such Lender that
is attributable to the making or maintaining of, or such Lender's commitment to
make, its portion of the Loan or the Letters of Credit, or (iii) require such
Lender or any Affiliate of such Lender to make any payment on, or calculated by
reference to, the gross amount of any amount received by such Lender under any
Credit Document (other than Taxes or income taxes), and (b) such reduction,
increased cost or payment shall not be fully compensated for by an adjustment in
the Applicable Rate or the Letter of Credit fees, then, within 15 days after the
receipt by the Company of a certificate from such Lender setting forth why it is
claiming compensation under this Section 3.10 and computations (in reasonable
detail) of the amount thereof, the Company shall pay to such Lender such
additional amounts
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as such Lender determines will, together with any adjustment in the Applicable
Rate, fully compensate for such reduction, increased cost or payment, together
with interest on such amount from the 15th day after receipt of such certificate
until payment in full thereof at the Overdue Reimbursement Rate. The good faith
determination by such Lender of the amount to be paid to it and the basis for
computation thereof hereunder shall, in the absence of manifest error, be
conclusive. In determining such amount, such Lender may use any reasonable
averaging and attribution methods. The Company shall be entitled to replace any
such Lender in accordance with Section 12.3.
3.11. Mitigation. Each Lender shall take such commercially reasonable
steps as it may determine are not disadvantageous to it, including changing
lending offices to the extent feasible, in order to reduce amounts otherwise
payable by the Company to such Lender pursuant to Sections 3.2.4, 3.7, 3.8 and
3.10 or to make Eurodollar Pricing Options available under Section 3.2.1 and
3.2.5.
4. Payment.
4.1. Payment at Maturity. Except as set forth in Section 2.2.5, on each
Money Market Loan Maturity Date, the Company will pay to the Agent for credit to
the applicable Money Market Loan Account the outstanding principal amount of its
Money Market Loan maturing on such date, together with all accrued and unpaid
interest with respect thereto. On the Final Maturity Date, the Company shall pay
to the Agent for credit to the Revolving Loan Account the entire outstanding
principal amount of Indebtedness evidenced thereby, together with all accrued
and unpaid interest with respect thereto, and all other Credit Obligations owing
by it to any Lender (to the extent not already paid in accordance with the
preceding sentence). On the Final Maturity Date, the Swingline Borrower shall
pay to the Agent for credit to the Swingline Loan Account the entire outstanding
principal amount of Indebtedness evidenced thereby, together with all accrued
and unpaid interest with respect thereto. On any accelerated maturity of the
Indebtedness evidenced by any Loan Account, the Company shall pay to the Agent
for credit to the Loan Accounts the entire outstanding principal amount of
Indebtedness evidenced thereby, together with all accrued and unpaid interest
with respect thereto, and all other Credit Obligations owing by it to any
Lender.
4.2. Contingent Required Prepayments.
4.2.1. Excess Credit Exposure. If at any time the sum of the
Revolving Loan plus the Money Market Loans plus the Swingline Loan plus the
Letter of Credit Exposure exceeds the Maximum Amount of Revolving Credit,
the Company will promptly pay the amount of such excess as a prepayment of
the Swingline Loan or the Revolving Loan or the Money Market Loans, as the
case may be.
4.2.2. Net Asset Sale Proceeds. Upon receipt of Net Asset Sale
Proceeds that exceed both (a) $3,000,000 in any year and (b) $15,000,000 in
the aggregate after
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the Initial Closing Date minus all amounts allocated to clause (a) after
the Initial Closing Date, the Company shall within three Banking Days pay
the amount of such excess to the Agent as a prepayment of the Revolving
Loan; provided, however, that the Company may elect to reserve all or a
portion of such Net Asset Sale Proceeds up to $50,000,000 in the aggregate,
for Permitted Reinvestments. The amount so reserved (the "Permitted
Reinvestment Reserve Amount") must be applied to a Permitted Reinvestment
within 270 days after the transaction creating the Permitted Reinvestment
Reserve Amount. In the event the Permitted Reinvestment is not consummated
within such 270-day period (or if the Company abandons its plans for a
Permitted Reinvestment prior to the end of such period), the Company shall
within three Banking Days repay the Revolving Loan in an amount equal to
such Permitted Reinvestment Reserve Amount. Upon receipt of Net Asset Sale
Proceeds exceeding $50,000,000 after the Initial Closing Date, the Company
shall within three Banking Days pay the amount of such excess to the Agent
as a repayment of the Revolving Loan.
4.2.3. Excess Letter of Credit Exposure. If at any time Letter of
Credit Exposure exceeds $45,000,000, the Company will promptly pay the
amount of such excess to the Agent to be applied as provided in Section
4.4.
4.3. Voluntary Prepayments. In addition to the prepayments required
by Section 4.2, at any time or from time to time upon not less than one
Banking Day prior written notice to the Agent (except that no such notice
need be given in the event of an automatic payment on a Money Market Loan
Closing Date in accordance with Section 2.2.5), the Company shall have the
right to prepay, without premium or penalty of any type (except as provided
in Sections 2.2.6 or 3.2.4), all or any part of its Revolving Loan or any
Money Market Loan in such amounts as are not less than $3,000,000 and in
integral multiples of $500,000, unless such payment is equal to the entire
outstanding principal amount of the Revolving Loan or the Money Market
Loan, as the case may be. At any time or from time to time upon telephone
notice to the Swingline Lender, given not later than 3:00 p.m. (Boston
time) on any Banking Day, the Swingline Borrower shall have the right to
prepay, without premium or penalty of any type, all or any part of the
outstanding principal amount of its Swingline Loan in such amounts as are
not less than $100,000 and in integral multiples of $50,000, unless such
payment is equal to the entire outstanding principal amount of the
Swingline Loan.
4.4. Letters of Credit. If on the stated or any accelerated maturity
of the Credit Obligations the Letter of Credit Issuer or the Lenders shall
be obligated in respect of a Letter of Credit or a draft accepted under a
Letter of Credit, the Company will either:
(a) prepay such obligation by depositing with the Agent an amount of
cash, or
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(b) deliver to the Agent a standby letter of credit (designating the
Agent as beneficiary and issued by a bank and on terms reasonably
acceptable to the Agent), in each case in an amount equal to the portion of
the then Letter of Credit Exposure issued for the account of the Company.
Any such cash so deposited and the cash proceeds of any draw under any
standby letter of credit so furnished, including any interest thereon,
shall be returned by the Agent to the Company only when, and to the extent
that, the amount of such cash held by the Agent exceeds the Letter of
Credit Exposure at a time when no Default exists; provided, however, that
if an Event of Default occurs and the Credit Obligations become or are
declared immediately due and payable, the Agent may apply such cash,
including any interest thereon, to the payment of any of the Credit
Obligations.
4.5. Reborrowing; Application of Payments, etc.
4.5.1. Reborrowing. The amounts of the Revolving Loan and Swingline
Loan prepaid pursuant to Section 4.3 may be reborrowed from time to time
prior to the Final Maturity Date in accordance with Section 2.1 and 2.3,
respectively, subject to the limits set forth therein.
4.5.2. Order of Application. Unless specified by the Company to the
contrary, all prepayments shall be deemed to apply to the Revolving Loan.
Any prepayment of the Revolving Loan shall be applied first to the portion
of the Loan not then subject to LIBOR Pricing Options, then the balance of
any such prepayment shall be applied to the portion of the Revolving Loan
then subject to LIBOR Pricing Options, in the chronological order of the
respective maturities thereof, together with any payments required by
Section 3.2.4.
4.5.3. Payments for Lenders. All payments of principal on the
Revolving Loan hereunder shall be made to the Agent for the account of the
Lenders in accordance with the Lenders' respective Percentage Interests.
5. Conditions to Extending Credit.
5.1. Conditions on Initial Closing Date. The obligations of the Lenders
to make any extension of credit pursuant to Section 2 shall be subject to the
satisfaction, on or before the Initial Closing Date, of the conditions set forth
in this Section 5.1 as well as the further conditions in Section 5.2. If the
conditions set forth in this Section 5.1 are not met on or prior to the Initial
Closing Date, the Lenders shall have no obligation to make any extensions of
credit hereunder.
5.1.1. Notes. The Company shall have duly executed and delivered to
the Agent a Revolving Note for each Lender and a Swingline Note for the
Swingline Lender.
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5.1.2. Guarantors Contribution Agreement. Each of the Guarantors
shall have entered into a contribution agreement in substantially the form
of Exhibit 5.1.2 (the "Guarantors Contribution Agreement"), pursuant to
which the Guarantors shall make contributions among themselves with respect
to payments made in accordance with their respective guarantees of the
Credit Obligations, and shall have delivered it to the Agent.
5.1.3. Subsidiary Subordination Agreement. Each of the Subsidiaries
of the Company shall have entered into a Subsidiary Subordination Agreement
in substantially the form of Exhibit 5.1.3 (the "Subsidiary Subordination
Agreement") and shall have delivered it to the Agent.
5.1.4. Payment of Fees. The Company shall have paid to the Agent (a)
the fees separately agreed between the Company and the Agent and (b) the
reasonable fees and disbursements of the Agent's special counsel for which
statements have been rendered on or prior to the Initial Closing Date.
5.1.5. Legal Opinions. On the Initial Closing Date, the Lenders
shall have received from the following counsel their respective opinions
with respect to the transactions contemplated by the Credit Documents,
which opinions shall be in form and substance reasonably satisfactory to
the Required Lenders:
(a) Baker, Donelson, Bearman & Caldwell, special counsel for the
Company.
(b) Kirkland & Ellis, special counsel for the Company.
(c) Ropes & Gray, special counsel for the Agent.
The Company authorizes and directs its counsel to furnish the
foregoing opinions.
5.1.6. Concurrent Transactions. On or immediately prior to the
Initial Closing Date:
(a) Corporate Reorganization. The Company's cotton linter plant in
Memphis, Tennessee, its wood pulp plant in Foley, Florida and all related
assets shall be owned by the Company and its Wholly Owned Subsidiaries.
(b) Approved Subordinated Debt. The Company shall have issued the
Approved Subordinated Debt in an aggregate principal amount of at least
$150,000,000 (sold at 99.626% of the face amount), the Approved
Subordinated Debt shall be rated
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at least BB- by S&P and Ba3 by Moody's and the proceeds of the Approved
Subordinated Debt shall be used solely to fund the acquisition of the 50%
ownership interest of Procter & Gamble Cellulose in Buckeye Florida
Partners and the repayment of Indebtedness owing by the Company to Procter
& Gamble Cellulose and MDCP contemplated below.
(c) Initial Public Offering. MDCP will have offered and sold in a
transaction registered under the Securities Act at least 4,000,000 shares
of the Company's common stock.
(d) P&G Call Option. The Company shall have exercised its option to
acquire the 50% ownership interest of Procter & Gamble Cellulose in Buckeye
Florida Partners with the proceeds of the Approved Subordinated Debt.
(e) Repayment of P&G and MDCP Debt. The Company shall have repaid in
full all Indebtedness owing by the Company and its Subsidiaries to Procter
& Gamble Cellulose, MDCP and their respective Affiliates with the proceeds
of the Approved Subordinated Debt and cash and Cash Equivalents owned by
the Company and its Subsidiaries immediately prior to the Initial Closing
Date.
(f) Repayment of Heller Debt. The Company shall have repaid in full
all Indebtedness owing by the Company and its Subsidiaries under the Heller
Credit Agreement with the proceeds of the Loan. The Heller Credit Agreement
shall be terminated and all guarantees and collateral relating thereto
shall be released.
(g) Repurchase of Senior Notes. The Company shall have accepted for
purchase through a tender offer at least a majority in outstanding
principal amount of the Senior Notes, and the indenture for such Senior
Notes shall have been amended to permit the transactions contemplated
hereby and to make other changes reasonably satisfactory to the Required
Lenders.
(h) Satisfaction of Conditions and Consents. All of the conditions
to the obligations of the parties to the Concurrent Transactions shall have
been satisfied in all material respects. Any material consent,
authorization, order or approval of any Person required in connection with
the Concurrent Transactions shall have been obtained and shall be in full
force and effect.
(i) Officer's Certificate. Contemporaneously with the making by the
Lenders of the first extension of credit under Section 2, the Agent shall
have received a certificate of a Financial Officer to the effect that the
Concurrent Transactions have been consummated and to the effect that each
of the conditions set forth in this Section 5.1.6 has been satisfied.
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5.1.7. Solvency; Minimum Net Worth. The Company shall have furnished
to the Lenders a certificate satisfactory to the Lenders as to (a) the
solvency of the Company and its Subsidiaries on a Consolidated basis and
(b) Consolidated Net Worth exceeding $80,000,000, in each case immediately
after giving effect to the Concurrent Transactions and the transactions
contemplated thereby and hereby.
5.1.8. Environmental Review. The Lenders shall have completed their
due diligence review of the environmental matters of the Company and its
Subsidiaries and shall have received a report of Environmental Engineering
& Remediation, Inc. as to the Environmental Capital Expenditures and other
environmental matters in form and substance reasonably satisfactory to the
Lenders.
5.1.9. Proper Proceedings. This Agreement, each other Credit
Document and the transactions contemplated hereby and thereby shall have
been authorized by all necessary corporate, partnership or other
proceedings on the part of the Company and the Guarantors. All necessary
consents, approvals and authorizations of any governmental or
administrative agency or any other Person of any of the transactions
contemplated hereby or by any other Credit Document shall have been
obtained and shall be in full force and effect.
5.1.10. General. All legal and corporate proceedings in connection
with the transactions contemplated by this Agreement shall be satisfactory
in form and substance to the Agent and the Agent shall have received copies
of all documents, including certified copies of the Charter and By-Laws of
the Company and the other Obligors, records of corporate and partnership
proceedings, certificates as to signatures and incumbency of officers and
opinions of counsel, which the Agent may have reasonably requested in
connection therewith, such documents where appropriate to be certified by
proper corporate or governmental authorities.
5.2. Conditions to Each Extension of Credit. The obligations of the
Lenders to make any extension of credit pursuant to Section 2 shall be subject
to the satisfaction, on or before the Closing Date for such extension of credit,
of the following conditions:
5.2.1. Officer's Certificate. The representations and warranties
contained in Section 7 shall be true and correct on and as of such Closing
Date with the same force and effect as though made on and as of such date
(except as to any representation or warranty which refers to a specific
earlier date); no Default shall exist on such Closing Date prior to or
immediately after giving effect to the requested extension of credit; no
Material Adverse Change shall have occurred since June 30, 1995; and the
Company shall have furnished to the Agent in connection with the requested
extension of credit a certificate to these effects, in substantially the
form of Exhibit 5.2.1, signed by a Financial Officer.
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5.2.2. Legality, etc. The making of the requested extension of
credit shall not (a) subject any Lender to any penalty or Tax (other than a
Tax for which the Company is required to reimburse the Lenders under
Section 3.8) or (b) be prohibited by any Legal Requirement. If any Lender
is unable to perform its obligations hereunder due to a lending restriction
under clauses (a) or (b), the Company shall be entitled to replace such
Lender pursuant to Section 12.3.
6. General Covenants. Each of the Company and the Guarantors covenants
that, until all of the Credit Obligations shall have been paid in full and until
the Lenders' commitments to extend credit under this Agreement and any other
Credit Document shall have been irrevocably terminated, the Company and its
Subsidiaries will comply with the following provisions:
6.1. Taxes and Other Charges; Accounts Payable.
6.1.1. Taxes and Other Charges. Each of the Company and its
Subsidiaries shall duly pay and discharge, or cause to be paid and
discharged, before the same becomes in arrears, all material taxes,
assessments and other governmental charges imposed upon such Person and its
properties, sales or activities, or upon the income or profits therefrom,
as well as all material claims for labor, materials or supplies which if
unpaid might by law become a Lien upon any of its property; provided,
however, that any such tax, assessment, charge or claim need not be paid if
the validity or amount thereof shall at the time be contested in good faith
by appropriate proceedings and if such Person shall, in accordance with
GAAP, have set aside on its books adequate reserves with respect thereto;
and provided, further, that each of the Company and its Subsidiaries shall
pay or bond, or cause to be paid or bonded, all such taxes, assessments,
charges or other governmental claims immediately upon the commencement of
proceedings to foreclose any Lien which may have attached as security
therefor (except to the extent such proceedings have been dismissed or
stayed).
6.1.2. Accounts Payable. Each of the Company and its Subsidiaries
shall promptly pay when due (taking into account any applicable grace
periods), or in conformity with customary trade terms and historical
practices, all other Indebtedness incident to the operations of such Person
not referred to in Section 6.1.1; provided, however, that any such
Indebtedness need not be paid if the validity or amount thereof shall at
the time be contested in good faith and if such Person shall, in accordance
with GAAP, have set aside on its books adequate reserves with respect
thereto.
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6.2. Conduct of Business, etc.
6.2.1. Types of Business. The Company and its Subsidiaries shall
engage principally in the business of (a) specialty cellulose pulps and (b)
other activities substantially related thereto.
6.2.2. Maintenance of Properties. Each of the Company and its
Subsidiaries:
(a) shall keep its properties in such repair, working order and
condition, and shall from time to time make such repairs, replacements,
additions and improvements thereto as are necessary for the efficient
operation of its businesses (in its reasonable judgment) and shall comply
at all times in all material respects with all material franchises,
licenses and leases to which it is party so as to prevent any loss or
forfeiture thereof or thereunder, except where (i) compliance is at the
time being contested in good faith by appropriate proceedings or (ii)
failure to comply with the provisions being contested have not resulted, or
do not create a material risk of resulting, in the aggregate in any
Material Adverse Change; and
(b) shall do all things necessary to preserve, renew and keep in full
force and effect and in good standing its legal existence and authority
necessary to continue its business; provided, however, that this Section
6.2.2 (b) shall not prevent the merger, consolidation or liquidation of
Subsidiaries permitted by Section 6.11.
6.2.3. Statutory Compliance. Each of the Company and its
Subsidiaries shall comply in all material respects with all valid and
applicable statutes, laws, ordinances, zoning and building codes and other
rules and regulations of the United States of America, of the states and
territories thereof and their counties, municipalities and other
subdivisions and of any foreign country or other jurisdictions applicable
to such Person, except where failure so to comply would not reasonably be
expected to result in the aggregate in any Material Adverse Change;
provided, however, that compliance with Environmental Laws shall be
governed solely by Section 6.19.
6.2.4. Compliance with Material Agreements. Each of the Company and
its Subsidiaries shall comply in all material respects with the Material
Agreements (to the extent not in violation of the other provisions of this
Agreement or any other Credit Document). Without the prior written consent
of the Required Lenders, no Material Agreement so designated in Exhibit
7.2.2 shall be amended, modified, waived or terminated in any manner that
would have in any material respect an adverse effect on the interests of
the Lenders.
6.3. Insurance.
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6.3.1. Business Interruption Insurance. Each of the Company and its
Subsidiaries shall maintain with financially sound and reputable insurers
insurance related to interruption of business, either for loss of revenues
or for extra expense as it relates to the loss of revenues, in an amount of
at least $1,000,000,000 and otherwise in the manner customary for
businesses of similar size engaged in similar activities at similar
locations.
6.3.2. Property Insurance. Each of the Company and its Subsidiaries
shall keep its assets which are of an insurable character insured by
financially sound and reputable insurers against theft and fraud and
against loss or damage by fire, explosion and hazards insured against by
extended coverage to the extent, in amounts and with deductibles at least
as favorable as those generally maintained by businesses of similar size
engaged in similar activities.
6.3.3. Liability Insurance. Each of the Company and its Subsidiaries
shall maintain with financially sound and reputable insurers insurance
against liability for hazards, risks and liability to persons and property,
including product liability insurance, to the extent, in amounts and with
deductibles at least as favorable as those generally maintained by
businesses of similar size engaged in similar activities at similar
locations; provided, however, that it may effect workers' compensation
insurance or similar coverage with respect to operations in any particular
state or other jurisdiction through an insurance fund operated by such
state or jurisdiction or by meeting the self-insurance requirements of such
state or jurisdiction.
6.4. Financial Statements and Reports. Each of the Company and its
Subsidiaries shall maintain a system of accounting in which correct entries
shall be made of all transactions in relation to their business and affairs in
accordance with generally accepted accounting practice. The fiscal year of the
Company and its Subsidiaries shall end on June 30 in each year and the fiscal
quarters of the Company and its Subsidiaries shall end on September 30, December
31, March 31 and June 30 in each year.
6.4.1. Annual Reports. The Company shall furnish to the Lenders as
soon as available, and in any event within 95 days after the end of each
fiscal year, the Consolidated and Consolidating balance sheets of the
Company and its Subsidiaries as at the end of such fiscal year, the
Consolidated and Consolidating statements of income and Consolidated
statements of changes in shareholders' equity and of cash flows of the
Company and its Subsidiaries for such fiscal year (all in reasonable
detail) and together, in the case of Consolidated financial statements,
with comparative figures for the immediately preceding fiscal year, all
accompanied by:
(a) Unqualified reports of Ernst & Young LLP (or, if they cease to be
auditors of the Company and its Subsidiaries, other independent certified
public accountants of recognized national standing reasonably satisfactory
to the Required
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Lenders), containing no material uncertainty, to the effect that they have
audited the foregoing Consolidated financial statements in accordance with
generally accepted auditing standards and that such Consolidated financial
statements present fairly, in all material respects, the financial position
of the Company and its Subsidiaries covered thereby at the dates thereof
and the results of their operations for the periods covered thereby in
conformity with GAAP.
(b) The statement of such accountants that they have caused this
Agreement to be reviewed and that in the course of their audit of the
Company and its Subsidiaries no facts have come to their attention that
cause them to believe that any Default exists and in particular that they
have no knowledge of any Default under Sections 6.5 through 6.18 or, if
such is not the case, specifying such Default and the nature thereof. This
statement is furnished by such accountants with the understanding that the
examination of such accountants cannot be relied upon to give such
accountants knowledge of any such Default except as it relates to
accounting or auditing matters within the scope of their audit.
(c) A certificate of the Company signed by a Financial Officer to the
effect that such officer has caused this Agreement to be reviewed and has
no knowledge of any Default, or if such officer has such knowledge,
specifying such Default and the nature thereof, and what action the Company
has taken, is taking or proposes to take with respect thereto.
(d) Computations by the Company, substantially in the form
historically prepared by the Company, comparing the financial statements
referred to above with the most recent budget for such fiscal year
furnished to the Lenders in accordance with Section 6.4.4.
(e) Computations by the Company demonstrating, as of the end of such
fiscal year, compliance with the Computation Covenants, certified by a
Financial Officer.
(f) Calculations, as at the end of such fiscal year, of (i) the
Accumulated Benefit Obligations for each Plan covered by Title IV of ERISA
(other than Multiemployer Plans) and (ii) the fair market value of the
assets of such Plan allocable to such benefits.
(g) Supplements to Exhibits 7.1 and 7.3 showing any changes in the
information set forth in such Exhibits not previously furnished to the
Lenders in writing, as well as any changes in the Charter, Bylaws or
incumbency of officers of the Company or its Subsidiaries from those
previously certified to the Agent.
(h) In the event of a change in GAAP after June 30, 1995, computations
by the Company, certified by a Financial Officer, reconciling the financial
statements
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referred to above with financial statements prepared in accordance with
GAAP as applied to the other covenants in Section 6 and related
definitions.
6.4.2. Quarterly Reports. The Company shall furnish to the Lenders
as soon as available and, in any event, within 45 days after the end of
each of the first three fiscal quarters of the Company, the internally
prepared Consolidated balance sheets of the Company and its Subsidiaries as
of the end of such fiscal quarter, the Consolidated statements of income,
of changes in shareholders' equity and of cash flows of the Company and its
Subsidiaries for such fiscal quarter and for the portion of the fiscal year
then ended (all in reasonable detail) and together, with comparative
figures for the same period in the preceding fiscal year, all accompanied
by:
(a) A certificate of the Company signed by a Financial Officer to the
effect that such financial statements have been prepared in accordance with
GAAP and present fairly, in all material respects, the financial position
of the Company and its Subsidiaries covered thereby at the dates thereof
and the results of their operations for the periods covered thereby,
subject only to normal year-end audit adjustments and the addition of
footnotes.
(b) A certificate of the Company signed by a Financial Officer to the
effect that such officer has caused this Agreement to be reviewed and has
no knowledge of any Default, or if such officer has such knowledge,
specifying such Default and the nature thereof and what action the Company
has taken, is taking or proposes to take with respect thereto.
(c) Computations by the Company, substantially in the form
historically prepared by the Company comparing the financial statements
referred to above with the most recent budget for the period covered
thereby furnished to the Lenders in accordance with Section 6.4.4.
(d) Computations by the Company demonstrating, as of the end of such
quarter, compliance with the Computation Covenants, certified by a
Financial Officer.
(e) Supplements to Exhibits 7.1 and 7.3 showing any changes in the
information set forth in such Exhibits not previously furnished to the
Lenders in writing, as well as any changes in the Charter, Bylaws or
incumbency of officers of the Company and its Subsidiaries from those
previously certified to the Agent.
(f) In the event of a change in GAAP after June 30, 1995,
computations by the Company, certified by a Financial Officer, reconciling
the financial statements referred to above with financial statements
prepared in accordance with GAAP as applied to the other covenants in
Section 6 and related definitions.
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6.4.3. Monthly Reports. The Company shall furnish to the Lenders as
soon as available and, in any event, within 30 days after the end of each
month, the internally prepared Consolidated balance sheet of the Company
and its Subsidiaries as at the end of such month and the Consolidated
statement of income of the Company and its Subsidiaries for such month (all
in reasonable detail), all accompanied by a certificate of the Company
signed by a Financial Officer to the effect that such computations were
prepared in accordance with GAAP and present fairly, in all material
respects, the financial position of the Persons covered thereby at the
dates thereof and the results of their operations for the periods covered
thereby, subject only to normal year-end audit adjustments and the addition
of footnotes.
6.4.4. Other Reports. The Company shall promptly furnish to the
Lenders:
(a) As soon as prepared and in any event before the beginning of
each fiscal year, an annual plan for each fiscal quarter in such fiscal
year of the Company and its Subsidiaries, prepared in a manner
substantially consistent with the Company's historical practices and with
the manner in which the financial projections described in Section 7.2.1
were prepared.
(b) On at least a quarterly basis, any material updates of such
budget and projections formally prepared by the Company.
(c) Any management letters furnished to the Company or any of its
Subsidiaries by the Company's auditors.
(d) All budgets, projections, statements of operations and other
reports furnished generally to the shareholders of the Company.
(e) Such registration statements, proxy statements and reports,
including Forms S-1, S-2, S-3, S-4, 10-K, 10-Q and 8-K, as may be filed by
the Company or any of its Subsidiaries with the Securities and Exchange
Commission.
(f) Any 90-day letter or 30-day letter from the federal Internal
Revenue Service (or the equivalent notice received from state or other
taxing authorities) asserting tax deficiencies against the Company or any
of its Subsidiaries.
(g) Progress reports as required under the Fenholloway River
Agreement (whether on a quarterly basis or otherwise).
6.4.5. Notice of Litigation; Notice of Defaults. Except with
respect to matters arising under Environmental Laws for which notices as
required by Section 6.19, the Company shall promptly furnish to the Lenders
notice of any litigation or any administrative or arbitration proceeding
(a) which would reasonably be expected to
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create a material risk of resulting, after giving effect to any applicable
insurance, in the payment by the Company and its Subsidiaries of more than
$3,000,000 or (b) which results, or would reasonably be expected to create
a material risk of resulting, in a Material Adverse Change. Promptly upon
acquiring knowledge thereof, the Company shall notify the Lenders of the
existence of any Default, specifying the nature thereof and what action the
Company or any Subsidiary has taken, is taking or proposes to take with
respect thereto.
6.4.6. ERISA Reports. The Company shall furnish to the Lenders as
soon as reasonably available the following items with respect to any Plan:
(a) any request for a waiver of the funding standards or an extension
of the amortization period,
(b) any reportable event (as defined in section 4043 of ERISA),
unless the notice requirement with respect thereto has been waived by
regulation,
(c) any notice received by any ERISA Group Person that the PBGC has
instituted or intends to institute proceedings to terminate any Plan, or
that any Multiemployer Plan is insolvent or in reorganization,
(d) notice of the possibility of the termination of any Plan by its
administrator pursuant to section 4041 of ERISA, and
(e) notice of the intention of any ERISA Group Person to withdraw, in
whole or in part, from any Multiemployer Plan.
6.4.7. Other Information. From time to time at reasonable intervals
upon request of any authorized officer of any Lender, the Company shall
furnish to the Lenders such other information, substantially consistent in
form and substance to information historically prepared by the Company,
regarding the business, assets, financial condition or income of the
Company and its Subsidiaries as such officer may reasonably request,
including copies of all tax returns and material licenses, agreements,
leases and instruments to which any of the Company or its Subsidiaries is
party. The Lenders' authorized officers and representatives shall have the
right during normal business hours upon reasonable notice and at reasonable
intervals to examine the books and records of the Company and its
Subsidiaries, to make copies and notes therefrom for the purpose of
ascertaining compliance with or obtaining enforcement of this Agreement or
any other Credit Document.
6.5. Certain Financial Tests.
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6.5.1. Consolidated Net Worth. Consolidated Net Worth shall not at
any time be less than $80,000,000; provided, however, that on December 31,
1995 and on the last day of each fiscal quarter of the Company thereafter,
the then effective dollar amount in this Section 6.5.1 shall be increased
by 50% of Consolidated net income (if positive) of the Company and its
Subsidiaries determined in accordance with GAAP for the quarter then ended.
6.5.2. Consolidated Total Net Debt to Consolidated EBITDA.
Consolidated Total Net Debt shall not on any date exceed 300% of
Consolidated EBITDA for the most recently completed period of four
consecutive fiscal quarters for which financial reports have been furnished
to the Lenders in accordance with Section 6.4.1 or 6.4.2.
6.5.3. Consolidated EBITDA to Consolidated Interest Expense. For
each period of four consecutive fiscal quarters of the Company,
Consolidated EBITDA shall equal or exceed 325% of Consolidated Interest
Expense for such period (or, prior to December 31, 1996, for the annualized
period commencing with the first fiscal quarter beginning after the Initial
Closing Date).
6.5.4. Environmental Capital Expenditures. The aggregate amount of
Environmental Capital Expenditures shall not exceed the aggregate amount
set forth in Exhibit 1.
6.5.5. Business Capital Expenditures. For each period of four
consecutive fiscal quarters of the Company, the excess of (a) Consolidated
EBITDA minus (b) Business Capital Expenditures shall equal or exceed 200%
of Consolidated Interest Expense.
6.6. Indebtedness. Neither the Company nor any of its Subsidiaries shall
create, incur, assume or otherwise become or remain liable with respect to any
Indebtedness except the following:
6.6.1. Indebtedness in respect of the Credit Obligations.
6.6.2. Guarantees permitted by Section 6.7.
6.6.3. Current liabilities, other than Financing Debt, incurred in
the ordinary course of business (including (a) accrued salaries, vacation
and benefits, accounts payable for services, inventory and equipment and
other trade accounts payable and (b) such current liabilities incurred in
the ordinary course of business by Persons acquired by the Company and its
Subsidiaries in accordance with Section 6.9).
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6.6.4. To the extent that payment thereof shall not at the time be
required by Section 6.1, Indebtedness in respect of taxes, assessments,
governmental charges and claims for labor, materials and supplies.
6.6.5. Indebtedness secured by Liens of carriers, warehouses,
mechanics and landlords permitted by Sections 6.8.4 and 6.8.5.
6.6.6. Indebtedness in respect of judgments or awards (a) which have
been in force for less than the applicable appeal period or (b) in respect
of which the Company or any Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and, in the case of each of
clauses (a) and (b), the Company or such Subsidiary shall have taken
appropriate reserves therefor in accordance with GAAP and execution of such
judgment or award shall not be levied.
6.6.7. To the extent permitted by Section 6.8.8, Indebtedness in
respect of Capitalized Lease Obligations or secured by purchase money
security interests; provided, however, that the aggregate principal amount
of all Indebtedness permitted by this Section 6.6.7 at any one time
outstanding shall not exceed $10,000,000.
6.6.8. Indebtedness in respect of deferred taxes arising in the
ordinary course of business.
6.6.9. Indebtedness in respect of inter-company loans and advances
among the Company and its Subsidiaries which are not prohibited by Section
6.9.
6.6.10. Indebtedness of the Company in respect of the Approved
Subordinated Debt and the Senior Notes.
6.6.11. Unfunded pension liabilities and obligations with respect to
Plans so long as the Company is in compliance with Section 6.17.
6.6.12. Indebtedness outstanding on the date hereof and described in
Exhibit 7.3 and all renewals and extensions thereof not in excess of the
amount thereof outstanding immediately prior to such renewal or extension;
provided, however, that (i) all such Indebtedness so indicated on Exhibit
7.3 shall be paid in full on the Initial Closing Date and (ii) all such
other Indebtedness shall be paid in accordance with the terms thereof as in
effect on the date hereof.
6.6.13. Indebtedness of the Company not in excess of $35,000,000 in
respect of an industrial development bond for environmental equipment at
its Foley, Florida plant.
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6.6.14. Indebtedness (other than Financing Debt) in addition to the
Indebtedness permitted by the other provisions of this Section 6.6;
provided, however, that the aggregate amount of all such Indebtedness at
any one time outstanding shall not exceed $10,000,000.
6.6.15. Financing Debt and unfunded pension liabilities of
Subsidiaries acquired in accordance with Section 6.9.5 or otherwise assumed
by the Company and its Subsidiaries in acquisitions permitted by Section
6.9.5 in an aggregate amount not exceeding $10,000,000 for all such
acquisitions after the Initial Closing Date.
6.6.16. Indebtedness of Foreign Subsidiaries in respect of credit
facilities to finance working capital, in an amount not to exceed
$15,000,000 in the equivalent amount of United States Funds in the
aggregate at any one time outstanding.
6.6.17. Indebtedness in respect of foreign currency hedging
agreements entered into in the ordinary course of business.
6.7. Guarantees; Letters of Credit. Neither the Company nor any of its
Subsidiaries shall become or remain liable with respect to any Guarantee,
including reimbursement obligations under letters of credit or other financial
guarantees by third parties, except the following:
6.7.1. Letters of Credit and Guarantees of the Credit Obligations.
6.7.2. Guarantees by the Company of Indebtedness incurred by its
Subsidiaries and permitted by Section 6.6.
6.7.3. Guarantees by the Company of loans by third parties to its
employees to purchase capital stock of the Company in an amount not to
exceed $4,000,000 in the aggregate at any one time outstanding.
6.8. Liens. Neither the Company nor any of its Subsidiaries shall create,
incur or enter into, or suffer to be created or incurred or to exist, any Lien,
except the following:
6.8.1. Liens to secure taxes, assessments and other governmental
charges, to the extent that payment thereof shall not at the time be
required by Section 6.1.
6.8.2. Deposits or pledges made (a) in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age pensions
or other social security, (b) in connection with casualty insurance
maintained in accordance with Section 6.3, (c) to secure the performance of
bids, tenders, contracts (other than contracts relating to Financing Debt),
utilities or leases, (d) to secure statutory obligations or surety or
appeal bonds, (e) to secure indemnity, performance or
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other similar bonds in the ordinary course of business or (f) in connection
with contested amounts to the extent that payment thereof shall not at that
time be required by Section 6.1.
6.8.3. Liens in respect of judgments or awards, to the extent that
such judgments or awards are permitted by Section 6.6.6.
6.8.4. Liens of carriers, warehouses, mechanics, suppliers and
similar Liens, in each case (a) in existence less than 90 days from the
later of (i) the date of creation thereof or (ii) the date payment of
Indebtedness secured thereby is due, or (b) being contested in good faith
by the Company or any Subsidiary in appropriate proceedings (so long as the
Company or such Subsidiary shall, in accordance with GAAP, have set aside
on its books adequate reserves with respect thereto).
6.8.5. Encumbrances in the nature of (a) zoning restrictions, (b)
easements, (c) restrictions of record on the use of real property, (d)
landlords' and lessors' Liens on rented premises and (e) restrictions on
transfers or assignment of leases, licenses and other contracts, which in
each case do not materially detract from the value of the encumbered
property or impair the use thereof in the business of the Company or any
Subsidiary.
6.8.6. Restrictions under federal and state securities laws and
shareholder agreements on the transfer of securities.
6.8.7. Restrictions under Foreign Trade Regulations on the transfer
or licensing of certain assets of the Company and its Subsidiaries.
6.8.8. Liens constituting (a) purchase money security interests
(including mortgages, conditional sales, Capitalized Leases and any other
title retention or deferred purchase devices) in real property, interests
in leases or tangible personal property (other than inventory) existing or
created on the date on which such property is acquired or within 90 days
thereafter, and (b) the renewal, extension or refunding of any security
interest referred to in the foregoing clause (a) in an amount not to exceed
the amount thereof remaining unpaid immediately prior to such renewal,
extension or refunding; provided, however, that (i) each such security
interest shall attach solely to the particular item of property so
acquired, and the principal amount of Indebtedness (including Indebtedness
in respect of Capitalized Lease Obligations) secured thereby shall not
exceed the cost (including all such Indebtedness secured thereby, whether
or not assumed) of such item of property; and (ii) the aggregate principal
amount of all Indebtedness secured by Liens permitted by this Section 6.8.8
shall not exceed the amount permitted by Section 6.6.7.
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6.8.9. Liens securing industrial development bonds permitted by
Section 6.6.13 or 6.6.15 on the assets being acquired, constructed or
improved with the proceeds of such bonds.
6.8.10. Liens securing the Credit Obligations.
6.8.11. Rights of set-off held by any banks.
6.8.12. Liens on foreign assets owned by Foreign Subsidiaries to
secure Indebtedness of Foreign Subsidiaries in respect of credit facilities
permitted by Section 6.6.16.
6.8.13. Pledge of certificates of deposit of the Company
constituting Guarantees permitted by Section 6.7.3.
6.8.14. Liens existing on the Initial Closing Date as described on
Exhibit 6.8.14.
6.9. Investments and Acquisitions. Neither the Company nor any of its
Subsidiaries shall have outstanding, acquire, commit itself to acquire or hold
any Investment (including any Investment consisting of the acquisition of any
business) except for the following:
6.9.1. Investments of the Company and its Subsidiaries in Wholly
Owned Subsidiaries (a) which are domestic Subsidiaries as of the date of
this Agreement or (b) which become domestic Wholly Owned Subsidiaries after
the Initial Closing Date and become Guarantors to the extent required by
Section 9.9; provided, however, that no such Investment shall involve the
transfer by the Company of any substantial assets (other than cash).
6.9.2. Intercompany loans and advances from any Subsidiary to the
Company or any Guarantor that are subordinated to the Credit Obligations in
accordance with the Subsidiary Subordination Agreement.
6.9.3. Investments in Cash Equivalents.
6.9.4. Guarantees permitted by Section 6.7.
6.9.5. So long as immediately before and after giving effect thereto
no Default exists, and so long as the Company is the surviving entity, the
Company may acquire another entity in the same line of business as the
Company as described in Section 6.2.1 for a purchase price not exceeding
$50,000,000; provided, however, that (a) the acquisition must be approved
by the target entity's board of directors, (b) the
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Company must be in compliance with the Computation Covenants immediately
after giving effect to such acquisition, (c) the acquired entity must not
have any environmental liabilities which, after giving effect to such
acquisition, would reasonably be expected to result in a Material Adverse
Change, (d) the cumulative purchase prices of acquisitions permitted under
this Section 6.9.5 shall not exceed $75,000,000 in the aggregate during the
period from the Initial Closing Date through the Final Maturity Date,
except with the consent of the Required Lenders and (e) any Subsidiary
acquired under this Section 6.9.5 shall guarantee the Credit Obligations,
or a pledge of such Subsidiary's stock shall be furnished to the Agent
under a Pledge Agreement in substantially the form of Exhibit 9.9 (each a
"Pledge Agreement"), in either case as contemplated by Section 9.9.
6.9.6. Investments in Unrestricted Affiliates engaged in businesses
contemplated by Section 6.2.1 in an aggregate outstanding amount not to
exceed, at the time any such Investment is made, (a) $25,000,000 at all
times when Consolidated Total Net Debt exceeds 150% of Consolidated EBITDA
for the most recent period of four consecutive fiscal quarters for which
financial reports have been (or are required to have been) furnished to the
Lenders in accordance with Sections 6.4.1 or 6.4.2 and (b) $45,000,000 at
all other times.
6.9.7. Loans or advances to employees of the Company in an amount
not to exceed (a) $1,000,000 in the aggregate outstanding at any time for
the purchase of capital stock of the Company and (b) $2,000,000 in the
aggregate outstanding at any time for all other purposes.
6.9.8. The acquisition by the Company's German Subsidiary for a
purchase price not in excess of U.S. $35,000,000, subject to customary
closing and post-closing adjustments, as applicable, of substantially all
of the assets of Peter Temming AG that are used in connection with such
company's cotton linter pulp facility located in Gluckstadt, Germany.
6.9.9. So long as immediately before and after giving effect
thereto no Default exists, Investments of the Company and its Subsidiaries
in foreign Wholly Owned Subsidiaries; provided, however, that (a) such
Investments shall not involve the transfer of substantial assets (other
than cash) from the Company and its domestic Subsidiaries to its Foreign
Subsidiaries and (b) cash Investments of the Company and its domestic
Subsidiaries in its Foreign Subsidiaries made pursuant to this Section
shall not exceed the sum of (i) $25,000,000 at any one time outstanding
plus (ii) the amount of Capital Expenditures permitted by Sections 6.5.4
and 6.5.5 incurred by such Foreign Subsidiaries.
6.10. Distributions. Neither the Company nor any of its Subsidiaries
shall make any Distribution except for the following:
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6.10.1. Subsidiaries of the Company may make Distributions to the
Company or any Wholly Owned Subsidiary of the Company.
6.10.2. So long as immediately before and after giving effect
thereto no Default exists, the Company may make Distributions in an amount
which shall not exceed (a) in any fiscal year 25% of Consolidated Net
Income (if positive) for the fiscal year then most recently ended plus (b)
$10,000,000 in the aggregate after the Initial Closing Date, which amount
in this clause (b) may be applied only to pay dividends to stockholders
after the amount in clause (a) for the year of payment has already been
applied in its entirety to pay stock dividends.
6.10.3. The Company may pay interest and principal of the Approved
Subordinated Debt in accordance with the subordination provisions thereof.
6.10.4. The Company may consummate the Concurrent Transactions on
the Initial Closing Date.
6.10.5. So long as immediately before and after giving effect
thereto no Default exists, the Company may repay intercompany Indebtedness
owing to its Subsidiaries.
6.11. Asset Dispositions and Mergers. Neither the Company nor any of its
Subsidiaries shall merge or enter into a consolidation or sell, lease, sell and
lease back, sublease or otherwise dispose of any of its assets, except the
following:
6.11.1. The Company and any of its Subsidiaries may sell or
otherwise dispose of (a) inventory in the ordinary course of business, (b)
tangible assets to be replaced in the ordinary course of business within 12
months by other tangible assets of equal or greater value and (c) tangible
assets that are no longer used or useful in the business of the Company or
such Subsidiary; provided, however, that the fair market value of all items
so sold or disposed of pursuant to this clause (c) plus all items sold or
disposed of pursuant to Section 6.11.4 shall not exceed $3,000,000 in any
fiscal year.
6.11.2. Any Subsidiary of the Company may merge or be liquidated
into the Company or any Wholly Owned Subsidiary of the Company so long as
after giving effect to any such merger to which the Company or a Guarantor
is a party the Company or (if the Company is not party thereto) a Guarantor
shall be the surviving or resulting Person.
6.11.3. So long as immediately before and after giving effect
thereto no Default exists, the Company may, in addition to transactions
permitted under 6.11.1,
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sell or otherwise dispose of assets for fair value; provided, however, that
the Company shall make any prepayments of the Loan required by Section
4.2.2.
6.11.4. So long as immediately before and after giving effect
thereto no Default exists, the Company may sell or otherwise dispose of
assets for fair market value so long as the fair market value of all items
so sold or disposed of pursuant to this Section 6.11.4 plus all items sold
or disposed of pursuant to Section 6.11.1(c) shall not exceed $3,000,000 in
any fiscal year.
6.11.5. Mergers constituting Investments permitted by Section
6.9.5.
6.12. Lease Obligations. Neither the Company nor any of its Subsidiaries
shall be or become obligated as lessee under any lease except:
6.12.1. Capitalized Leases permitted by Sections 6.6.7, 6.8.8 and
6.8.9.
6.12.2. Leases other than Capitalized Leases; provided, however,
that the aggregate fixed rental obligations for any year (excluding
payments required to be made by the lessee in respect of taxes, insurance
and operating expenses whether or not denominated as rent) shall not exceed
$10,000,000.
6.13. Issuance of Stock by Subsidiaries; Subsidiary Distributions.
------------------------------------------------------------
6.13.1. Issuance of Stock by Subsidiaries. No Wholly Owned
Subsidiary shall issue or sell any shares of its capital stock or other
evidence of beneficial ownership (except for directors' qualifying shares
and, in the case of Foreign Subsidiaries, shares required to be held by
foreign nationals) to any Person other than the Company or any Wholly Owned
Subsidiary of the Company.
6.13.2. No Restrictions on Subsidiary Distributions. Except for
this Agreement and the Credit Documents and except as provided in the
credit facilities of the Foreign Subsidiaries permitted by Section 6.16.4
or required by law, neither the Company nor any Subsidiary shall enter into
or be bound by any agreement (including covenants requiring the maintenance
of specified amounts of net worth or working capital) restricting the right
of any Subsidiary to make Distributions or extensions of credit to the
Company (directly or indirectly through another Subsidiary).
6.14. Voluntary Prepayments of Other Indebtedness. Neither the Company
nor any of its Subsidiaries shall make any voluntary prepayment of principal of
or interest on any Financing Debt (other than the Credit Obligations and as
contemplated by the Concurrent Transactions) or make any voluntary redemptions
or repurchases of Financing Debt (other than the Credit Obligations and as
contemplated by the Concurrent Transactions) in an aggregate amount exceeding
$3,000,000 since the Initial Closing Date, except that the Company may
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refinance Financing Debt and may purchase Senior Notes outstanding after the
Initial Closing Date.
6.15. Derivative Contracts. Neither the Company nor any of its
Subsidiaries shall enter into any Interest Rate Protection Agreement, foreign
currency exchange contract or other financial or commodity derivative contracts
except to provide hedge protection for an underlying economic transaction in the
ordinary course of business.
6.16. Negative Pledge Clauses. Neither the Company nor any of its
Subsidiaries shall enter into any agreement, instrument, deed or lease which
prohibits or limits the ability of the Company or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of their respective
properties, assets or revenues, whether now owned or hereafter acquired, except
the following:
6.16.1. This Agreement and the other Credit Documents.
6.16.2. Covenants in documents creating Liens permitted by Section
6.8 prohibiting further Liens on the assets encumbered thereby.
6.16.3. Covenants in the indenture for the Approved Subordinated
Debt and the Senior Notes, each as in effect on the Initial Closing Date.
6.16.4. Covenants in the credit facilities of the Foreign
Subsidiaries permitted by Section 6.6.16 prohibiting further Liens on the
assets of the Foreign Subsidiaries, restrictions required by law or
customary non-assignment provisions.
6.17. ERISA, etc. Each of the Company and its Subsidiaries shall comply,
and shall cause all ERISA Group Persons to comply, in all material respects,
with the provisions of ERISA and the Code applicable to each Plan. Each of the
Company and its Subsidiaries shall meet, and shall cause all ERISA Group Persons
to meet, all minimum funding requirements applicable to them with respect to any
Plan pursuant to section 302 of ERISA or section 412 of the Code, without giving
effect to any waivers of such requirements or extensions of the related
amortization periods which may be granted, except if the failure to comply would
not reasonably be expected to result in a Material Adverse Change. At no time
shall the Accumulated Benefit Obligations under any Plan that is not a
Multiemployer Plan exceed the fair market value of the assets of such Plan
allocable to such benefits by more than $5,000,000. The Company and its
Subsidiaries shall not withdraw, and shall cause all other ERISA Group Persons
not to withdraw, in whole or in part, from any Multiemployer Plan so as to give
rise to withdrawal liability exceeding $5,000,000 in the aggregate. At no time
shall the actuarial present value of unfunded liabilities for post-employment
health care benefits, whether or not provided under a Plan, calculated in a
manner consistent with Statement No. 106 of the Financial Accounting Standards
Board, exceed $25,000,000.
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6.18. Transactions with Affiliates. Neither the Company nor any of its
Subsidiaries shall effect any transaction with any of their respective
Affiliates (except for the Company and its Subsidiaries) on a basis less
favorable, in the reasonable, good faith judgment of the Company, to the Company
and its Subsidiaries than would be the case if such transaction had been
effected with a non-Affiliate.
6.19. Environmental Laws.
------------------
6.19.1. Compliance with Law and Permits. Each of the Company and
its Subsidiaries shall use and operate all of its facilities and properties
in material compliance with all Environmental Laws (for purposes of this
sentence, any such facility that is now or hereafter listed on the National
Priorities List pursuant to procedures described in 40 C.F.R. (S)300.425
shall be deemed solely for purposes of this sentence not to be in material
compliance with Environmental Laws), keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to environmental
matters in effect and remain in material compliance therewith, and handle
all Hazardous Materials in material compliance with all applicable
Environmental Laws, except where such failure to use, operate, keep, or
handle in compliance would not reasonably be expected to result in a
Material Adverse Change.
6.19.2. Notice of Claims, etc. Each of the Company and its
Subsidiaries shall, as soon as reasonably practicable, notify the Agent,
and provide copies (when applicable) of (a) any failure to comply with
Section 6.19.1 or (b) upon receipt, of all written claims, complaints,
notices or inquiries from governmental authorities relating to any alleged
noncompliance with or liability under Environmental Laws with respect to
the facilities or properties that might reasonably be expected to result in
payments by the Company and its Subsidiaries in an aggregate amount
exceeding $5,000,000 in excess of applicable insurance.
6.20. Interpretation of Covenants. In Sections 6.6 through 6.19, the
various permitted transactions provided in the subsections to each Section are
cumulative and not exclusive of each other. The Company and its Subsidiaries may
decide in their reasonable discretion which of the various applicable
subsections shall apply to a particular transaction.
7. Representations and Warranties. In order to induce the Lenders to extend
credit to the Company hereunder, each of the Company and such of its
Subsidiaries as are party hereto from time to time jointly and severally
represents and warrants as follows:
7.1. Organization and Business.
-------------------------
7.1.1. The Company. The Company is a duly organized and validly
existing corporation, in good standing under the laws of Delaware with all
power and authority, corporate or otherwise, necessary to (a) enter into
and perform this Agreement and
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each other Credit Document to which it is party and (b) own its properties
and carry on the business now conducted by it. Certified copies of the
Charter and By-laws of the Company have been previously delivered to the
Agent and are correct and complete. Exhibit 7.1, as from time to time
hereafter supplemented in accordance with Sections 6.4.1 and 6.4.2, sets
forth, as of the later of the date hereof or as of the end of the most
recent fiscal quarter for which financial statements are required to be
furnished in accordance with such Sections, (i) the jurisdiction of
incorporation of the Company, (ii) the address of the Company's principal
executive office and chief place of business, (iii) each name, including
any trade name, under which the Company conducts its business and (iv) the
jurisdictions in which the Company keeps tangible personal property.
7.1.2. Subsidiaries. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with all power and authority,
corporate or otherwise, necessary to (a) enter into and perform this
Agreement and each other Credit Document to which it is party, (b)
guarantee the Credit Obligations and (c) own its properties and carry on
the business now conducted by it. Certified copies of the Charter and By-
laws of each Subsidiary of the Company have been previously delivered to
the Agent and are correct and complete. Exhibit 7.1, as from time to time
hereafter supplemented in accordance with Sections 6.4.1 and 6.4.2, sets
forth, as of the later of the date hereof or as of the end of the most
recent fiscal quarter for which financial statements are required to be
furnished in accordance with such Sections, (i) the name and jurisdiction
of organization of each Subsidiary of the Company, (ii) the address of the
chief executive office and principal place of business of each such
Subsidiary, (iii) each name under which each such Subsidiary conducts its
business, (iv) each jurisdiction in which each such Subsidiary keeps
tangible personal property, and (v) the number of authorized and issued
shares and ownership of each such Subsidiary.
7.1.3. Qualification. Each of the Company and its Subsidiaries is
duly and legally qualified to do business as a foreign corporation or other
entity and is in good standing in each state or jurisdiction in which such
qualification is required and is duly authorized, qualified and licensed
under all laws, regulations, ordinances or orders of public authorities, or
otherwise, to carry on its business in the places and in the manner in
which it is conducted, except for failures to be so qualified, authorized
or licensed which would not in the aggregate reasonably be expected to
result, or create a material risk of resulting, in any Material Adverse
Change.
7.1.4. Capitalization. No options, warrants, conversion rights,
preemptive rights or other statutory or contractual rights to purchase
shares of capital stock or other securities of any Subsidiary now exist,
nor has any Subsidiary authorized any such right, nor is any Subsidiary
obligated in any other manner to issue shares of its capital stock or other
securities.
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7.2. Financial Statements and Other Information; Material Agreements.
7.2.1. Financial Statements and Other Information. The Company has
previously furnished to the Lenders copies of the following:
(a) The audited Consolidated balance sheets of the Company and its
Subsidiaries as at June 30 in each of 1994 and 1995 and the audited
Consolidated statements of income, changes in shareholders' equity and cash
flows of the Company and its Subsidiaries for the fiscal years of the
Company then ended.
(b) The unaudited Consolidated balance sheet of the Company and its
Subsidiaries as at June 30, 1993 and September 30, 1995 and the unaudited
Consolidated statements of income, changes in shareholders' equity and cash
flows of the Company and its Subsidiaries for the portion of the fiscal
year then ended.
(c) The five-year financial and operational projections for the
Company dated October 26, 1995.
(d) Calculations demonstrating pro forma compliance with the
Computation Covenants as of the end of October 1995.
The audited Consolidated financial statements (including the notes
thereto) referred to in clause (a) above were prepared in accordance with
GAAP and fairly present the financial position of the Company and its
Subsidiaries on a Consolidated basis at the respective dates thereof and
the results of their operations for the periods covered thereby. The
unaudited Consolidated financial statements referred to in clause (b) above
were prepared in accordance with GAAP and fairly present the financial
position of the Company and its Subsidiaries at the respective dates
thereof and the results of their operations for the periods covered
thereby, subject to normal year-end audit adjustment and the addition of
footnotes in the case of interim financial statements. Neither the Company
nor any of its Subsidiaries has any known contingent liability material to
the Company and its Subsidiaries on a Consolidated basis which is not
reflected in the balance sheets referred to in clauses (a) or (b) above (or
delivered pursuant to Sections 6.4.1 or 6.4.2) or in the notes thereto or
otherwise disclosed to the Agent in writing.
In the Company's judgment, the financial and operational projections
referred to in clause (c) above constitute a reasonable basis as of the
Initial Closing Date for the assessment of the future performance of the
Company and its Subsidiaries during the periods indicated therein, it being
understood that any projected financial information represents an estimate,
based on various assumptions, of future results of operations which may or
may not in fact occur.
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7.2.2. Material Agreements. The Company has previously furnished to
the Lenders correct and complete copies, including all exhibits, schedules
and amendments thereto, of the agreements and registration statements, each
as in effect on the date hereof, listed in Exhibit 7.2.2 (the "Material
Agreements").
7.3. Agreements Relating to Financing Debt, Investments, etc. Exhibit
7.3, as from time to time hereafter supplemented in accordance with Sections
6.4.1 and 6.4.2, sets forth (a) the amounts (as of the dates indicated in
Exhibit 7.3, as so supplemented) of all Financing Debt of the Company and its
Subsidiaries and all agreements which relate to such Financing Debt, (b) all
Liens and Guarantees with respect to such Financing Debt and (c) all agreements
which directly or indirectly require the Company or any Subsidiary to make any
Investment. The Company has furnished the Lenders with correct and complete
copies of any agreements described in clauses (a), (b) and (c) above requested
by the Required Lenders.
7.4. Changes in Condition. Since June 30, 1995 no Material Adverse Change
has occurred and between June 30, 1995 and the date hereof, neither the Company
nor any Subsidiary of the Company has entered into any material transaction
outside the ordinary course of business except for the transactions permitted by
this Agreement and the Material Agreements.
7.5. Title to Assets. The Company and its Subsidiaries have good and
marketable title to, or adequate license or leasehold rights in, all assets
necessary for or used in the operations of their business as now conducted by
them and reflected in the most recent balance sheet referred to in Section 7.2.1
(or the balance sheet most recently furnished to the Lenders pursuant to
Sections 6.4.1 or 6.4.2), and to all assets acquired subsequent to the date of
such balance sheet, subject to no Liens except for Liens permitted by Section
6.8 and except for assets disposed of as permitted by Section 6.11.
7.6. Operations in Conformity With Law, etc. The operations of the
Company and its Subsidiaries as now conducted or proposed to be conducted are
not in violation of, nor is the Company or its Subsidiaries in default under,
any Legal Requirement presently in effect, except for such violations and
defaults as do not and would not reasonably be expected, in the aggregate, to
result, or create a material risk of resulting, in any Material Adverse Change.
The Company has received no notice of any such violation or default and has no
knowledge of any basis on which the operations of the Company or its
Subsidiaries, as now conducted and as currently proposed to be conducted after
the date hereof, would be held so as to violate or to give rise to any such
violation or default.
7.7. Litigation. No litigation, at law or in equity, or any proceeding
before any court, board or other governmental or administrative agency or any
arbitrator is pending or, to the knowledge of the Company or any Guarantor,
threatened which may involve any material risk of any final judgment, order or
liability which, after giving effect to any applicable insurance, has resulted,
or is reasonably expected to create a material risk of resulting, in any
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Material Adverse Change or which seeks to enjoin the consummation, or which
questions the validity, of any of the transactions contemplated by this
Agreement or any other Credit Document. No judgment, decree or order of any
court, board or other governmental or administrative agency or any arbitrator
has been issued against or binds the Company or any of its Subsidiaries which
has resulted, or is reasonably likely to create a material risk of resulting, in
any Material Adverse Change.
7.8. Authorization and Enforceability. Each of the Company and each other
Obligor has taken all corporate action required to execute, deliver and perform
this Agreement and each other Credit Document to which it is party. No consent
of stockholders of the Company is necessary in order to authorize the execution,
delivery or performance of this Agreement or any other Credit Document to which
the Company is party. Each of this Agreement and each other Credit Document
constitutes the legal, valid and binding obligation of each Obligor party
thereto and is enforceable against such Obligor in accordance with its terms
except as the enforceability of such documents may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws from time to time
in effect and affecting the rights of creditors generally and by general
principles of equity, good faith and fair dealing.
7.9. No Legal Obstacle to Agreements. Neither the execution and delivery
of this Agreement or any other Credit Document, nor the making of any borrowings
hereunder, nor the guaranteeing of the Credit Obligations, nor the consummation
of any transaction referred to in or contemplated by this Agreement or any other
Credit Document, nor the fulfillment of the terms hereof or thereof or of any
other agreement, instrument, deed or lease contemplated by this Agreement or any
other Credit Document, has constituted or resulted in or will constitute or
result in:
(a) any breach or termination of the provisions of any agreement,
instrument, deed or lease to which the Company, any of its Subsidiaries or
any other Obligor is a party or by which it is bound, or of the Charter or
By-laws of the Company, any of its Subsidiaries or any other Obligor;
(b) the violation in any material respect of any law, statute,
judgment, decree or governmental order, rule or regulation applicable to
the Company, any of its Subsidiaries or any other Obligor;
(c) the creation under any agreement, instrument, deed or lease of
any Lien (other than Liens which secure the Credit Obligations) upon any of
the assets of the Company, any of its Subsidiaries or any other Obligor; or
(d) any redemption, retirement or other repurchase obligation of the
Company, any of its Subsidiaries or any other Obligor under any Charter,
By-law, agreement, instrument, deed or lease.
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No approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by the Company, any of its Subsidiaries or any other Obligor
in connection with the execution, delivery and performance of this Agreement,
the Notes or any other Credit Document, the transactions contemplated hereby or
thereby, the making of any borrowing hereunder or the guaranteeing of the Credit
Obligations.
7.10. Defaults. Neither the Company nor any of its Subsidiaries is in
default under any provision of its Charter or By-laws or of this Agreement or
any other Credit Document. Neither the Company nor any of its Subsidiaries is in
default under any provision of any agreement, instrument, deed or lease to which
it is party or by which it or its property is bound. Neither the Company nor
any of its Subsidiaries has violated any law, judgment, decree or governmental
order, rule or regulation, in each case so as to result, or to be reasonably
expected to create a material risk of resulting, in any Material Adverse Change.
7.11. Licenses, etc. The Company and its Subsidiaries have all patents,
patent applications, patent licenses, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, licenses, franchises,
permits, authorizations and other rights as are necessary for the conduct of the
business of the Company and its Subsidiaries as now conducted by them. All of
the foregoing are in full force and effect in all material respects, and each of
the Company and its Subsidiaries is in substantial compliance with the foregoing
without any known conflict with the valid rights of others which has resulted,
or is reasonably likely to create a material risk of resulting, in any Material
Adverse Change. No event has occurred which permits, or after notice or lapse
of time or both would permit, the revocation or termination of any such license,
franchise or other right or which affects the rights of any of the Company and
its Subsidiaries thereunder so as to result, or is reasonably expected to create
a material risk of resulting, in any Material Adverse Change. No litigation or
other proceeding or dispute exists with respect to the validity or, where
applicable, the extension or renewal, of any of the foregoing which has
resulted, or is reasonably likely to create a material risk of resulting, in any
Material Adverse Change.
7.12. Tax Returns. Each of the Company and its Subsidiaries has filed all
material tax and information returns which are required to be filed by it and
has paid, or made adequate provision for the payment of, all taxes which have
become due pursuant to such returns or to any assessment received by it, except
with respect to those taxes that the Company or its Subsidiaries are contesting
in good faith. Neither the Company nor any of its Subsidiaries knows of any
material additional assessments or any basis therefor. The Company reasonably
believes that the charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes or other governmental charges are adequate.
7.13. Certain Business Representations.
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7.13.1. Labor Relations. No dispute or controversy between the
Company or any of its Subsidiaries and any of their respective employees
has resulted, or is reasonably likely to result, in any Material Adverse
Change, and neither the Company nor any of its Subsidiaries anticipates
that its relationships with its unions or employees will result, or are
reasonably likely to result, in any Material Adverse Change. The Company
has not experienced a strike or other labor interruption in the past five
years. The Company and each of its Subsidiaries is in compliance in all
material respects with all federal and state laws with respect to (a) non-
discrimination in employment with which the failure to comply, in the
aggregate, has resulted, or is reasonably likely to create a material risk
of resulting, in a Material Adverse Change and (b) the payment of wages.
7.13.2. Antitrust. Each of the Company and its Subsidiaries is in
compliance in all material respects with all federal and state antitrust
laws relating to its business and the geographic concentration of its
business.
7.13.3. Consumer Protection. Neither the Company nor any of its
Subsidiaries is in violation of any rule, regulation, order, or
interpretation of any rule, regulation or order of the Federal Trade
Commission (including truth-in-lending), with which the failure to comply,
in the aggregate, has resulted, or is reasonably likely to create a
material risk of resulting, in a Material Adverse Change.
7.13.4. Burdensome Obligations. Neither the Company nor any of its
Subsidiaries is party to or bound by any agreement, instrument, deed or
lease or is subject to any Charter, By-law or other restriction, commitment
or requirement which, in the opinion of the management of such Person, is
so unusual or burdensome as in the foreseeable future to result, or to be
reasonably likely to create a material risk of resulting, in a Material
Adverse Change.
7.13.5. Future Expenditures. Neither the Company nor any of its
Subsidiaries anticipate that the future expenditures, if any, by the
Company and its Subsidiaries needed to meet the provisions of any federal,
state or foreign governmental statutes, orders, rules or regulations will
be so burdensome as to result, or create a material risk of resulting, in
any Material Adverse Change.
7.14. Environmental Regulations. Except to the extent set forth in
Exhibit 7.14:
7.14.1. Environmental Compliance. Each of the Company and its
Subsidiaries is in compliance in all material respects with the
Environmental Laws in effect in any jurisdiction in which any properties of
the Company or any of its Subsidiaries are located or where any of them
conducts its business, and with all applicable published rules and
regulations (and applicable standards and requirements) of the federal
Environmental Protection Agency and of any similar agencies in states or
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foreign countries in which the Company or its Subsidiaries conducts its
business other than those which in the aggregate have not resulted, and do
not create a material risk of resulting, in a Material Adverse Change.
7.14.2. Environmental Litigation. As of the date hereof and except
where any matter described in clauses (i) or (ii) would not reasonably be
expected to result in a Material Adverse Change, (i) no suit, claim, action
or proceeding of which the Company or any of its Subsidiaries has been
given notice or otherwise has knowledge is now pending before any court,
governmental agency or board or other forum, or to the Company's or any of
its Subsidiaries' knowledge, threatened by any Person for, and (ii) neither
the Company nor any of its Subsidiaries have received written
correspondence from any federal, state or local governmental authority with
respect to:
(a) noncompliance by the Company or any of its Subsidiaries with
any Environmental Law;
(b) personal injury, wrongful death or other tortious conduct
relating to materials, commodities or products used, generated, sold,
transferred or manufactured by the Company or any of its Subsidiaries
(including products made of, containing or incorporating asbestos, lead or
other hazardous materials, commodities or toxic substances); or
(c) the release into the environment by the Company or any of its
Subsidiaries of any Hazardous Material generated by the Company or any of
its Subsidiaries whether or not occurring at or on a site owned, leased or
operated by the Company or any of its Subsidiaries.
7.14.3. Hazardous Material. The disposal or arrangement for
disposal at any waste disposal or dump sites at which Hazardous Material
generated by either the Company or any of its Subsidiaries has been
disposed of directly by the Company or any of its Subsidiaries and all
independent contractors to whom the Company or any of its Subsidiaries have
delivered Hazardous Material for disposal, or to the Company's or any of
its Subsidiaries' knowledge, where Hazardous Material finally came to be
located, has not resulted, and would not reasonably be expected to result
in a Material Adverse Change.
7.14.4. Environmental Condition of Properties. No release of any
Hazardous Material is present in any real property currently or formerly
owned or operated by the Company or any of its Subsidiaries except that
which has not resulted, and could not reasonably be expected to result in a
Material Adverse Change.
7.14.5. No Other Representations and Warranties. The
representations and warranties in this Section 7.14 constitute the sole and
exclusive representations and
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warranties of the Company and its Subsidiaries with respect to all matters
arising under Environmental Laws.
7.15. Pension Plans. Each Plan (other than a Multiemployer Plan) and, to
the knowledge of the Company and its Subsidiaries, each Multiemployer Plan is in
material compliance with the applicable provisions of ERISA and the Code. As of
the date hereof, each Multiemployer Plan and each Plan that constitutes a
"defined benefit plan" (as defined in ERISA) are set forth in Exhibit 7.15. Each
ERISA Group Person has met all of the funding standards applicable to all Plans
that are not Multiemployer Plans, and no condition exists which would permit the
institution of proceedings to terminate any Plan that is not a Multiemployer
Plan under section 4042 of ERISA. To the best knowledge of the Company and each
Subsidiary, no Plan that is a Multiemployer Plan is currently insolvent or in
reorganization or has been terminated within the meaning of ERISA.
7.16. Foreign Trade Regulations; Government Regulation; Margin Stock.
7.16.1. Foreign Trade Regulations. Neither the execution and
delivery of this Agreement or any other Credit Document, nor the making by
the Company of any borrowings hereunder, nor the guaranteeing of the Credit
Obligations by any Guarantor has constituted or resulted in or will
constitute or result in the violation of any Foreign Trade Regulation.
7.16.2. Government Regulation. Neither the Company nor any of its
Subsidiaries, nor any Person controlling the Company or any of its
Subsidiaries or under common control with the Company or any of its
Subsidiaries, is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Investment Company Act, the
Interstate Commerce Act or any statute or regulation which regulates the
incurring by the Company or any of its Subsidiaries of Financing Debt as
contemplated by this Agreement and the other Credit Documents.
7.16.3. Margin Stock. Neither the Company nor any of its
Subsidiaries owns any Margin Stock in excess of 25% of the value of the
assets subject to any negative pledge arrangement.
7.17. Disclosure. Neither this Agreement nor any other Credit Document to
be furnished to the Lenders by or on behalf of the Company or any of its
Subsidiaries in connection with the transactions contemplated hereby or by such
Credit Document contains any untrue statement of material fact or omits to state
a material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
No fact is actually known to the Company or any of its Subsidiaries which has
not been disclosed to the Lenders and which has resulted, or in the future (so
far as the Company or any of its Subsidiaries can reasonably foresee) will
result, or is reasonably expected to create a material risk of resulting, in any
Material Adverse Change,
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except to the extent that present or future general economic conditions may
result in a Material Adverse Change.
8. Defaults.
8.1. Events of Default. The following events are referred to as
"Events of Default":
8.1.1. Payment. The Company shall fail to make any payment in
respect of: (a) interest or any fee on or in respect of any of the Credit
Obligations owed by it as the same shall become due and payable, and such
failure shall continue for a period of three Banking Days, or (b) any
Credit Obligation with respect to payments made by any Letter of Credit
Issuer under any Letter of Credit or any draft drawn thereunder within
three Banking Days after demand therefor by such Letter of Credit Issuer or
(c) principal of any of the Credit Obligations owed by it as the same shall
become due, whether at maturity or by acceleration or otherwise.
8.1.2. Specified Covenants. The Company or any of its
Subsidiaries shall fail to perform or observe any of the provisions of
Sections 6.5 through 6.16.
8.1.3. Other Covenants. The Company, any of its Subsidiaries or
any other Obligor shall fail to perform or observe any covenant, agreement
or provision to be performed or observed by it under this Agreement or any
other Credit Document (other than covenants, agreements or provisions with
which the failure to comply would constitute an Event of Default under
Sections 8.1.2, 8.1.9 or 8.1.11), and such failure shall not be rectified
or cured to the written satisfaction of the Required Lenders within 30 days
after the earlier of (a) notice thereof by the Agent to the Company or (b)
a Financial Officer shall have actual knowledge thereof.
8.1.4. Representations and Warranties. Any representation or
warranty of or with respect to the Company, any of its Subsidiaries or any
other Obligor made to the Lenders or the Agent in, pursuant to or in
connection with this Agreement or any other Credit Document shall be
materially false on the date as of which it was made.
8.1.5. Cross Default, etc.
(a) The Company or any of its Subsidiaries shall fail to make
any payment when due (after giving effect to any applicable grace periods)
in respect of any Financing Debt (other than the Credit Obligations)
outstanding in an aggregate amount of principal (whether or not due) and
accrued interest exceeding $5,000,000;
(b) the Company or any of its Subsidiaries shall fail to perform
or observe the terms of any agreement or instrument relating to such
Financing Debt, and such
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failure shall continue, without having been duly cured, waived or consented
to, beyond the period of grace, if any, specified in such agreement or
instrument, and such failure shall permit the acceleration of such
Financing Debt;
(c) all or any part of such Financing Debt of the Company or any
of its Subsidiaries shall be accelerated or shall become due or payable
prior to its stated maturity (except with respect to voluntary prepayments
thereof) for any reason whatsoever;
(d) any Lien on any property of the Company or any of its
Subsidiaries securing any such Financing Debt shall be enforced by
foreclosure or similar action; or
(e) any holder of any such Financing Debt shall exercise any
right of rescission or put right with respect thereto.
8.1.6. Ownership; Liquidation; etc. Except as permitted by
Section 6.11:
(a) the Company shall cease to own, directly or indirectly, all
the capital stock of its Wholly Owned Subsidiaries (other than director's
qualifying shares and, in the case of Foreign Subsidiaries, shares required
to be owned by foreign nationals);
(b) (i) any "person" or "group" (as such terms are used in
sections 13(d) and 14(d) of the Exchange Act), other than MDCP and the
current members of the Company's management who own capital stock of the
Company is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting stock of the Company;
(ii) the Company consolidates with, or mergers with or into,
another Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any
Person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which any voting stock of the Company is
reclassified or changed into or exchanged for cash, securities or other
property, other than any such transaction where (A) any voting stock of the
Company is reclassified or changed into or exchanged for voting stock
(other than redeemable capital stock) of the surviving or transferee
corporation and (B) immediately after such transaction no "person" or
"group" (as such terms are used in sections 13(d) and 14(d) of the Exchange
Act), other than the MDCP and the current members of the Company's
management who own capital stock of the Company, is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all securities
that such
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Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 35% of the total voting stock of the surviving or transferee
corporation;
(iii) during any consecutive two-year period, individuals who at
the beginning of such period constituted the board of directors of the
Company (together with any new directors whose election by such board of
directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the board of directors of the
Company then in office; or
(iv) any final order, judgment or decree of a court of competent
jurisdiction shall be entered against the Company decreeing the dissolution
of liquidation of the Company; and
(c) the Company or any of its Subsidiaries or any other Obligor
shall initiate any action to dissolve, liquidate or otherwise terminate its
existence.
8.1.7. Enforceability, etc. Any Credit Document shall cease for
any reason (other than the scheduled termination thereof in accordance with
its terms) to be enforceable in accordance with its terms or in full force
and effect; or any party to any Credit Document shall so assert in a
judicial or similar proceeding; or the security interests (if any) created
by this Agreement or any other Credit Documents shall cease to be
enforceable and of the same effect and priority purported to be created
hereby.
8.1.8. Judgments. A final judgment (a) which, with other
outstanding final judgments against the Company and its Subsidiaries,
exceeds an aggregate of $5,000,000 in excess of applicable insurance
coverage shall be rendered against the Company or any of its Subsidiaries,
or (b) which grants injunctive relief that results, or is reasonably likely
to create a material risk of resulting, in a Material Adverse Change and in
either case if, (i) within 30 days after entry thereof, such judgment shall
not have been discharged or execution thereof stayed pending appeal or (ii)
within 30 days after the expiration of any such stay, such judgment shall
not have been discharged.
8.1.9. ERISA. Any "reportable event" (as defined in section 4043
of ERISA) shall have occurred that reasonably could be expected to result
in termination of a Plan or the appointment by the appropriate United
States District Court of a trustee to administer any Plan or the imposition
of a Lien in favor of a Plan; or any ERISA Group Person shall fail to pay
when due amounts aggregating in excess of $5,000,000 which it shall have
become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan shall be filed under Title IV of ERISA
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by any ERISA Group Person or administrator; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to
be appointed to administer any Plan or a proceeding shall be instituted by
a fiduciary of any Plan against any ERISA Group Person to enforce section
515 or 4219(c)(5) of ERISA and such proceeding shall not have been
dismissed within 30 days thereafter; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that
any Plan must be terminated.
8.1.10. Bankruptcy, etc. The Company, any of its Subsidiaries
or any other Obligor shall:
(a) commence a voluntary case under the Bankruptcy Code or
authorize, by appropriate proceedings of its board of directors or other
governing body, the commencement of such a voluntary case;
(b) (i) have filed against it a petition commencing an
involuntary case under the Bankruptcy Code that shall not have been
dismissed within 60 days after the date on which such petition is filed, or
(ii) file an answer or other pleading within such 60-day period admitting
or failing to deny the material allegations of such a petition or seeking,
consenting to or acquiescing in the relief therein provided, or (iii) have
entered against it an order for relief in any involuntary case commenced
under the Bankruptcy Code;
(c) seek relief as a debtor under any applicable law, other than
the Bankruptcy Code, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief;
(d) have entered against it an order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or
approving its liquidation or reorganization as a debtor or any modification
or alteration of the rights of its creditors or (iii) assuming custody of,
or appointing a receiver or other custodian for, all or a substantial
portion of its property; or
(e) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint, or consent to the appointment
of, or suffer to exist a receiver or other custodian for, all or a
substantial portion of its property.
8.1.11. Environmental Matters. The Company or any of its
Subsidiaries shall fail to comply with any Environmental Law in effect in
any jurisdiction in which any properties of the Company or any of its
Subsidiaries are located or where any of them conducts its business, which
failure would be reasonably likely to result in or create a material risk
of resulting in a Material Adverse Change and within 30 days
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after such noncompliance, the Company or its Subsidiaries shall continue to
be out of compliance with such Environmental Law; provided, however, that
such 30-day period may be extended for up to an additional 150 days so long
as (a) such noncompliance is reasonably capable of cure within such 150-day
period, and the Company and its Subsidiaries shall have commenced, and
shall continue to pursue diligently, a cure for such noncompliance and (b)
no Material Adverse Change shall have occurred.
8.2. Certain Actions Following an Event of Default. If any one or more
Events of Default shall occur, then in each and every such case:
8.2.1. Terminate Obligation to Extend Credit. Upon request of the
Required Lenders, the Agent on behalf of the Lenders shall terminate the
obligations of the Lenders to make any further extensions of credit under
the Credit Documents by furnishing notice of such termination to the
Company.
8.2.2. Specific Performance; Exercise of Rights. Upon request of
the Required Lenders, the Agent on behalf of the Lenders shall proceed to
protect and enforce the Lenders' rights by suit in equity, action at law
and/or other appropriate proceeding, either for specific performance of any
covenant or condition contained in this Agreement or any other Credit
Document or in any instrument or assignment delivered to the Lenders
pursuant to this Agreement or any other Credit Document, or in aid of the
exercise of any power granted in this Agreement or any other Credit
Document or any such instrument or assignment.
8.2.3. Acceleration. Upon request of the Required Lenders, the
Agent on behalf of the Lenders shall by notice in writing to the Company
(a) declare all or any part of the unpaid balance of the Credit Obligations
then outstanding to be immediately due and payable, and (b) require the
Company immediately to deposit with the Agent in cash an amount equal to
the then Letter of Credit Exposure (which cash shall be held and applied as
provided in Section 4.5), and thereupon such unpaid balance or part thereof
and such amount equal to the Letter of Credit Exposure shall become so due
and payable without presentation, protest or further demand or notice of
any kind, all of which are hereby expressly waived; provided, however, that
if a Bankruptcy Default shall have occurred, the unpaid balance of the
Credit Obligations shall automatically become immediately due and payable.
8.2.4. Enforcement of Payment; Setoff. Upon request of the Required
Lenders, the Agent on behalf of the Lenders shall proceed to enforce
payment of the Credit Obligations in such manner as it may elect, and to
cancel, or instruct other Letter of Credit Issuers to cancel, any
outstanding Letters of Credit which permit the cancellation thereof. The
Lenders may offset and apply toward the payment of the Credit Obligations
(and/or toward the curing of any Event of Default) any Indebtedness from
the Lenders to the respective Obligors, including any Indebtedness
represented by
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deposits in any account maintained with the Lenders, regardless of the
adequacy of any security for the Credit Obligations. The Lenders shall have
no duty to determine the adequacy of any such security in connection with
any such offset.
8.2.5. Cumulative Remedies. To the extent not prohibited by
applicable law which cannot be waived, all of the Lenders' rights hereunder
and under each other Credit Document shall be cumulative.
8.3. Annulment of Defaults. Once an Event of Default has occurred, such
Event of Default shall be deemed to exist and be continuing for all purposes of
the Credit Documents until the Required Lenders or the Agent (with the consent
of the Required Lenders) shall have waived such Event of Default in writing,
stated in writing that the same has been cured to such Lenders' reasonable
satisfaction or entered into an amendment to this Agreement which by its express
terms cures such Event of Default, at which time such Event of Default shall no
longer be deemed to exist or to have continued. No such action by the Lenders or
the Agent shall extend to or affect any subsequent Event of Default or impair
any rights of the Lenders upon the occurrence thereof. The making of any
extension of credit during the existence of any Default or Event of Default
shall not constitute a waiver thereof.
8.4. Waivers. To the extent that such waiver is not prohibited by the
provisions of applicable law that cannot be waived, each of the Company and the
other Obligors waives:
(a) all presentments, demands for performance, notices of
nonperformance (except to the extent required by this Agreement or any
other Credit Document), protests, notices of protest and notices of
dishonor;
(b) any requirement of diligence or promptness on the part of any
Lender in the enforcement of its rights under this Agreement, the Notes or
any other Credit Document;
(c) any and all notices of every kind and description which may be
required to be given by any statute or rule of law; and
(d) any defense (other than indefeasible payment in full) which it
may now or hereafter have with respect to its liability under this
Agreement, the Notes or any other Credit Document or with respect to the
Credit Obligations.
9. Guarantees.
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9.1. Guarantees of Credit Obligations. Each Guarantor unconditionally
jointly and severally guarantees that the Credit Obligations will be performed
and will be paid in full in cash when due and payable, whether at the stated or
accelerated maturity thereof or otherwise, this guarantee being a guarantee of
payment and not of collectability and being absolute and in
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no way conditional or contingent. In the event any part of the Credit
Obligations shall not have been so paid in full when due and payable, each
Guarantor will, immediately upon notice by the Agent or, without notice,
immediately upon the occurrence of a Bankruptcy Default, pay or cause to be paid
to the Agent for the account of each Lender in accordance with the Lenders'
respective Percentage Interests the amount of such Credit Obligations which are
then due and payable and unpaid. The obligations of each Guarantor hereunder
shall not be affected by the invalidity, unenforceability or irrecoverability of
any of the Credit Obligations as against any other Obligor, any other guarantor
thereof or any other Person. For purposes hereof, the Credit Obligations shall
be due and payable when and as the same shall be due and payable under the terms
of this Agreement or any other Credit Document notwithstanding the fact that the
collection or enforcement thereof may be stayed or enjoined under the Bankruptcy
Code or other applicable law.
9.2. Continuing Obligation. Each Guarantor acknowledges that the Lenders
and the Agent have entered into this Agreement (and, to the extent that the
Lenders or the Agent may enter into any future Credit Document, will have
entered into such agreement) in reliance on this Section 9 being a continuing
irrevocable agreement, and such Guarantor agrees that its guarantee may not be
revoked in whole or in part. The obligations of the Guarantors hereunder shall
terminate when the commitment of the Lenders to extend credit under this
Agreement shall have terminated and all of the Credit Obligations have been
indefeasibly paid in full in cash and discharged; provided, however, that:
(a) if a claim is made upon the Lenders at any time for repayment or
recovery of any amounts or any property received by the Lenders from any
source on account of any of the Credit Obligations and the Lenders repay or
return any amounts or property so received (including interest thereon to
the extent required to be paid by the Lenders) or
(b) if the Lenders become liable for any part of such claim by
reason of (i) any judgment or order of any court or administrative
authority having competent jurisdiction, or (ii) any settlement or
compromise of any such claim,
then the Guarantors shall remain liable under this Agreement for the amounts so
repaid or property so returned or the amounts for which the Lenders become
liable (such amounts being deemed part of the Credit Obligations) to the same
extent as if such amounts or property had never been received by the Lenders,
notwithstanding any termination hereof or the cancellation of any instrument or
agreement evidencing any of the Credit Obligations. Not later than five days
after receipt of notice from the Agent, the Guarantors shall jointly and
severally pay to the Agent an amount equal to the amount of such repayment or
return for which the Lenders have so become liable. Payments hereunder by a
Guarantor may be required by the Agent on any number of occasions.
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9.3. Waivers with Respect to Credit Obligations. Except to the extent
expressly required by this Agreement or any other Credit Document, each
Guarantor waives, to the fullest extent permitted by the provisions of
applicable law, all of the following (including all defenses, counterclaims and
other rights of any nature based upon any of the following):
(a) presentment, demand for payment and protest of nonpayment of any
of the Credit Obligations, and notice of protest, dishonor or
nonperformance;
(b) notice of acceptance of this guarantee and notice that credit
has been extended in reliance on the Guarantor's guarantee of the Credit
Obligations;
(c) notice of any Default or of any inability to enforce performance
of the obligations of the Company or any other Person with respect to any
Credit Document, or notice of any acceleration of maturity of any Credit
Obligations;
(d) demand for performance or observance of, and any enforcement of
any provision of, the Credit Obligations, this Agreement or any other
Credit Document or any pursuit or exhaustion of rights or remedies against
the Company or any other Person in respect of the Credit Obligations or any
requirement of diligence or promptness on the part of the Agent or the
Lenders in connection with any of the foregoing;
(e) any act or omission on the part of the Agent or the Lenders
which may impair or prejudice the rights of the Guarantor, including rights
to obtain subrogation, exoneration, contribution, indemnification or any
other reimbursement from the Company or any other Person, or otherwise
operate as a deemed release or discharge;
(f) any statute of limitations or any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than the obligation of the principal;
(g) any "single action" or "anti-deficiency" law which would
otherwise prevent the Lenders from bringing any action, including any claim
for a deficiency, against the Guarantor before or after the Agent's or the
Lenders' commencement or completion of any foreclosure action, whether
judicially, by exercise of power of sale or otherwise, or any other law
which would otherwise require any election of remedies by the Agent or the
Lenders;
(h) all demands and notices of every kind with respect to the
foregoing; and
(i) to the extent not referred to above, all defenses (other than
payment) which the Company may now or hereafter have to the payment of the
Credit
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Obligations, together with all suretyship defenses, which could otherwise
be asserted by such Guarantor.
Each Guarantor represents that it has obtained the advice of counsel as to the
extent to which suretyship and other defenses may be available to it with
respect to its obligations hereunder in the absence of the waivers contained in
this Section 9.3.
No delay or omission on the part of the Agent or the Lenders in exercising
any right under this Agreement or any other Credit Document or under any
guarantee of the Credit Obligations shall operate as a waiver or relinquishment
of such right. No action which the Agent or the Lenders or the Company may take
or refrain from taking with respect to the Credit Obligations, including any
amendments thereto or modifications thereof or waivers with respect thereto,
shall affect the provisions of this Agreement or the obligations of the
Guarantor hereunder. None of the Lenders' or the Agent's rights shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Obligor, or by any noncompliance by the Company with the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
which the Agent or the Lenders may have or otherwise be charged with.
9.4. Lenders' Power to Waive, etc. Each Guarantor grants to the Lenders
full power in their discretion, without notice to or consent of such Guarantor,
such notice and consent being expressly waived to the fullest extent permitted
by applicable law, and without in any way affecting the liability of the
Guarantor under its guarantee hereunder:
(a) To waive compliance with, and any Default under, and to consent
to any amendment to or modification or termination of any terms or
provisions of, or to give any waiver in respect of, this Agreement, any
other Credit Document, the Credit Obligations or any guarantee thereof
(each as from time to time in effect);
(b) To grant any extensions of the Credit Obligations (for any
duration), and any other indulgence with respect thereto, and to effect any
total or partial release (by operation of law or otherwise), discharge,
compromise or settlement with respect to the obligations of the Obligors or
any other Person in respect of the Credit Obligations, whether or not
rights against the Guarantor under this Agreement are reserved in
connection therewith;
(c) To collect or liquidate or realize upon any of the Credit
Obligations in any manner or to refrain from collecting or liquidating or
realizing upon any of the Credit Obligations; and
(d) To extend credit under this Agreement, any other Credit Document
or otherwise in such amount as the Lenders may determine, including
increasing the amount of credit and the interest rate and fees with respect
thereto, even though the
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condition of the Obligors (financial or otherwise on an individual or
Consolidated basis) may have deteriorated since the date hereof.
9.5. Information Regarding the Company, etc. Each Guarantor has made such
investigation as it deems desirable of the risks undertaken by it in entering
into this Agreement and is fully satisfied that it understands all such risks.
Each Guarantor waives any obligation which may now or hereafter exist on the
part of the Agent or the Lenders to inform it of the risks being undertaken by
entering into this Agreement or of any changes in such risks and, from and after
the date hereof, each Guarantor undertakes to keep itself informed of such risks
and any changes therein. Each Guarantor expressly waives any duty which may now
or hereafter exist on the part of the Agent or the Lenders to disclose to the
Guarantor any matter related to the business, operations, character, collateral,
credit, condition (financial or otherwise), income or prospects of the Company
or its Affiliates or their properties or management, whether now or hereafter
known by the Agent or the Lenders. Each Guarantor represents, warrants and
agrees that it assumes sole responsibility for obtaining from the Company all
information concerning this Agreement and all other Credit Documents and all
other information as to the Company and its Affiliates or their properties or
management as such Guarantor deems necessary or desirable.
9.6. Certain Guarantor Representations. Each Guarantor represents that:
---------------------------------
(a) it is in its best interest and in pursuit of the purposes for
which it was organized as an integral part of the business conducted and
proposed to be conducted by the Company and its Subsidiaries, and
reasonably necessary and convenient in connection with the conduct of the
business conducted and proposed to be conducted by them, to induce the
Lenders to enter into this Agreement and to extend credit to the Company by
making the Guarantees contemplated by this Section 9,
(b) the credit available hereunder will directly or indirectly inure
to its benefit,
(c) by virtue of the foregoing it is receiving at least reasonably
equivalent value from the Lenders for its Guarantee,
(d) it will not be rendered insolvent as a result of entering into
this Agreement,
(e) after giving effect to the transactions contemplated by this
Agreement, it will have assets having a fair saleable value in excess of
the amount required to pay its probable liability on its existing debts as
they become absolute and matured,
(f) it has, and will have, access to adequate capital for the
conduct of its business,
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(g) it has the ability to pay its debts from time to time incurred in
connection therewith as such debts mature, and
(h) it has been advised by the Agent that the Lenders are unwilling
to enter into this Agreement unless the Guarantees contemplated by this
Section 9 are given by it.
9.7. Subrogation. Each Guarantor agrees that, until the Credit Obligations
are paid in full, it will not exercise any right of reimbursement, subrogation,
contribution, offset or other claims against the other Obligors arising by
contract or operation of law in connection with any payment made or required to
be made by such Guarantor under this Agreement. After the payment in full of the
Credit Obligations, each Guarantor shall be entitled to exercise against the
Company and the other Obligors all such rights of reimbursement, subrogation,
contribution and offset, and all such other claims, to the fullest extent
permitted by law.
9.8. Subordination. Each Guarantor covenants and agrees that, after the
occurrence of an Event of Default, all Indebtedness, claims and liabilities then
or thereafter owing by the Company or any other Obligor to such Guarantor
whether arising hereunder or otherwise are subordinated to the prior payment in
full of the Credit Obligations and are so subordinated as a claim against such
Obligor or any of its assets, whether such claim be in the ordinary course of
business or in the event of voluntary or involuntary liquidation, dissolution,
insolvency or bankruptcy, so that no payment with respect to any such
Indebtedness, claim or liability will be made or received while any Event of
Default exists.
9.9. Future Subsidiaries; Further Assurances. The Company will from time to
time cause (a) any present Wholly Owned Subsidiary that is not a Guarantor
within 30 days after notice from the Agent or (b) any future Wholly Owned
Subsidiary within 30 days after any such Person becomes a Wholly Owned
Subsidiary, to join this Agreement as a Guarantor pursuant to a joinder
agreement in form and substance satisfactory to the Agent; provided, however,
that in the event such a Wholly Owned Subsidiary is prohibited by any valid law,
statute, rule or regulation from guaranteeing the Credit Obligations, or if such
a guarantee by any Foreign Subsidiary would result in a repatriation of a
material amount of foreign earnings under the Code (including the "deemed
dividend" provisions of section 956 of the Code), (i) such guarantee will be
limited to the extent necessary to comply with such prohibition or to prevent
such repatriation of foreign earnings or (ii) if such limitation on the
guaranteed amount is not sufficient to avoid such prohibition or repatriation,
the Company and its other Subsidiaries will pledge the stock of such Wholly
Owned Subsidiary (or as much of such stock as may be pledged without resulting
in such a repatriation) to the Agent to secure the Credit Obligations pursuant
to a pledge agreement in substantially the form of Exhibit 9.9. Each Guarantor
will, promptly upon the request of the Agent from time to time, execute,
acknowledge and deliver, and file and record, all such instruments, and take all
such action, as the Agent deems necessary or advisable to carry out the intent
and purposes of this Section 9.
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10. Expenses; Indemnity.
-------------------
10.1. Expenses. Whether or not the transactions contemplated hereby
shall be consummated, the Company will pay:
(a) all reasonable expenses of the Agent (including the out-
of-pocket expenses related to forming the group of Lenders and
reasonable fees and disbursements of the counsel to the Agent) in
connection with the preparation and duplication of this Agreement,
each other Credit Document, any environmental audit report, the
transactions contemplated hereby and thereby and amendments, waivers,
consents and other operations hereunder and thereunder;
(b) all recording and filing fees and transfer and documentary
stamp and similar taxes at any time payable in respect of this
Agreement, any other Credit Document or the incurrence of the Credit
Obligations; and
(c) all other reasonable expenses incurred by the Lenders or
the holder of any Credit Obligation in connection with the enforcement
of any rights hereunder or under any other Credit Document, including
costs of collection and reasonable attorneys' fees (including a
reasonable allowance for the hourly cost of attorneys employed by the
Lenders on a salaried basis) and expenses.
10.2. General Indemnity. The Company shall indemnify the Lenders and
the Agent and hold them harmless from any liability, loss or damage
resulting from the violation by the Company of Section 2.5. In addition,
the Company shall indemnify each Lender, the Agent, each of the Lenders' or
the Agent's directors, officers and employees, and each Person, if any, who
controls any Lender or the Agent (each Lender, the Agent and each of such
directors, officers, employees and control Persons is referred to as an
"Indemnified Party") and hold each of them harmless from and against any
and all claims, damages, liabilities and reasonable expenses (including
reasonable fees and disbursements of counsel with whom any Indemnified
Party may consult in connection therewith and all reasonable expenses of
litigation or preparation therefor) which any Indemnified Party may incur
or which may be asserted against any Indemnified Party in connection with
(a) the Indemnified Party's compliance with or contest of any subpoena or
other process issued against it in any proceeding involving the Company or
any of its Subsidiaries or their Affiliates, (b) any litigation or
investigation involving the Company, any of its Subsidiaries or their
Affiliates, or any officer, director or employee thereof, (c) the existence
or exercise of any security rights with respect to the Credit Security in
accordance with the Credit Documents, or (d) this Agreement, any other
Credit Document or any transaction contemplated hereby or thereby;
provided, however, that the foregoing indemnity shall not apply to
litigation commenced by the Company against the Lenders or the Agent which
seeks enforcement of any of the rights of the Company hereunder or under
any other Credit Document and is determined adversely to the Lenders or the
Agent
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in a final nonappealable judgment or to the extent such claims, damages,
liabilities and expenses result from a Lender's or the Agent's gross
negligence or willful misconduct.
10.3. Indemnity With Respect to Letters of Credit. The Company shall
indemnify each Letter of Credit Issuer and its correspondents and hold each
of them harmless from and against any and all claims, losses, liabilities,
damages and reasonable expenses (including reasonable attorneys' fees)
arising from or in connection with any Letter of Credit, including any such
claim, loss, liability, damage or expense arising out of any transfer,
sale, delivery, surrender or endorsement of any invoice, bill of lading,
warehouse receipt or other document at any time held by the Agent, any
other Letter of Credit Issuer or held for their respective accounts by any
of their correspondents, in connection with any Letter of Credit, except to
the extent such claims, losses, liabilities, damages and expenses result
from gross negligence or willful misconduct on the part of the Agent or any
other Letter of Credit Issuer.
11. Operations; Agent.
-----------------
11.1. Interests in Revolving Loan. The percentage interest of each
Lender in the Loan and Letters of Credit, and the related Commitments,
shall be computed based on the maximum principal amount for each Lender as
set forth in Exhibit 11.1.
11.2. Agent's Authority to Act, etc. Each of the Lenders appoints
and authorizes Fleet to act for the Lenders as the Lenders' Agent in
connection with the transactions contemplated by this Agreement and the
other Credit Documents on the terms set forth herein. In acting hereunder,
the Agent is acting for the account of Fleet to the extent of its
Percentage Interest in the Revolving Loans and of its interest in Money
Market Loans and Swingline Loans made by it and for the account of the
other Lenders to the extent of the Lenders' respective Percentage Interests
or each of their interests in the Money Market Loans and Swingline Loans
made by them, and all action in connection with the enforcement of, or the
exercise of any remedies (other than the Lenders' rights of set-off as
provided in Section 8.2.4 or in any Credit Document) in respect of the
Credit Obligations and Credit Documents shall be taken by the Agent.
11.3. Company to Pay Agent, etc. The Company and each Guarantor
shall be fully protected in making all payments in respect of the Credit
Obligations to the Agent, in relying upon consents, modifications and
amendments executed by the Agent purportedly on the Lenders' behalf, and in
dealing with the Agent as herein provided. The Agent may charge the
accounts of the Company, on the dates when the amounts thereof become due
and payable, with the amounts of the principal of and interest on the Loan,
any amounts paid by the Letter of Credit Issuers to third parties under
Letters of Credit or drafts presented thereunder, commitment fees, Letter
of Credit fees and all other fees and amounts owing under any Credit
Document.
11.4. Lender Operations for Advances, Letters of Credit, etc.
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11.4.1. Advances. On each Closing Date, each Lender shall advance
to the Agent in immediately available funds such Lender's Percentage
Interest in the portion of the Loan advanced on such Closing Date prior to
12:00 noon (Boston time). If such funds are not received at such time, but
all applicable conditions set forth in Section 5 have been satisfied, each
Lender authorizes and requests the Agent to advance for the Lender's
account, pursuant to the terms hereof, the Lender's respective Percentage
Interest in such portion of the Loan and agrees to reimburse the Agent in
immediately available funds for the amount thereof prior to 2:00 p.m.
(Boston time) on the day any portion of the Loan is advanced hereunder;
provided, however, that the Agent is not authorized to make any such
advance for the account of any Lender who has previously notified the Agent
in writing that such Lender will not be performing its obligations to make
further advances hereunder; and provided, further, that the Agent shall be
under no obligation to make any such advance.
11.4.2. Letters of Credit. Each of the Lenders authorizes and
requests each Letter of Credit Issuer to issue the Letters of Credit
provided for in Section 2.3 and to grant each Lender a participation in
each of such Letters of Credit in an amount equal to its Percentage
Interest in the amount of each such Letter of Credit. Promptly upon the
request of the Letter of Credit Issuer, each Lender shall reimburse the
Letter of Credit Issuer in immediately available funds for such Lender's
Percentage Interest in the amount of all obligations to third parties
incurred by the Letter of Credit Issuer in respect of each Letter of Credit
and each draft accepted under a Letter of Credit to the extent not
reimbursed by the Company. The Letter of Credit Issuer will notify each
Lender of the issuance of any Letter of Credit, the amount and date of
payment of any draft drawn or accepted under a Letter of Credit and whether
in connection with the payment of any such draft the amount thereof was
added to the Revolving Loan or was reimbursed by the Company.
11.4.3. Agent to Allocate Payments, etc. All payments of principal
and interest in respect of the extensions of credit made pursuant to this
Agreement, reimbursement of amounts paid by any Letter of Credit Issuer to
third parties under Letters of Credit or drafts presented thereunder,
commitment fees, Letter of Credit fees and other fees under this Agreement
shall, as a matter of convenience, be made by the Company and the
Guarantors to the Agent in immediately available funds. The share of each
Lender shall be credited to such Lender by the Agent in immediately
available funds in such manner that the principal amount of the Credit
Obligations to be paid shall be paid proportionately in accordance with the
Lenders' respective Percentage Interests in such Credit Obligations, except
as otherwise provided in this Agreement. Under no circumstances shall any
Lender be required to produce or present its Notes as evidence of its
interests in the Credit Obligations in any action or proceeding relating to
the Credit Obligations.
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11.4.4. Delinquent Lenders; Nonperforming Lenders. In the event
that any Lender fails to reimburse the Agent pursuant to Section 11.4.1 for
the Percentage Interest of such Lender (a "Delinquent Lender") in any
credit advanced by the Agent pursuant hereto, overdue amounts (the
"Delinquent Payment") due from the Delinquent Lender to the Agent shall
bear interest, payable by the Delinquent Lender on demand, at a per annum
rate equal to (a) the Federal Funds Rate for the first three days overdue
and (b) the sum of 2% plus the Federal Funds Rate for any longer period.
Such interest shall be payable to the Agent for its own account for the
period commencing on the date of the Delinquent Payment and ending on the
date the Delinquent Lender reimburses the Agent on account of the
Delinquent Payment (to the extent not paid by the Company as provided
below) and the accrued interest thereon (the "Delinquency Period"), whether
pursuant to the assignments referred to below or otherwise. Upon notice by
the Agent, the Company will pay to the Agent the principal (but not the
interest) portion of the Delinquent Payment. During the Delinquency Period,
in order to make reimbursements for the Delinquent Payment and accrued
interest thereon, the Delinquent Lender shall be deemed to have assigned to
the Agent all interest, commitment fees and other payments made by the
Company under Section 3 that would have thereafter otherwise been payable
under the Credit Documents to the Delinquent Lender. During any other
period in which any Lender is not performing its obligations to extend
credit under Section 2 (a "Nonperforming Lender"), the Nonperforming Lender
shall be deemed to have assigned to each Lender that is not a Nonperforming
Lender (a "Performing Lender") all principal and other payments made by the
Company under Section 4 that would have thereafter otherwise been payable
under the Credit Documents to the Nonperforming Lender. The Agent shall
credit a portion of such payments to each Performing Lender in an amount
equal to the Percentage Interest of such Performing Lender in an amount
equal to the Percentage Interest of such Performing Lender divided by one
minus the Percentage Interest of the Nonperforming Lender until the
respective portions of the Loan owed to all the Lenders are the same as the
Percentage Interests of the Lenders immediately prior to the failure of the
Nonperforming Lender to perform its obligations under Section 2. The
foregoing provisions shall be in addition to any other remedies the Agent,
the Performing Lenders or the Company may have under law or equity against
the Delinquent Lender as a result of the Delinquent Payment or against the
Nonperforming Lender as a result of its failure to perform its obligations
under Section 2.
11.5. Sharing of Payments, etc. Each Lender agrees that (a) if by
exercising any right of set-off or counterclaim or otherwise, it shall receive
payment of (i) a proportion of the aggregate amount due with respect to its
Percentage Interest in the Loan and Letter of Credit Exposure which is greater
than (ii) the proportion received by any other Lender in respect of the
aggregate amount due with respect to such other Lender's Percentage Interest in
the Revolving Loan and Letter of Credit Exposure and (b) if such inequality
shall continue for more than 10 days, the Lender receiving such proportionately
greater payment shall purchase participations in the Percentage Interests in the
Revolving Loan and Letter of Credit Exposure
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held by the other Lenders, and such other adjustments shall be made from time to
time (including rescission of such purchases of participations in the event the
unequal payment originally received is recovered from such Lender through
bankruptcy proceedings or otherwise), as may be required so that all such
payments of principal and interest with respect to the Revolving Loan and Letter
of Credit Exposure held by the Lenders shall be shared by the Lenders pro rata
in accordance with their respective Percentage Interests; provided, however,
that this Section 11.5 shall not impair the right of any Lender to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of Indebtedness of any Obligor other than such
Obligor's Indebtedness with respect to the Revolving Loan and Letter of Credit
Exposure. Each Lender that grants a participation in the Credit Obligations to a
Credit Participant shall require as a condition to the granting of such
participation that such Credit Participant agree to share payments received in
respect of the Credit Obligations as provided in this Section 11.5. The
provisions of this Section 11.5 are for the sole and exclusive benefit of the
Lenders and no failure of any Lender to comply with the terms hereof shall be
available to any Obligor as a defense to the payment of the Credit Obligations.
11.6. Amendments, Consents, Waivers, etc. Except as otherwise set forth
herein, the Agent may (and upon the written request of the Required Lenders the
Agent shall) take or refrain from taking any action under this Agreement or any
other Credit Document, including giving its written consent to any modification
of or amendment to and waiving in writing compliance with any covenant or
condition in this Agreement or any other Credit Document (other than an Interest
Rate Protection Agreement) or any Default or Event of Default, all of which
actions shall be binding upon all of the Lenders; provided, however, that:
(a) Except as provided below, without the written consent of the
Lenders owning at least a majority of the Percentage Interests, no written
modification of, amendment to, consent with respect to, waiver of
compliance with or waiver of a Default under, any of the Credit Documents
(other than an Interest Rate Protection Agreement) shall be made.
(b) Without the written consent of such Lenders as own 100% of the
Percentage Interests (other than Delinquent Lenders during the existence of
a Delinquency Period so long as such Delinquent Lender is treated the same
as the other Lenders with respect to any actions enumerated below):
(i) No reduction shall be made in (A) the amount of
principal of the Loan or reimbursement obligations for payments made
under Letters of Credit, (B) the interest rate on the Loan or (C)
the Letter of Credit fees or commitment fees.
(ii) No change shall be made in the stated time of payment of
all or any portion of the Loan or interest thereon or reimbursement
of payments
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made under Letters of Credit or fees relating to any of the
foregoing payable to all of the Lenders and no waiver shall be made
of any Default under Section 8.1.1.
(iii) No increase shall be made in the amount, or extension of
the term, of the Commitments beyond that provided for under Section
2.
(iv) No alteration shall be made of the Lenders' rights of
set-off contained in Section 8.2.4.
(v) No release of any Guarantor shall be made (except that
the Agent may release particular Guarantors in dispositions
permitted by Section 6.11 without the written consent of the
Lenders).
(vi) No amendment to or modification of this Section 11.6(b)
shall be made.
11.7. Agent's Resignation. The Agent may resign at any time by giving at
least 60 days' prior written notice of its intention to do so to each of the
Lenders and the Company and upon the appointment by the Required Lenders of a
successor Agent satisfactory to the Company. If no successor Agent shall have
been so appointed and shall have accepted such appointment within 45 days after
the retiring Agent's giving of such notice of resignation, then the retiring
Agent may with the consent of the Company, which shall not be unreasonably
withheld, appoint a successor Agent which shall be a bank or a trust company
organized under the laws of the United States of America or any state thereof
and having a combined capital, surplus and undivided profit of at least
$100,000,000; provided, however, that any successor Agent appointed under this
sentence may be removed upon the written request of the Required Lenders, which
request shall also appoint a successor Agent satisfactory to the Company. If the
Agent assigns its entire Percentage Interest in the Loans hereunder, the Company
shall be entitled to remove the Agent. A successor Agent shall be appointed in
accordance with this Section 11.7. Upon the appointment of a new Agent
hereunder, the term "Agent" shall for all purposes of this Agreement thereafter
mean such successor. After any retiring Agent's resignation hereunder as Agent,
or the removal hereunder of any successor Agent, the provisions of this
Agreement shall continue to inure to the benefit of such Agent as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
11.8. Concerning the Agent.
--------------------
11.8.1. Action in Good Faith, etc. The Agent and its officers,
directors, employees and agents shall be under no liability to any of the
Lenders or to any future holder of any interest in the Credit Obligations
for any action or failure to act taken or suffered in good faith, and any
action or failure to act in accordance with an opinion of its counsel shall
conclusively be deemed to be in good faith. The Agent shall in all
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cases be entitled to rely, and shall be fully protected in relying, on
instructions given to the Agent by the required holders of Credit
Obligations as provided in this Agreement.
11.8.2. No Implied Duties, etc. The Agent shall have and may
exercise such powers as are specifically delegated to the Agent under this
Agreement or any other Credit Document together with all other powers
incidental thereto. The Agent shall have no implied duties to any Person or
any obligation to take any action under this Agreement or any other Credit
Document except for action specifically provided for in this Agreement or
any other Credit Document to be taken by the Agent. Before taking any
action under this Agreement or any other Credit Document, the Agent may
request an appropriate specific indemnity satisfactory to it from each
Lender in addition to the general indemnity provided for in Section 11.11.
Until the Agent has received such specific indemnity, the Agent shall not
be obligated to take (although it may in its sole discretion take) any such
action under this Agreement or any other Credit Document. Each Lender
confirms that the Agent does not have a fiduciary relationship to it under
the Credit Documents. Each of the Company and its Subsidiaries party hereto
confirms that neither the Agent nor any other Lender has a fiduciary
relationship to it under the Credit Documents.
11.8.3. Validity, etc. The Agent shall not be responsible to any
Lender or any future holder of any interest in the Credit Obligations (a)
for the legality, validity, enforceability or effectiveness of this
Agreement or any other Credit Document, (b) for any recitals, reports,
representations, warranties or statements contained in or made in
connection with this Agreement or any other Credit Document and (c) for the
existence or value of any assets included in any security for the Credit
Obligations, (d) for the effectiveness of any Lien purported to be included
in any security for the Credit Obligations or (e) unless the Agent shall
have failed to comply with Section 11.8.1, for the perfection of any
security for the Credit Obligations.
11.8.4. Compliance. The Agent shall not be obligated to ascertain
or inquire as to the performance or observance of any of the terms of this
Agreement or any other Credit Document; and in connection with any
extension of credit under this Agreement or any other Credit Document, the
Agent shall be fully protected in relying on a certificate of the Company
as to the fulfillment by the Company of any conditions to such extension of
credit.
11.8.5. Employment of Agents and Counsel. The Agent may execute
any of its duties as Agent under this Agreement or any other Credit
Document by or through employees, agents and attorneys-in-fact and shall
not be responsible to any of the Lenders, the Company or any other Obligor
for the default or misconduct of any such agents or attorneys-in-fact
selected by the Agent acting in good faith. The Agent shall be entitled to
advice of counsel concerning all matters pertaining to the agency hereby
created and its duties hereunder or under any other Credit Document.
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11.8.6. Reliance on Documents and Counsel. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
affidavit, certificate, cablegram, consent, instrument, letter, notice,
order, document, statement, telecopy, telegram, telex or teletype message
or writing reasonably believed in good faith by the Agent to be genuine and
correct and to have been signed, sent or made by the Person in question,
including any telephonic or oral statement made by such Person, and, with
respect to legal matters, upon an opinion or the advice of counsel selected
by the Agent.
11.8.7. Agent's Reimbursement. Each of the Lenders severally agrees
to reimburse the Agent, in the amount of such Lender's Percentage Interest,
for any reasonable expenses not reimbursed by the Company or the Guarantors
(without limiting the obligation of the Company or the Guarantors to make
such reimbursement): (a) for which the Agent is entitled to reimbursement
by the Company or the Guarantors under this Agreement or any other Credit
Document, and (b) after the occurrence of a Default, for any other
reasonable expenses incurred by the Agent on the Lenders' behalf in
connection with the enforcement of the Lenders' rights under this Agreement
or any other Credit Document.
11.8.8. Agent's Fees. The Company shall pay to the Agent for its own
account an agent's fee in the amounts separately agreed to from time to
time by the Company and the Agent.
11.9. Rights as a Lender. With respect to any credit extended by it
hereunder, Fleet shall have the same rights, obligations and powers hereunder as
any other Lender and may exercise such rights and powers as though it were not
the Agent, and unless the context otherwise specifies, Fleet shall be treated in
its individual capacity as though it were not the Agent hereunder. Without
limiting the generality of the foregoing, the Percentage Interest of Fleet shall
be included in any computations of Percentage Interests. Fleet and its
Affiliates may accept deposits from, lend money to, act as trustee for and
generally engage in any kind of banking or trust business with the Company, any
of its Subsidiaries or any Affiliate of any of them and any Person who may do
business with or own an equity interest in the Company, any of its Subsidiaries
or any Affiliate of any of them, all as if Fleet were not the Agent and without
any duty to account therefor to the other Lenders.
11.10. Independent Credit Decision. Each of the Lenders acknowledges that
it has independently and without reliance upon the Agent, based on the financial
statements and other documents referred to in Section 7.2, on the other
representations and warranties contained herein and on such other information
with respect to the Company and its Subsidiaries as such Lender deemed
appropriate, made such Lender's own credit analysis and decision to enter into
this Agreement and to make the extensions of credit provided for hereunder. Each
Lender represents to the Agent that such Lender will continue to make its own
independent credit and
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other decisions in taking or not taking action under this Agreement or any other
Credit Document. Each Lender expressly acknowledges that neither the Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to such Lender, and no act
by the Agent taken under this Agreement or any other Credit Document, including
any review of the affairs of the Company and its Subsidiaries, shall be deemed
to constitute any representation or warranty by the Agent. Except for notices,
reports and other documents expressly required to be furnished to each Lender by
the Agent under this Agreement or any other Credit Document, the Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition, financial
or otherwise, or creditworthiness of the Company or any Subsidiary which may
come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
11.11. Indemnification. The holders of the Credit Obligations shall
indemnify the Agent and its officers, directors, employees and agents (to the
extent not reimbursed by the Obligors and without limiting the obligation of any
of the Obligors to do so), pro rata in accordance with their respective
Percentage Interests, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time be imposed on,
incurred by or asserted against the Agent or such Persons relating to or arising
out of this Agreement, any other Credit Document, the transactions contemplated
hereby or thereby, or any action taken or omitted by the Agent in connection
with any of the foregoing; provided, however, that the foregoing shall not
extend to actions or omissions which are taken by the Agent with gross
negligence or willful misconduct.
12. Successors and Assigns; Lender Assignments and Participations. Any
reference in this Agreement to any of the parties hereto shall be deemed to
include the successors and assigns of such party, and all covenants and
agreements by or on behalf of the Company, the Guarantors, the Agent or the
Lenders that are contained in this Agreement or any other Credit Documents shall
bind and inure to the benefit of their respective successors and assigns;
provided, however, that (a) the Company and its Subsidiaries may not assign
their rights or obligations under this Agreement except for mergers or
liquidations permitted by Section 6.11 and (b) the Lenders shall be not entitled
to assign their respective Percentage Interests in the Loan hereunder except as
set forth below in this Section 12.
12.1. Assignments by Lenders.
12.1.1. Assignees and Assignment Procedures. Each Lender may (a)
without the consent of the Agent or the Company if the proposed assignee is
already a Lender hereunder or a Wholly Owned Subsidiary of the same
corporate parent of which the assigning Lender is a Subsidiary, or (b)
otherwise with the consents of the Agent and (so long as no Event of
Default exists) the Company (which consents will not be unreasonably
withheld), in compliance with applicable laws in connection with
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such assignment, assign to one or more commercial banks or other financial
institutions (each, an "Assignee") all or a portion of its interests,
rights and obligations under this Agreement and the other Credit Documents,
including all or a portion, which need not be pro rata between the Loan and
the Letter of Credit Exposure, of its Commitment, the portion of the Loan
and Letter of Credit Exposure at the time owing to it and the Notes held by
it, but excluding its rights and obligations as a Letter of Credit Issuer;
provided, however, that:
(i) the aggregate amount of the Commitment of the assigning Lender
subject to each such assignment to any Assignee other than another Lender
(determined as of the date the Assignment and Acceptance with respect to
such assignment is delivered to the Agent) shall be not less than
$10,000,000 and in increments of $1,000,000 and after giving effect to such
assignment, the Commitment, if any, of the assigning Lender shall be at
least $10,000,000; and
(ii) the parties to each such assignment shall execute and deliver
to the Agent an Assignment and Acceptance (the "Assignment and Acceptance")
substantially in the form of Exhibit 12.1.1, together with the Note subject
to such assignment and a processing and recordation fee of $2,500 payable
to the Agent by the assigning Lender or the Assignee.
Upon acceptance and recording pursuant to Section 12.1.4, from and after the
effective date specified in each Assignment and Acceptance (which effective date
shall be at least five Banking Days after the execution thereof unless waived by
the Agent):
(A) the Assignee shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement and
(B) the assigning Lender shall, to the extent provided in such assignment,
be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 3.2.4, 3.7, 3.8,
3.9, 3.10 and 10, as well as to any fees accrued for its account
hereunder and not yet paid).
12.1.2. Terms of Assignment and Acceptance. By executing and delivering
an Assignment and Acceptance, the assigning Lender and Assignee shall be deemed
to confirm to and agree with each other and the other parties hereto as follows:
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(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Credit Document or any
other instrument or document furnished pursuant hereto;
(b) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Company and its Subsidiaries or the performance or observance by the
Company or any of its Subsidiaries of any of its obligations under this
Agreement, any other Credit Document or any other instrument or document
furnished pursuant hereto;
(c) such Assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 7.2 or Section 6.4 and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(d) such Assignee will independently and without reliance upon the
Agent, such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement;
(e) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and
(f) such Assignee agrees that it will perform in accordance with the
terms of this Agreement all the obligations which are required to be
performed by it as a Lender.
12.1.3. Register. The Agent shall maintain at the Boston Office a
register (the "Register") for the recordation of (a) the names and
addresses of the Lenders and the Assignees which assume rights and
obligations pursuant to an assignment under Section 12.1.1, (b) the
Percentage Interest of each such Lender as set forth in Section 11.1 and
(c) the amount of the Revolving Loan, Money Market Loan, Swingline Loan,
and Letter of Credit Exposure owing to each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest
error, and the Company, the Agent and the Lenders may treat each Person
whose name is registered therein for all purposes as a party to this
Agreement. The Register shall be
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available for inspection by the Company or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
12.1.4. Acceptance of Assignment and Assumption. Upon its receipt of
a completed Assignment and Acceptance executed by an assigning Lender and
an Assignee together with the Note subject to such assignment, and the
processing and recordation fee referred to in Section 12.1.1, the Agent
shall (a) accept such Assignment and Acceptance, (b) record the information
contained therein in the Register and (c) give prompt notice thereof to the
Company. Within five Banking Days after receipt of notice, the Company, at
its own expense, shall execute and deliver to the Agent, in exchange for
the surrendered Note, a new Note to the order of such Assignee in a
principal amount equal to the applicable Commitment and Loan assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment and Loan, a new Note to the order of such assigning
Lender in a principal amount equal to the applicable Commitment and Loan
retained by it. Such new Note shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note, and shall
be dated the date of the surrendered Note which it replaces.
12.1.5. Federal Reserve Bank. Notwithstanding the foregoing
provisions of this Section 13, any Lender may at any time pledge or assign
all or any portion of such Lender's rights under this Agreement and the
other Credit Documents to a Federal Reserve Bank; provided, however, that
no such pledge or assignment shall release such Lender from such Lender's
obligations hereunder or under any other Credit Document.
12.1.6. Further Assurances. The Company and its Subsidiaries shall
sign such documents and take such other actions from time to time
reasonably requested by an Assignee to enable it to share in the benefits
of the rights created by the Credit Documents.
12.2. Credit Participants. Each Lender may, without the consent of the
Company or the Agent, in compliance with applicable laws in connection with such
participation, sell to one or more commercial banks or other financial
institutions (each a "Credit Participant") participations in all or a portion of
its interests, rights and obligations under this Agreement and the other Credit
Documents (including all or a portion of its Commitment, the Loan and Letter of
Credit Exposure owing to it and the Note held by it); provided, however, that:
(a) such Lender's obligations under this Agreement shall remain
unchanged;
(b) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations;
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(c) the Credit Participant shall be entitled to the benefit of the
cost protection provisions contained in Sections 3.2.4, 3.7, 3.8, 3.9, 3.10
and 10; provided, however, that the Credit Participant shall not be
entitled to receive any greater payment thereunder than the selling Lender
would have been entitled to receive with respect to the interest so sold if
such interest had not been sold; provided, further, that the Credit
Participant shall not be entitled to receive any greater payment hereunder
than the Credit Participant would have been entitled to receive if such
Credit Participant itself were a Lender; and
(d) the Company, the Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain
the sole right in its discretion as one of the Lenders to vote with respect
to the enforcement of the obligations of the Company relating to the Loan
and Letter of Credit Exposure and the approval of any amendment,
modification or waiver of any provision of this Agreement (other than
amendments, modifications, consents or waivers described in clause (b) of
the proviso to Section 11.6).
Each Obligor agrees, to the fullest extent permitted by applicable law, that any
Credit Participant and any Lender purchasing a participation from another Lender
pursuant to Section 11.5 may exercise all rights of payment (including the right
of set-off), with respect to its participation as fully as if such Credit
Participant or such Lender were the direct creditor of the Obligors and a Lender
hereunder in the amount of such participation.
12.3. Replacement of Lender. In the event that any Lender or, to the
extent applicable, any Credit Participant (the "Affected Lender"):
(a) fails to perform its obligations to fund any portion of the Loan
or to issue any Letter of Credit on any Closing Date when required to do so
by the terms of the Credit Documents or excused only by virtue of Section
5.2.2, or fails to provide its portion of any LIBOR Pricing Option pursuant
to Section 3.2.1 or on account of a Legal Requirement as contemplated by
Section 3.2.5;
(b) demands payment under the Reserve provisions of Section 3.7, the
Tax provisions of Section 3.8, the capital adequacy provisions of Section
3.9 or the regulatory change provisions in Section 3.10 in an amount the
Company deems materially in excess of the amounts with respect thereto
demanded by the other Lenders; or
(c) refuses to consent to a proposed amendment, modification, waiver
or other action requiring consent of the holders of 100% of the Percentage
Interests under Section 11.6(b) that is consented to by the Lenders owning
at least two-thirds of the Percentage Interests;
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then, so long as no Event of Default exists, the Company shall have the
right to seek a replacement lender which is reasonably satisfactory to the
Agent (the "Replacement Lender"). The Replacement Lender shall purchase the
interests of the Affected Lender in the Loan, Letters of Credit and its
Commitment and shall assume the obligations of the Affected Lender
hereunder and under the other Credit Documents upon execution by the
Replacement Lender of an Assignment and Acceptance and the tender by it to
the Affected Lender of a purchase price agreed between it and the Affected
Lender (or, if they are unable to agree, a purchase price in the amount of
the Affected Lender's Percentage Interest in the Loan and Letter of Credit
Exposure, or appropriate credit support for contingent amounts included
therein, and all other outstanding Credit Obligations then owed to the
Affected Lender). Such assignment by the Affected Lender shall be deemed an
early termination of any LIBOR Pricing Option to the extent of the Affected
Lender's portion thereof, and the Company will pay to the Affected Lender
any resulting amounts due under Section 3.2.4. Upon consummation of such
assignment, the Replacement Lender shall become party to this Agreement as
a signatory hereto and shall have all the rights and obligations of the
Affected Lender under this Agreement and the other Credit Documents with a
Percentage Interest equal to the Percentage Interest of the Affected
Lender, the Affected Lender shall be released from its obligations
hereunder and under the other Credit Documents, and no further consent or
action by any party shall be required. Upon the consummation of such
assignment, the Company, the Agent and the Affected Lender shall make
appropriate arrangements so that a new Revolving Note is issued to the
Replacement Lender if it has acquired a portion of the Revolving Loan. The
Company and the Guarantors shall sign such documents and take such other
actions reasonably requested by the Replacement Lender to enable it to
share in the benefits of the rights created by the Credit Documents. The
Affected Lender shall use reasonable efforts to minimize any increased
costs, taxes and the impact of adverse Legal Requirements or market
conditions. Until the consummation of an assignment in accordance with the
foregoing provisions of this Section 12.3, the Company shall continue to
pay to the Affected Lender any Credit Obligations as they become due and
payable.
13. Confidentiality. Each Lender will make no disclosure of confidential
information furnished to it by the Company or any of its Subsidiaries unless
such information shall have become public, except:
(a) in connection with operations under or the enforcement of this
Agreement or any other Credit Document, if and only to the extent required,
and in so doing shall require the Person to whom such disclosure is made to
enter into a confidentiality agreement with respect to the information
disclosed;
(b) pursuant to any statutory or regulatory requirement or any
mandatory court order, subpoena or other legal process;
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(c) to any parent or corporate Affiliate of such Lender or to any
Credit Participant, proposed Credit Participant or proposed Assignee;
provided, however, that any such Person shall agree to comply with the
restrictions set forth in this Section 13 with respect to such information;
(d) to its independent counsel, auditors and other professional
advisors with an instruction to such Person to keep such information
confidential; and
(e) with the prior written consent of the Company, to any other
Person.
14. Foreign Lenders. If any Lender or Credit Participant is not incorporated
or organized under the laws of the United States of America or a state thereof,
such Lender or Credit Participant shall deliver to the Company and the Agent the
following:
(a) Two duly completed and executed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor form, as the case may be,
certifying in each case that such Person is entitled to receive payments
under this Agreement, the Notes and reimbursement obligations under Letters
of Credit payable to it, without deduction or withholding of any United
States federal income taxes; and
(b) A duly completed and executed Internal Revenue Service Form W-8
or W-9 or successor form, as the case may be, to establish an exemption
from United States backup withholding tax.
Until such time as the Company and the Agent have received such forms
indicating that payments hereunder are not subject to deduction or withholding
of United States federal income tax, the Company shall withhold United States
federal income tax from such payments at the applicable statutory rate and
Section 3.8 shall not apply to such withholding.
Each such Lender or Credit Participant that delivers to the Company and the
Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to this Section 14
further undertakes to deliver to the Company and the Agent two further copies of
Form 1001 or 4224 and Form W-8 or W-9, or successor applicable form, or other
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Company and
the Agent. Such Forms 1001 or 4224 shall certify that such Lender or Credit
Participant is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes. Until such
time as the Company and the Agent have received such forms indicating that
payments hereunder are not subject to deduction or withholding of United States
federal income tax, the Company shall withhold United States federal income tax
from such payments at the applicable statutory rate and Section 3.8 shall not
apply to such withholding. The foregoing documents need not be delivered in the
event (i) any change in treaty, law or regulation or official interpretation
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thereof has occurred after the date hereof which renders all such forms
inapplicable or which would prevent such Lender or Credit Participant from
delivering any such form with respect to it, or (ii) such Lender or Credit
Participant advises the Company that it is not capable of receiving payments
without any deduction or withholding of United States federal income tax. In the
event of clause (ii), the Company shall withhold United States federal income
tax from payments to such Lender or Credit Participant in accordance with
applicable law, and Section 3.8 shall not apply to such withholding. For
purposes of the prior sentence, if any such Lender or Credit Participant
delivers two duly completed and executed copies of Form 1001 or successor form
establishing a reduced withholding tax rate under an applicable tax treaty, the
Company shall withhold United States federal income tax from such payments at
the reduced withholding tax rate established in such treaty. Notwithstanding
the foregoing, if a Lender or Credit Participant has delivered the forms
required to be delivered under clauses (i) and (ii) certifying that such Lender
or Credit Participant is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income tax and if,
subsequently, any change in treaty, law or regulation or official interpretation
thereof occurs which renders such forms inapplicable or which prevents such
Lender or Credit Participant from delivering any further such forms with respect
to it, then the Company shall withhold United States federal income tax form
payments to such Lender or Credit Participant in accordance with applicable law
and Section 3.8 shall apply to such withholding; provided, however, that if an
applicable tax treaty provides for a reduced withholding tax rate, Section 3.8
shall only apply if such Lender or Credit Participant delivers two duly
completed and executed copies of Form 1001 or successor form or otherwise
complies with any applicable requirements for establishing such reduced
withholding tax rate.
15. Notices. Except as otherwise specified in this Agreement, any notice
required to be given pursuant to this Agreement shall be given in writing. Any
notice, consent, approval, demand or other communication in connection with this
Agreement shall be deemed to be given if given in writing (including telex,
telecopy or similar teletransmission) addressed as provided below (or to the
addressee at such other address as the addressee shall have specified by notice
actually received by the addressor), and if either (a) actually delivered in
fully legible form to such address (evidenced in the case of a telex by receipt
of the correct answer back) or (b) in the case of a letter, unless actual
receipt of the notice is required by any Credit Document five days shall have
elapsed after the same shall have been deposited in the United States mails,
with first-class postage prepaid and registered or certified.
If to the Company or any of its Subsidiaries, to it at its address set
forth in Exhibit 7.1 (as supplemented pursuant to Sections 6.4.1 and 6.4.2), to
the attention of the chief financial officer.
If to any Lender or the Agent, to it at its address set forth on the
signature pages of this Agreement or in the Register, with a copy to the Agent.
-97-
<PAGE>
16. Course of Dealing; Amendments and Waivers. No course of dealing between
any Lender or the Agent, on one hand, and the Company or any other Obligor, on
the other hand, shall operate as a waiver of any of the Lenders' or the Agent's
rights under this Agreement or any other Credit Document or with respect to the
Credit Obligations. Each of the Company and the Guarantors acknowledges that if
the Lenders or the Agent, without being required to do so by this Agreement or
any other Credit Document, give any notice or information to, or obtain any
consent from, the Company or any other Obligor, the Lenders and the Agent shall
not by implication have amended, waived or modified any provision of this
Agreement or any other Credit Document, or created any duty to give any such
notice or information or to obtain any such consent on any future occasion. No
delay or omission on the part of any Lender of the Agent in exercising any right
under this Agreement or any other Credit Document or with respect to the Credit
Obligations shall operate as a waiver of such right or any other right hereunder
or thereunder. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right or remedy on any future occasion. No waiver, consent or
amendment with respect to this Agreement or any other Credit Document shall be
binding unless it is in writing and signed by the Agent or the Required Lenders.
17. Venue; Service of Process. Each of the Company and the other Obligors:
(a) Irrevocably submits to the nonexclusive jurisdiction of the state
courts of The Commonwealth of Massachusetts and to the nonexclusive
jurisdiction of the United States District Court for the District of
Massachusetts for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement or any other Credit Document or
the subject matter hereof or thereof.
(b) Waives to the extent not prohibited by applicable law that cannot
be waived, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such proceeding brought in any of the above-named courts,
any claim that it is not subject personally to the jurisdiction of such
court, that its property is exempt or immune from attachment or execution,
that such proceeding is brought in an inconvenient forum, that the venue of
such proceeding is improper, or that this Agreement or any other Credit
Document, or the subject matter hereof or thereof, may not be enforced in
or by such court.
Each of the Company and the other Obligors consents to service of process in any
such proceeding in any manner at the time permitted by Chapter 223A of the
General Laws of The Commonwealth of Massachusetts and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified in or pursuant to Section 15 is reasonably calculated to give
actual notice.
18. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
THAT CANNOT BE WAIVED, EACH OF THE COMPANY, THE OTHER OBLIGORS, THE AGENT AND
THE LENDERS WAIVES, AND COVENANTS
-98-
<PAGE>
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING
ARISING OUT OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER
HEREOF OR THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY CONNECTED WITH THE
DEALINGS OF THE LENDERS, THE AGENT, THE COMPANY OR ANY OTHER OBLIGOR IN
CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. Each of the Company and the
other Obligors acknowledges that it has been informed by the Agent that the
provisions of this Section 18 constitute a material inducement upon which each
of the Lenders has relied and will rely in entering into this Agreement and any
other Credit Document, and that it has reviewed the provisions of this Section
18 with its counsel. Any Lender, the Agent, the Company or any other Obligor
may file an original counterpart or a copy of this Section 18 with any court as
written evidence of the consent of the Company, the other Obligors, the Agent
and the Lenders to the waiver of their rights to trial by jury.
19. Status for Senior Notes. This Agreement refinances and replaces the
Heller Credit Agreement for purposes of constituting the "Bank Credit Agreement"
and "Bank Credit Facility" as defined in the indenture for the Senior Notes.
20. General. All covenants, agreements, representations and warranties made
in this Agreement or any other Credit Document or in certificates delivered
pursuant hereto or thereto shall be deemed to have been relied on by each
Lender, notwithstanding any investigation made by any Lender on its behalf, and
shall survive the execution and delivery to the Lenders hereof and thereof. The
invalidity or unenforceability of any provision hereof shall not affect the
validity or enforceability of any other provision hereof. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof. This Agreement and the other Credit Documents
constitute the entire understanding of the parties with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous
understandings and agreements, whether written or oral. This Agreement may be
executed in any number of counterparts which together shall constitute one
instrument. This Agreement shall be governed by and construed in accordance with
the laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
-99-
<PAGE>
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
BUCKEYE CELLULOSE CORPORATION
By /s/ D. B. Ferraro
--------------------------------
Title: President
BUCKEYE FLORIDA CORPORATION
BUCKEYE LIMITED CORPORATION
By /s/ D. B. Ferraro
--------------------------------
Title: President
BUCKEYE FLORIDA, LIMITED PARTNERSHIP
By BUCKEYE FLORIDA CORPORATION,
general partner
By /s/ D. B. Ferraro
--------------------------------
Title: President
FLEET BANK OF MASSACHUSETTS, N.A.
By
--------------------------------
Vice President
75 State Street
Boston, Massachusetts 02109
Telecopy: (617) 346-1569
SUNTRUST BANK, CENTRAL FLORIDA N.A.
By
--------------------------------
Vice President
200 South Orange Avenue
Orlando, Florida 32801
Telecopy: (407) 237-6704
-100-
<PAGE>
NEW LENDERS:
-----------
DRESDNER BANK AG
CHICAGO AND GRAND CAYMAN BRANCHES
By /s/ Elizabeth Holden Paul Casey
--------------------------------------------
Title: Vice President Assistant Treasurer
Elizabeth Holden Paul Casey
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Charles Dee O'Dell II
--------------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ Michael J. Kolosowski
--------------------------------------------
Title: Vice President
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By /s/ James H. Moore Jr.
--------------------------------------------
Title: Vice President
FIRST AMERICAN NATIONAL BANK
By /s/ Elizabeth H. Vaughn
--------------------------------------------
Title: Senior Vice President
-101-
<PAGE>
EXHIBITS
1 - Environmental Capital Expenditures
2.1.4 - Revolving Note
2.2.1 - Money Market Loan Bid Request
2.2.2 - Invitation to Bid on Money Market Loan
2.2.3A - Money Market Loan Bid
2.2.3B - List of Money Market Loan Bids
2.2.4A - List of Acceptances and Non-Acceptances of Money Market Loan Bids
2.2.4B - Acceptance of Money Market Loan Bid
2.2.4C - Non-Acceptance of Money Market Loan Bid
2.2.4D - Notice of Money Market Loan
2.2.5 - Money Market Note
2.3.3 - Swingline Note
5.1.2 - Guarantors Contribution Agreement
5.1.3 - Subsidiary Subordination Agreement
5.1.6 - Financial Officer's Certificate as to Concurrent Transactions
5.1.7 - Officer's Certificate as to Solvency and Net Worth
5.2.1 - Officer's Certificate
6.8.14 - Existing Liens
7.1 - Company and its Subsidiaries
7.2.2 - Material Agreements
<PAGE>
7.3 - Financing Debt, Certain Investments, etc.
7.14 - Environmental Matters
7.15 - Multi-employer and Defined Benefit Plans
9.9 - Pledge Agreement
11.1 - Revolving Loan Percentage Interests
12.1.1 - Assignment and Acceptance
<PAGE>
EXHIBIT 1
---------
ENVIRONMENTAL CAPITAL EXPENDITURES
(amounts in thousands)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000 Total
----- ----- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Environmental Projects
- ---------------------
Fenholloway Project 0 55 4,200 22,800 11,500 0 38,555
MACT-Clean Air Act 0 0 0 7,400 5,600 1,000 14,000
Contingency & Other 0 0 2,000 5,000 3,545 2,000 12,545
Total $ 0 $ 55 $6,200 $35,200 $20,545 $3,000 $65,000
===== ===== ====== ======= ======= ====== =======
</TABLE>
-2-
<PAGE>
EXHIBIT 2.1.4
-------------
REVOLVING LOAN NOTE
No. ___ _______________, 199_
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned BUCKEYE CELLULOSE CORPORATION, a
Delaware corporation, (the "Borrower") hereby promises to pay to
____________________ (the "Holder") or order, on November 27, 2000, the
aggregate unpaid Revolving Loan made to the Borrower by the Holder, with daily
interest from the date hereof, computed as provided in the Credit Agreement
referred to below, on the principal amount of such Revolving Loan from time to
time unpaid at a rate per annum on each portion of the principal amount which
shall at all times equal the Applicable Rate (as defined in the Credit
Agreement) applicable to such portion in accordance with the Credit Agreement.
Interest shall be payable on the dates specified in the Credit Agreement, except
that all accrued interest shall be paid at the stated or accelerated maturity
hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to Fleet Bank of Massachusetts, N.A., as
Agent for the payee hereof, at 75 State Street, Boston, Massachusetts 02109.
This Note is one of several Notes evidencing the Revolving Loan under and
is entitled to the benefits and subject to the provisions of the Credit
Agreement dated as of November 28, 1995, as from time to time in effect (the
"Credit Agreement"), among Buckeye Cellulose Corporation, its Subsidiaries from
time to time party thereto, and certain Lenders for which Fleet Bank of
Massachusetts, N.A., is acting as agent, and SunTrust Bank, Central Florida N.A.
is acting as co-agent. The principal of this Note may be due and payable in
whole or in part prior to the maturity date stated above and is subject to
required prepayment in the amounts and under the circumstances set forth in the
Credit Agreement, and may be prepaid in whole or from time to time in part, all
as set forth in the Credit Agreement. Amounts so prepaid may be reborrowed by
the Borrower in accordance with and subject to the terms of the Credit
Agreement. This Note may not be assigned or otherwise transferred except in
accordance with the Credit Agreement.
In case an Event of Default (as defined in the Credit Agreement) shall
occur, the entire principal amount of this Note may become or be declared due
and payable in the manner and with the effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of Massachusetts.
<PAGE>
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, except as specifically otherwise provided in the Credit Agreement, and
assent to extensions of time of payment or forbearance or other indulgence
without notice.
BUCKEYE CELLULOSE CORPORATION
By__________________________________
Title:
-4-
<PAGE>
EXHIBIT 2.2.1
-------------
MONEY MARKET LOAN BID REQUEST
Date:
To: Fleet Bank of Massachusetts, N.A., as Agent under the Credit Agreement
(as defined below)
Re: Credit Agreement dated as of November 28, 1995, as from time to time in
effect (the "Credit Agreement"), among Buckeye Cellulose Corporation,
its Subsidiaries from time to time party thereto and certain Lenders for
which Fleet Bank of Massachusetts, N.A, is acting as Agent and SunTrust
Bank, Central Florida N.A. is acting as co-agent.
The undersigned hereby gives notice pursuant to Section 2.2.1 of the Credit
Agreement that the undersigned requests bids from the Lenders with respect to
the following Money Market Loan(s):
Money Market Loan Closing
Date/1/ (Date of Borrowing): ____________________
Principal Amount(s)/2/ Money Market Loan/3/
of Requested Interest Payment Money Market Loan/4/
Money Market Loan(s) Dates (if any) Maturity Date(s)
- -------------------- ----------------------- -----------------
Such Money Market Loan bids should offer a Money Market Rate.
The sum of the aggregate principal amount of Money Market Loans outstanding,
after giving effect to the Money Market Loans requested hereby, plus the
Revolving Loan plus the
- ---------------
(1) Must be the Banking Day following the applicable Request Date.
(2) Aggregate amount must be a minimum of $3,000,000, and if larger, in
integral multiples of $500,000.
(3) Must pay accrued and unpaid interest on the 90th day after the Money
Market Loan Closing Date if the Money Market Loan Maturity Date is
more than 90 days after the Money Market Loan Closing Date.
(4) day following the Money Market Loan Closing Date _________ and
(ii) the Final Maturity Date.
<PAGE>
Swingline Loan plus Letter of Credit Exposure will be $________.(5)
Aggregate number of LIBOR Pricing Options and Money Market Loans outstanding,
after giving effect to the Money Market Loans requested hereby.(6) __________
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
Very truly yours,
BUCKEYE CELLULOSE CORPORATION
By__________________________
Title:
---------------
(5) Must not exceed the Maximum Amount of Revolving Credit as
determined by Section 2.1.2 of the Credit Agreement.
(6) Must not exceed 10.
-2-
<PAGE>
EXHIBIT 2.2.2
-------------
INVITATION TO BID ON MONEY MARKET LOAN
Date:
To: Lenders Participating in the Money Market Loan Bid Auction under the Credit
Agreement
Re: Invitation to Bid on Money Market Loan
--------------------------------------
Pursuant to Section 2.2.2 of the Credit Agreement dated as of November 28, 1995,
as from time to time in effect (the "Credit Agreement"), among Buckeye Cellulose
Corporation, its Subsidiaries from time to time party thereto and certain
Lenders for which Fleet Bank of Massachusetts, N.A., is acting as Agent and
SunTrust Bank, Central Florida N.A. is acting as co-agent. We are pleased on
behalf of Buckeye Cellulose Corporation to invite you to submit bids with
respect to the following Money Market Loan(s):
Money Market Loan Closing
Date (Date of Borrowing): ____________________
Principal Amount(s) Money Market Loan
of Requested Interest Payment Money Market Loan
Money Market Loan(s) Dates (if any) Maturity Date(s)
- -------------------- ----------------------- ---------------------
Such Money Market Loan bids should offer a Money Market Rate.
Please respond to this invitation by no later than 10:00 a.m. (Boston time) on
the Money Market Loan Closing Date.
<PAGE>
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
Very truly yours,
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent under the Credit Agreement
By
-----------------------------------
Title:
-2-
<PAGE>
EXHIBIT 2.2.3A
--------------
MONEY MARKET LOAN BID
Date:
Fleet Bank of Massachusetts, N.A.,
as Agent under the Credit
Agreement (as defined below)
75 State Street
Boston, Massachusetts 02109
Attention: Structured Finance Group
Re: Buckeye Cellulose Corporation
In response to your invitation on behalf of Buckeye Cellulose Corporation (the
"Borrower") dated ____________________, the undersigned (the "Bidding Lender")
hereby submits the following Money Market Loan bid(s) with respect to the
following Money Market Loan(s):
1. Bidding Lender:
---------------------
2. Person to contact at Bidding Lender:
---------------------
3. Money Market Loan Closing
Date (Date of Borrowing):
----------------------
4. The undersigned hereby offers to make to the Borrower, on the Money Market
Loan Closing Date specified above, the following Money Market Loan(s):
<TABLE>
<CAPTION>
Principal Amount(s)/1/ Money Market Loan Money Market
of Offered Interest Payment Loan Maturity Money Market
Money Market Loan(s) Dates (if any) Date(s) Rate(s)/2/
- -------------------- -------------- ------------- ------------
<S> <C> <C> <C>
</TABLE>
The undersigned understands and agrees that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of
- -----------------
/1/ Principal amount of bids may not exceed principal amount requested.
Bids must be for a minimum of $1,000,000, and if larger, in integral multiples
of $1,000,000.
/2/ Specify rate of interest per annum (each rounded to the nearest
1/100%).
<PAGE>
November 28, 1995, as from time to time in effect (the "Credit Agreement"),
among Buckeye Cellulose Corporation, its Subsidiaries from time to time party
thereto and certain Lenders for which Fleet Bank of Massachusetts, N.A., is
acting as Agent and SunTrust Bank, Central Florida N.A. is acting as co-agent,
obligates the undersigned to make the Money Market Loan(s) for which any
offer(s) are accepted in whole or in part by the Borrower.
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
Very truly yours,
[NAME OF LENDER]
By
------------------------
Title:
-2-
<PAGE>
EXHIBIT 2.2.3B
--------------
LIST OF MONEY MARKET LOAN BIDS
Date:
Buckeye Cellulose Corporation
1001 Tillman Street
Memphis, Tennessee 38108-0407
Attention: Treasurer's Office
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of November 28, 1995, as from
time to time in effect (the "Credit Agreement"), among Buckeye Cellulose
Corporation, its Subsidiaries from time to time party thereto and certain
Lenders for which Fleet Bank of Massachusetts, N.A., is acting as Agent and
SunTrust Bank, Central Florida N.A. is acting as co-agent. Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the
meanings so defined.
Notice is hereby given that pursuant to Section 2.2.3 of the Credit Agreement,
the following Lenders have offered to make to Buckeye Cellulose Corporation on
____________________, the following Money Market Loan(s) in the amount(s) and at
the rate(s) specified below:
<TABLE>
<CAPTION>
Principal Money Market Money Market
Amount(s) of Loan Interest Loan Money
Offered Money Payment Dates Maturity Market
Lender(s) Market Loan(s) (if any) Date(s) Rate(s)
- --------- -------------- ------------- ------------ -------
<S> <C> <C> <C> <C>
</TABLE>
Very truly yours,
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent under the Credit Agreement
By
-----------------------------------
Title:
<PAGE>
EXHIBIT 2.3.3
-------------
SWINGLINE LOAN NOTE
No. ___ _______________, 199_
$_______________ Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned BUCKEYE CELLULOSE CORPORATION, a
Delaware corporation, (the "Borrower") hereby promises to pay to FLEET BANK OF
MASSACHUSETTS, N.A., (the "Holder") or order, on November 28, 2000,
___________________________________ DOLLARS ($_______________) or, if less, the
aggregate unpaid Swingline Loan made to the Borrower by the Holder, with daily
interest from the date hereof, computed as provided in the Credit Agreement
referred to below, on the principal amount of such Swingline Loan from time to
time unpaid at a rate per annum on each portion of the principal amount which
shall at all times equal the Swingline Rate (as defined in the Credit Agreement)
applicable to such portion in accordance with the Credit Agreement. Interest
shall be payable on the dates specified in the Credit Agreement, except that all
accrued interest shall be paid at the stated or accelerated maturity hereof or
upon the prepayment in full hereof.
Payments hereunder shall be made to Fleet Bank of Massachusetts, N.A., as
Agent for the payee hereof, at 75 State Street, Boston, Massachusetts 02109.
This Note is one of several Notes evidencing the Revolving Loan under and
is entitled to the benefits and subject to the provisions of the Credit
Agreement dated as of November 28, 1995, as from time to time in effect (the
"Credit Agreement"), among Buckeye Cellulose Corporation, its Subsidiaries from
time to time party thereto, and certain Lenders for which Fleet Bank of
Massachusetts, N.A., is acting as Agent and SunTrust Bank, Central Florida N.A.
is acting as co-agent. The principal of this Note may be due and payable in
whole or in part prior to the maturity date stated above and is subject to
required prepayment in the amounts and under the circumstances set forth in the
Credit Agreement, and may be prepaid in whole or from time to time in part, all
as set forth in the Credit Agreement. Amounts so prepaid may be reborrowed by
the Borrower in accordance with and subject to the terms of the Credit
Agreement. This Note may not be assigned or otherwise transferred except in
accordance with the Credit Agreement.
In case an Event of Default (as defined in the Credit Agreement) shall
occur, the entire principal amount of this Note may become or be declared due
and payable in the manner and with the effect provided in the Credit Agreement.
<PAGE>
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of Massachusetts.
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, except as specifically otherwise provided in the Credit Agreement, and
assent to extensions of time of payment or forbearance or other indulgence
without notice.
BUCKEYE CELLULOSE CORPORATION
By
--------------------------------
Title:
-2-
<PAGE>
EXHIBIT 2.2.4A
--------------
LIST OF ACCEPTANCES AND NON-ACCEPTANCES
OF MONEY MARKET LOAN BIDS
Fleet Bank of Massachusetts, N.A.,
as Agent under the Credit
Agreement (as defined below)
75 State Street
Boston, Massachusetts 02109
Attention: Structured Finance Group
Ladies and Gentlemen:
Reference is made to (a) the Credit Agreement dated as of November 28,
1995, as from time to time in effect (the "Credit Agreement"), among Buckeye
Cellulose Corporation (the "Company"), its Subsidiaries from time to time party
thereto and certain Lenders for which you are acting as Agent and (b) the bid
notices (the "Bid Notices") received from you on [insert applicable Money Market
Loan Closing Date]. Terms defined in the Credit Agreement and not otherwise
defined herein are used herein with the meanings so defined.
[Pursuant to Section 2.2.4 of the Credit Agreement, the Company hereby
irrevocably accepts the offer(s) of the Lender(s) specified below to make the
following Money Market Loans:
Lender(s):
----------------------
Money Market Loan
Closing Date:
----------------------
Principal amount(s)
of offered Money
Market Loan(s): $
---------------------
Money Market Rate(s): %
----------------------
Money Market Loan
Maturity Date(s):
----------------------
<PAGE>
Money Market Loan
Interest Payment
Dates (if any): ]
----------------------
[repeat for each accepted bid]
[Except as provided above,] all offers to make Money Market Loans described
in the Bid Notices are hereby rejected.
Very truly yours,
BUCKEYE CELLULOSE CORPORATION
By
-----------------------------
Title:
-2-
<PAGE>
EXHIBIT 2.2.4B
--------------
ACCEPTANCE OF MONEY MARKET LOAN BIDS
Date:
To: Lenders Participating in the Money Market Loan Bid Auction under the Credit
Agreement
Reference is made to the Credit Agreement dated as of November 28, 1995, as from
time to time in effect (the "Credit Agreement"), among Buckeye Cellulose
Corporation, its Subsidiaries from time to time party thereto and certain
Lenders for which Fleet Bank of Massachusetts, N.A., is acting as Agent and
SunTrust Bank, Central Florida N.A. is acting as co-agent.
Pursuant to Section 2.2.4 of the Credit Agreement, notification has been
received from Buckeye Cellulose Corporation that it has accepted the following
bids:
<TABLE>
<CAPTION>
Principal Money Market Money Market
Amount(s) of Loan Interest Loan Money
Offered Money Payment Dates Maturity Market
Lender(s) Market Loan(s) (if any) Date(s) Rate(s)
- --------- -------------- -------------- ------------ -------
<S> <C> <C> <C> <C>
</TABLE>
If your quote has been accepted, funds should be transferred to Fleet Bank of
Massachusetts, N.A., [insert transfer instructions] and should be immediately
available as of 2:30 p.m. (Boston time) on _________________.
Following are the Money Market Loan bids which were submitted by the Lenders in
today's auction:
<TABLE>
<CAPTION>
Principal Money Market Money Market
Amount(s) of Loan Interest Loan Money
Offered Money Payment Dates Maturity Market
Lender(s) Market Loan(s) (if any) Date(s) Rate(s)
- --------- -------------- -------------- ------------ -------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
Very truly yours,
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent under the Credit Agreement
By
-----------------------------------
Title:
-2-
<PAGE>
EXHIBIT 2.2.4C
--------------
NON-ACCEPTANCE OF MONEY MARKET LOAN BIDS
Date:
To: Lenders Participating in the Money Market Loan Bid Auction under the Credit
Agreement
Reference is made to the Credit Agreement dated as of November 28, 1995, as from
time to time in effect (the "Credit Agreement"), among Buckeye Cellulose
Corporation, its Subsidiaries from time to time party thereto and certain
Lenders for which Fleet Bank of Massachusetts, N.A., is acting as Agent and
SunTrust Bank, Central Florida N.A. is acting as co-agent.
Pursuant to Section 2.2.4 of the Credit Agreement, notification has been
received from the Company that it has not accepted any of the following bids:
<TABLE>
<CAPTION>
Principal Money Market Money Market
Amount(s) of Loan Interest Loan Money
Offered Money Payment Dates Maturity Market
Lender(s) Market Loan(s) (if any) Date(s) Rate(s)
- --------- -------------- -------------- ------------ -------
<S> <C> <C> <C> <C>
</TABLE>
Following are the Money Market Loan bids which were submitted by the Lenders in
today's auction:
<TABLE>
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Principal Money Market Money Market
Amount(s) of Loan Interest Loan Money
Offered Money Payment Dates Maturity Market
Lender(s) Market Loan(s) (if any) Date(s) Rate(s)
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<S> <C> <C> <C> <C>
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<PAGE>
Very truly yours,
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent under the Credit Agreement
By
-----------------------------------
Title:
-2-
<PAGE>
EXHIBIT 2.2.4D
--------------
NOTICE OF MONEY MARKET LOAN
Date:
Buckeye Cellulose Corporation
1001 Tillman Street
Memphis, Tennessee 38108-0407
Attention: Treasurer
[Each Lender]
[Address]
Attention:
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of November 28, 1995, as from
time to time in effect (the "Credit Agreement"), among Buckeye Cellulose
Corporation, its Subsidiaries from time to time party thereto and certain
Lenders for which the undersigned is acting as Agent. Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the
meanings so defined.
Pursuant to Section 2.2.4 of the Credit Agreement, the undersigned hereby
notifies you that the following Money Market Loan(s) became effective on the
date hereof:
Principal Amount of Money Market Loan
Money Market Loan(s) Maturity Date(s)
- -------------------- -----------------
<PAGE>
Very truly yours,
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent under the Credit Agreement
By____________________________________
Title:
-2-
<PAGE>
EXHIBIT 2.2.5
-------------
MONEY MARKET NOTE
No. ______ _______________, 199__
$_______________ Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned BUCKEYE CELLULOSE CORPORATION, a
Delaware corporation, (the "Borrower") hereby promises to pay to
______________________ (the "Holder") or order, on [insert Money Market Loan
Maturity Date], ___________________________________ DOLLARS ($_______________)
or, if less, the aggregate unpaid Money Market Loan made to the Borrower by the
Holder, with daily interest from the date hereof, computed as provided in the
Credit Agreement referred to below, on the principal amount of such Money Market
Loan from time to time unpaid at a rate per annum of [insert Money Market Rate]
plus an additional rate per annum on the occurrence and continuation of an Event
of Default, as provided for in the Credit Agreement. Accrued interest shall be
payable on [insert Money Market Loan Interest Payment Date, if any] [and on]
[insert Money Market Loan Maturity Date] except that all accrued interest shall
be paid at the accelerated maturity hereof or upon the prepayment in full
hereof.
Payments hereunder shall be made to Fleet Bank of Massachusetts, N.A., as
Agent for the payee hereof, at 75 State Street, Boston, Massachusetts 02109.
This Note evidences a Money Market Loan under and is entitled to the
benefits and subject to the provisions of the Credit Agreement dated as of
November 28, 1995, as from time to time in effect (the "Credit Agreement"),
among Buckeye Cellulose Corporation, its Subsidiaries from time to time party
thereto, and certain Lenders for which Fleet Bank of Massachusetts, N.A., is
acting as Agent and SunTrust Bank, Central Florida N.A. is acting as co-agent.
The principal of this Note may be due and payable in whole or in part prior to
the maturity date stated above and is subject to required prepayment in the
amounts and under the circumstances set forth in the Credit Agreement, and may
be prepaid in whole or from time to time in part, all as set forth in the Credit
Agreement. This Note may not be assigned or otherwise transferred except in
accordance with the Credit Agreement.
In case an Event of Default (as defined in the Credit Agreement) shall
occur, the entire principal amount of this Note may become or be declared due
and payable in the manner and with the effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of Massachusetts.
<PAGE>
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, except as specifically otherwise provided in the Credit Agreement, and
assent to extensions of time of payment or forbearance or other indulgence
without notice.
BUCKEYE CELLULOSE CORPORATION
By______________________________
Title:
-2-
<PAGE>
Exhibit 5.1.2
-------------
GUARANTORS CONTRIBUTION AGREEMENT
This Agreement, dated as of November 28, 1995, is among Buckeye Cellulose
Corporation, a Delaware corporation (the "Company"), and the other guarantors
listed on Schedule A hereto (together with the Company, the "Guarantors"), in
connection with the Credit Agreement dated as of November 28, 1995, as from time
to time in effect (the "Credit Agreement"), among the Company, the other
Guarantors, and the Lenders, including Fleet Bank of Massachusetts, N.A., as
Agent for itself and the other Lenders and SunTrust Bank, Central Florida N.A.
as co-agent for itself and the other Lenders. Terms defined in the Credit
Agreement and not otherwise defined herein are used herein with the meanings so
defined.
The Guarantors agree as follows:
1. Inducement. In order to induce the Lenders to extend credit to the
Company pursuant to the Credit Agreement, the Guarantors have guaranteed, to the
extent provided in the Credit Documents, the payment and performance of all
Credit Obligations. The extensions of credit by the Lenders to the Company
under the Credit Agreement will directly or indirectly inure to the benefit of
each Guarantor, and the guarantees referred to in the foregoing sentence are in
pursuit of the business purposes of the Guarantor that has given such guarantee
as an integral part of the business conducted and proposed to be conducted by it
and are reasonably necessary and convenient in connection with the conduct of
the business conducted and proposed to be conducted by it. By virtue of the
foregoing and after giving effect to the probable liability of each Guarantor on
its guarantee, each Guarantor is receiving at least fair consideration and
reasonably equivalent value from the Lenders for such guarantee.
2. Contribution. The Guarantors agree that, as among themselves in their
capacity as guarantors under the Credit Agreement, the ultimate responsibility
for repayment of the Credit Obligations, in the event that the Company fails to
pay when due its Credit Obligations, shall be equitably apportioned, to the
extent consistent with the Credit Documents, among the respective Guarantors in
the proportion that each, in its capacity as a guarantor, has benefited from the
extensions of credit to the Company by the Lenders under the Credit Agreement,
or if such equitable apportionment cannot reasonably be determined or agreed
upon among the affected Guarantors, in proportion to their respective net worths
determined on or about the date hereof (or such later date as such Guarantor
becomes party hereto). In the event that any Guarantor, in its capacity as a
guarantor, pays an amount with respect to the Credit Obligations in excess of
its proportionate share as set forth in this Section 2, each other Guarantor
shall, to the extent consistent with the Credit Documents, make a contribution
payment to such Guarantor in an amount such that the aggregate amount paid by
each Guarantor reflects its proportionate share of the Credit Obligations. In
the event of any default by any Guarantor under this Section 2, each other
Guarantor will bear, to the extent consistent
<PAGE>
with the Credit Documents, its proportionate share of the defaulting Guarantor's
obligation under this Section 2.
3. Enforcement; Parties. This Agreement is intended to set forth
only the rights and obligations of the Guarantors among themselves and shall not
in any way affect the obligations of any Guarantor to the Lenders under the
Credit Documents (which obligations shall at all times constitute the joint and
several obligations of all the Guarantors) and, in furtherance of the foregoing,
the provisions of this Agreement shall be carried out in a manner consistent
with the requirements contained in Section 9 of the Credit Agreement. The
parties agree that, from time to time, additional Subsidiaries which are
included as Guarantors under the Credit Documents may be added as parties hereto
(and will also then be added to Schedule A hereto) by executing a counterpart of
this Agreement or an agreement by which such Subsidiary agrees to be bound
hereby, and without further action by any party hereto or thereto.
4. Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute one instrument.
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as of the date first above written.
BUCKEYE CELLULOSE CORPORATION
By___________________________________
Title:
BUCKEYE FLORIDA CORPORATION
BUCKEYE FOLEY CORPORATION
By___________________________________
Title:
BUCKEYE FLORIDA, LIMITED PARTNERSHIP
By BUCKEYE FLORIDA CORPORATION,
general partner
By:____________________________________
Title:
-2-
<PAGE>
SCHEDULE A
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OTHER GUARANTORS
<PAGE>
Exhibit 5.1.3
-------------
BUCKEYE CELLULOSE CORPORATION
SUBSIDIARY SUBORDINATION AGREEMENT
This Agreement, dated as of November 28, 1995, is among Buckeye Cellulose
Corporation, a Delaware corporation (the "Company"), Buckeye Florida
Corporation, Buckeye Foley Corporation, Buckeye Florida, Limited Partnership and
Fleet Bank of Massachusetts N.A., as agent (the "Agent") for itself and the
other Lenders under the Credit Agreement (as defined below). The parties agree
as follows:
1. Reference to Credit Agreement; Certain Rules of Construction;
Definitions. Reference is made to the Credit Agreement dated as of the date
hereof, as from time to time in effect (the "Credit Agreement"), among the
Company, its Subsidiaries from time to time party thereto, the Lenders, the
Agent and SunTrust Bank, Central Florida N.A. as co-agent for itself and the
other Lenders. Except as the context otherwise explicitly requires, (a) the
capitalized term "Section" refers to sections of this Agreement, (b) references
to a particular Section shall include all subsections thereof and (c) the word
"including" shall be construed as "including without limitation". Capitalized
terms defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined. Certain other capitalized terms are used
in this Agreement as specifically defined in this Section 1 as follows:
1.1. "Junior Creditor" means each of Buckeye Florida Corporation, Buckeye
Foley Corporation, Buckeye Florida, Limited Partnership and each other Person
becoming a party to this Agreement pursuant to Section 9.1.
1.2. "Reorganization" means any voluntary or involuntary dissolution,
winding-up, total or partial liquidation or reorganization or restructuring,
whether by judicial proceedings or otherwise, or bankruptcy, insolvency,
receivership or other statutory or common law proceedings or arrangements,
including any proceeding under the federal Bankruptcy Code or any similar law of
any other jurisdiction, involving the Company or any guarantor of the
Subordinated Indebtedness or any of their present or future Subsidiaries or any
of their respective properties or the readjustment of the respective liabilities
of the Company or any such other Person or any assignment for the benefit of
creditors or any marshaling of the assets or liabilities of the Company or any
such other Person.
-1-
<PAGE>
1.3. "Senior Indebtedness" means:
-------------------
(a) all Credit Obligations, including:
(i) The obligation to pay the Indebtedness evidenced
by the Notes;
(ii) Any contingent or matured obligations of the Company
to the Agent or to any of the Lenders in respect of Letters of
Credit or drafts accepted under Letters of Credit, including any
obligation of the Company arising under the Credit Agreement or
any other Credit Document to reimburse the Agent or any of the
Lenders for payments made under Letters of Credit and to deposit
with or to pay to the Agent cash in an amount equal to all or
part of the Letter of Credit Exposure;
(iii) Obligations to pay interest owing under the Credit
Agreement or any other Credit Document, whether such obligations
arise before or after the institution of any Reorganization and
whether or not such obligations are allowed claims in such
Reorganization;
(iv) Any contingent or matured obligations of the Company
to any Lender or any of its Affiliates with respect to Interest
Rate Protection Agreements; and
(v) Obligations to pay commitment fees, Letter of Credit
fees, Agent's fees and other fees, charges, indemnities and
expenses from time to time owing under the Credit Agreement or
any other Credit Document, whether such obligations arise before
or after the institution of any Reorganization and whether or
not such obligations are allowed claims in such Reorganization;
and
(b) All renewals, extensions and refinancings of the items
described in clause (a) above.
1.4. "Subordinated Indebtedness" means:
-------------------------
(a) The principal of and interest on any inter-company loans
from any Junior Creditor to the Company and its Subsidiaries and all
other Indebtedness of the Company and its Subsidiaries to the Junior
Creditors permitted under Section 6.9.2 of the Credit Agreement; and
(b) All other obligations of the Company and its Subsidiaries
to the Junior Creditors with respect to the items in clause
(a), whether now existing or hereafter
-2-
<PAGE>
arising, including intercompany advances and any claim against the Company
and its Subsidiaries in respect of rescission, indemnification, expenses,
damages or otherwise.
2. Subordination Covenants. The Company and each of the Junior Creditors
covenants that, so long as any part of the Senior Indebtedness is outstanding
and until the Lenders' obligations to extend credit under each Credit Document
shall have been irrevocably terminated, each of them will comply with the
following provisions:
2.1. Subordination. To the extent and in the manner provided in this
Agreement, the payment of any Subordinated Indebtedness is and shall be
expressly subordinated and junior in right of payment to the prior payment in
full of all Senior Indebtedness, and the Subordinated Indebtedness is hereby
subordinated as a claim against the Company, any of its Subsidiaries, any
guarantor of the Senior Indebtedness or any of their respective assets to the
prior payment in full of the Senior Indebtedness, in each case whether such
claim be (a) in the ordinary course of business or (b) in the event of any
Reorganization.
2.2. Restricted Payments. The Company and its Subsidiaries will not make,
and the Junior Creditors will not accept or receive, any payment of any
Subordinated Indebtedness, whether in cash, securities or other property or by
way of conversion, exchange or set-off or otherwise, and no such payment shall
become due; provided, however, that the Company may make any Distribution
permitted by Section 6.10 of the Credit Agreement, subject to the limitations
set forth therein.
2.3. Reorganization. In the event of any Reorganization, all Senior
Indebtedness shall first be paid in full in cash before any payment is made on
account of any Subordinated Indebtedness. In any proceedings seeking to effect
a Reorganization any payment or distribution of any kind or character, whether
in cash or property or securities, which may be payable or deliverable in
respect of any such Subordinated Indebtedness shall be paid or delivered
directly to the Agent for application to payment of the Senior Indebtedness,
unless and until all Senior Indebtedness shall have been paid in full.
2.4. Specific Powers in Reorganization. In any proceedings with respect
to any Reorganization, each Junior Creditor irrevocably authorizes the Agent
(and such Junior Creditor shall have no liability for any of such actions taken
by the Agent):
(a) To prove and enforce any claims on the Subordinated Indebtedness
owed by the Company and its Subsidiaries to such Junior Creditor either in
the name of the Agent or in the name of such Junior Creditor as the
attorney-in-fact of such Junior Creditor;
-3-
<PAGE>
(b) To vote claims comprising any such Subordinated Indebtedness and
to accept or reject on behalf of such Junior Creditor any plan proposed in
connection with any such Reorganization;
(c) To accept and execute receipts for any payment or distribution
made with respect to any such Subordinated Indebtedness and to apply such
payment or distribution to the payment of the Senior Indebtedness; and
(d) To take any action and to execute any instruments necessary to
effectuate the foregoing, either in the name of the Agent or in the name of
such Junior Creditor as the attorney-in-fact of such Junior Creditor.
2.5. Payments Held in Trust. If, notwithstanding the foregoing, any
payment or distribution of the assets of the Company or any of its present or
future Subsidiaries of any kind or character (other than payments permitted by
Section 2.2) shall be received, by way of set-off or otherwise, by any Junior
Creditor before all Senior Indebtedness is paid in full and before the Lenders'
obligations to extend credit under all Credit Documents shall have been
irrevocably terminated, such payment or distribution and the amount of any such
set-off shall be held in trust by the Junior Creditor and promptly paid over to
the Agent (who shall have the right to convert any such assets into cash) for
application (including the applications of such cash and cash proceeds) to the
payment of all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent
payment or distribution to the holders of Senior Indebtedness, and the Lenders'
obligations to extend credit under all Credit Documents shall have been
irrevocably terminated.
2.6. Restrictions on Acceleration. Notwithstanding any contrary provision
of any Subordinated Indebtedness or of any agreement or instrument relating
thereto, (a) no Subordinated Indebtedness (other than payments permitted by
Section 2.2) shall become or be declared to be due and payable prior to the date
on which the Senior Indebtedness becomes or is declared to be due and payable
and (b) if any Senior Indebtedness shall have become or been declared to be due
and payable prior to its stated maturity, the Subordinated Indebtedness shall
become immediately due and payable.
2.7. Restrictions on Remedies. No Junior Creditor shall, without the
Agent's prior written consent, institute proceedings to enforce any Subordinated
Indebtedness, notwithstanding any provision to the contrary contained in any
Subordinated Indebtedness or in any agreement or instrument relating thereto.
Without limiting the generality of the foregoing sentence, no Junior Creditor
shall, without the Agent's prior written consent, commence or join with any
other creditor of the Company and its Subsidiaries in commencing any proceeding
against the Company and its Subsidiaries seeking to effect a Reorganization.
-4-
<PAGE>
2.8. No Collateral. The Company and its Subsidiaries shall not grant, and
no Junior Creditor shall demand, accept or receive, any collateral, direct or
indirect, for any Subordinated Indebtedness.
2.9. No Other Subordination. Each Junior Creditor represents that the
Subordinated Indebtedness is not subordinated to any obligations other than the
Senior Indebtedness, the Senior Notes and the Approved Subordinated Debt and
covenants that it will not subordinate the Subordinated Indebtedness to any
other obligations except with the prior written consent of the Agent.
2.10. Payment in Full. For the purposes of this Agreement, no Senior
Indebtedness shall be deemed to have been paid in full unless the holder thereof
shall have received and have been permitted to retain cash equal to the amount
thereof then outstanding and such Senior Indebtedness shall have been fully and
indefeasibly discharged.
3. Effect of Provisions; Subrogation.
---------------------------------
3.1. Effect of Provisions; Relative Rights. The provisions hereof as to
subordination are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on one hand and each Junior Creditor on the other
hand, and such provisions shall not impair as between the Company and any Junior
Creditor the obligation of the Company, which is unconditional and absolute, to
pay to such Junior Creditor the principal of any Subordinated Indebtedness owed
by the Company to such Junior Creditor and interest thereon, and all other
amounts in respect thereof, nor shall any such provisions prevent any Junior
Creditor from exercising all remedies otherwise permitted by applicable law or
under the terms of such Subordinated Indebtedness upon a default thereunder,
except to the extent prohibited by this Agreement.
3.2. Subrogation. When all Senior Indebtedness then outstanding has been
paid in full and the Lenders' obligations to extend credit under all Credit
Documents have been irrevocably terminated, each Junior Creditor shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Company or any of its Subsidiaries
that would be deemed payable on the Senior Indebtedness until the Subordinated
Indebtedness shall be paid in full. For the purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which any Junior Creditor would be entitled except for
the provisions of this Agreement, and no payment over pursuant to the provisions
of this Agreement to the holders of Senior Indebtedness by such Junior Creditor,
shall, as between the Company or any of its Subsidiaries and their creditors
other than the holders of Senior Indebtedness, on one hand, and such Junior
Creditor, on the other hand, be deemed to be a payment by the Company or any of
its Subsidiaries to or on account of Senior Indebtedness.
-5-
<PAGE>
4. Legend, etc. The Company and each of the Junior Creditors covenants to
cause each instrument or certificate representing or evidencing any of the
Subordinated Indebtedness to have affixed upon it a legend substantially as
follows:
"This instrument is subject to the Subsidiary Subordination Agreement
dated as of November 28, 1995, as from time to time in effect, among the
maker, the payee and Fleet Bank of Massachusetts, N.A., as Agent, which,
among other things, subordinates the obligations of the obligor hereunder
to the prior payment of certain obligations of the obligor to the holders
of Senior Indebtedness as defined therein."
The Company shall cause any financial statement describing or listing or
otherwise reflecting the existence of any Indebtedness included in the
Subordinated Indebtedness to indicate clearly the subordinated character
thereof.
5. Further Assurances. The Company and each of the Junior Creditors
covenants to execute and deliver to the Agent such further instruments and to
take such further action as the Agent may at any time or times reasonably
request in order to carry out the provisions and intent of this Agreement.
6. Representations and Warranties. In order to induce the Lenders to
extend credit under the Credit Agreement, each Junior Creditor represents and
warrants that:
6.1. Organization and Business. Such Junior Creditor is a duly organized
and validly existing corporation, in good standing under the laws of the state
of its incorporation, with all power and authority, corporate or otherwise,
necessary (a) to enter into and perform this Agreement and each other Credit
Document to which it is a party and (b) to own its properties and carry on the
business now conducted or proposed to be conducted by it. Certified copies of
the Charter and By-laws of such Junior Creditor have been previously delivered
to the Agent and are correct and complete.
6.2. Authorization and Enforceability. Such Junior Creditor has taken all
corporate action required to execute, deliver and perform this Agreement and
each other Credit Document to which it is a party. Each of this Agreement and
each other Credit Document to which such Junior Creditor is party constitutes
the legal, valid and binding obligation of such Junior Creditor, enforceable
against such Junior Creditor in accordance with its terms except as the
enforceability of such documents may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws from time to time in effect and
affecting the rights of creditors generally and by general principles of equity,
good faith and fair dealing.
6.3. No Legal Obstacle to Agreements. Neither the execution and delivery
of this Agreement or any other Credit Document, nor the consummation of any
transaction referred to in or contemplated by this Agreement or any other Credit
Document, nor the fulfillment of the terms hereof or thereof or of any other
agreement, instrument, deed or lease referred to in this
-6-
<PAGE>
Agreement or any other Credit Document, has constituted or resulted, or will
constitute or result, in:
(a) Any breach or termination of the provisions of any agreement,
instrument, deed or lease to which any Junior Creditor is a party or by
which it is bound, or of the Charter or By-laws of such Junior Creditor; or
(b) The violation in any material respect of any law, statute,
judgment, decree or governmental order, rule or regulation applicable to
any Junior Creditor.
No approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by any Junior Creditor in connection with the execution,
delivery and performance of this Agreement or any other Credit Document to which
it is party or the transactions contemplated hereby or thereby.
6.4. Litigation. No litigation, at law or in equity, or any proceeding
before any court, board or other governmental or administrative agency or any
arbitrator is pending or, to the knowledge of any Junior Creditor, threatened
which may involve any material risk of any final judgment, order or liability
which, after giving effect to any applicable insurance, has resulted, or is
reasonably expected to create a material risk of resulting, in any material
adverse change in such Junior Creditor's business, assets, financial condition
or income or which seeks to enjoin the consummation, or which questions the
validity, of any of the transactions contemplated by this Agreement or any other
Credit Document. No judgment, decree or order of any court, board or other
governmental or administrative agency or any arbitrator has been issued against
or binds any Junior Creditor which has resulted, or is reasonably expected to
create a material risk of resulting, in any material adverse change in such
Junior Creditor's business, assets, financial condition or income.
7. Information Regarding the Company. Each Junior Creditor expressly
acknowledges and agrees that it has made such investigation as it deems
desirable of the risks undertaken by it in entering into this Agreement and is
fully satisfied that it understands all such risks. Each Junior Creditor waives
any obligation which may now or hereafter exist on the part of the Agent or any
holder of any Senior Indebtedness to inform such Junior Creditor of the risks
being undertaken by entering into this Agreement or of any changes in such risks
and such Junior Creditor undertakes to keep itself informed of such risks and
any changes therein. Each Junior Creditor expressly waives (except to the
extent prohibited by applicable law which cannot be waived) any duty which may
now or hereafter exist on the part of the Agent or any holder of any Senior
Indebtedness to disclose to such Junior Creditor any matter related to the
business, operations, character, collateral, credit, condition (financial or
otherwise), income or prospects of the Company or its Affiliates, properties or
management, whether now or hereafter known by any Lender. Each Junior Creditor
represents, warrants and agrees that it assumes sole responsibility for
obtaining from the Company and its Affiliates all information
-7-
<PAGE>
concerning the Credit Agreement and all other Credit Documents and all other
information as to the Company and its Subsidiaries and their respective
Affiliates, properties or management or anything relating to any of the above as
it deems necessary or desirable.
8. Continuing Agreement; Lender Powers; etc.
-----------------------------------------
8.1. Continuing Agreement, etc. This Agreement shall be a continuing
agreement, shall be irrevocable and shall remain in full force and effect until
the payment in full of the Senior Indebtedness then outstanding in accordance
with the terms thereof at a time when the Lenders' obligations to extend credit
under all Credit Documents shall have been irrevocably terminated.
8.2. Consent to Credit Agreement. Each Junior Creditor acknowledges
receipt from the Company of a correct and complete copy of the Credit Agreement
as in effect as of the date hereof, and consents to all of the provisions of the
Credit Agreement as in effect as of such date.
8.3. Power to Modify Credit Agreement, etc. To the extent permitted by
applicable law that cannot be waived, each Junior Creditor grants the Agent and
the Lenders full power, in their sole discretion, without notice to or consent
by such Junior Creditor and without in any way affecting the subordination of
the Subordinated Indebtedness provided in this Agreement:
8.3.1. To waive compliance with any Default under, and to consent to
any amendment or change of any terms of, the Credit Agreement, any other
Credit Document, the Credit Obligations or any Guarantee thereof (each as
from time to time in effect);
8.3.2. To grant one or more extensions or renewals of the Credit
Obligations (for any duration), and any other indulgence with respect
thereto and to effect any total or partial release (by operation of law or
otherwise), discharge, compromise or settlement with respect to the
obligations of the Company in respect of the Credit Obligations, whether or
not rights against the Company under this Agreement are reserved in
connection therewith;
8.3.3. To take security in any form for the Credit Obligations and to
consent to the addition to or the substitution, exchange, release, failure
to perfect or any other disposition of, and to deal in any other manner
with, any property which may from time to time secure the Credit
Obligations whether or not the property, if any, received upon the exercise
of such power shall be of a character or value the same as or different
from the character or value of any property disposed of, and to obtain,
modify or release any present or future Guarantees of the Credit
Obligations and to proceed against such Guarantees in any order;
-8-
<PAGE>
8.3.4. To extend credit under the Credit Agreement or any other Credit
Document, or otherwise, in such amount as the Lenders may determine,
whether for a greater or lesser amount than is presently in effect, even
though the financial condition of the Company and its Subsidiaries may have
deteriorated since the date hereof; and
8.3.5. To collect or liquidate or realize upon any of the Credit
Obligations in any manner or to refrain from collecting or liquidating or
realizing upon any of the Credit Obligations.
8.4. No Impairment by Company, Lenders, etc. No right of the Lenders or
any present or future holder of any Senior Indebtedness shall at any time be
prejudiced or impaired by any act or failure to act on the part of the Company,
including any noncompliance by the Company with the terms of this Agreement, or
by any act or failure to act, in good faith, by any Lender or any such holder,
regardless of any knowledge thereof which any Lender or any such holder may have
or otherwise be charged with.
8.5. Specific Performance. The Agent is authorized to demand specific
performance of this Agreement at any time when the Company or any Junior
Creditor shall have failed to comply with any provision hereof applicable to it,
and each of them irrevocably waives any defense based on the adequacy of a
remedy at law which might be asserted as a bar to the remedy of specific
performance hereof in any action brought therefor by the Lenders.
9. Transfers; Successors and Assigns.
9.1. Transfers. No Junior Creditor will sell, assign, transfer or
otherwise dispose of any Subordinated Indebtedness except to another Person
which shall have entered into this Agreement or another agreement with the
Agent, in a form satisfactory to the Agent, providing for subordination of such
Subordinated Indebtedness to the prior payment of the Credit Obligations on the
terms provided in this Agreement.
9.2. Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of the Lenders and their successors and assigns and shall be
binding upon each of the Company and each of the Junior Creditors and their
respective successors and assigns. Neither the Company nor any Junior Creditor
may assign its rights or obligations under this Agreement except to the extent
provided in Section 9.1.
10. Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be given if given in writing (including telex,
telecopy or similar teletransmission) addressed as provided below (or to the
addressee at such other address as the addressee shall have specified by notice
actually received by the addressor), and if either (a) actually delivered in
fully legible form to such address (evidenced in the case of a telex by receipt
of the correct answerback) or (b) in the case of a letter, five business days
shall have
-9-
<PAGE>
elapsed after the same shall have been deposited in the United States mails,
with first-class postage prepaid and registered or certified.
If to the Company, to it at its address specified in or pursuant to Section
16 of the Credit Agreement, to the attention of its chief financial officer.
If to any Junior Creditor, to it at its address specified in or pursuant to
Section 15 of the Credit Agreement, to the attention of its chief financial
officer.
If to the Agent, to it at its address specified in or pursuant to Section
15 of the Credit Agreement.
11. Venue; Service of Process. Each of the Company and each Junior
Creditor by its execution hereof:
(a) Irrevocably submits to the nonexclusive jurisdiction of the state
courts of The Commonwealth of Massachusetts and to the nonexclusive
jurisdiction of the United States District Court for the District of
Massachusetts for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement or any other Credit Document or
the subject matter hereof or thereof; and
(b) Waives to the extent not prohibited by applicable law, and agrees
not to assert, by way of motion, as a defense or otherwise, in any such
proceeding brought in any of the above-named courts, any claim that it is
not subject personally to the jurisdiction of such court, that its property
is exempt or immune from attachment or execution, that such proceeding is
brought in an inconvenient forum, that the venue of any such proceeding is
improper, or that this Agreement or any other Credit Document, or the
subject matter hereof or thereof, may not be enforced in or by such court.
Each of the Company and each Junior Creditor consents to service of process in
any such proceeding in any manner permitted by Chapter 223A of the General Laws
of The Commonwealth of Massachusetts and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
in or pursuant to Section 10 is reasonably calculated to give actual notice.
12. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE AGENT, THE COMPANY AND EACH JUNIOR CREDITOR
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND OR ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE CREDIT
AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR
-10-
<PAGE>
THE SUBJECT MATTER HEREOF OR THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY
CONNECTED WITH THE DEALINGS OF THE AGENT, THE COMPANY OR SUCH JUNIOR CREDITOR IN
CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each of the Company and
each Junior Creditor acknowledges that it has been informed by the Lenders that
the provisions of this Section 12 constitute a material inducement upon which
each of the Lenders has relied, is relying and will rely in entering into the
Credit Agreement and any other Credit Document, and that it has reviewed the
provisions of this Section 12 with its counsel. The Agent, the Company or any
Junior Creditor may file an original counterpart or a copy of this Section 12
with any court as written evidence of the consent of the Agent, the Company and
such Junior Creditor to the waiver of the right to trial by jury.
13. General. All covenants, agreements, representations and warranties
made in this Agreement or any other Credit Document or in certificates delivered
pursuant hereto or thereto shall be deemed to have been relied on by each
Lender, notwithstanding any investigation made by the Agent on its behalf, and
shall survive the execution and delivery to the Lenders hereof and thereof. The
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of any other term or provision hereof. The
headings in this Agreement are for convenience of reference only and shall not
limit, alter or otherwise affect the meaning hereof. This Agreement and the
other Credit Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior and
current understandings and agreements, whether written or oral. This Agreement
is a Credit Document and may be executed in any number of counterparts, which
together shall constitute one instrument. This Agreement shall be governed by
and construed in accordance with the laws (other than the conflict of laws
rules) of The Commonwealth of Massachusetts.
-11-
<PAGE>
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
dated first written above.
BUCKEYE CELLULOSE CORPORATION
By
------------------------------
Title:
BUCKEYE FLORIDA CORPORATION
BUCKEYE FOLEY CORPORATION
By
------------------------------
Title:
BUCKEYE FLORIDA, LIMITED PARTNERSHIP
By Buckeye Florida Corporation, General Partner
By
------------------------------
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
as Agent under the Credit Agreement
By
------------------------------
Title:
-12-
<PAGE>
EXHIBIT 5.1.6
-------------
FINANCIAL OFFICER'S CERTIFICATE AS TO
CONCURRENT TRANSACTIONS
Fleet Bank of Massachusetts, N.A.
as Agent under the Credit
Agreement (as defined below)
75 State Street
Boston, Massachusetts 02109
Dear Agent:
Pursuant to Section 5.1.6(i) of the Credit Agreement dated as of November
28, 1995, as from time to time in effect (the "Credit Agreement"), among Buckeye
Cellulose Corporation (the "Company"), its Subsidiaries from time to time party
thereto, you and the other Lenders party thereto, including SunTrust Bank,
Central Florida N.A. as co-agent, the Company represents and warrants as
follows:
(a) The Company's cotton linter plant in Memphis, Tennessee, its wood pulp
plant in Foley, Florida and all related assets are owned by the Company and its
Wholly Owned Subsidiaries.
(b) The Company has issued the Approved Subordinated Debt in an aggregate
principal amount of at least $150,000,000 (sold at 99.626% of face amount), the
Approved Subordinated Debt is rated at least BB - by S&P and Ba3 by Moody's, and
the proceeds of the Approved Subordinated Debt have been used solely to fund the
acquisition of the 50% ownership interest of Procter & Gamble Cellulose in
Buckeye Florida Partners and to repay the Indebtedness owing by the Company to
Procter & Gamble Cellulose and MDCP contemplated under paragraph (e) below.
(c) MDCP has offered and sold, in a transaction registered under the
Securities Act, at least 4,000,000 shares of the Company's common stock.
(d) The Company has exercised its option to acquire the 50% ownership
interest of Procter & Gamble Cellulose in Buckeye Florida Partners with the
proceeds of the Approved Subordinated Debt.
(e) The Company has repaid in full all Indebtedness owing by the Company
and its Subsidiaries to Procter & Gamble Cellulose, MDCP and their respective
Affiliates with the proceeds of the Approved Subordinated Debt and cash and Cash
Equivalents owned by the Company and its Subsidiaries immediately prior to date
hereof.
<PAGE>
(f) The Company has repaid in full all Indebtedness owing by the Company
and its Subsidiaries under the Heller Credit Agreement with the proceeds of the
Loan. The Heller Credit Agreement has been terminated, and all guarantees and
collateral relating thereto have been released.
(g) The Company has accepted for purchase through a tender offer at least a
majority in outstanding principal amount of the Senior Notes, and the indenture
for such Senior Notes has been amended to permit the transactions contemplated
under the Credit Agreement and to make other changes reasonably satisfactory to
the Lenders.
(h) All of the conditions to the obligations of the parties to the
Concurrent Transactions have been satisfied in all material reflects. Any
material consent, authorization, order or approval of any Person required in
connection with the Concurrent Transactions has been obtained and are in full
force and effect.
Terms defined in the Credit Agreement and not otherwise defined are used
herein with the meanings so defined.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
________ day of _______________, 199_.
BUCKEYE CELLULOSE CORPORATION
By:
------------------------------------
Title:
-2-
<PAGE>
EXHIBIT 5.1.7.
--------------
OFFICER'S CERTIFICATE AS TO
SOLVENCY AND NET WORTH
Fleet Bank of Massachusetts, N.A.
as Agent under the Credit
Agreement (as defined below)
75 State Street
Boston, Massachusetts 02109
Dear Agent:
Pursuant to Section 5.1.7 of the Credit Agreement dated as of November 28,
1995, as from time to time in effect (the "Credit Agreement"), among Buckeye
Cellulose Corporation (the "Company"), its Subsidiaries from time to time party
thereto, you and the other Lenders party thereto, including SunTrust Bank,
Central Florida N.A. as co-agent, the Company represents and warrants as
follows:
(a) The Company and its Subsidiaries, on a Consolidated basis, are not
insolvent; and
(b) The Consolidated Net Worth of the Company and its Subsidiaries exceeds
$80,000,000,
in each case immediately after giving effect to the Concurrent Transactions and
the transactions contemplated thereby and by the Credit Agreement.
Terms defined in the Credit Agreement and not otherwise defined are used
herein with the meanings so defined.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
__________day of _______________, 199_.
BUCKEYE CELLULOSE CORPORATION
By: ______________________________
Title:
<PAGE>
EXHIBIT 5.2.1
-------------
OFFICER'S CERTIFICATE
Fleet Bank of Massachusetts, N.A.,
as Agent under the Credit
Agreement (as defined below)
75 State Street
Boston, Massachusetts 02109
Dear Agent:
Pursuant to Section 5.2.1 of the Credit Agreement dated as of November 28,
1995, as from time to time in effect (the "Credit Agreement"), among Buckeye
Cellulose Corporation, its Subsidiaries from time to time party thereto, you and
the other Lenders party thereto, including SunTrust Bank, Central Florida N.A.
as co-agent, Buckeye Cellulose Corporation (the "Company") has requested that
an extension of credit be made to it on the date hereof in the principal amount
of $__________________ in accordance with the [insert Revolving Loan facility,
Money Market Loan facility, Swingline Loan facility, or Letters of Credit
Facility] under the Credit Agreement.
The Company represents and warrants as follows:
(a) The representations and warranties contained in Sections 7 of the
Credit Agreement are true and correct on and as of the date hereof with the same
force and effect as though made on and as of such date.
(b) No Default under the Credit Agreement has occurred or shall exist
after giving effect to the extension of credit.
(c) Between June 30, 1995 and the date hereof, no Material Adverse Change
has occurred.
(d) Except as set forth in the certificate, if any, attached hereto, there
has been no change in (i) the charters or by-laws of the Company and its
Subsidiaries heretofore certified to you, or (ii) the incumbency of the officers
of the Company and its Subsidiaries whose signatures have been heretofore
certified to you.
(e) After giving effect to the extension of credit requested hereby, the
principal amount of all credit extended to the Company under the Credit
Agreement shall not exceed an amount equal to the Maximum Amount of Revolving
Credit set forth in the Credit Agreement.
(f) The proceeds of the loan requested hereby will be dedicated to the
following application in accordance with the designation previously made under
Section 2.5 of the Credit Agreement:
<PAGE>
Terms defined in the Credit Agreement and not otherwise defined are used
herein with the meanings so defined.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
____ day of ________________, 199_.
BUCKEYE CELLULOSE CORPORATION
By:
--------------------------------------
Title:
-2-
<PAGE>
EXHIBIT 6.8.14
--------------
LIENS
Certain assets of the Company and/or its Subsidiaries may be subject to
Liens of the type described in Sections 6.8.1 through 6.8.8, inclusive, and
6.8.11.
Buckeye Florida Partners has pledged certificates of deposits in the
amounts of $2,300,000 and $900,000 to Union Planters National Bank, to secure
payment by certain executive officers of the Company of loans, which are in the
principal amounts equal to the denominations of the respective certificates of
deposit, the proceeds of which were utilized to purchase stock in the Company.
The Company granted a security interest in its inventory and accounts
receivable to secure borrowings under the Heller Agreement, which security
interest will be released on the Initial Closing Date.
Buckeye Florida, Limited Partnership's indebtedness to Procter & Gamble
Cellulose Company is secured by a security interest in its machinery and
equipment and a mortgage on its land and buildings, both of which will be
released on the Initial Closing Date.
The Company is the lessee under the following, which have been capitalized:
Capital Lease for SAP Software license with Winthrop Resources from
March 1994 - February 1997
Capital Lease for Disk Mirroring Software license with Winthrop
Resources from June 1995 - March 1997
Capital Lease for E-MaiL Software license with Winthrop Resources
from January 1995 - March 1997
Operating Lease for Computer Hardware with Winthrop Resources from
March 1994 - April 1997
Operating Lease for E-Mail Hardware witH Winthrop Resources from
January 1995 - April 1997
Operating Lease for Disk Mirroring System with Winthrop Resources
from June 1995 - April 1997
In addition, the following Liens exist on the Initial Closing Date:
Signode Corporation has filed a UCC-1 financing statement covering
inventory of Signode on consignment to Buckeye Florida, Limited Partnership at
its Perry, Florida plant.
<PAGE>
EXHIBIT 7.1
-----------
COMPANY AND ITS SUBSIDIARIES
----------------------------
COMPANY
- -------
NAME: Buckeye Cellulose Corporation
-----
STATE OF INCORPORATION: Delaware
-----------------------
PRINCIPLE EXECUTIVE OFFICE
--------------------------
AND PLACE OF BUSINESS: 1001 Tillman Street
----------------------
Memphis, TN 38108
OTHER NAMES USED: None other than product trade names and trademarks.
-----------------
JURISDICTIONS WHERE TANGIBLE PERSONAL PROPERTY LOCATED:
-------------------------------------------------------
Tennessee
Georgia
Switzerland
SUBSIDIARIES
- ------------
CORPORATE SUBSIDIARIES (following Closing):
- ----------------------
1. NAME: Buckeye Florida Corporation
-----
STATE OF INCORPORATION: Delaware
-----------------------
PRINCIPAL EXECUTIVE OFFICE: 1001 Tillman Street
---------------------------
Memphis, TN 28108
PRINCIPAL PLACE OF BUSINESS: State Road 30
----------------------------
Rt. 3, Box 260
Foley, Florida 32347
OTHER NAMES USED: None other than produce trade names and trademarks.
-----------------
JURISDICTION WHERE TANGIBLE PERSONAL PROPERTY LOCATED:
------------------------------------------------------
None
CAPITAL STOCK: 200,000 shares of Class A Common Stock authorized, 112,500
outstanding, and 300,000 shares of Class B Common Stock authorized, 147,412
outstanding before the Initial Closing Date. Following the Initial Closing Date,
100 shares of Class A Common Stock will be outstanding, all of which will be
held by the Company.
<PAGE>
2. NAME: Buckeye Cellulose S.A.
-----
JURISDICTION OF INCORPORATION: Switzerland
------------------------------
PRINCIPAL EXECUTIVE OFFICE: Route de Frontenex, 62
---------------------------
1207 Geneva
Switzerland
PRINCIPAL PLACE OF BUSINESS: Same as above.
----------------------------
OTHER NAMES USED: None.
-----------------
JURISDICTION WHERE TANGIBLE PERSONAL PROPERTY LOCATED:
------------------------------------------------------
Switzerland.
CAPITAL STOCK: 100 shares of common stock issued and outstanding.
-------------
3. NAME: Buckeye Foley Corporation
-----
JURISDICTION OF INCORPORATION: Delaware
------------------------------
PRINCIPAL EXECUTIVE OFFICE: 1001 Tillman Street
---------------------------
Memphis, Tennessee
PRINCIPAL PLACE OF BUSINESS: 1001 Tillman Street
----------------------------
Memphis, Tennessee
OTHER NAMES USED: None.
-----------------
JURISDICTION WHERE TANGIBLE PERSONAL PROPERTY LOCATED:
------------------------------------------------------
None
CAPITAL STOCK: 100 shares of common stock, all of which will be owned by
--------------
the Company.
PARTNERSHIP SUBSIDIARY
- ----------------------
NAME: Buckeye Florida, Limited Partnership
-----
STATE OF ORGANIZATION: Delaware
----------------------
PRINCIPAL EXECUTIVE OFFICE: 1001 Tillman Street
---------------------------
Memphis, TN 28108
PRINCIPAL PLACE OF BUSINESS: State Road 30
----------------------------
<PAGE>
Rt. 3, Box 260
Foley, Florida 32347
OTHER NAMES USED: None other than product trade names and trademarks.
-----------------
JURISDICTION WHERE TANGIBLE PERSONAL PROPERTY LOCATED:
------------------------------------------------------
Florida
Georgia
CAPITAL STRUCTURE: Buckeye Florida Corporation is the sole general
partner, with a 50% partnership interest. The Procter & Gamble Cellulose Company
is the sole limited partner, with a 50% partnership interest. Following the
Initial Closing Date, Buckeye Florida Corporation will be the sole general
partner with a 50.5% partnership interest, and Buckeye Foley Corporation will be
the sole limited partner with a 49.5% partnership interest.
<PAGE>
EXHIBIT 7.2.2
-------------
MATERIAL AGREEMENTS
1. International Purchase Agreement dated November 28, 1995 among the Company
and the purchasers listed on the signature pages thereto for the purchase of
8,222,500 shares of common stock of the Company.
2. U.S. Purchase Agreement dated November 28, 1995 among the Company and the
purchasers listed on the signature pages thereto for the purchase of 8,222,500
shares of common stock of the Company.
3. Purchase Agreement dated November 28, 1995 among the Company and the
purchasers listed on the signature pages thereto for the purchase of
$150,000,000 8 1/2% Senior Subordinated Notes due 2005.
4. Trust Indenture dated as of May 27, 1993 (as supplemented on November 28,
1995) between the Company and Bankers Trust Company, as Trustee, respecting the
10.25% Senior Notes.
5. Financing Agreement dated March 16, 1993 between Buckeye Florida, Limited
Partnership and The Procter & Gamble Cellulose Company, which will be terminated
on the Initial Closing Date.
6. Class D Senior Secured Note Agreement dated March 16, 1993 between Buckeye
Florida, Limited Partnership and The Procter & Gamble Cellulose Company, which
will be terminated on the Initial Closing Date.
7. Indenture dated as of November 28, 1995 between the Company and Union
Planters National Bank, as Trustee.
8. Pulp Supply Agreement dated as of March 16, 1993 between Buckeye Florida,
Limited Partnership and The Procter & Gamble Cellulose Company.
9. Timberlands Agreement dated as of March 16, 1993 between Buckeye Florida,
Limited Partnership and The Procter & Gamble Cellulose Company.
10. Timber Purchase Agreement dated as of March 16, 1993 between Buckeye
Florida, Limited Partnership and The Procter & Gamble Cellulose Company.
11. Fenholloway River Agreement dated as of March 29, 1995 between the State of
Florida Department of Environmental Protection and Buckeye Florida, Limited
Partnership.
<PAGE>
EXHIBIT 7.3
-----------
FINANCING DEBT, CERTAIN INVESTMENTS, ETC.
1. See Exhibit 6.8.15, which to the extent referred to herein is incorporated
herein by reference, respecting Capitalized Leases and the Pledge Agreement for
the certificates of deposit, which will remain following the Initial Closing
Date.
2. Indebtedness under 10.25% Senior Notes, an undetermined amount of which
will remain outstanding following the Initial Closing Date.
3. Indebtedness under the Heller Credit Agreement, none of which is
outstanding or will be outstanding following the Initial Closing Date.
4. Indebtedness under the Class D Senior Secured Note Agreement dated March
16, 1992 between Buckeye Florida, Limited Partnership and The Procter & Gamble
Cellulose Company, all of which has previously been repaid.
5. $150,000,000 aggregate principal amount Senior Subordinated Notes Due 2005,
pursuant to Trust Indenture between the Company and Union Planters National
Bank, as Trustee.
6. 10% Class A Secured Notes due March 16, 2000 owed to Procter & Gamble,
which will be repaid at the Initial Closing Date.
7. 12% Subordinated Secured Notes due March 16, 2003 in the amount of
$75,000,000 owed to Procter & Gamble, which will be repaid at the Initial
Closing Date.
8. Three Standby Letters of Credit issued by Heller for workers' compensation,
as follows (to be replaced on the Initial Closing Date):
(a) #5170-01, dated June 25, 1994, in amount of $75,000 for benefit of The
Home Insurance Company;
(b) $5170-02, dated April 1, 1994, in amount of $415,000 for benefit of
Home Insurance Company; and
(c) #5170-03, dated March 20, 1995, in amount of $517,000 for benefit of
The Zurich Insurance Company.
9. Stockholders Agreements among the Company and certain stockholders, and
Buckeye Florida Corporation and certain of its stockholders, require repurchase
of certain stockholders' shares upon death or permanent disability; the
repurchase obligations will be terminated at the Initial Closing.
10. Letter of Intent respecting acquisition of assets of Peter Temming AG.
<PAGE>
EXHIBIT 7.14
------------
ENVIRONMENTAL MATTERS
1. Although presently in compliance in material respects with Environmental
Laws, the effectiveness of the proposed reclassification of the Fenholloway
River, into which the Foley, Florida plant discharges waste water, will require
significant expenditures in order for Buckeye Florida to remain in compliance.
Additionally, the adoption by the United States Environmental Protection Agency
of certain proposed rules addresses the emission of certain "hazardous air
pollutants" and waste water discharges by the pulp and paper industry may
require further expenditures in order for the Company and Subsidiaries to remain
in compliance.
2. The Company is aware that The Procter & Gamble Cellulose Company has been
named a potentially responsible party with respect to certain disposal sites
associated with operations of the Foley, Florida plant, prior to its acquisition
by Buckeye Florida, Limited Partnership. The Procter & Gamble Cellulose Company
retained all liability and has agreed to indemnify the Company and Buckeye
Florida, Limited Partnership, respecting such potential liability.
3. The Foley Plant has been the subject of certain additional environmental
and public health assessments, including a study being conducted by the federal
agency for Toxic Substance and Disease Registry ("ATSDR"). ATSDR advised the
Company in early 1993 of its interest in conducting a public health assessment
at the Foley Plant. In the Spring of 1994, ATSDR orally informed the Company
that its investigation had not identified any significant concerns related to
the Foley Plant or ground water conditions. To date, ATSDR has not issued any
reports.
4. A number of lawsuits are currently pending alleging that historical
hazardous substance releases associated with the Foley Plant have adversely
affected ground water and property values and could adversely affect public
health. The Company believes that these lawsuits are without merit.
5. The Foley Plant is on the EPA CERCLIS list of potential hazardous substance
release sites prepared pursuant to CERCLA. The EPA conducted a site
investigation in early 1995. The Company considers it unlikely that the Foley
Plant will be listed on the CERCLA list.
<PAGE>
EXHIBIT 7.15
------------
MULTIEMPLOYER AND DEFINED BENEFIT PLANS
Neither the Company nor any Subsidiary maintains any multi-employer plan or
defined benefit plan as such terms are defined in ERISA.
<PAGE>
EXHIBIT 9.9
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[COMPANY OR SUBSIDIARY NAME]
PLEDGE AGREEMENT
Dated as of ___________________ ____, 1995
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Table of Contents PAGE
<S> <C>
1. Background; Definitions. ......................................................... -1-
1.1. Background............................................................... -1-
1.2. Reference to Credit Agreement; Definitions............................... -1-
2. Pledge............................................................................ -1-
2.1. Credit Security.......................................................... -1-
2.2. Representations, Warranties and Covenants with Respect to Pledged Stock.. -2-
2.2.1. Pledged Stock.................................................. -2-
2.2.2. No Liens....................................................... -2-
2.2.3. Perfection of Pledged Stock.................................... -2-
2.3. Administration of Pledged Stock.......................................... -2-
2.3.1. Distributions.................................................. -2-
2.3.2. Voting......................................................... -3-
2.3.3. Custody of Pledged Stock....................................... -3-
2.4. Modifications to Pledged Stock........................................... -3-
2.5. Right to Realize upon Pledged Stock...................................... -3-
2.5.1. Marshaling..................................................... -4-
2.5.2. Sales of Pledged Stock......................................... -4-
2.5.3. Sale without Registration...................................... -4-
2.5.4. Application of Proceeds........................................ -5-
2.5.5. Contractual Restrictions....................................... -6-
3. Continuing Agreement, etc......................................................... -6-
4. Waivers; Powers, etc.............................................................. -6-
4.1. Specific Performance..................................................... -6-
4.2. Power to Modify, etc..................................................... -6-
5. Successors and Assigns............................................................ -7-
6. Notices........................................................................... -7-
7. Defeasance........................................................................ -7-
8. Venue; Service of Process......................................................... -8-
9. WAIVER OF JURY TRIAL.............................................................. -8-
10. General........................................................................... -9-
</TABLE>
-i-
<PAGE>
[COMPANY OR SUBSIDIARY NAME]
PLEDGE AGREEMENT
This Agreement, dated as of _____________ ___, 1995, is between [COMPANY OR
SUBSIDIARY NAME], a [Jurisdiction of Organization] corporation, and FLEET BANK
OF MASSACHUSETTS, N.A., as agent (the "Agent") for itself and the other Lenders
under the Credit Agreement (as defined below). The parties agree as follows:
1. Background; Definitions.
1.1. Background. The Lenders (as defined in the Credit Agreement) are
providing loans and letters of credit to Buckeye Cellulose Corporation (the
"Company") under the Credit Agreement (as defined below). [(name of foreign
subsidiary) is a Wholly Owned Subsidiary of the Company.] This Agreement creates
the pledge by [the Company or the Subsidiary] of 66% of its stock of [name of
Wholly Owned Subsidiary, the stock of which is being pledged] under the Laws of
[Country] to secure the repayment of the Credit Obligations.
1.2. Reference to Credit Agreement; Definitions. Reference is made to the
Credit Agreement dated as of November 28, 1995, as amended and as from time to
time in effect (the "Credit Agreement"), among Buckeye Cellulose Corporation, a
Delaware corporation (the "Company"), certain of its subsidiaries from time to
time party thereto, the Lenders (as defined therein) and the Agent. Except as
the context otherwise explicitly requires, (a) the capitalized term "Section"
refers to sections of this Agreement, (b) references to a particular Section
shall include all subsections thereof and (c) the word "including" shall be
construed as "including without limitation". Capitalized terms defined in the
Credit Agreement are used herein with the meanings so defined.
2. Pledge.
2.1. Credit Security. As security for the payment and performance of the
Credit Obligations, the [Company or Subsidiary] mortgages, pledges and
collaterally grants and assigns to the Agent for the benefit of the Lenders and
the holders from time to time of any Credit Obligation, and creates a security
interest in favor of the Agent for the benefit of the Lenders and such holders
in, (a) 66% of its right, title and interest in and to (but none of its
obligations or liabilities with respect to) the shares of capital stock of [name
of subsidiary] and (b) all options, warrants and similar rights to acquire up to
66% of such capital stock, together with the proceeds thereof, dividends or
distributions thereon (subject to Section 2.3.1); provided, however, that the
aggregate amount of stock and other interests and rights pledged hereunder shall
at no time exceed 66% of the aggregate outstanding capital stock, stock
equivalents, and rights and interests to acquire, or convertible into, capital
stock of [name of
<PAGE>
subsidiary]. All such capital stock, options, warrants and other rights are
collectively referred to as the "Pledged Stock".
2.2. Representations, Warranties and Covenants with Respect to
Pledged Stock. The [Company or Subsidiary] represents, warrants and covenants
that:
2.2.1. Pledged Stock. All shares of capital stock and similar
securities included in the Pledged Stock are and shall be at all times duly
authorized, validly issued, fully paid and nonassessable. The [Company or
Subsidiary] will deliver to the Agent certificates representing the Pledged
Stock (to the extent it has not previously done so), registered, if the
Agent so requests, in the name of the Agent or its nominee, as pledgee, or
accompanied by a stock transfer power executed in blank and, if the Agent
so requests, with the signature guaranteed, all in form and substance
satisfactory to the Agent. Pledged Stock that is not evidenced by a
certificate will be registered in the Agent's name as pledgee on the
issuer's records, all in form and substance satisfactory to the Agent. The
Agent may at any time transfer into its name or the name of its nominee, as
pledgee, any Pledged Stock.
2.2.2. No Liens. All Pledged Stock shall be free and clear of any
Liens and restrictions on the transfer thereof except for (a) restrictions
on transfer of the Pledged Stock imposed by state, federal or other
applicable securities laws and (b) Liens created hereby. The [Company or
Subsidiary] will not pledge or create or permit to exist any security
interest in any Pledged Stock except for the Liens created hereby. None of
the Pledged Stock is subject to any options to purchase or similar rights
of any Person.
2.2.3. Perfection of Pledged Stock. Upon the Agent's written
request from time to time, the [Company or Subsidiary] will make, execute
and deliver all such instruments and documents, including appropriate
financing statements, transfer powers and notices, and take all such action
as the Agent may deem necessary or advisable to carry out the intent and
purposes of this Agreement and the Credit Documents or for assuring and
confirming to the Lenders the pledge and security interests in the Pledged
Stock created hereby.
2.3. Administration of Pledged Stock. The Pledged Stock shall be
administered as follows, and if an Event of Default shall have occurred, Section
2.5 shall also apply.
2.3.1. Distributions.
(a) To the extent permitted by the Credit Agreement, unless
an Event of Default shall occur, the [Company or Subsidiary] shall be
entitled to receive all Distributions paid on the Pledged Stock. All
other Distributions made or paid on the Pledged Stock will be
retained by the Agent (or if received by the [Company or Subsidiary]
shall be held by
-2-
<PAGE>
the [Company or Subsidiary] and shall be forthwith paid by it to the
Agent in the original form received, endorsed in blank) as a part of
the Pledged Stock.
(b) If an Event of Default shall occur, all Distributions and
other payments with respect to the Pledged Stock shall be retained by
the Agent (or if received by the [Company or Subsidiary] shall be
held by the [Company or Subsidiary] and shall be forthwith paid by it
to the Agent in the original form received, endorsed in blank) as
part of the Pledged Stock or applied by the Agent to the payment of
the Credit Obligations in accordance with Section 2.5.4.
2.3.2. Voting.
(a) Until an Event of Default shall occur, the [Company or
Subsidiary] shall be entitled to vote or consent with respect to the
Pledged Stock in any manner that would not cause a violation of the
terms of any Credit Document, and the Agent will, if so requested,
execute appropriate revocable proxies therefor.
(b) If an Event of Default shall occur, and if and to the
extent that the Agent shall so notify the [Company or Subsidiary] in
writing, only the Agent shall be entitled to vote or consent or take
any other action with respect to the Pledged Stock (and the [Company
or Subsidiary] will, if so requested, execute or cause to be executed
appropriate proxies therefor).
2.3.3. Custody of Pledged Stock. The Agent will use reasonable care
in the custody and physical preservation of any Pledged Stock in its
possession. Except as set forth in the immediately preceding sentence, and
except as provided by applicable law that cannot be waived, the Agent will
have no duty with respect to the custody and protection of the Pledged
Stock, the collection of any part thereof or of any income thereon or the
preservation or exercise of any rights pertaining thereto, including rights
against prior parties. The Lenders will not be liable or responsible for
any loss or damage to any Pledged Stock, or for any diminution in the value
thereof, by reason of the act or omission of any agent selected by the
Agent, except when the Agent has acted with gross negligence or willful
misconduct in the selection of such agent.
2.4. Modifications to Pledged Stock. Except with the prior written
consent of the Agent, the [Company or Subsidiary] shall not amend or modify, or
waive any of its rights under or with respect to the Pledged Stock (other than
stock splits and stock dividends) if the effect of such amendment, modification
or waiver would be materially to reduce the amount of
-3-
<PAGE>
such item, or to waive or impair any remedies of the [Company or Subsidiary] or
the Lenders under or with respect to the Pledged Stock.
2.5. Right to Realize upon Pledged Stock. Except to the extent prohibited
by applicable law that cannot be waived, this Section 2.5 shall govern the
Lenders' and the Agent's right to realize upon the Pledged Stock if any Event of
Default shall have occurred. The provisions of this Section 2.5 are in addition
to any rights and remedies available at law or in equity and in addition to the
provisions of any other Credit Document. In the case of a conflict between this
Section 2.5 and any other Credit Document, this Section 2.5 shall govern.
2.5.1. Marshaling. The Lenders and the Agent shall not be required
to make any demand upon, accelerate, or pursue or exhaust any of their
rights or remedies against the [Company or Subsidiary], any other Obligor
or any other Person with respect to the payment of the Credit Obligations,
or to pursue or exhaust any of its rights or remedies with respect to any
of the collateral therefor or any direct or indirect guarantee thereof. The
Lenders and the Agent shall not be required to marshal the Pledged Stock,
or any guarantee of the Credit Obligations or to resort to the Pledged
Stock, or any such guarantee in any particular order, and all of their
rights hereunder shall be cumulative. Without limiting the generality of
the foregoing, the [Company or Subsidiary] agrees that it will not invoke
or raise as a defense to any enforcement by the Agent or any other Lender
of its rights and remedies relating to the Credit Obligations any legal or
contractual requirement with which the Agent or any other Lender may have
in good faith failed to comply, the consequence of which defense would
prevent or materially delay or otherwise impede the enforcement of the
Agent's or the Lenders' rights under this Agreement and hereby waives the
same. In addition, the [Company or Subsidiary] waives any right to prior
notice (except to the extent expressly required by this Agreement) or
judicial hearing in connection with foreclosure on or disposition of any
Pledged Stock, including any such right which the [Company or Subsidiary]
would otherwise have under the Constitution of the United States of
America, any state or territory thereof or any other jurisdiction.
2.5.2. Sales of Pledged Stock. Any Pledged Stock may be sold for
cash or other value in any number of lots at any commercially reasonable
public or private sale, without demand, advertisement or notice; provided,
however, that the Agent shall give the [Company or Subsidiary] 10 days'
prior written notice of the time and place of any public sale, or the time
after which a private sale or a sale on a recognized market may be made,
which notice the [Company or Subsidiary] and the Lenders agree to be
reasonable. At any sale of Pledged Stock (except to the extent prohibited
by applicable law that cannot be waived) the Agent or any of the Lenders or
any of its or their respective officers acting on its or their behalf, or
their assigns, may bid for and purchase all or any part of the property and
rights so sold and upon compliance with the terms of such sale may hold and
dispose of such property and rights without further
-4-
<PAGE>
accountability to the [Company or Subsidiary], except for the proceeds of
such sale pursuant to Section 2.5.4. The [Company or Subsidiary]
acknowledges that any such sale will be made by the Agent on an "as is"
basis with disclaimers of all warranties, whether express or implied, to
the extent permitted by applicable law. The Company will execute and
deliver or cause to be executed and delivered such instruments, documents,
assignments, waivers, certificates and affidavits, will supply or cause to
be supplied such further information and will take such further action as
the Agent shall require in connection with any such sale.
2.5.3. Sale without Registration. If, at any time when the Agent
shall determine to exercise its rights hereunder to sell all or part of the
securities included in the Pledged Stock, the securities in question shall
not be effectively registered under the Securities Act (or other applicable
law), the Agent may, in its sole discretion, sell such securities by
private or other sale not requiring such registration in such manner and in
such circumstances as the Agent may deem necessary or advisable in order
that such sale may be effected in a commercially reasonable manner in
compliance with applicable securities laws without such registration and
without the related delays, expense and uncertainty. Without limiting the
generality of the foregoing, in any event the Agent may, in its sole
discretion, (a) approach and negotiate with one or more possible purchasers
to effect such sale, (b) restrict such sale to one or more purchasers each
of whom will represent and agree that such purchaser is purchasing for its
own account, for investment and not with a view to the distribution or sale
of such securities and (c) cause to be placed on certificates representing
the securities in question a legend to the effect that such securities have
not been registered under the Securities Act (or other applicable law) and
may not be disposed of in violation of the provisions thereof. The [Company
or Subsidiary] agrees that such manner of disposition is commercially
reasonable, that it will upon the Agent's request give any such purchaser
access to such information regarding the issuer of the securities in
question as the Agent may reasonably request and that neither the Agent nor
any of the Lenders shall incur any responsibility for selling all or part
of the securities included in the Pledged Stock at any private or other
sale not requiring such registration, notwithstanding the possibility that
a substantially higher price might be realized if the sale were deferred
until after registration under the Securities Act (or other applicable law)
or until made in compliance with certain other rules or exemptions from the
registration provisions under the Securities Act (or other applicable law).
The [Company or Subsidiary] acknowledges that no adequate remedy at law
exists for breach by it of this Section 2.5.3 and that such breach would
not be adequately compensable in damages and therefore agrees that this
Section 2.5.3 may be specifically enforced.
2.5.4. Application of Proceeds. The proceeds of all sales and
collections in respect of any Pledged Stock and all funds collected from
the [Company or Subsidiary], the application of which is not otherwise
specifically provided for herein, shall be applied as follows:
-5-
<PAGE>
First, to the payment of the costs and expenses of such sales and
collections, the reasonable expenses of the Agent and the reasonable
fees and expenses of its special counsel;
Second, any surplus then remaining to the payment of the Credit
Obligations in such order and manner as the Agent may in its sole
discretion determine; provided, however, that any such payment shall
be pro rata in accordance with (a) the relative Percentage Interests
of the Lenders and (b) the relative amounts of the Loan and the
payments due to the Lenders under Interest Rate Protection Agreements
having an aggregate notional amount not exceeding the Maximum Amount
of Revolving Credit and the Letter of Credit Exposure as from time to
time in effect; and
Third, any surplus then remaining shall be paid to the [Company
or Subsidiary] subject, however, to the rights of the holder of any
then existing Lien of which the Agent has actual notice.
2.5.5. Contractual Restrictions. To the extent that the Pledged Stock
includes investments in a party to an agreement, lease, franchise or other
instrument which prohibits assignments by or changes in control of the
parties thereto, then, notwithstanding anything else herein to the
contrary, no action shall be taken by the Agent with respect to such items
until the required consent to or approval of such action by the other
parties thereto has been obtained. The [Company or Subsidiary] covenants
that upon the Agent's request, it will file such applications and take such
other action as the Agent may request to obtain consent or approval to any
action contemplated by this Agreement and to give effect to the security
interests created by the Credit Documents.
3. Continuing Agreement, etc. This Agreement shall be a continuing agreement,
shall be irrevocable and shall remain in full force and effect until the
indefeasible payment in full of the Credit Obligations then outstanding in
accordance with the terms thereof at a time when the Lenders' obligations to
extend credit under all Credit Documents shall have been irrevocably terminated
(other than indemnity and similar provisions of the Credit Documents that
expressly survive the termination of such documents). No action which the
[Company or Subsidiary] may take or refrain from taking shall affect the
provisions of this Agreement or the obligations of the [Company or Subsidiary]
hereunder. No right of the Lenders or any present or future holder of any of the
Credit Obligations shall at any time be prejudiced or impaired by any act or
failure to act on the part of the [Company or Subsidiary], or by any
noncompliance by the [Company or Subsidiary] with the terms of this Agreement,
regardless of any knowledge thereof which any Lender, the Agent or any such
holder may have or otherwise be charged with.
-6-
<PAGE>
4. Waivers; Powers, etc.
4.1. Specific Performance. The Agent is authorized to demand specific
performance of this Agreement at any time when the [Company or Subsidiary] shall
have failed to comply with any provision hereof, and it irrevocably waives any
defense based on the adequacy of a remedy at law which might be asserted as a
bar to the remedy of specific performance hereof in any action brought therefor
by the Lenders.
4.2. Power to Modify, etc. Except to the extent prohibited by the
provisions of applicable law that cannot be waived, the [Company or Subsidiary]
grants the Agent and the Lenders full power, in their sole discretion:
4.2.1. To waive compliance with any Default under, and to consent to
any amendment or change or any terms of, the Credit Agreement, any other
Credit Document, the Pledged Stock, the Credit Obligations or any Guarantee
thereof (each as from time to time in effect);
4.2.2. To grant one or more extensions or renewals of the Credit
Obligations (for any period, no matter how long), and any other indulgence
with respect thereto and to effect any total or partial release (by
operation of law or otherwise), discharge, compromise or settlement with
respect to the obligations of the Company in respect of the Credit
Obligations, whether or not rights against the [Company or Subsidiary]
under this Agreement are reserved in connection therewith;
4.2.3. To take security in any form for the Credit Obligations and to
consent to the addition to or the substitution, exchange, release, failure
to perfect or any other disposition of, and to deal in any other manner
with, to the extent permitted by applicable law that cannot be waived, all
or part of any property which may from time to time secure the Credit
Obligations whether or not the property, if any, received upon the exercise
of such power shall be of a character or value the same as or different
from the character or value of any property disposed of, and to obtain,
modify or release any present or future Guarantees of the Credit
Obligations and to proceed against any of the Pledged Stock or such
Guarantees in any order;
4.2.4. To extend credit under the Credit Agreement or any other Credit
Document, or otherwise, in such amount as the Lenders may determine,
whether for a greater or lesser amount than is presently in effect, even
though the financial condition of the Company and its Subsidiaries may have
deteriorated since the date hereof; and
4.2.5. To collect or liquidate any of the Credit Obligations or the
Pledged Stock in any manner or to refrain from collecting or liquidating
any of the Credit Obligations or the Pledged Stock.
-7-
<PAGE>
5. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of the Lenders and their successors and assigns and shall be binding
upon the [Company or Subsidiary] and its respective successors and assigns.
6. Notices. Except as otherwise specified in this Agreement, any notice required
to be given pursuant to this Agreement shall be given in writing. Any notice,
demand or other communication in connection with this Agreement shall be deemed
to be given if given in writing (including telex, telecopy (confirmed by
telephone or writing) or similar teletransmission) addressed as provided below
(or to the addressee at such other address as the addressee shall have specified
by notice actually received by the addressor), and if either (a) actually
delivered in fully legible form to such address (evidenced in the case of a
telex by receipt of the correct answerback) or (b) in the case of a letter, five
days shall have elapsed after the same shall have been deposited in the United
States mails, with first-class postage prepaid and registered or certified.
If to the [Company or Subsidiary], to it at the address set forth on the
signature page hereof.
If to the Agent or any other Lender, to it at its address set forth on the
signature page of the Credit Agreement, with a copy to the Agent.
7. Defeasance. When all Credit Obligations have been paid, performed and
reasonably determined by the Lenders to have been indefeasibly discharged in
full, and if at the time no Lender continues to be committed to extend any
credit to the Company under the Credit Agreement or under any other Credit
Document, this Agreement shall terminate and, at the written request of the
[Company or Subsidiary] accompanied by such certificates and opinions as the
Agent shall reasonably deem necessary, the Pledged Stock shall revert to the
[Company or Subsidiary], and all right, title and interest of the Lenders
therein shall terminate. Thereupon, on the [Company's or Subsidiary's] demand
and at its cost and expense, the Agent shall execute proper instruments,
acknowledging satisfaction of and discharging this Agreement, and shall
redeliver to the [Company or Subsidiary], as the case may be, any Pledged Stock
then in its possession; provided, however, that Sections 2.2.4, 9 and 10 shall
survive the termination of this Agreement.
8. Venue; Service of Process. The [Company or Subsidiary], by its execution
hereof:
(a) Irrevocably submits to the nonexclusive jurisdiction of the
state courts of The Commonwealth of Massachusetts and to the
nonexclusive jurisdiction of the United States District Court for the
District of Massachusetts for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement, the Credit
Agreement, or any other Credit Document or the subject matter hereof
or thereof brought by the Agent, or its successors or assigns; and
-8-
<PAGE>
(b) Waives to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in
any such proceeding, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that such proceeding is
brought in an inconvenient forum, that the venue of such proceeding is
improper, or that this Agreement, the Credit Agreement or any other
Credit Document, or the subject matter hereof or thereof, may not be
enforced in or by such court.
The [Company or Subsidiary] hereby consents to service of process in any such
proceeding in any manner permitted by Chapter 223A of the General Laws of The
Commonwealth of Massachusetts and agrees that service of process by registered
or certified mail, return receipt requested, at its address specified in or
pursuant to Section 6 is reasonably calculated to give actual notice.
9. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT
CANNOT BE WAIVED, EACH OF THE [COMPANY OR SUBSIDIARY] AND THE AGENT HEREBY
WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND OR ACTION ARISING OUT OF THIS AGREEMENT, THE CREDIT AGREEMENT OR
ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY CREDIT
OBLIGATION OR IN ANY WAY CONNECTED WITH THE DEALINGS OF THE AGENT OR THE COMPANY
IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. The [Company or
Subsidiary] acknowledges that it has been informed by the Agent that the
provisions of this Section 9 constitute a material inducement upon which each of
the Lenders has relied, is relying and will rely in entering into this
Agreement, the Credit Agreement and any other Credit Document, and that it has
reviewed the provisions of this Section 9 with its counsel. The Agent or the
[Company or Subsidiary] may file an original counterpart or a copy of this
Section 9 with any court as written evidence of the consent of the Agent or the
Company to the waiver of their rights to trial by jury.
10. General. The headings in this Agreement are for convenience of reference
only and shall not limit, alter or otherwise affect the meaning hereof. The
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of any other term or provision hereof. This
Agreement and the other Credit Documents referred to herein or in the Credit
Agreement constitute the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. This Agreement is a
Credit Document and may be executed in any number of counterparts, which
together shall constitute one instrument. This Agreement shall
-9-
<PAGE>
be governed by and construed in accordance with the laws (other than the
conflict of laws rules) of the Commonwealth of Massachusetts.
-10-
<PAGE>
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
[COMPANY OR SUBSIDIARY]
By
-----------------------------------
Title:
[Address]
Telecopy:
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent under the Credit Agreement
By
-----------------------------------
Title:
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<PAGE>
EXHIBIT 11.1
------------
REVOLVING LOAN PERCENTAGE INTERESTS
The Percentage Interest of each Lender in the Loan and Letters of Credit,
and the related Commitments, shall be computed based on the maximum principal
amount for each Lender in the Maximum Amount of Credit set forth below.
<TABLE>
<CAPTION>
Lender Maximum Principal Amount
------ ------------------------
<S> <C>
Fleet Bank of Massachusetts, N.A. $ 35,000,000
SunTrust Bank, Central Florida N.A. $ 30,000,000
Dresdner Bank AG
Chicago and Grand Cayman Branches $ 17,500,000
Wachovia Bank of Georgia, N.A. $ 17,500,000
First Union National Bank of North Carolina $ 15,000,000
First Tennessee Bank National Association $ 10,000,000
First American National Bank $ 10,000,000
------------
TOTAL $135,000,000
</TABLE>
<PAGE>
EXHIBIT 12.1.1
--------------
ASSIGNMENT AND ACCEPTANCE
[Assignor's Letterhead]
[Date]
[Name and Address of Assignee]
Re: Buckeye Cellulose Corporation
-----------------------------
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of November 28, 1995, as
in effect from time to time (the "Credit Agreement"), among Buckeye Cellulose
Corporation (the "Company"), its Subsidiaries from time to time party thereto
and certain lenders (the "Lenders"), including Fleet Bank of Massachusetts,
N.A., as Agent for the Lenders (the "Agent") and SunTrust Bank, Central Florida
N.A. as co-agent for itself and the other Lenders. Terms defined in the Credit
Agreement and not otherwise defined herein are used herein with the meanings so
defined.
For valuable consideration, the receipt of which is hereby acknowledged,
the undersigned (the "Assignor") hereby agrees with you (the "Assignee") as
follows:
1. Assignment and Assumption. Pursuant to Section 12.1 of the Credit
Agreement, as of ________________ (the "Effective Date"), the Assignor hereby
assigns to the Assignee the following:
[All or a portion of the Assignor's interests, rights and obligations under the
Credit Agreement and other Credit Documents, subject to the provisions and
limitations set forth in the Credit Agreement.]
The foregoing assignment is made together with the concomitant proportionate
amounts of the Assignor's other rights and obligations as a Lender under the
Credit Agreement and the other Lender Agreements, and the Assignee hereby
assumes such rights and obligations completely. As of the Effective Date, the
Assignor shall have the interests in the Credit Obligations and under the Credit
Agreement as set forth on Schedule A hereto.
<PAGE>
2. Representations and Warranties of the Assignor. The Assignor hereby
represents and warrants that the Assignor owns that portion of the rights and
obligations under the Credit Agreement assigned hereunder legally and
beneficially, free and clear of any adverse claim.
Except as to the representations and warranties set forth in this Section 2, the
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Credit Document or any other instrument or document
furnished pursuant thereto. The Assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Company and its Subsidiaries or the performance or observance by the
Company or any of its Subsidiaries of any of its obligations under the Credit
Agreement, any other Credit Document or any other instrument or document
furnished pursuant thereto.
3. Representations and Warranties of the Assignee. The Assignee hereby-
represents and warrants that:
3.1. The Assignee is a commercial bank or financial institution.
3.2. The Assignee has received a copy of the Credit Agreement,
together with copies of the most recent financial statements delivered
pursuant to Section 7.2 or Section 6.4 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance.
3.3. The Assignee will independently and without reliance upon the
Agent, such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this agreement.
3.4. The Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the terms thereof, together with
such powers as are reasonably incidental thereto.
3.5. The Assignee will perform in accordance with the terms of the
Credit Agreement all the obligations which are required to be performed by
it as a Lender.
4. Party to the Credit Agreement, etc. Upon the execution and delivery
of this Agreement by the parties hereto (including, without limitation, the
Company and Agent), the Assignee shall become party to the Credit Agreement as a
signatory thereto. Notwithstanding the five Banking Day execution and delivery
requirement set forth in Section 12.1.4 of the Credit Agreement, the parties
hereto (including, without limitation, the Company and Agent)
-2-
<PAGE>
agree that as of the Effective Date, the Assignee shall have all the rights and
obligations of a Lender under the Credit Agreement and the other Lender
Agreements, including without limitation, as set forth on Schedule B (including
interest accrued thereon from and after the Effective Date). As of the
Effective Date, the Assignor shall, to the extent provided in such assignment,
be released from its obligations under the Credit Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under the Credit Agreement, such
Lender shall cease to be a party to the Credit Agreement but shall continue to
be entitled to the benefits of Sections 3.2.4, 3.7, 3.8, 3.9, 3.10 and 10 of the
Credit Agreement, as well as to any fees accrued for its account hereunder and
not yet paid). Pursuant to Section 12.1 of the Credit Agreement, the Agent and
the Company by their execution hereof waive compliance with the five Banking Day
execution and delivery requirement described above.
5. Notices. All notices and other communications required to be given or
made to the Assignee under this Agreement or the Credit Agreement shall be given
or made at the address of the Assignee set forth on the first page hereof or at
such other address as the Assignee shall have specified to the Assignor, the
Agent and the Company in writing.
6. Expenses. The Assignee shall pay its own expenses but not the
expenses of the Assignor in connection with the preparation and execution of
this Agreement and the consummation of the transactions contemplated hereby.
The Assignee shall be responsible for paying to the Agent the fee called for
pursuant to Sections 12.1.1 and 12.1.4 of the Credit Agreement.
7. Further Assurances. The parties hereto hereby agree to execute and
deliver such other instruments and documents and to take such other actions as
any party hereto may reasonably request in connection with the transactions
contemplated by this Agreement.
8. General. This Agreement and the Credit Agreement constitute the
entire understanding of the parties with respect to the subject matter hereof
and thereof and supersede all prior and current understandings and agreements,
whether written or oral. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter, limit or otherwise affect the meaning
hereof. This Agreement may be executed in any number of counterparts, which
together shall constitute one instrument, and shall bind and inure to the
benefit of the parties and their respective successors and assigns, including as
such successors and assigns all holders of any Credit Obligation. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (OTHER THAN THE
CONFLICT OF LAWS RULES) OF THE COMMONWEALTH OF MASSACHUSETTS.
-3-
<PAGE>
If the foregoing corresponds with your understanding of our agreement,
please sign this letter and the accompanying copies thereof in the appropriate
space below and return copies to the undersigned, the Company and the Agent,
whereupon this letter shall become a binding agreement between you and the
undersigned.
[ASSIGNOR]
By
--------------------------
Title:
The foregoing is hereby accepted:
[ASSIGNEE]
By
--------------------------------
Title:
The foregoing is hereby approved:
BUCKEYE CELLULOSE CORPORATION
By
--------------------------------
Title:
FLEET BANK OF MASSACHUSETTS, N.A.,
as Agent
By
--------------------------------
Title:
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<PAGE>
Schedule A
----------
[Rights and obligations of Assignor on and after the Effective Date after
giving effect to the other assignments being made on the Effective Date.]
<PAGE>
Schedule B
----------
[Rights and obligations of Assignee on and after the Effective Date after
giving effect to the other assignments being made on the Assignment Date.]
<PAGE>
STOCK PURCHASE AGREEMENT
AMONG
BUCKEYE CELLULOSE CORPORATION
("BUYER")
AND
STONEBRIDGE PARTNERS EQUITY FUND, L.P.,
ALPHA CELLULOSE ASSOCIATES I, L.P.,
ALPHA CELLULOSE ASSOCIATES II, L.P.
STONEBRIDGE PARTNERS MANAGEMENT, L.P.,
AS NOMINEE FOR PNC VENTURE CORP.
AND DAWKS CORPORATION,
JOHN P. FLANAGAN, MICHAEL M. BROWN
JANICE S. VALENTA, JOHN F. MANNING, KEN L. WILCOX,
ALBERT A. BOUNDS, JR., RALPH BOLIN,
CHARLES P. OXENDINE AND JAMES R. ISRAELSON
(COLLECTIVELY, "SELLERS")
APRIL 26, 1996
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TABLE OF CONTENTS
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1. DEFINITIONS....................................................................... 1
2. PURCHASE AND SALE OF HOLDINGS SHARES.............................................. 7
(a) Basic Transaction.......................................................... 7
(b) Purchase Price............................................................. 7
(c) Operating Liabilities...................................................... 8
(d) Indebtedness............................................................... 8
(e) Off-Balance Sheet Issues................................................... 9
(f) Preliminary Closing Balance Sheet; Projected Closing Balance Sheet......... 9
(g) Post-Closing Adjustment.................................................... 9
(h) Hold-Back.................................................................. 10
(i) Hold Back Disputes......................................................... 11
(j) Buyer's Option............................................................. 11
(k) The Closing................................................................ 11
(l) Deliveries at the Closing.................................................. 12
3. NON-COMPETITION PAYMENT........................................................... 12
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION......................... 12
(a) Representations and Warranties of the Sellers.............................. 12
(i) Organization of Certain Sellers.................................... 12
(ii) Authorization of Transaction....................................... 12
(iii) Noncontravention................................................... 13
(iv) Brokers' Fees...................................................... 13
(v) Holdings Shares.................................................... 13
(b) Representations and Warranties of the Buyer................................ 13
(i) Organization of the Buyer.......................................... 13
(ii) Authorization of Transaction....................................... 13
(iii) Noncontravention................................................... 14
(iv) Brokers' Fees...................................................... 14
(v) Investment......................................................... 14
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5. REPRESENTATIONS AND WARRANTIES CONCERNING HOLDINGS AND ITS SUBSIDIARIES........... 14
(a) Organization, Qualification, and Corporate Power........................... 14
(b) Capitalization............................................................. 15
(c) Noncontravention........................................................... 15
(d) Brokers' Fees.............................................................. 16
(e) Title to Assets............................................................ 16
(f) Subsidiaries............................................................... 16
(g) Financial Statements....................................................... 16
(h) Events Subsequent to Most Recent Fiscal Year End........................... 17
(i) Undisclosed Liabilities.................................................... 19
(j) Legal Compliance........................................................... 19
(k) Tax Matters................................................................ 20
(l) Real Property.............................................................. 22
(m) Intellectual Property...................................................... 24
(n) Tangible Assets............................................................ 26
(o) Inventory.................................................................. 26
(p) Contracts.................................................................. 27
(q) Notes and Accounts Receivable.............................................. 28
(r) Powers of Attorney......................................................... 28
(s) Insurance.................................................................. 28
(t) Litigation................................................................. 29
(u) Product Warranty........................................................... 29
(v) Product Liability.......................................................... 29
(w) Employees.................................................................. 30
(x) Employee Benefits.......................................................... 30
(y) Guaranties................................................................. 32
(z) Environment, Health, and Safety............................................ 32
(aa) Certain Business Relationships with Holdings and Its Subsidiaries.......... 33
(ab) Disclosure................................................................. 33
6. PRE-CLOSING COVENANTS............................................................. 34
(a) General.................................................................... 34
(b) Amendment to Tax Return.................................................... 34
(c) Notices and Consents....................................................... 34
(d) Operation of Business...................................................... 35
(e) Preservation of Business................................................... 35
(f) Full Access................................................................ 35
(g) Notice of Developments..................................................... 35
(h) Exclusivity................................................................ 35
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(i) Title Insurance............................................................ 36
(j) Surveys.................................................................... 37
(k) Tax Basis of Assets........................................................ 37
7. POST-CLOSING COVENANTS............................................................ 37
(a) General.................................................................... 37
(b) Litigation Support......................................................... 38
(c) Transition................................................................. 38
(d) Confidentiality............................................................ 38
(e) Subsequent Disclosure...................................................... 39
8. CONDITIONS TO OBLIGATION TO CLOSE................................................. 39
(a) Conditions to Obligation of the Buyer...................................... 39
(b) Conditions to Obligation of the Sellers.................................... 41
9. REMEDIES FOR BREACHES OF THIS AGREEMENT........................................... 42
(a) Survival of Sellers' Representations and Warranties........................ 42
(b) Indemnification Provisions for Benefit of the Buyer........................ 42
(c) Matters Involving Third Parties............................................ 43
(d) Waiver of Indemnification Provisions....................................... 45
10. TERMINATION....................................................................... 45
(a) Termination of Agreement................................................... 45
(b) Effect of Termination...................................................... 46
11. MISCELLANEOUS..................................................................... 46
(a) Press Releases and Public Announcements.................................... 46
(b) No Third-Party Beneficiaries............................................... 46
(c) Entire Agreement........................................................... 46
(d) Succession and Assignment.................................................. 46
(e) Counterparts............................................................... 47
(f) Headings................................................................... 47
(g) Notices.................................................................... 47
(h) Governing Law.............................................................. 48
(i) Arbitration................................................................ 48
(j) Amendments and Waivers..................................................... 48
(k) Severability............................................................... 48
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(l) Expenses................................................................... 49
(m) Construction............................................................... 49
(n) Incorporation of Exhibits, Annexes, and Schedules.......................... 49
(o) Sellers' Agent............................................................. 49
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STOCK PURCHASE AGREEMENT
Agreement entered into as of April 26, 1996, by and among BUCKEYE CELLULOSE
CORPORATION, a Delaware corporation (the "Buyer"), and STONEBRIDGE PARTNERS
EQUITY FUND, L.P., ALPHA CELLULOSE ASSOCIATES I, L.P., ALPHA CELLULOSE
ASSOCIATES II, L.P., STONEBRIDGE PARTNERS MANAGEMENT, L.P., AS NOMINEE FOR PNC
VENTURE CORP., DAWKS CORPORATION, JOHN P. FLANAGAN, MICHAEL M. BROWN, JANICE S.
VALENTA, JOHN F. MANNING, KEN L. WILCOX, ALBERT A. BOUNDS, JR., RALPH BOLIN,
CHARLES P. OXENDINE AND JAMES R. ISRAELSON (collectively the "Sellers"). The
Buyer and the Sellers are referred to collectively herein as the "Parties."
WHEREAS, the Sellers in the aggregate own all of the outstanding capital
stock of Alpha Cellulose Holdings, Inc., a Delaware corporation ("Holdings").
WHEREAS, Alpha Cellulose Corporation ("Alpha") is a wholly-owned Subsidiary
of Holdings whose primary business is the manufacture and sale of specialty
pulp;
WHEREAS, Alpha Cellulose Export, Inc. ("Export"), a Barbados corporation,
is a foreign sales corporation and wholly-owned Subsidiary of Holdings;
WHEREAS, the only assets of Holdings is all the capital stock of Alpha and
Export;
WHEREAS, this Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of Holdings in return for cash.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Accounts Receivable" has the meaning set forth in (S) 2(b)(iii) below.
"Accounts Receivable Component" has the meaning set forth in (S) 2(b)(iii)
below.
"Audited Closing Balance Sheet" has the meaning set forth in (S) 2(g)
below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement,
<PAGE>
Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Sec. 1504 or any similar group defined under a similar provision of state, local
or foreign law.
"Agreed Upon Accounting Guidelines" means those accounting policies and
guidelines attached hereto as EXHIBIT "A."
"Alpha" means Alpha Cellulose Corporation, a North Carolina corporation,
which is a wholly-owned Subsidiary of Holdings.
"Assets Component" has the meaning set forth in (S) 2(b)(i) below.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that causes or could contribute in causing any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash Component" has the meaning set forth in (S) 2(b)(iv) below.
"Closing" has the meaning set forth in (S) 2(j) below.
"Closing Date" has the meaning set forth in (S) 2(j) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of Holdings and its Subsidiaries that is not already generally
available to the public.
"Controlled Group of Corporations" has the meaning set forth in Code Sec.
1563, except that, for purposes of Section 5(x), it has the meaning set forth in
Code Sec. 414(b) or (c).
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. (S) 1.1502-13.
"Disclosure Schedule" has the meaning set forth in (S) 5 below.
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"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental, Health and Safety Laws" includes, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the
Federal Water Pollution Control Act of 1972 and the Occupational Safety and
Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) and all common law concerning pollution
or protection of the environment, public health and safety, or employee health
and safety, including, without limitation, laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials, substances or wastes into
ambient air, surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials, substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Treas. Reg. (S) 1.1502-
19.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statements" has the meaning set forth in (S) 5(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GAAS" means United States generally accepted auditing standards as defined
and described by the American Institute of Certified Public Accountants.
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"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hold-Back" has the meaning set forth in (S) 2(h) below.
"Holdings" has the meaning set forth in the preface above.
"Holdings Share" means any share of the common capital stock of Holdings,
par value $.01 per share.
"Indebtedness" has the meaning set forth in (S) 2(d) below.
"Indemnified Party" has the meaning set forth in (S) 9(d) below.
"Indemnifying Party" has the meaning set forth in (S) 9(d) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (e) all computer software (including data and related
documentation), (f) all other proprietary rights, and (g) all copies and
tangible embodiments thereof (in whatever form or medium).
"Inventory" has the meaning set forth in (S) 2(b)(ii) below.
"Inventory Component" has the meaning set forth in (S) 2(b)(ii) below.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
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"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S) 5(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in (S) 5(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in (S) 5(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Non-Competition Agreements" means those agreements to be entered into by
certain of the Sellers as provided by (S) 3 in substantially the same form as
that attached hereto as EXHIBIT "B."
"Non-Competition Payment" has the meaning set forth in (S) 3 below.
"Operating Liabilities" has the meaning set forth in (S) 2(c) below.
"Ordinary Course of Business" means the ordinary and normal course of
business consistent with past custom and practice.
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Post Closing Adjustment" has the meaning set forth in (S) 2(g) below.
"Preferred Stock" means the cumulative redeemable preferred stock, par
value $.01 per share of Holdings.
"Preliminary Closing Balance Sheet" has the meaning set forth in (S) 2(f)
below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Projected Closing Balance Sheet" has the meaning set forth in (S) 2(f)
below.
"Purchase Price" has the meaning set forth in (S) 2(b) below.
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"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Seller Representative" means David A. Zackrison or, in the event of his
incapacity, Michael S. Bruno.
"SOC" means the 1996 Special Order by Consent entered into between Alpha
and the environmental agency for the State of North Carolina which, among other
things, provides temporary approval for water discharges from the Alpha facility
that meet certain interim effluent limitations.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors. Alpha is a Subsidiary of Holdings.
"Survey" has the meaning set forth in (S) 6(i) below.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in (S) 9(c) below.
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2. PURCHASE AND SALE OF HOLDINGS SHARES.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from each of the Sellers, and each of
the Sellers agrees to sell to the Buyer, all of his or its Holdings Shares for
the consideration specified below in this (S) 2.
(b) Purchase Price. The Buyer agrees to pay to the Seller Representative at
the Closing the purchase price as calculated in this paragraph and as adjusted
herein (the "Purchase Price"), by delivery of cash payable by wire transfer or
delivery of other immediately available funds. The Purchase Price shall be
allocated by the Seller Representative among all the Sellers. The Purchase Price
shall be equal to the sum of the Assets Component, the Inventory Component, the
Accounts Receivable Component and the Cash Component, less the adjustments as
specified in (S) 2(c) and (d) below. For purposes of this paragraph, the
following definitions shall apply:
(i) Assets Component. The Assets Component of the Purchase Price shall
be $49,600,000.00.
(ii) Inventory Component. The Inventory Component shall be an amount
equal to the value of all of Alpha's inventory of raw cotton linters, denim
wastes and finished pulp (collectively, the "Inventory") as determined from
a physical count of such Inventory taken jointly by the designated
representatives of the Sellers and Buyer within three (3) business days
prior to Closing and projected through the close of business on the day
immediately preceding the Closing, subject to the Post Closing Adjustment.
Any other items of inventory, including, but not limited to, chemicals,
felts, wrapper stocks, fuel oil, supplies, stores and spare parts, and
work-in-process pulp, shall not be deemed to be Inventory for purposes of
calculating the Inventory Component. For purposes of determining the
Inventory Component, the value of Inventory shall be the lower of cost to
Alpha of the Inventory or its fair market value as of Closing, taking into
account fitness for use, determined in accordance with EXHIBIT "A" hereof.
(iii) Accounts Receivable Component. The Accounts Receivable Component
shall be an amount equal to the aggregate value of all of Alpha's accounts
receivable which are derived from sales in the Ordinary Course of Business
of Alpha (the "Accounts Receivable") as determined from the Projected
Closing Balance Sheet, subject to the Post-Closing Adjustment. To the
extent any Account Receivable is not fully collected within sixty (60) days
of its invoice due date (which invoice due date shall not be more than
ninety (90) days from date of the later of the on-board ocean bill of
lading or shipment), Buyer shall have the right to draw against the
Hold-Back the full dollar equivalent of all Accounts Receivable which
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are uncollected within such time period. If a payment is received by Alpha
from a customer with an Account Receivable which has been satisfied from
the Hold-Back, and if application to such Account Receivable is not
specified by the customer, then Alpha shall apply such amounts first to any
account receivable incurred subsequent to the Closing Date not satisfied
from the Hold-Back, with the remainder being returned to the Hold-Back.
(iv) Cash Component. The Cash Component shall be the amount of cash
and cash equivalents (positive or negative) as determined from the
Projected Closing Balance Sheet, subject to the Post-Closing Adjustment.
(c) Operating Liabilities. "Operating Liabilities" shall be defined as (i)
accounts payable and accrued liabilities incurred in the Ordinary Course of
Business, and (ii) any accrued Taxes (net of Taxes receivable for amended
returns as contemplated by (S) 6(b)) as determined from the Projected Closing
Balance Sheet, subject to the Post Closing Adjustment. The Purchase Price will
be reduced, on a dollar-for-dollar basis, by (i) the aggregate amount of all
such Operating Liabilities, plus (ii) any amounts paid or payable by Holdings or
its Subsidiaries from and after the Closing for the assumption of any such
Operating Liabilities or for any fees, expenses or costs attributable to such
Operating Liabilities resulting from the sale of Holdings Shares to Buyer to the
extent not reflected on the Projected Closing Balance Sheet or the Audited
Closing Balance Sheet. Operating Liabilities will include net deferred Taxes
which include current and non-current deferred tax assets and liabilities.
However, for purposes hereof, there will be no reduction in the Purchase Price
for the amount of any deferred Taxes reflected in the Projected Closing Balance
Sheet or the Audited Closing Balance Sheet which are solely attributable to the
increase in the financial reporting basis of assets resulting from Holdings'
acquisition of Alpha. Additionally, there will be no increase in the Purchase
Price for the amount of any deferred Taxes reflected in the Projected Closing
Balance Sheet or the Audited Closing Balance Sheet which are attributable to net
operating loss carryforwards (NOL's) or other tax credits available for
carryforward to offset future taxable income.
(d) Indebtedness. "Indebtedness" shall be defined as all debts and
obligations of Holdings or its Subsidiaries reflected in the Projected Closing
Balance Sheet, subject to the Post Closing Adjustment, except Operating
Liabilities, including, but not limited to, the amount due and owing by Holdings
to fully redeem all its Preferred Stock, any amounts owing to the current or
former employees of Holdings or its Subsidiaries as deferred compensation and
any amounts owing on account of noncompetition agreements. Sellers will arrange
for the full payment or retirement of all Indebtedness as of the Closing with
funds provided by Buyer, unless both Buyer and Seller jointly agree that certain
existing deferred compensation, non-compete obligations, and employee-related
obligations will not be prepaid or retired at the Closing. The Purchase Price
will be reduced on a dollar-for-dollar basis, by (i) the aggregate amount of all
Indebtedness, plus (ii) any amounts paid or payable by Holdings or its
Subsidiaries on or after the Closing Date for the prepayment of any such
Indebtedness prior to its stated term or for any fees, expenses or costs
attributable to such Indebtedness resulting from the sale of the Holdings Shares
to Buyer to the extent not reflected on the Projected Closing Balance Sheet or
Audited Closing Balance Sheet.
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(e) Off-Balance Sheet Issues.
(i) Any liability resulting from the termination of Alpha's foreign
agency sales agreements on or after the Closing Date shall not result in an
adjustment to the Purchase Price, and any expense associated therewith
shall remain an expense of Alpha payable by Alpha in the Ordinary Course of
Business.
(ii) The Purchase Price shall be decreased by the amount, if any, by
which the aggregate costs of raw cotton linters and textile waste to be
paid by Alpha subsequent to Closing under all purchase commitments
heretofore entered into, all of which are identified in EXHIBIT "C" hereto,
shall exceed the fair market value of such raw materials as of the Closing
Date ("fair market value" being determined in the same manner as provided
in (S) 2(b)(ii) above).
(f) Preliminary Closing Balance Sheet; Projected Closing Balance Sheet. No
later than ten (10) business days prior to the Closing Date, the Sellers will
cause to be prepared in accordance with GAAP applied on a basis consistent with
the audited December 31, 1995 Financial Statements, a balance sheet of Holdings
and its Subsidiaries, on a consolidated basis, as of the end of the month
immediately preceding the Closing Date (the "Preliminary Closing Balance
Sheet"), which shall be delivered to Buyer in form and substance reasonably
acceptable to Buyer and its auditors. At or immediately prior to the Closing,
the Preliminary Closing Balance Sheet will be adjusted to take into account
changes in the amounts stated therein resulting from the application of the
Agreed Upon Accounting Guidelines and changes in the financial position and
results of operations of Holdings and its Subsidiaries for the period between
the date of the Preliminary Closing Balance Sheet through the close of business
on the day immediately preceding the Closing Date, and such adjusted balance
sheet (which shall be hereinafter referred to as the "Projected Closing Balance
Sheet") will reflect Sellers' reasonable best estimate of Holdings' and its
Subsidiaries' stated assets and Liabilities as of the close of business on the
day immediately preceding the Closing Date in accordance with GAAP applied on a
basis consistent with the audited December 31, 1995 Financial Statements, except
as adjusted by the Agreed Upon Accounting Guidelines, including the Inventory as
determined pursuant to (S) 2(b)(ii) hereof, consistent with the terms hereof.
(g) Post-Closing Adjustment; Audited Closing Balance Sheet. Within sixty
(60) days of the Closing Date, Sellers shall cause to be prepared in accordance
with GAAP applied on a basis consistent with the audited December 31, 1995
Financial Statements, except as adjusted by the Agreed Upon Accounting
Guidelines, a balance sheet of Holdings and its Subsidiaries, on a consolidated
basis, as of the close of business on the day immediately preceding the Closing
Date in form and substance reasonably acceptable to Buyer and its auditors, and
shall cause such balance sheet to be audited by Deloitte & Touche LLP,
independent public accountants, in accordance with GAAS (the "Audited Closing
Balance Sheet"). Any adjustment to the balances set forth in the Projected
Closing Balance Sheet
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resulting from the Audited Closing Balance Sheet pertaining to the Inventory
Component, Accounts Receivable Component, Cash Component, Operating Liabilities
and Indebtedness (or any costs or expenses of Alpha pertaining to either) shall
result in a dollar-for-dollar adjustment to the Purchase Price. To the extent
such adjustment to the Projected Closing Balance Sheet (the "Post-Closing
Adjustment") results in a decrease in value of the Inventory, Accounts
Receivable or Cash of Alpha or an increase in amount of the Operating
Liabilities or Indebtedness (or expenses relating thereto), Buyer shall be
entitled to draw from the Hold-Back an amount equal to such decrease or
increase, as the case may be. In the event the Post-Closing Adjustment results
in an opposite adjustment to each such item, Buyer shall pay to the Sellers the
amount of such difference within ten (10) business days from the date Buyer
receives the Audited Closing Balance Sheet.
(h) Hold-Back. Buyer will withhold from the cash payment Buyer will make to
Sellers at Closing $4,000,000.00 (the "Hold-Back"). The Hold-Back will be placed
in an interest-bearing account with an escrow agent acceptable to both Sellers
and Buyer (the "Escrow Agent") pursuant to an escrow agreement substantially
similar to EXHIBIT "D" attached hereto (the "Escrow Agreement"). During the term
of the Hold-Back, Buyer will be entitled to draw upon the Hold-Back (or if
disputed, as resolved pursuant to clause (i) of this Section 2) for (i) Post-
Closing Adjustments to the Purchase Price, uncollected Accounts Receivable,
damages resulting from the breach of representations and warranties by the
Sellers and other claims made in accordance with the provisions of Section 9
hereof and (ii) any damages resulting from violations of the Non-Competition
Agreements. On the first anniversary of the Closing Date, the Hold-Back shall be
reduced to $3,000,000.00 (plus the aggregate amount of any unpaid claims of
Buyer made against the Hold-Back in writing on or before the expiration of such
one (1) year period), and from the expiration of such one (1) year period until
the expiration of a period of an additional six (6) months, Buyer shall be
entitled to draw against the Hold-Back only for (i) damages resulting from the
breach of any representations and warranties of Sellers relating to tax,
litigation and environmental issues set forth in (S) 5, paragraphs (k), (t) and
(z) and Section 8(a)(v), or (ii) damages resulting from violations of the Non-
Competition Agreements. Upon expiration of the period which is eighteen (18)
months following the Closing Date, the Hold-Back shall be reduced to
$2,000,000.00 (plus the aggregate amount of any unpaid claims of Buyer made
against the Hold-Back in writing on or before the expiration of such eighteen
(18) month period) and from such date through the second anniversary of the
Closing Date, Buyer shall be entitled to draw against the Hold-Back only for
damages resulting from the breach of any representations and warranties of
Sellers relating to tax issues as set forth in (S) 5, paragraph (k) and for
damages resulting from violations of the Non-Competition Agreements. On the
second anniversary of the Closing Date, the Hold-Back shall terminate and any
funds remaining in escrow from the Hold-Back, after deducting the aggregate
amount of any claims made thereon by Buyer shall be returned to Sellers. All
disputes concerning the Hold Back shall be resolved pursuant to Subsection (i)
below.
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(i) Hold Back Disputes. Buyer shall provide written notice to the Seller
Representative prior to each of Buyer's requested draws from the Hold-Back. If
Seller Representative, within fifteen (15) days of receipt of Buyer's notice,
does not provide Buyer with written notice of the reasonable basis for a dispute
(the "Dispute Notice"), or notifies Buyer that there is no dispute, Buyer may
draw the requested amount. The Dispute Notice shall set forth in reasonable
detail the nature of the dispute(s). During the fifteen (15) day period
following the date of the Dispute Notice, the Seller Representative and Buyer
shall attempt to resolve such disputes. If at the end of the fifteen (15) day
period following the date of such notice, the Seller Representative and Buyer
shall have failed to reach a written agreement with respect to such dispute, the
matter shall be referred to a national "big six" accounting firm, or other
Person with requisite expertise in the field at issue, to be selected by the
independent auditors of Buyer and the Seller Representative (the "Expert") which
shall act as an expert and shall issue a report as to its conclusions concerning
the disputed draw, based solely upon submission of the parties, within sixty
(60) days after such dispute is referred to the Expert, or within such longer
period as the Expert may require to finalize his conclusions. The Seller
Representative, on the one hand, and the Buyer, on the other hand, shall each
bear all costs and expenses incurred by it in connection with such process,
except that the fees and expenses of the Expert hereunder shall be borne by the
party whom the Expert rules against (or pro rata between the parties based on
the relative success of their positions). This provision for review and judgment
by the Expert shall be specifically enforceable by the parties, and the decision
of the Expert in accordance with the provisions hereof shall be final and
binding, and there shall be no right of appeal therefrom.
(j) Buyer's Option. In the event that Wayland W. McAllister ("McAllister")
or Dawks Corporation ("Dawks") enters into a contribution agreement with Buyer
and an Affiliate of Buyer in form and substance satisfactory to Buyer, such
Affiliate, McAllister and/or Dawks, then Buyer or its Affiliate may elect prior
to Closing not to acquire all or a portion of McAllister's or Dawk's Holdings
Shares as provided in Section 2(a) and (b) above, and the rights and obligations
of Buyer, the Affiliate of Buyer and McAllister or Dawks with respect to such
Holdings Shares then owned by McAllister or Dawks shall be set forth in such
contribution agreement. If Buyer or its Affiliate so elects, the Purchase Price
as defined in (S) 2(b) shall be adjusted to take into account McAllister's or
Dawk's proportionate ownership of Holdings Shares which Buyer or its Affiliate
has elected not to purchase.
(k) The Closing. Provided that each condition precedent to Closing shall
have been satisfied or waived as set forth in Section 8 hereof, the closing of
the transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of Baker, Donelson, Bearman & Caldwell in Memphis, Tennessee,
commencing at 9:00 a.m. local time on the last business day of the month (with
an effective date as of the first day of the next month) which is at least two
weeks after the termination of the waiting period pursuant to the Hart-Scott-
Rodino Act or such other date as the Buyer and the Seller Representative may
mutually determine (the "Closing Date"); provided, however, that if
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each of the conditions to Closing outlined in (S) 8 hereof have not occurred or
been waived on or before the ninetieth (90th) day after the date of this
Agreement, then either Buyer, on the one hand, or Seller Representative, on the
other hand, shall be entitled to terminate this Agreement pursuant to (S) 10
hereof.
(l) Deliveries at the Closing. At the Closing, (i) the Seller
Representative will deliver to the Buyer the various certificates, instruments,
and documents referred to in (S) 8(a) below, (ii) the Buyer will deliver to the
Sellers the various certificates, instruments, and documents referred to in (S)
8(b) below, (iii) each of the Sellers will deliver to the Buyer stock
certificates representing all of his or its Holdings Shares, endorsed in blank
or accompanied by duly executed assignment documents, and (iv) the Buyer will
deliver to the Seller Representative the consideration specified in (S) 2(b)
above.
3. NON-COMPETITION PAYMENT. As consideration for each of the Sellers
(excluding, however, Janice S. Valenta, John F. Manning, Ken L. Wilcox, Albert
A. Bounds, Jr., Ralph Bolin, Charles P. Oxendine and James R. Israelson)
entering into Non-Competition Agreements in substantially the same form as that
attached hereto as EXHIBIT "B," Alpha shall pay to those Sellers from funds
contributed by Buyer at Closing an aggregate of $4,000,000 at the Closing.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Buyer that the statements contained in this (SS)
4(a) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
(SS) 4(a) with respect to himself or itself, except as set forth in ANNEX I
attached hereto.
(i) Organization of Certain Sellers. If the Seller is a corporation,
the Seller is duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. Each Seller has full power and
authority (including, if the Seller is a corporation, full corporate power
and authority) to execute and deliver this Agreement and to perform his or
its obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of each Seller, enforceable in accordance with its terms
and conditions. With the exception of approval required under the Hart-
Scott-Rodino Act, no Seller need give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
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(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Sellers are
subject or, if a Seller is a corporation, any provision of its charter or
bylaws or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which any of the Sellers are a party or by which he or it is bound or to
which any of his or its assets is subject.
(iv) Brokers' Fees. Each of the Sellers has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(v) Holdings Shares. Each of the Sellers holds of record and owns
beneficially the number of Holdings Shares set forth next to his or its
name in (S) 5(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. Except for such agreements executed by and among the Sellers, each
of which shall be terminated prior to the Closing, the Seller is not a
party to any (A) option, warrant, purchase right, or other contract or
commitment that could require the Seller to sell, transfer, or otherwise
dispose of any capital stock of the Holdings (other than this Agreement) or
(B) voting trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of the Holdings.
(b) Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers that the statements contained in this (S) 4(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this (S) 4(b)),
except as set forth in ANNEX II attached hereto.
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes
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the valid and legally binding obligation of the Buyer, enforceable in
accordance with its terms and conditions. With the exception of approval
required under the Hart-Scott-Rodino Act, the Buyer need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or
any provision of its charter or bylaws or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which
it is bound or to which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(v) Investment. The Buyer is not acquiring the Holdings Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act.
5. REPRESENTATIONS AND WARRANTIES CONCERNING HOLDINGS AND ITS SUBSIDIARIES.
The Sellers represent and warrant to the Buyer that the statements contained in
this (S) 5 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
(S) 5, except as set forth in the disclosure schedule delivered by the Sellers
to the Buyer on the date hereof and initialed by the Parties (the "Disclosure
Schedule").
(a) Organization, Qualification, and Corporate Power. Each of Holdings and
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Additionally,
each of Holdings and its Subsidiaries is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such qualification
is required, except in jurisdictions other than the jurisdiction of its
incorporation, where such failure would not have a material Adverse Consequence
on the operation or business prospects of Holdings or its Subsidiaries. Each of
Holdings and its Subsidiaries has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses
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in which it is engaged in all material respects and to own and use the
properties owned and used by it. Section 5(a) of the Disclosure Schedule lists
the directors and officers of each of Holdings and its Subsidiaries. The Sellers
have delivered to the Buyer correct and complete copies of the charter and
bylaws of each of Holdings and its Subsidiaries (as amended to date). The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of each of Holdings and its Subsidiaries are
correct and complete. None of Holdings and its Subsidiaries is in default under
or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of Holdings
consists of 1,000,000 Holdings Shares of which 1,000,000 Holdings Shares are
issued and outstanding. Additionally, 85,000 shares of Preferred Stock are
authorized, of which 50,000 shares are issued and outstanding, and all of such
shares are held beneficially and of record by Stonebridge Partners Equity Fund,
L.P., Alpha Cellulose Associates I, L.P., Alpha Cellulose Associates II, L.P.
and Stonebridge Partners Management, L.P., as nominee for PNC Venture Corp. All
of the issued and outstanding Holdings Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Sellers as set forth in (S) 5(b) of the Disclosure Schedule. Except
for such agreements executed by and among the Sellers, each of which shall be
terminated prior to the Closing, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require Holdings to issue,
sell, or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Holdings. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Holdings.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Holdings and its Subsidiaries is
subject or any provision of the charter or bylaws of any of Holdings and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or, except as set forth in Section
5(c) of the Disclosure Schedule, require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which any of
Holdings and its Subsidiaries is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets). Except for filing under the Hart-Scott-Rodino Act, none
of Holdings and its Subsidiaries needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
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(d) Brokers' Fees. None of Holdings and its Subsidiaries has any Liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
(e) Title to Assets. Except for the mortgages securing the indebtedness
referred to in (S) 5(p)(xii) of the Disclosure Schedule, Holdings and its
Subsidiaries have good and marketable title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises, or shown
on the Most Recent Balance Sheet or acquired after the date thereof, free and
clear of all Security Interests, except for properties and assets disposed of in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. Section 5(f) of the Disclosure Schedule sets forth for
each Subsidiary of Holdings (i) its name and jurisdiction of incorporation, (ii)
the number of shares of authorized capital stock of each class of its capital
stock, (iii) the number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof, and the number of shares held
by each such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of each
Subsidiary of Holdings have been duly authorized and are validly issued, fully
paid, and nonassessable. Holdings holds of record and owns beneficially all of
the outstanding shares of each Subsidiary of Holdings, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands and no Subsidiary
of Holdings owns any other Subsidiary or any interest in any other business or
enterprise. Except for such agreements executed by and among the Sellers, all of
which will be terminated prior to the Closing, there are no outstanding or
authorized options, warrants, purchase rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of Holdings and
its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of
any of its Subsidiaries or that could require any Subsidiary of Holdings to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of Holdings.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of Holdings. None
of Holdings and its Subsidiaries controls directly or indirectly or has any
direct or indirect equity participation in any corporation, partnership, trust,
or other business association which is not a Subsidiary of Holdings.
(g) Financial Statements. Attached hereto as EXHIBIT "E" are the following
financial statements (collectively the "Financial Statements"): (i) audited
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1994 and
1995 (the "Most Recent Fiscal Year End") for Holdings and its Subsidiaries; and
(ii) unaudited consolidated balance sheets and statements of income, and cash
flow (the "Most Recent Financial Statements")
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as of and for the three (3) months ended March 31, 1996 (the "Most Recent Fiscal
Month End") for Holdings and its Subsidiaries. The Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, present fairly in all material respects the
financial condition of Holdings and its Subsidiaries as of such dates and the
results of operations and cash flows of Holdings and its Subsidiaries for such
periods and are consistent with the books and records of Holdings and its
Subsidiaries (which books and records are correct and complete in all material
respects), provided that the Most Recent Financial Statements do not include
footnotes in accordance with GAAP and are subject to year-end adjustments. The
Preliminary Closing Balance Sheet shall contain all required footnotes and shall
take into account all necessary year-end adjustments.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of Holdings and its Subsidiaries. Without limiting the
generality of the foregoing, except as set forth in the Disclosure Schedule,
since that date:
(i) none of Holdings and its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible, other
than for a fair consideration in the Ordinary Course of Business;
(ii) none of Holdings and its Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $25,000 or
outside the Ordinary Course of Business;
(iii) no party (including any of Holdings and its Subsidiaries) has
accelerated, terminated, modified, or cancelled any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) involving more than $25,000 to which any of Holdings and its
Subsidiaries is a party or by which any of them is bound;
(iv) none of Holdings and its Subsidiaries has imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) none of Holdings and its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either involving
more than $25,000 or outside the Ordinary Course of Business;
(vi) none of Holdings and its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or assets
of, any other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $5,000 or outside the Ordinary
Course of Business;
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(vii) none of Holdings and its Subsidiaries has issued any note, bond,
or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either
involving more than $5,000 singly or $25,000 in the aggregate;
(viii) none of Holdings and its Subsidiaries has delayed or postponed
the payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(ix) none of Holdings and its Subsidiaries has cancelled, compromised,
waived, or released any right or claim (or series of related rights and
claims) either involving more than $25,000 or outside the Ordinary Course
of Business;
(x) none of Holdings and its Subsidiaries has granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
(xi) there has been no change made or authorized in the charter or
bylaws of any of Holdings and its Subsidiaries;
(xii) none of Holdings and its Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(xiii) none of Holdings and its Subsidiaries has declared, set aside,
or paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiv) none of Holdings and its Subsidiaries has experienced any
damage, destruction, or loss (whether or not covered by insurance) to its
property;
(xv) none of Holdings and its Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xvi) none of Holdings and its Subsidiaries has entered into any
employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) none of Holdings and its Subsidiaries has granted any increase
in the base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
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(xviii) none of Holdings and its Subsidiaries has adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect
to any other Employee Benefit Plan);
(xix) none of Holdings and its Subsidiaries has made any other change
in employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xx) none of Holdings and its Subsidiaries has made or pledged to make
any charitable or other capital contribution outside the Ordinary Course of
Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of Holdings and its Subsidiaries; and
(xxii) none of Holdings and its Subsidiaries has committed to any of
the foregoing.
(i) Undisclosed Liabilities. None of Holdings and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability), except for (i) Liabilities set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto),
(ii) Liabilities not required to be set forth on the face of the Most Recent
Balance Sheet in accordance with GAAP, and (iii) Liabilities which have arisen
after the Most Recent Financial Statement in the Ordinary Course of Business
(provided that none of the Liabilities referred to in clause (i-iii) hereof
shall have resulted from, arise out of, relate to, be in the nature of, or be
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law); and, as of the Closing Date, none of Holdings and its
Subsidiaries shall have any Liability (and there shall be no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against any of them giving rise to any Liability),
except for Liabilities set forth on the face of the Audited Closing Balance
Sheet, and Liabilities not required to be set forth on the face of the Audited
Closing Balance Sheet in accordance with GAAP (provided that none of such
Liabilities shall have resulted from, arise out of, relate to, be in the nature
of, or be caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
(j) Legal Compliance. Each of Holdings, its Subsidiaries, and their
respective predecessors and Affiliates has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof),
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except where the failure to comply would not result in an Adverse Consequence
which is material, and has obtained all licenses, permits and authorizations
necessary for the ownership and operation of Holdings and its Subsidiaries.
Except as set forth in Section 5(j) of the Disclosure Schedule, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of Holdings or its Subsidiaries alleging
any failure to comply with applicable laws (as hereinabove stated) or
challenging the validity or enforceability of any license, permit or
authorization as aforestated. Section 5(j) of the Disclosure Schedule list all
licenses, permits and authorizations of Holdings and its Subsidiaries issued to
Holdings or its Subsidiaries for the ownership or operation of their businesses.
(k) Tax Matters.
(i) Each of Holdings and its Subsidiaries has filed all Tax Returns
that it was required to file, including all Tax Returns required to be
filed prior to the 1994 acquisition of stock of Alpha by Holdings. All such
Tax Returns were correct and complete in all material respects. All Taxes
owed by any of Holdings, its Subsidiaries and their respective predecessors
(whether or not shown on any Tax Return) have been paid or will be properly
accrued in the Audited Closing Balance Sheet. None of Holdings or its
Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where any of Holdings and its Subsidiaries does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of any of Holdings and
its Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) Each of Holdings, its Subsidiaries and their respective
predecessors has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(iii) No Seller or director or officer (or employee responsible for
Tax matters) of any of Holdings and its Subsidiaries has Knowledge that any
authority will assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of any of Holdings, its Subsidiaries or, to Sellers' Knowledge,
their respective predecessors claimed or raised by any authority. Section
5(k) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to any of Holdings and its
Subsidiaries for taxable periods for which the statute of limitations
remains open or are currently subject to audit. No audit of any Tax Return
of Holdings or its Subsidiaries is currently open, and neither Holdings nor
any of its Subsidiaries have received notice that a Tax Return will be
audited. The Sellers have delivered to the Buyer correct and complete
copies of all federal
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income Tax Returns filed, examination reports received, and statements of
deficiencies assessed against and received or agreed to by any of Holdings,
its Subsidiaries and their respective predecessors since June 30, 1993.
(iv) None of Holdings, its Subsidiaries and their respective
predecessors has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v) None of Holdings, its Subsidiaries and their respective
predecessors has filed a consent under Code Sec. 341(f) concerning
collapsible corporations. None of Holdings, its Subsidiaries and, to the
Knowledge of Sellers, their respective predecessors has made any payments,
is obligated to make any payments, or is a party to any agreement that
could obligate it to make any payments that will not be deductible under
Code Sec. 280G. None of Holdings, its Subsidiaries and, to the Knowledge of
Sellers, their respective predecessors has been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2)
during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
Neither Holdings, any of its Subsidiaries nor, to the Knowledge of Sellers,
any of their respective predecessors has taken a position on its federal or
state income Tax Returns that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec. 6662,
or any corresponding provision of state, local or foreign tax law. None of
Holdings, its Subsidiaries and, to the Knowledge of Sellers, their
respective predecessors is or has been a party to any Tax allocation or
sharing agreement. None of Holdings, its Subsidiaries and their respective
predecessors (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was Holdings) or (B) has any Liability for the Taxes of any
Person under Treas. Reg. (S) 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(vi) Section 5(k) of the Disclosure Schedule sets forth the following
information with respect to each of Holdings and its Subsidiaries as of the
most recent practicable date: (A) the amount of any deferred gain or loss
allocable to Holdings or Subsidiary arising out of any Deferred
Intercompany Transaction, or any item treated similarly to a Deferred
Intercompany Gain or Loss; (B) the amount of any adjustments required by
Code Sec. 481 for any changes in methods of accounting; and (C) any
elections made under the Code which are currently in effect.
(vii) The unpaid Taxes of Holdings, its Subsidiaries and their
respective predecessors (A) did not, as of the end of the month immediately
preceding the Closing Date, exceed the reserve for Tax Liability (excluding
deferred Taxes established under GAAP) included in the Preliminary Closing
Balance Sheet and (B) do not exceed that reserve as adjusted for the
passage of time through the
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Closing Date in accordance with the past custom and practice of Holdings
and its Subsidiaries in filing their Tax Returns.
(viii) None of Holdings and its Subsidiaries has filed an election
under Code Sec. 338.
(l) Real Property.
(i) Section 5(l)(i) of the Disclosure Schedule lists and describes
briefly all real property that any of Holdings and its Subsidiaries owns.
With respect to each such parcel of owned real property:
(A) there are no pending or, to Sellers' Knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating
to the property or other matters affecting materially and adversely
the current use, occupancy, or value thereof;
(B) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described
parcels of land, are not in material violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties
or buildings or improvements thereon are subject to "permitted non-
conforming use" or permitted non-conforming structure"
classifications), and do not materially encroach on any easement which
may burden the land, and the land does not serve any adjoining
property for any purpose inconsistent with the use of the land, and
the property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary
to the use thereof have not been obtained;
(C) all facilities have received all material approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been
operated and maintained in material accordance with applicable laws,
rules, and regulations;
(D) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties
the right of use or occupancy of any portion of the parcel of real
property;
(E) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or
interest therein;
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(F) there are no parties (other than Holdings and its
Subsidiaries) in possession of the parcel of real property;
(G) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation
of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and
regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcel of real
property; and
(H) each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via
a permanent, irrevocable, appurtenant easement benefitting the parcel
of real property, and access to the property is provided by paved
public right-of-way with adequate curb cuts available.
(ii) Section 5(l)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to any of Holdings and its
Subsidiaries, or any properties operated or managed by contract or
otherwise by Holdings or any of its subsidiaries. Section 5(l)(ii) of the
Disclosure Schedule also identifies the leased or subleased properties for
which title insurance policies are to be procured in accordance with (S)
6(h)(ii) below. The Sellers have delivered to the Buyer correct and
complete copies of the leases and subleases listed in (S) 5(l)(ii) of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in (S) 5(l)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding, enforceable,
and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(C) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
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(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true and
correct with respect to the underlying lease;
(G) none of Holdings and its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(H) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws,
rules, and regulations; and
(I) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
(m) Intellectual Property.
(i) Holdings and its Subsidiaries own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of Holdings and its
Subsidiaries as presently conducted. Each item of Intellectual Property
owned or used by any of Holdings and its Subsidiaries immediately prior to
the Closing hereunder will be owned or available for use by Holdings or the
Subsidiary on identical terms and conditions immediately subsequent to the
Closing hereunder. Each of Holdings and its Subsidiaries has taken all
necessary action to maintain and protect each item of Intellectual Property
that it owns or uses.
(ii) None of Holdings and its Subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the Sellers and
the directors and officers (and employees with responsibility for
Intellectual Property matters) of Holdings and its Subsidiaries has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that any of Holdings and its Subsidiaries must license or refrain
from using any Intellectual Property rights of any third party). To the
Knowledge of any of the Sellers and the directors and officers (and
employees with responsibility for Intellectual Property matters) of
Holdings and its Subsidiaries, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any of Holdings and its Subsidiaries.
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(iii) Section 5(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to any of Holdings and its
Subsidiaries with respect to any of its Intellectual Property, identifies
each pending patent application or application for registration which any
of Holdings and its Subsidiaries has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission which any of Holdings and its Subsidiaries has granted to any
third party with respect to any of its Intellectual Property (together with
any exceptions). The Sellers have delivered to the Buyer correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date) and have made available to
the Buyer correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such item.
Section 5(m)(iii) of the Disclosure Schedule also identifies each trade
name or unregistered trademark used by any of Holdings and its Subsidiaries
in connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in (S) 5(m)(iii) of the
Disclosure Schedule: (A) Holdings and its Subsidiaries possess all right,
title, and interest in and to the item, free and clear of any Security
Interest, license, or other restriction; (B) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge; (C) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand is pending or is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and (D) none of
Holdings and its Subsidiaries has ever agreed to indemnify any Person for
or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iv) Section 5(m)(iv) of the Disclosure Schedule identifies each item
of Intellectual Property that any third party owns and that any of Holdings
and its Subsidiaries uses pursuant to license, sublicense, agreement, or
permission. The Sellers have delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property
required to be identified in (S) 5(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the Closing;
(C) no party to the license, sublicense, agreement, or permission
is in breach or default, and no event has occurred which with notice
or lapse
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of time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or permission
has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(H) none of Holdings and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of any of the Sellers and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of Holdings and its Subsidiaries, neither Holdings nor any of its
subsidiaries will interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of its business as
presently conducted.
(n) Tangible Assets. Except as set forth in (S) 5(n) of the Disclosure
Schedule, Holdings and its Subsidiaries own or lease all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of their
businesses as presently conducted. Each such tangible asset is free from
material defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(o) Inventory. Except for the Inventory identified in Section 2(b)(ii)
above, all other items of inventory of Holdings and its Subsidiaries, net of
applicable reserves as set forth on the face of the Most Recent Balance Sheet,
consisting of chemicals, felts, wrapper stocks, fuel oil, supplies, stores and
spare parts and work-in-process pulp, are merchantable and fit for the purposes
for which they were procured or manufactured in all material respects, and are
fully adequate for the needs of the business, and fairly valued on the books of
Holdings and its Subsidiaries and are not obsolete.
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(p) Contracts. Section 5(p) of the Disclosure Schedule lists the
following contracts and other agreements to which any of Holdings and its
Subsidiaries is a party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a material loss to any of Holdings and its Subsidiaries, or
involve consideration in excess of $25,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $25,000 or under
which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Sellers and their Affiliates (other
than Holdings and its Subsidiaries);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing annual compensation
in excess of $25,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any amount to
any of its directors, officers, and employees outside the Ordinary Course
of Business;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of any of
Holdings and its Subsidiaries; or
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(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in (S) 5(p) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in (S) 5(p) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no party
is in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (D) no party has repudiated any
provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
Holdings and its Subsidiaries are reflected properly on their books and records,
are valid receivables subject to no setoffs or counterclaims and are
collectible.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of Holdings and its Subsidiaries.
(s) Insurance. Section 5(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which any of Holdings and its Subsidiaries has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past 2 years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid,
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binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (C) neither any of
Holdings and its Subsidiaries nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. Each of Holdings and its Subsidiaries has been covered
during the past 2 years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Section 4(s) of the Disclosure Schedule describes any self- insurance
arrangements affecting any of Holdings and its Subsidiaries.
(t) Litigation. Section 5(t) of the Disclosure Schedule sets forth each
instance in which any of Holdings and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to Sellers' Knowledge, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in (S) 5(t) of the Disclosure Schedule
could result in any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of any of
Holdings and its Subsidiaries. None of the Sellers and the directors and
officers (and employees with responsibility for litigation matters) of Holdings
and its Subsidiaries has any reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against any
of Holdings and its Subsidiaries.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by any of Holdings and its Subsidiaries has been in conformity with
all applicable contractual commitments and all express and implied warranties,
and none of Holdings and its Subsidiaries has any Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Holdings and its Subsidiaries.
No product manufactured, sold, leased, or delivered by any of Holdings and its
Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Section 5(u) of the
Disclosure Schedule includes copies of the standard terms and conditions of sale
or lease for each of Holdings and its Subsidiaries (containing applicable
guaranty, warranty, and indemnity provisions).
(v) Product Liability. None of Holdings and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation,
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charge, complaint, claim, or demand against any of them giving rise to any
Liability) arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by any of Holdings and its Subsidiaries.
(w) Employees. To the Knowledge of any of the Sellers and the directors
and officers (and employees with responsibility for the management or
supervision of employment or employment-related matters) of Holdings and its
Subsidiaries, no executive, manager, director of any organizational division or
department, key employee, or group of employees has any plans to terminate
employment with any of Holdings and its Subsidiaries. None of Holdings and its
Subsidiaries is a party to or bound by any collective bargaining agreement, nor
has any of them experienced any strikes, grievances, claims of unfair labor
practices, unfair employment practices, or other dispute(s) arising out of or
related to the past or present employment, or termination thereof, of any
employee of Holdings or any subsidiary, or any applicant or candidate for such
employment. Neither Holdings nor its Subsidiaries have committed any unfair
labor practice, or any unfair or wrongful employment or employment-related
practice, nor do any of the directors and officers (and employees with
responsibility for the management or supervision of employment or employment-
related matters) have any knowledge, information or belief with respect to any
pending or threatened claim arising out of or related to any allegation of
employment discrimination or wrongful discipline or discharge asserted by, for
or on behalf of any employee of Holdings or its Subsidiaries. None of the
Sellers and the directors and officers (and employees with responsibility for
the management or supervision of employment or employment-related matters) of
Holdings and its Subsidiaries has any knowledge of, or information related to,
any organizational effort or other collective activity presently being
considered, threatened or undertaken by or on behalf of any labor
organization or any employee or employees of Holdings or any of its
Subsidiaries.
(x) Employee Benefits.
(i) Section 5(x) of the Disclosure Schedule lists each Employee
Benefit Plan that any of Holdings and its Subsidiaries maintains or to
which any of Holdings and its Subsidiaries contributes or with respect to
which Holdings or its Subsidiaries has any liability.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA, the Code, and
other applicable laws where the failure to comply could be reasonably
expected to result in material Liability, specifically:
1) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and
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Summary Plan Descriptions) have been filed or distributed in
accordance with applicable law with respect to each such Employee
Benefit Plan.
2) The requirements of Part 6 of Subtitle B of Title I of
ERISA and of Code Sec. 4980B have been met with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit
Plan;
3) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have
been paid to each Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each such Employee
Pension Benefit Plan or accrued in accordance with the past
custom and practice of Holdings and its Subsidiaries; and
4) All premiums or other payments for all periods ending on
or before the Closing Date have been paid with respect to each
Employee Welfare Benefit Plan.
(ii) Each Employee Pension Benefit Plan intended to satisfy the
requirements of a "qualified plan" under Code Sec. 401(a) is so qualified
and has received, within the last two years, a favorable determination
letter from the Internal Revenue Service, which remains valid and may be
relied upon by Holdings and its Subsidiaries as of the date of closing.
(iii) Neither Holdings nor any of its Subsidiaries have any liability
in respect of an Employee Pension Benefit Plan which is now or has ever
been subject to Title IV of ERISA, including any Multiemployer Plan, and
has no Liability with respect to any such Plan.
(iv) Sellers have delivered to the Buyer correct and complete copies
of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.
(v) With respect to each Employee Benefit Plan that any of Holdings,
its Subsidiaries, and the Controlled Group of Corporations which includes
Holdings and its Subsidiaries maintains or ever has maintained or to which
any of them contributes, ever has contributed, or ever has been required to
contribute:
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i) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan as to which there exists any material
liability on the part of Holdings or its Subsidiary.
ii) No Fiduciary, to the knowledge of the Company, has any
material Liability for which Holdings or any of its Subsidiaries would
be liable on account of breach of fiduciary duty or any other failure
to act or comply in connection with the administration or investment
of the assets of any such Employee Benefit Plan;
iii) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits) is
to the knowledge of the Company pending or threatened, and none of the
Sellers and the directors and officers (and employees with
responsibility for employee benefits matters) of Holdings and its
Subsidiaries has any Knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
(vi) None of Holdings and its Subsidiaries maintains or contributes,
or has any material Liability with respect to any Employee Welfare Benefit
Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with Code Sec.
4980B).
(y) Guaranties. Except as set forth in the Disclosure Statement, none of
Holdings and its Subsidiaries is a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other Person.
(z) Environment, Health, and Safety.
(i) Each of Holdings, its Subsidiaries, and their respective
predecessors and Affiliates has complied with all Environmental, Health,
and Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed, commenced or
threatened against any of them by anyone relating to any of their
facilities, properties or assets and alleging any failure so to comply or
other violation or any liability relating in any way to any Environmental,
Health, and Safety Laws. Without limiting the generality of the preceding
sentence, each of Holdings, its Subsidiaries, and their respective
predecessors and Affiliates has obtained and been in compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied in all material respects with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental, Health, and Safety Laws. In addition to the
foregoing, on or before Closing, the SOC in its
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current form and content, shall have become binding upon Alpha and upon the
State of North Carolina.
(ii) None of Holdings and its Subsidiaries has any Liability (and
none of Holdings, its Subsidiaries, and their respective predecessors and
Affiliates has handled, released or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or facility
in any manner that could form the Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of Holdings and its Subsidiaries giving rise to any
Liability) for any site, location, asset, property or body of water
(surface or subsurface), for any condition of or personal injury to any
employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(iii) All properties and equipment owned or operated by, or adjacent
to the properties of, Holdings, its Subsidiaries, and their respective
predecessors and Affiliates have been and are free of asbestos, PCB's oil
and other petroleum products, Extremely Hazardous Substances, and hazardous
or toxic substances, hazardous wastes, and/or hazardous materials as
defined by any Environmental, Health, and Safety Laws."
(iv) Holdings, its Subsidiaries and Affiliates have delivered to
Buyer true and complete copies and results of any reports, studies,
analyses, tests, monitoring data, and other relevant information in their
possession or in the possession of their consultants and contractors
pertaining to hazardous substances and/or environmental conditions in, on,
or under any property or facilities now or formerly owned, leased, or
managed by Holdings, its Subsidiaries and Affiliates, or relating to their
compliance (or to the compliance or potential liability of any other person
or entity for whose conduct they are or may be held responsible) with any
Environmental, Health, and Safety Laws.
(aa) Certain Business Relationships with Holdings and Its Subsidiaries.
Except as set forth in the Disclosure Schedule, none of the Sellers and their
Affiliates has been involved in any business arrangement or relationship with
any of Holdings and its Subsidiaries within the past 12 months, and none of the
Sellers and their Affiliates owns any asset, tangible or intangible, which is
used in the business of any of Holdings and its Subsidiaries.
(ab) Disclosure. The representations and warranties contained in this (S)
5 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this (S) 5 not misleading in any material respect.
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6. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its commercially
reasonable efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in (S) 8 below).
(b) Amendment to Tax Return. To the extent the auditors of Buyer
determine it is necessary in order to correct Alpha's application of prior year
net operating losses ("NOL") to offset "built-in" gains for the taxable year
ending December 31, 1993, the Sellers agree to cause Alpha to prepare and file
amended tax returns for the taxable years ending June 30, 1990, 1991 and 1992,
and December 31, 1993 to properly carry-back or carry forward the NOL's
generated in the taxable year ended June 30, 1993 to prior years before the NOL
can be applied to the "built-in" gains for the taxable year ending December 31,
1993 or any subsequent taxable year. In addition, to the extent the auditors of
Buyer determine it necessary, Sellers will cause Holdings to prepare and file
amended tax returns for the taxable year ended December 31, 1994 to correct
depreciation deductions. To the extent additional Taxes are owed for any
taxable year resulting from these amended returns, Sellers will cause Alpha to
pay such Taxes prior to Closing, provided that any refunds received by Alpha
after Closing on account of such amended tax returns shall be credited to
Sellers as a part of the Cash Component of the Purchase Price to the extent not
reflected in Taxes receivable on the Projected Closing Balance Sheet or Audited
Closing Balance Sheet.
(c) Notices and Consents. The Sellers will cause each of Holdings and its
Subsidiaries to give any notices to third parties, and will cause each of
Holdings and its Subsidiaries to use its commercially reasonable efforts to
obtain any third-party consents, that the Buyer may request in connection with
the matters referred to in (S) 5(c) above. Each of the Parties will (and the
Sellers will cause each of Holdings and its Subsidiaries to) give any notices
to, make any filings with, and use its commercially reasonable efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in (S) 4(a)(ii), (S)
4(b)(ii), and (S) 5(c) above. Without limiting the generality of the foregoing,
each of the Parties will file (and the Sellers will cause each of Holdings and
its Subsidiaries to file) any Notification and Report Forms and related material
that he or it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the Hart-
Scott-Rodino Act, will use his or its best efforts to obtain (and the Sellers
will cause each of Holdings and its Subsidiaries to use its commercially
reasonable efforts to obtain) an early termination of the applicable waiting
period, and, to the extent this Agreement has not been properly terminated
pursuant to (S) 10 hereof, will make (and the Sellers will cause each of
Holdings and its Subsidiaries to make) any further filings pursuant thereto that
may be necessary, proper, or advisable in connection therewith.
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(d) Operation of Business. Except as contemplated by this Agreement, the
Sellers will not cause or permit any of Holdings and its Subsidiaries to engage
in any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business. Without limiting the generality of the foregoing,
the Sellers will not cause or permit any of Holdings and its Subsidiaries to (i)
declare, set aside, or pay any dividend or make any distribution with respect to
its capital stock or redeem, purchase, or otherwise acquire any of its capital
stock, (ii) reduce the level of any stock of chemicals, felts, wrapper stocks,
fuel oil, supplies, stores and spare parts, and work-in-process pulp below
levels which have been consistently kept by Holdings and its Subsidiaries in the
past and which are normal and prudent for the continued, uninterrupted operation
of their business, (iii) enter into any purchase commitment for the purchase of
raw cotton linters or textile wastes without obtaining Buyer's prior approval,
or (iv) otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in (S) 5(h) above.
(e) Preservation of Business. The Sellers will cause each of Holdings and
its Subsidiaries to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
(f) Full Access. Each of the Sellers will permit, and the Sellers will
cause each of Holdings and its Subsidiaries to permit, representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Holdings and its Subsidiaries,
to all premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to each of Holdings and its
Subsidiaries. Notwithstanding the foregoing, prior to the termination of the
applicable waiting period under the Hart-Scott-Rodino Act, Buyer shall not be
entitled to (i) receive documentation or other information relating to sales
contracts, pricing or manufacturing processes of Holdings and its Subsidiaries
or any other similar information of competitive sensitivity, or (ii) conduct on-
site investigations at the facilities of Holdings and its Subsidiaries (except
for environmental due diligence).
(g) Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in (S) 5 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in (S) 4 above.
No disclosure by any Party pursuant to this (S) 6(g), however, shall be deemed
to amend or supplement ANNEX I, ANNEX II, or the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or breach of covenant
without the expressed written agreement of the other Party.
(h) Exclusivity. None of the Sellers will (and the Sellers will not cause
or permit any of Holdings and its Subsidiaries to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets of, any of Holdings and its
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Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. None of the Sellers will vote their Holdings Shares in
favor of any such acquisition structured as a merger, consolidation, or share
exchange. The Sellers will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
(i) Title Insurance. The Sellers will cause Holdings and its Subsidiaries
to obtain the following title insurance commitments, policies, and riders in
preparation for the Closing:
(i) with respect to each parcel of real estate that any of Holdings
and its Subsidiaries owns, an ALTA Owner's Policy of Title Insurance Form
B-1987 (or equivalent policy reasonably acceptable to the Buyer if the real
property is located in a state in which an ALTA Owner's Policy of Title
Insurance Form B-1987 is not available) issued by a title insurer
reasonably satisfactory to the Buyer (and, if requested by the Buyer,
reinsured in whole or in part by one or more insurance companies and
pursuant to a direct access agreement reasonably acceptable to the Buyer),
in such amount as the Buyer reasonably may determine to be the fair market
value of such real property (including all improvements located thereon),
insuring title to such real property to be in Holdings or its Subsidiary as
of the Closing (subject only to the title exceptions described above in (S)
5(l)(i) and in (S) 5(l)(i) of the Disclosure Schedule); and
(ii) with respect to each parcel of real estate that any of Holdings
and its Subsidiaries leases or subleases with terms in excess of one (1)
year and which is listed on (S) 5(l)(ii) of the Disclosure Schedule as a
property for which a title insurance policy is to be procured, an ALTA
Leasehold Owner's Policy of Title Insurance-1987 (or equivalent policy
reasonably acceptable to the Buyer if the real property is located in a
state in which an ALTA Leasehold Owner's Policy of Title Insurance-1987 is
not available) issued by a title insurer reasonably satisfactory to the
Buyer (and, if requested by the Buyer, reinsured in whole or in part by one
or more insurance companies and pursuant to a direct access agreement
reasonably acceptable to the Buyer) in such amount as the Buyer reasonably
may determine, insuring title to the leasehold or subleasehold estate to be
in Holdings or its Subsidiary as of the Closing (subject only to the title
exceptions described above in (S) 5(l)(ii) and in (S) 5(l)(ii) of the
Disclosure Schedule).
Each title insurance policy delivered under (S) 6(i)(i) and (S) 6(i)(ii) above
shall (A) insure title to the real property and all recorded easements
benefitting such real property, (B) contain an "extended coverage endorsement"
insuring over the general exceptions contained customarily in such policies, (C)
contain an ALTA Zoning Endorsement 3.1
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(or equivalent), (D) contain an endorsement insuring that the real property
described in the title insurance policy is the same real estate as shown on the
Survey delivered with respect to such property, (E) contain an endorsement
insuring that each street adjacent to the real property is a public street and
that there is direct and unencumbered pedestrian and vehicular access to such
street from the real property, (F) contain an inflation endorsement providing
for annual adjustments in the amount of coverage corresponding to the annual
percentage increase, if any, in the United States Department of Commerce
Composite Construction Cost Index (Base Year = ____), (G) if the real property
consists of more than one record parcel, contain a "contiguity" endorsement
insuring that all of the record parcels are contiguous to one another, and (H)
contain a "non-imputation" endorsement to the effect that title defects known to
the officers, directors, and stockholders of the owner prior to the Closing
shall not be deemed "facts known to the insured" for purposes of the policy.
(j) Surveys. With respect to each parcel of real property that any of
Holdings and its Subsidiaries owns, leases, or subleases, and as to which a
title insurance policy is to be procured pursuant to (S) 6(i) above, the Sellers
will cause Holdings and its Subsidiaries to procure in preparation for the
Closing a current survey of the real property certified to the Buyer, prepared
by a licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing.
(k) Tax Basis of Assets. Prior to the Closing, Sellers shall deliver a
supplement to (S) 5(k) of the Disclosure Schedule setting forth the following
with respect to Holdings and its Subsidiaries as of the most recent practicable
date, which shall be reasonably acceptable to Buyer and its auditors: (A) the
tax basis of Holdings or Subsidiary in its assets; (B) the tax basis of the
stockholder(s) of Alpha in its stock for tax purposes (or the amount of any
Excess Loss Account); and (C) the amount of carryforward for tax purposes of any
net operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to Holdings or Alpha.
7. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents, and copies thereof) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under (S) 9
below). The Sellers acknowledge and agree that from and after the Closing the
Buyer will be entitled to possession of all documents, books,
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records (including Tax records), agreements, and financial data of any sort
relating to Holdings and its Subsidiaries.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of Holdings and its Subsidiaries, each of the
other Parties will cooperate with him or it and his or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under (S) 9 below).
(c) Transition. For a period of two (2) years following the Closing Date,
none of the Sellers will take any action that is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of any of Holdings and its subsidiaries from maintaining the
same business relationships with Holdings and its Subsidiaries after the Closing
as it maintained with Holdings and its Subsidiaries prior to the Closing. For a
period of two (2) years following the Closing Date, each of the Sellers will
refer all customer inquiries relating to the businesses of Holdings and its
Subsidiaries to the Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
its possession, provided that nothing herein shall preclude the Seller
Representative from communicating with or providing necessary financial
information to present and/or prospective investors in Stonebridge Partners. In
the event that any of the Sellers is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, that Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this (S) 7(d). If, in the
absence of a protective order or the receipt of a waiver hereunder, any of the
Sellers is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that Seller may
disclose the Confidential Information to the tribunal; provided, however, that
the disclosing Seller shall use his or its reasonable best efforts to obtain, at
the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
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(e) Subsequent Disclosure. Each of the Sellers shall take such action as
necessary to assist Buyer in preparing the required financial information
relating to Holdings and its Subsidiaries in accordance with Regulation S-X
under the Securities Exchange Act within seven (7) calendar days following the
Closing.
8. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the Sellers shall have delivered to Buyer all of the Holdings
Shares with duly executed stock powers transferring the Holdings Shares to
Buyer or its designee free of all liens, claims, encumbrances or pledge of
any nature;
(ii) the representations and warranties set forth in (S) 4(a) and (S)
5 above shall be true and correct in all material respects at and as of the
Closing Date;
(iii) the Sellers shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iv) Holdings and its Subsidiaries shall have procured all material
third party consents and any other third party consents deemed reasonably
necessary by Buyer for its continued ownership and operation of Alpha from
and after the Closing Date, all of the title insurance commitments,
policies, and riders specified in (S) 6(i) above, and all of the surveys
specified in (S) 6(j) above;
(v) all necessary licenses, permits and authorizations for the
ownership and operation of Holdings and each of its Subsidiaries shall have
been lawfully issued to and obtained by each such entity and shall not be
restricted, forfeited, rescinded, terminated or otherwise adversely
affected by the acquisition of the Holdings Shares by Buyer; provided that,
at Buyer's election, if all valid and legally required permits including
those created by a valid and binding SOC shall not have been issued as of
the Closing Date, Buyer may draw against the Hold-Back at any time after
Closing within the eighteen (18) month period for environmental
indemnification set forth in Section 9(a) hereof to install the essential
equipment needed to allow the Alpha plant to meet the levels required by
the SOC unless the Sellers can give Buyer reasonable assurance that the
required permits will be issued within twelve (12) months of the Closing
Date;
(vi) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any
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of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyer to own Holdings
Shares and to control Holdings and its Subsidiaries, or (D) affect
adversely the right of any of Holdings and its Subsidiaries to own its
assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(vii) the Sellers shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in (S) 8(a)(i)-(vi)
is satisfied in all respects;
(viii) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties, Holdings, and its Subsidiaries shall have
received all other authorizations, consents, and approvals of governments
and governmental agencies referred to in (S) 4(a)(ii), (S) 4(b)(ii), and
(S) 5(c) above;
(ix) each Seller (except for Janice S. Valenta, John F. Manning, Ken
L. Wilcox, Albert A. Bounds, Jr., Ralph Bolin, Charles P. Oxendine and
James R. Israelson) shall have executed and delivered to Buyer a
Noncompetition Agreement in substantially the same form as that attached
hereto as EXHIBIT "B."
(x) the Buyer shall have received from counsel to the Sellers an
opinion under the laws of the States of Delaware and North Carolina, as
appropriate, in form and substance reasonably satisfactory to Buyer and its
counsel, addressed to the Buyer, and dated as of the Closing Date
concerning the matters set forth in Section 4(a) and Section 5(a-c) above;
(xi) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of Holdings and its Subsidiaries
other than those whom the Buyer shall have specified in writing at least
five business days prior to the Closing;
(xii) all Operating Liabilities and Indebtedness of Holdings and its
Subsidiaries shall have been discharged or paid in full as of the Closing
Date or any such Operating Liabilities and Indebtedness which remain
outstanding as of the Closing Date shall be capable of being discharged
subsequent to the Closing Date at any time upon the election of Buyer,
except, at the option of Buyer, for existing deferred compensation, non-
compete obligations and employee-related obligations;
(xiii) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments,
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and other documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the Buyer; and
(xiv) Buyer shall have completed, to its reasonable satisfaction, its
due diligence review relating to: (A) on-site investigations of Holdings'
and its Subsidiaries' facilities and the manufacturing process of Holdings
and its Subsidiaries, (B) interviews with employees of Holdings and its
Subsidiaries, (C) sales contracts and pricing information of Holdings and
its Subsidiaries, or (D) environmental and tax matters.
(xv) Sellers shall have delivered the supplement to (S) 5(k) of the
Disclosure Schedule to Buyer pursuant to (S) 6(k) and the information
contained therein shall be reasonably acceptable to Buyer and its auditors.
(xvi) Sellers shall have delivered to Buyer an officer's certificate
certifying the allocation of manufacturing costs to finished goods
inventory at the Closing Date as reasonably based on anticipated aggregate
manufacturing costs for the current calendar year.
To the extent it may legally do so, Buyer may waive any condition specified in
this (S) 8(a) if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in (S) 4(b) above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing including
the payment of the Purchase Price;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
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(iv) the Buyer shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in (S) 8(b)(i)-(iii)
is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Act shall have expired or otherwise been terminated
and the Parties, Holdings, and its Subsidiaries shall have received all
other authorizations, consents, and approvals of governments and
governmental agencies referred to in (S) 4(b)(ii), and (S) 5(c) above;
(vi) the Sellers shall have received from counsel to the Buyer an
opinion under the laws of the State of Tennessee, in form and substance
reasonably satisfactory to Sellers and their counsel, addressed to the
Sellers, and dated as of the Closing Date concerning the matters set forth
in Section 4(b) above; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller Representative.
To the extent they may legally do so, the Seller Representative may waive any
condition specified in this (S) 8(b) if they execute a writing so stating at or
prior to the Closing.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) Survival of Sellers' Representations and Warranties.
All of the representations and warranties of Sellers contained herein shall
survive the Closing hereunder and continue in full force and effect for a period
of one year thereafter, except for the representations and warranties of Sellers
contained in (S) 5(t) and (z) relating to litigation and environmental issues
which shall continue in full force and effect for a period of eighteen months
from the Closing, and except for the representations and warranties of Sellers
contained in (S) 5(k) relating to tax issues which shall continue in full force
and effect for a period of two years from the Closing.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches (or in the event any
third party alleges facts that, if true, would mean any of the Sellers has
breached) any of their representations, warranties, and covenants contained
herein, and Buyer makes a written claim for indemnification against any of
the Sellers pursuant to (S) 11(g) below within the survival period set
forth in Section 9(a), then each of the Sellers, jointly and severally,
agrees to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer through and after the date of
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the claim for indemnification (including any Adverse Consequences the Buyer
may suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach). Notwithstanding the preceding sentence, if any such
breach or alleged fact already resulted in a Post-Closing Adjustment, there
shall be no claim of indemnification hereunder to the extent of any such
Post-Closing Adjustment already resulted in an adjustment to the Purchase
Price.
(ii) Each of the Sellers, jointly and severally, agrees to indemnify
the Buyer from and against the entirety of any Adverse Consequences (net of
any reduction to the Purchase Price resulting from any applicable reserves
on the Audited Closing Balance Sheet), the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any Liability
of any of Holdings and its Subsidiaries for the unpaid Taxes of any Person
(other than any of Holdings and its Subsidiaries) under Treas. Reg. (S)
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(iii) Each of the Sellers, jointly and severally, agrees to indemnify
the Buyer from and against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of, relating to, in the nature
of, or caused by Alpha's failure to have obtained all valid and legally
required permits including those created by the SOC in accordance with and
pursuant to the provisions of Section 8(a)(v) above, including Seller's
failure to obtain the required permits within twelve (12) months of Closing
if Sellers shall have given Buyer their reasonable assurance that such
permits will have been obtained within that time period.
(iv) All claims for indemnification under clauses (i)-(iii) above
shall be net of any insurance proceeds received by Holdings or Alpha
subsequent to Closing specifically on account of the matter resulting in
the claim.
(v) NOTWITHSTANDING THE PROVISIONS OF CLAUSES (I) - (III) ABOVE AND
ANY OTHER TERM OF THIS AGREEMENT, ANY PAYMENTS FROM SELLERS UNDER THIS
AGREEMENT, SHALL BE LIMITED TO THE AMOUNTS CONTAINED IN THE HOLD-BACK, AND
BUYER AGREES TO LOOK SOLELY TO THE HOLD-BACK FOR ITS CLAIMS FOR ADVERSE
CONSEQUENCES RESULTING FROM THE MATTERS FOR WHICH INDEMNIFICATION WAS
SOUGHT HEREUNDER. SELLERS SHALL HAVE NO PERSONAL LIABILITY FOR ANY CLAIM
HEREUNDER AND ALL CLAIMS IN EXCESS OF THE HOLD-BACK AMOUNT ARE NON-
RECOURSE.
(c) Matters Involving Third Parties.
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(i) If any third party shall notify Buyer (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against the Sellers (the "Indemnifying Party")
under this (S) 9, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party acknowledges
that it will be fully responsible for the payment of all fees and expenses
of its counsel and other related costs incurred in the defense of such
claim, (C) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business interests
of the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with (S) 9(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), (C) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party (not to be
withheld unreasonably), and (D) in the event any settlement is executed or
judgement entered, it will be satisfied first from the Hold-Back, and any
remaining amounts will remain the Liability of Holdings or its
Subsidiaries, as the case may be.
(iv) In the event any of the conditions in (S) 9(d)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the
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<PAGE>
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), and (B) the Indemnifying
Parties will reimburse the Indemnified Party promptly and periodically for
the costs of defending against the Third Party Claim (including reasonable
attorneys' fees and expenses).
(d) Waiver of Indemnification Provisions. Each of the Sellers hereby
agrees that he or it expressly waives any right to make any claim for
indemnification against any of Holdings and its Subsidiaries by reason of the
fact that he or it was a director, officer, employee, or agent of any such
entity at any time prior to the Closing Date or was serving at the request of
any such entity as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought by any third party against Holdings or any of its Subsidiaries
and/or any of the Sellers for any matter, action or transaction occurring prior
to the Closing Date.
10. TERMINATION.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller Representative may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller Representative on or before the end of the second week
following termination of the Hart-Scott-Rodino waiting period if the Buyer
is not reasonably satisfied with the results of its continuing due
diligence relating to (A) on-site investigations of Holdings and its
Subsidiaries' facilities and the manufacturing processes of Holdings and
its Subsidiaries, (B) interviews with employees of Holdings and its
Subsidiaries, (C) sales contracts and pricing information of Holdings and
its Subsidiaries, or (D) environmental and tax matters;
(iii) the Buyer may terminate this Agreement by giving written notice
to the Seller Representative at any time prior to the Closing (A) in the
event any of the Sellers has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer has
notified the Seller Representative of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach
or (B) if the Closing shall not have occurred on or before the ninetieth
(90th) day from the date hereof, by reason of the failure of any condition
precedent, which has not been waived by Buyer, under
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<PAGE>
(S) 8(a) hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant contained in this
Agreement); and
(iv) the Seller Representative may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, any of the Sellers has
notified the Buyer of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach or (B) if the Closing
shall not have occurred on or before the ninetieth (90th) day from the date
hereof, by reason of the failure of any condition precedent, which has not
been waived by the Seller Representative, under (S) 8(b) hereof (unless the
failure results primarily from any of the Sellers themselves breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to (S) 10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
11. MISCELLANEOUS.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Buyer and the Seller
Representative; provided, however, that Buyer may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the Buyer
will use its reasonable best efforts to advise the other Parties prior to making
the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. Except for the Confidentiality Agreement among the
parties, this Agreement (including the documents referred to herein) constitutes
the entire agreement among the Parties and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller Representative; provided, however, that the
Buyer may (i) assign any or all of its rights
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<PAGE>
and interests hereunder to one or more of its Affiliates and (ii) designate one
or more of its Affiliates to perform its obligations hereunder (in any or all of
which cases the Buyer nonetheless shall remain responsible for the performance
of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Sellers: c/o DAVID A. ZACKRISON
STONEBRIDGE PARTNERS
Westchester Financial Center
50 Main Street
White Plains, New York 10606
Copy to: SIMPSON, THATCHER & BARTLETT
425 Lexington Avenue
New York, New York 10018-3909
ATTN: Richard C. Weisberg
If to the Buyer: BUCKEYE CELLULOSE CORPORATION
1001 Tillman Street
P.O. Box 8407
Memphis, Tennessee 38105-0407
ATTN: Robert Cannon
Copy to: BAKER, DONELSON, BEARMAN & CALDWELL
2000 First Tennessee Building
Memphis, Tennessee 38103
ATTN: Henry P. Doggrell
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex,
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<PAGE>
ordinary mail, or electronic mail), but no such notice, request, demand, claim,
or other communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Tennessee without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Tennessee or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Tennessee. However, all
disputes involving claims against the Hold-Back shall be resolved in accordance
with Section 2(i) above.
(i) Arbitration. If, following the Closing, any dispute, claim or
difference [except disputes arising under Section 2(i)] arises out of this
Agreement, or as to the rights and liabilities of the parties hereunder or as to
the breach or invalidity hereof, or in connection with the construction of this
Agreement including any dispute, claim or difference as to whether an issue is
arbitrable (each such event being hereinafter called a "Dispute"), the parties
shall settle such Dispute exclusively by binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect as of the date of commencement of the arbitration; provided, however,
that any such arbitration shall be presided over by three arbitrators. The
arbitration shall be held in Atlanta, Georgia, unless the parties mutually agree
to have the arbitration held elsewhere, and judgment upon the award made therein
may be entered by any court having jurisdiction thereof; provided, however, that
nothing contained in this Section 11(i) shall be construed to limit or preclude
a party from bringing any action in any court of competent jurisdiction in the
United States for injunctive or other provisional relief to compel another party
hereto to comply with its obligations under this Agreement or any other
agreement between or among the parties during the pendency of the arbitration
proceedings.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller Representative. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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<PAGE>
(l) Expenses. Each of the Parties, Holdings, and its Subsidiaries will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Sellers agree that none of Holdings and its Subsidiaries has borne
or will bear any of the Sellers' costs and expenses (including any of their
legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Sellers' Agent. Each Seller hereby irrevocably appoints David A.
Zackrison and Michael Bruno, Jr., and each of them, as his, her or its true and
lawful attorney in fact with respect to all matters arising under and in
connection with this Agreement or the Escrow Agreement including, but not
limited to, the determination of Purchase Price and responding to claims to
recover Damages under Escrow. This power of attorney shall not be affected by
subsequent disability or incapacity of any Seller.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SELLERS:
STONEBRIDGE PARTNERS EQUITY /s/ JANICE S. VALENTA
FUND, L.P. ----------------------------------
JANICE S. VALENTA
ALPHA CELLULOSE ASSOCIATES I, L.P. /s/ JOHN F. MANNING
----------------------------------
JOHN F. MANNING
ALPHA CELLULOSE ASSOCIATES II, L.P. /s/ KEN L. WILCOX
----------------------------------
KEN L. WILCOX
BY: Stonebridge Partners Management, /s/ ALBERT A. BOUNDS, JR.
L.P., General Partner ----------------------------------
ALBERT A. BOUNDS, JR.
By: /s/ DAVID A. ZACKRISON /s/ RALPH BOLIN
---------------------------------- ----------------------------------
David A. Zackrison, RALPH BOLIN
General Partner
STONEBRIDGE PARTNERS /s/ CHARLES P. OXENDINE
MANAGEMENT, L.P., AS NOMINEE FOR ----------------------------------
PNC VENTURE CORP. CHARLES P. OXENDINE
By: /s/ DAVID A. ZACKRISON /s/ JAMES R. ISRAELSON
---------------------------------- ----------------------------------
Title: General Partner JAMES R. ISRAELSON
DAWKS CORPORATION BUYER:
By: /s/ WAYLAND W. MCALLISTER BUCKEYE CELLULOSE CORPORATION
----------------------------------
Wayland W. McAllister, President By: /s/
-------------------------------
/s/ JOHN P. FLANAGAN Title: Chairman & CEO
- ---------------------------------- ----------------------------
JOHN P. FLANAGAN
/s/ MICHAEL M. BROWN
- ----------------------------------
MICHAEL M. BROWN
/s/ WAYLAND W. MCALLISTER
- ----------------------------------
WAYLAND W. MCALLISTER, only as to
the obligation to deliver the Non-
Competition Agreement
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<PAGE>
New York
STATE OF ____________
Westchester
COUNTY OF ____________
Barbara Timm
Personally appeared before me, __________________________, a Notary
Public in and for said State and County duly commissioned and qualified, DAVID
A. ZACKRISON, with whom I am personally acquainted (or proved to me on the basis
of satisfactory evidence), and who, upon oath, acknowledged that he executed the
within instrument for the purposes therein contained, and who further
acknowledged that he is the General Partner of STONEBRIDGE PARTNERS, MANAGEMENT,
L.P. (the "Constituent"), the general partner of STONEBRIDGE PARTNERS EQUITY
FUND, L.P., ALPHA CELLULOSE ASSOCIATES I, L.P., AND ALPHA CELLULOSE ASSOCIATES
II, L.P., each a limited partnership (the "Makers") and is authorized by each
Maker or by its Constituent, the Constituent being authorized by the Maker, to
execute this instrument on behalf of the Maker.
30th April
WITNESS my hand, at office, this ____ day of ______________, 1996.
/s/ Barbara Timm
__________________________
Notary Public
BARBARA TIMM
My Commission Expires: Notary Public, State of New York
No. 41-4866950
August 25, 1996 Qualified in Queens County
_____________________ Commission Expires August 25, 1996
New York
STATE OF ____________
Westchester
COUNTY OF ____________
Barbara Timm
Before me, _____________________________, a Notary Public in and for said
David A. Zackrison
County and State, personally appeared _____________________________________,
with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who, upon oath, acknowledged ___self to be a partner
of STONEBRIDGE PARTNERS MANAGEMENT, L.P., AS NOMINEE FOR PNC VENTURE CORP., the
within named bargainor, a partnership, and that _he as such partner executed the
foregoing instrument for the purposes therein contained, by signing the name of
the partnership by ___self as such partner.
30th April
WITNESS my hand and seal at office, on this ____ day of _______________,
1996.
/s/ Barbara Timm
__________________________
Notary Public
BARBARA TIMM
My Commission Expires: Notary Public, State of New York
No. 41-4866950
August 25, 1996 Qualified in Queens County
_____________________ Commission Expires August 25, 1996
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<PAGE>
STATE OF North Carolina
COUNTY OF Robeson
Before me, Carolyn W. Jennings, a Notary Public in and for the
___________________
State and County aforesaid, personally appeared WAYLAND W. MCALLISTER, with whom
I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself (or herself) to be the
President of DAWKS CORPORATION, the within named bargainor, a corporation, and
that he as such President, being duly authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself as such President.
WITNESS my hand and seal at office, on this the 30th day of April, 1996.
____ _____
/s/ Carolyn W. Jennings
--------------------------
Notary Public
My Commission Expires:
12/14/1999
______________________
STATE OF _____________
COUNTY OF ____________
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, JOHN P. FLANAGAN, the within named bargainor,
with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that he executed the foregoing
instrument for the purposes therein contained.
WITNESS my hand and seal at office, on this ____ day of ______________,
1996.
------------------------
Notary Public
My Commission Expires:
______________________
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<PAGE>
STATE OF _______________
COUNTY OF ______________
Before me, ___________________ , a Notary Public in and for the
State and County aforesaid, personally appeared WAYLAND W. MCALLISTER, with whom
I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself (or herself) to be the
President of DAWKS CORPORATION, the within named bargainor, a corporation, and
that he as such President, being duly authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself as such President.
WITNESS my hand and seal at office, on this the ____ day of _____, 1996.
______________________________
Notary Public
My Commission Expires:
8/25/96
______________________
STATE OF New York
_____________
COUNTY OF Westchester
____________
Personally appeared before me, Barbara Timm , a Notary Public in and for
------------
said State and County, JOHN P. FLANAGAN, the within named bargainor, with whom I
am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who acknowledged that he executed the foregoing instrument for
the purposes therein contained.
WITNESS my hand and seal at office, on this 30th day of April, 1996.
---- -----
/s/ Barbara Timm
______________________________
Notary Public
My Commission Expires: BARBARA TIMM
Notary Public, State of New York
8/25/96 No. 41-4866950
______________________ Commission Expires August 25, 1996
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<PAGE>
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, _________________________, a Notary Public
in and for said State and County, MICHAEL M. BROWN, the within named bargainor,
with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that he executed the foregoing
instrument for the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, JANICE S. VALENTA, the within named bargainor,
with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that she executed the foregoing
instrument for the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
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<PAGE>
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, JOHN F. MANNING, the within named bargainor,
with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that he executed the foregoing
instrument for the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, KEN L. WILCOX, the within named bargainor,
with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that he executed the foregoing
instrument for the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
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<PAGE>
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, ALBERT A. BOUNDS, JR., the within named
bargainor, with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that he executed the foregoing
instrument for the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, RALPH BOLIN, the within named bargainor, with
whom I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who acknowledged that he executed the foregoing instrument for
the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
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<PAGE>
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, CHARLES P. OXENDINE, the within named
bargainor, with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that he executed the foregoing
instrument for the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
North Carolina
STATE OF __________________
Robeson
COUNTY OF _________________
Carolyn W. Jennings
Personally appeared before me, __________________________, a Notary Public
in and for said State and County, JAMES R. ISRAELSON, the within named
bargainor, with whom I am personally acquainted (or proved to me on the basis of
satisfactory evidence), and who acknowledged that he executed the foregoing
instrument for the purposes therein contained.
30th April
WITNESS my hand and seal at office, on this ______ day of _____________,
1996.
/s/ Carolyn W. Jennings
____________________________
Notary Public
My Commission Expires:
12/14/1999
______________________
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<PAGE>
EXHIBIT "A"
-----------
AGREED UPON ACCOUNTING GUIDELINES
---------------------------------
The following outlines those specific accounting policies to be used in
preparation of the Projected Closing Balance Sheet and Audited Closing Balance
Sheet.
The manufacturing costs component of finished goods inventory at the
Closing Date will be determined by applying manufacturing overhead at a
rate calculated by dividing cumulative year-to-date manufacturing costs as
of the Closing Date, by finished goods tons produced during the same
period.
The accrual for customer rebates at the Closing Date will be
calculated using the rebate percentage for estimated purchase volume for
the 1996 calendar year applied to the purchases made during the current
fiscal year up to and including the Closing Date, reduced by any related
payments or credits issued to the customer for such rebates.
An annual accrual for bonuses to all employees will be established
assuming 100% of budgeted targets are achieved, with the calculated bonus
pool totaling in the aggregate $770,401, multiplied by the percentage of
the number of days in the current fiscal year through the Closing Date,
divided by 365.
Leases will be recorded as operating or capital in accordance with
Statement of Financial Accounting Standards No. 13, regardless of
materiality, at the Closing Date.
The cost of the annual shutdown will be estimated as of the Closing
Date. The estimate will include: repair and maintenance expense
anticipated during the annual shutdown and any other costs, including
related labor, that are directly identifiable with the annual shutdown and
which in the aggregate shall be $174,000, plus the costs of direct labor of
Alpha's employees. An accrual will be established based on the estimated
costs of the annual shutdown multiplied by the percentage of the number of
days in the current fiscal year through the Closing Date, divided by 365.
Any liability for deferred compensation agreements will be valued at
the estimated cost to liquidate those agreements as determined by a quote
from an insurance company at the Closing Date.
A-1
<PAGE>
Any liability under noncompete agreements will be valued at the
accumulated cash value of future payments as of the Closing Date.
A reserve for incurred-but-not-reported claims for short-term
disability benefits and group medical benefits will be accrued as of the
closing date in an amount of $100,000.
A liability will be recorded, as an Operating Liability and not as an
inventory reserve or as an Indebtedness, for the amount by which the
aggregate costs of raw cotton linters and textile waste to be paid by Alpha
subsequent to Closing under all purchase commitments heretofore entered
into, all of which are identified in EXHIBIT "C" hereto, exceeds the fair
market value of such raw materials as of the Closing Date (with "Fair
Market Value" being determined in the same manner as provided herein).
The "Cost" and "Fair Market Value" of Inventory pursuant to
/S/2(b)(ii) shall be determined as follows:
12. Raw Cotton Linters. The cost to Alpha of its raw cotton
linters shall be determined from its financial records, based on its
FIFO cost, determined in accordance with its normal accounting
procedures, as of the Closing Date. The fair market value of Alpha's
raw cotton linters shall be determined by (i) calculating the volume
weighted average base price specified in all firm purchase contract
commitments entered into by Buckeye with all U.S. suppliers of cotton
linters by cut during the three (3) month period immediately preceding
the Closing Date (including the month during which the Closing occurs)
and applying this weighted average base price to Alpha's raw cotton
linters by cut and (ii) adding thereto Alpha's actual freight cost and
(iii) adjusting the sum of (i) and (ii) hereof by any cellulose
content price premiums paid or discounts received by Alpha. For
purposes of the preceding sentence, "base price" shall mean the base
price F.O.B. cotton seed oil mill, excluding any quality premiums or
discounts, freight pick-ups, or other price adjustments, and "firm
purchase contracts" shall mean purchase contracts executed by Buckeye
with a U.S. supplier of cotton linters which is not subject to any
base price adjustment at a later date.
13. Denim Wastes. The cost to Alpha of its denim waste shall be
determined in the same manner as the cost of Alpha's raw cotton
linters as set forth in paragraph 1 above.
A-2
<PAGE>
The fair market value of Alpha's denim wastes shall be equal to the
average of the price quotes obtained from three (3) independent denim
dealers (acceptable to both Seller and Buyer) on a delivered basis
within ten (10) days of the Closing Date.
14. Finished Pulp. The cost to Alpha of its finished pulp shall
be determined by adding (i) Alpha's manufacturing costs (exclusive of
raw cotton linters) to produce the finished pulp determined pursuant
to its normal accounting procedures, to (ii) the cost of the raw
cotton linters utilized in the production of the finished pulp
determined in accordance with paragraph 1 above). Finished pulp fair
market value shall mean the actual sales price for each grade of
finished pulp, net of all rebates, discounts, commissions and freight
cost sold by Alpha determined on a weighted average basis for the
thirty (30) day period immediately preceding the Closing Date.
A-3
<PAGE>
EXHIBIT "B"
-----------
NON-COMPETITION AGREEMENT
-------------------------
B-1
<PAGE>
EXHIBIT "B"
-----------
NONCOMPETITION AGREEMENT
------------------------
THIS NONCOMPETITION AGREEMENT ("Agreement") is made and entered into as of
the ____ day of ________ , 1996 by and between BUCKEYE CELLULOSE CORPORATION, a
Delaware corporation ("Company"), and __________________, an individual residing
in _______________ ("Obligor").
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company is purchasing all of the capital stock (the "Shares") of
Alpha Cellulose Holdings, Inc. ("Holdings") including all Shares owned by
Obligor, (such transactions herein referred to as the "Acquisition");
WHEREAS, a material asset of Holdings is 100% of the capital stock of Alpha
Cellulose Corporation ("Alpha") whose primary business is the manufacture and
sale of specialty cellulose pulp;
WHEREAS, Obligor, as the owner of approximately _______ percent (___%) of
the outstanding Shares, is now and has been personally and actively engaged in
the manufacture and sale of specialty cellulose pulp and is familiar with and
has knowledge of the business and services involved in such manufacture and
sale;
WHEREAS, upon consummation of the Acquisition, the Company intends to
continue to conduct and operate the businesses as presently conducted by
Holdings and Alpha;
WHEREAS, the Company, Holdings and Alpha are engaged in the business of
producing, manufacturing, selling, promoting, marketing and distribution
specialty cellulose pulp throughout the world, with reasonable expectations in
the foreseeable future of extending the geographic scope of its business
operations within the world market;
WHEREAS; the Company, Holdings and Alpha have developed and compiled highly
valuable and confidential business plans which include applications of its
expertise in connection with its business operations, its list of customers and
suppliers of goods and services, as well as its purchasing, manufacturing,
marketing and business systems, programs, processes, procedures and techniques;
and,
B-1
<PAGE>
WHEREAS, by reason of and during the course of Obligor's association with
Holdings and Alpha and the performance by Obligor of related duties, Obligor has
become familiar with the nature and extent of the business of Holdings and
Alpha, both present and planned; and,
WHEREAS, the competition among and between other persons, Businesses
Entities, and enterprises engaged in the production, manufacturing, selling,
promotion, marketing, and distribution of specialty cellulose pulp is both
substantial and intense; and
WHEREAS, Obligor recognizes and agrees that this Agreement is reasonably
necessary to protect and interests of the Company, Holdings and Alpha throughout
the geographic area and period of time defined below for the purpose of
protecting the business and competitive positions of the Company, Holdings and
Alpha, all without imposing undue hardship on Obligor; and, Obligor further
acknowledges and agrees that the public interest is not and will not adversely
be affected by the Agreement, and that it is in all respects warranted and
appropriate, given the modern facilities of travel and communication, as well as
the unique and highly competitive industry in which the Company, Holdings and
Alpha are engaged; and, Obligor acknowledges and understands the Company's
reliance upon this Agreement; and,
WHEREAS, the Company irreparably will be harmed if, within the period set
forth below, Obligor, directly or indirectly, competes with the businesses as
conducted by the Company, Holdings and Alpha in any manner prohibited by this
Agreement; and
WHEREAS, the execution of this Agreement by Obligor is a condition to, and
constitutes a material inducement for, the consummation of the Acquisition by
the Company;
NOW, THEREFORE, in consideration of the above premises and other good and
valuable consideration as herein recited, the parties hereto agree as follows:
1. Covenants. During the "Noncompetition Term" (hereinafter defined),
Obligor covenants and agrees that he will not directly or indirectly:
(a) engage, individually or as a principal, owner, officer, director,
employee, shareholder (other than a holder of fewer than 5% of the outstanding
shares of a publicly-traded company), consultant, partner, joint venturer,
agent, equity owner, or in any other capacity whatsoever, in any corporation,
partnership, sole proprietorship, joint venture, or other business association
or entity (a "Business Enterprise") that constitutes a "Competing Business"
(hereinafter defined). As used in this Agreement, the term "Competing Business"
means any Business Enterprise that provides to any "Client" (hereinafter
defined) any specialty cellulose pulp products, whether such products are
purchased, manufactured, processed, or distributed by such
B-2
<PAGE>
Business Enterprise, or services directly related thereto (collectively
"Goods and Services") as presently provided by the Company or as provided
by Holdings or Alpha prior to the Acquisition. As used in this Agreement,
the term "Client" means any person or Business Enterprise (i) for whom the
Company, Holdings or Alpha is providing Goods and Services as of the date
of this Agreement, (ii) to whom the Company, Holdings or Alpha has provided
such Goods and Services within the eighteen-month period immediately
preceding the date of this Agreement, or (iii) who purchases Goods or
Services, whether from Alpha, the Company or other manufacturers,
processors, and distributors;
(b) perform, engage in or otherwise participate in or on behalf
of any Competing Business any duty Obligor has performed for Holdings
or Alpha in connection with the Goods and Services that directly or
indirectly in any way utilize or otherwise call upon Obligor's access
to, knowledge of, or application of Confidential Information
(hereafter defined); it being understood that this paragraph 1(b)
shall be in addition to and not be construed as a limitation upon any
other covenant in this paragraph 1 or paragraph 2; or
(c) induce, request, advise, attempt to influence, or solicit,
directly or indirectly, any Client to purchase any such Goods and
Services from any person or Business Enterprise other than the
Company, Holdings or Alpha or provide such Goods and Services to any
such Client except on behalf of the Company, Holdings or Alpha. It is
understood that this paragraph 1(c) shall be in addition to and not
construed as a limitation upon any other covenant in paragraph 1
hereof.
2. Confidential Information. Obligor acknowledges that during the course
of his association with Holdings and Alpha, Obligor was exposed to and became
privy to certain Confidential Information (herein defined) regarding the
business and customers of Holdings and Alpha and their Goods and Services and
that such information is valuable, special and unique. Obligor further
acknowledges that, as a result of the Acquisition [AND OBLIGOR'S SUBSEQUENT
EMPLOYMENT WITH ALPHA AND/OR THE COMPANY FOLLOWING THE ACQUISITION,] Obligor has
received [AND WILL CONTINUE TO ACQUIRE] Confidential Information belonging to
the Company. Obligor further acknowledges that the Company, through the
Acquisition, is acquiring the exclusive ownership and control of, and the right
to use, the Confidential Information of Holdings and Alpha and that the
maintenance by the Company of the exclusive ownership and confidentiality of the
Confidential Information to the fullest extent feasible is important to the
Company and a significant inducement to the Company's consummation of the
Acquisition. Accordingly, to the extent Obligor may have actual knowledge of or
access to any Confidential Information, Obligor agrees that he shall not,
without the prior written consent of the Company, at any time, whether before,
during or
B-3
<PAGE>
after the term of the other provisions of this Agreement, [EXCEPT AS REQUIRED TO
PERFORM HIS DUTIES OF EMPLOYMENT WITH ALPHA DURING SUCH TIME AS OBLIGOR MAY BE
EMPLOYED BY ALPHA AND/OR THE COMPANY,] disseminate, disclose, or, by any means
or medium, communicate any Confidential Information to any person or entity
without limitation as to geographic location of Obligor or the person or
entity to whom such dissemination, disclosure or communication is or may be made
inside or outside the United States or otherwise use, whether for Obligor's own
benefit or for the benefit of any other person or business enterprise, any
Confidential information. As used herein, the term "Confidential Information"
means all information disclosed or made known to Obligor as a direct or indirect
consequence of or through his past association with Holdings or Alpha [AND
THROUGH HIS CONTINUED ASSOCIATION WITH ALPHA AND/OR THE COMPANY] that is not
generally known in the manufacturing and sale of specialty cellulose pulp
industry, including without limitation information regarding (i) financial
position, customers (including customer lists), suppliers and markets of
Holdings, Alpha and the Company; (ii) profit margins, pricing techniques, and
pricing information; (iii) past, present, and future plans with respect to the
Goods and Services of Holdings, Alpha and the Company; (iv) bids, negotiations,
and techniques in bidding and negotiating, pursuant to supplier, customer, or
other contracts relating to the Goods and Services; (v) current or future
advertising or promotion plans or programs relating to the Goods and Services;
(vi) any system, procedure, or administrative operations relating to the Goods
and Services; (vii) present or future plans for the extension or expansion of
the Goods and Services; (viii) manufacturing processes and techniques, including
chemical applications and compositions utilized in the manufacturing process;
and (ix) manufacturers' information (including the terms on which goods are
supplied to the Holdings, Alpha and the Company); provided, however, that
Confidential Information shall not include information that (1) is or becomes
generally available to the public other than as a result of a disclosure by
Obligor or (2) becomes available to Obligor on a nonconfidential basis from a
source other than the Company, Holdings or Alpha or any of its representatives,
provided that such source is not bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligations of confidentiality to the
Company, Holdings or Alpha or any other party with respect to such information.
3. Noncompetition Term. All of the provisions of paragraph 1 shall be
effective commencing immediately upon the date hereof and shall continue until a
period of two (2) years has elapsed form the date hereof ("Noncompetition
Term"), but the obligations contained in paragraph 2 shall survive the
Noncompetition Term and continue in effect thereafter.
4. Consideration. For and in consideration of the covenants of Obligor
contained in this Agreement, the Company agrees to pay (a) $________________ on
the date hereof, which is a part of an aggregate amount of Four Million Dollars
($4,000,000) the Company is paying to certain of the individuals and entities,
including Obligor, selling Shares to the Company as consideration for their
execution of Non-Competition Agreements in
B-4
<PAGE>
substantially the same form as this Agreement, and Obligor hereby acknowledges
the receipt and sufficiency of the consideration.
5. Geographical Boundaries. The restriction contained in paragraph 1 of
this Agreement shall apply to any and all actions of Obligor within any
geographic area of the world where (i) either the Company, Holdings or Alpha
have within the last eighteen (18) months manufactured or sold (or are presently
manufacturing or selling or reasonably may be expected to manufacture and sell
within the term of this Agreement) specialty cellulose pulp containing either
cotton linters or wood fibers, or otherwise conducted its business as of the
date hereof, or (ii) any Clients are located.
6. Reasonableness of Restrictions. Obligor acknowledges that the geographic
scope of prohibited activities and time duration of the provisions of this
Agreement are reasonable, and are no broader than the necessary to maintain the
confidentiality of the Confidential Information and the goodwill associated with
the business of Holdings, Alpha and the Company (including without limitation
the Goods and Services). Specifically, Obligor recognizes that (i) the relevant
market for both Clients and Suppliers is the entire world and (ii) the conduct
by Obligor of any activity prohibited herein would have a material adverse
effect on the business of Alpha and the Company. Obligor also acknowledges that
the provisions of this Agreement are not oppressive and do not and will not
impose any unreasonable burden on Obligor.
7. Severability; Invalid Provisions and Request for Reformation. Each of
the covenants in this Agreement shall be deemed a separate covenant, each being
enforceable irrespective of the enforceability (with or without reformation) of
the other covenants contained in this Agreement. If any provison of this
Agreement (including without limitation any provision relating to the activities
covered by, or time period of, the covenants provided for in paragraphs 1, 2 and
3) is held to be illegal, invalid, or unenforceable under present or future laws
effective during the term hereof; such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provison had never comprised a part hereof; and the remaining
provisions shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its severance herefrom.
Furthermore, in leiu of such illegal, invalid, or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid, or unenforceable provisions as may be
possible and be legal, valid, and enforceable, and the parties hereby request
the court to whom disputes relating to this Agreement are submitted to reform
any otherwise unenforceable covenants contained in paragraphs 1, 2 and 3 hereof
in accordance with the preceding provision.
B-5
<PAGE>
8. Enforcement. Obligor acknowledges that the covenants of Obligor
contained in this Agreement are special and unique, that a breach by Obligor of
any term or provision of either of paragraphs 1, 2 and 3 hereof may cause
irreparable injury to the Company, and that remedies at law for the breach of
any terms or provison of paragraphs 1, 2 and 3 hereof may be inadequate.
Accordingly, in addition to any other remedies it may have in the event of
breach, the Company shall be entitled to enforce specific performance of the
terms and provisions of paragraphs 1, 2 and 3 hereof, to obtain temporary and
permanent injunctive relief to prevent the continued breach of such terms and
provisions without the necessity of posting bond or of proving actual damage.
The covenants in paragraphs 1, 2 and 3 hereof are in addition to, independent of
and supplemental to the terms and provisions of each of (i) any Employment
Agreement of even date herewith entered into between Obligor and the Company and
(ii) the Asset Purchase Agreement pursuant to which the Acquisition was
consummated, and the existence of any claim or cause of action of Obligor
against the Company, whether predicated on either of those agreements or
otherwise, shall not constitute a defense to the enforcement of paragraphs 1, 2
and 3 hereof by the Company.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee without giving effect to any
choice or conflict of law provison or rule (whether of the State of Tennessee or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Tennessee.
10. Clients. The parties hereto agree that the eighteen-month period
immediately preceding the date of this Agreement referred to in the definition
of Client in this Agreement is a reasonable period of time, given the nature of
the business of the Company and Alpha, to determine whether a person or Business
Enterprise is a Client of the Company, Holdings or Alpha as of the date of this
Agreement.
11. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
12. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Obligor: ______________________
______________________
______________________
B-6
<PAGE>
______________________________
______________________________
Copy to: SIMPSON,THATCHER & BARTLETT
425 Lexington Avenue
New York, New York 10018-3909
ATTN: Richard C. Weisberg
If to the Company: BUCKEYE CELLULOSE CORPORATION
1001 Tillman Street
P.O. Box 8407
Memphis, Tennessee 38105-0407
ATTN: Robert Cannon
Copy to: BAKER, DONELSON, BEARMAN & CALDWELL
2000 First Tennessee Building
Memphis, Tennessee 38103
ATTN: Henry P. Doggrell
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
13. Amendment, Waiver. No modification or amendment hereof shall be valid
and binding unless it be in writing and signed by the parties hereto. The waiver
of any provision hereof shall be effective only in the specific instance and for
the particular purpose for which it was given. No failure to exercise, and no
delay in exercising, any right or power hereunder shall operate as a waiver
thereof.
14. Benefit; Assignment. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and the subsidiaries, successors and
assigns of the Company. Obligor may not assign his rights or obligations under
this Agreement to any other person or Business Enterprise. The rights of the
Company and its subsidiaries hereunder shall not be diminished by reason of the
merger of the Company, or such subsidiaries, with or into any other entity. The
rights of the Company and its subsidiaries hereunder are assignable in whole or
in part to any person or Business Enterprise with or into which the Company or
any of its subsidiaries is merged or that otherwise acquires the business of the
Company.
B-7
<PAGE>
15. Costs. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs, and necessary disbursements in addition to
any other relief to which it may be entitled.
16. Remedies Cumulative. No remedy conferred by any of the specific
provisions of his Agreement is intended to be exclusive of any other remedy, and
each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies by any party
hereto shall not constitute a waiver of the right to pursue other available
remedies.
17. Cumulative Rights. The rights of the parties under this Agreement are
cumulative and in addition to all similar and other rights of the parties under
other agreements between them, or among them or others.
18. Headings. The captions of each paragraph hereof are included solely for
convenience and shall not be construed to limit or define the provisions of any
paragraph.
19. Construction. Each party has been represented by counsel of his or its
own choosing in the negotiation and preparation of this Agreement, each of which
has fully participated in the preparation hereof. Therefore, although for
convenience the Company's counsel drafted this document, such fact shall not
influence the construction of any provision contained herein; each provision
shall be construed as if prepared by both parties hereto, and without any
construction against any party by virtue of whether that party or his or its
counsel actually drafted such provision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY: BUCKEYE CELLULOSE CORPORATION
By:______________________________
Title:___________________________
OBLIGOR: _________________________________
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<PAGE>
EXHIBIT "C"
-----------
PURCHASE COMMITMENTS
--------------------
ALPHA CELLULOSE CORPORATION
ESTIMATED RAW LINTERS OPEN CONTRACT COMMITMENTS AS OF 06/30/96: (does not
include Freight costs):
<TABLE>
<CAPTION>
CONTRACT
(600# AVG) COST PER CONTRACT
BALES AVG. WT. LB. COMMITMENT
=====================================================================
<S> <C> <C> <C> <C>
FIRST CUTS:
Osceola 1,040 624,000 0.200 $124,800
- ---------------------------------------------------------------------
SECONDS:
- ---------------------------------------------------------------------
Planters-Pine Bluff 439 263,400 0.200 52,680
- ---------------------------------------------------------------------
Producers-Oklahoma 800 480,000 0.220 105,600
- ----------------------------================-----------------========
TOTAL LINTERS 2,279 1,367,400 $283,080
COMMITMENTS:
=====================================================================
</TABLE>
C-1
<PAGE>
EXHIBIT "D"
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT is made and entered into as of the ____ day of
_________, 1996, by and among STONEBRIDGE PARTNERS EQUITY FUND, L.P., ALPHA
CELLULOSE ASSOCIATES I, L.P., ALPHA CELLULOSE ASSOCIATES II, L.P., STONEBRIDGE
PARTNERS MANAGEMENT, L.P., AS NOMINEE FOR PNC VENTURE CORP., DAWKS CORPORATION,
JOHN P. FLANAGAN, MICHAEL M. BROWN, JANICE S. VALENTA, JOHN F. MANNING, KEN L.
WILCOX, ALBERT A. BOUNDS, JR., RALPH BOLIN, CHARLES P. OXENDINE AND JAMES R.
ISRAELSON (herein collectively referred to as the "Sellers"), DAVID A. ZACKRISON
(the "Seller Representative"), BUCKEYE CELLULOSE CORPORATION, a Delaware
corporation ("Buyer"), and _____________________________, (the "Escrow Agent").
WHEREAS, Sellers and Buyer are parties to that certain Stock Purchase
Agreement dated April ___, 1996 (the "Contract"), a copy of which is attached
hereto; and
WHEREAS, pursuant to the Contract, Sellers have agreed to convey to Buyer
all of the Holdings Shares pursuant to the terms of the Contract; and
WHEREAS, the Contract requires that the Buyer deposit part of the Purchase
Price with Escrow Agent and Escrow Agent has agreed to serve as escrow agent
hereunder and is willing to hold, invest and disburse the Purchase Price in
accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree as follows:
1. Definitions. Capitalized terms used herein but not defined herein shall
have the meanings set forth in the Contract.
2. Appointment of Escrow Agent. Sellers and Buyer hereby appoint Escrow
Agent as the escrow agent with respect to this Agreement and as set forth in the
Contract.
3. Receipt and Distribution of Purchase Price. (a) On the Closing Date,
Buyer shall deposit with Escrow Agent the sum of Four Million Dollars
($4,000,000) as provided under the Contract (which together with any accrued
interest thereon shall be hereinafter referred to as the "Escrow Amount") as
part of the total Purchase Price. The Escrow Agent shall deposit to the Escrow
Amount to an interest bearing account.
D-1
<PAGE>
(b) During the term hereof, Buyer will be entitled to draw upon the Escrow
Amount, subject to paragraph (d) below, for (i) any Post-Closing Adjustments
resulting in a decrease in the value of the Inventory, Accounts Receivable or
Cash of Alpha or an increase in the amount of the Liabilities or Indebtedness
(or expenses relating thereto); (ii) Accounts Receivable not fully collected
within sixty (60) days of its invoice due date pursuant to Section 2(b)(iii) of
the Contract; (iii) damages resulting from the breach of representations and
warranties of the Sellers contained in the Contract and other claims made by the
Buyer in accordance with the provisions of Section 9 of the Contract; and (iv)
any damages resulting from violations of the Non-Competition Agreements.
(c) On the first anniversary of the Closing Date, the Escrow Amount shall
be reduced to Three Million Dollars ($3,000,000) (plus the aggregate amount of
any unpaid claims of Buyer made against the Escrow Amount in writing on or
before the expiration of such one year period) by Escrow Agent distributing such
excess to the Shareholder Representative, and from the expiration of such one
year period until the expiration of a period of an additional six months, Buyer
shall be entitled to draw against the Escrow Amount ony for (i) damages
resulting from the breach of any representations and warranties of Sellers
relating to tax, litigation and environmental, issues set forth in Section 5,
paragraphs (k), (t) and (z) and Section 8(a)(v) of the Contract, or (ii) damages
resulting from violations of the Non-Competition Agreements. Upon expiration of
the period which is eighteen months following the Closing Date, the Escrow
Amount shall be reduced to Two Million Dollars ($2,000,000) (plus the aggregate
amount of any unpaid claims of Buyer made against the Escrow Amount in writing
on or before the expiration of such eighteen-month period) by Escrow Agent
distributing such excess to the Shareholder Representative and from such date
through the second anniversary of the Closing Date, Buyer shall be entitled to
draw against the Escrow Amount ony for damages resulting from the breach of any
representations and warranties of Sellers relating to tax issues as set forth in
Section 5, paragraph (k) and for damages resulting from violations of the Non-
Competition Agreements. On the second anniversary of the Closing Date, the
Escrow shall terminate and any funds remaining in escrow, after deducting the
aggregate amount of any claims made thereon by Buyer shall be returned to Seller
Representative for distribution to the Sellers.
(d) Buyer shall provide written notice to the Seller Representative prior
to each of Buyer's requested draws from the Escrow Amount. If the Seller
Representative does not provide written notice to Buyer within fifteen (15) days
of receipt of Buyer's notice of the reasonable basis for a dispute (the "Dispute
Notice"), or if Seller Representative notifies Buyer that no dispute exists,
Buyer may draw the requested amount. The Dispute Notice shall set forth in
reasonable detail the nature of the dispute(s). During the fifteen (15) day
period following the date of such Dispute Notice, the Seller Representative and
Buyer shall attempt to resolve such disputes. If at the end of the fifteen (15)
day period following the date of such Dispute Notice, the Seller Representative
and Buyer shall have failed to reach a written agreement with respect to such
dispute, the matter shall be referred to a national "big six" accounting firm to
be selected by the independent auditors of Buyer and the Seller
D-2
<PAGE>
Representative (the "Expert") which shall act as an expert and shall issue a
report as to its conclusions concerning the disputed draw, based solely on the
submission of the parties, within sixty (60) days after such dispute is referred
to the Expert, or within such longer period as the Expert may require to
finalize his conclusions. The Seller Representative, on the one hand, and the
Buyer, on the other hand, shall each bear all costs and expenses incurred by it
in connection with such process, except that the fees and expenses of the Expert
hereunder shall be borne by the party whom the Expert rules against (or pro rata
between the parties based on the relative success of their positions as
determined by the Expert). This provision for review and judgment by the Expert
shall be specifically enforceable by the parties, and the decision of the Expert
in accordance with the provisions hereof shall be final and binding, and there
shall be no right of appeal therefrom. Immediately upon receipt by the Expert of
its or his conclusions, the Buyer and Requisite Seller shall jointly instruct
the Escrow Agent as to how to proceed with regard to the disputed draw in the
manner provided for by the Expert.
4. Termination. This Agreement and the escrow arrangement hereunder shall
terminate at such time as the Escrow Agent shall have disbursed all escrowed
funds hereunder.
5. Interest. All interest and other income earned on the escrow fund
principal shall be disbursed to the Seller Representative upon the final
termination of the Escrow. Additionally, Escrow Agent shall distribute on April
1 of each year during the term of the Escrow 45% of the income generated during
the prior year to Seller Representative for tax purposes.
6. Resignation of Escrow Agent. The Escrow Agent may resign as depositary
hereunder at any time upon thirty (30) days written notice to each of the
Undersigned. If the Undersigned fail to appoint a successor Escrow Agent or
otherwise direct the Escrow Agent regarding the dispositions of the escrowed
funds, then the Escrow Agent may interplead the escrowed funds as provided in
paragraph 8(a)(iii) hereof. At the time of the resignation of the Escrow Agent
if there are unpaid fees and expenses of the Escrow Agent which are accrued, the
Escrow Agent may deduct its unpaid but accrued fees and expenses from the
escrowed funds prior to its delivery as directed by the Undersigned or at the
time the Escrow Agent is required to interplead the escrowed funds. If the
Escrow Agent has been paid its fees or expenses in advance, that portion of
Escrow Agent's fees or expenses which are unearned at the time of Escrow Agent's
resignation shall be distributed as directed by the Undersigned.
7. Investment of Escrow Funds. Escrow Agent is hereby directed to invest
the Purchase Price and all funds controlled by Escrow Agent hereunder in one of
the following mutual money market funds of the Escrow Agent:
----------------------------------------
D-3
<PAGE>
----------------------------------------
8. Escrow Agent's Performance.
---------------------------
(a) Conflicting Demands. Escrow Agent will be obligated to perform only
such duties as are expressly set forth in this Agreement. In case of conflicting
demands upon the Escrow Agent, Escrow Agent shall be entitled, at its option (i)
to refuse to comply therewith so long as such disagreement continues and to make
no delivery or other disposition of the Escrow Amount (and Escrow Agent shall
not be or become liable in any way for such failure or refusal to comply with
such conflicting or adverse claims or demands); or (ii) to continue to so
refrain and to so refuse to act until all differences shall have been adjusted
by agreement and the Escrow Agent shall have been notified thereof in writing,
signed jointly by the Seller Representative and Buyer. Any payment by Escrow
Agent to the Seller Representative made pursuant to Section 3 above, shall be
deemed a payment to all Sellers and shall constitute full performance of Escrow
Agent's obligation related to such payment.
(b) Other Obligations. In performing any of its duties under this
Agreement, or upon the claimed failure to perform its duties hereunder, Escrow
Agent shall not be liable to anyone for any damages, losses or expenses which
they may incur as a result of the Escrow Agent so acting, or failing to act;
provided, Escrow Agent shall be liable only for damages arising out of its
willful misconduct or gross negligence under this Agreement. Accordingly, Escrow
Agent shall not incur any such liability with respect to (i) any action taken or
omitted to be taken in good faith upon advice of its counsel or counsel to
Sellers and Buyer given with respect to any questions related to the duties and
responsibilities of the Escrow Agent hereunder; or (ii) any action taken or
omitted to be taken in reliance upon any document, including any written notice
or instructions provided for in this Agreement, not only as to its due execution
and as to the validity and effectiveness of its provisions but also as to the
truth and accuracy of any information contained therein, which Escrow Agent
shall in good faith believe to be genuine, to have been signed or presented by a
proper person or proper persons and to conform with the provisions of this
Agreement.
(c) Indemnity. Sellers and Buyer agree to indemnify and hold harmless
Escrow Agent against any and all losses, claims, damages, liabilities and
expenses, including, without limitation, reasonable costs of investigation and
counsel fees and expenses and costs and expenses associated with Escrow Agent's
decision to interplead the Escrow Amount (collectively "Indemnification Costs")
which may be imposed upon Escrow Agent or incurred by it in connection with its
acceptance of this appointment as escrow agent hereunder and or the performance
of its duties hereunder, including, without limitation, any litigation arising
from this Agreement or involving the subject matter hereof; except that, if
Escrow Agent shall be found guilty of criminal acts, willful misconduct or gross
negligence under this Agreement, in that event, Escrow Agent shall bear all such
losses, claims, damages and expenses. Sellers and Buyer further agree that, once
it has been established that Escrow Agent is entitled to indemnification as
provided herein, Escrow Agent shall have the right
D-4
<PAGE>
to offset the Indemnification Costs against the balance of the escrow fund. This
indemnification provision shall survive termination of this Escrow Agreement.
(d) Written Instructions of Parties. Notwithstanding any provision to the
contrary contained herein, Escrow Agent shall, at all times, have the full
right and authority to pay over and disburse the Purchase Price in accordance
with the joint written instructions signed by Sellers and Buyer.
9. Compensation of Escrow Agent. Escrow Agent shall receive compensation
out of the Escrow Account for its services in the amount and manner described in
Exhibit A hereto.
10. Miscellaneous.
--------------
(a) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties hereto and supersedes
any prior understandings, agreements, or representations by or among the parties
hereto, written or oral, to the extent they related in any way to the subject
matter hereof.
(b) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns. No party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller Representative; provided, however, that the
Buyer may (i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(c) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(d) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
D-5
<PAGE>
If to the Sellers: c/o DAVID A. ZACKRISON
STONEBRIDGE PARTNERS
Westchester Financial Center
50 Main Street
White Plains, New York 10606
Copy to: SIMPSON,THATCHER & BARTLETT
425 Lexington Avenue
New York, New York 10018-3909
ATTN: Richard C. Weisberg
If to the Buyer: BUCKEYE CELLULOSE CORPORATION
1001 Tillman Street
P.O. Box 8407
Memphis, Tennessee 38105-0407
ATTN: Robert Cannon
Copy to: BAKER, DONELSON, BEARMAN & CALDWELL
2000 First Tennessee Building
Memphis, Tennessee 38103
ATTN: Henry P. Doggrell
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Tennessee without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Tennessee or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Tennessee.
(g) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same. No waiver by any party hereto of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurence.
D-6
<PAGE>
(h) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SELLER REPRESENTATIVE:
_____________________________________
DAVID A. ZACKRISON, as Attorney-in-
Fact for Sellers
BUYER:
BUCKEYE CELLULOSE CORPORATION
By: _________________________________
Title: ______________________________
D-7
<PAGE>
EXHIBIT "E"
-----------
FINANCIAL STATEMENTS
--------------------
1. Audited consolidated balance sheets and statements of income changes in
stockholder's equity and cash flow as of and for the fiscal years ended
1994 (August 8, 1994 through December 31, 1994) and 1995 ("the Most Recent
Fiscal Year End") for Holdings and its Subsidiaries.
2. Unaudited consolidated balancing sheets and statements of income ("the Most
Recent Financial Statements") as of and for the three months ended March
31, 1996 ("the Most Recent Fiscal Month End") for Holdings and its
Subsidiaries.
The Financial Statements reflect the allocation of purchase price in
connection with Holdings' acquisition of Alpha based on information
available at the date of such acquisition, including information as to tax
basis acquired assets. Information currently available indicates that the
amount of tax basis used in connection with such allocation of purchase
price may have been overstated. Accordingly, the amounts of deferred taxes
and goodwill (and reltated amortization) reflected in the Financial
Statements may have been misstated. See Section 6(k) of the Stock Purchase
Agreement.
E-1
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD
AUGUST 8, 1994 THROUGH DECEMBER 31, 1994 AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Alpha Cellulose Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Alpha Cellulose
Holdings, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for the year ended December 31, 1995 and for the period August 8,
1994 through December 31, 1994. 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 Alpha Cellulose Holdings, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the year ended December 31, 1995 and the
period August 8, 1994 through December 31, 1994, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
February 29, 1996
- ---------------
Deloitte Touche
Tohmatsu
International
- ---------------
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 186,386 $ 731,166
Receivables:
Trade 5,675,744 4,644,631
Related parties (Note 8) 60,000 144,000
Other 6,749 58,588
Inventory (Note 3) 14,910,692 8,395,981
Prepaid expenses and other assets 163,500 337,804
Deferred income tax (Note 6) 594,000 559,670
----------- -----------
Total current assets 21,597,071 14,871,840
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET (Note 4) 27,391,460 28,269,128
INTANGIBLE ASSETS, NET (Note 5) 4,528,386 5,731,598
----------- -----------
TOTAL ASSETS $53,516,917 $48,872,566
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations (Note 7) $ 7,122,053 $ 2,699,198
Accounts payable 1,951,302 2,534,260
Accrued expenses 2,935,802 2,912,082
Income tax payable 146,327 6,809
----------- -----------
Total current liabilities 12,155,484 8,152,349
----------- -----------
LONG-TERM OBLIGATIONS (Notes 7 and 8) 28,089,544 31,864,110
DEFERRED INCOME TAX (Note 6) 4,135,000 3,954,670
COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 1,000,000 shares authorized,
1,000,000 and 970,000 shares outstanding
at December 31, 1995 and 1994, respectively 10,000 9,700
Preferred stock, $.01 par value,
50,000 shares authorized and outstanding 500 500
Paid-in capital 3,989,500 3,929,800
Retained earnings 5,136,889 961,437
----------- -----------
Total stockholders' equity 9,136,889 4,901,437
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $53,516,917 $48,872,566
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995 AND FOR THE
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
SALES $54,850,902 $18,227,472
Less allowances (4,516,483) (1,677,788)
----------- -----------
Net sales 50,334,419 16,549,684
COST OF SALES 35,477,777 12,161,940
----------- -----------
Gross profit 14,856,642 4,387,744
SELLING AND ADMINISTRATIVE EXPENSES 4,084,565 1,454,317
----------- -----------
Operating income 10,772,077 2,933,427
----------- -----------
OTHER INCOME (EXPENSE):
Interest income (Note 8) 7,077 4,144
Interest expense (Note 8) (3,265,474) (1,385,201)
Trucking income, net 31,465 84,885
Miscellaneous, net (445,651) (22,818)
----------- -----------
Total other expense (3,672,583) (1,318,990)
----------- -----------
INCOME BEFORE INCOME TAXES 7,099,494 1,614,437
PROVISION FOR INCOME TAXES (Note 6) 2,682,000 653,000
----------- -----------
NET INCOME $ 4,417,494 $ 961,437
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 AND FOR THE
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Preferred Paid-in Retained
Stock Stock Capital Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCE,
AUGUST 8, 1994 $ 9,700 $500 $3,929,800 $ $3,940,000
Net income 961,437 961,437
------- ---- ---------- ---------- ----------
BALANCE,
DECEMBER 31, 1994 9,700 500 3,929,800 961,437 4,901,437
Common stock, 30,000
shares issued 300 59,700 60,000
Dividends (242,042) (242,042)
Net income 4,417,494 4,417,494
------- ---- ---------- ---------- ----------
BALANCE,
DECEMBER 31, 1995 $10,000 $500 $3,989,500 $5,136,889 $9,136,889
======= ==== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 AND FOR THE
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994 (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,417,494 $ 961,437
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,961,534 1,227,627
Deferred income tax 146,000 (614,000)
Net loss on disposal of assets 445,850
Provision for bad debts 75,000
Changes in operating assets and liabilities:
Receivables (970,274) 456,489
Inventory (6,514,711) 1,077,331
Prepaid expenses and other assets 174,304 1,237,802
Accounts payable (582,958) 131,928
Accrued expenses and income tax payable 163,238 976,704
----------- ------------
Net cash provided by operating activities 315,477 5,455,318
----------- ------------
INVESTING ACTIVITIES:
Proceeds from sale of equipment 119,747
Acquisition of Alpha Cellulose, Inc., includes net cash
acquired of $351,108 636,084 (40,246,940)
Purchases of equipment (2,082,335) (800,798)
----------- ------------
Net cash used in investing activities (1,326,504) (41,047,738)
----------- ------------
FINANCING ACTIVITIES:
Proceeds from issuance of subordinated notes 9,000,000
Borrowings on term loan 23,000,000
Borrowings on line of credit, net 2,097,487 5,325,000
Proceeds from issuance of stock 60,000 2,970,000
Principal payments on long-term obligations (1,449,198) (3,971,414)
Dividends paid to shareholders (242,042)
----------- ------------
Net cash provided by financing activities 466,247 36,323,586
----------- ------------
NET INCREASE (DECREASE) IN CASH (544,780) 731,166
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 731,166
----------- ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 186,386 $ 731,166
=========== ============
</TABLE>
-5-
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 AND FOR THE
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994 (CONCLUDED)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash paid during the year for:
Interest (net of amount capitalized) $3,736,792 $ 415,542
========== ==========
Income taxes $2,401,917 $1,044,000
========== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with the incorporation of the Company in 1994, common stock was
issued in exchange for a note receivable of $60,000 and property with a fair
market value of $910,000.
In conjunction with the acquisition of Alpha Cellulose, Inc. (as discussed in
Note 1 to the consolidated financial statements), the Company established a
note payable to a related party of $90,000 to revalue certain property and
equipment to its fair value at the acquisition date.
Also in conjunction with the acquisition of Alpha Cellulose, Inc., the Company
entered into a noncompete agreement with a former officer of the Company. This
resulted in the recording of assets and liabilities of $1,045,165,
respectively, representing the present value of future payments to be made
under the agreement.
See notes to consolidated financial statements.
-6-
<PAGE>
ALPHA CELLULOSE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995 AND FOR THE
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Alpha Cellulose Holdings, Inc. ("Holdings") was incorporated in the State
of Delaware on August 5, 1994 through the issuance of 50,000 shares of
preferred stock and 970,000 shares of common stock for $2,970,000 in cash,
note receivable of $60,000 and property with a fair value of $910,000.
On August 7, 1994, Holdings acquired all of the outstanding capital stock
of Alpha Cellulose, Inc. ("Alpha") in a business combination for an
aggregate purchase price of $42,352,105 (the "Acquisition"). The
Acquisition was funded as follows:
<TABLE>
<CAPTION>
<S> <C>
Exchange of stock $ 3,940,000
Borrowings on revolving line of credit 5,366,940
Borrowings on term loan 23,000,000
Borrowings on subordinated notes 9,000,000
Noncompete agreement 1,045,165
-----------
$42,352,105
===========
</TABLE>
The Acquisition has been accounted for in accordance with the purchase
method of accounting and the accompanying consolidated financial statements
of the Company reflect the purchase price allocated to assets acquired and
liabilities assumed based on their fair values as of the acquisition date.
The fair values of assets and liabilities were based on independent
appraisals and estimates by management. The following is a summary of the
purchase price allocation as of the date of acquisition:
<TABLE>
<CAPTION>
<S> <C>
Current assets $17,093,737
Property, plant and equipment 28,336,547
Intangible assets 6,001,005
Liabilities assumed (9,079,184)
-----------
Total purchase price $42,352,105
===========
</TABLE>
All goodwill resulting from the purchase is being amortized over 40 years.
The noncompete asset is being amortized over the three year life of the
agreement.
In 1995, $636,084 was received in settlement of certain contingent
obligations existing at the acquisition date. Accordingly, goodwill has
been reduced by $636,084 to reflect this settlement.
Operations--Alpha is the leading worldwide manufacturer of cotton pulp used
by specialty papermills in the production of a variety of fine writing and
other specialty papers.
-7-
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES:
a. Principles of Consolidation--The consolidated financial statements
include the accounts of Alpha Cellulose Holdings, Inc. and its wholly-
owned subsidiaries Alpha and Alpha Cellulose Exports, Inc. All
intercompany balances and transactions have been eliminated.
b. Statement of Cash Flows--For the purposes of reporting cash flows,
cash and cash equivalents include cash on hand and amounts due from
banks and investments in money market accounts.
c. Inventory--Inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Obsolete and
possible excess quantities are reduced to estimated net realizable
value.
d. Property, Plant and Equipment--Additions and improvements are
capitalized at cost. Maintenance and repairs are charged to expense as
incurred. Depreciation is provided on both straight-line and
accelerated methods for financial statement and income tax purposes
over the following useful lives:
<TABLE>
<CAPTION>
<S> <C>
Land improvements 10-30 years
Leasehold improvements 5-10 years
Buildings 10-31.5 years
Machinery and equipment 3-20 years
</TABLE>
e. Intangible Assets--Intangible assets consist primarily of goodwill
resulting from the purchase of Alpha Cellulose, Inc. and a noncompete
agreement with a former officer of the Company. The goodwill is being
amortized over 40 years and the noncompete agreement over the three
year term of the agreement.
f. Income Taxes--On August 8, 1994, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes
("SFAS 109"). SFAS 109 requires a change from the deferred method, as
required under the American Institute of Certified Public Accountants
Accounting Principles Board Opinion No. 11 ("APB 11"), to the asset
and liability method of accounting for income taxes. Under the asset
and liability method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing
assets and liabilities.
g. Environmental Remediation and Compliance--Environmental remediation
costs are accrued based on estimates of known environmental
remediation exposures. Environmental compliance costs include
maintenance and operating costs with respect to pollution control
facilities, costs of ongoing monitoring programs and similar costs.
Such costs are expensed as incurred.
h. Employee Benefit Costs--Alpha has a cash option thrift plan [401(k)]
which covers substantially all employees. The Company matches employee
contributions to the plan up to 5% of the employee's gross
compensation. Thrift plan costs charged to operations were $229,764
for 1995 and $74,797 for the period August 8, 1994 through December
31, 1994.
-8-
<PAGE>
i. 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 reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the recorded
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
j. Reclassifications - Certain amounts for 1994 have been reclassified to
conform with the 1995 presentation.
3. INVENTORY
Inventory consists of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Supplies $ 623,055 $ 640,350
Raw materials 10,823,700 6,212,075
Finished goods 3,463,937 1,543,556
----------- -----------
Total inventory $14,910,692 $ 8,395,981
=========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of the following at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land and improvements $ 1,298,652 $ 983,774
Leasehold improvements 72,641 72,641
Buildings 6,058,911 5,929,052
Machinery and equipment 22,313,951 22,011,184
Construction in progress 848,282 178,458
----------- -----------
30,592,437 29,175,109
Less accumulated depreciation and amortization (3,200,977) (905,981)
----------- -----------
Property, plant and equipment, net $27,391,460 $28,269,128
=========== ===========
</TABLE>
-9-
<PAGE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1995 and 1994 and
are related to the purchase of Alpha by Holdings on August 7, 1994 (see Note
1).
1995 1994
Goodwill $ 3,361,117 $ 4,014,001
Noncompete agreement 1,045,165 1,045,165
Deferred financing fees 936,514 919,714
Other 22,125 22,125
----------- -----------
5,364,921 6,001,005
Less accumulated amortization (836,535) (269,407)
----------- -----------
Intangible assets, net $ 4,528,386 $ 5,731,598
=========== ===========
Amounts are being amortized using straight-line and effective interest
methods over lives ranging from 3 to 40 years.
6. INCOME TAXES
The Company adopted SFAS 109 on August 8, 1994 (see Note 1). The primary
effect of adopting SFAS 109 resulted in tax effecting gross deductible and
taxable temporary differences at currently enacted rates.
The components of the income tax provision for the year ended December 31,
1995 and for the period August 8, 1994 through December 31, 1994 are as
follows:
1995 1994
Current:
Federal $ 2,022,000 $ 1,012,000
State 514,000 255,000
----------- -----------
Total current 2,536,000 1,267,000
----------- -----------
Deferred:
Federal 116,000 (494,500)
State 30,000 (119,500)
----------- ------------
Total deferred 146,000 (614,000)
----------- ------------
TOTAL PROVISION FOR INCOME TAXES $ 2,682,000 $ 653,000
=========== ===========
-10-
<PAGE>
The approximate tax effect on each of the temporary differences that gave rise
to the Company's net deferred income tax liabilities at December 31, 1995 and
1994 under SFAS 109 are as follows:
1995 1994
Current deferred income tax (assets) liabilities:
Inventory purchase price adjustments $ $ 17,000
Deferred compensation (262,000) (201,983)
Inventory capitalization (119,000) (53,607)
Accrued liabilities (213,000) (321,080)
---------- ----------
Current deferred income tax asset $ (594,000) $ (559,670)
========== ==========
Noncurrent deferred income tax liabilities:
Depreciation $ 694,000 $ 42,000
Property, plant and equipment
purchase price adjustments 3,532,000 3,920,000
Amortization of noncompete agreement (136,000) (7,330)
Other 45,000
---------- ----------
Noncurrent deferred income tax liability $4,135,000 $3,954,670
========== ==========
A reconciliation between anticipated income taxes, computed at the statutory
federal income tax rate applied to pretax accounting income, and the provision
for income taxes included in the consolidated statements of income for the year
ended December 31, 1995 and for the period August 8, 1994 through December 31,
1994 follows:
1995 1994
Anticipated income taxes at the statutory federal rate $2,414,000 $549,000
State income taxes, net of federal tax benefit 375,000 80,000
Amortization of goodwill 37,000
Meals and entertainment 8,000
Foreign sales corporation income tax benefit (168,000)
Other, net 16,000 24,000
---------- --------
Provision for income taxes $2,682,000 $653,000
========== ========
-11-
<PAGE>
7. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at December 31, 1995 and
1994.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Term loan: the term loan is with a
commercial bank and bears interest at a
variable rate of the greater of the
prime rate (8.5% at December 31, 1995),
base CD rate (5.68% at December 31, 1995)
plus 1%, or the federal funds effective
rate (5.38% at December 31, 1995) plus
1.25%. The Company has the option to
convert any term loan exclusive of the
revolving line of credit to a eurodollar
loan for three to six month periods. The
interest rate for the applicable period
is the LIBOR plus 2.75%. All eurodollar
loans are to be made net of regularly
scheduled debt service payments that
fall within the eurodollar loan period.
Payments are due quarterly in amounts
ranging from $250,000 to $375,000 in
1996, plus accrued interest. The loan is
secured by all assets of the Company. $21,970,867 $23,000,000
Subordinated notes: the subordinated notes
are with shareholders of the Company and
bear interest at 9.25% with interest
payable semi-annually on May 25 and
November 25 of each year. Principal
amounts are due in two equal installments
of $4,500,000 on November 25, 2003 and
2004. 9,000,000 9,000,000
Revolving line of credit: the revolving
line of credit is with a commercial bank
and allows borrowings of up to $7,000,000
but not to exceed 80% of eligible
receivables plus 50% of eligible
inventory. Borrowings bear interest at a
variable rate based on the greater of the
prime rate (8.5% at December 31, 1995),
base CD rate (5.68% at December 31, 1995)
plus 1%, or the federal funds effective
rate (5.38% at December 31, 1995) plus
1.25%. Interest is payable on the first
business day of January, April, July and
October of each year. During 1995, the
line of credit was modified to reflect
monthly net cash receipts (disbursements)
as reductions from (additions to) the
outstanding balance. The line of credit
expires August 8, 1997. 3,347,484 1,250,000
Noncompete agreement: the noncompete
agreement is with a former officer of the
Company. The agreement requires the
Company to make monthly payments of
$33,333 (includes interest) through
January 1998. Interest was imputed at a
rate of 9.2% on the outstanding balance. 587,278 916,604
Note payable: the note payable was
established for the purchase of a
warehouse. The note bears interest at a
rate of 6.5% and is payable in monthly
installments of $9,000 through February
1998. 215,968 306,704
Note payable--related party: the note
payable--related party was established to
revalue certain property and equipment to
its fair value at the acquisition date.
The note bears interest at a rate of 8%
and is payable in August 2001. 90,000 90,000
----------- -----------
Total obligation 35,211,597 34,563,308
Less current portion 7,122,053 2,699,198
----------- -----------
Total long-term obligations $28,089,544 $31,864,110
=========== ===========
</TABLE>
-12-
<PAGE>
The term loan and the revolving line of credit are subject to terms and
conditions of a credit agreement, which provides for certain covenants. At
December 31, 1995, the Company was in compliance with, or had obtained
waivers from, all covenants. In addition, the credit agreement provides for
a mandatory prepayment of the loans (including accrued interest) to be made
within 90 days after year-end, contingent upon the results of certain
financial ratios. At December 31, 1995, $1,941,000 was included in the
current portion of long-term obligations relating to such mandatory
prepayment.
Principal payments on long-term obligations, excluding deferred
compensation amounts, are due as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 7,122,053
1997 2,579,635
1998 3,265,857
1999 4,250,000
2000 4,500,000
Thereafter 13,494,052
-----------
$35,211,597
===========
</TABLE>
8. RELATED-PARTY TRANSACTIONS
At December 31, 1995 and 1994, there were outstanding notes receivable from
a director and an employee of the Company for $60,000 and $114,000,
respectively. Interest earned from these notes receivable during the years
ended December 31, 1995 and for the period August 8, 1994 through December
31, 1994 totaled approximately $5,000 and $4,000, respectively.
At December 31, 1995 and 1994, there was an outstanding note payable to an
officer of the Company for $90,000. Interest expense related to the note
payable for the year ended December 31, 1995 and the period August 8, 1994
through December 31, 1994 totaled approximately $7,500 and $2,900,
respectively.
The Company paid management fees to an owner of the Company of
approximately $203,000 and $93,500 for the year ended December 31, 1995 and
the period August 8, 1994 through December 31, 1994, respectively.
9. COMMITMENTS
At December 31, 1995, the Company had outstanding purchase commitments of
$8,200,000 to purchase cotton linters and other raw materials.
**********
-13-
<PAGE>
ALPHA CELLULOSE, INC.
Financial Statements for the Period
August 8, 1994 through December 31, 1994 and
Independent Auditors' Report
<PAGE>
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Alpha Cellulose, Inc.
We have audited the accompanying balance sheet of Alpha Cellulose, Inc. (the
"Company") as of December 31, 1994, and the related statements of income and
retained earnings and of cash flows for the period August 8, 1994 through
December 31, 1994. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements referred to above present fairly, in
all material respects, the financial position of Alpha Cellulose, Inc. as of
December 31, 1994, and the results of its operations and its cash flows for the
period August 8, 1994 through December 31, 1994, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
February 17, 1995
[LOGO OF DELOITTE TOUCHE TOHMATSU INTERNATIONAL]
<PAGE>
ALPHA CELLULOSE, INC.
BALANCE SHEET
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 731,166
Receivables:
Trade 4,644,631
Related parties (Note 8) 144,000
Other 58,588
Inventory (Note 3) 8,395,981
Prepaid expenses and other assets 337,804
Deferred income tax (Note 6) 567,000
-----------
Total current assets 14,879,170
-----------
PROPERTY, PLANT AND EQUIPMENT, NET (note 4) 28,269,128
INTANGIBLE ASSETS, NET (Note 5) 5,731,598
-----------
TOTAL ASSETS $48,879,896
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations (Note 7) $ 2,699,198
Accounts payable 2,534,260
Accrued expenses 2,912,082
Income tax payable 6,809
-----------
Total current liabilities 8,152,349
-----------
LONG-TERM OBLIGATIONS (Notes 7 and 8) 22,864,110
DEFERRED INCOME TAX (Note 6) 3,962,000
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value,
100 shares authorized and outstanding 1
Paid-in capital 12,939,999
Retained earnings 961,437
-----------
Total stockholder's equity 13,901,437
-----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $48,879,896
===========
</TABLE>
See notes to financial statements.
-2-
<PAGE>
ALPHA CELLULOSE, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SALES $18,227,472
Less allowances (1,677,788)
-----------
Net sales 16,549,684
COST OF SALES 12,161,940
-----------
Gross profit 4,387,744
SELLING AND ADMINISTRATIVE EXPENSES 1,454,317
-----------
Operating income 2,933,427
-----------
OTHER INCOME (EXPENSE):
Interest income (Note 8) 4,144
Interest expense (Note 8) (1,047,576)
Management fees (337,625)
Trucking income, net 84,885
Miscellaneous, net (22,818)
-----------
Total other expense (1,318,990)
-----------
INCOME BEFORE INCOME TAXES 1,614,437
PROVISION FOR INCOME TAXES (Note 6) 653,000
-----------
NET INCOME AND RETAINED EARNINGS AT DECEMBER 31, 1994 $ 961,437
===========
</TABLE>
See notes to financial statements.
-3-
<PAGE>
ALPHA CELLULOSE, INC.
STATEMENTS OF CASH FLOWS
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994 (CONCLUDED)
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
<S> <C>
Cash paid during the year for:
Interest (net of amount capitalized) $ 415,542
==========
Income taxes $1,044,000
==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with the acquisition of Alpha Cellulose Corporation and Pulp
Transport Corporation (as discussed in Note 1 to the financial statements), the
Company established a note payable to a related party of $90,000 to revalue
certain property and equipment to its fair value at the acquisition date.
Also in conjunction with the acquisition of Alpha Cellulose Corporation and
Pulp Transport Corporation, the Company entered into a noncompete agreement
with a former officer of the Company. This resulted in the recording of assets
and liabilities of $1,045,165, respectively, representing the present value of
future payments to be made under the agreement.
See notes to financial statements.
-5-
<PAGE>
ALPHA CELLULOSE, INC.
NOTES TO FINANCIAL STATEMENTS
PERIOD AUGUST 8, 1994 THROUGH DECEMBER 31, 1994
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
Alpha Cellulose, Inc. (the "Company") was incorporated in the State of
Delaware on August 5, 1994 through the issuance of 100 shares of common
stock for $12,940,000. The Company is a wholly-owned subsidiary of Alpha
Cellulose Holdings, Inc., which purchased all of the Company's outstanding
capital stock on August 7, 1994.
On August 7, 1994, the Company acquired all of the outstanding capital
stock of Alpha Cellulose Corporation and Pulp Transport Corporation in a
business combination for an aggregate purchase price of $42,310,165 (the
"Acquisition"). The Acquisition was funded as follows:
<TABLE>
<CAPTION>
<S> <C>
Exchange of stock $12,940,000
Borrowings on revolving line of credit 5,325,000
Borrowings on term loan 23,000,000
Noncompete agreement 1,045,165
-----------
$42,310,165
===========
</TABLE>
The Acquisition has been accounted for in accordance with the purchase
method of accounting and the accompanying financial statements of the
Company reflect the purchase price allocated to assets acquired and
liabilities assumed based on their fair values as of the acquisition date.
The fair values of assets and liabilities were based on independent
appraisals and estimates by management. The following is a summary of the
purchase price allocation as of the date of acquisition:
<TABLE>
<CAPTION>
<S> <C>
Current assets $17,093,737
Property, plant and equipment 28,336,548
Intangible assets 5,959,064
Liabilities assumed (9,079,184)
-----------
Total purchase price $42,310,165
===========
</TABLE>
All goodwill resulting from the purchase is being amortized over 40 years.
The noncompete asset is being amortized over the three year life of the
agreement.
Operations--The Company is the leading worldwide manufacturer of cotton
pulp used by specialty papermills in the production of a variety of fine
writing and other specialty papers.
-6-
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES:
a. Statement of Cash Flows - For the purposes of reporting cash flows,
cash and cash equivalents include cash on hand and amounts due from
banks and investments in money market accounts.
b. Inventory - Inventory is stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method. Obsolete
and possible excess quantities are reduced to estimated net realizable
value.
c. Property, Plant and Equipment - Additions and improvements are
capitalized at cost. Maintenance and repairs are charged to expense as
incurred. Depreciation is provided on both straight-line and
accelerated methods for financial statement and income tax purposes
over the following useful lives:
Land improvements 10-30 years
Leasehold improvements 5-10 years
Buildings 10-31.5 years
Machinery and equipment 3-20 years
d. Intangible Assets - Intangible assets consist primarily of goodwill
resulting from the purchase of Alpha Cellulose Corporation and Pulp
Transport Corporation and a noncompete agreement with a former officer
of the Company. The goodwill is being amortized over 40 years and the
noncompete agreement over the three year term of the agreement.
e. Income Taxes - On August 8, 1994, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes,
("SFAS 109"). SFAS 109 requires a change from the deferred method, as
required under the American Institute of Certified Public Accountants
Accounting Principles Board Opinion No. 11 ("APB 11"), to the asset
and liability method of accounting for income taxes. Under the asset
and liability method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing
assets and liabilities.
f. Environmental Remediation and Compliance - Environmental remediation
costs are accrued based on estimates of known environmental
remediation exposures. Environmental compliance costs include
maintenance and operating costs with respect to pollution control
facilities, costs of ongoing monitoring programs and similar costs.
Such costs are expenses as incurred.
g. Employee Benefit Costs - The Company has a cash option thrift plan
[401(k)] which covers substantially all employees. The Company matches
employee contributions to the plan up to 5% of the employee's gross
compensation. Thrift plan costs charged to operations were $74,797 for
the period from August 8, 1994 through December 31, 1994.
-7-
<PAGE>
3. INVENTORY
Inventory consists of the following at December 31, 1994:
<TABLE>
<CAPTION>
<S> <C>
Supplies $ 640,350
Raw materials 6,212,075
Finished goods 1,543,556
-----------
Total inventory $ 8,395,981
===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of the following at
December 31, 1994:
<TABLE>
<CAPTION>
<S> <C>
Land and improvements $ 983,774
Leasehold improvements 72,641
Buildings 5,929,052
Machinery and equipment 22,011,184
Construction in progress 178,458
-----------
29,175,109
Less accumulated depreciation and amortization (905,981)
-----------
Property, plant and equipment, net $28,269,128
===========
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1994 and are
related to the Acquisition (see Note 1).
<TABLE>
<CAPTION>
<S> <C>
Goodwill $ 4,014,001
Noncompete agreement 1,045,165
Deferred financing fees 919,714
Other 22,125
-----------
6,001,005
Less accumulated amortization (269,407)
-----------
Intangible assets, net $ 5,731,598
===========
</TABLE>
Amounts are being amortized using straight-line and effective interest
methods over lives ranging from 3 to 40 years. Amortization expense
recorded for the period from August 8, 1994 through December 31, 1994 was
$269,407.
-8-
<PAGE>
6. INCOME TAXES
The Company adopted SFAS 109 on August 8, 1994 (see Note 1). The primary
effect of adopting SFAS 109 resulted in tax affecting gross deductible and
taxable temporary differences at currently enacted rates.
The components of the income tax provision for the year ended December 31,
1994 are as follows:
<TABLE>
<S> <S>
Current:
Federal $1,012,000
State 255,000
----------
Total current 1,267,000
----------
Deferred:
Federal (494,496)
State (119,504)
----------
Total deferred (614,000)
----------
TOTAL PROVISION FOR INCOME TAXES $ 653,000
==========
</TABLE>
The approximate tax effect on each of the temporary differences that gave
rise to the Company's net deferred income tax liabilities at December 31,
1994 under SFAS 109 are as follows:
<TABLE>
<S> <C>
Current deferred income tax (assets)
liabilities:
Inventory purchase price adjustments $ 17,000
Deferred compensation (201,983)
Inventory capitalization (53,607)
Accrued liabilities (321,080)
Other (7,330)
----------
Current deferred income tax asset $ (567,000)
==========
Noncurrent deferred income tax liabilities:
Depreciation $ 42,000
Property, plant and equipment purchase
price adjustments 3,920,000
----------
Noncurrent deferred income tax liability $3,962,000
==========
</TABLE>
A reconciliation between anticipated income taxes, computed at the
statutory federal income tax rate applied to pretax accounting income, and
the provision for income taxes included in the statement of income for the
year ended December 31, 1994 follows:
<TABLE>
<S> <C>
Anticipated income taxes at the statutory
federal rate $ 549,000
State income taxes, net of federal tax benefit 80,000
Other, net 24,000
----------
Provision for income taxes $ 653,000
==========
</TABLE>
-9-
<PAGE>
7. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following as of December 31, 1994:
<TABLE>
<S> <C>
Term loan; the term loan is with a commercial bank
and bears interest at a variable rate of the
greater of the prime rate (8.5% at December 31,
1994) base CD rate (6.69% at December 31, 1994)
plus 1%, or the federal funds effective rate
(4.94% at December 31, 1994) plus 1.25%. Payments
are due quarterly in the amount of $250,000 plus
accrued interest. The loan is secured by all
assets of the Company. $23,000,000
Revolving line of credit; the revolving line of
credit is with a commercial bank and allows
borrowings of up to $7,000,000 but not to exceed
80% of eligible receivables plus 50% of eligible
inventory. Borrowings bear interest at a variable
rate based on the greater of the prime rate (8.5%
at December 31, 1994) base CD rate (6.69% at
December 31, 1994) plus 1%, or the federal funds
effective rate (4.94% at December 31, 1994) plus
1.25%. Interest is payable on the first business
day of January, April, July and October of each
year. The line of credit expires August 8, 1997. 1,250,000
Noncompete agreement; the noncompete agreement is
with a former officer of the Company. The agreement
requires the Company to make monthly payments of
$33,333 (includes interest) through January 1998.
Interest was imputed at a rate of 9.2% on the
outstanding balance. 916,604
Note payable; the note payable was established for
the purchase of a warehouse. The note bears interest
at a rate of 6.5% and is payable in monthly
installments of $9,000 through February 1998. 306,704
Note payable - related party; the note payable -
related party was established to revalue certain
property and equipment to its fair value at the
acquisition date. The note bears interest at a rate
of 8% and is payable in August 2001. 90,000
-----------
Total obligation 25,563,308
Less current portion 2,699,198
-----------
Total long-term obligations $22,864,110
===========
</TABLE>
The term loan and the revolving line of credit are subject to terms and
conditions of a credit agreement, which provides for certain covenants. At
December 31, 1994, the Company was in compliance with all covenants. In
addition, the credit agreement provides for a mandatory prepayment of the
loans (including accrued interest) to be made within 90 days after year-
end, contingent upon the results of certain financial ratios. At December
31, 1994, $279,133 was included in the current portion of long-term
obligations relating to such mandatory prepayment.
-10-
<PAGE>
Principal payments on long-term obligations, excluding deferred
compensation amounts, are due as follows:
<TABLE>
<CAPTION>
<S> <C>
1995 $ 2,699,198
1996 1,832,751
1997 2,579,635
1998 3,265,857
1999 4,250,000
Thereafter 10,935,867
-----------
$25,563,308
===========
</TABLE>
8. RELATED-PARTY TRANSACTIONS
At December 31, 1994, there were outstanding notes receivable from a
director and an employee of the Company for $60,000 and $84,000,
respectively. Interest earned from these notes receivable during the period
August 8, 1994 through December 31, 1994 was approximately $4,000.
At December 31, 1994, there was an outstanding note payable to an officer
of the Company for $90,000. Interest expense related to the note payable
for the period August 8, 1994 through December 31, 1994 was approximately
$2,900.
9. COMMITMENTS AND CONTINGENCIES
During 1994, the Company reported that it had wastewater discharge permit
violations. The Company is currently discussing such violations and
penalties with the North Carolina Division of Environmental Management.
Management of the Company does not believe this contingency will have a
significant effect on the financial statements.
**********
-11-
<PAGE>
15-Apr-96
ALPHA CELLULOSE CORPORATION
---------------------------
CONSOLIDATED PROFIT & LOSS STATEMENT
------------------------------------
YEAR-TO-DATE ENDING: 3/31/96
----------------------------
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C> <C> <C>
YTD PRIOR YEAR BUDGET
YTD YTD
-------------------------------------------------------------------------
TONS SOLD 11,588 12,069 13,265
SALES
GROSS SALES $15,270,129 $14,077,752 $17,926,000
RETURNS & ALLOWANCES (1,534,006) (1,176,308) (2,087,000)
-------------------------------------------------------------------------
NET SALES 13,736,123 100.0% 12,901,444 100.0% 15,839,000 100.0%
COST OF GOODS SOLD 10,510,733 76.5% 7,972,312 61.8% 11,659,000 73.6%
GROSS PROFIT 3,225,390 23.5% 4,929,132 38.2% 4,180,000 26.4%
SELLING & ADMIN EXPENSES 715,487 5.2% 935,589 7.3% 657,000 4.1%
-------------------------------------------------------------------------
EBIT 2,509,903 18.3% 3,993,543 31.0% 3,523,000 22.2%
OTHER INCOME & EXPENSE
STONEBRIDGE MGT. FEE 50,000 0.4% 50,000 0.4% 50,001 0.3%
AMORTIZATION 415,613 3.0% 432,240 3.4% 417,000 2.6%
INTEREST EXPENSE 782,181 5.7% 807,536 6.3% 785,000 5.0%
-------------------------------------------------------------------------
TOTAL OTHER INCOME & EXPENSE 1,247,794 9.1% 1,289,776 10.0% 1,252,001 7.9%
INCOME BEFORE TAXES 1,262,109 9.2% 2,703,767 21.0% 2,270,999 14.3%
INCOME TAX EXPENSE 323,969 2.4% 1,172,497 9.1% 770,000 4.9%
-------------------------------------------------------------------------
NET INCOME $938,140 6.8% $1,531,270 11.9% $1,500,999 9.5%
=========================================================================
</TABLE>
<PAGE>
15-Apr-96
ALPHA CELLULOSE CORPORATION
COMPARATIVE CONSOLIDATED BALANCE SHEET
AS OF 3/31/96
<TABLE>
<CAPTION>
Assets 3/31/96 3/31/95
<S> <C> <C>
Current Assets
Cash $ 110,891 $ 87,090
Checks intransit/uncollected (1,351,721)
Trade Accounts Receivable 7,204,549 5,777,671
Other Receivables 15,435 339,401
----------- -----------
7,219,984 6,117,072
Notes Receivable 61,000 135,000
Inventories 16,198,713 9,326,625
Prepaids & Other Current Assets 286,981 336,247
Deferred Income Tax Asset 594,000 573,750
----------- -----------
Total Current Assets 23,119,848 16,575,784
Non-Current Assets
Property, Plant & Equip
Land & Improvements 1,353,755 1,038,877
Buildings 5,870,740 5,740,881
Leasehold Improvements 17,538 17,538
Machinery & Equipment 23,003,352 22,199,357
Construction in Progress 926,474 386,810
----------- -----------
31,171,859 29,383,463
Less: Accumulated Depreciation/Amort. (3,776,302) (1,496,600)
Net Property, Plant & Equip. 27,395,557 27,886,863
Organizational Expenses 699,690 854,777
Non-Compete Agreement 464,525 812,909
Goodwill 3,205,501 3,949,151
----------- -----------
Total Assets $54,885,121 $50,079,484
=========== ===========
Liabilities & Stockholders' Equity 3/31/96 3/31/95
Current Liabilities
Note Payable Warehouse - Current $ 73,194 $ 68,600
Non-Compete Agreement - Current 273,780 249,804
Deferred Income Tax - Current 600,734 601,040
Current Portion of Term Debt 3,125,000 1,029,133
Revolving Credit Line 4,596,975 1,250,000
Trade Accounts Payable 1,160,131 1,144,651
Accrued Liabilities 2,741,696 3,481,396
----------- -----------
Total Current Liabilities 12,571,511 7,824,624
Non-Current Liabilities
- -----------------------
Note Payable - Related Parties 90,000 90,000
Long Term Note Payable -
Warehouse 119,155 215,968
Deferred Compensation 669,000 553,500
Non-Compete Agreement 226,339 587,277
Deferred Income Tax 3,534,254 3,404,541
Long Term Debt 18,595,867 21,970,867
Subordinated Debt 9,000,000 9,000,000
----------- -----------
Total Non-Current Liabilities 32,234,615 35,822,153
Stockholder's Equity
Preferred Stock 500 500
Common Stock 10,000 9,700
Additional Paid in Capital 3,993,475 3,929,800
Retained Earnings 6,075,020 2,492,707
----------- -----------
10,078,995 6,432,707
----------- -----------
Total Liabilities & Stockholder's Equity $54,885,121 $50,079,484
=========== ===========
</TABLE>
<PAGE>
15-Apr-96
Alpha Cellulose Corporation
Consolidated Statement of Cash Flows
Year to date 3/31/96
<TABLE>
<CAPTION>
OPERATING ACTIVITIES: 3/31/96 3/31/95
----------- -----------
<S> <C> <C>
Net Income $ 938,140 $ 1,531,270
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 327,330 342,627
Amortization 415,613 432,240
Proceeds from sale of Inventory 153,427
Net Loss on Disposal of Assets 27,257
Deferred Compensation 38,499
Deferred income tax 36,390
Changes in Operating Assets & Liabilities:
(Incr.)/Decr. Receivables (1,538,492) (1,413,853)
(Incr.)/Decr. Iventories (1,468,702) (974,214)
(Incr.)/Decr. Prepaids & Other Assets (132,443) (15,189)
Incr./(Decr.) Accounts Payable Trade (692,354) (1,336,829)
Incr./(Decr.) Accrued Liabilities 229,744 1,024,993
-------------------------
Net Cash (Used)/Provided By Operating Activities (1,740,480) (334,066)
INVESTING ACTIVITIES:
Property, Plant & Equipment Additions, Net (579,421) (208,352)
FINANCING ACTIVITIES:
Note Payable Warehouse (23,618) (22,135)
Revolving Credit Line 2,963,707
Term Loan (250,000)
Additional Paid in Capital 3,975
Non-Compete Agreement (87,158) (79,523)
-------------------------
Net Cash (Used)/Provided By Financing Activities 2,606,906 (101,658)
Increase (Decrease) in Cash/Cash Equivalents 287,005 (644,076)
Cash/Cash Equivalents at Beginning of Period (1,527,835) 731,166
-------------------------
Cash/Cash Equivalents at End of Period $(1,240,830) $ 87,090
=========================
</TABLE>
<PAGE>
EXHIBIT 10.30
BUCKEYE CELLULOSE CORPORATION
FORMULA PLAN FOR NON-EMPLOYEE DIRECTORS
---------------------------------------
1. Purpose. The purpose of the Buckeye Cellulose Corporation Formula Plan
for Non-Employee Directors (the "Plan") is to promote the interests of the
Company by providing an inducement to obtain and retain the services of
qualified persons who are neither employees nor officers of the Company to serve
as members of the Board.
2. Eligibility. An option to purchase shares of Common Stock shall be
granted to each Non-Employee Director pursuant to the terms of this Plan.
3. Limitation on Aggregate Shares. The number of shares of Common Stock
with respect to which options may be granted under this Plan and which may be
issued upon the exercise thereof shall not exceed, in the aggregate, 200,000
shares; provided, however, that if any options granted under this Plan expire
unexercised or unpaid or are cancelled, terminated or forfeited in any manner
without the issuance of Common Stock thereunder, the shares with respect to
which such options were granted shall be available under this Plan; provided
further, that the Non-Employee Director received no benefit of ownership from
such shares. Such shares of Common Stock may be either authorized and unissued
shares, treasury shares or a combination thereof, as the Committee or the Board
shall determine.
4. Options. Options granted under this Plan shall be subject to such
terms and conditions and evidenced by option agreements in such form as shall be
determined from time to time by the Committee or the Board and shall in any
event be subject to the terms and conditions set forth below and in paragraph 5:
(a) Grant of Options. An option to purchase 25,000 shares of Common
Stock shall automatically be granted to each Non-Employee Director at the
close
<PAGE>
of business on the date on which such Non-employee Director is elected or
appointed to the Board ("Grant").
(b) Option Price. The option exercise price per share of Common
Stock shall be 100% of the fair market value of a share of Common Stock at
the time of grant, which shall be the closing sales price of a share of
Common Stock on the date of grant on the New York Stock Exchange ("NYSE")
or, if the NYSE is closed on that date, on the last preceding date on which
the NYSE was open for trading; but in no event will such option exercise
price be less than the par value of such a share of Common Stock.
(c) Term of Options; Vesting. Subject to the terms and conditions
herein, each Grant shall expire on the tenth anniversary of the date of
such grant. A director may exercise an option received in the Grant only to
the extent it has become vested. Each Grant vests in part immediately on
the date of the grant and in additional amounts on the next succeeding four
(4) anniversary dates, if on such dates the option holder is a director of
the Company, according to the following schedule:
<TABLE>
<CAPTION>
Vesting Date Cumulative
------------ ----------
Amount Vested
-------------
<S> <C>
Immediately Upon Grant 5,000
First Anniversary Date 5,000
Second Anniversary Date 5,000
Third Anniversary Date 5,000
Fourth Anniversary Date 5,000
</TABLE>
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<PAGE>
(d) Exercise of Options. Options may be exercised (in full or in
part) only by written notice to the Company at its principal office
accompanied by payment, in cash, of the option exercise price or, in lieu
thereof, by tendering to the Company shares of Common Stock owned by the
person exercising the option and having a fair market value equal to the
cash exercise price applicable to such option, such fair market value to be
the closing sales price of a share of Common Stock on the date of exercise
on the NYSE or, if the NYSE is closed on that date, on the last preceding
date on which the NYSE was open for trading; but in no event will such
option exercise price less than the par value of such a share of Common
Stock.
5. Additional Provisions.
(a) Termination of Term of Directorship. All rights of a Non-Employee
Director pursuant to options granted hereunder shall expire ninety (90)
days after the date of his termination as a director for any reason;
provided, however, that upon the termination of a Non-Employee Director's
tenure as a result of death or disability, all outstanding grants of
options shall vest notwithstanding the original vesting schedule and shall
expire upon the first anniversary of the date of such termination.
(b) Listing, Registration and Compliance with Laws and Regulations.
Each option shall be subject to the requirement that if at any time the
Committee or the Board shall determine, in its discretion, that the
listing, registration or qualification of the shares subject to the option
upon any securities exchange or under any state or federal securities or
other law or regulation, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to or in
connection with the granting of such option or the issuance or purchase of
shares thereunder, no such option may be exercised or paid in
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<PAGE>
Common Stock, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee or the Board. The
holder of such option will supply the Company with such certificates,
representations and information as the Company shall request and shall
otherwise cooperate with the Company in obtaining such listing,
registration, qualification, consent or approval. The Committee or the
Board may at any time impose any limitations upon the exercise of an option
or the sale of the Common Stock issued upon exercise of an option that, in
the Committee's or the Board's discretion, are necessary or desirable in
order to comply with Section 16(b) of the Exchange Act and the rules and
regulations thereunder.
(c) Nontransferability of Options. Options may not be transferred
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order, as defined by (S) 1 et seq. of the
Code, Title I of ERISA or the rules thereunder, and, during the lifetime of
the person to whom they are granted, may be exercised only by such person
or his or her guardian or legal representative or pursuant to a qualified
domestic relations order.
(d) Adjustment for Change in Common Stock. The Company will make such
provision with respect to the Plan, including without limitation
adjustments in the number of shares which may thereafter be acquired under
the Plan, the number of shares subject to options under the Plan or the
purchase price specified in options outstanding under the Plan, or for the
termination or continuation of options under the Plan, as it may determine
to be appropriate and equitable, in connection with any stock dividend,
stock split, or reverse stock split or combination or other reduction in
the number of issued common shares of the Company or in connection with any
merger, consolidation, reorganization, sale or exchange of substantially
all assets, change of control, spinoff or other distribution
-4-
<PAGE>
of any assets of the Company or any subsidiary or all of any portion of the
interest of the Company in any subsidiary to the stockholders, or
dissolution of the Company.
(e) Sale of the Company. In the event of a merger of the Company with
or into another corporation constituting a change of control, a sale of all
or substantially all of the Company's assets or a sale of a majority of the
Company's outstanding voting securities (a "Sale of the Company"), the
options may be assumed by the successor corporation or a parent of such
successor corporation or substantially equivalent options may be
substituted by the successor corporation or a parent of such successor
corporation, and if the successor corporation does not agree to assume the
options or substitute options at least 10 days prior to the Sale of the
Company, then the options shall become immediately exercisable and such
options shall terminate if not exercised as of the date of the Sale of the
Company or other prescribed period of time.
(f) Liquidation of Dissolution. In the event of the liquidation or
dissolution of the Company, options shall terminate immediately prior to
the liquidation or dissolution.
(g) Taxes. The Company shall be entitled, if necessary or desirable,
to withhold (or secure payment from the Plan participant in lieu of
withholding) the amount of any withholding or other tax due from the
Company with respect to any shares issuable under this Plan, and the
Company may defer such issuance unless indemnified to its satisfaction.
6. Administration. This Plan shall be administered by the Committee or
the Board. The Committee or the Board shall have full power to construe and
interpret this Plan and options granted hereunder, to establish and amend rules
for its administration and to correct any defect or omission and to reconcile
any inconsistency in this Plan or in any option granted hereunder to the extent
the Committee or the Board deems desirable to carry this Plan or any option
granted hereunder into effect. Each member of the Board or the Committee, and,
to the extent provided
-5-
<PAGE>
by the Board or the Committee, any person to whom duties or powers shall be
delegated in connection with the Plan, shall incur no liability with respect to
any action taken or omitted to be taken in connection with the Plan and shall be
fully protected in relying in good faith upon the advice of counsel, to the
fullest extent permitted under applicable law.
7. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means a committee of the Board appointed thereby to
administer this Plan, or if no such committee is appointed, the Board.
(d) "Common Stock" means shares of the Company's common stock, $0.01
par value, or such other shares as are substituted therefor pursuant to
paragraphs 5(d) or (e).
(e) "Company" means Buckeye Cellulose Corporation.
(f) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Non-Employee Director" means any director of the Company (i) who
is not and who was not a director of the Company on the date this Plan
becomes effective pursuant to Section 10 hereof or (ii) after the date this
Plan becomes effective, is elected by the shareholders or appointed by the
Board of Directors pursuant to the bylaws of the Company, and (iii) who is
not an officer or employee of the Company or its affiliates.
-6-
<PAGE>
8. No Right to Continue as a Director. Neither the Plan nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a Non-Employee Director for any period of time, or at any
particular rate of compensation.
9. Non-Qualified Stock Options. All options granted under the Plan shall
be non-qualified options not entitled to special tax treatment under Code
Section 222, as may be amended from time to time.
10. Effective Date of the Plan. The Plan shall take effect May 15, 1996.
11. Termination and Amendment. The Board or the Committee shall, in its
discretion, have the power to amend the Plan from time to time to the fullest
extent permitted under the Delaware General Corporation Law as in effect at the
time of such amendment; provided however, that paragraphs 3 and 4(a) and (b)
shall not be amended more than once every six months (other than to comply with
the Code or ERISA or the rules thereunder). No amendment of the Plan may
materially and adversely affect any right of any participant with respect to any
option theretofore granted without such participant's written consent. No
options shall be granted hereunder after May 15, 2001.
-7-
<PAGE>
Ropes & Gray EXHIBIT 10.31
BUCKEYE CELLULOSE CORPORATION
CREDIT AGREEMENT
Amendment No. 1
This Agreement, dated as of April 25, 1996, is among Buckeye Cellulose
Corporation, a Delaware corporation (the "Company"), the Subsidiaries of the
Company party hereto, Fleet National Bank (formerly Fleet Bank of Massachusetts,
N.A.), as agent (the "Agent") for the Lenders and SunTrust Bank, Central
Florida, N.A., as co-agent (the "Co-Agent) for the Lenders. The parties agree as
follows:
1. Reference to Credit Agreement; Definitions. Reference is made to the
Credit Agreement dated as of November 28, 1995, as in effect on the date hereof
(the "Credit Agreement") prior to giving effect to this Agreement, among the
Company, its Subsidiaries, the Lenders, the Agent and the Co-Agent. Terms
defined in the Credit Agreement as amended by this Agreement (the "Amended
Credit Agreement") and not otherwise defined herein are used herein with the
meanings so defined.
2. Amendment of the Credit Agreement.
2.1. Amendment of Section 1.57. The definition of "Fleet" in Section
1.57 of the Credit Agreement is amended to read in its entirety as follows:
"1.57. "Fleet" means Fleet National Bank."
2.2. Amendment of Section 6.7. Section 6.7 of the Credit Agreement is
amended by adding immediately after Section 6.7.3 a new Section 6.7.4 to read in
its entirety as follows:
"6.7.4. Letters of Credit issued by foreign financial institutions for
the account of Foreign Subsidiaries in an aggregate face amount not exceeding
$5,000,000 in the equivalent amount of United States Funds at any one time
outstanding."
2.3. Amendment of Section 6.9.5. Section 6.9.5 of the Credit
Agreement is amended to read in its entirety as follows:
"6.9.5. So long as immediately before and after giving effect thereto
no Default exists, and so long as the Company (if the Company is party thereto)
or a Guarantor (if the Company is not party thereto) is the surviving entity,
the Company and its Subsidiaries may acquire another entity in the same line of
business as the Company as described in Section 6.2.1 for a purchase price not
exceeding, except with the consent of the Required Lenders:
-2-
<PAGE>
Ropes & Gray
(a) at all times when Consolidated Total Net Debt (calculated on a pro
forma basis giving effect to the proposed acquisition) is less than 150% of
Consolidated EBITDA for the most recent period of four consecutive fiscal
quarters (calculated on a pro forma basis giving effect to the proposed
acquisition as if such acquisition had been consummated at the beginning of
such period) for which financial reports have been (or are required to have
been) furnished to the Lenders in accordance with Sections 6.4.1 or 6.4.2,
$75,000,000 for any single acquisition and $75,000,000 in cumulative aggregate
purchase price for all acquisitions permitted by this Section 6.9.5 during the
period from the Initial Closing Date through the Final Maturity and
(b) at all other times, $35,000,000 for any single acquisition and
$50,000,000 in cumulative aggregate purchase price for all acquisitions
permitted by this Section 6.9.5 during the period from the Initial Closing Date
through the Final Maturity Date;
provided, however, that the (i) the acquisition must be approved by the
target entity's board of directors, (ii) the Company must be in compliance with
the Computation Covenants immediately after giving effect to such acquisition,
(iii) the acquired entity must not have any environmental liabilities which,
after giving effect to such acquisition, would reasonably be expected to result
in a Material Adverse Change and (iv) any Subsidiary acquired under this Section
6.9.5 shall guarantee the Credit Obligations, or a pledge of such Subsidiary's
stock shall be furnished to the Agent under a Pledge Agreement in substantially
the form of Exhibit 9.9 (each a "Pledge Agreement"), in either case as
contemplated by Section 9.9."
2.4. Amendment of Section 6.9. Section 6.9 of the Credit Agreement is
amended by adding immediately after Section 6.9.9 a new Section 6.9.10 to read
in its entirety as follows:
"6.9.10. So long as immediately before and after giving effect thereto
no Default exists, and so long as the Company (if the Company is party
thereto) or a Guarantor (if the Company is not party thereto) is the
surviving entity, the Company and its Subsidiaries may acquire Alpha
Cellulose Corporation for a purchase price not exceeding $70,000,000 to be
paid in cash; provided, however, that (a) the acquisition must be approved
by the target entity's board of directors, (b) the Company must be in
compliance with the Computation Covenants immediately after giving effect
to such acquisition, (c) the acquired entity must not have any
environmental liabilities which after giving effect to such acquisition,
would reasonably be expected to result in a Material Adverse Change and (d)
the acquired entity must guarantee the Credit Obligations as contemplated
by Section 9.9."
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<PAGE>
Ropes & Gray
3. Representation and Warranty. In order to induce the Agent and the
Co-Agent to enter into this Agreement, the Company represents and warrants to
the Lenders that after giving effect to this Agreement, no Default will exist.
4. General. The Amended Credit Agreement and all of the Credit Documents
are each confirmed as being in full force and effect. This Agreement, the
Amended Credit Agreement and the other Credit Documents referred to herein or
therein constitute the entire understanding of the parties hereto with respect
to the subject matter hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. Each of the Amended
Credit Agreement and this Agreement is a Credit Document and may be executed in
any number of counterparts, which together shall constitute one instrument, and
shall bind and inure to the benefit of the parties and their respective
successors and assigns and all holders of any Note. This Agreement shall be
governed by and construed in accordance with the laws (other than the conflict
of laws rules) of The Commonwealth of Massachusetts.
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<PAGE>
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first written above.
BUCKEYE CELLULOSE CORPORATION
By ????????????
------------------------------------
Title: V.P. & Controller
BUCKEYE FLORIDA CORPORATION
BUCKEYE FOLEY CORPORATION
By ????????????
------------------------------------
Title: Secty
BUCKEYE FLORIDA, LIMITED PARTNERSHIP
By BUCKEYE FLORIDA CORPORATION,
its general partner
By ????????????
------------------------------------
Title: Secty
FLEET NATIONAL BANK,
as Agent under the Credit Agreement
By
------------------------------------
Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.,
as Co-Agent under the Credit Agreement
By
------------------------------------
Vice President
<PAGE>
EXHIBIT 10.32
COMPANY STOCK REPURCHASE AGREEMENT
AGREEMENT, dated as of June 3, 1996, between BKI Investment Corp., a
Delaware corporation ("BKI"), and Madison Dearborn Capital Partners, L.P.
("MDCP").
WHEREAS, MDCP is the owner of 7,290,313 shares of the common stock, $.01
par value (the "Common Stock"), of Buckeye Cellulose Corporation, a Delaware
corporation of which BKI is a wholly owned subsidiary ("Buckeye Cellulose");
WHEREAS, MDCP desires to sell, and BKI desires to purchase, 2,259,887
shares of Common Stock (the "Company Stock Repurchase");
WHEREAS, MDCP and certain individuals employed by Buckeye Cellulose have
entered into separate agreements, each dated as of the date hereof
(collectively, the "Individuals' Stock Purchase Agreements"), pursuant to which
MDCP shall sell, and such individuals shall buy, an aggregate of 1,385,269
shares of Common Stock (the "Individuals' Stock Purchases");
WHEREAS, MDCP desires to sell in an underwritten public offering up to
3,645,157 shares of Common Stock, on terms and conditions customary for similar
public offerings (the "Equity Offering"); and
WHEREAS, Buckeye Cellulose desires to obtain approximately $100,000,000
(before deducting fees and expenses and underwriters' discount) in debt
financing, on terms and conditions customary for similar types of debt financing
(the "Debt Financing"), a portion of which will be contributed to BKI to enable
BKI to consummate the Company Stock Repurchase.
NOW, THEREFORE, in consideration thereof and the mutual agreements
hereinafter contained, MDCP and BKI agree as follows:
1. Purchase and Sale of Common Stock. MDCP hereby agrees to sell and
transfer to BKI, and BKI hereby agrees to purchase from MDCP, 2,259,887 shares
of Common Stock (the "Shares") at a price of $22.125 per share. Such purchase
and sale shall take place at the New York offices of Kirkland & Ellis on the
date of the closing of the Equity Offering, or such other location, date and
time mutually agreed to by the parties (the "Closing"). At the Closing MDCP
shall deliver to BKI certificate(s) representing the Shares, duly endorsed for
transfer or accompanied by stock transfer power(s) duly executed in blank. After
the Closing MDCP shall have no rights in respect of the Shares, except the right
to receive (at the time paid to other stockholders of record) payment of
dividends on the Shares declared payable after the Closing to holders of record
of Common Stock on a date prior to the Closing.
<PAGE>
2. Purchase Price. BKI agrees to pay to MDCP at the Closing $50,000,000
by wire transfer of immediately available funds to an account previously
designated by MDCP against the receipt of certificate(s) representing the
Shares.
3. Conditions to MDCP's Obligations at Closing. The obligation of MDCP to
sell the Shares to BKI pursuant to the Company Stock Repurchase shall be subject
to the satisfaction of the following conditions, each of which may be waived by
MDCP:
(a) Representations and Warranties. The representations and
warranties of BKI set forth in paragraph 6 shall be true and correct when
made and at and as of the time of the Closing as though then made.
(b) Individuals' Stock Purchase. Simultaneously with the Closing, the
aggregate number of shares to be purchased by the individuals employed by
Buckeye Cellulose pursuant to the Individuals' Stock Purchase Agreements
shall be purchased from MDCP by some or all of such individuals in
accordance with the terms of the Individuals' Stock Purchase Agreements.
(c) Board Approval. The board of directors of each of BKI and Buckeye
Cellulose shall have approved the Company Stock Repurchase on the terms
contemplated by this Agreement.
(d) Equity Offering. Simultaneously with the Closing, certain
underwriters shall purchase from MDCP an aggregate of up to 3,645,157
shares of Common Stock pursuant to the Equity Offering at an offering price
per share not less than 90% of the per share price to be paid to MDCP by
BKI pursuant to the terms hereof.
4. Conditions to BKI's Obligations at Closing. The obligation of BKI to
purchase the Shares from MDCP pursuant to the Company Stock Repurchase shall be
subject to the satisfaction of the following conditions, each of which may be
waived by BKI:
(a) Representations and Warranties. The representations and
warranties of MDCP set forth in paragraph 5 shall be true and correct when
made and at and as of the time of the Closing as though then made.
(b) Debt Financing. Simultaneously with or prior to the Closing,
Buckeye Cellulose shall have obtained the Debt Financing, which shall bear
interest at or below a rate of 12% per annum, on terms and conditions
customary for similar debt financings.
(c) Board Approval. The board of directors of each of BKI and Buckeye
Cellulose shall have approved the Company Stock Repurchase on the terms
contemplated by this Agreement.
2
<PAGE>
(d) Equity Offering. Simultaneously with the Closing, certain underwriters
shall purchase from MDCP an aggregate of up to 3,645,157 shares of Common Stock
pursuant to the Equity Offering at an offering price per share not less than 90%
of the per share price to be paid to MDCP by BKI pursuant to the terms hereof.
5. Representations, Warranties and Agreements of MDCP.
(a) MDCP represents and warrants to BKI as follows:
(i) The making and performance of this Agreement has been duly authorized
by all necessary partnership action and will not constitute a violation of,
conflict with or result in a default under, its partnership agreement or
any contract, commitment, agreement, understanding or arrangement of any
kind to which MDCP is subject or is a party or by which it is bound.
(ii) This Agreement has been duly executed and delivered by MDCP and
constitutes a valid and binding obligation of MDCP, enforceable against it
in accordance with its terms.
(iii) MDCP has (and at the Closing MDCP will have) good and valid title to
the Shares free and clear of all claims, liens, charges, encumbrances and
security interests.
(b) MDCP agrees that it will hold and maintain all of the Shares free of any
liens, encumbrances or other restrictions until transferred in accordance
with this Agreement.
(c) MDCP agrees that it will use its reasonable best efforts to cause the
Company Stock Repurchase, the Individuals' Stock Purchases, the Equity
Offering and the Debt Financing to occur on or prior to June 30, 1996 but
in no event later than August 15, 1996.
6. Representations, Warranties and Agreements of BKI.
(a) BKI represents and warrants to MDCP as follows:
(i) The making and performance of this Agreement have been duly authorized
by all necessary corporate action of BKI and Buckeye Cellulose and will not
violate any provision of BKI's or Buckeye Cellulose's Certificate of
Incorporation or Bylaws and will not constitute a violation of, conflict
with or result in a default under, any contract, commitment, agreement,
understanding or arrangement of any kind to which BKI or Buckeye Cellulose
is subject or is a party or by which BKI or Buckeye Cellulose is bound.
3
<PAGE>
(ii) This Agreement has been duly executed and delivered by BKI and
constitutes a valid and binding obligation of BKI, enforceable against
it in accordance with its terms.
(b) Each of BKI and Buckeye Cellulose agrees that it will use its
reasonable best efforts to cause the Company Stock Repurchase, the
Individuals' Stock Purchases, the Equity Offering and the Debt Financing to
occur on or prior to June 30, 1996 but in no event later than August 15,
1996.
7. Registration Agreement. The parties agree to cause the Amended and
Restated Registration Agreement among Buckeye Cellulose, MDCP and certain other
individuals and entities listed therein (the "Registration Agreement") to be
amended at or prior to the Closing in a manner that is reasonably satisfactory
to Buckeye Cellulose and MDCP.
8. Termination. If (a) the board of directors of each of BKI and Buckeye
Cellulose have not approved the Company Stock Repurchase on the terms
contemplated by this Agreement on or prior to June 15, 1996 or (b) the Closing
has not occurred on or prior to August 15, 1996, then any party that is not in
breach of its obligations hereunder may terminate this Agreement by delivering
written notice of such termination to the other party.
9. Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented except by a writing signed by BKI and MDCP.
10. Notices. All notices and other communications provided for or permitted
hereunder shall be in writing and shall be made by hand delivery, by registered
or certified first-class mail, return receipt requested, or by facsimile
transmission;
(a) if to BKI:
BKI Investment Corp.
1001 Tillman Street
Memphis, Tennessee 38108
Attn: Robert E. Cannon, President
with a copy to:
Buckeye Cellulose Corporation
1001 Tillman Street
Memphis, Tennessee 38108
Attn: Henry P. Doggrell, Vice President/General Counsel
4
<PAGE>
(b) if to MDCP:
Madison Dearborn Capital Partners, L.P.
c/o Madison Dearborn Partners, Inc.
Three First National Plaza, Suite 1330
Chicago, Illinois 60602
Attn: Samuel M. Mencoff
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attn: William S. Kirsch, P.C.
All notices and communications shall be deemed to have been duly given and
received: when delivered by hand, if hand delivered; the third business day
after being deposited in the mail, registered or certified, return receipt
requested, first class postage prepaid, or such earlier business day actually
received, if mailed; upon oral confirmation of receipt, if by facsimile
transmission. Each party agrees promptly to confirm receipt of all notices. The
validity or effectiveness of any notice or other communication provided for or
permitted under this Agreement shall not be effected by the failure to deliver
the copies referred to above.
11. Third Party Rights and Obligations. Nothing in this Agreement shall be
construed to give any person or entity other than BKI and MDCP and their
successors, any legal or equitable right, remedy or claim under this Agreement,
and this Agreement shall be for the sole and exclusive benefit of such persons.
12. Descriptive Headings. The headings of the sections of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
13. Cooperation. Each party hereto shall take such further action, and
execute such additional documents as may be reasonably requested by any other
party hereto in order to consummate the transactions contemplated by this
Agreement.
14. Binding Effect; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by each of the parties and
their successors. None of the rights or obligations under this Agreement shall
be assigned by MDCP without the consent of BKI or by BKI without the consent of
the MDCP, except that BKI may assign its rights and obligations under this
Agreement to Buckeye Cellulose or any of its wholly owned subsidiaries, if such
entity agrees to be bound by the terms of this Agreement.
5
<PAGE>
15. Counterparts. This Agreement may be executed in any number of
counterparts, and shall be deemed to have been duly executed and delivered by
all parties when each party has executed a counterpart hereof and delivered an
original or facsimile copy thereof to the other party. Each such counterpart
hereof shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal law, and not the law of conflicts, of the State of
Delaware.
17. Remedies. MDCP and BKI agree that in addition to being entitled to
exercise all rights granted by law, including recovery of damages, each party
will be entitled to specific performance of its rights under this Agreement.
Each party agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
* * * * *
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BKI INVESTMENT CORP.
By:___________________________
Robert E. Cannon
Its: President
MADISON DEARBORN CAPITAL PARTNERS, L.P.
By: Madison Dearborn Partners, L.P.
Its: General Partner
By: Madison Dearborn Partners Inc.
Its: General Partner
By:___________________________
Samuel M. Mencoff
Its: Vice President
7
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
Buckeye Florida Corporation Delaware
Buckeye Foley Corporation Delaware
Buckeye Florida, Limited Partnership Delaware
Buckeye Cellulose S.A. Switzerland
Buckeye (Barbados) Ltd. Barbados
Buckeye Cellulose GmbH Germany
BKI Management Company, LP Tennessee
BKI Holding Corporation Delaware
BKI Finance Corporation Tennessee
BKI Asset Management Corporation Delaware
BKI Limited Corporation Delaware
BKI Investment Corp. Delaware
<PAGE>
EXHIBIT 23.1
AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated July 28, 1995, with respect to the combined
consolidated financial statements of Buckeye Cellulose Corporation and
Affiliates and the combined statement of operating income of the Predecessor,
in the Registration Statement (Form S-3) and related Prospectus of Buckeye
Cellulose Corporation for the registration of 3,045,157 shares of its Common
Stock, and to the incorporation by reference therein of our reports dated July
28, 1995 with respect to the consolidated financial statements and schedule of
Buckeye Cellulose Corporation, and dated September 1, 1993 with respect to the
statement of operating income and related schedule of the Memphis Mill
Operations of the Procter & Gamble Cellulose Company included in Buckeye
Cellulose Corporation's Annual Report on Form 10-K for the year ended June 30,
1995, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Memphis, Tennessee
June 3, 1996
<PAGE>
EXHIBIT 23.2
AUDITOR'S CONSENT
I consent to the reference to my firm under the caption "Experts" and to the
use of my report dated April 29, 1996 in the Registration Statement (Form S-3)
and related Prospectus of Buckeye Cellulose Corporation for the registration
of 3,045,157 shares of its common stock.
Dipl.-Ing. Wolf Gadecke
Wirtschaftsprufer
Hamburg, Germany
May 31, 1996
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EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Buckeye Cellulose
Corporation on Form S-3 of our report on Alpha Cellulose Holdings, Inc. dated
February 29, 1996, appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
June 3, 1996
Raleigh, North Carolina
