<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1996
REGISTRATION NO. 333-05135
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
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
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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
<TABLE>
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE* PRICE* FEE
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<S> <C> <C> <C> <C>
% Senior Subordinated Notes
due 2008 $100,000,000 100% $100,000,000 $34,483
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</TABLE>
*Estimated solely for purposes of computing the amount of the registration
fee.
----------------
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 27, 1996
PROSPECTUS
LOGO
$100,000,000
BUCKEYE CELLULOSE CORPORATION
% SENIOR SUBORDINATED NOTES DUE 2008
The % Senior Subordinated Notes due 2008 (the "Notes") of Buckeye Cellulose
Corporation (the "Company") are being offered (the "Offering") by the Company.
The Notes will mature on September 15, 2008. Interest on the Notes will be
payable semiannually on March 15 and September 15 of each year, beginning on
September 15, 1996. The Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after September 15, 2001 at the
redemption prices set forth herein, plus accrued and unpaid interest, if any,
to the date of redemption. See "Description of Notes--Optional Redemption."
Upon a Change of Control (as defined), holders of the Notes may require the
Company to purchase all or a portion of the Notes at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase. See "Description of Notes--Repurchase at the Option of
Holders Upon a Change of Control."
Concurrent with this Offering, the Selling Stockholder (as defined) is offering
2,845,157 shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock") to the public. This Offering is contingent upon the
consummation of such equity offering, the Company Stock Repurchase (as defined)
and the Individuals' Stock Purchase (as defined). See "The Company Stock
Repurchase and Related Transactions."
The Notes will be unsecured senior subordinated obligations of the Company. The
Notes will be subordinated in right of payment to all existing and future
Senior Indebtedness (as defined), including indebtedness under the Bank Credit
Facility (as defined) and the Existing Senior Notes (as defined), pari passu
with the Existing Senior Subordinated Notes (as defined) and with any future
senior subordinated indebtedness and senior to any future junior subordinated
indebtedness of the Company. On a pro forma combined basis, after giving effect
to the Offering, the Company Stock Repurchase and the 1996 Acquisitions (as
defined), Senior Indebtedness at March 31, 1996 would have been $102.4 million
and senior subordinated indebtedness would have been $249.5 million. The Notes
will be structurally subordinated to the indebtedness and other liabilities of
the Company's subsidiaries. On a pro forma combined basis, the total
Indebtedness (as defined) of the Company's subsidiaries was $95.5 million at
March 31, 1996.
The Notes will be represented by a Global Security registered in the name of
the nominee of The Depository Trust Company, which will act as the depository
(the "Depositary"). Beneficial interests in the Global Security will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depositary and its participants. Except as described herein, Notes in
definitive form will not be issued. See "Description of Notes--Book Entry
System."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
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(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per Note................................... % % %
Total...................................... $ $ $
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</TABLE>
(1)Plus accrued interest, if any, from , 1996 to the date of
delivery.
(2)Before deducting expenses payable by the Company estimated to be $1,000,000.
The Notes are offered subject to receipt and acceptance by the Underwriters (as
defined), 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 Notes 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.
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 NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
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 in connection with the Equity Offering (as defined), (ii) all
information in this Prospectus has been adjusted to give effect to the
recapitalization and stock split of the Common Stock (as defined) effected in
connection with the initial public offering of the Common Stock in November
1995, (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) and (iv) all references in this Prospectus to
the "Offering" shall refer to the offering hereby of $100,000,000 principal
amount of % Senior Subordinated Notes due 2008 of the Company.
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.
3
<PAGE>
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 Company's plant
located near Perry, Florida (the "Foley Plant") has an annual capacity of over
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.
4
<PAGE>
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 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 this Offering.
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 and their related trusts 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 the Company Stock Repurchase, the Individuals' Stock Purchase and the
public offering by MDCP of 2,845,157 shares of Common Stock, on terms
satisfactory to MDCP (the "Equity Offering" and, together with the Company
Stock Repurchase and the Individuals' Stock Purchase, the "Stock
Transactions"), is subject,
5
<PAGE>
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
this Offering. This Offering is subject to the concurrent completion of the
Stock Transactions. This Offering and the Equity Offering are referred to
herein collectively as the "Offerings." 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 OFFERINGS
Securities Offered.......... $100.0 million aggregate principal amount of %
Senior Subordinated Notes due 2008.
Maturity Date............... September 15, 2008.
Interest Payment Dates...... March 15 and September 15 of each year,
commencing September 15, 1996.
Optional Redemption......... On or after September 15, 2001, the Notes will be
redeemable, at the Company's option, in whole or
in part, at the redemption prices set forth
herein, together with accrued and unpaid
interest, if any, to the redemption date. See
"Description of the Notes--Optional Redemption."
Optional Redemption in
Event of One or More
Public Equity Offerings.... At any time on or prior to September 15, 1999,
the Company, at its option, may redeem up to
$30.0 million aggregate principal amount of the
Notes from the net proceeds of one or more Public
Equity Offerings, at a redemption price of % of
the principal amount thereof, 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 in aggregate principal amount of the
Notes remains outstanding. See "Description of
the Notes--Optional Redemption."
Sinking Fund................ None.
Change in Control........... Upon a Change in Control, each holder of Notes
will have the right to require the Company to
repurchase, in whole or in part, such holder's
Notes at a cash purchase price equal to 101% of
the principal amount thereof, together with
accrued and unpaid interest, if any, to the
repurchase date. See "Description of the Notes--
Certain Covenants--Purchase of Notes Upon a
Change in Control."
Ranking..................... The Notes will be unsecured senior subordinated
indebtedness of the Company and will be
subordinated in right of payment to all existing
and future Senior Indebtedness of the Company,
including indebtedness under the Bank Credit
Facility and the Existing Senior Notes, and will
rank pari passu in right of payment with the
Existing Senior Subordinated Notes and all other
future senior subordinated indebtedness of the
Company. The Notes will also be effectively
subordinated to all indebtedness of the Company's
subsidiaries, including guarantees by the
Company's subsidiaries of the Company's
obligations under the Bank Credit Facility. As of
March 31, 1996, on a pro forma basis after giving
effect to the Offering, the Company Stock
Repurchase, the Temming Acquisition and the Alpha
Acquisition (such acquisitions being collectively
referred to as the "1996 Acquisitions"), there
would have been outstanding
6
<PAGE>
approximately $102.4 million of Senior
Indebtedness of the Company (which would have
been guaranteed by domestic subsidiaries of the
Company, which guarantees would effectively rank
senior to the Notes) and $249.5 million of senior
subordinated indebtedness of the Company
consisting of the Notes and the Existing Senior
Subordinated Notes. See "Description of the
Notes--Ranking."
Certain Covenants........... The indenture relating to the Notes (the
"Indenture") will contain certain covenants,
including, but not limited to, covenants with
respect to the following matters: (i) limitation
on indebtedness; (ii) limitation on restricted
payments; (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 issuance of guarantees of
subordinated and pari passu indebtedness; (viii)
restriction on transfer of assets; (ix)
limitation on subsidiary capital stock; (x)
limitation on dividends and other payment
restrictions affecting subsidiaries; (xi)
limitation on unrestricted subsidiaries; (xii)
provision of financial statements; and (xiii)
restrictions on consolidations, mergers and sales
of assets. See "Description of the Notes--Certain
Covenants."
Use of Proceeds.............
A portion of the net proceeds from the Offering
will be contributed by the Company to BKI
Investment, its wholly owned subsidiary, which
will use such contributions to consummate the
Company Stock Repurchase. The Company intends to
use the remaining net proceeds to finance a
substantial portion of the Alpha Acquisition or,
pending completion of the Alpha Acquisition or in
the event that the Alpha Acquisition is not
consummated for any reason, to reduce outstanding
borrowings under the Bank Credit Facility, which,
in the case of LIBOR-based borrowings, may occur
on expiration of the related borrowings. See "Use
of Proceeds."
Absence of a Public Market.. There is currently no public market for the
Notes. The Company has been advised by the
Underwriters that they presently intend to make a
market in the Notes after the consummation of the
Offering, although they are not obligated to do
so and may discontinue any market-making
activities with respect to the Notes at any time
without notice. No assurance can be given as to
the liquidity of the trading market for the Notes
or that an active public market for the Notes
will develop. If an active public market for the
Notes does not develop, the market price and
liquidity of the Notes may be adversely affected.
Equity Offering............. Concurrently with this Offering, the Selling
Stockholder is offering 2,845,157 shares of
Common Stock to the public by means of a separate
prospectus. This Offering is contingent upon the
consummation of the Equity Offering and the other
Stock Transactions. The Equity Offering is
contingent on the consummation of the other Stock
Transactions and upon the availability of debt
financing in an amount sufficient to consummate
the Company Stock Repurchase, which debt
financing is anticipated to be provided by this
Offering.
RISK FACTORS
Prospective purchasers of the Notes 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 Notes.
7
<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
item................... 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
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
Ratio of EBITDA to cash
interest expense (i)... 3.44x 4.62x
Ratio of total debt to
EBITDA (j)............. 3.25x N/A
EBITDA (k).............. $ 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 (k).............. 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)
8
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------
PRO
ACTUAL FORMA (H)
-------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................. $101,027 $132,848
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
Acqusitions 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) Cash interest expense is defined as total interest expense less non-cash
items, including amortization of debt discount and deferred financing
costs.
(j) Ratio of total debt to EBITDA is based on estimated indebtedness assuming
consummation of the Company Stock Repurchase and related transactions and
the 1996 Acquisitions on June 30, 1995.
(k) 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.
9
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors in the Notes offered hereby should carefully consider
the following risk factors before making an investment in the Notes.
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 virtually 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."
SIGNIFICANT LEVERAGE
The Company has significant debt service obligations. As of March 31, 1996,
on a pro forma basis after giving effect to the Offering, the Company Stock
Repurchase and 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 the Notes, 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 Notes, thereby reducing the funds available to the
Company for its operations and other purposes;
10
<PAGE>
(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 Indenture 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 1996 Acquisitions," "Capitalization,"
"Unaudited Pro Forma Consolidated Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Description
of Certain Indebtedness" and "Description of the Notes."
The Bank Credit Facility will mature on November 27, 2000. Beginning in
1998, the Bank Credit Facility commitment will be reduced by $3.75 million per
quarter through maturity. The Existing Senior Notes will mature on May 15,
2001 and the Existing Senior Subordinated Notes will mature on December 15,
2005. The Company believes that it will generate sufficient cash flow from
operations to be able to make the scheduled interest and principal payments
and meet scheduled commitment reductions under the Bank Credit Facility and
the scheduled interest payments under the Existing Notes and the Notes;
however, the Company may not generate sufficient cash flow from operations to
make the principal payment due at maturity on the Notes and, depending upon
the principal amount then outstanding, the Existing Notes. Accordingly, the
Company may have to either refinance its obligations with respect to the
Existing Notes and the Notes prior to maturity, sell assets or raise equity
capital to repay the principal amount of the Existing Notes and the Notes. The
Company's ability to make scheduled principal payments, to refinance its
obligations with respect to its indebtedness, to sell assets or to raise
equity capital depends on its financial and operating performance, which, in
turn, is subject to prevailing economic conditions and to financial, business
and other factors beyond its control. There can be no assurance that the
Company's operating results will continue to be sufficient or that future
borrowing facilities will be available for the payment or refinancing of the
Company's indebtedness.
RESTRICTIONS IMPOSED BY BANK CREDIT FACILITY
The Bank Credit Facility contains a number of significant covenants that,
among other things, restrict the ability of the Company to dispose of assets,
incur additional indebtedness and other liabilities, pay dividends,
voluntarily prepay certain indebtedness, enter into sale and leaseback
transactions, create liens, make capital expenditures and make certain
investments or acquisitions, incur contingent obligations and otherwise
restrict corporate activities. In addition, under the Bank Credit Facility,
the Company is required to satisfy specified financial covenants, including
total debt to cash flow, interest coverage, and consolidated net worth tests.
The ability of the Company to comply with such provisions may be affected by
events beyond the Company's control. The breach of any of the covenants could
result in a default under the Bank Credit Facility. In the event of any such
default, depending upon the actions taken by the lenders under the Bank Credit
Facility (the "Banks"), the Company could be prohibited from making any
payments of principal of, premium, if any, or interest on the Notes. In
addition, the Banks could elect to declare all amounts borrowed under the Bank
Credit Facility, together with accrued interest, to be due and payable. These
restrictions, in combination with the Company's leverage, could limit the
Company's ability to respond to changing market and economic conditions and to
provide for capital expenditures. If the Company is unable to generate
sufficient cash flow from operations, it may be required to refinance its
outstanding debt or to obtain additional financing. There can be no assurance
that any such refinancing would be possible or that any additional financing
could be obtained on terms that would be favorable or acceptable to the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Description of
Certain Indebtedness" and "Description of the Notes."
11
<PAGE>
SUBORDINATION
The payment of principal of, premium, if any, and interest on, and any other
amounts owing in respect of, the Notes will be subordinated to the prior
payment in full of existing and future Senior Indebtedness of the Company,
which includes all indebtedness under the Bank Credit Facility and the
Existing Senior Notes. Furthermore, the terms of the Bank Credit Facility, the
Existing Notes Indentures and the Indenture will permit the Company to incur
additional indebtedness, including Senior Indebtedness. Therefore, in the
event of the liquidation, dissolution, reorganization, or any similar
proceeding regarding the Company, the assets of the Company will be available
to pay obligations on the Notes only after Senior Indebtedness has been paid
in full and there may not be sufficient assets to pay amounts due on all or
any of the Notes. In addition, the Company may not pay principal of, premium,
if any, interest on or any other amounts owing in respect of the Notes, make
any deposit pursuant to defeasance provisions or purchase, redeem or otherwise
retire the Notes, (i) if any Designated Senior Indebtedness (as defined) is
not paid when due, or (ii) any other default on Designated Senior Indebtedness
occurs and the maturity of such indebtedness is accelerated in accordance with
its terms unless, in either case, such default has been cured or waived, and
with respect to clause (ii) above, such acceleration has been rescinded or
such indebtedness has been repaid in full. In addition, under certain
circumstances, if any non-payment default exists with respect to Designated
Senior Indebtedness, the Company may not make any payment on the Notes for a
specified period of time, unless such default is cured or waived, any
acceleration of such indebtedness has been rescinded or such indebtedness has
been repaid in full. See "Description of Certain Indebtedness--Bank Credit
Facility" and "Description of the Notes--Ranking."
The Notes will also be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. On the date of the Indenture, the
Notes will not be guaranteed by any of the Company's subsidiaries, and will
receive the benefit of subordinated guarantees from any such subsidiaries in
the future only in certain limited circumstances. See "Description of the
Notes--Certain Covenants--Limitations on Issuance of Guarantees of
Subordinated and Pari Passu Indebtedness." In addition, the Company's
obligations under the Bank Credit Facility are guaranteed on a senior basis by
all the Company's domestic subsidiaries. Furthermore, under certain
circumstances, the Company is required to pledge up to 65% of the stock of
certain foreign subsidiaries acquired by the Company to the lenders under the
Bank Credit Facility.
The Notes are obligations of the Company. As of March 31, 1996, on a pro
forma basis after giving effect to the Offering, the Company Stock Repurchase
and the 1996 Acquisitions, $369.1 million of the tangible assets of the
Company were held by its subsidiaries, and for the year ended June 30, 1995
and the nine months ended March 31, 1996 on a pro forma basis after giving
effect to the Offering, the Company Stock Repurchase, the 1996 Acquisitions
and the 1995 Business Combination Transactions, $70.5 million and $75.5
million, respectively, of the Company's operating income was derived from
operations of the Company's subsidiaries. Therefore, the Company's ability to
make interest and principal payments when due to holders of the Notes and to
the holders of the Company's other indebtedness will be dependent, to some
extent, upon the receipt of dividends or other distributions from its
subsidiaries. The Company's subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to make payments on
the Notes or to make any funds available therefor, whether by dividends, loans
or other payments.
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
12
<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 $43.0
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 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
13
<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."
FRAUDULENT CONVEYANCE; RISK OF SUBORDINATION OR INVALIDATION OF THE NOTES
The Company has incurred substantial indebtedness and is incurring
additional indebtedness pursuant to the Offering. The Offering and certain
related transactions may be subject to review under relevant federal and state
fraudulent conveyance laws if a bankruptcy, reorganization or rehabilitation
case or a lawsuit (including in circumstances where bankruptcy is not
involved) were ever commenced by or on behalf of unpaid creditors of the
Company at some future date. Under applicable provisions of the federal
bankruptcy code or comparable provisions of state fraudulent transfer or
conveyance laws, if, in a bankruptcy, reorganization, or rehabilitation case,
or similar proceeding or a lawsuit by or on behalf of unpaid creditors of the
Company, a court were to find under relevant federal and state fraudulent
conveyance statutes that the Company, at the time it issued the Notes (a)
incurred such indebtedness with intent to hinder, delay or defraud current or
future creditors, or (b)(i) received less than reasonably equivalent value or
fair consideration for incurring such indebtedness in connection with the
Offering and (ii)(A) was insolvent at the time of the incurrence, (B) was
rendered insolvent by reason of the Offering, (C) was engaged or was about to
engage in a business or transaction for which the assets remaining with the
Company constituted unreasonably small capital to carry on its business, (D)
intended to incur, or believed that it would incur, debts beyond its ability
to pay such debts as they mature (as all such foregoing terms are defined in
or interpreted under the fraudulent conveyance statutes) or (E) was a
defendant in an action for money damages or had a judgment for money damages
docketed against it (if, in either case, after final judgment, the judgment is
unsatisfied), then, in each such case, a court of competent jurisdiction could
avoid, in whole or in part, the Notes or, in the alternative, subordinate the
Notes to existing and future indebtedness of the Company and take other action
detrimental to the holders of the Notes, including, under certain
circumstances, invalidating the Notes and/or ordering the return of payments
previously made thereunder.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in such proceeding. Generally, however, the Company would
be considered insolvent if the sum of its debts, including contingent
liabilities, was greater than all of its assets at fair valuation or if the
present fair saleable value of its assets on a going concern basis was less
than the amount that would be required to pay the probable liability on its
total existing debts, including contingent liabilities, as they become
absolute and matured.
ABSENCE OF PUBLIC MARKET FOR THE NOTES; LACK OF LIQUIDITY
There is no public market for the Notes and the Company does not intend to
apply for listing of the Notes on any national securities exchange. The
Company has been advised by the Underwriters that they presently intend to
make a market in the Notes after the consummation of the Offering, although
they are not obligated to do so and may discontinue any market-making
activities with respect to the Notes at any time without notice. Accordingly,
no assurance can be given as to the liquidity of the trading market for the
Notes or that an active public market for the Notes will develop. If an active
public market for the Notes does not develop, the market price and liquidity
of the Notes may be adversely affected.
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.
14
<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 the 1995 Business
Combination 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 38108. 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 the Company, 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 Acquisition 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
15
<PAGE>
intends to finance a substantial portion of the Alpha Acquisition with a
portion of the proceeds of the 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 this 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 and their related trusts 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 anticipated to be provided by this Offering. This Offering is
subject to the concurrent completion of the Stock Transactions. Upon
completion of the Stock Transactions, the Company will have approximately
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 EQUITY OFFERING
Concurrently with the closing of the sale of the Notes, the Selling
Stockholder will sell 2,845,157 shares of Common Stock in the Equity Offering.
This Offering is contingent upon the consummation of the Stock Transactions.
The Equity Offering is contingent upon the consummation of the other Stock
Transactions and the availability of debt financing in an amount sufficient to
consummate the Company Stock Repurchase, which is expected to be provided by
the proceeds of this Offering.
16
<PAGE>
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 their respective equity
ownership in the Company. See "Principal Stockholders." Concurrently with the
Stock Transactions and the Offering, the Bank Credit Facility will be amended
to permit the transactions contemplated by the Company Stock Repurchase and
the Offering. As a result of the Company Stock Repurchase and the Offering,
the percentage of the Company's total capitalization represented by
indebtedness will increase. See "Capitalization," "Unaudited Pro Forma
Consolidated Financial Data" and "Risk Factors--Significant Leverage."
SOURCES AND USES OF FUNDS
The net proceeds to the Company from this Offering are estimated to be
$96.75 million, after payment of estimated fees and expenses (including
underwriting discount). An aggregate of $50.0 million of such proceeds will be
contributed by the Company to BKI Investment to fund the Company Stock
Repurchase. The Company intends to use the remaining net proceeds to finance a
substantial portion of the Alpha Acquisition or, pending completion of the
Alpha Acquisition or in the event that the Alpha Acquisition is not
consummated for any reason, to reduce outstanding borrowings under the Bank
Credit Facility, which, in the case of LIBOR-based borrowings, may occur on
expiration of the related borrowings. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholder in the
Equity Offering. See "Use of Proceeds" and "The 1996 Acquisitions--Alpha
Acquisition."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes (after deducting
the underwriters' discount and fees and expenses) are estimated to be
approximately $96.75 million. The Company will contribute an aggregate of
$50.0 million of such net proceeds to BKI Investment, its wholly owned
subsidiary, which will use such contributions to consummate the Company Stock
Repurchase. The Company intends to use the remaining net proceeds of
approximately $46.75 million to finance a substantial portion of the Alpha
Acquisition or, pending completion of the Alpha Acquisition or in the event
that the Alpha Acquisition is not consummated for any reason, to reduce
outstanding borrowings under the Bank Credit Facility, which, in the case of
LIBOR-based borrowings, may occur on expiration of the related borrowings.
Pending such repayments, which are expected to be made by November, 1996, a
portion of the net proceeds may be invested in high-quality, short-term
investments.
The Bank Credit Facility matures on November 27, 2000. Borrowings under the
Bank Credit Facility bear interest at rates based on (i) LIBOR plus a margin
ranging from 0.5% per annum to 1.0% per annum, depending on the Company's debt
coverage ratio (in the case of revolving loan borrowings), (ii) the greater of
the prime rate announced by Fleet Bank of Massachusetts, N.A. or the federal
funds rate plus 0.5% per annum (the "Base Rate") (in the case of money market
line borrowings) and (iii) the Base Rate less 0.5% per annum (in the case of
swingline loans).
17
<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, this 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 TEMMING PRO FORMA
ACQUISITION AS ADJUSTED
----------- -----------
(DOLLARS 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
Notes offered hereby................................. -- 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; and 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 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 Equity Offering.
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial statements give
effect to the Company Stock Repurchase, the 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 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 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 $680,000 in estimated secondary offering costs to be incurred by the
Company in connection with the Equity 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 OFFERING, THE 1995 BUSINESS COMBINATION TRANSACTIONS, 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.
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------------------------- ------------------------------------------------
BUCKEYE
CELLULOSE ALPHA COMPANY STOCK
CORPORATION TEMMING CELLULOSE TEMMING REPURCHASE ALPHA PRO FORMA
AND AFFILIATES BUSINESS (A) HOLDINGS, INC. ACQUISITION (B) AND 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
and 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 4,077 (12,205) -- -- 36,052
Current portion
of long-term
debt and notes
payable........ -- 4,513 8,962 (4,513) -- (8,962) --
-------- ------- ------- -------- ------- ------- --------
Total current
liabilities..... 49,820 19,216 14,199 (18,756) -- (8,962) 55,517
Long-term debt:
Existing Notes.. 156,364 -- -- -- -- -- 156,364
Bank Credit
Facility....... 41,000 -- -- 28,512 (45,750) 71,722 95,484
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 41 226 (41) -- -- 4,547
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.
20
<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
BUCKEYE BUSINESS COMPANY
CELLULOSE COMBINATION STOCK
CORPORATION TRANSACTIONS REPURCHASE
AND TEMMING ALPHA CELLULOSE AND TEMMING AND ALPHA PRO FORMA
AFFILIATES BUSINESS(E) HOLDINGS, 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.
21
<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 TRANSACTIONS REPURCHASE
CORPORATION TEMMING ALPHA CELLULOSE AND TEMMING AND 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.
22
<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 Notes. Underwriting fees and
other expenses related to the Notes are deferred and amortized over the
term of the Notes. The proceeds of the 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 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.
23
<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 Notes, and the increase in interest expense on
borrowings under the 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.
24
<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,
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
(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
(g).................... 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)
25
<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.
26
<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 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.
27
<PAGE>
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
ENDED
JULY 1, 1992 MARCH 16, YEAR ENDED MARCH
THROUGH THROUGH JUNE 30, 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
primarily due to softer market demand. Although unit sales volume was below
the prior year, it has been stable throughout the current fiscal year.
28
<PAGE>
Gross Margin. Gross margin for the nine month period ending 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 execution of the Bank Credit Facility,
lower interest rates.
Minority Interest. Minority interest was eliminated as a result of the
purchase of Procter & Gamble 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 stockholders 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.
29
<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 Proctor & Gamble
Cellulose in connection
30
<PAGE>
with 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 a 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 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 this 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 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 $43.0 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.
31
<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
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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. 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
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to increase the portion of its business in the most technically demanding (and
therefore least cyclical) 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.
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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 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.
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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.
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
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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 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
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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 in 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 Timber and
Land Company, L.P., a third party unrelated to either Procter & Gamble or the
Company.
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. The
Memphis Plant is strategically located in the Mississippi Valley, one of the
largest cotton linter producing regions in the world. 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.
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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.
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 25 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
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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 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 $43.0 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 $57.0 million in
environmental capital expenditure costs through fiscal 2000, which
expenditures include the costs to implement its river reclassification plan
(the $43.0 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
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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.
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 for Foley-related
lawsuits 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.
41
<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 65 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.
42
<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 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 as Chief Financial Officer of Hallmark Cards, Inc., 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 H&R Block Inc., CompuServe, Inc., Dimon International 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.
43
<PAGE>
PRINCIPAL 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) SHARES BEING AFTER STOCK TRANSACTIONS(B)
----------------------------- OFFERED IN -----------------------------
NUMBER OF PERCENT OF THE EQUITY NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL OFFERING 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)..... 3,974,766 18.6 -- 4,990,995 26.1
David B. Ferraro(f)..... 1,100,887 5.1 -- 1,236,481 6.5
Herman P. van Eck(g).... 256,864 1.2 -- 258,864 1.4
George B. Ellis(h)...... 321,513 1.5 -- 371,513 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)...... 12,976,443 60.6 2,845,157 7,689,953 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. Each of Messrs. Mencoff and Huscher expressly
disclaims beneficial ownership of such shares of Common Stock. 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. 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, 1,873,447 shares held by the
Kathryn Gracey Cannon Grantor Retained Annuity Trust, Robert Howard
Cannon, Trustee and 3,995 shares held in the Company's 401(k) and
retirement plans. 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
Equity Offering.
(f) Includes 442,085 shares held by the David B. Ferraro Grantor Retained
Annuity Trust, Barbara A. Ferraro, Trustee and 3,572 shares held in the
Company's 401(k) and retirement plans. 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 Equity 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 Equity Offering.
(h) Includes 1,055 shares held in the Company's 401(k) and retirement plans.
Mr. Ellis will purchase 50,000 shares of Common Stock in the Individuals'
Stock Purchase and may purchase additional shares in the Equity 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 7.6% of the Common
Stock after giving effect to the Individuals' Stock Purchase.
44
<PAGE>
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 Related Transactions."
45
<PAGE>
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. 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 January 1, 1998, the Bank Credit Facility
commitment will be reduced by $3.75 million per quarter through maturity (or,
if the Alpha Acquisition is consummated, by $5.0 million per quarter until
January 2000, and by $6.25 million per quarter thereafter 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 will range 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 will be 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, of at least $70 million plus 50% of consolidated net income for
each quarter after September 30, 1996, maximum ratio of consolidated total
debt to consolidated EBITDA of 300%, minimum consolidated EBITDA equal to or
greater than 325% of consolidated interest expense 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.
46
<PAGE>
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 will 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 indebtedness of the Company, including the 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)
47
<PAGE>
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.
48
<PAGE>
DESCRIPTION OF THE NOTES
The Notes offered hereby will be issued under an Indenture to be dated as of
, 1996 (the "Indenture") between the Company and Union Planters
National Bank, as trustee (the "Trustee"). References to "(Section )" mean
the applicable Section of the Indenture.
A copy of the form of Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part and will be made available to
prospective purchasers of the Notes upon request. The Indenture is subject to
and governed by the Trust Indenture Act. The following summaries of the
material provisions of the Indenture do not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a
part of the Indenture by the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, see "--Certain Definitions."
GENERAL
The Notes will mature on September 15, 2008, will be limited to $100,000,000
aggregate principal amount, and will be unsecured senior subordinated
obligations of the Company. Each Note will bear interest at the rate set forth
on the cover page hereof from , 1996 or from the most recent
interest payment date to which interest has been paid, payable semiannually on
March 15 and September 15 in each year, commencing September 15, 1996, to the
Person in whose name the Note (or any predecessor Note) is registered at the
close of business on the March 1 or September 1 next preceding such interest
payment date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. (Sections 202, 301, 307 and 310)
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency
of the Company in The City of New York maintained for such purposes (which
initially will be the corporate trust office of the Trustee); provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the Person entitled thereto as shown on the security register.
(Sections 301, 305 and 1002) The Notes will be issued only in fully registered
form without coupons, in denominations of $1,000 and any integral multiple
thereof. (Section 302) No service charge will be made for any registration of
transfer, exchange or redemption of Notes, except in certain circumstances for
any tax or other governmental charge that may be imposed in connection
therewith. (Section 305)
OPTIONAL REDEMPTION
(a) The 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 the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning September 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001.......................... %
2002.......................... %
2003.......................... %
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due
on an interest payment date).
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(b) In addition, up to $30 million aggregate principal amount of the Notes
will be redeemable at any time on or prior to September 15, 1999 at the option
of the Company within 60 days after the consummation of one or more Public
Equity Offerings by the Company from the net proceeds to the Company of such
Public Equity Offerings, upon not less than 20 nor more than 60 days' prior
notice, in amounts of $1,000 or an integral multiple thereof, at a redemption
price equal to % of the principal amount, together with accrued and unpaid
interest, if any, to the redemption date (subject to the rights of holders of
record on applicable record dates to receive interest due on an interest
payment date); provided that, after giving effect to any such redemption, at
least $70 million aggregate principal amount of the Notes remains outstanding.
(c) If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed pro rata, by lot or by any
other method the Trustee shall deem fair and reasonable. (Sections 203, 1101,
1105 and 1107)
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
RANKING
The payment of the principal of, premium, if any, and interest on, the Notes
will be subordinated, as set forth in the Indenture, in right of payment to
the prior payment in full of all Senior Indebtedness (including the
Indebtedness under the Bank Credit Facility and the Existing Senior Notes).
The Notes will be senior subordinated indebtedness of the Company ranking pari
passu with the Existing Senior Subordinated Notes and all other existing and
future senior subordinated indebtedness of the Company and senior to all
existing and future Subordinated Indebtedness of the Company. The Notes will
also be effectively subordinated to all indebtedness of the Company's
Subsidiaries. (Sections 1201 and 1202)
Upon the occurrence of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period and after the receipt by the
Trustee from a representative of holders of such Designated Senior
Indebtedness (the "Senior Representative") of written notice of such default,
no payment (other than payments previously made pursuant to the provisions
described under "--Defeasance or Covenant Defeasance of Indenture") or
distribution of any assets of the Company of any kind or character (excluding
certain permitted equity interests or subordinated securities) may be made on
account of the principal of, premium, if any, or interest on the Notes or on
account of the purchase, redemption, defeasance or other acquisition of, or in
respect of, the Notes, unless and until such default shall have been cured or
waived or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full after which the Company shall
resume making any and all required payments in respect of the Notes, including
any missed payments.
Upon the occurrence and during the continuance of any non-payment default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may then be accelerated (a "Non-payment Default") and after
the receipt by the Trustee and the Company from a Senior Representative of
written notice of such Non-Payment Default, no payment (other than payments
previously made pursuant to the provisions described under "--Defeasance or
Covenant Defeasance of Indenture") or distribution of any assets of the
Company of any kind or character (excluding certain permitted equity interests
or subordinated securities) may be made on account of the principal of,
premium, if any, or interest on the Notes or on account of the purchase,
redemption, defeasance or other acquisition of, or in respect of, the Notes
for the period specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of the
Non-payment Default by the Trustee from a Senior Representative and shall end
on the earliest of (i) the 179th day after such commencement, (ii) the date on
which such Non-payment Default (and all Non-payment Defaults as to which
50
<PAGE>
notice is given after such Payment Blockage Period is initiated) is cured,
waived or ceases to exist or on which such Designated Senior Indebtedness is
discharged or paid in full or (iii) the date on which such Payment Blockage
Period (and all Non-payment Defaults as to which notice is given after such
Payment Blockage Period is initiated) shall have been terminated by written
notice to the Company or the Trustee from the Senior Representative initiating
such Payment Blockage Period, after which, in the case of each of clauses (i),
(ii) and (iii), the Company will promptly resume making any and all required
payments in respect of the Notes, including any missed payments. In no event
will a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Company or the Trustee of the notice initiating such Payment
Blockage Period (such 179-day period referred to as the "Initial Period"). Any
number of notices of Non-payment Defaults may be given during the Initial
Period; provided that during any period of 365 consecutive days only one
Payment Blockage Period, during which payment of principal of, premium, if
any, or interest on the Notes may not be made, may commence and the duration
of such period may not exceed 179 days. No Non-payment Default with respect to
any Designated Senior Indebtedness that existed or was continuing on the date
of the commencement of any Payment Blockage Period will be, or can be, made
the basis for the commencement of a second Payment Blockage Period unless such
default has been cured or waived for a period of not less than 90 consecutive
days. (Section 1203)
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "--Events of Default."
The Indenture will provide that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company or
its assets, or any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary, or whether or not involving
insolvency or bankruptcy, or any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of the Company, all Senior
Indebtedness must be paid in full before any payment or distribution
(excluding distributions of certain permitted equity interests or subordinated
securities) is made on account of the principal of, premium, if any, or
interest on the Notes or on account of the purchase, redemption, defeasance or
other acquisition of, or in respect of, the Notes (other than payments
previously made pursuant to the provisions described under "--Defeasance or
Covenant Defeasance of Indenture").
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and funds which would be
otherwise payable to the holders of the Notes will be paid to the holders of
the Senior Indebtedness to the extent necessary to pay the Senior Indebtedness
in full, such that the Company may be unable to meet its obligations with
respect to the Notes.
"Senior Indebtedness" under the Indenture means the principal of, premium,
if any, and interest (including interest accruing after the filing of a
petition initiating any proceeding under any state, federal or foreign
bankruptcy law whether or not allowable as a claim in such proceeding) on any
Indebtedness of the Company (other than as otherwise provided in this
definition), whether outstanding on the date of the Indenture or thereafter
created, incurred or assumed, and whether at any time owing, actually or
contingent, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Notes. Without limiting the generality of the foregoing,
"Senior Indebtedness" shall include the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on all monetary
obligations of every kind and nature of the Company from time to time owed to
the lenders under the Bank Credit Facility; provided, however, that any
Indebtedness under any refinancing, refunding, or replacement of the Bank
Credit Facility shall not constitute Senior Indebtedness to the extent that
the
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Indebtedness thereunder is by its express terms stated to be subordinate in
right of payment to any other Indebtedness of the Company. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include (i) Indebtedness evidenced
by the Notes, (ii) Indebtedness evidenced by the Existing Senior Subordinated
Notes, (iii) Indebtedness that is by its terms subordinate or junior in right
of payment to any Indebtedness of the Company, (iv) Indebtedness which, when
incurred and without respect to any election under Section 1111(b) of Title 11
United States Code, is without recourse to the Company, (v) Indebtedness which
is represented by Redeemable Capital Stock, (vi) any liability for foreign,
federal, state, local or other taxes owed or owing by the Company to the
extent such liability constitutes Indebtedness, (vii) Indebtedness of the
Company to a Subsidiary of the Company or any other Affiliate of the Company
or any of such Affiliate's Subsidiaries and (viii) that portion of any
Indebtedness which at the time of issuance is issued in violation of the
Indenture.
"Designated Senior Indebtedness" under the Indenture means (i) all Senior
Indebtedness under the Bank Credit Facility and (ii) any other Senior
Indebtedness which is incurred pursuant to an agreement (or series of related
agreements) providing for Indebtedness of at least $25 million and is
specifically designated in the instrument evidencing such Senior Indebtedness
or the agreement under which such Senior Indebtedness arises as "Designated
Senior Indebtedness" by the Company.
As of March 31, 1996, on a pro forma basis after giving effect to the
Offering, the Company Stock Repurchase and the 1996 Acquisitions, there would
have been outstanding approximately $102.4 million of Senior Indebtedness of
the Company consisting of Indebtedness under the Bank Credit Facility and the
Existing Senior Notes, and $249.5 million of senior subordinated indebtedness
of the Company consisting of the Existing Senior Subordinated Notes and the
Notes, and Subsidiaries of the Company would have had $95.5 million in
Indebtedness (consisting of, among other things, guarantees of the Company's
Indebtedness under the Bank Credit Facility given by the Company's domestic
Subsidiaries).
The Indenture will limit, but not prohibit, the incurrence by the Company of
additional Indebtedness and the Indenture will prohibit the incurrence by the
Company of Indebtedness that is subordinated by its express terms in right of
payment to any Senior Indebtedness of the Company and senior in right of
payment to the Notes.
See "Risk Factors--Significant Leverage", "Risk Factors--Subordination" and
"Capitalization."
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
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, 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 1008)
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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 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 the provisions described under "--Limitation on
Indebtedness"; 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) $25 million;
(B) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on July
1, 1996 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, 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;
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(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
converted 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.
(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 to Stated Maturity greater than the
remaining Average Life to Stated Maturity 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 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 in Control (as defined
below) pursuant to a provision similar to "--Purchase of Notes upon Change
in
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Control"; provided that prior to or simultaneously with such repurchase,
the Company has made the Change in Control Offer as provided in such
covenant and has repurchased all Notes validly tendered for payment in
connection with such Change in 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 "--Limitation on Sale of Assets"; provided that prior to such repurchase
the Company has made an Offer to purchase the Notes as provided in such
covenant and has repurchased all Notes validly tendered for payment in
connection with such 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 $2 million plus the aggregate amount by
which repurchases in prior years was less than $2 million. (Section 1009)
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 or director of
the Company or any of its Subsidiaries, including under any stock option or
stock incentive plans). (Section 1010)
Limitation on Liens. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur or affirm any Lien of
any kind (other than Permitted Liens) securing any Pari Passu Indebtedness or
Subordinated Indebtedness (including any assumption, guarantee or other
liability with respect thereto by any Subsidiary of the Company) upon any
property or assets (including any intercompany notes) of the Company or any of
its Subsidiaries owned on the date of the Indenture or acquired after the date
of the Indenture, or any income or profits therefrom, unless the Notes are
directly secured equally and ratably with (or, in the case of Subordinated
Indebtedness, prior or senior thereto, with the same relative priority as the
Notes shall have with respect to such Subordinated Indebtedness) the
obligation or liability secured by such Lien, and except for any Lien securing
Acquired Indebtedness created prior to (and not created in connection with, or
in contemplation of) the incurrence of such Pari Passu Indebtedness or
Subordinated Indebtedness by the Company or any of its Subsidiaries which
Indebtedness is permitted under the provisions of "--Limitation on
Indebtedness"; provided that any such Lien extends only to the assets that
were subject to such Lien securing such Acquired Indebtedness prior to the
related acquisition by the Company or its Subsidiaries. (Section 1011)
Limitation on Sale of Assets. (a) The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, consummate an Asset Sale
unless (i) at least 75% of the consideration from such Asset
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<PAGE>
Sale is received in cash and (ii) the Company or such Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets subject to such Asset Sale (as determined by the board of
directors of the Company and evidenced in a board resolution); provided that
the amount of any Senior Indebtedness of the Company that is assumed by the
transferee of any asset in connection with any Asset Sale shall be deemed to
be cash for all purposes of this clause (a).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness then
outstanding as required by the terms thereof, or the Company determines not to
apply such Net Cash Proceeds to the permanent prepayment of such Senior
Indebtedness, or if no such Senior Indebtedness is then outstanding, then the
Company or any of its Subsidiaries may, within 18 months of the Asset Sale,
invest (or enter into a legally binding commitment to invest) the Net Cash
Proceeds in properties and other assets that (as determined by the board of
directors of the Company) replace the properties and assets that were the
subject of the Asset Sale or in properties and other assets that will be used
in the businesses of the Company or its Subsidiaries existing on the date of
the Indenture or in businesses reasonably related thereto. If any such legally
binding commitment to invest such Net Cash Proceeds is terminated, then the
Company may, within 90 days of such termination or within 18 months of such
Asset Sale, whichever is later, invest such Net Cash Proceeds as provided
above. The amount of such Net Cash Proceeds not used or invested as set forth
in this paragraph constitutes "Excess Proceeds."
(c) The Indenture will provide that, when the aggregate amount of Excess
Proceeds exceeds $15 million, the Company will apply the Excess Proceeds to
the repayment of the Notes and any other Pari Passu Indebtedness outstanding
with similar provisions requiring the Company to make an offer to purchase
such Indebtedness with the proceeds from any Asset Sale as follows: (A) the
Company will make an offer to purchase (an "Offer") from all holders of the
Notes in accordance with the procedures set forth in the Indenture in the
maximum principal amount (expressed as a multiple of $1,000) of Notes that may
be purchased out of an amount (the "Note Amount") equal to the product of such
Excess Proceeds multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Notes, and the denominator of which is the
sum of the outstanding principal amount of the Notes and such Pari Passu
Indebtedness (subject to proration in the event such amount is less than the
aggregate Offered Price (as defined herein) of all Notes tendered) and (B) to
the extent required by such Pari Passu Indebtedness to reduce permanently the
principal amount of such Pari Passu Indebtedness, the Company will make an
offer to purchase or otherwise repurchase or redeem Pari Passu Indebtedness (a
"Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the
excess of the Excess Proceeds over the Note Amount; provided that in no event
will the Company be required to make a Pari Passu Offer in a Pari Passu Debt
Amount exceeding the principal amount of such Pari Passu Indebtedness plus the
amount of any premium required to be paid to repurchase such Pari Passu
Indebtedness. The offer price for the Notes will be payable in cash in an
amount equal to 100% of the principal amount of the Notes plus accrued and
unpaid interest, if any, to the date (the "Offer Date") such Offer is
consummated (the "Offered Price"), in accordance with the procedures set forth
in the Indenture. To the extent that the aggregate Offered Price of the Notes
tendered pursuant to the Offer is less than the Note Amount relating thereto
or the aggregate amount of Pari Passu Indebtedness that is purchased in a Pari
Passu Offer is less than the Pari Passu Debt Amount, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and Pari Passu Indebtedness surrendered by holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon the completion of the purchase
of all the Notes tendered pursuant to an Offer and the completion of a Pari
Passu Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
(d) The Indenture will provide that, when the aggregate amount of Excess
Proceeds exceeds $15 million, such Excess Proceeds will, prior to any purchase
of Notes described in paragraph (c) above, be set aside by the Company in a
separate account pending (i) deposit with the depository or a paying agent of
the amount required to purchase the Notes tendered in an Offer or Pari Passu
Indebtedness tendered in a Pari Passu Offer, (ii) delivery by the Company of
the Offered Price to the holders of the Notes tendered in an Offer or Pari
Passu Indebtedness tendered in a Pari Passu Offer and (iii) application, as
set forth above, of Excess Proceeds in the business of the
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Company and its Subsidiaries for general corporate purposes. Such Excess
Proceeds may be invested in Cash Equivalents, provided that the maturity date
of any such investment made after the amount of Excess Proceeds exceeds $15
million shall not be later than the Offer Date. The Company shall be entitled
to any interest or dividends accrued, earned or paid on such Cash Equivalents;
provided that the Company shall not withdraw such interest from the separate
account if an Event of Default has occurred and is continuing.
(e) The Indenture will provide that, if the Company becomes obligated to
make an Offer pursuant to clause (c) above, the Notes and the Pari Passu
Indebtedness shall be purchased by the Company, at the option of the holders
thereof, in whole or in part in integral multiples of $1,000, on a date that
is not earlier than 45 days and not later than 60 days from the date the
notice of the Offer is given to holders, or such later date as may be
necessary for the Company to comply with the requirements under the Exchange
Act.
(f) The Indenture will provide that the Company will comply with the
applicable tender offer rules, including Rule 14e-1 under the Exchange Act,
and any other applicable securities laws or regulations in connection with an
Offer.
(g) The Indenture will provide that the Company will not, and will not
permit any of its Subsidiaries to, create or permit to exist or become
effective any restriction (other than restrictions existing under (A) Pari
Passu Indebtedness or Subordinated Indebtedness as in effect on the date of
the Indenture and listed on schedules thereto as such Indebtedness may be
refinanced from time to time or (B) any Senior Indebtedness existing on the
date of the Indenture or thereafter; provided that such restrictions are no
less favorable to the holders of Notes than those existing on the date of the
Indenture) that would materially impair the ability of the Company to make an
Offer to purchase the Notes or, if such Offer is made, to pay for the Notes
tendered for purchase. (Section 1012)
Limitation on Senior Subordinated Indebtedness. The Company will not,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
in any manner become directly or indirectly liable for or with respect to or
otherwise permit to exist any Indebtedness that is subordinate by its express
terms in right of payment to any Indebtedness of the Company, unless such
Indebtedness is also pari passu with the Notes or subordinate in right of
payment to the Notes at least to the same extent as the Notes are subordinate
in right of payment to Senior Indebtedness as set forth in the Indenture.
(Section 1013)
Limitation on Issuances of Guarantees of Subordinated and Pari Passu
Indebtedness. (a) The Company will not permit any of its Subsidiaries,
directly or indirectly, to guarantee, assume or in any other manner become
liable with respect to any Subordinated Indebtedness and Pari Passu
Indebtedness of the Company unless such Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Guarantee
of the Notes, on the same terms as the guarantee of such Indebtedness except
that (A) if any such guarantee, assumption or liability is subordinated to a
guarantee of Senior Indebtedness, the Guarantee under the supplemental
indenture shall be subordinated to such guarantee of Senior Indebtedness to
the same extent as the Notes are subordinated to Senior Indebtedness under the
Indenture and (B) if such Indebtedness constitutes Subordinated Indebtedness
any such guarantee, assumption or other liability of such Subsidiary with
respect to such Subordinated Indebtedness shall be subordinated to such
Subsidiary's Guarantee of the Notes at least to the same extent as such
Subordinated Indebtedness is subordinated to the Notes.
(b) Notwithstanding the foregoing, any Guarantee by a Subsidiary of the
Company of the Notes shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's Capital Stock in, or all or substantially all of the assets of, such
Subsidiary; provided that such transaction is in compliance with the terms of
the Indenture and such Subsidiary is released from its guarantees of all other
Subordinated Indebtedness and Pari Passu Indebtedness of the Company. (Section
1014)
Restriction on Transfer of Assets. The Company will not sell, convey,
transfer or otherwise dispose of its assets or property to any Subsidiary of
the Company, except for sales, conveyances, transfers or other
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dispositions (a) made in the ordinary course of business or (b) to any
Subsidiary of the Company if such Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Guarantee
by such Subsidiary of the Notes on a senior subordinated basis to the same
extent as the Notes are subordinated to Senior Indebtedness. (Section 1015)
Purchase of Notes Upon a Change in Control. If a Change in Control shall
occur at any time, then each holder of Notes shall have the right to require
that the Company purchase such holder's Notes in whole or in
part in integral multiples of $1,000, at a purchase price (the "Change in
Control Purchase Price") in cash in an amount equal to 101% of the principal
amount of such Notes, plus accrued and unpaid interest, if any, to the date of
purchase (the "Change in Control Purchase Date"), pursuant to the offer
described below (the "Change in Control Offer") and in accordance with the
other procedures set forth in the Indenture.
Within 30 days following any Change in Control, the Company shall notify the
Trustee thereof and give written notice of such Change in Control to each
holder of Notes, by first-class mail, postage prepaid, at his address
appearing in the security register, stating, among other things: the Change in
Control Purchase Price and the Change in Control Purchase Date which shall be
fixed by the Company and shall be a business day no earlier than 30 days nor
later than 60 days from the date such notice is mailed, or such later date as
is necessary to comply with requirements under the Exchange Act; that any Note
not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the purchase price, any Notes accepted for payment
pursuant to the Change in Control Offer shall cease to accrue interest after
the Change in Control Purchase Date; and certain other procedures that a
holder of Notes must follow to accept a Change in Control Offer or to withdraw
such acceptance.
If a Change in Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change in Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change in Control Offer. See "--Ranking." The
failure of the Company to make or consummate the Change in Control Offer or
pay the Change in Control Purchase Price when due will give the Trustee and
the holders of the Notes the rights described under "Events of Default."
The term "all or substantially all" as used in the definition of "Change in
Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the Notes elected to exercise their
rights under the Indenture and the Company elected to contest such election,
there could be no assurance as to how a court interpreting New York law would
interpret the phrase.
The existence of a holder's right to require the Company to repurchase such
holder's Notes upon a Change in Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change in Control.
In addition to the obligations of the Company under the Indenture with
respect to the Notes in the event of a "Change in Control," the Company will
be obligated under the Existing Notes Indentures to purchase the Existing
Notes upon a "Change of Control" as defined in such indentures. In addition,
the Bank Credit Facility contains an event of default upon a "Change in
Control" as defined therein which obligates the Company to repay amounts
outstanding under the Bank Credit Facility upon an acceleration of the
indebtedness issued thereunder. Under the Bank Credit Facility, the Company
may be restricted from repurchasing the Notes or the Existing Notes upon a
Change in Control. See "Description of Other Indebtedness."
The provisions of the Indenture will not afford holders of Notes the right
to require the Company to repurchase the Notes in the event of a highly
leveraged transaction or certain transactions with the Company's management or
its Affiliates, including a reorganization, restructuring, merger or similar
transaction (including, in certain circumstances, an acquisition of the
Company by management or its Affiliates) involving the Company that may
adversely affect holders of the Notes, if such transaction is not a
transaction defined as a Change in
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Control. A transaction involving the Company's management, or a transaction
involving a recapitalization of the Company, will result in a Change in
Control if it is the type of transaction specified by such definition.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change in Control Offer.
The Company will not, and will not permit any of its Subsidiaries to, create
or permit to exist or become effective any restriction (other than
restrictions existing under the Bank Credit Facility (or any guarantee
thereof) or under Indebtedness as in effect on the date of the Indenture) and
any extensions, refinancings, renewals or replacements of any of the foregoing
that would materially impair the ability of the Company to make a Change in
Control Offer to purchase the Notes or, if such Change in Control Offer is
made, to pay for the Notes tendered for purchase; provided that the
restrictions in any such extensions, refinancings, renewals or replacements
are no less favorable in any material respect to the holders of the Notes than
those under the Indebtedness being extended, refinanced, renewed or replaced.
(Section 1016)
Limitation on Subsidiary Capital 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. (Section 1017)
Limitation on Dividends 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 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 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 date of the Indenture; (b) any encumbrance or
restriction, with respect to a Subsidiary of the Company that is not a
Subsidiary of the Company on the date of the Indenture, 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 1018)
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 the
"--Limitation on Restricted Payments" covenant plus the amount of Permitted
Investments described in clauses (ix) and (x) of the definition thereof then
permitted to be made. Any Investment in an Unrestricted Subsidiary permitted
to be
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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 1019)
Provision of Financial Statements. The Indenture provides that, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the
Company will, to the extent permitted under the Exchange
Act, file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) if the Company were so
subject, such documents to be filed with the Commission on or prior to the
date (the "Required Filing Date") by which the Company would have been
required so to file such documents if the Company were so subject. The Company
will also in any event (x) within 15 days of each Required Filing Date (i)
transmit by mail to all holders, as their names and addresses appear in the
security register, without cost to such holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act if the Company were subject to
either of such Sections and (y) if filing such documents by the Company with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost.
(Section 1020)
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in The City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company will not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially
all of its properties and assets to any Person or group of affiliated Persons,
or permit any of its Subsidiaries to enter into any such transaction or series
of related transactions if such transaction or series of related transactions,
in the aggregate, would result in a sale, assignment, conveyance, transfer,
lease or disposition of all or substantially all of the properties and assets
of the Company and its Subsidiaries on a Consolidated basis to any other
Person or group of affiliated Persons, unless at the time and after giving
effect thereto (i) either (a) the Company will be the continuing corporation
or (b) the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or the Person which acquires by sale,
assignment, conveyance, transfer, lease or disposition of all or substantially
all of the properties and assets of the Company and its Subsidiaries on a
Consolidated basis (the "Surviving Entity") will be a corporation duly
organized and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such Person expressly
assumes, by a supplemental indenture, in a form satisfactory to the Trustee,
all the obligations of the Company under the Notes and the Indenture, as the
case may be, and the Notes and the Indenture will remain in full force and
effect as so supplemented; (ii) immediately before and immediately after
giving effect to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any of its
Subsidiaries which becomes the obligation of the Company or any of its
Subsidiaries as a result of such transaction as having been incurred at the
time of such transaction), no Default or Event of Default will have occurred
and be continuing; (iii) immediately before and immediately after giving
effect to such transaction on a pro forma basis (on the assumption that the
transaction occurred on the first day of the four-quarter period immediately
prior to the consummation of such transaction with the appropriate adjustments
with respect to the transaction being included in such pro forma calculation),
the Company (or the Surviving Entity if the Company is not the continuing
obligor under the Indenture) could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the provisions of "--Certain
Covenants--Limitation on Indebtedness"; and (iv) at the time of the
transaction the Company or the Surviving Entity will have delivered, or caused
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the
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Trustee, an officers' certificate and an opinion of counsel, each to the
effect that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other transaction and the supplemental indenture in respect
thereof comply with the Indenture and that all conditions precedent therein
provided for relating to such transaction have been complied with. (Section
801)
In the event of any transaction described in and complying with the
conditions listed in the two immediately preceding paragraphs in which the
Company is not the continuing corporation, the successor Person formed or
remaining shall succeed to, and be substituted for, and may exercise every
right and power of, the Company, and the Company (except in the case of a
lease) would be discharged from all obligations and covenants under the
Indenture and the Notes. (Section 802)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any Note
when it becomes due and payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (upon acceleration, optional
or mandatory redemption, if any, required repurchase or otherwise);
(iii) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company under the Indenture (other than a
default in the performance, or breach, of a covenant or agreement which is
specifically dealt with in clause (i) or (ii) or in clause (b), (c) or (d)
of this clause (iii)) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified mail,
(x) to the Company by the Trustee or (y) to the Company and the Trustee by
the holders of at least 25% in aggregate principal amount of the
outstanding Notes; (b) there shall be a default in the performance or
breach of the provisions described in "--Consolidation, Merger, Sale of
Assets"; (c) the Company shall have failed to make or consummate an Offer
in accordance with the provisions of "--Certain Covenants--Limitation on
Sale of Assets"; or (d) the Company shall have failed to make or consummate
a Change in Control Offer in accordance with the provisions of "--Certain
Covenants--Purchase of Notes Upon a Change in Control";
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company or any of its
Subsidiaries then has outstanding Indebtedness in excess of $10 million in
the aggregate and, if such Indebtedness has not already matured at its
final maturity in accordance with its terms, such Indebtedness shall have
been accelerated;
(v) one or more judgments, orders or decrees for the payment of money in
excess of $5 million, either individually or in the aggregate, shall be
rendered against the Company or any of its Subsidiaries or any of their
respective properties and shall not be discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of an appeal or otherwise, shall not be in effect;
(vi) any holder or holders of at least $10 million in aggregate principal
amount of Indebtedness of the Company or any of its Subsidiaries after a
default under such Indebtedness shall notify the Trustee of the intended
sale or disposition of any assets of the Company or any of its Subsidiaries
that have been pledged to or for the benefit of such holder or holders to
secure such Indebtedness or shall commence proceedings, or take any action
(including by way of set-off), to retain in satisfaction of such
Indebtedness or to collect on, seize, dispose of or apply in satisfaction
of Indebtedness, assets of the Company or any of its Subsidiaries
(including funds on deposit or held pursuant to lock-box and other similar
arrangements);
(vii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company
or any of its Subsidiaries in an involuntary case or proceeding under any
applicable Bankruptcy Law or (b) a decree or order adjudging the Company or
any of its Subsidiaries
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bankrupt or insolvent, or seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company or any of its Subsidiaries
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any of its Subsidiaries or of any substantial
part of their respective properties, or ordering the winding up or
liquidation of their respective affairs, and any such decree or order for
relief shall continue to be in effect, or any such other decree or order
shall be unstayed and in effect, for a period of 60 consecutive days; or
(viii) (a) the Company or any of its Subsidiaries commences a voluntary
case or proceeding under any applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent, (b) the Company or any
of its Subsidiaries consents to the entry of a decree or order for relief
in respect of the Company or any such Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, (c) the Company
or any of its Subsidiaries files a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, (d) the
Company or any of its Subsidiaries (I) consents to the filing of such
petition or the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company or any such Subsidiary or of any substantial part of their
respective properties, (II) makes an assignment for the benefit of
creditors or (III) admits in writing its inability to pay its debts
generally as they become due or (e) the Company or any of its Subsidiaries
takes any corporate action in furtherance of any such actions in this
paragraph (viii). (Section 501)
If an Event of Default (other than as specified in clauses (vii) and (viii)
of the prior paragraph) shall occur and be continuing with respect to the
Indenture, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on all Notes to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by the holders
of the Notes) and upon any such declaration, such principal, premium, if any,
and interest shall become due and payable immediately. If an Event of Default
specified in clause (vii) or (viii) of the prior paragraph occurs and is
continuing, then all the Notes shall ipso facto become and be due and payable
immediately in an amount equal to the principal amount of the Notes, together
with premium, if any, and accrued and unpaid interest, if any, to the date the
Notes become due and payable, without any declaration or other act on the part
of the Trustee or any holder. Thereupon, the Trustee may, at its discretion,
proceed to protect and enforce the rights of the holders of Notes by
appropriate judicial proceedings.
After a declaration of acceleration but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all Notes then outstanding, (iii) the principal of and premium, if any, on any
Notes then outstanding which have become due otherwise than by such
declaration of acceleration and interest thereon at a rate borne by the Notes
and (iv) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes; and (b) all Events of
Default, other than the non-payment of principal of the Notes which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in the Indenture. (Section 502)
The holders of not less than a majority in aggregate principal amount of the
Notes outstanding may on behalf of the holders of all outstanding Notes waive
any past default under the Indenture and its consequences, except a default in
the payment of the principal of, premium, if any, or interest on any Note or
in respect of a covenant or provision which under the Indenture cannot be
modified or amended without the consent of the holder of each Note affected by
such modification or amendment. (Section 513)
The Company is also required to notify the Trustee within 10 business days
of the occurrence of any Default. The Company is required to deliver to the
Trustee not more than 120 days after the end of each fiscal
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year, a written statement as to compliance with the Indenture, including
whether or not any Default has occurred. (Section 1021) The Trustee is under
no obligation to exercise any of the rights or powers vested in it by the
Indenture at the request or direction of any of the holders of the Notes
unless such holders offer to the Trustee security or indemnity satisfactory to
the Trustee against the costs, expenses and liabilities which might be
incurred thereby. (Section 603)
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage
in other transactions, provided that if it acquires any conflicting interest
it must eliminate such conflict upon the occurrence of an Event of Default or
else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company and any other obligor upon the Notes discharged
with respect to the outstanding Notes ("defeasance"). Such defeasance means
that the Company and any other obligor under the Indenture shall be deemed to
have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of holders of such outstanding
Notes to receive payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes, and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties, indemnities and
immunities of the Trustee and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("covenant defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Notes. In the event covenant defeasance occurs,
certain events (not including non-payment, bankruptcy and insolvency events)
described under "Events of Default" will no longer constitute a Default or an
Event of Default with respect to the Notes. (Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants or a nationally recognized investment
banking firm, to pay and discharge the principal of, premium, if any, and
interest on the outstanding Notes on the Stated Maturity (or on any date after
September 15, 2001 (such date being referred to as the "Defeasance Redemption
Date"), if at or prior to electing either defeasance or covenant defeasance,
the Company has delivered to the Trustee an irrevocable notice to redeem all
of the outstanding Notes on the Defeasance Redemption Date); (ii) in the case
of defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel in the United States stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of independent counsel in the United States shall
confirm that, the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance
had not occurred; (iii) in the case of covenant defeasance, the Company shall
have delivered to the Trustee an opinion of independent counsel in the United
States to the effect that the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as clauses (vii) or (viii) under the first paragraph under "--Events
of Default" are concerned, at any time during the period
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ending on the 91st day after the date of deposit; (v) such defeasance or
covenant defeasance shall not cause the Trustee to have a conflicting interest
as defined in the Indenture and for purposes of the Trust Indenture Act with
respect to any securities of the Company; (vi) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
Default under, the Indenture or any other material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which it is
bound; (vii) such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment company within the
meaning of the Investment Company Act of 1940, as amended, unless such trust
shall be registered under such Act or exempt from registration thereunder;
(viii) the Company will have delivered to the Trustee an opinion of
independent counsel in the United States to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (ix) the Company shall have delivered
to the Trustee an officers' certificate stating that the deposit was not made
by the Company with the intent of preferring the holders of the Notes over the
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; (x) no event or
condition shall exist that would prevent the Company from making payments of
the principal of, premium, if any, and interest on the Notes on the date of
such deposit or at any time ending on the 91st day after the date of such
deposit; and (xi) the Company will have delivered to the Trustee an officers'
certificate and an opinion of independent counsel, each stating that all
conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with. (Section
404)
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes as expressly provided for in the Indenture) as to all outstanding Notes
under the Indenture when (a) either (i) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid or Notes whose payment has been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust as provided for in the Indenture) have
been delivered to the Trustee for cancellation or (ii) all Notes not
theretofore delivered to the Trustee for cancellation (x) have become due and
payable, (y) will become due and payable at their Stated Maturity within one
year, or (z) are to be called for redemption within one year under
arrangements satisfactory to the applicable Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of the Company;
and the Company has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust an amount in United States dollars sufficient
to pay and discharge the entire indebtedness on the Notes not theretofore
delivered to the Trustee for cancellation, including principal of, premium, if
any, and accrued interest at such Maturity, Stated Maturity or redemption
date; (b) the Company has paid or caused to be paid all other sums payable
under the Indenture by the Company; and (c) the Company has delivered to the
Trustee an officers' certificate and an opinion of independent counsel each
stating that (i) all conditions precedent under the Indenture relating to the
satisfaction and discharge of such Indenture have been complied with and (ii)
such satisfaction and discharge will not result in a breach or violation of,
or constitute a default under, the Indenture or any other material agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound. (Section 1301)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of at least a majority of
aggregate principal amount of the Notes then outstanding; provided, however,
that no such modification or amendment may, without the consent of the holder
of each outstanding Note affected thereby: (i) change the Stated Maturity of
the principal of, or any installment of interest on, or waive a default in the
payment of the principal or interest on any such Note or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which the principal of
any such Note or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment after the
Stated Maturity thereof (or, in the case of redemption, on or after the
redemption date); (ii) amend, change or modify the obligation of the Company
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to make and consummate an Offer with respect to any Asset Sale or Asset Sales
in accordance with "--Certain Covenants--Limitation on Sale of Assets" or the
obligation of the Company to make and consummate a Change in Control Offer in
the event of a Change in Control in accordance with "--Certain Covenants--
Purchase of Notes Upon a Change in Control," including, in each case,
amending, changing or modifying any definitions relating thereto; (iii) reduce
the percentage in principal amount of such outstanding Notes, the consent of
whose holders is required for any such supplemental indenture, or the consent
of whose holders is required for any waiver or compliance with certain
provisions of the Indenture; (iv) modify any of the provisions relating to
supplemental indentures requiring the consent of holders or relating to the
waiver of past defaults or relating to the waiver of certain covenants, except
to increase the percentage of such outstanding Notes required for such actions
or to provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of the holder of each such Note
affected thereby; (v) except as otherwise permitted under "--Consolidation,
Merger, Sale of Assets," consent to the assignment or transfer by the Company
of any of its rights and obligations under the Indenture; or (vi) amend or
modify any of the provisions of the Indenture relating to the subordination of
the Notes in any manner adverse to the holders of the Notes. (Section 902)
Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company and the Trustee may modify or amend the Indenture: (a) to
evidence the succession of another Person to the Company, and the assumption
by any such successor of the covenants of the Company in the Indenture and in
the Notes in accordance with "--Consolidation, Merger, Sale of Assets"; (b) to
add to the covenants of the Company or any other obligor upon the Notes for
the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company or any other obligor upon the Notes, as applicable,
in the Indenture or in the Notes; (c) to cure any ambiguity, or to correct or
supplement any provision in the Indenture or the Notes which may be defective
or inconsistent with any other provision in the Indenture or the Notes or make
any other provisions with respect to matters or questions arising under the
Indenture or the Notes; provided that, in each case, such provisions shall not
adversely affect the interest of the holders of the Notes; (d) to comply with
the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; (e) to add a
Guarantor under the Indenture; (f) to evidence and provide the acceptance of
the appointment of a successor Trustee under the Indenture; or (g) to
mortgage, pledge, hypothecate or grant a security interest in favor of the
Trustee for the benefit of the holders of the Notes as additional security for
the payment and performance of the Company's obligations under the Indenture,
in any property, or assets, including any which are required to be mortgaged,
pledged or hypothecated, or in which a security interest is required to be
granted to the Trustee pursuant to the Indenture or otherwise. (Section 901)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1022)
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to the
conflicts of law principles thereof.
CERTAIN DEFINITIONS
"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.
"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
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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.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of: (i) any Capital
Stock of any Subsidiary of the Company; (ii) all or substantially all of the
properties and assets of any division or line of business of the Company or
any of its Subsidiaries; or (iii) any other properties or assets of the
Company or any Subsidiary of the Company other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include any transfer of properties and assets (A) that is governed by the
provisions described under "--Consolidation, Merger, Sale of Assets," (B) that
is by any Subsidiary of the Company to the Company or any Wholly Owned
Subsidiary in accordance with the terms of the Indenture, (C) that is of
inventory in the ordinary course of business, (D) that is of obsolete
equipment in the ordinary course of business or (E) the Fair Market Value of
which in the aggregate during any 12 month period, for all such transfers,
does not exceed $5 million.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the
sum of the products of (a) the number of years from the date of determination
to the date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
"Bank Credit Facility" means the Bank Credit Agreement, dated as of November
28, 1995, 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).
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization
or relief of debtors or any amendment to, succession to or change in any such
law.
"Banks" means the lenders under the Bank Credit Facility.
"Capital 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.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable
for or convertible into such capital stock, whether now outstanding or issued
after the date of the Indenture.
"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
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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, (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 Investors 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.
"Change in Control" means the occurrence of any of the following events: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders (including any Permitted
Holders that are part of a "group"), 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 shares that such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly (including, without
limitation, through direct or indirect purchase or beneficial ownership of
Capital Stock of an entity referred to in clause (ii) of the definition of
"Permitted Holders"), of more than 50% of the total voting power of all
outstanding Voting Stock of the Company; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the board of directors of the Company (together with any new directors whose
election to such board 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 such board of directors then in office;
(iii) the Company consolidates with or merges with or into any Person or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any corporation consolidates with or merges into or with the
Company in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is changed into or exchanged for cash, securities
or other property, other than any such transaction where the outstanding
Voting Stock of the Company is not affected or is not changed or exchanged at
all (except to the extent necessary to reflect a change in the jurisdiction of
incorporation of the Company or the formation of a holding company for the
Company as described in clause (ii) of the definition of "Permitted Holders"
or where (A) the outstanding Voting Stock of the Company is changed into or
exchanged for (x) Voting Stock of the surviving corporation which is not
Redeemable Capital Stock or (y) cash, securities and other property (other
than Capital Stock of the surviving corporation) in an amount which could be
paid by the Company as a Restricted Payment as described under "--Certain
Covenants--Limitation on Restricted Payments" (and such amount shall be
treated as a Restricted Payment subject to the provisions in the Indenture
described under "--Certain Covenants--Limitation on Restricted Payments"), and
(B) no "person" or "group", other than Permitted Holders (including any
Permitted Holders as part of a "group"), "beneficially owns" immediately after
such transaction, directly or indirectly (including, without limitation,
through direct or indirect purchase or beneficial ownership of Capital Stock
of an entity referred to in clause (ii) of the definition of "Permitted
Holders"), more than 50% of the total voting power of all outstanding Voting
Stock of the surviving corporation); or (iv) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other than in a
transaction which complies with the provisions described under "--
Consolidation, Merger, Sale of Assets."
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing
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and performing the duties now assigned to it under the Trust Indenture Act
then the body performing such duties at such time.
"Commodity Price Protection Agreement" means any forward contract, commodity
swap, commodity option or other similar financial agreement or arrangement
relating to, or the value of which is dependent upon, fluctuations in
commodity prices.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company.
"Company" means Buckeye Cellulose Corporation, a corporation incorporated
under the laws of Delaware, until a successor Person shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter
"Company" shall mean such successor Person.
"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.
"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.
"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 Capital 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.
"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
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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.
"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.
"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).
"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.
"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.
"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.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series of
related transactions, a member of the board of directors of the Company 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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"Existing Senior Notes" means the 10 1/4% Senior Notes Due 2001 of the
Company.
"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.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied,
which are in effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor of the Company's Indenture
Obligations.
"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 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
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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.
"Guarantor" means any Subsidiary of the Company which becomes a guarantor of
the Notes after the date of the Indenture by executing a Guarantee pursuant to
the terms of the Indenture until a successor replaces such party pursuant to
the applicable provisions of the Indenture and, thereafter, shall mean such
successor.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit issued under letter of
credit facilities, acceptance facilities or other similar facilities and in
connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or hereafter outstanding,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables arising
in the ordinary course of business, (iv) all obligations under Interest Rate
Agreements, Currency Hedging Agreements or Commodity Price Protection
Agreements of such Person, (v) all Capital Lease Obligations of such Person,
(vi) all Indebtedness referred to in clauses (i) through (v) above of other
Persons and all dividends of other Persons, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien, upon or with respect to
property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness, (vii) all Guaranteed Debt of such Person,
(viii) all Redeemable Capital Stock issued by such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, and (ix) any amendment, supplement,
modification, deferral, renewal, extension, refunding or refinancing of any
liability of the types referred to in clauses (i) through (viii) above. For
purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the Fair Market Value of such Redeemable
Capital Stock, such Fair Market Value to be determined in good faith by the
board of directors of the issuer of such Redeemable Capital Stock.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the Indenture or under the Notes, including any Guarantor, to
pay principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with the Indenture,
the Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the respective terms
thereof.
"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.
"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.
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"Lien" means any mortgage or deed of trust, charge, pledge, lien (statutory
or otherwise), security interest, assignment, deposit, arrangement, easement,
hypothecation, claim, preference, priority or other encumbrance upon or with
respect to any property of any kind (including any conditional sale, capital
lease or other title retention agreement, any leases in the nature thereof,
and any agreement to give any security interest), real or personal, movable or
immovable, now owned or hereafter acquired.
"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 Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect
of Excess Proceeds, Change in Control Offer in respect of a Change in Control,
call for redemption or otherwise.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof (without duplication in respect of all Asset Sales) 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 (i) brokerage
commissions and other reasonable fees and expenses (including 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 the subject of such Asset Sale, (iv)
amounts required to be paid to any Person (other than the Company or any
Subsidiary of the Company) owning a beneficial interest in the assets subject
to the Asset Sale, (v) appropriate amounts to be provided by the Company or
any Subsidiary of the Company, as the case may be, as a reserve, in accordance
with GAAP, against any liabilities associated with such Asset Sale and
retained by the Company or any Subsidiary of the Company, as the case may be,
after such Asset Sale, 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, all as reflected in an officers' certificate delivered to the
Trustee and (vi) any amounts required to be placed by the Company or any
Subsidiary of the Company in a restricted escrow or reserve account by the
terms of the agreements pursuant to which the Asset Sale is made, provided
that any such amounts shall be deemed to be Net Cash Proceeds of an Asset Sale
upon the release of such amounts to the Company or any Subsidiary 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
"--Certain Covenants--Limitation on Restricted Payments," 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.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is pari
passu in right of payment to the Notes.
"Permitted Holders" means (i) the individuals and related entities listed on
a schedule to the Indenture and (ii) any corporation (or other entity) which
owns all of the outstanding Capital Stock of the Company if such entity
acquires such ownership in a transaction in which the former owners of all of
the Capital Stock of the Company acquire proportionate ownership of all of the
Capital Stock (or similar equity ownership interest) of such entity (or any
parent organization which owns all of the outstanding Capital Stock (or
similar equity ownership interest) of such entity).
"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) $155 million 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);
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(ii) Indebtedness of the Company pursuant to the Notes;
(iii) guarantees of any of the Company's Subsidiaries of Indebtedness of
the Company; provided such Indebtedness and guarantees are incurred in
accordance with the terms of the Indenture;
(iv) Indebtedness of the Company or any of its Subsidiaries outstanding
on the date of the Indenture and listed on a schedule thereto;
(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 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; 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) 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, which has Indebtedness owing
to the Company or any other Wholly Owned Subsidiary, ceases to be a Wholly
Owned Subsidiary 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 Capital Lease Obligations not to exceed $5
million outstanding at any one time in the aggregate;
(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 $6 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
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Indebtedness, as the case may be, such refinancing does not reduce the
Average Life to Stated Maturity 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.
"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 "--Certain Covenants--Limitation
on Sale of Assets" to the extent such Investments are non-cash proceeds as
permitted under such covenant; (v) Investments in existence on the date of the
Indenture; (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 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.
"Permitted Lien" means any Lien arising by reason of taxes not yet
delinquent or which are being contested in good faith.
"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.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"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.
"Public Equity Offering" means an underwritten offer and sale of Common
Stock by the Company to the public pursuant to a registration statement (other
than Form S-8 or any successor form or forms or a registration statement
relating to securities issuable by or in connection with any benefit plan of
such Person) that has been declared effective by the Commission pursuant to
the Securities Act.
"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,
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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 recourse solely
to the assets so purchased or acquired, any additions and accessions thereto
and any proceeds therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"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.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Senior Note Indenture" means the indenture dated as of May 27, 1993 between
the Company and Bankers Trust Company, as trustee, relating to the Existing
Senior Notes.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as
the fixed date on which the principal of such Indebtedness or such installment
of interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company subordinated
in right of payment to the Notes.
"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.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, or
any successor statute.
"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 of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company 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 "--Certain Covenants--
Limitation on Unrestricted Subsidiaries" 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 understanding are no less
favorable to the Company or such other Subsidiary than those
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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 of the Company 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 Company's Board of Directors.
The Board of Directors of the Company 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 "--Certain Covenants--Limitation on Indebtedness" 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.
"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.
"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).
"Wholly Owned Subsidiary" means a Subsidiary of the Company all the Capital
Stock of which is owned by the Company or another Wholly Owned Subsidiary. For
purposes of this definition any directors' qualifying shares or investments by
foreign nationals mandated by applicable law shall be disregarded in
determining the ownership of a Subsidiary of the Company.
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UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement") among the Company and Salomon Brothers Inc and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, the
"Underwriters"), the Company has agreed to issue and sell to the Underwriters,
and each of the Underwriters severally has agreed to purchase from the
Company, the Notes in the respective principal amounts of such Notes set forth
opposite their names below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
Salomon Brothers Inc.................................... $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
------------
Total............................................... $100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions set forth therein. The Underwriters will be
obligated to purchase all the Notes offered hereby if any Notes are purchased.
The Underwriters have advised the Company that the Underwriters propose
initially to offer the Notes 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 % of the principal amount of the
Notes. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of % of such principal amount. After the Offering, the public
offering price and such concessions may be changed.
The Company does not intend to list the Notes on any national securities
exchange. The Underwriters have indicated that they intend to make a market in
the Notes, subject to applicable laws and regulations. However, the
Underwriters are not obligated to do so and any such market-making may be
discontinued at any time at the sole discretion of the Underwriters without
notice. Accordingly, no assurance can be given that any market for the Notes
will develop, or, if any such market develops, as to the liquidity of such
market. See "Risk Factors--Absence of Public Market for the Notes; Lack of
Liquidity."
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
The Company has agreed, during a period of 90 days after the date of this
Prospectus, not to offer, issue, sell, contract to sell, grant any option for
the sale of, or otherwise dispose of, or register for sale by others, any debt
securities with terms and provisions that are substantially the same as those
of the Notes, other than the initial sale of the Notes without the prior
written consent of Salomon Brothers Inc.
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, and the Underwriters may similarly do so in the
future. 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, the Underwriters are acting as underwriters in connection with the
Equity Offering.
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LEGAL MATTERS
The validity of the Notes being offered hereby and certain other legal
matters relating to the Offering will be passed upon for the Company 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 auditors, 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 of 1933, as amended (the "Securities Act"),
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covering the Notes 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.
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 on Form 8-K/A
dated May 10, 1996.
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 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.
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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 currency (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.............................................................. 10
Company History........................................................... 15
The 1996 Acquisitions..................................................... 15
The Company Stock Repurchase and The Related Transactions................. 16
Use of Proceeds........................................................... 17
Capitalization............................................................ 18
Unaudited Pro Forma Consolidated Financial Data........................... 19
Selected Consolidated Financial Data...................................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 27
Business.................................................................. 32
Management................................................................ 42
Principal Stockholders.................................................... 44
Certain Relationships and Related Transactions............................ 45
Description of Certain Indebtedness....................................... 46
Description of the Notes.................................................. 49
Underwriting.............................................................. 76
Legal Matters............................................................. 77
Experts................................................................... 77
Available Information..................................................... 77
Incorporation of Certain Documents by Reference........................... 78
Index to Financial Statements............................................. F-1
</TABLE>
$100,000,000
BUCKEYE CELLULOSE CORPORATION
% SENIOR SUBORDINATED
NOTES DUE 2008
LOGO
SALOMON BROTHERS INC
MERRILL LYNCH & CO.
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........... $ 34,483
National Association of Securities Dealers, Inc. fee.......... 10,500
Blue sky fees and expenses (including attorneys' fees and
expenses).................................................... 14,950
Printing and engraving expenses............................... 264,000
Trustee's fees and expenses................................... 12,000
Accounting fees and expenses.................................. 158,400
Legal fees and expenses....................................... 388,750
Miscellaneous expenses........................................ 116,917
----------
Total........................................................ $1,000,000
==========
</TABLE>
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), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such
II-1
<PAGE>
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, the 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 Indenture
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 Amended and Restated Registration Agreement by and among the
Registrant, Madison Dearborn Capital Partners, L.P. and the named
"Executives."**
10.18 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.*****
10.19 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.**
10.20 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.**
10.21 1995 Management Stock Option Plan of the Registrant.**
10.22 1995 Incentive and Nonqualified Stock Option Plan for Management
Employees of the Registrant.**
10.23 Form of Management Stock Option Subscription Agreement.**
10.24 Form of Stock Option Subscription Agreement.**
10.25 Indenture dated as of May 27, 1993 between the Registrant and
Bankers Trust Company.***
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.******
10.33 Amendment No. 2 to Credit Agreement dated as of June 6, 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.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.34 Amendment No. 3 to Credit Agreement dated as of June 24, 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.******
12.1 Computation of Ratio of Earnings to Fixed Charges*
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
23.4 Consent of Kirkland & Ellis (included in opinion filed as Exhibit
5.1)
24.1 Powers of attorney (included in signature page)*
25.1 Statement of Eligibility of Trustee (separately bound)
</TABLE>
- --------
*Previously filed.
**Incorporated by reference to the Registrant's Registration Statement on
Form S-1, File No. 33-97836, 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.
******Incorporated by reference to the Registrant's Registration Statement on
Form S-3, File No. 333-05139, as filed with the Securities and Exchange
Commission on June 4, 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 hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 2
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF MEMPHIS, STATE OF TENNESSEE, ON JUNE
26, 1996.
Buckeye Cellulose Corporation
/s/ Robert E. Cannon
By: _________________________________
Robert E. Cannon
Chief Executive Officer, Chairman
of the Board and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON JUNE 26, 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)
* President, Chief Operating Officer and
___________________________________________ Director (Principal Financial Officer)
David B. Ferraro
* Comptroller (Principal Accounting Officer)
___________________________________________
David H. Whitcomb
* Director
___________________________________________
Samuel M. Mencoff
* Director
___________________________________________
Justin S. Huscher
* Director
___________________________________________
Red Cavaney
* Director
___________________________________________
Henry Frigon
* Director
___________________________________________
</TABLE> Harry Phillips
/s/ Robert E. Cannon
*By: ________________________________
Robert E. Cannon
Attorney-in-Fact
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 1.1
[Draft--06/21/96]
BUCKEYE CELLULOSE CORPORATION
$100,000,000
% Senior Subordinated Notes Due 2008
Underwriting Agreement
New York, New York
, 1996
Salomon Brothers Inc
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Buckeye Cellulose Corporation, a Delaware corporation (the "Company"),
proposes to sell to you (the "Underwriters") $100,000,000 aggregate principal
amount of its % Senior Subordinated Notes Due 2008 (the "Securities"), to be
issued under an indenture (the "Indenture") to be dated as of , 1996, between
the Company and Union Planters National Bank, as trustee (the "Trustee").
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, each Underwriter as set forth below in this
Section 1. Certain terms used in this Section 1 are defined in paragraph (c)
hereof.
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and has filed with the Securities and
Exchange Commission (the "Commission") a registration statement
(registration number 333-05135) on such Form, including the related
preliminary prospectus, for the registration under the Act of the offering
and sale of the Securities. The Company has filed one or more amendments
thereto, including the related preliminary prospectus, each of which has
previously been furnished to you. The Company will next file with the
Commission one of the following: (i) prior to effectiveness
<PAGE>
2
of such registration statement, a further amendment to such registration
statement, including the form of final prospectus, or (ii) a final
prospectus in accordance with Rules 430A and 424(b). In the case of clause
(ii), the Company has included in such registration statement, as amended
at the Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in the
Prospectus with respect to the Securities and the offering thereof. As
filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together with all
other such required information, with respect to the Securities and the
offering thereof and, except to the extent the Underwriters shall agree in
writing to a modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior to the
Execution Time, will be included or made therein. If the Registration
Statement contains the undertaking specified by Regulation S-K Item 512(a),
the Registration Statement, at the Execution Time, meets the requirements
set forth in Rule 415(a)(1)(x). Upon your request, but not without our
agreement, the Company also will file a Rule 462(b) Registration Statement
in accordance with Rule 462(b).
(b) On the Effective Date, the Registration Statement did or will, and
when the Prospectus is first filed (if required) in accordance with Rule
424(b) and on the Closing Date, the Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable
requirements of the Act, the Securities Exchange Act of 1934 (the "Exchange
Act") and the Trust Indenture Act of 1939 (the "Trust Indenture Act") and
the respective rules thereunder; on the Effective Date, the Registration
Statement did not or will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; on the
Effective Date and on the Closing Date the Indenture did or will comply in
all material respects with the requirements of the Trust Indenture Act and
the rules thereunder; and, on the Effective Date, the Prospectus, if not
filed pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to
<PAGE>
3
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties
as to (i) that part of the Registration Statement which shall constitute
the Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of the Trustee or (ii) the information contained in or
omitted from the Registration Statement or the Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives specifically for inclusion in the Registration
Statement or the Prospectus (or any supplement thereto).
(c) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement, any post-effective amendment or amendments
thereto and any Rule 462(b) Registration Statement became or become
effective and each date after the date hereof on which a document
incorporated by reference in the Registration Statement is filed.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto. "Preliminary Prospectus"
shall mean any preliminary prospectus referred to in paragraph (a) above
and any preliminary prospectus included in the Registration Statement at
the Effective Date that omits Rule 430A Information. "Prospectus" shall
mean the prospectus relating to the Securities that is first filed pursuant
to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule
424(b) is required, shall mean the form of final prospectus relating to the
Securities included in the Registration Statement at the Effective Date,
except that if the final prospectus first furnished to the Underwriters
after the Execution Time for use in connection with the offering of
Securities differs from the prospectus included in the Registration
Statement at the Effective Date (whether or not such prospectus is required
to be filed pursuant to Rule 424(b)), "Prospectus" shall mean the final
prospectus first furnished to the Underwriters for such use. "Registration
Statement" shall mean the registration statement referred to in paragraph
(a) above, including incorporated documents, exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
<PAGE>
4
event any post-effective amendment thereto or any Rule 462(b) Registration
Statement becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended or such
Rule 462(b) Registration Statement, as the case may be. Such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 415", "Rule 424", "Rule
430A", "Rule 462" and "Regulation S-K" refer to such rules or regulation
under the Act. "Rule 430A Information" means information with respect to
the Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration statement
and any amendments thereto filed pursuant to Rule 462(b) relating to the
offering covered by the initial registration statement (file number 333-
05135). Except as otherwise noted, any reference herein to the Registration
Statement, a Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on
or before the Effective Date of the Registration Statement or the issue
date of such Preliminary Prospectus or the Prospectus, as the case may be;
and any reference herein to the terms "amend", "amendment" or "supplement"
with respect to the Registration Statement, any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the filing of any
document under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the Effective Date of the Registration Statement, or the issue date of any
Preliminary Prospectus or the Prospectus, as the case may be, deemed to be
incorporated therein by reference.
2. Purchase and Sale. Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Company agrees to
sell to each Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from the Company, at a purchase price of % of the
principal amount thereof, plus accrued interest, if any, on the Securities
from , 1996, to the Closing Date, the principal amount of the Securities
set forth opposite such Underwriter's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the Securities
shall be made at 10:00 AM, Chicago time,
<PAGE>
5
on , 19 , or such later date (not later than , 19 )
as the Representatives shall designate, which date and time may be postponed by
agreement between the Representatives and the Company or as provided in Section
9 hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities shall be made to
the Representatives for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representatives of the
purchase price thereof to or upon the order of the Company by wire transfer of
immediately available funds. Such delivery of and payment for the Securities
shall be made through the facilities of the Depository Trust Company.
Certificates for the Securities shall be registered in such names and in such
denominations as the Representatives may request not less than three full
business days in advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters
that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment thereof, to
become effective. Prior to the termination of the offering of the Securities,
the Company will not file any amendment of the Registration Statement,
supplement to the Prospectus or any Rule 462(b) Registration Statement unless
the Company has furnished you a copy for your review prior to filing and will
not file any such proposed amendment, supplement or Rule 462(b) Registration
Statement to which you reasonably object. Subject to the foregoing sentence, if
the Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule 424(b), the
Company will cause the Prospectus, properly completed, and any supplement
thereto to be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the
<PAGE>
6
Representatives of such timely filing. Upon your request, the Company will
cause the Rule 462(b) Registration Statement, completed in compliance with the
Act and the applicable rules and regulations thereunder, to be filed with the
Commission pursuant to Rule 462(b) and will provide evidence satisfactory to the
Representatives of such filing. The Company will promptly advise the
Representatives (i) when the Registration Statement, if not effective at the
Execution Time, and any amendment thereto, shall have become effective, (ii)
when the Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b), (iii) when, prior to
termination of the offering of the Securities, any amendment to the Registration
Statement shall have been filed or become effective, (iv) of any request by the
Commission for any amendment of the Registration Statement, or any Rule 462(b)
Registration Statement, or supplement to the Prospectus or for any additional
information, (v) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (vi) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the Registration Statement
or supplement the Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Company promptly will (i) prepare and file with
the Commission, subject to the second sentence of paragraph (a) of this Section
5, an amendment or supplement which will correct such statement or omission or
effect such compliance and (ii) supply any supplemented Prospectus to you in
such quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally available
to its security holders and to the Representatives an earnings statement or
statements of the
<PAGE>
7
Company and its subsidiaries which will satisfy the provisions of Section 11(a)
of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and, will furnish to each Underwriter (x) until the
later of the Effective Date and, if the Company has elected to rely upon Rule
430A, the Execution Time, as many copies of each Preliminary Prospectus as such
Underwriter may reasonably request and (y) so long as delivery of a prospectus
by an Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and any supplement thereto as the Representatives may reasonably
request. The Company will furnish or cause to be furnished to the
Representatives copies of all reports on Form SR required by Rule 463 under the
Act. The Company will pay the expenses of printing or other production of all
documents relating to the offering.
(e) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Representatives may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities, will arrange for the determination of the
legality of the Securities for purchase by institutional investors; provided,
however, that neither the Company nor any subsidiary shall be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(f) The Company will not, for a period of 90 days following the
Execution Time, without prior written consent of Salomon Brothers Inc, offer,
sell or contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any debt securities with terms and conditions
substantially the same as those of the Securities issued or guaranteed by the
Company.
(g) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate
<PAGE>
8
located in Cuba after the date the Registration Statement becomes or has become
effective with the Commission or with the Florida Department of Banking and
Finance (the "Department"), whichever date is later, or if the information
reported in the Prospectus, if any, concerning the Company's business with Cuba
or with any person or affiliate located in Cuba changes in any material way, the
Company will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Securities shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time and the Closing Date, to the accuracy
of the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later time,
the Registration Statement will become effective not later than (i) 6:00 PM New
York City time, on the date of determination of the public offering price, if
such determination occurred at or prior to 3:00 PM New York City time on such
date or (ii) 12:00 Noon on the business day following the day on which the
public offering price was determined, if such determination occurred after 3:00
PM New York City time on such date; if filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any
such supplement, will be filed in the manner and within the time period required
by Rule 424(b); and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the Representatives the
opinion of Kirkland & Ellis, special counsel for the Company, dated the Closing
Date, to the effect that:
(i) each of the Company and the subsidiaries of the Company listed on
Schedule II hereto (individually a "Subsidiary" and collectively the
"Subsidiaries") has been duly incorporated or organized and is validly
<PAGE>
9
existing as a corporation or partnership in good standing under the laws of
the jurisdiction in which it is chartered or organized, with full corporate
power and authority to own its properties and conduct its business as
described in the Prospectus, and the Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
Tennessee and Georgia which, to the best of our knowledge are the only
jurisdictions in which the nature of its business or its ownership or
leasing of property requires such qualification, and Buckeye Florida
Corporation and Buckeye Florida, Limited Partnership, are duly qualified to
do business as a foreign corporation or a foreign limited partnership, as
the case may be, and are in good standing under the laws of Florida which,
to the best of our knowledge, is the only jurisdiction in which the nature
of their respective businesses or the ownership or leasing of their
respective properties require such qualification;
(ii) all the outstanding shares of capital stock or partnership
interests of each Subsidiary have been duly and validly authorized and
issued and, in the case of shares of capital stock, are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock or partnership interests of the
Subsidiaries are owned by the Company either directly or through wholly
owned subsidiaries, to the best knowledge of such counsel, after due
inquiry, free and clear of any perfected or other security interests,
claims, liens or encumbrances;
(iii) the Company's authorized equity capitalization at March 31, 1996
is as set forth in the Prospectus under the caption "Capitalization"; and
the statements made in the Prospectus under the caption "Description of the
Notes," to the extent they constitute summaries of law or provisions of
documents described therein, have been reviewed by such counsel and are
fair and accurate summaries in all material respects.
(iv) the Indenture has been duly authorized, executed and delivered,
has been duly qualified under the Trust Indenture Act, and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms (subject to (x) the effect of
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
<PAGE>
10
transfer or other similar laws, (y) the effect of general principles of
equity (regardless of whether enforcement is considered in proceedings at
law or in equity), and (z) limitations imposed by federal or state
securities laws or principles of public policy to enforcement of rights to
indemnification and contribution); and the Securities have been duly
authorized and, when executed, authenticated and issued in accordance with
the provisions of the Indenture and the Securities, as applicable, and
delivered to and paid for by the Underwriters pursuant to this Agreement,
will constitute legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture;
(v) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of
its subsidiaries of a character required to be disclosed in the
Registration Statement which is not disclosed as required in the
Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit, which is not described or filed
as required;
(vi) such counsel has been advised by the Commission that the
Registration Statement was declared effective under the Act; any required
filing of the Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required by
Rule 424(b); to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued,
no proceedings for that purpose have been instituted or threatened by the
Commission under the Act and the Registration Statement and the Prospectus
(other than the financial statements, Financial Schedules and other
financial and statistical information contained therein or omitted
therefrom, as to which such counsel need express no opinion) appear on
their face to have been appropriately responsive in all material respects
with the applicable requirements of the Act, the Exchange Act and the Trust
Indenture Act and the respective rules thereunder; and such counsel shall
advise the Underwriters that it has no reason to believe that at the
Effective Date the Registration Statement contained any untrue statement of
a material
<PAGE>
11
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading
(other than the financial statements, Financial Schedules and other
financial and statistical information contained therein or omitted
therefrom, as to which such counsel need express no opinion);
(vii) this Agreement has been duly authorized, executed and delivered
by the Company;
(viii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated herein, except such as have been obtained under
the Act, the Exchange Act and the respective rules thereunder and such as
may be required under the blue sky laws of any jurisdiction in connection
with the purchase and distribution of the Securities by the Underwriters
and such other approvals (specified in such opinion) as have been obtained;
(ix) neither the execution and delivery of the Indenture, the issue
and sale of the Securities, nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof
will conflict with, result in a breach or violation of, or constitute a
default under any applicable law, rule or regulation of the states of New
York, Illinois or Delaware or of the United States (except for the Act, the
Exchange Act and state securities or blue sky laws) or the charter or by-
laws of the Company or the terms of any agreement listed on Schedule III
hereto or any judgment, order or decree known to such counsel to be
applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over the Company or any of its subsidiaries; and
(x) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement except
such as have been waived by such holders.
<PAGE>
12
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriters and (B) as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and public officials. References to the Prospectus in this paragraph
(b) include any supplements thereto at the Closing Date. For purposes of such
opinion, the terms "Registration Statement" and "Prospectus" shall not include
any documents incorporated by reference therein which were prepared and filed by
the Company without the participation of such counsel.
(c) The Underwriters shall have received the opinion of Henry P.
Doggrell, Esq., General Counsel for the Company, dated the Closing Date, to the
effect that the Registration Statement was declared effective under the Act; any
required filing of the Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued, no proceedings for
that purpose have been instituted or threatened and the Registration Statement
and the Prospectus (other than the financial statements, Financial Statements
and other financial and statistical information contained therein or omitted
therefrom as to which such counsel need express no opinion) comply as to form in
all material respects with the applicable requirements of the Act and the
Exchange Act and the respective rules thereunder; and such counsel has no reason
to believe that at the Effective Date the Registration Statement includes any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
(other than the financial statements, Financial Statements and other financial
and statistical information contained therein or omitted therefrom as to which
such counsel need express no opinion);
(d) The Representatives shall have received from Cravath, Swaine &
Moore, counsel for the Underwriters, such
<PAGE>
13
opinion or opinions, dated the Closing Date, with respect to the issuance and
sale of the Securities, the Indenture, the Registration Statement, the
Prospectus (together with any supplement thereto) and other related matters as
the Representatives may reasonably require, and the Company shall have furnished
to such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(e) The Company shall have furnished to the Representatives a
certificate of the Company, signed on behalf of the Company by the Chairman of
the Board or the President and the principal financial or accounting officer of
the Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened by the Commission;
and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in the condition (financial or other), earnings,
business or properties of the Company and its subsidiaries, whether or not
arising from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(f) At the Execution Time and at the Closing Date, Ernst & Young
L.L.P. shall have furnished to the Representatives a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Act and the Exchange Act and
the respective
<PAGE>
14
applicable published rules and regulations thereunder and that they have
performed a review of the unaudited interim financial information of the Company
for the nine-month period ended March 31, 1996, in accordance with Statement of
Auditing Standards No. 71 and stating in effect that:
(i) in their opinion the audited financial statements and financial
statement schedules and pro forma financial statements included or
incorporated in the Registration Statement and the Prospectus and reported
on by them comply in form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries; their
limited review in accordance with standards established by the American
Institute of Certified Public Accountants under Statement of Auditing
Standards No. 71 of the unaudited interim financial information for the
nine-month period ended March 31, 1996, and as at March 31, 1996, as
indicated in their report dated __________, 1996, carrying out certain
specified procedures (but not an examination in accordance with generally
accepted auditing standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter; a
reading of the minutes of the meetings of the stockholders, directors and
the compensation and audit committees of the Company and the subsidiaries;
and inquiries of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and its subsidiaries as
to transactions and events subsequent to June 30, 1995, nothing came to
their attention which caused them to believe that:
(1) any unaudited financial statements included or incorporated
in the Registration Statement and the Prospectus do not comply in form
in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with
respect to financial statements included or incorporated in quarterly
reports on Form 10-Q under the Exchange Act; and said unaudited
financial statements are not in conformity with generally accepted
accounting principles applied
<PAGE>
15
on a basis substantially consistent with that of the audited financial
statements included or incorporated in the Registration Statement and
the Prospectus; or
(2) with respect to the period subsequent to March 31, 1996,
there were any changes, at a specified date not more than five
business days prior to the date of the letter, in the long-term debt
(including current maturities) of the Company and its subsidiaries or
capital stock of the Company or decreases in the stockholders' equity
of the Company as compared with the amounts shown on the March 31,
1996, consolidated balance sheet included or incorporated in the
Registration Statement and the Prospectus, or for the period from
April 1, 1996 to such specified date there were any decreases, as
compared with the corresponding period in the preceding year net
revenues or income before income taxes or in total or per share
amounts of net income of the Company and its subsidiaries, except in
all instances for changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said explanation is not
deemed necessary by the Representatives; and
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Company and its subsidiaries) set forth in the Registration Statement
and the Prospectus and in Exhibit 12 to the Registration Statement,
including the information set forth under the captions "Summary Historical
and Pro Forma Consolidated Financial Data", "Unaudited Pro Forma
Consolidated Financial Data" and "Selected Consolidated Financial Data" in
the Prospectus, the information included or incorporated in Items 1, 2, 6,
7 and 11 of the Company's Annual Report on Form 10-K, incorporated in the
Registration Statement and the Prospectus, and the information included in
the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included or incorporated in the Company's Quarterly
Reports on Form 10-Q, incorporated in the Registration Statement and
<PAGE>
16
the Prospectus, agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.
(iv) On the basis of a reading of the unaudited pro forma financial
statements included or incorporated in the Registration Statement and the
Prospectus (the "pro forma financial statements"); carrying out certain
specified procedures; inquiries of certain officials of the Company who
have responsibility for financial and accounting matters; and proving the
arithmetic accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma financial statements, nothing came to
their attention which caused them to believe that the pro forma financial
statements do not comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
References to the Prospectus in this paragraph (f) include any
supplement thereto at the date of the letter.
The Representatives shall have also received from Ernst & Young L.L.P.
(1) a report on their examination with respect to pro forma financial
information for the year ended June 30, 1995 stating that in their opinion,
management's assumptions provide a reasonable basis for presenting the
significant effects directly attributable to the transactions set forth in such
report and described in the Notes to Pro Forma Financial Information, the
related pro forma adjustments give appropriate effect to those assumptions, and
the pro forma column for the year ended June 30, 1995 reflects the proper
application of those adjustments to the historical financial statements amounts
in the pro forma financial information for the year then ended and (2) a report
of their review with respect to pro forma financial information for the nine
months ended March 31, 1996 and 1995 stating that based on their review, nothing
came to their attention that caused them to believe that management's
assumptions do not provide a reasonable basis for presenting the significant
effects directly attributable to the transactions set forth in such report and
described in the Notes to Pro Forma Financial Information, that the related pro
forma adjustments do not give appropriate effect to those assumptions, or that
the pro forma column for the nine months ended March 31, 1996
<PAGE>
17
and 1995 do not reflect the proper allocation of those adjustments to the
historical statement amounts in the pro forma financial information for the nine
month period then ended.
The Representatives shall have also received from Ernst & Young L.L.P.
a letter stating that the Company's system of internal accounting controls taken
as a whole is sufficient to meet the broad objectives of internal accounting
control insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in relation to the
financial statements of the Company and its subsidiaries.
(g) At the Execution Time and at the Closing Date, Deloitte & Touche
LLP shall have furnished to the Representatives a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the Representatives and the Selling Stockholder,
confirming that, with respect to Alpha Cellulose Holdings, Inc. ("Alpha") and
its subsidiaries, they are independent accountants within the meaning of the Act
and the applicable published rules and regulations thereunder and that they have
performed a review of the unaudited interim financial information for the three-
month period ended March 31, 1996, in accordance with Statement of Auditing
Standards No. 71 and stating in effect that:
(i) in their opinion the audited financial statements of Alpha
included in the Registration Statement and the Prospectus and reported on
by them comply in form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by Alpha and its subsidiaries; their limited
review in accordance with standards established by the American Institute
of Certified Public Accountants under Statement of Auditing Standards No.
71 of the unaudited interim financial information for the three-month
period ended March 31, 1996, and as at March 31, 1996, as indicated in
their report dated __________, 1996, carrying out certain specified
procedures (but not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter; a
reading of the minutes of the meetings of the
<PAGE>
18
stockholders, directors and the compensation and audit committees of Alpha
and the subsidiaries; and inquiries of certain officials of Alpha who have
responsibility for financial and accounting matters of Alpha and its
subsidiaries as to transactions and events subsequent to December 31, 1995,
nothing came to their attention which caused them to believe that:
(1) any unaudited financial statements included or incorporated
in the Registration Statement and the Prospectus do not comply in form
in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with
respect to financial statements included or incorporated in quarterly
reports on Form 10-Q under the Exchange Act; and said unaudited
financial statements are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent with
that of the audited financial statements included or incorporated in
the Registration Statement and the Prospectus; or
(2) with respect to the period subsequent to March 31, 1996,
there were any changes, at a specified date not more than five
business days prior to the date of the letter, in the long-term debt
(including current maturities) of Alpha and its subsidiaries or
capital stock of Alpha or decreases in the stockholders' equity of
Alpha as compared with the amounts shown on the March 31, 1996,
consolidated balance sheet included or incorporated in the
Registration Statement and the Prospectus, or for the period from
April 1, 1996 to such specified date there were any decreases, as
compared with the corresponding period in the preceding year net
revenues or income before income taxes or in total or per share
amounts of net income of Alpha and its subsidiaries, except in all
instances for changes or decreases set forth in such letter, in which
case the letter shall be accompanied by an explanation by Alpha as to
the significance thereof unless said explanation is not deemed
necessary by the Representatives; and
(iii) they have performed certain other specified procedures as a
result of which they determined that
<PAGE>
19
certain information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical information
derived from the general accounting records of Alpha and its subsidiaries)
set forth in the Registration Statement and the Prospectus agrees with the
accounting records of Alpha and its subsidiaries, excluding any questions
of legal interpretation.
References to the Prospectus in this paragraph (g) include any
supplement thereto at the date of the letter.
(h) At the Execution Time and at the Closing Date, Dipl.-Ing. Wolf
Gadecke Wirtschaftsprufer shall have furnished to the Representatives a letter
or letters, dated respectively as of the Execution Time and as of the Closing
Date, in form and substance satisfactory to the Representatives, confirming
that, with respect to Peter Temming Aktiengesellschaft, they are independent
accountants within the meaning of the Act and the applicable published rules and
regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements of Peter
Temming Aktiengesellschaft included in the Registration Statement and the
Prospectus and reported on by them comply in form in all material respects
with the applicable accounting requirements of the Act and the related
published rules and regulations; and
(ii) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
Peter Temming Aktiengesellschaft and its subsidiaries) set forth in the
Registration Statement and the Prospectus, agrees with the accounting
records of Peter Temming Aktiengesellschaft and its subsidiaries, excluding
any questions of legal interpretation.
References to the Prospectus in this paragraph (h) include any
supplement thereto at the date of the letter.
(i) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
<PAGE>
20
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraphs (f), (g) and (h) of this Section 6 or (ii) any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company and its subsidiaries the effect of which,
in any case referred to in clause (i) or (ii) above, is, in the judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(j) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act) or any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that does
not indicate the direction of the possible change.
(k) Prior to the Closing Date, the Company shall have furnished to
the Representatives such further information, certificates and documents as the
Representatives may reasonably request.
(l) Prior to the Closing Date, the Company shall have consummated the
Equity Offering, the Company Stock Repurchase and shall have caused the
consummation of the Individuals' Stock Purchase (each as defined in the
Prospectus).
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of
such cancellation shall be given to the Company in writing or by telephone or
telefax confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Kirkland &
<PAGE>
21
Ellis, 200 East Randolph Drive, Chicago, IL 60601, on the Closing Date.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including reasonable fees
and disbursements of Cravath, Swaine & Moore) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representatives
specifically for
<PAGE>
22
inclusion therein. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to the
Company by or on behalf of such Underwriter through the Representatives
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any Underwriter may otherwise have. The Company acknowledges that the
statements set forth in the last paragraph of the cover page and under the
heading "Underwriting" in any Preliminary Prospectus and the Prospectus
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in any Preliminary Prospectus or the
Prospectus, and you, as the Representatives, confirm that such statements are
correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified
<PAGE>
23
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding. An indemnifying party
shall not be liable under this Section 8 to any indemnified party regarding any
settlement or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent is consented to by such
indemnifying party, which consent shall not be unreasonably withheld.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the Underwriters may be subject in such proportion as is
<PAGE>
24
appropriate to reflect the relative benefits received by the Company and by the
Underwriters from the offering of the Securities; provided, however, that in no
case shall any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Securities) be responsible for any
amount in excess of the underwriting discount or commission applicable to the
Securities purchased by such Underwriter hereunder. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the Company
and the Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and of the Underwriters in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses), and
benefits received by the Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set forth on the cover
page of the Prospectus. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the Company or the Underwriters. The Company and the Underwriters agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their
<PAGE>
25
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the
principal amount of Securities set forth opposite their names in Schedule I
hereto bears to the aggregate principal amount of Securities set forth opposite
the names of all the remaining Underwriters) the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase; provided, however,
that in the event that the aggregate principal amount of Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate principal amount of Securities set forth in Schedule
I hereto, the remaining Underwriters shall have the right to purchase all, but
shall not be under any obligation to purchase any, of the Securities, and if
such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if prior to such time (i)
trading in the Company's Common Stock shall have been suspended by the
Commission or the New York Stock Exchange or trading in securities generally on
the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on such Exchange, (ii) a banking moratorium
shall have been declared either by Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the judgment of the Representatives, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Prospectus (exclusive of any supplement thereto).
<PAGE>
26
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of
the Company or its officers and of the Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter or the Company or any
of the officers, directors or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York, 10048; or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at 1001 Tillman
Street, Memphis, Tennessee 38108, attention: General Counsel, with a copy to
Kirkland & Ellis, 200 East Randolph Drive, Chicago, IL 60601, attention: Alan G.
Berkshire.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
<PAGE>
27
15. Counterparts. This Agreement may be executed in one or more
counterparts and, when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
Buckeye Cellulose Corporation
By:
----------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
By: Salomon Brothers Inc
By:
------------------------------
Vice President
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
<PAGE>
28
Schedule I
Principal Amount
of Securities
Underwriters to be Purchased
------------ ---------------
Salomon Brothers Inc .................... $
Merrill Lynch, Pierce, Fenner &
Smith Incorporated ...................... $
Total: $
<PAGE>
29
SCHEDULE II
Name of Subsidiary
- ------------------
Buckeye Florida Corporation
Buckeye Florida, Limited
Partnership
Buckeye Limited Corporation
<PAGE>
30
Schedule III
Instruments and Agreements
--------------------------
[To be provided by Kirkland & Ellis]
<PAGE>
Exhibit 4.1
BUCKEYE CELLULOSE CORPORATION, as Issuer,
and
UNION PLANTERS NATIONAL BANK, as Trustee
_________
INDENTURE
Dated as of July___, 1996
________
$100,000,000
_____% Senior Subordinated Notes due 2008
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of July , 1996
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C> <C>
(S) 310 (a)(1).................................... 609
(a)(2).................................... 609
(b).....................................607,610
(S) 311 (a)....................................... 613
(S) 312 (a)....................................... 701
(c)....................................... 702
(S) 313 (a)....................................... 703
(c).....................................703,704
(S) 314 (a)....................................... 704
(a)(4).................................... 1020
(c)(1).................................... 103
(c)(2).................................... 103
(e)....................................... 103
(S) 315 (a)..................................... 601(b)
(b)....................................... 602
(c)..................................... 601(a)
(d)................................ 601(c), 603
(e)....................................... 514
(S) 316 (a)(last sentence)..........101 ("Outstanding")
(a)(1)(A).............................. 502,512
(a)(1)(B)................................. 513
(b)....................................... 508
(c)....................................... 105
(S) 317 (a)(1).................................... 503
(a)(2).................................... 504
(b)....................................... 1003
(S) 318 (a)....................................... 108
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES............................................................... 1
RECITALS.............................................................. 1
</TABLE>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
<TABLE>
<CAPTION>
<S> <C>
Section 101. Definitions................................................ 1
Acquired Indebtedness...................................... 2
Affiliate.................................................. 2
Asset Sale................................................. 3
Average Life to Stated Maturity............................ 3
Bank Credit Facility....................................... 3
Bankruptcy Law............................................. 3
Banks...................................................... 3
Board of Directors......................................... 4
Board Resolution........................................... 4
Business Day............................................... 4
Capital Lease Obligation................................... 4
Capital Stock.............................................. 4
Cash Equivalents........................................... 4
Change in Control.......................................... 5
Commission................................................. 6
Commodity Price Protection Agreement....................... 6
Common Stock............................................... 6
Company.................................................... 6
Company Request or Company Order........................... 6
Consolidated Fixed Charge Coverage Ratio................... 6
Consolidated Income Tax Expense............................ 7
Consolidated Interest Expense.............................. 7
Consolidated Net Income (Loss)............................. 7
</TABLE>
- -----------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
(i)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Consolidated Net Worth .............................. 8
Consolidated Non-cash Charges ....................... 8
Consolidated Tangible Assets ....................... 8
Consolidation ...................................... 8
Corporate Trust Office .............................. 8
Currency Hedging Arrangements ...................... 9
Default ............................................ 9
Designated Senior Indebtedness ..................... 9
Disinterested Director ............................. 9
Event of Default ................................... 9
Exchange Act ....................................... 9
Existing Senior Notes .............................. 9
Existing Senior Subordinated Notes ................. 9
Fair Market Value .................................. 9
Generally Accepted Accounting Principles or GAAP..... 10
Guarantee .......................................... 10
Guaranteed Debt .................................... 10
Guarantor .......................................... 10
Holder ............................................. 10
Indebtedness ....................................... 10
Indenture .......................................... 11
Indenture Obligations .............................. 11
Interest Payment Date .............................. 11
Interest Rate Agreements ........................... 12
Investment ......................................... 12
Lien ............................................... 12
Maturity ........................................... 12
Moody's ............................................ 12
Net Cash Proceeds .................................. 12
Officers' Certificate .............................. 13
Opinion of Counsel ................................. 13
Opinion of Independent Counsel ..................... 13
Outstanding ........................................ 14
Pari Passu Indebtedness ............................ 15
Paying Agent ....................................... 15
Permitted Holders .................................. 15
Permitted Indebtedness ............................. 15
Permitted Investment ............................... 17
Permitted Lien ..................................... 18
Permitted Subsidiary Indebtedness .................. 18
Person ............................................. 18
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Predecessor Security....................................... 18
Preferred Stock............................................ 18
Public Equity Offering..................................... 18
Purchase Money Obligation.................................. 18
Qualified Capital Stock.................................... 19
Redeemable Capital Stock................................... 19
Redemption Date............................................ 19
Redemption Price........................................... 19
Regular Record Date........................................ 19
Responsible Officer........................................ 19
S&P........................................................ 20
Securities................................................. 20
Securities Act............................................. 20
Senior Indebtedness........................................ 20
Senior Representative...................................... 20
Special Record Date........................................ 21
Stated Maturity............................................ 21
Subordinated Indebtedness.................................. 21
Subsidiary................................................. 21
Trust Indenture Act........................................ 21
Trustee.................................................... 21
Unrestricted Subsidiary.................................... 21
Unrestricted Subsidiary Indebtedness....................... 22
Voting Stock............................................... 23
Wholly Owned Subsidiary.................................... 23
Section 102. Other Definitions.......................................... 23
Section 103. Compliance Certificates and Opinions....................... 24
Section 104. Form of Documents Delivered to Trustee..................... 25
Section 105. Acts of Holders............................................ 26
Section 106. Notices, etc., to the Trustee and the Company.............. 27
Section 107. Notice to Holders; Waiver.................................. 28
Section 108. Conflict with Trust Indenture Act.......................... 28
Section 109. Effect of Headings and Table of Contents................... 28
Section 110. Successors and Assigns..................................... 29
Section 111. Separability Clause........................................ 29
Section 112. Benefits of Indenture...................................... 29
Section 113. GOVERNING LAW.............................................. 29
Section 114. Legal Holidays............................................. 29
Section 115. Independence of Covenants.................................. 30
Section 116. Schedules and Exhibits..................................... 30
Section 117. Counterparts............................................... 30
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE TWO
SECURITY FORMS
<S> <C> <C>
Section 201. Forms Generally............................................ 30
Section 202. Form of Face of Security................................... 31
Section 203. Form of Reverse of Securities.............................. 33
Section 204. Form of Trustee's Certificate of Authentication............ 37
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms............................................ 38
Section 302. Denominations.............................................. 39
Section 303. Execution, Authentication, Delivery and Dating............. 39
Section 304. Temporary Securities....................................... 41
Section 305. Registration, Registration of Transfer and Exchange........ 41
Section 306. Mutilated, Destroyed, Lost and Stolen Securities........... 42
Section 307. Payment of Interest; Interest Rights Preserved............. 43
Section 308. Persons Deemed Owners...................................... 45
Section 309. Cancellation............................................... 45
Section 310. Computation of Interest.................................... 45
Section 311. CUSIP Numbers.............................................. 46
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance................................................ 46
Section 402. Defeasance and Discharge................................... 46
Section 403. Covenant Defeasance........................................ 47
Section 404. Conditions to Defeasance or Covenant Defeasance............ 48
Section 405. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions............. 51
Section 406. Reinstatement.............................................. 51
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.......................................... 52
Section 502. Acceleration of Maturity; Rescission and Annulment......... 54
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................... 55
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 504. Trustee May File Proofs of Claim........................... 56
Section 505. Trustee May Enforce Claims without Possession of
Securities................................................ 57
Section 506. Application of Money Collected............................. 58
Section 507. Limitation on Suits........................................ 58
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest...................................... 59
Section 509. Restoration of Rights and Remedies......................... 59
Section 510. Rights and Remedies Cumulative............................. 60
Section 511. Delay or Omission Not Waiver............................... 60
Section 512. Control by Holders......................................... 60
Section 513. Waiver of Past Defaults.................................... 61
Section 514. Undertaking for Costs...................................... 61
Section 515. Waiver of Stay, Extension or Usury Laws.................... 62
Section 516. Remedies Subject to Applicable Law......................... 62
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee.......................................... 62
Section 602. Notice of Defaults......................................... 64
Section 603. Certain Rights of Trustee.................................. 64
Section 604. Trustee Not Responsible for Recitals, Dispositions
of Securities or Application of Proceeds Thereof.......... 66
Section 605. Trustee and Agents May Hold Securities;
Collections; etc.......................................... 66
Section 606. Money Held in Trust........................................ 67
Section 607. Compensation and Indemnification of Trustee and
Its Prior Claim........................................... 67
Section 608. Conflicting Interests...................................... 68
Section 609. Corporate Trustee Required; Eligibility.................... 68
Section 610. Resignation and Removal; Appointment of Successor
Trustee................................................... 69
Section 611. Acceptance of Appointment by Successor..................... 71
Section 612. Merger, Conversion, Consolidation or Succession
to Business............................................... 72
Section 613. Preferential Collection of Claims Against Company.......... 72
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses
of Holders................................................ 73
Section 702. Disclosure of Names and Addresses of Holders............... 73
Section 703. Reports by Trustee......................................... 74
Section 704. Reports by Company......................................... 74
</TABLE>
(v)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
<S> <C> <C>
Section 801. Company May Consolidate, etc., Only on Certain Terms....... 75
Section 802. Successor Substituted...................................... 77
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without
Consent of Holders........................................ 77
Section 902. Supplemental Indentures and Agreements with Consent
of Holders................................................ 78
Section 903. Execution of Supplemental Indentures....................... 80
Section 904. Effect of Supplemental Indentures.......................... 80
Section 905. Conformity with Trust Indenture Act........................ 81
Section 906. Reference in Securities to Supplemental Indentures......... 81
Section 907. Notice of Supplemental Indentures.......................... 81
Section 908. Revocation and Effect of Consents.......................... 81
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest................. 82
Section 1002. Maintenance of Office or Agency............................ 82
Section 1003. Money for Security Payments to Be Held in Trust............ 82
Section 1004. Corporate Existence........................................ 84
Section 1005. Payment of Taxes and Other Claims.......................... 84
Section 1006. Maintenance of Properties.................................. 85
Section 1007. Insurance.................................................. 85
Section 1008. Limitation on Indebtedness................................. 86
Section 1009. Limitation on Restricted Payments.......................... 87
Section 1010. Limitation on Transactions with Affiliates................. 91
Section 1011. Limitation on Liens........................................ 92
Section 1012. Limitation on Sale of Assets............................... 92
Section 1013. Limitation on Senior Subordinated Indebtedness............. 98
Section 1014. Limitation on Issuances of Guarantees of Subordinated
and Pari Pasu Indebtedness................................ 98
Section 1015. Restriction on Transfer of Assets.......................... 99
Section 1016. Purchase of Securities upon a Change in Control............ 99
Section 1017. Limitation on Subsidiary Capital Stock..................... 104
</TABLE>
(vi)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1018. Limitation on Dividends and Other Payment Restriction
Affecting Subsidiaries.................................... 105
Section 1019. Limitation on Unrestricted Subsidiaries.................... 105
Section 1020. Provision of Financial Statements.......................... 106
Section 1021. Statement by Officers as to Default........................ 106
Section 1022. Waiver of Certain Covenants................................ 107
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption....................................... 107
Section 1102. Applicability of Article................................... 108
Section 1103. Election to Redeem; Notice to Trustee...................... 108
Section 1104. Selection by Trustee of Securities to Be Redeemed.......... 108
Section 1105. Notice of Redemption....................................... 109
Section 1106. Deposit of Redemption Price................................ 110
Section 1107. Securities Payable on Redemption Date...................... 110
Section 1108. Securities Redeemed or Purchased in Part................... 111
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Section 1201. Securities Subordinate to Senior Indebtedness.............. 111
Section 1202. Payment Over of Proceeds Upon Dissolution, Etc............. 112
Section 1203. Suspension of Payment When Senior Indebtedness
in Default................................................ 114
Section 1204. Payment Permitted if No Default............................ 115
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness.... 116
Section 1206. Provisions Solely to Define Relative Rights................ 116
Section 1207. Trustee to Effectuate Subordination........................ 117
Section 1208. No Waiver of Subordination Provisions...................... 117
Section 1209. Notice to Trustee.......................................... 118
Section 1210. Reliance on Judicial Orders or Certificates................ 119
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness
Preservation of Trustee's Rights.......................... 119
Section 1212. Article Applicable to Paying Agents........................ 120
Section 1213. No Suspension of Remedies.................................. 120
Section 1214. Trustee's Relation to Senior Indebtedness.................. 120
</TABLE>
(vii)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
<S> <C> <C>
Section 1301. Satisfaction and Discharge of Indenture.................... 121
Section 1302. Application of Trust Money................................. 122
TESTIMONIUM............................................................... 123
SIGNATURES AND SEALS...................................................... 124
ACKNOWLEDGMENTS
SCHEDULE I Permitted Holders
SCHEDULE II Existing Indebtedness
SCHEDULE III Existing Dividend Restrictions
EXHIBIT A Form of Intercompany Note
</TABLE>
(viii)
<PAGE>
INDENTURE, dated as of July , 1996, between Buckeye Cellulose Corporation,
a Delaware corporation (the "Company"), and Union Planters National Bank, a
national banking association organized under the statutes of the United States,
as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of _____% Senior
Subordinated Notes due 2008 (the "Securities"), of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture and the Securities;
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of and to govern indentures
qualified under the Trust Indenture Act;
All acts and things necessary have been done to make the Securities, when
duly issued and executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company and this Indenture a valid
agreement of the Company in accordance with the terms of this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;
<PAGE>
(b) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(e) all references to $, US$, dollars or United States dollars shall refer
to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles refer to this
Indenture unless otherwise so indicated.
Certain terms used principally in Article Four are defined in Article Four.
The following terms shall have the following meanings:
"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.
"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
-2-
<PAGE>
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of: (i) any
Capital Stock of any Subsidiary of the Company; (ii) all or substantially all of
the properties and assets of any division or line of business of the Company or
any of its Subsidiaries; or (iii) any other properties or assets of the Company
or any Subsidiary of the Company other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties and assets (A) that is governed by Article Eight, (B)
that is by any Subsidiary of the Company to the Company or any Wholly Owned
Subsidiary in accordance with the terms of this Indenture, (C) that is of
inventory in the ordinary course of business, (D) that is of obsolete equipment
in the ordinary course of business or (E) the Fair Market Value of which in the
aggregate during any 12 month period, for all such transfers, does not exceed $5
million.
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means the Bank Credit Agreement, dated as of
November 28, 1995, 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 this Indenture).
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Banks" means the lenders under the Bank Credit Facility.
-3-
<PAGE>
"Board of Directors" means the board of directors of the Company or
any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions or trust companies in
The City of New York, Memphis, Tennessee or the city in which the Corporate
Trust Office of the Trustee is located are authorized or obligated by law,
regulation or executive order to close.
"Capital 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.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock, whether now outstanding or issued after
the date of this Indenture.
"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 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, (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 or any successor
-4-
<PAGE>
rating agency or "A-1" (or higher) according to 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" according to Moody's or "A-1" 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.
"Change in Control" means the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders (including any
Permitted Holders that are part of a "group"), 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 shares that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly (including, without
limitation, through direct or indirect purchase or beneficial ownership of
Capital Stock of an entity referred to in clause (ii) of the definition of
"Permitted Holders"), of more than 50% of the total voting power of all
outstanding Voting Stock of the Company; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the board of directors of the Company (together with any new directors whose
election to such board 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 such board of directors then in office; (iii)
the Company consolidates with or merges with or into any Person or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
corporation consolidates with or merges into or with the Company in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is changed into or exchanged for cash, securities or other property,
other than any such transaction where the outstanding Voting Stock of the
Company is not affected or is not changed or exchanged at all (except to the
extent necessary to reflect a change in the jurisdiction of incorporation of the
Company or the formation of a holding company for the Company as described in
clause (ii) of the definition of "Permitted Holders" or where (A) the
outstanding Voting Stock of the Company is changed into or exchanged for (x)
Voting Stock of the surviving corporation which is not Redeemable Capital Stock
or (y) cash, securities and other property (other than Capital Stock of the
surviving corporation) in an amount which could be paid by the Company as a
Restricted Payment in accordance with Section 1009 (and such amount shall be
treated as a Restricted Payment subject to the provisions described under
Section
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1009), and (B) no "person" or "group", other than Permitted Holders (including
any Permitted Holders as part of a "group"), "beneficially owns" immediately
after such transaction, directly or indirectly (including, without limitation,
through direct or indirect purchase or beneficial ownership of Capital Stock of
an entity referred to in clause (ii) of the definition of "Permitted Holders"),
more than 50% of the total voting power of all outstanding Voting Stock of the
surviving corporation); or (iv) the Company is liquidated or dissolved or adopts
a plan of liquidation or dissolution other than in a transaction which complies
with the provisions described under Article Eight.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act then the
body performing such duties at such time.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value of which is dependent upon, fluctuations
in commodity prices.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" means Buckeye Cellulose Corporation, a corporation
incorporated under the laws of Delaware, until a successor Person shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice-Chairman, its President, its Chief Executive Officer, its Chief Operating
Officer or a Vice President (regardless of Vice Presidential designation), and
by any one of its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"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
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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.
"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.
"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 Capital 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.
"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)
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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 this
Indenture, or (viii) any gain arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness of such Person.
"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.
"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).
"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.
"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.
"Corporate Trust Office" means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be administered, as designated
by the Trustee, which office at the date of execution of this Indenture is
located at 6200 Poplar Avenue, Memphis, TN 38119.
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"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.
"Default" means any event which is, or after notice or passage of any
time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Bank Credit Facility and (ii) any other Senior Indebtedness which is
incurred pursuant to an agreement (or series of related agreements) providing
for Indebtedness of at least $25 million and is specifically designated in the
instrument evidencing such Senior Indebtedness or the agreement under which such
Senior Indebtedness arises as "Designated Senior Indebtedness" by the Company.
"Disinterested Director" means, with respect to any transaction or
series of related transactions, a member of the board of directors of the
Company 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.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"Existing Senior Notes" means the 10-1/4% Senior Notes Due 2001 of the
Company.
"Existing Senior Subordinated Notes" means the 8-1/2% Senior
Subordinated Notes due 2005 of the Company.
"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.
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"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of this Indenture.
"Guarantee" means the guarantee by any Guarantor of the Company's
Indenture Obligations.
"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 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.
"Guarantor" means any Subsidiary of the Company which becomes a
guarantor of the Securities pursuant to Section 1014 or Section 1015 of this
Indenture until a successor replaces such party pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit issued under letter of credit
facilities, acceptance facilities or other similar facilities and in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Capital Stock of such Person, or any warrants, rights or options
to acquire such Capital Stock, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds,
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notes, debentures or other similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables arising in
the ordinary course of business, (iv) all obligations under Interest Rate
Agreements, Currency Hedging Agreements or Commodity Price Protection Agreements
of such Person, (v) all Capital Lease Obligations of such Person, (vi) all
Indebtedness referred to in clauses (i) through (v) above of other Persons and
all dividends of other Persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien, upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
(vii) all Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock
issued by such Person valued at the greater of its voluntary or involuntary
maximum fixed repurchase price plus accrued and unpaid dividends, and (ix) any
amendment, supplement, modification, deferral, renewal, extension, refunding or
refinancing of any liability of the types referred to in clauses (i) through
(viii) above. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value to be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed (including
all exhibits and schedules hereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company, any
Guarantor and any other obligor under this Indenture or under the Securities to
pay principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with this Indenture,
the Securities and the performance of all other obligations to the Trustee and
the holders under this Indenture and the Securities, according to the respective
terms thereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
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"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.
"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.
"Lien" means any mortgage or deed of trust, charge, pledge, lien
(statutory or otherwise), security interest, assignment, deposit, arrangement,
easement, hypothecation, claim, preference, priority or other encumbrance upon
or with respect to any property of any kind (including any conditional sale,
capital lease or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired.
"Maturity" means, when used with respect to the Securities, the date
on which the principal of the Securities becomes due and payable as therein
provided or as provided in this Indenture, whether at Stated Maturity, the Offer
Date or the redemption date and whether by declaration of acceleration, Offer in
respect of Excess Proceeds, Change in Control Offer in respect of a Change in
Control, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor
rating agency.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any
Person, the proceeds thereof (without duplication in respect of all Asset Sales)
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 (i) brokerage
commissions and other reasonable fees and expenses (including 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 the subject of such Asset Sale, (iv) amounts required to be paid
to any Person (other than the Company or any
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Subsidiary of the Company) owning a beneficial interest in the assets subject to
the Asset Sale, (v) appropriate amounts to be provided by the Company or any
Subsidiary of the Company, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Subsidiary of the Company, as the case may be, after such
Asset Sale, 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, all as reflected in an officers' certificate delivered to the Trustee and
(vi) any amounts required to be placed by the Company or any Subsidiary of the
Company in a restricted escrow or reserve account by the terms of the agreements
pursuant to which the Asset Sale is made, provided that any such amounts shall
be deemed to be Net Cash Proceeds of an Asset Sale upon the release of such
amounts to the Company or any of its Subsidiaries 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 in Section 1009, 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.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Vice Chairman, the President, the Chief Executive Officer, the Chief
Operating Officer or a Vice President (regardless of Vice Presidential
designation), and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company or the Trustee, unless an Opinion of Independent Counsel
is required pursuant to the terms of this Indenture, and who shall be reasonably
acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel
issued by someone who is not an employee or consultant (other than non-employee
legal counsel) of the Company but who may be regular outside counsel to the
Company and who shall be reasonably acceptable to the Trustee.
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"Outstanding" when used with respect to Securities means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent) for
the Holders of such Securities; provided that if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor reasonably satisfactory to the Trustee has been
made;
(c) Securities, except to the extent provided in Sections 402 and
403, with respect to which the Company has effected defeasance or covenant
defeasance as provided in Article Four; and
(d) Securities paid in lieu of replacement pursuant to Section 306
and Securities in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
and the Company proof reasonably satisfactory to each of them that such
Securities are held by a bona fide purchaser in whose hands the Securities are
valid obligations of the Company; provided, however, that in determining whether
the Holders of the requisite principal amount of Outstanding Securities have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company, any other obligor upon the
Securities or any Affiliate of the Company or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the reasonable satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor.
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"Pari Passu Indebtedness" means any Indebtedness of the Company that
is pari passu in right of payment to the Securities.
"Paying Agent" means any Person (including the Company) authorized by
the Company to pay the principal of, premium, if any, or interest on any
Securities on behalf of the Company.
"Permitted Holders" means (i) the individuals and related entities
listed on Schedule I hereto and (ii) any corporation (or other entity) which
owns all of the outstanding capital stock of the Company if such entity acquires
such ownership in a transaction in which the former owners of all the Capital
Stock of the Company acquire proportionate ownership of all of the Capital Stock
(or similar equity ownership interest) of such entity (or any parent
organization which owns all of the outstanding Capital Stock (or similar equity
ownership interest) of such entity).
"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) $155 million 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 Securities;
(iii) guarantees of any of the Company's Subsidiaries of Indebtedness of
the Company; provided such Indebtedness and guarantees are incurred in
accordance with the terms of this Indenture;
(iv) Indebtedness of the Company or any of its Subsidiaries outstanding on
the date of this Indenture and listed on Schedule II hereto;
(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 this
Indenture and is subordinated in right of payment from and after such time as
the Securities shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Securities; provided, further, that any disposition,
pledge or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to
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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 this Indenture;
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)
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, which has Indebtedness owing to the Company or any
other Wholly Owned Subsidiary, ceases to be a Wholly Owned Subsidiary 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 Capital Lease Obligations not to exceed $5
million outstanding at any one time in the aggregate;
(x) Indebtedness of the Company or any of its Subsidiaries incurred after
the date of this Indenture relating to letters of credit supporting workers
compensation obligations not to exceed $6 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
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(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 Securities 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 to Stated Maturity 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.
"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 1012 to the extent such Investments are non-
cash proceeds as permitted under such Section; (v) Investments in existence on
the date of this Indenture; (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 definition of "Permitted
-17-
<PAGE>
Investments," Investments valued at Fair Market Value at the time made not to
exceed $15 million outstanding at any one time in the aggregate.
"Permitted Lien" means any Lien arising by reason of taxes not yet
delinquent or which are being contested in good faith.
"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.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for a mutilated
Security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"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.
"Public Equity Offering" means an underwritten offer and sale of
Common Stock by the Company to the public pursuant to a registration statement
(other than Form S-8 or any successor form or forms or a registration statement
relating to securities issuable by or in connection with any benefit plan of
such Person) that has been declared effective by the Commission pursuant to the
Securities Act.
"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 Securities 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
-18-
<PAGE>
(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 recourse solely to the assets so purchased or acquired,
any additions and accessions thereto and any proceeds therefrom.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Redeemable Capital Stock.
"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 Securities 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.
"Redemption Date" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the date fixed for
such redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the price at which it
is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 1 or September 1 (whether or not a Business Day) next
preceding such Interest Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or the agent of the Trustee
appointed hereunder,
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<PAGE>
including any vice president, assistant vice president, assistant secretary, or
any other officer or assistant officer of the Trustee or the agent of the
Trustee appointed hereunder to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"S&P" means Standard & Poor's Corporation or any successor rating
agency.
"Securities" has the meaning specified in the first recital of this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding) on any Indebtedness of the Company
(other than as otherwise provided in this definition), whether outstanding on
the date of this Indenture or thereafter created, incurred or assumed, and
whether at any time owing, actually or contingent, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
the principal of, premium, if any, and interest (including interest accruing
after the filing of a petition initiating any proceeding under any state,
federal or foreign bankruptcy laws whether or not allowable as a claim in such
proceeding) on all monetary obligations of every kind and nature of the Company
from time to time owed to the lenders under the Bank Credit Facility; provided,
however, that any Indebtedness under any refinancing, refunding, or replacement
of the Bank Credit Facility shall not constitute Senior Indebtedness to the
extent that the Indebtedness thereunder is by its express terms subordinate to
any other Indebtedness of the Company. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the Securities,
(ii) Indebtedness evidenced by the Existing Senior Subordinated Notes, (iii)
Indebtedness that is by its terms subordinate or junior in right of payment to
any Indebtedness of the Company, (iv) Indebtedness which, when incurred and
without respect to any election under Section 1111 (b) of Title 11 United States
Code, is without recourse to the Company, (v) Indebtedness which is represented
by Redeemable Capital Stock, (vi) any liability for foreign, federal, state,
local or other taxes owed or owing by the Company to the extent such liability
constitutes Indebtedness, (vii) Indebtedness of the Company to a Subsidiary of
the Company or any other Affiliate of the Company or any of such Affiliate's
Subsidiaries and (viii) that
-20-
<PAGE>
portion of any Indebtedness which at the time of issuance is issued in violation
of this Indenture.
"Senior Representative" means a representative of one or more holders
of Designated Senior Indebtedness.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means, when used with respect to any Indebtedness or
any installment of interest thereon, the dates specified in such Indebtedness as
the fixed date on which the principal of such Indebtedness or such installment
of interest, as the case may be, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
subordinated in right of payment to the Securities.
"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 of the Company shall not be deemed a
Subsidiary of the Company under the Securities.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, or any successor statute.
"Trustee" means, except as set forth in Section 405 hereof, the Person
named as the "Trustee" in the first paragraph of this Indenture, until a
successor trustee shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean such successor trustee.
"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 of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
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
-21-
<PAGE>
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 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 of the
Company 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
1008 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.
"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
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<PAGE>
Indebtedness of the Company or any of its Subsidiaries or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity.
"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).
"Wholly Owned Subsidiary" means a Subsidiary of the Company all the
Capital Stock of which is owned by the Company or another Wholly Owned
Subsidiary. For purposes of this definition any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall be disregarded
in determining the ownership of a Subsidiary of the Company.
Section 102. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Act" 105
"Change in Control Offer" 1016
"Change in Control Purchase Date" 1016
"Change in Control Purchase Notice" 1016
"Change in Control Purchase Price" 1016
"covenant defeasance" 403
"Defaulted Interest" 307
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Deficiency" 1012
"Excess Proceeds" 1012
"incur" 1008
"Offer" 1012
"Offer Date" 1012
"Offered Price" 1012
"Pari Passu Debt Amount" 1012
"Pari Passu Offer" 1012
"Permitted Payments" 1209
"Required Filing Date" 1020
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
"Restricted Payments" 1009
"Security Amount" 1012
"Security Register" 305
"Security Registrar" 305
"Special Payment Date" 307
"Surviving Entity" 801
"U.S. Government Obligations" 404
</TABLE>
Section 103. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company and any other obligor
on the Securities (if applicable) shall furnish to the Trustee an Officers'
Certificate in a form and substance reasonably acceptable to the Trustee stating
that all conditions precedent, if any, provided for in this Indenture (including
any covenant compliance with which constitutes a condition precedent) relating
to the proposed action have been complied with, and an Opinion of Counsel in a
form and substance reasonably acceptable to the Trustee stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that, in the case of any such application or request as to
which the furnishing of such certificates or opinions is specifically required
by any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or Opinion of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
individual or firm signing such opinion has read such covenant or condition and
the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual or such firm,
he or it has made such examination or investigation as is necessary to enable
him or it to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
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<PAGE>
(d) a statement as to whether, in the opinion of each such individual or
such firm, such condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or other obligor on
the Securities may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company or
other obligor on the Securities stating that the information with respect to
such factual matters is in the possession of the Company or other obligor on the
Securities, unless such officer or counsel knows, or in the exercise of
reasonable care should know that the certificate or opinion or representations
with respect to such matters are erroneous. Opinions of Counsel required to be
delivered to the Trustee may have qualifications customary for opinions of the
type required and counsel delivering such Opinions of Counsel may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, including certificates certifying as to matters
of fact, including that various financial covenants have been complied with.
Any certificate or opinion of an officer of the Company or other obligor on
the Securities may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer knows or in the
exercise of reasonable care should know that the certificate or opinion or
representations with respect to the accounting matters upon which his
certificate or opinion may be based are erroneous. Any certificate or opinion of
any independent firm of public accountants filed with the Trustee shall contain
a statement that such firm is independent with respect to the Company.
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<PAGE>
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 105. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section 105.
(b) The ownership of Securities shall be proved by the Security Register.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holder of any Security shall bind every future Holder of the
same Security or the Holder of every Security issued upon the transfer thereof
or in exchange therefor or in lieu thereof, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or the Company
in reliance thereon, whether or not notation of such action is made upon such
Security.
(d) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate of affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its
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<PAGE>
option, by or pursuant to a Board Resolution, fix in advance a record date for
the determination of such Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. Notwithstanding Trust Indenture Act Section
316(c), any such record date shall be the record date specified in or pursuant
to such Board Resolution, which shall be a date not more than 30 days prior to
the first solicitation of Holders generally in connection therewith and no later
than the date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for purposes of determining
whether Holders of the requisite proportion of Securities then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; provided
that no such request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date.
Section 106. Notices, etc., to the Trustee and the Company.
---------------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company or any other obligor on
the Securities shall be sufficient for every purpose (except as provided in
Section 501(c)) hereunder if in writing and mailed, first-class postage prepaid,
or delivered by recognized overnight courier, to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Trustee Administration, or at
any other address previously furnished in writing to the Holders, the Company or
any other obligor on the Securities by the Trustee; or
(b) the Company by the Trustee or any Holder shall be sufficient for every
purpose (except as provided in Section 501(c)) hereunder if in writing and
mailed, first-class postage prepaid, or delivered by recognized overnight
courier, to the Company addressed to it at 1001 Tillman Street, Memphis,
Tennessee 38108, Attention: David B. Ferraro, or at any other address previously
furnished in writing to the Trustee by the Company.
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<PAGE>
Section 107. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice when mailed to a Holder in the aforesaid manner shall
be conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause, it shall be impracticable to mail notice of any event as
required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Section 108. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, the provision or requirement of the Trust Indenture Act shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
Section 109. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
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<PAGE>
Section 110. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall bind
successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 112. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent, the Holders and the holders of Senior Indebtedness)
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 113. GOVERNING LAW.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
Section 114. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Maturity
or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal or premium, if any, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Maturity or Stated Maturity and no interest shall accrue with respect to such
payment for the period from and after such Interest Payment Date, Redemption
Date, Maturity or Stated Maturity, as the case may be, to the next succeeding
Business Day.
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<PAGE>
Section 115. Independence of Covenants.
-------------------------
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
Section 116. Schedules and Exhibits.
----------------------
All schedules and exhibits attached hereto are by this reference made
a part hereof with the same effect as if herein set forth in full.
Section 117. Counterparts.
------------
This 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 the same instrument.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication thereon
shall be in substantially the forms set forth in this Article Two, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange, any
organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as
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<PAGE>
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Section 202. Form of Face of Security.
------------------------
(a) The form of the face of the Securities shall be substantially as
follows:
BUCKEYE CELLULOSE CORPORATION
-----------------
% SENIOR SUBORDINATED NOTE DUE 2008
------
No.
----------- $
----------------------
CUSIP No.
------------
Buckeye Cellulose Corporation, a Delaware corporation (herein called
the "Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to ______
or registered assigns, the principal sum of ________ United States dollars on
September 15, 2008, at the office or agency of the Company referred to below,
and to pay interest thereon from __________, 1996, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semiannually on March 15 and September 15 in each year, commencing September 15,
1996 at the rate of _____% per annum, in cash in United States dollars, until
the principal hereof is paid or duly provided for. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 1 or September 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for, and interest on such
defaulted interest at the interest rate borne by the Securities, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such defaulted interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities
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<PAGE>
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in The City of New York, and at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the address of the Person
entitled thereto as such address shall appear on the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon.
BUCKEYE CELLULOSE CORPORATION
By:__________________________
Title:_______________________
Attest:
[SEAL]
_________________________
Authorized Officer
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<PAGE>
Section 203. Form of Reverse of Securities.
-----------------------------
(a) The form of the reverse of the Securities shall be
substantially as follows:
This Security is one of a duly authorized issue of Securities of
the Company designated as its _____% Senior Subordinated Notes due 2008
(herein called the "Securities"), limited (except as otherwise provided in
the Indenture referred to below) in aggregate principal amount to
$100,000,000, issued under and subject to the terms of an indenture (herein
called the "Indenture") dated as of July, 1996, between the Company and
Union Planters National Bank, as trustee (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are,
and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time of
(a) the entire Indebtedness on the Securities and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Indebtedness evidenced by the Securities is, to the extent
and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter, and this
Security is issued subject to such provisions. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee his
attorney-in-fact for such purpose; provided, however, that, subject to
Section 406 of the Indenture, the Indebtedness evidenced by this Security
shall cease to be so subordinate and subject in right of payment upon any
defeasance of this Security referred to in clause (a) or (b) of the
preceding paragraph.
The Securities are 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 to the Holders by
first-class mail in
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<PAGE>
amounts of $1,000 or an integral multiple thereof at the following
redemption prices (expressed as a percentage of the principal amount), if
redeemed during the 12-month period beginning on September 15 of the years
indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2001 .................... %
_________
2002 .................... %
_________
2003 .................... %
_________
</TABLE>
and thereafter at 100% of the principal amount in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on applicable Regular Record Dates or Special
Record Dates to receive interest due on applicable Interest Payment Dates
or Special Payment Dates).
Up to $30,000,000 aggregate principal amount of the Securities
may be redeemed at any time on or prior to September 15, 1999, at the
option of the Company within 60 days after the consummation of one or more
Public Equity Offerings by the Company from the net proceeds to the Company
of any such Public Equity Offering, upon not less than 20 nor more than 60
days prior notice to the Holders, in amounts of $1,000 or an integral
multiple thereof, at a redemption price equal to _____% of the principal
amount, together with accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on applicable
Record Dates or Special Record Dates to receive interest due on applicable
Interest Payment Dates or Special Payment Dates); provided that after
giving effect to any such redemption, at least $70,000,000 aggregate
principal amount of the Securities remains outstanding.
If less than all of the Securities are to be redeemed pursuant to
the preceding two paragraphs, the Trustee shall select the Securities or
portions thereof to be redeemed pro rata, by lot or by any other method the
Trustee shall deem fair and reasonable.
If a Change in Control shall occur at any time, then, each Holder
shall have the right to require that the Company purchase such Holder's
Securities 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
thereof, plus accrued and unpaid interest, if any, to the date of purchase.
Within 30 days following any Change in Control, the
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Company shall notify the Trustee thereof and give written notice of such
Change in Control to each Holder by first-class mail, postage prepaid, at
his address appearing in the Security Register.
Notice of redemption if mailed in the manner provided in the
Indenture shall be conclusively presumed to have been given, whether or not
the Holder receives such notice. In any case, failure to give such notice
by mail or any defect in the notice to the Holder of any Security
designated for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other Security.
Under certain circumstances, in the event the Net Cash Proceeds
received by the Company from any Asset Sale, which proceeds are not used to
repay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company or reasonably related thereto, equals or exceeds
a specified amount, the Company will be required to apply such proceeds to
the repayment of the Securities and Pari Passu Indebtedness.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity
is on or prior to the Redemption Date will be payable to the Holders of
such Securities of record as of the close of business on the applicable
Regular Record Date or Special Record Date referred to on the face hereof.
Securities (or portions thereof) for whose redemption and payment provision
is made in accordance with the Indenture shall cease to bear interest from
and after the Redemption Date.
In the event of redemption or repurchase of this Security in
accordance with the Indenture in part only, a new Security or Securities
for the unredeemed portion hereof shall be issued in the name of the Holder
hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal amount of all the Securities may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the
Indenture and the Securities at any time by the
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<PAGE>
Company and the Trustee with the consent of the Holders of a specified
percentage in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders
of specified percentages in aggregate principal amount of the Securities at
the time Outstanding, on behalf of the Holders of all the Securities, to
waive compliance by the Company with certain provisions of the Indenture
and the Securities and certain past Defaults under the Indenture and the
Securities and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Security shall be conclusive and binding upon
such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent or waiver
is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company or any other obligor on the Securities (in the event such other
obligor is obligated to make payments in respect of the Securities), which
is absolute and unconditional, to pay the principal of, premium, if any,
and interest on this Security at the times, place, and rate, and in the
coin or currency, herein prescribed, subject to the subordination
provisions of the Indenture.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities shall have the right to direct the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, provided that (a) such direction shall not be in conflict with any
rule of law or with the Indenture, expose the Trustee to personal
liability, or be unduly prejudicial to Holders not joining therein and (b)
subject to the provisions of Section 315 of the Trust Indenture Act, the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
The Securities are issuable only in fully registered form without
coupons, in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set
forth, the Securities are exchangeable for a like aggregate principal
amount of Securities of a different authorized denomination, as requested
by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable on the
Security Register of the Company, upon surrender of this Security for
registration of transfer at the office or
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<PAGE>
agency of the Company maintained for such purpose in The City of New York,
and at such other office or agency of the Company as may be maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar
duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued
to the designated transferee or transferees.
No service charge shall be made for any registration of transfer
or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to and at the time of due presentment of this Security for
registration of transfer, the Company, the Trustee and any Paying Agent of
the Company or the Trustee may treat the Person in whose name this Security
is registered as the owner hereof for all purposes, whether or not this
Security is overdue, and neither the Company, the Trustee nor any Paying
Agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
Section 204. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
The Trustee's certificate of authentication shall be included on
the form of the face of the Securities substantially in the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
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<PAGE>
Dated:
UNION PLANTERS NATIONAL
BANK, as Trustee
By:_________________________
Authorized Officer
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $100,000,000
in principal amount of Securities, except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities pursuant to Section 303, 304, 305, 306, 906, 1012,
1016 or 1108.
The Securities shall be known and designated as the "_____%
Senior Subordinated Notes due 2008" of the Company. The Stated Maturity of
the Securities shall be September 15, 2008, and the Securities shall each
bear interest at the rate of _____% from __________, 1996, or from the
most recent Interest Payment Date to which interest has been paid, as the
case may be, payable semiannually on March 15 and September 15, in each
year, commencing September 15, 1996, until the principal thereof is paid or
duly provided for. Interest on any overdue principal, interest (to the
extent lawful) or premium, if any, shall be payable on demand.
The principal of, premium, if any, and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose in The City of New York, and at such other office or agency of the
Company as may be maintained for such purpose; provided, however, that
interest may be paid at the option of the Company by check mailed to
addresses of the Persons entitled thereto as such addresses shall appear on
the Security Register.
The Securities shall be subject to repurchase by the Company
pursuant to an Offer as provided in Section 1012.
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<PAGE>
Holders shall have the right to require the Company to purchase
their Securities, in whole or in part, in the event of a Change in Control
pursuant to Section 1016.
The Securities shall be redeemable as provided in Article Eleven
and in the Securities.
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and
certain Events of Default thereunder may be defeased as provided in Article
Four.
The Indebtedness evidenced by the Securities shall be
subordinated in right of payment to Senior Indebtedness as provided in
Article 12.
Section 302. Denominations.
-------------
The Securities shall be issuable only in fully registered form
without coupons, in denominations of $1,000 and any integral multiple
thereof.
Section 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by one
of its Chairman of the Board, its President, its Chief Executive Officer,
its Chief Operating Officer or one of its Vice Presidents under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signatures of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of
such Securities or did not hold such offices at the date of such
Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by
the Company to the Trustee for authentication, together with a Company
Order for the authentication and delivery of such Securities; and the
Trustee in accordance with such Company Order shall authenticate and
deliver such Securities as provided in this Indenture and not otherwise.
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<PAGE>
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided
for herein duly executed by the Trustee by manual signature of an
authorized officer, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been
duly authenticated and delivered hereunder and is entitled to the benefits
of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall sell, assign,
convey, transfer, lease or otherwise dispose of substantially all of its
properties and assets to any Person, and the successor Person resulting
from such consolidation or surviving such merger, or into which the Company
shall have been consolidated or merged, or the successor Person which shall
have participated in the sale, assignment, conveyance, transfer, lease or
other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
sale, assignment, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Securities executed in the name of the successor Person with such
changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such exchange and
of like principal amount; and the Trustee, upon Company Request of the
successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any
time be authenticated and delivered in any new name of a successor Person
pursuant to this Section 303 in exchange or substitution for or upon
registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities
authenticated and delivered in such new name.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities on behalf of the Trustee. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as any Security
Registrar or Paying Agent to deal with the Company and its Affiliates.
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<PAGE>
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten or
otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and
with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such
purpose pursuant to Section 1002 (or in accordance with Section 303, in the
case of initial Securities), without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor
a like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as
definitive Securities.
Section 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause the Trustee to keep, so long as it is the
Security Registrar, at the Corporate Trust Office of the Trustee, or such
other office as the Trustee may designate, a register (the register
maintained in such office or in any other office or agency designated
pursuant to Section 1002 being herein sometimes referred to as the
"Security Register") in which, subject to such reasonable regulations as
the Security Registrar may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee
shall initially be the "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided. The Company may
appoint one or more co-registrars.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 1002,
the Company shall execute, and the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more new
Securities of the same series of any authorized denomination or
denominations, of a like aggregate principal amount.
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At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination or denominations, of a like
aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities of the same series which the
Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same Indebtedness, and entitled to the same benefits under
this Indenture, as the Securities surrendered upon such registration of
transfer or exchange.
Every Security presented or surrendered for registration of
transfer, or for exchange or redemption shall (if so required by the
Company or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made to a Holder for any registration
of transfer or exchange or redemption of Securities, but the Company may
require payment of a sum sufficient to pay all documentary, stamp or
similar issue or transfer taxes or other governmental charges that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 303, 304, 305, 306,
906, 1012, 1016 or 1108 not involving any transfer.
The Company shall not be required (a) to issue, register the
transfer of or exchange any Security during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
the Securities selected for redemption under Section 1104 and ending at the
close of business on the day of such mailing or (b) to register the
transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of Securities being redeemed in
part.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If (a) any mutilated Security is surrendered to the Trustee, or
(b) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Security, and there is delivered to
the Company and the Trustee, such security or indemnity, in each case, as
may be required by them to save each of them
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<PAGE>
harmless, then, in the absence of notice to the Company or the Trustee that
such Security has been acquired by a bona fide purchaser, the Company shall
execute and upon a Company Request the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a replacement Security of like tenor
and principal amount, bearing a number not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a replacement Security, pay such
Security.
Upon the issuance of any replacement Securities under this
Section, the Company may require the payment of a sum sufficient to pay all
documentary, stamp or similar issue or transfer taxes or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company and any other obligor upon
the Securities, whether or not the destroyed, lost or stolen Security shall
be at any time enforceable by anyone, and shall be entitled to all benefits
of this Indenture equally and proportionately with any and all other
Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest payment.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on the Stated Maturity of such and
interest on such defaulted interest at the then applicable interest rate
borne by the Securities, to the extent lawful (such defaulted interest and
interest thereon herein collectively called
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<PAGE>
"Defaulted Interest"), shall forthwith cease to be payable to the Holder on
the Regular Record Date; and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Subsection (a) or (b)
below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the
date (not less than 30 days after such notice) of the proposed
payment (the "Special Payment Date"), and at the same time the
Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the Special Payment Date, such
money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Subsection
provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the Special
Payment Date and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company in writing of such Special Record
Date. In the name and at the expense of the Company, the Trustee
shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it
appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date and Special
Payment Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are
registered on such Special Record Date and shall no longer be
payable pursuant to the following Subsection (b).
(b) The Company may make payment to the Persons in whose name the
Securities are registered at the close of business on the Special
Record Date of any Defaulted Interest in any other lawful manner
not
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<PAGE>
inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may
be required by such exchange, if, after written notice given by
the Company to the Trustee of the proposed payment pursuant to
this Subsection, such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section 307, each
Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such
other Security.
Section 308. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name any Security is registered as
the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 307) interest on
such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary.
Section 309. Cancellation.
------------
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and,
if not already cancelled, shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities cancelled as provided in this
Section 309, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be returned to the Company.
The Trustee shall provide the Company a list of all Securities that have
been cancelled from time to time as requested in writing by the Company.
Section 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
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Section 311. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers
in notices of redemption as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness
of such numbers either as printed on the Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption
shall not be affected by any defect in or omission of such numbers.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either Section 402 or Section
403 be applied to all of the Outstanding Securities (the "Defeased
Securities"), upon compliance with the conditions set forth below in this
Article Four.
Section 402. Defeasance and Discharge.
Upon the Company's exercise under Section 401 of the option
applicable to this Section 402, the Company and any other obligor upon the
Securities, if any, shall be deemed to have been discharged from its
obligations with respect to the Defeased Securities on the date the
conditions set forth in Section 404 below are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that each of the
Company and any other obligor upon the Securities shall be deemed to have
paid and discharged the entire Indebtedness represented by the Defeased
Securities, which shall thereafter be deemed to be "Outstanding" only for
the purposes of Section 405 and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company,
and, upon Company Request, shall execute proper instruments acknowledging
the same), except for the following which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of
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Defeased Securities to receive, solely from the trust fund described in
Section 404 and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such
Securities when such payments are due, (b) the Company's obligations with
respect to such Defeased Securities under Sections 304, 305, 306, 1002 and
1003, (c) the rights, powers, trusts, duties, indemnities and immunities of
the Trustee hereunder, including, without limitation, the Trustee's rights
under Section 606, and (d) this Article Four. Subject to compliance with
this Article Four, the Company may exercise its option under this Section
402 notwithstanding the prior exercise of its option under Section 403 with
respect to the Securities.
Section 403. Covenant Defeasance.
Upon the Company's exercise under Section 401 of the option
applicable to this Section 403, the Company and any other obligor upon the
Securities shall be released from its obligations under any covenant or
provision contained or referred to in Sections 1005 through 1020,
inclusive, and the provisions of clauses (iii) and (iv) of Section 801(a)
and Article Twelve shall not apply, with respect to the Defeased Securities
on and after the date the conditions set forth in Section 404 below are
satisfied (hereinafter, "covenant defeasance"), and the Defeased Securities
shall thereafter be deemed to be not "Outstanding" for the purposes of any
direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants and the
provisions of Article Twelve, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Defeased Securities, the Company
and any such obligor may omit to comply with, and shall have no liability
in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly, by reason of any
reference elsewhere herein or in such Defeased Securities or other
documents to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an
Event of Default under Section 501(c) but, except as specified above, the
remainder of this Indenture and such Defeased Securities shall be
unaffected thereby.
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Section 404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 402 or Section 403 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 608 who shall agree to comply with the provisions of this
Article Four applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (a)
United States dollars in an amount, (b) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect thereof
in accordance with their terms and with no further reinvestment will
provide, not later than one day before the due date of any payment, money
in an amount, or (c) a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants or a nationally recognized investment banking firm
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge the principal of, premium, if any,
and interest on the Defeased Securities on the Stated Maturity of such
principal or installment of principal or interest (or on any date after
September 15, 2001 (such date being referred to as the "Defeasance
Redemption Date"), if at or prior to exercising under Section 401 either
its option applicable to Section 402 or its option applicable to Section
403, the Company shall have delivered to the Trustee an irrevocable notice
to redeem all of the Outstanding Securities on the Defeasance Redemption
Date); provided that the Trustee (or such qualifying trustee) shall have
been irrevocably instructed to apply such United States dollars or the
proceeds of such U.S. Government Obligations to said payments with respect
to the Securities; and provided, further, that the United States dollars or
U.S. Government Obligations deposited shall not be subject to the rights of
the holders of Senior Indebtedness pursuant to the provisions of Article
Twelve. For this purpose, "U.S. Government Obligations" means securities
that are (i) direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such U.S.
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Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or
the specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(2) In the case of an election under Section 402, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in
the United States stating that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B) since
the date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Independent Counsel in the United States shall
confirm that, the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such defeasance had not occurred.
(3) In the case of an election under Section 403, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in
the United States to the effect that the Holders of the Outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred.
(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as subsections 501(g) and
(h) are concerned, at any time during the period ending on the 91st day
after the date of deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period).
(5) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in this Indenture and for
purposes of the Trust Indenture Act with respect to any securities of the
Company or any other obligor upon the Securities (assuming the Securities
are in default within the meaning of said Act).
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(6) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which it is bound.
(7) Such defeasance or covenant defeasance shall not result in
the trust arising from such deposit constituting an investment company as
defined in the Investment Company Act of 1940, as amended, unless such
trust shall be qualified under such Act or exempt from regulation
thereunder.
(8) The Company shall have delivered to the Trustee an Opinion of
Independent Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(9) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the Securities over the other creditors
of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others.
(10) No event or condition shall exist that would prevent the
Company from making payments of the principal of, premium, if any, and
interest on the Securities on the date of such deposit or at any time
ending on the 91st day after the date of such deposit.
(11) The Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel in the United States,
each stating that all conditions precedent provided for relating to either
the defeasance under Section 402 or the covenant defeasance under Section
403 (as the case may be) have been complied with as contemplated by this
Section 404.
Opinions of Counsel or Opinions of Independent Counsel required
to be delivered under this Section may have qualifications customary for
opinions of the type required and counsel delivering such opinions may rely
on certificates of the Company or government or other officials customary
for opinions of the type required, which certificates shall be limited as
to matters of fact, including that various financial covenants have been
complied with.
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Section 405. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003,
all United States dollars and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee--
collectively for purposes of this Section 405, the "Trustee") pursuant to
Section 404 in respect of the Defeased Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through
any Paying Agent (excluding the Company or any of its Affiliates acting as
Paying Agent) as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law. Money so
held in trust shall not be subject to the provisions of Article Twelve.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 404 or the principal and interest
received in respect thereof other than any such tax, fee or other charge
which by law is for the account of the Holders of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon
Company Request any United States dollars or U.S. Government Obligations
held by it as provided in Section 404 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect defeasance
or covenant defeasance.
Section 406. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or U.S. Government Obligations in accordance with Section
402 or 403, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Securities, and the provisions of Article Twelve hereof,
shall be revived and reinstated as though no deposit had occurred pursuant
to Section 402 or 403, as the case may be, until such time as the
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Trustee or Paying Agent is permitted to apply all such United States
dollars or U.S. Government Obligations in accordance with Section 402 or
403, as the case may be; provided, however, that if the Company makes any
payment to the Trustee or Paying Agent of principal, premium, if any, or
interest on any Security following the reinstatement of its obligations,
the Trustee or Paying Agent shall promptly pay any such amount to the
Holders of the Securities and the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the United
States dollars and U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be occasioned by the provisions of Article Twelve or be voluntary
or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) there shall be a default in the payment of any interest on
any Security when it becomes due and payable, and such default shall
continue for a period of 30 days;
(b) there shall be a default in the payment of the principal of
(or premium, if any, on) any Security at its Maturity (upon acceleration,
optional or mandatory redemption, if any, required repurchase or
otherwise);
(c) (i) there shall be a default in the performance, or breach,
of any covenant or agreement of the Company under this Indenture (other
than a default in the performance, or breach, of a covenant or agreement
which is specifically dealt with in Subsection (a) or (b) of this Section
501 or in clauses (ii), (iii) and (iv) of this Subsection (c) of this
Section 501) and such default or breach shall continue for a period of 30
days after written notice has been given, by certified mail, (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of the Outstanding
Securities, specifying such default or breach and requiring it to be
remedied and stating that such notice is a
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"Notice of Default" hereunder; (ii) there shall be a default in the
performance or breach of the provisions of Article Eight; (iii) the Company
shall have failed to make or consummate an Offer in accordance with the
provisions of Section 1012; or (iv) the Company shall have failed to make
or consummate a Change in Control Offer in accordance with the provisions
of Section 1016;
(d) one or more defaults shall have occurred under any
agreements, indentures or instruments under which the Company or any of its
Subsidiaries then has outstanding Indebtedness in excess of $10 million in
the aggregate and, if such Indebtedness has not already matured at its
final maturity in accordance with its terms, such Indebtedness shall have
been accelerated;
(e) one or more judgments, orders or decrees for the payment of
money in excess of $5 million, either individually or in the aggregate,
shall be rendered against the Company or any of its Subsidiaries or any of
their respective properties and shall not be discharged and either (i) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (ii) there shall have been a period of 60 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of an appeal or otherwise, shall not be in effect;
(f) any holder or holders of at least $10 million in aggregate
principal amount of Indebtedness of the Company or any of its Subsidiaries
after a default under such Indebtedness shall notify the Trustee of the
intended sale or disposition of any assets of the Company or any of its
Subsidiaries that have been pledged to or for the benefit of such holder or
holders to secure such Indebtedness or shall commence proceedings, or take
any action (including by way of set-off), to retain in satisfaction of such
Indebtedness or to collect on, seize, dispose of or apply in satisfaction
of Indebtedness, assets of the Company or any of its Subsidiaries
(including funds on deposit or held pursuant to lock-box and other similar
arrangements);
(g) there shall have been the entry by a court of competent
jurisdiction of (i) a decree or order for relief in respect of the Company
or any of its Subsidiaries in an involuntary case or proceeding under any
applicable Bankruptcy Law or (ii) a decree or order adjudging the Company
or any of its Subsidiaries bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any of its Subsidiaries under any applicable federal or
state law, or appointing a custodian, receiver, liquidator,
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assignee, trustee, sequestrator (or other similar official) of the Company
or any of its Subsidiaries or of any substantial part of their respective
properties, or ordering the winding up or liquidation of their respective
affairs, and any such decree or order for relief shall continue to be in
effect, or any such other decree or order shall be unstayed and in effect,
for a period of 60 consecutive days; or
(h) (i) the Company or any of its Subsidiaries commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (ii) the
Company or any of its Subsidiaries consents to the entry of a decree or
order for relief in respect of the Company or any such Subsidiary in an
involuntary case or proceeding under any applicable Bankruptcy Law or to
the commencement of any bankruptcy or insolvency case or proceeding against
it, (iii) the Company or any of its Subsidiaries files a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state law, (iv) the Company or any of its Subsidiaries (1) consents to the
filing of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or any such Subsidiary or of any substantial part
of their respective properties, (2) makes an assignment for the benefit of
creditors or (3) admits in writing its inability to pay its debts generally
as they become due, or (v) the Company or any of its Subsidiaries takes any
corporate action in furtherance of any such actions in this paragraph (h).
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified
in Sections 501(g) and (h)) shall occur and be continuing, the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Securities Outstanding may, and the Trustee at the request of the Holders
of not less than 25% in aggregate principal amount of the Securities
Outstanding shall, declare all unpaid principal of, premium, if any, and
accrued interest on all the Securities to be due and payable immediately,
by a notice in writing to the Company (and to the Trustee if given by the
Holders of the Securities) and upon any such declaration, such principal,
premium, if any, and interest shall become due and payable immediately. If
an Event of Default specified in clause (g) or (h) of Section 501 occurs
and is continuing with respect to the Company and is continuing, then all
the Securities shall ipso facto become and be due and payable immediately
in an amount equal to the principal amount of the Securities, together with
premium, if any, and accrued and unpaid interest, if any, to the date the
Securities become due and payable, without any
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declaration or other act on the part of the Trustee or any Holder.
Thereupon, the Trustee may, at its discretion, proceed to protect and
enforce the rights of the holders of Securities by appropriate judicial
proceedings.
After such declaration of acceleration but before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in
aggregate principal amount of the Securities Outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and
its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all sums paid or advanced by the Trustee under Section
607 and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Outstanding Securities,
(iii) the principal of and premium, if any, on any
Outstanding Securities which have become due otherwise than by
such declaration of acceleration and interest thereon at a rate
borne by the Securities, and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the
Securities; and
(b) all Events of Default, other than the non-payment of
principal of the Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
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(a) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
(b) default is made in the payment of the principal of or
premium, if any, on any Security at the Stated Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, subject to Article Twelve, the whole amount
then due and payable on such Securities for principal and premium, if any,
and interest, with interest upon the overdue principal and premium, if any,
and, to the extent that payment of such interest shall be legally
enforceable, upon overdue installments of interest, at the rate borne by
the Securities; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due
and unpaid and may prosecute such proceeding to judgment or final decree,
and may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other
obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights
of the Holders under this Indenture by such appropriate private or judicial
proceedings as the Trustee shall deem most effectual to protect and enforce
such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein or therein, or to enforce any other proper remedy, subject however
to Section 512. No recovery of any such judgment upon any property of the
Company shall affect or impair any rights, powers or remedies of the
Trustee or the Holders.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial
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proceeding relative to the Company or any other obligor upon the Securities
or the property of the Company or of such other obligor or their creditors,
the Trustee (irrespective of whether the principal of the Securities shall
then be due and payable as therein expressed or by declaration or otherwise
and irrespective of whether the Trustee shall have made any demand on the
Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal,
and premium, if any, and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(b) subject to Article Twelve, to collect and receive any moneys
or other property payable or deliverable on any such claims and to
distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay the Trustee any amount due it
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 505. Trustee May Enforce Claims without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name and as trustee of an express
trust, and any recovery of judgment shall, after provision for the payment
of the reasonable compensation, expenses, disbursements and advances of the
Trustee,
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its agents and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article or
otherwise on behalf of the Holders or the Trustee pursuant to this Article
or through any proceeding or any arrangement or restructuring in
anticipation or in lieu of any proceeding contemplated by this Article
shall be applied, subject to applicable law, in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal, premium, if any, or interest, upon
presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: Subject to Article Twelve, to the payment of the amounts
then due and unpaid upon the Securities for principal, premium, if any, and
interest, in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal,
premium, if any, and interest; and
THIRD: Subject to Article Twelve, the balance, if any, to the
Person or Persons entitled thereto, including the Company, provided that
all sums due and owing to the Holders and the Trustee have been paid in
full as required by this Indenture.
Section 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or the
Securities, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
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(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as trustee hereunder;
(c) such Holder or Holders have offered to the Trustee an
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 15 days after its receipt of such notice,
request and offer (and if requested, provision) of indemnity has failed to
institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 15-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture or any Security to affect, disturb or prejudice the
rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture or any Security, except in the manner provided in this Indenture
and for the equal and ratable benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, but
subject to Article Twelve, the Holder of any Security shall have the right
based on the terms stated herein, which is absolute and unconditional, to
receive payment of the principal of, premium, if any, and (subject to
Section 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption or repurchase, on
the Redemption Date or the repurchase date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder, subject to Article Twelve.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been discontinued
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or abandoned for any reason, or has been determined adversely to the
Trustee or to such Holder, then and in every such case the Company, any
other obligor on the Securities, the Trustee and the Holders shall, subject
to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no
such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as provided in Section 306, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to
be exclusive of any other right or remedy, and every right and remedy
shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given
by this Article or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee
or by the Holders, as the case may be.
Section 512. Control by Holders.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities shall have the right to direct the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, provided that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture (including, without limitation, Section 507), expose
the Trustee to personal liability, or be unduly prejudicial to Holders not
joining therein; and
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(b) subject to the provisions of Section 315 of the Trust
Indenture Act, the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of all
the Securities waive any past Default hereunder and its consequences,
except a Default
(a) in the payment of the principal of, premium, if any, or
interest on any Security; or
(b) in respect of a covenant or a provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Security Outstanding affected by such modification or
amendment.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee
for any action taken, suffered or omitted by it as Trustee, the filing by
any party litigant in such suit of an undertaking to pay the costs of such
suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section
shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of the Outstanding Securities, or to any
suit instituted by any Holder for the enforcement of the payment of the
principal of, premium, if any, or interest on any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
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Section 515. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and any other obligor upon the Securities
covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which
would prohibit or forgive the Company or any such obligor from paying all
or any portion of the principal of, premium, if any, or interest on the
Securities contemplated herein or in the Securities or which may affect the
covenants or the performance of this Indenture; and each of the Company and
any such obligor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
Section 516. Remedies Subject to Applicable Law.
----------------------------------
All rights, remedies and powers provided by this Article Five may
be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law in the premises, and all the provisions of
this Indenture are intended to be subject to all applicable mandatory
provisions of law which may be controlling in the premises and to be
limited to the extent necessary so that they will not render this Indenture
invalid, unenforceable or not entitled to be recorded, registered or filed
under the provisions of any applicable law.
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee.
-----------------
Subject to the provisions of Trust Indenture Act Section 315(a)
through 315(d):
(a) if a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in its
exercise thereof as a
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prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) except during the continuance of a Default or an Event of
Default:
(1) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse
to the Trustee; and
(2) in the absence of bad faith or willful misconduct on
its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture. However, in
the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of
this Indenture, but need not confirm or investigate the accuracy
of mathematical calculations or other facts stated therein.
(c) the Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this Subsection (c) does not limit the effect of
Subsection (b) of this Section 601;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
is proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith, in accordance
with a direction of the Holders of a majority in principal amount
of Outstanding Securities relating to the time, method and place
of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power confirmed upon the
Trustee under this Indenture.
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(d) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(e) whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to Subsections (a), (b), (c) and (d) of this Section 601.
(f) the Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from
other assets except to the extent required by law.
Section 602. Notice of Defaults.
------------------
Within 90 days after the occurrence of any Default, the Trustee
shall transmit by mail to all Holders and any other persons entitled to
receive reports pursuant to Section 313(c) of the Trust Indenture Act, as
their names and addresses appear in the Security Register, notice of such
Default hereunder known to the Trustee, unless such Default shall have been
cured or waived; provided, however, that, except in the case of a Default
in the payment of the principal of, premium, if any, or interest on any
Security, the Trustee shall be protected in withholding such notice if and
so long as a trust committee of Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of
the Holders.
Section 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601 hereof and Trust
Indenture Act Sections 315(a) through 315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of Indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
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(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and
any resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) the Trustee may consult with counsel of its selection and
any advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon
in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities
which might be incurred therein or thereby in compliance with such request
or direction;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within
the discretion, rights or powers conferred upon it by this Indenture other
than any liabilities arising out of the negligence, bad faith or willful
misconduct of the Trustee;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security or other paper
or document unless requested in writing to do so by the Holders of not less
than a majority in aggregate principal amount of the Securities then
Outstanding; provided that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such investigation shall be paid by the
Company or, if paid by the Trustee or any predecessor Trustee, shall be
repaid by the Company upon demand; provided, further, the Trustee in its
discretion may make such further inquiry or investigation into such facts
or matters as it may deem fit, and, if the Trustee shall determine to make
such
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further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(h) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder; and
(i) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers.
Section 604. Trustee Not Responsible for Recitals, Dispositions of
------------------------------------------------------
Securities or Application of Proceeds Thereof.
---------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Securities and perform its obligations
hereunder and that the statements made by it in a Statement of Eligibility
on Form T-1 supplied to the Company are true and accurate subject to the
qualifications set forth therein. The Trustee shall not be accountable for
the use or application by the Company of Securities or the proceeds
thereof.
Section 605. Trustee and Agents May Hold Securities; Collections;
----------------------------------------------------
etc.
---
The Trustee, any Paying Agent, Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become
the owner or pledgee of Securities, with the same rights it would have if
it were not the Trustee, Paying Agent, Security Registrar or such other
agent and, subject to Sections 608 and
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613 hereof and Trust Indenture Act Sections 310 and 311, may otherwise deal
with the Company and receive, collect, hold and retain collections from the
Company with the same rights it would have if it were not the Trustee,
Paying Agent, Security Registrar or such other agent.
Section 606. Money Held in Trust.
-------------------
All moneys received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Except for funds or securities
deposited with the Trustee pursuant to Article Four, the Trustee shall be
required to invest all moneys received by the Trustee, until used or
applied as herein provided, in Cash Equivalents in accordance with the
specific written directions of the Company.
Section 607. Compensation and Indemnification of Trustee and Its
---------------------------------------------------
Prior Claim.
-----------
The Company covenants and agrees to pay to the Trustee from time
to time, and the Trustee shall be entitled to, such compensation as the
Company and the Trustee shall from time to time agree in writing for all
services rendered by it hereunder (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust) and the Company covenants and agrees to pay or reimburse the Trustee
and each predecessor Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by or on behalf of the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel
and of all agents and other persons not regularly in its employ) except any
such expense, disbursement or advance as may arise from its negligence, bad
faith or willful misconduct. The Company also covenants and agrees to
indemnify the Trustee and each predecessor Trustee for, and to hold it
harmless against, any and all claim, loss, damage, liability, tax,
assessment or other governmental charge (other than taxes applicable to the
Trustee's compensation hereunder) or expense incurred without negligence,
bad faith or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of this Indenture or the
trusts hereunder and its duties hereunder, including enforcement of this
Section 607 and also including any liability which the Trustee may incur as
a result of failure to withhold, pay or report any tax, assessment or other
governmental charge, and the costs and expenses of defending itself against
or investigating any claim or liability in connection with the
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exercise or performance of any of its powers or duties hereunder. The
obligations of the Company under this Section 607 to compensate, reimburse
and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall constitute an additional obligation
hereunder and shall survive the satisfaction and discharge of this
Indenture and the resignation or removal of the Trustee and each
predecessor Trustee.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to
funds held in trust for the benefit of the Holders of particular
Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(g) or Section
501(h), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.
Section 608. Conflicting Interests.
---------------------
The Trustee shall comply with the provisions of Section 310(b) of
the Trust Indenture Act.
Section 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as trustee under Trust Indenture Act Section 310(a)(5) and
which shall have an office in The City of New York, a combined capital and
surplus of at least $100,000,000, to the extent there is an institution
eligible and willing to serve. If the Trustee does not have an office in
The City of New York, the Trustee may appoint an agent in The City of New
York reasonably acceptable to the Company to conduct any activities which
the Trustee may be required under this Indenture to conduct in The City of
New York. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of federal, state,
territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section 609, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with
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the provisions of this Section 609, the Trustee shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor
-------------------------------------------------
Trustee.
-------
(a) No resignation or removal of the Trustee and no appointment
of a successor trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor trustee under Section
611.
(b) The Trustee, or any trustee or trustees hereafter appointed,
may at any time resign by giving written notice thereof to the Company.
Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee by written instrument executed by authority of
the Board of Directors, a copy of which shall be delivered to the resigning
Trustee and a copy to the successor trustee.
(c) The Trustee may be removed at any time by an Act of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
Trust Indenture Act Section 310(b) after written request therefor
by the Company or by any Holder who has been a bona fide Holder
of a Security for at least six months,
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or
of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, the Holder of any Security who has
been a bona fide
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Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper
and prescribe, remove the Trustee and appoint a successor trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, the Company, by a Board Resolution, shall promptly appoint a
successor trustee and shall comply with the applicable requirements of
Section 611. If an instrument of acceptance by a successor trustee shall
not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, or after such removal or incapacity, the
resigning Trustee may, or any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, the Company has not appointed a successor
Trustee, a successor trustee shall be appointed by the Act of the Holders
of a majority in principal amount of the Outstanding Securities delivered
to the Company and the retiring Trustee. Such successor trustee so
appointed shall forthwith upon its acceptance of such appointment become
the successor trustee and supersede the successor trustee appointed by the
Company. If no successor trustee shall have been so appointed by the
Company or the Holders of the Securities and accepted appointment in the
manner hereinafter provided, the Holder of any Security who has been a bona
fide Holder for at least six months may, subject to Section 514, on behalf
of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor trustee by
mailing written notice of such event by first-class mail, postage prepaid,
to the Holders of Securities as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor
trustee and the address of its Corporate Trust Office or agent hereunder.
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Section 611. Acceptance of Appointment by Successor.
--------------------------------------
Every successor trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee as
if originally named as Trustee hereunder; but, nevertheless, on the written
request of the Company or the successor trustee, upon payment of its
charges pursuant to Section 607 then unpaid, such retiring Trustee shall
pay over to the successor trustee all moneys at the time held by it
hereunder and shall execute and deliver an instrument transferring to such
successor trustee all such rights, powers, duties and obligations. Upon
request of any such successor trustee, the Company shall execute any and
all instruments for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any Trustee ceasing to
act shall, nevertheless, retain a prior lien upon all property or funds
held or collected by such Trustee or such successor trustee to secure any
amounts then due such Trustee pursuant to the provisions of Section 607.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 611 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under
the provisions of Trust Indenture Act Section 310(a) and this Article Six
and shall have a combined capital and surplus of at least $100,000,000 and
have a Corporate Trust Office or an agent selected in accordance with
Section 609.
Upon acceptance of appointment by any successor trustee as
provided in this Section 611, the Company shall give notice thereof to the
Holders of the Securities, by mailing such notice to such Holders at their
addresses as they shall appear on the Security Register. If the acceptance
of appointment is substantially contemporaneous with the resignation, then
the notice called for by the preceding sentence may be combined with the
notice called for by Section 610. If the Company fails to give such notice
within 10 days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be given at the expense of
the Company.
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Section 612. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
--------
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under Trust
Indenture Act Section 310(a) and this Article Six and shall have a combined
capital and surplus of at least $100,000,000 and have a Corporate Trust
Office or an agent selected in accordance with Section 609 without the
execution or filing of any paper or any further act on the part of any of
the parties hereto.
In case at the time such successor to the Trustee shall succeed
to the trusts created by this Indenture any of the Securities shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and
deliver such Securities so authenticated; and, in case at that time any of
the Securities shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor trustee; and in all
such cases such certificate shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have; provided that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities in
the name of any predecessor Trustee shall apply only to its successor or
successors by merger, amalgamation, conversion or consolidation.
Section 613. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the
Company (or other obligor under the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the
collection of claims against the Company (or any such other obligor). A
Trustee who has resigned or been removed shall be subject to the Trust
Indenture Act Section 311 (a) to the extent indicated therein.
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders.
--------
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such request, a
list of similar form and content to that in Subsection (a) hereof as of a
date not more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Holders may communicate pursuant to Trust Indenture Act Section
312(b) with other Holders with respect to their rights under this Indenture
or the Securities, and the Trustee shall comply with Trust Indenture Act
Section 312(b). The Company, the Trustee, the Registrar and any other
Person shall have the protection of Trust Indenture Act Section 312(c).
Further, every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee or any agent of either of them shall be held accountable by reason
of the disclosure of any information as to the names and addresses of the
Holders in accordance with Trust Indenture Act Section 312, regardless of
the source from which such information was derived, and that the Trustee
shall not be held accountable by reason of mailing any material pursuant to
a request made under Trust Indenture Act Section 312.
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Section 703. Reports by Trustee.
------------------
(a) Within 60 days after May 15 of each year commencing with the
first May 15 after the issuance of Securities, the Trustee, if so required
under the Trust Indenture Act, shall transmit by mail to all Holders, in
the manner and to the extent provided in Trust Indenture Act Section
313(c), a brief report dated as of such May 15 in accordance with and with
respect to the matters required by Trust Indenture Act Section 313(a). The
Trustee shall also transmit by mail to all Holders, in the manner and to
the extent provided in Trust Indenture Act Section 313(c), a brief report
in accordance with and with respect to the matters required by Trust
Indenture Act Section 313(b)(2).
(b) A copy of each report transmitted to Holders pursuant to this
Section 703 shall, at the time of such transmission, be mailed to the
Company and filed with each stock exchange, if any, upon which the
securities are listed and also with the Commission. The Company will
promptly notify the Trustee when the Securities are listed on any stock
exchange.
Section 704. Reports by Company.
------------------
The Company shall:
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the Exchange
Act; or, if the Company is not required to file information, documents or
reports pursuant to either of said Sections, then it shall (i) deliver to
the Trustee annual audited financial statements of the Company and its
Subsidiaries, prepared on a consolidated basis in conformity with GAAP,
within 150 days after the end of each fiscal year of the Company, and (ii)
file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
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(b) file with the Trustee and the Commission, in accordance with
the rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants of this
Indenture as is required from time to time by such rules and regulations
(including such information, documents and reports referred to in Trust
Indenture Act Section 314(a)); and
(c) within 30 days after the filing thereof with the Trustee,
transmit by mail to all Holders in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information,
documents and reports required to be filed by the Company pursuant to
Section 1020 hereunder and subsections (a) and (b) of this Section as is
required by rules and regulations prescribed from time to time by the
Commission.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of
such shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, etc., Only on Certain Terms.
----------------------------------------------------
The Company will not, in a single transaction or through a series
of related transactions, consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all
or substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any
such transaction or series of related transactions if such transaction or
series of related transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or disposition of all or
substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis to any other Person or group of
affiliated Persons, unless at the time and after giving effect thereto:
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(i) either (1) the Company shall be the continuing
corporation or (2) the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, conveyance, transfer,
lease or disposition all or substantially all of the properties
and assets of the Company and its Subsidiaries on a Consolidated
basis (the "Surviving Entity") shall be a corporation duly
organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia
and such Person expressly assumes, by a supplemental indenture,
executed and delivered to the Trustee, in a form satisfactory to
the Trustee, all the obligations of the Company under the
Securities and this Indenture, as the case may be, and the
Securities and this Indenture shall remain in full force and
effect as so supplemented;
(ii) immediately before and immediately after giving effect
to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any
of its Subsidiaries which becomes an obligation of the Company or
any of its Subsidiaries in connection with or as a result of such
transaction as having been incurred at the time of such
transaction), no Default or Event of Default shall have occurred
and be continuing;
(iii) immediately before and immediately after giving
effect to such transaction on a pro forma basis (on the
assumption that the transaction occurred on the first day of the
four-quarter period immediately prior to the consummation of such
transaction with the appropriate adjustments with respect to the
transaction being included in such pro forma calculation), the
Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
Section 1008; and
(iv) at the time of the transaction the Company or the
Surviving Entity shall have delivered, or caused to be delivered,
to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel,
each to the effect that such consolidation, merger, transfer,
sale, assignment, conveyance, transfer, lease or other
transaction and the supplemental indenture in respect
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thereof comply with this Indenture and that all conditions
precedent herein provided for relating to such transaction have
been complied with.
Section 802. Successor Substituted.
---------------------
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of
the properties and assets of the Company in accordance with Section 801,
the successor Person formed by such consolidation or into which the Company
is merged or the successor Person to which such sale, assignment,
conveyance, transfer, lease or disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company
under this Indenture and the Securities with the same effect as if such
successor had been named as the Company herein and in the Securities. When
a successor (other than a successor that is an Affiliate of the Company)
assumes all the obligations of its predecessor under this Indenture or the
Securities, the predecessor shall be released from those obligations;
provided that in the case of a transfer by lease, the predecessor shall not
be released from the payment of principal and interest on the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures and Agreements without Consent
------------------------------------------------------
of Holders.
-- -------
Without the consent of any Holders, the Company and any other
obligor upon the Securities, when authorized by a Board Resolution, and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form and substance satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
or any other obligor upon the Securities, and the assumption by any such
successor of the covenants of the Company or such obligor herein and in the
Securities in accordance with Article Eight;
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(b) to add to the covenants of the Company or any other obligor
upon the Securities for the benefit of the Holders or to surrender any
right or power herein conferred upon the Company or any other obligor upon
the Securities, as applicable, herein or in the Securities;
(c) to cure any ambiguity, to correct or supplement any provision
herein or in the Securities which may be defective or inconsistent with any
other provision herein or in the Securities or to make any other provisions
with respect to matters or questions arising under this Indenture or the
Securities, provided that, in each case, such provisions shall not
adversely affect the interests of the Holders;
(d) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by Section 905 or otherwise;
(e) to add a Guarantor pursuant to the requirements of Section
1014 or 1015;
(f) to evidence and provide the acceptance of the appointment of
a successor trustee hereunder; or
(g) to mortgage, pledge, hypothecate or grant a security interest
in favor of the Trustee for the benefit of the Holders as additional
security for the payment and performance of the Indenture Obligations, in
any property or assets, including any which are required to be mortgaged,
pledged or hypothecated, or in which a security interest is required to be
granted to the Trustee pursuant to this Indenture or otherwise.
Section 902. Supplemental Indentures and Agreements with Consent of
------------------------------------------------------
Holders.
-------
With the consent of the Holders of at least a majority in
aggregate principal amount of the Outstanding Securities, by Act of said
Holders delivered to the Company and the Trustee, the Company, when
authorized by Board Resolutions, and the Trustee may (i) enter into an
indenture or indentures supplemental hereto in form and substance
satisfactory to the Trustee, for the purpose of adding any provisions to or
amending, modifying or changing in any manner or eliminating any of the
provisions of this Indenture or the Securities (including but not limited
to, for the purpose of modifying in any manner the rights of the Holders
under this Indenture
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or the Securities) or (ii) waive compliance with any provision in this
Indenture or the Securities (other than waivers of past Defaults covered by
Section 513 and waivers of covenants which are covered by Section 1022);
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security or waive a default in the payment
of the principal or interest on any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or change the coin or currency in which the
principal of any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date);
(b) amend, change or modify the obligation of the Company to make
and consummate an Offer with respect to any Asset Sale or Asset Sales in
accordance with Section 1012 or the obligation of the Company to make and
consummate a Change in Control Offer in the event of a Change in Control in
accordance with Section 1016, including amending, changing or modifying any
definitions with respect thereto;
(c) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(d) modify any of the provisions of this Section 902 or Section
513 or 1022, except to increase the percentage in principal amount of the
Outstanding Securities the consent of whose Holders is required for any
such actions or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Security affected thereby;
(e) except as otherwise permitted under Article Eight, consent to
the assignment or transfer by the Company of any of its rights and
obligations under this Indenture; or
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(f) amend or modify any of the provisions of this Indenture
relating to the subordination of the Securities in any manner adverse to
the Holders or otherwise affect the ranking of the Securities in any manner
adverse to the Holders.
Upon the written request of the Company accompanied by a copy of
Board Resolutions authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent
of Holders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture.
It shall not be necessary for any Act of Holders under this
Section 902 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
Section 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture or waiver permitted by this Article Nine or the
modifications thereby of the trusts created by this Indenture, the Trustee
shall be entitled to receive, and (subject to Trust Indenture Act Section
315(a) through 315(d) and Section 602 hereof) shall be fully protected in
relying upon, an Opinion of Counsel and an Officers' Certificate stating
that the execution of such supplemental indenture (a) is authorized or
permitted by this Indenture and (b) does not violate the provisions of any
agreement or instrument evidencing any other Indebtedness of the Company or
any of its Subsidiaries. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this
Article, this Indenture and the Securities shall be modified in accordance
therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
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Section 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article
Nine shall conform to the requirements of the Trust Indenture Act as then
in effect.
Section 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company
shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
Section 907. Notice of Supplemental Indentures.
---------------------------------
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding
Security affected, in the manner provided for in Section 106, setting forth
in general terms the substance of such supplemental indenture.
Section 908. Revocation and Effect of Consents.
---------------------------------
Until an amendment or waiver becomes effective, a consent to it
by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same Indebtedness as the consenting Holders Security, even if a notation of
the consent is not made on any Security. However, any such Holder, or
subsequent Holder, may revoke the consent as to his Security or portion of
a Security if the Trustee receives the notice of revocation before the date
the amendment or waiver becomes effective. An amendment or waiver shall
become effective in accordance with its terms and thereafter bind every
Holder.
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ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
------------------------------------------
Subject to the provisions of Article Twelve, the Company shall
duly and punctually pay the principal of, premium, if any, and interest on
the Securities in accordance with the terms of the Securities and this
Indenture.
Section 1002. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in The City of New York an office or
agency where Securities may be presented or surrendered for payment, and
where Securities may be surrendered for registration of transfer,
redemption or exchange and where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Company
will give prompt written notice to the Trustee of the location and any
change in the location of any such offices or agencies. If at any time the
Company shall fail to maintain any such required offices or agencies or
shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
office of the agent of the Trustee described above and the Company hereby
appoints such agent as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes,
and may from time to time rescind such designation. The Company will give
prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such office or agency.
Section 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company or any of its Affiliates shall at any time act as
Paying Agent, it will, on or before each due date of the principal of,
premium, if any, or interest on any of the Securities, segregate and hold
in trust for the benefit of the Holders entitled thereto a sum sufficient
to pay the principal, premium, if any, or interest so becoming due until
such sums shall be paid to such Persons or otherwise
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disposed of as herein provided, and will promptly notify the Trustee of its
action or failure so to act.
If the Company or any of its Affiliates is not acting as Paying
Agent, the Company will, on or before each due date of the principal of,
premium, if any, or interest on, any Securities, deposit with a Paying
Agent a sum in same day funds sufficient to pay the principal, premium, if
any, or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will
cause each Paying Agent other than the Trustee to execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such Paying Agent
will:
(a) hold all sums held by it for the payment of the principal
of, premium, if any, or interest on Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal, premium, if any, or interest;
(c) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with
the provisions of this Indenture relating to the duties, rights and
disabilities of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying
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Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Security and remaining unclaimed for two years
after such principal and premium, if any, or interest has become due and
payable shall promptly be paid to the Company on Company Request, or (if
then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company
cause to be published once, in the New York Times and The Wall Street
Journal (national edition), and mail to each such Holder, notice that such
money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification,
publication and mailing, any unclaimed balance of such money then remaining
will promptly be repaid to the Company.
Section 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence and related rights and franchises (charter and
statutory) of the Company and each of its Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right or
franchise or the corporate existence of any such Subsidiary if the Board of
Directors of the Company shall determine that the preservation thereof is
no longer desirable in the conduct of the business of the Company and its
Subsidiaries as a whole and that the loss thereof would not reasonably be
expected to have a material adverse effect on the ability of the Company to
perform its obligations hereunder; and provided, further, however, that the
foregoing shall not prohibit a sale, transfer or conveyance of a Subsidiary
of the Company or any of its assets in compliance with the terms of this
Indenture.
Section 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or
discharged, on or before the date the same shall become due and payable,
(a) all taxes,
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assessments and governmental charges levied or imposed upon the Company or
any of its Subsidiaries shown to be due on any return of the Company or any
of its Subsidiaries or otherwise assessed or upon the income, profits or
property of the Company or any of its Subsidiaries if failure to pay or
discharge the same could reasonably be expected to have a material adverse
effect on the ability of the Company to perform its obligations hereunder
and (b) all lawful claims for labor, materials and supplies, which, if
unpaid, would by law become a Lien upon the property of the Company or any
of its Subsidiaries, except for any Lien permitted to be incurred under
Section 1012, if failure to pay or discharge the same could reasonably be
expected to have a material adverse effect on the ability of the Company to
perform its obligations hereunder; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged
any such tax, assessment charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings
properly instituted and diligently conducted and in respect of which
appropriate reserves (in the good faith judgment of management of the
Company) are being maintained in accordance with GAAP.
Section 1006. Maintenance of Properties.
-------------------------
The Company shall cause all material properties owned by the
Company or any of its Subsidiaries or used or held for use in the conduct
of its business or the business of any of its Subsidiaries to be maintained
and kept in good condition, repair and working order (ordinary wear and
tear excepted) and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the reasonable judgment of the Company may
be consistent with sound business practice and necessary so that the
business carried on in connection therewith may be properly conducted at
all times; provided, however, that nothing in this Section shall prevent
the Company from discontinuing the maintenance of any of such properties if
such discontinuance is, in the reasonable judgment of the Company,
desirable in the conduct of its business or the business of any of its
Subsidiaries and not reasonably expected to have a material adverse effect
on the ability of the Company to perform its obligations hereunder.
Section 1007. Insurance.
---------
The Company shall at all times keep all of its and its
Subsidiaries' properties which are of an insurable nature insured with
insurers, believed by the
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Company in good faith to be financially sound and responsible, against loss
or damage to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
the same general geographic areas in which the Company and its Subsidiaries
operate, except where the failure to do so could not reasonably be expected
to have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or prospects of the Company and its
Subsidiaries, taken as a whole.
Section 1008. 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,
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.
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Section 1009. 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 this 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
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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 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 the provisions contained in Section 1008; 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 this Indenture, does
not exceed the sum of:
(A) $25 million;
(B) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning
July 1, 1996 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 this
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, to
the extent such proceeds are used to purchase, redeem or
otherwise retire Capital Stock or Subordinated Indebtedness as
set forth in clause (ii) or (iii) of paragraph (b) of this
Section 1009);
(D) the aggregate Net Cash Proceeds received after the date of this
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 this
Indenture by the Company from the conversion or exchange, if any,
of
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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 converted debt securities or Redeemable
Capital Stock were issued after the date of this 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 this 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.
(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 1009 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 1009;
(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 1009;
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(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 1009;
(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 (1) 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 to Stated Maturity
greater than the remaining Average Life to Stated Maturity of the
Securities; (3) has a Stated Maturity for its final scheduled
principal payment later than the Stated Maturity for the final
scheduled principal payment of the Securities; and (4) is
expressly subordinated in right of payment to the Securities 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 in Control pursuant to a provision similar to Section
1016; provided that prior to or simultaneously with such
repurchase, the Company has
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made the Change in Control Offer as provided in Section 1016 and
has repurchased all Securities validly tendered for payment in
connection with such Change in 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 1012; provided
that prior to such repurchase the Company has made an Offer to
purchase the Securities as provided in Section 1012 and has
repurchased all Securities validly tendered for payment in
connection with such 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 $2 million plus the aggregate amount by which
repurchases in prior years was less than $2 million.
Section 1010. 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 (i) 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, (ii) 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 (i) above and (iii) with respect
to any transaction or series of related transactions involving an aggregate
value in excess of $5 million, either (x) 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 (y) the Company delivers to
the Trustee a written opinion of an investment banking firm of national
standing or other recognized independent
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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 or
employee benefit arrangements with any officer or director of the Company
or any of its Subsidiaries, including under any stock option or stock
incentive plans).
Section 1011. Limitation on Liens.
-------------------
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create, incur or affirm any Lien of any kind
(other than Permitted Liens) securing any Pari Passu Indebtedness or
Subordinated Indebtedness (including any assumption, guarantee or other
liability with respect thereto by any Subsidiary of the Company) upon any
property or assets (including any intercompany notes) of the Company or any
of its Subsidiaries owned on the date of this Indenture or acquired after
the date of this Indenture, or any income or profits therefrom, unless the
Securities are directly secured equally and ratably with (or, in the case
of Subordinated Indebtedness, prior or senior thereto, with the same
relative priority as the Securities shall have with respect to such
Subordinated Indebtedness) the obligation or liability secured by such
Lien, and except for any Lien securing Acquired Indebtedness created prior
to (and not created in connection with, or in contemplation of) the
incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness by
the Company or any of its Subsidiaries which Indebtedness is permitted
under the provisions of Section 1008; provided that any such Lien extends
only to the assets that were subject to such Lien securing such Acquired
Indebtedness prior to the related acquisition by the Company or its
Subsidiaries.
Section 1012. Limitation on Sale of Assets.
----------------------------
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, consummate an Asset Sale unless
(i) at least 75% of the consideration from such Asset Sale are received in
cash and (ii) the Company or such Subsidiary receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the
assets subject to such Asset Sale (as determined by the Board of Directors
of the Company and evidenced in a Board Resolution); provided that the
amount of any Senior Indebtedness (as shown on the Company's most recent
balance sheet or in the notes thereto) of the Company that is
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assumed by the transferee of any asset in connection with any Asset Sale
shall be deemed to be cash for all purposes of this provision.
(b) If all or a portion of the Net Cash Proceeds of any Asset
Sale are not required to be applied to repay permanently any Senior
Indebtedness then outstanding as required by the terms thereof, or the
Company determines not to apply such Net Cash Proceeds to the permanent
prepayment of such Senior Indebtedness, or if no such Senior Indebtedness
is then outstanding, then the Company or any of its Subsidiaries may,
within 18 months of the Asset Sale, invest (or enter into a legally binding
commitment to invest) the Net Cash Proceeds in properties and other assets
that (as determined by the Board of Directors of the Company) replace the
properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in the businesses of the Company or
its Subsidiaries existing on the date of this Indenture or in businesses
reasonably related thereto. If any such legally binding commitment to
invest such Net Cash Proceeds is terminated, then the Company may, within
90 days of such termination or within 18 months of such Asset Sale,
whichever is later, invest such Net Cash Proceeds as provided above. The
amount of such Net Cash Proceeds not used or invested as set forth in this
subsection (b) of this Section 1012 constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $15
million, the Company will apply the Excess Proceeds to the repayment of the
Securities and any other Pari Passu Indebtedness outstanding with similar
provisions requiring the Company to make an offer to purchase such
Indebtedness with the proceeds from any Asset Sale as follows: (A) the
Company will make an offer to purchase (an "Offer") from all holders of the
Securities in accordance with the procedures set forth in this Indenture in
the maximum principal amount (expressed as a multiple of $1,000) of
Securities that may be purchased out of an amount (the "Security Amount")
equal to the product of such Excess Proceeds multiplied by a fraction, the
numerator of which is the outstanding principal amount of the Securities,
and the denominator of which is the sum of the outstanding principal amount
of the Securities and such Pari Passu Indebtedness (subject to proration in
the event such amount is less than the aggregate Offered Price (as defined
herein) of all Securities tendered) and (B) to the extent required by such
Pari Passu Indebtedness to reduce permanently the principal amount of such
Pari Passu Indebtedness, the Company will make an offer to purchase or
otherwise repurchase or redeem Pari Passu Indebtedness (a "Pari Passu
Offer") in an amount (the "Pari Passu Debt Amount") equal to the excess of
the Excess Proceeds over the Security Amount; provided that in no event
will the Company be required to make a Pari Passu Offer in a Pari Passu
Debt
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Amount exceeding the principal amount of such Pari Passu Indebtedness plus
the amount of any premium required to be paid to repurchase such Pari Passu
Indebtedness. The offer price for the Securities will be payable in cash
in an amount equal to 100% of the principal amount of the Securities plus
accrued and unpaid interest, if any, to the date (the "Offer Date") such
Offer is consummated (the "Offered Price"), in accordance with the
procedures set forth in this Indenture. To the extent that the aggregate
Offered Price of the Securities tendered pursuant to the Offer is less than
the Security Amount relating thereto or the aggregate amount of Pari Passu
Indebtedness that is purchased in a Pari Passu Offer is less than the Pari
Passu Debt Amount, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of
Securities and Pari Passu Indebtedness surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the
Securities to be purchased on a pro rata basis. Upon the completion of the
purchase of all the Securities tendered pursuant to an Offer and the
completion of a Pari Passu Offer, the amount of Excess Proceeds, if any,
shall be reset at zero.
(d) When the aggregate amount of Excess Proceeds exceeds $15
million, such Excess Proceeds will, prior to any purchase of Securities
described in subsection (c) of this Section 1012, be set aside by the
Company in a separate account pending (i) deposit with the depository or a
paying agent of the amount required to purchase the Securities tendered in
an Offer or Pari Passu Indebtedness tendered in a Pari Passu Offer, (ii)
delivery by the Company of the Offered Price to the holders of the
Securities tendered in an Offer or Pari Passu Indebtedness tendered in a
Pari Passu Offer and (iii) application, as set forth above, of Excess
Proceeds in the business of the Company and its Subsidiaries for general
corporate purposes. Such Excess Proceeds may be invested in Cash
Equivalents, provided that the maturity date of any such investment made
after the amount of Excess Proceeds exceeds $15 million shall not be later
than the Offer Date. The Company shall be entitled to any interest or
dividends accrued, earned or paid on such Cash Equivalents; provided that
the Company shall not withdraw such interest from the separate account if
an Event of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant
to subsection (c) of this Section 1012, the Securities and the Pari Passu
Indebtedness shall be purchased by the Company, at the option of the
holders thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 45 days and not later than 60 days from the
date the notice of the Offer is given to holders, or
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such later date as may be necessary for the Company to comply with the
requirements under the Exchange Act.
(f) The Company will comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, and any other
applicable securities laws or regulations in connection with an Offer.
(g) The Company will not, and will not permit any of its
Subsidiaries to, create or permit to exist or become effective any
restriction (other than restrictions existing under (A) Pari Passu
Indebtedness or Subordinated Indebtedness as in effect on the date of this
Indenture and listed on Schedule I hereto as such Indebtedness may be
refinanced from time to time or (B) any Senior Indebtedness existing on the
date of this Indenture or thereafter; provided that such restrictions are
no less favorable to the holders of Securities than those existing on the
date of this Indenture) that would materially impair the ability of the
Company to make an Offer to purchase the Securities or, if such Offer is
made, to pay for the Securities tendered for purchase.
(h) Subject to paragraph (f) above, within 30 days after the date
on which the amount of Excess Proceeds equals or exceeds $15 million, the
Company shall send or cause to be sent by first-class mail, postage
prepaid, to the Trustee and to each Holder, at his address appearing in the
Security Register, a notice stating or including:
(1) that the Holder has the right to require the Company to
repurchase, subject to proration, such Holder's Securities at the
Offered Price;
(2) the Offer Date;
(3) the instructions a Holder must follow in order to have
his Securities purchased in accordance with subsection (c) of
this Section 1012; and
(4) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on
Form 10-Q, as applicable, and any Current Report on Form 8-K of
the Company filed subsequent to such Quarterly Report, other than
Current Reports
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describing Asset Sales otherwise described in the offering
materials (or corresponding successor reports) (or in the event
the Company is not required to prepare any of the foregoing
Forms, the comparable information required pursuant to Section
1020), (ii) a description of material developments in the
Company's business subsequent to the date of the latest of such
Reports, (iii) if material, appropriate pro forma financial
information, and (iv) such other information, if any, concerning
the business of the Company which the Company in good faith
believes will enable such Holders to make an informed investment
decision regarding the Offer;
(5) the Offered Price;
(6) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
(7) that Securities must be surrendered at least three
Business Days prior to the Offer Date to the Paying Agent to an
office or agency referred to in Section 1002 to collect payment;
(8) that any Securities not tendered will continue to accrue
interest and that unless the Company defaults in the payment of
the purchase price, any Security accepted for payment pursuant to
the Offer shall cease to accrue interest on and after the Offer
Date; and
(9) the procedures for withdrawing a tender.
(i) Holders electing to have Securities purchased hereunder will
be required to surrender such Securities at the address specified in the
notice at least three Business Days prior to the Offer Date. Holders will
be entitled to withdraw their election to have their Securities purchased
pursuant to this Section 1012 if the Company receives, not later than the
Offer Date, a facsimile transmission or letter setting forth (1) the name
of the Holder, (2) the certificate number of the Security in respect of
which such notice of withdrawal is being submitted, (3) the principal
amount of the Security (which shall be $1,000 or an integral multiple
thereof) delivered for purchase by the Holder as to which his election is
to be withdrawn, (4) a statement that such Holder is withdrawing his
election to have such principal amount of such Security purchased, and (5)
the principal amount, if any, of such Security (which shall be $1,000 or an
integral multiple thereof) that remains subject to
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the original notice of the Offer and that has been or will be delivered for
purchase by the Company.
(j) The Company shall (i) not later than the Offer Date, accept
for payment Securities or portions thereof tendered pursuant to the Offer,
(ii) not later than 10:00 a.m. (New York time) on the Offer Date, deposit
with the Trustee or with a Paying Agent (or, if the Company or any of its
Affiliates is acting as Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in same day funds (or New York
Clearing House funds if such deposit is made prior to the Offer Date)
sufficient to pay the aggregate Offered Price of all the Securities or
portions thereof which are to be purchased on that date and (iii) not later
than 10:00 a.m. (New York time) on the Offer Date, deliver to the Paying
Agent (if other than the Company) an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company.
Subject to applicable escheat laws, as provided in the
Securities, the Trustee and the Paying Agent shall return to the Company
any cash that remains unclaimed, together with interest, if any, thereon,
held by them for the payment of the Offered Price; provided, however, that
(x) to the extent that the aggregate amount of cash deposited by the
Company with the Trustee in respect of an Offer exceeds the aggregate
Offered Price of the Securities or portions thereof to be purchased, then
the Trustee shall hold such excess for the Company and (y) unless otherwise
directed by the Company in writing, promptly after the Business Day
following the Offer Date the Trustee shall return any such excess to the
Company together with interest or dividends, if any, thereon.
(k) Securities to be purchased shall, on the Offer Date, become
due and payable at the Offered Price and from and after such date (unless
the Company shall default in the payment of the Offered Price) such
Securities shall cease to bear interest. Such Offered Price shall be paid
to such Holder promptly following the later of the Offer Date and the time
of delivery of such Security to the relevant Paying Agent at the office of
such Paying Agent by the Holder thereof in the manner required. Upon
surrender of any such Security for purchase in accordance with the
foregoing provisions, such Security shall be paid by the Company at the
Offered Price; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Offer Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities,
registered as such on the relevant Regular Record Dates according to the
terms and the provisions of Section 307; provided, further, that Securities
to be purchased are subject to proration in the event the Security Amount
is
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less than the aggregate Offered Price of all Securities tendered for
purchase, with such adjustments as may be appropriate by the Trustee so
that only Securities in denominations of $1,000 or integral multiples
thereof, shall be purchased. If any Security tendered for purchase shall
not be so paid upon surrender thereof by deposit of funds with the Trustee
or a Paying Agent in accordance with subsection (j) of this Section 1012,
the principal thereof (and premium, if any, thereon) shall, until paid,
bear interest from the Offer Date at the rate born by such Security. Any
Security that is to be purchased only in part shall be surrendered to a
Paying Agent at the office of such Paying Agent (with, if the Company, the
Security Registrar or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar or the Trustee duly executed by, the Holder thereof or
such Holder's attorney duly authorized in writing), and the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of
such Security, without service charge, one or more new Securities of any
authorized denomination as requested by such Holder in an aggregate
principal amount equal to, and in exchange for, the portion of the
principal amount of the Security so surrendered that is not purchased. The
Company shall publicly announce the results of the Offer on or as soon as
practicable after the Offer Date.
Section 1013. Limitation on Senior Subordinated Indebtedness.
----------------------------------------------
The Company will not, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to or otherwise permit to exist any
Indebtedness that is subordinate by its express terms in right of payment
to any Indebtedness of the Company, unless such Indebtedness is also pari
passu with the Securities or subordinate in right of payment to the
Securities at least to the same extent as the Securities are subordinate in
right of payment to Senior Indebtedness as set forth in this Indenture.
Section 1014. Limitation on Issuances of Guarantees of Subordinated
-----------------------------------------------------
and Pari Passu Indebtedness.
---------------------------
(a) The Company will not permit any of its Subsidiaries,
directly or indirectly, to guarantee, assume or in any other manner become
liable with respect to any Subordinated Indebtedness or Pari Passu
Indebtedness of the Company unless such Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee of the Securities, on the same terms as the guarantee of such
Indebtedness except that (A) if any such guarantee, assumption or liability
is subordinated to a guarantee of Senior Indebtedness, the Guarantee under
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the supplemental indenture shall be subordinated to such guarantee of
Senior Indebtedness to the same extent as the Securities are subordinated
to Senior Indebtedness under this Indenture and (B) if such Indebtedness
constitutes Subordinated Indebtedness any such guarantee, assumption or
other liability of such Subsidiary with respect to such Subordinated
Indebtedness shall be subordinated to such Subsidiary's Guarantee of the
Securities at least to the same extent as such Subordinated Indebtedness is
subordinated to the Securities.
(b) Notwithstanding the foregoing, any Guarantee by a Subsidiary
of the Company of the Securities shall provide by its terms that it shall
be automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all
of the Company's Capital Stock in, or all or substantially all of the
assets of, such Subsidiary; provided that such transaction is in compliance
with the terms of this Indenture and such Subsidiary is released from its
guarantees of all other Subordinated Indebtedness and Pari Passu
Indebtedness of the Company.
Section 1015. Restriction on Transfer of Assets.
---------------------------------
The Company will not sell, convey, transfer or otherwise dispose
of its assets or property to any Subsidiary of the Company, except for
sales, conveyances, transfers or other dispositions (a) made in the
ordinary course of business or (b) to any Subsidiary of the Company if such
Subsidiary simultaneously executes and delivers a supplemental indenture to
this Indenture providing for a Guarantee by such Subsidiary of the
Securities on a senior subordinated basis to the same extent as the
Securities are subordinated to Senior Indebtedness.
Section 1016. Purchase of Securities upon a Change in Control.
-----------------------------------------------
(a) If a Change in Control shall occur at any time, then each
Holder shall have the right to require that the Company purchase such
Holder's Securities in whole or in part in integral multiples of $1,000, at
a purchase price (the "Change in Control Purchase Price") in cash in an
amount equal to 101% of the principal amount of such Securities, plus
accrued and unpaid interest, if any, to the date of purchase (the "Change
in Control Purchase Date"), pursuant to the offer described below in this
Section 1016 (the "Change in Control Offer") and in accordance with the
procedures set forth in Subsections (b), (c), (d), (e) and (f) of this
Section 1016.
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(b) Within 30 days following a Change in Control and prior to the
mailing of the Change in Control Purchase Notice (as defined) to the
Holders provided for in subsection (c) of this Section 1016, the Company
will either (1) repay in full all Indebtedness under the Bank Credit
Facility and permanently reduce the commitments of the Banks thereunder or
offer to repay in full all such Indebtedness and permanently reduce the
commitment of each Bank who has accepted such offer or (2) obtain the
requisite consent under the Bank Credit Facility to permit the repurchase
of the Securities as provided for in this Section 1016. The Company shall
first comply with the provisions of this subsection (b) of this Section
1016 before it shall be required to repurchase the Securities in accordance
with this Section 1016, but any failure to comply with this Section 1016
shall constitute an Event of Default under this Indenture.
(c) Within 30 days following any Change in Control, the Company
shall notify the Trustee thereof and give written notice (a "Change in
Control Purchase Notice") of such Change in Control to each Holder by
first-class mail, postage prepaid, at his address appearing in the Security
Register stating or including:
(1) that a Change in Control has occurred, the date of such
event, and that such Holder has the right to require the Company
to repurchase such Holder's Securities at the Change in Control
Purchase Price;
(2) the circumstances and relevant facts regarding such
Change in Control (including but not limited to information with
respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change in Control);
(3) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on
Form 10-Q, as applicable, and any Current Report on Form 8-K of
the Company filed subsequent to such Quarterly Report (or in the
event the Company is not required to prepare any of the foregoing
Forms, the comparable information required to be prepared by the
Company pursuant to Section 1020), (ii) a description of material
developments in the Company's business subsequent to the date of
the latest of such reports and (iii) such other information, if
any, concerning the business of the Company which the Company in
good faith believes will enable such
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Holders to make an informed investment decision regarding the
Change in Control Offer;
(4) that the Change in Control Offer is being made pursuant
to this Section 1016 and that all Securities properly tendered
pursuant to the Change in Control Offer will be accepted for
payment at the Change in Control Purchase Price;
(5) the Change in Control Purchase Date which shall be fixed
by the Company and shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed,
or such later date as is necessary to comply with requirements
under the Exchange Act;
(6) the Change in Control Purchase Price;
(7) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
(8) that Securities must be surrendered at least one
Business Day prior to the Change in Control Purchase Date to the
Paying Agent at the office of the Paying Agent or to an office or
agency referred to in Section 1002 to collect payment;
(9) that the Change in Control Purchase Price for any
Security which has been properly tendered and not properly
withdrawn will be paid promptly following the Change in Control
Offer Purchase Date;
(10) the procedures for withdrawing a tender of Securities
and Change in Control Purchase Notice;
(11) that any Security not tendered will continue to accrue
interest; and
(12) that, unless the Company defaults in the payment of the
Change in Control Purchase Price, any Securities accepted for
payment pursuant to the Change in Control Offer shall cease to
accrue interest after the Change in Control Purchase Date.
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(d) Upon receipt by the Company of the proper tender of
Securities, the Holder of the Security in respect of which such proper
tender was made shall (unless the tender of such Security is properly
withdrawn) thereafter be entitled to receive solely the Change in Control
Purchase Price with respect to such Security. Upon surrender of any such
Security for purchase in accordance with the foregoing provisions, such
Security shall be paid by the Company at the Change in Control Purchase
Price; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Change in Control Purchase Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 307. If any Security
tendered for purchase in accordance with the provisions of this Section
1016 shall not be so paid upon surrender thereof, the principal thereof
(and premium, if any, thereon) shall, until paid, bear interest from the
Change in Control Purchase Date at the rate borne by such Security.
Holders electing to have Securities purchased will be required to surrender
such Securities to the Paying Agent at the address specified in the Change
in Control Purchase Notice at least one Business Day prior to the Change in
Control Purchase Date. Any Security that is to be purchased only in part
shall be surrendered to a Paying Agent at the office of such Paying Agent
(with, if the Company, the Security Registrar or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Security Registrar or the Trustee, as
the case may be, duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security,
without service charge, one or more new Securities of any authorized
denomination as requested by such Holder in an aggregate principal amount
equal to, and in exchange for, the portion of the principal amount of the
Security so surrendered that is not purchased.
(e) The Company shall (i) not later than the Change in Control
Purchase Date, accept for payment Securities or portions thereof tendered
pursuant to the Change in Control Offer, (ii) not later than 10:00 a.m.
(New York time) on the Change in Control Purchase Date, deposit with the
Paying Agent an amount of cash sufficient to pay the aggregate Change in
Control Purchase Price of all the Securities or portions thereof which are
to be purchased as of the Change in Control Purchase Date and (iii) not
later than 10:00 a.m. (New York time) on the Change in Control Purchase
Date, deliver to the Paying Agent an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the Change in Control Purchase Price
of the Securities purchased
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from each such Holder, and the Company shall execute and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Paying Agent at the Company's expense to the Holder
thereof. The Company will publicly announce the results of the Change in
Control Offer on the Change in Control Purchase Date. For purposes of this
Section 1016, the Company shall choose a Paying Agent which shall not be
the Company.
(f) A tender made in response to a Change in Control Purchase
Notice may be withdrawn before or after delivery by the Holder to the
Paying Agent at the office of the Paying Agent of the Security to which
such tender relates, by means of a written notice of withdrawal delivered
by the Holder to the Paying Agent at the office of the Paying Agent or to
the office or agency referred to in Section 1002 to which the related
tender was delivered prior to the Change in Control Purchase Date
specifying, as applicable:
(1) the name of the Holder;
(2) the certificate number of the Security in respect
of which such notice of withdrawal is being submitted;
(3) the principal amount of the Security (which shall
be $1,000 or an integral multiple thereof) delivered for
purchase by the Holder as to which such notice of withdrawal
is being submitted; and
(4) the principal amount, if any, of such Security
(which shall be $1,000 or an integral multiple thereof) that
remains subject to the original Change in Control Purchase
Notice and that has been or will be delivered for purchase
by the Company.
(g) Subject to applicable escheat laws, as provided in the
Securities, the Trustee and the Paying Agent shall return to the Company
any cash that remains unclaimed, together with interest or dividends, if
any, thereon, held by them for the payment of the Change in Control
Purchase Price; provided, however, that (x) to the extent that the
aggregate amount of cash deposited by the Company pursuant to clause (ii)
of subsection (e) of this Section 1016 exceeds the aggregate Change in
Control Purchase Price of the Securities or portions thereof to be
purchased, then the
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Trustee shall hold such excess for the Company and (y) unless otherwise
directed by the Company in writing, promptly after the Business Day
following the Change in Control Purchase Date the Trustee shall return any
such excess to the Company together with interest, if any, thereon.
The Company shall not be required to make a Change in Control
Offer upon a Change in Control if a third party makes the Change in Control
Offer in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change in Control Offer made by the Company
and purchases all Securities validly tendered and not withdrawn under such
Change in Control Offer.
(h) The Company will comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, and any other
applicable securities laws or regulations in connection with a Change in
Control Offer.
(i) The Company will not, and will not permit any of its
Subsidiaries to, create or permit to exist or become effective any
restriction (other than restrictions existing under the Bank Credit
Facility (or any guarantee thereof) or under Indebtedness as in effect on
the date of this Indenture) and any extensions, refinancings, renewals or
replacements of any of the foregoing that would materially impair the
ability of the Company to make a Change in Control Offer to purchase the
Securities or, if such Change in Control Offer is made, to pay for the
Securities tendered for purchase; provided that the restrictions in any
such extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the holders of the Securities than
those under the Indebtedness being extended, refinanced, renewed or
replaced.
Section 1017. Limitation on Subsidiary Capital 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),
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(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 this
Indenture.
Section 1018. Limitation on Dividends 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 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 date of this Indenture and
listed on Schedule III hereto; (b) any encumbrance or restriction, with
respect to a Subsidiary of the Company that is not a Subsidiary of the
Company on the date of this Indenture, 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 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 1009 plus
the amount of Permitted Investments described
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in clauses (ix) and (x) of the definition thereof then permitted to be
made. Any Investment in an Unrestricted Subsidiary permitted to be made
pursuant to this Section 1019 (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 1020. Provision of Financial Statements.
---------------------------------
Whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, the Company will, to the extent permitted under the
Exchange Act, file with the Commission the annual reports, quarterly
reports and other documents which the Company would have been required to
file with the Commission pursuant to such Section 13(a) or 15(d) if the
Company were so subject, such documents to be filed with the Commission on
or prior to the date (the "Required Filing Date") by which the Company
would have been required so to file such documents if the Company were so
subject. The Company will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names
and addresses appear in the Security Register, without cost to such holders
and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company would have been required to
file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act if the Company were subject to either of such Sections and (y) if
filing such documents by the Company with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such
documents to any prospective holder at the Company's cost.
Section 1021. Statement by Officers as to Default.
-----------------------------------
(a) The Company will deliver to the Trustee, not more than 120
days after the end of each fiscal year of the Company ending after the date
hereof, a written statement signed by two executive officers of the
Company, one of whom shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company, stating
whether or not after a review of the activities of the Company during such
year and of the Company's performance under this Indenture, to the best
knowledge, based on such review, of the signers thereof, the Company has
fulfilled all of its obligations and is in compliance with all conditions
and covenants under this Indenture throughout such year and, if there has
been a Default specifying each Default and the nature and status thereof
and any actions being taken by the Company with respect thereto.
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(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or the trustee for or the
holder of any other evidence of Indebtedness of the Company or any of its
Subsidiaries gives any notice or takes any other action with respect to a
claimed default the Company shall deliver to the Trustee by registered or
certified mail or facsimile transmission followed by hard copy an Officers'
Certificate specifying such Default, Event of Default, notice or other
action, the status thereof and what actions the Company is taking or
proposes to take with respect thereto, within 10 Business Days of its
occurrence.
Section 1022. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Sections 1006 through 1011, 1013,
1014, 1015 and 1017 through 1020, if, before or after the time for such
compliance, the Holders of not less than a majority in aggregate principal
amount of the Securities at the time Outstanding shall, by Act of such
Holders, waive such compliance in such instance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in
full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
--------------------
(a) The Securities are subject to redemption, at any time on or
after September 15, 2001, at the option of the Company, in whole or in
part, subject to the conditions, and at the Redemption Prices, specified in
the form of Security, together with accrued and unpaid interest, if any, to
the Redemption Date (subject to the right of Holders of record on relevant
Regular Record Dates and Special Record Dates to receive interest due on
applicable Interest Payment Dates and Special Payment Dates).
(b) Up to $30,000,000 aggregate principal amount of the
Securities may be redeemed at any time on or prior to September 15, 1999,
at the option of the Company within 60 days after the consummation of one
or more Public Equity
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Offerings by the Company from the net proceeds to the Company of such
Public Equity Offerings, upon not less than 20 nor more than 60 days' prior
notice to the Holders, in amounts of $1,000 or integral multiples of
$1,000, at a redemption price equal to _____% of the principal amount,
together, in each case, with accrued and unpaid interest if any, to the
Redemption Date (subject to the right of Holders of record on applicable
Record Dates or Special Record Dates to receive interest due on applicable
Interest Payment Dates or Special Payment Dates); provided that after
giving effect to any such redemption, at least $70,000,000 aggregate
principal amount of the Securities remains outstanding.
Section 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this
Indenture, shall be made in accordance with such provision and this
Article Eleven.
Section 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Company Order and an Officers'
Certificate. In case of any redemption at the election of the Company,
the Company shall, not less than 45 nor more than 60 days prior to the
Redemption Date fixed by the Company, notify the Trustee in writing of
such Redemption Date and of the principal amount of Securities to be
redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the
particular Securities or portions thereof to be redeemed shall be
selected not more than 30 days prior to the Redemption Date by the
Trustee, from the Outstanding Securities not previously called for
redemption in compliance with the requirements of the principal
national securities exchange, if any, on which the Securities being
redeemed are listed, or if the Securities are not listed on a national
securities exchange, pro rata, by lot or such other method as the
Trustee shall deem fair and reasonable, and the amounts to be redeemed
may be equal to $1,000 or any integral multiple thereof.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in
the case of any
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Securities selected for partial redemption, the principal amount thereof to
be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
Section 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed to each Holder of Securities to be redeemed, at his address
appearing in the Security Register as follows:
(i) if the Company is redeeming the Securities pursuant to
Section 1101(a), not less than 30 nor more than 60 days prior to the
Redemption Date; or
(ii) if the Company is redeeming the Securities pursuant to
Section 1101(b), not less than 20 nor more than 60 days prior to the
Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed,
the identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the
principal amount of such Security to be redeemed and that after the
Redemption Date upon surrender of such Security, new Security or Securities
in the aggregate principal amount equal to the unredeemed portion thereof
will be issued;
(e) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;
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(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof to be redeemed, and
that (unless the Company shall default in payment of the Redemption Price)
interest thereon shall cease to accrue on and after said date;
(g) the place or places where such Securities are to be surrendered
for payment of the Redemption Price; and
(h) the CUSIP number, if any, relating to such Securities.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request, by
the Trustee in the name and at the expense of the Company. If the Company elects
to give notice of redemption, it shall provide the Trustee with a certificate
stating that such notice has been given in compliance with the requirements of
this Section 1105.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice and
shall be deemed to have been given on the date of the mailing of such notice. In
any case, failure to give such notice by mail or any defect in the notice to the
Holder of any Security designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Security.
Section 1106. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 a.m. (New York time) on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company or any of its Affiliates is acting as Paying Agent, segregate and hold
in trust as provided in Section 1003) an amount of money in same day funds
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date or Special Payment Date) accrued interest on,
all the Securities or portions thereof which are to be redeemed on that date.
All money earned on funds held in trust by the Trustee or any Paying Agent shall
be remitted to the Company.
Section 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company
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shall default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price together with accrued interest to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such on the
relevant Regular Record Dates and Special Record Dates according to the terms
and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and premium, if any, shall, until paid,
bear interest from the Redemption Date at the rate borne by such Security.
Section 1108. Securities Redeemed or Purchased in Part.
----------------------------------------
Any Security which is to be redeemed or purchased only in part shall be
surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 1002 (with, if the Company, the Security Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, the Security Registrar or the
Trustee, as the case may be, duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute,
and the Trustee shall authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the unredeemed portion of the principal of the Security so
surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Section 1201. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the Indebtedness represented
by the Securities and the payment of the principal of, premium, if any, and
interest on the
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Securities are hereby expressly made subordinate and subject in right of
payment as provided in this Article to the prior payment in full of all
Senior Indebtedness.
This Article Twelve shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or
continue to hold Senior Indebtedness; and such provisions are made for the
benefit of the holders of Senior Indebtedness; and such holders are made
obligees hereunder and they or each of them may enforce such provisions.
Section 1202. Payment Over of Proceeds Upon Dissolution, Etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company
or to its assets, or (b) any liquidation, dissolution or other winding up
of the Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or (c) any assignment for the benefit
of creditors or any other marshaling of assets or liabilities of the
Company, then and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full before the Holders of the Securities are entitled
to receive any payment or distribution of any kind or character excluding
securities of the Company or any other corporation that are equity
securities or are subordinated in right of payment to all Senior
Indebtedness, that may at the time be outstanding, to substantially the
same extent as, or to a greater extent than, the Securities are so
subordinated as provided in this Article; such securities are hereinafter
collectively referred to as "Permitted Junior Securities" on account of
principal of, premium, if any, or interest on the Securities (including any
payment or other distribution which may be received from the holders of
Subordinated Indebtedness as a result of any payment on such Subordinated
Indebtedness); and
(2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (excluding
Permitted Junior Securities), by set-off or otherwise, to which the Holders
or the Trustee would be entitled but for the provisions of this Article
(including any payment or other distribution which may be received from the
holders of Subordinated Indebtedness as a result of any payment on such
Subordinated Indebtedness) shall be paid by the liquidating trustee or
agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly
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to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, in respect of
principal, premium, if any, and interest on the Securities before all
Senior Indebtedness is paid in full, then and in such event such payment or
distribution (excluding Permitted Junior Securities) (including any payment
or other distribution which may be received from the holders of
Subordinated Indebtedness as a result of any payment on such Subordinated
Indebtedness) shall be paid over or delivered forthwith directly to the
holders of Senior Indebtedness or their representative or representatives
or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Senior Indebtedness have been issued for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of
the Company following the conveyance, transfer or lease of its properties
and assets substantially as an entirety to another Person upon the terms
and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshaling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation
or the surviving entity of such merger or the Person which acquires by
conveyance, transfer or lease such properties and assets substantially as
an entirety, as the case may be, shall, as a part of such consolidation,
merger, conveyance, transfer or lease, comply with the conditions set forth
in Article Eight.
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Section 1203. Suspension of Payment When Senior Indebtedness in
-------------------------------------------------
Default.
-------
(a) Unless Section 1202 shall be applicable, upon (1) the
occurrence and during the continuance of any default in the payment of any
Designated Senior Indebtedness beyond any applicable grace period (a
"Payment Default") and (2) receipt by the Trustee from the Senior
Representative of written notice of such Payment Default, no payment (other
than any payments previously made pursuant to Section 402 or 403 in this
Indenture) or distribution of any assets of the Company of any kind or
character (excluding Permitted Junior Securities) shall be made by the
Company on account of principal of, premium, if any, or interest on, the
Securities, or on account of the purchase, redemption, defeasance or other
acquisition of or in respect of the Securities unless and until such
Payment Default shall have been cured or waived or shall have ceased to
exist or the Designated Senior Indebtedness shall have been discharged or
paid in full after which the Company shall (subject to the other provisions
of this Article Twelve) resume making any and all required payments in
respect of the Securities, including any missed payments.
(b) Unless Section 1202 shall be applicable, upon (1) the
occurrence and during the continuance of any non-payment default with
respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may then be accelerated (a "Non-payment Default") and (2)
receipt by the Trustee and the Company from a Senior Representative of
written notice of such Non-payment Default, no payment (other than any
payments previously made pursuant to Sections 402 or 403 in this Indenture)
or distribution of any assets of the Company of any kind or character
(excluding Permitted Junior Securities) shall be made by the Company on
account of any principal of, premium, if any, or interest on, the
Securities, or on account of the purchase, redemption, defeasance or other
acquisition of, or in respect of, Securities for a period ("Payment
Blockage Period") commencing on the date of receipt by the Trustee of such
notice and continuing until the earliest of (subject to any blockage of
payments that may then or thereafter be in effect under subsection (a) of
this Section 1203) (x) 179 days after receipt of such written notice by the
Trustee (provided any Designated Senior Indebtedness as to which notice was
given shall theretofore have not been accelerated), (y) the date on which
such Non-payment Default (and all Non-payment Defaults as to which notice
is given after such Payment Blockage Period is initiated) is cured or
waived or ceases to exist or on which the Designated Senior Indebtedness
related thereto is discharged or paid in full or (z) the date on which such
Payment Blockage Period (and all Non-payment Defaults as to which notice is
given after such Payment Blockage Period is initiated) shall have been
terminated by written notice to the Company or the Trustee from the Senior
Representative or holder of
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Designated Senior Indebtedness initiating such Payment Blockage Period,
after which, in the case of clause (x), (y) or (z), the Company shall
(subject to the other provisions of this Article including subsection (a)
of this Section 1203) promptly resume making any and all required payments
in respect of the Securities, including any missed payments.
Notwithstanding any other provision of this Indenture, in no event shall a
Payment Blockage Period under this subsection (b) of this Section 1203
extend beyond 179 days from the date of the receipt by the Company or the
Trustee of the notice referred to in clause (2) of this subsection (b) of
this Section 1203 (such 179-day period referred to as the "Initial
Period"). Any number of notices of Non-payment Defaults may be given
during the Initial Period; provided that during any period of 365
consecutive days only one Payment Blockage Period during which payment of
principal of, premium, if any, or interest on the Securities may not be
made, may commence and the duration of such period may not exceed 179 days.
No Non-payment Default with respect to any Designated Senior Indebtedness
that existed or was continuing on the date of the commencement of any
Payment Blockage Period will be, or can be, made the basis for the
commencement of a second Payment Blockage Period, whether or not within a
period of 365 consecutive days, unless such Non-payment Default shall have
been cured or waived for a period of not less than 90 consecutive days.
The Company shall deliver a notice to the Trustee promptly after the date
on which any Non-payment Default is cured or waived or ceases to exist or
on which the Designated Senior Indebtedness related thereto is discharged
or paid in full and the Trustee is authorized to act in reliance on such
notice.
(c) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security
prohibited by the foregoing provisions of this Section, then and in such
event such payment shall be paid over and delivered forthwith to a Senior
Representative of the holders of the Designated Senior Indebtedness or as a
court of competent jurisdiction shall direct.
Section 1204. Payment Permitted if No Default.
-------------------------------
Nothing contained in this Article, elsewhere in this Indenture or
in any of the Securities shall prevent the Company, at any time except
during the pendency of any case, proceeding, dissolution, liquidation or
other winding-up, assignment for the benefit of creditors or other
marshaling of assets and liabilities of the Company referred to in Section
1202 or under the conditions described in Section 1203, from making
payments at any time of principal of, premium, if any, or interest on the
Securities.
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Section 1205. Subrogation to Rights of Holders of Senior
------------------------------------------
Indebtedness.
------------
After the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property
and securities applicable to the Senior Indebtedness until the principal
of, premium, if any, and interest on the Securities shall be paid in full.
For purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for
the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by Holders
of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment or distribution by the Company to or
on account of the Senior Indebtedness.
Section 1206. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on
the one hand and the holders of Senior Indebtedness on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, the Company, its creditors
other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of,
premium, if any, and interest on the Securities as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Securities and
creditors of the Company other than the holders of Senior Indebtedness; or
(c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness (1) in any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Company referred to in
Section 1202, to receive, pursuant to and in accordance with such Section,
cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section
1203, to prevent any payment prohibited by such Section or enforce their
rights pursuant to Section 1203(c).
-116-
<PAGE>
Section 1207. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee his attorney-in-fact for any and all such
purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of the Company whether in bankruptcy,
insolvency, receivership proceedings, or otherwise, the timely filing of a
claim for the unpaid balance of the indebtedness of the Company owing to
such Holder in the form required in such proceedings and the causing of
such claim to be approved. If the Trustee does not file a proper claim at
least 30 days before the expiration of the time to file such claim, then
the holders of Senior Indebtedness, and their agents, trustees or other
representatives are authorized (but shall not have any obligation) to do so
for and on behalf of the Holders of the Securities.
Section 1208. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by any
such holder, or by any non-compliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(b) without limiting the generality of Subsection (a) of this
Section, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of
the Securities, without incurring responsibility to the Holders of the
Securities and without impairing or releasing the subordination provided in
this Article or the obligations hereunder of the Holders of the Securities
to the holders of Senior Indebtedness, do any one or more of the following:
(1) change the manner, place or terms of payment or extend the time of
payment of, or renew or alter, Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding; (2) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (3)
release any Person liable in any manner for the collection or payment of
Senior Indebtedness; and (4) exercise or refrain from exercising any rights
against the Company and any other Person; provided, however, that in no
event shall any such actions limit the right of the Holders of the
Securities
-117-
<PAGE>
to take any action to accelerate the maturity of the Securities pursuant to
Article Five of this Indenture or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article, subject to the rights, if any,
under this Article, of the holders, from time to time, of Senior
Indebtedness to receive the cash, property or securities receivable upon
the exercise of such rights or remedies.
Section 1209. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Securities. Notwithstanding
the provisions of this Article or any provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Indebtedness
or from a Senior Representative or any trustee, fiduciary or agent
therefor; and, prior to the receipt of any such written notice, the Trustee
shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice
provided for in this Section at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of, premium,
if any, or interest on any Security), then, anything herein contained to
the contrary notwithstanding but without limiting the rights and remedies
of the holders of Senior Indebtedness, a Senior Representative or any
trustee, fiduciary or agent thereof, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for
which such money was received and shall not be affected by any notice to
the contrary which may be received by it within two Business Days prior to
such date; nor shall the Trustee be charged with knowledge of the curing of
any such default or the elimination of the act or condition preventing any
such payment unless and until the Trustee shall have received an Officers'
Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it
of a written notice to the Trustee and the Company by a Person representing
himself to be a Senior Representative or a holder of Senior Indebtedness
(or a trustee, fiduciary or agent therefor) to establish that such notice
has been given by a Senior Representative or a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor); provided,
however, that failure to give such notice to the Company shall not affect
in
-118-
<PAGE>
any way the ability of the Trustee to rely on such notice. In the event
that the Trustee determines in good faith that other evidence is required
with respect to the right of any Person as a holder of Senior Indebtedness
to participate in any payment or distribution pursuant to this Article, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in
such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment. A certificate of
the Senior Representative shall be sufficient evidence with respect to
Designated Senior Indebtedness.
Section 1210. Reliance on Judicial Orders or Certificates.
-------------------------------------------
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee and the Holders of the Securities
shall be entitled to rely upon any order or decree entered by any court of
competent jurisdiction in which such insolvency, bankruptcy, receivership,
liquidation, reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of
creditors, agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities or a Certificate
of a Senior Representative, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article, provided
that the foregoing shall apply only if such court has been fully apprised
of the provisions of this Article.
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness;
-----------------------------------------------------
Preservation of Trustee's Rights.
--------------------------------
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder. Nothing in this
Article shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 607.
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<PAGE>
Section 1212. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting under this Indenture,
the term "Trustee" as used in this Article shall in such case (except with
respect to delivery of notices and unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1211 shall not apply to the Company or any Affiliate
of the Company if it or such Affiliate acts as Paying Agent.
Section 1213. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Five of this Indenture or to
pursue any rights or remedies hereunder or under applicable law, subject to
the rights, if any, under this Article of the holders, from time to time,
of Senior Indebtedness to receive the cash, property or securities
receivable upon the exercise of such rights or remedies.
Section 1214. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Article against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness
and the Trustee shall not be liable to any holder of Senior Indebtedness if
it shall mistakenly (absent gross negligence, bad faith or willful
misconduct) pay over or deliver to Holders, the Company or any other Person
moneys or assets to which any holder of Senior Indebtedness shall be
entitled by virtue of this Article or otherwise.
-120-
<PAGE>
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
Section 1301. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or
exchange of Securities expressly provided for herein) and the Trustee, upon
Company Request and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture
(including, but not limited to Article Twelve), when
(a) either
(1) all the Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section
306 or (ii) all Securities for whose payment United States dollars
have theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the
Trustee cancelled or for cancellation (x) have become due and payable,
(y) will become due and payable at their Stated Maturity within one
year or (z) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company; and the Company has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose an
amount in United States dollars sufficient to pay and discharge the
entire Indebtedness on the Securities not theretofore delivered to the
Trustee for cancellation, including the principal of, premium, if any,
and accrued interest on such Securities at such Maturity, Stated
Maturity or Redemption Date;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
-121-
<PAGE>
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel stating that (i) all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with and (ii) such
satisfaction and discharge will not result in a breach or violation of, or
constitute a default under, this Indenture or any other material agreement
or instrument to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 607 and, if
United States dollars shall have been deposited with the Trustee pursuant
to subclause (2) of Subsection (a) of this Section 1301, the obligations of
the Trustee under Section 1302 and the last paragraph of Section 1003 shall
survive.
Section 1302. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003,
all United States dollars deposited with the Trustee pursuant to Section
1301 shall be held in trust and applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Persons entitled
thereto, of the principal of, premium, if any, and interest on the
Securities for whose payment such United States dollars have been deposited
with the Trustee.
* * *
-122-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
BUCKEYE CELLULOSE CORPORATION
[SEAL] By: ____________________________________
Name: Robert E. Cannon
Title: Chief Executive Officer and
Chairman of the Board
Attest: ____________________
Name:
Title:
UNION PLANTERS NATIONAL BANK,
as Trustee
[SEAL] By: _____________________________________
Name:
Title:
Attest: ____________________
Name:
Title:
-123-
<PAGE>
STATE OF NEW YORK )
) ss.:
CITY OF NEW YORK )
On the day of July, 1996, before me personally came Robert E.
Cannon, to me known, who, being by me duly sworn, did depose and say that
he resides at 445 South Shady Grove Road, Memphis, Tennessee 38120; that he
is Chief Executive Officer and Chairman of the Board of Buckeye Cellulose
Corporation, one of the corporations described in and which executed the
foregoing instrument; that he knows the corporate seal of such corporation;
that the seal affixed to said instrument is such corporate seal; that it
was so affixed pursuant to authority of the Board of Directors of such
corporation; and that he signed his name thereto pursuant to like
authority.
(NOTARIAL SEAL)
-------------------------------
-124-
<PAGE>
(Indenture)
STATE OF TENNESSEE
COUNTY OF SHELBY
On the day of July, 1996, before me personally came to
me known, who, being by me duly sworn, did depose and say that [she]
resides at ; that [she] is
of Union Planters National Bank, one of the corporations described in and
which executed the foregoing instrument; that she knows the corporate seal
of such corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed pursuant to the authority of the
Board of Directors of such corporation; and that [she] signed her name
thereto pursuant to like authority.
________________________________
Notary Public
My commission expires: _________
-125-
<PAGE>
SCHEDULE I
Permitted Holders
[To be provided by K & E]
-126-
<PAGE>
SCHEDULE II
Existing Indebtedness
[To be reviewed and revised by K & E]
I. Buckeye Florida Partners has pledged certificates of deposit 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.
II. 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
III. Indebtedness under the Existing Senior Notes
-127-
<PAGE>
SCHEDULE III
Existing Dividend Restrictions
[To be reviewed and revised by K & E]
I. Indenture dated as of May 27, 1993 between the Company and Bankers
Trust Company, as trustee, as amended November 9, 1995
II. Bank Credit Facility
-128-
<PAGE>
A-1
EXHIBIT A
---------
INTERCOMPANY NOTE
-----------------
_________, 19___
Evidences of all loans or advances ("Loans") made hereunder shall be
reflected on the grid attached hereto. FOR VALUE RECEIVED, _______________, a
________________ corporation (the "Maker"), HEREBY PROMISES TO PAY ON DEMAND to
the order of _______________ (the "Holder") the principal sum of the aggregate
unpaid principal amount of all Loans (plus accrued interest thereon) at any time
and from time to time made hereunder which has not been previously paid.
All capitalized terms used herein that are defined in, or by reference
in, the Indenture between BUCKEYE CELLULOSE CORPORATION, a Delaware corporation
(the "Company"), and UNION PLANTERS NATIONAL BANK, as trustee, dated as of July
, 1996 (the "Indenture"), have the meanings assigned to such terms therein,
or by reference therein, unless otherwise defined.
ARTICLE I
TERMS OF INTERCOMPANY NOTE
Section 1.01 Note Not Forgivable. Unless the Maker of the Loan
hereunder is the Company, the Holder may not forgive any amounts owing under
this intercompany note.
Section 1.02 Interest; Prepayment. (a) The interest rate ("Interest
Rate") on the Loans shall be a rate per annum reflected on the grid attached
hereto.
(b) The interest, if any, payable on each of the Loans shall accrue
from the date such Loan is made and, subject to Section 2.01, shall be payable
upon demand of the Holder.
(c) If the principal or accrued interest, if any, of the Loans is not
paid on the date demand is made, interest on the unpaid principal and interest
will accrue at a rate equal to the Interest Rate, if any, plus 100 basis points
per annum from maturity until the principal and interest on such Loans are fully
paid.
<PAGE>
A-2
(d) Subject to Section 2.01, any amounts hereunder may be prepaid at
any time by the Maker.
Section 1.03 Subordination. All Loans made to the Company shall be
subordinated in right of payment to the payment and performance of the
obligations of the Company under the Indenture, the Securities or any other
Indebtedness ranking senior to or pari passu with the Securities, including,
without limitation, any Indebtedness incurred under the Bank Credit Facility;
provided, that this provision shall not prohibit the repayment by any Subsidiary
of the Company of any Loans of which the Company is the Holder.
ARTICLE II
EVENTS OF DEFAULT
Section 2.01 Events of Default. If after the date of issuance of
this Loan (i) an Event of Default has occurred under the Indenture, (ii) an
Event of Default (as defined) has occurred under the Bank Credit Facility or
(iii) an "event of default" (as defined) has occurred under any other
Indebtedness of the Company or any of its Subsidiaries, then (x) in the event
the Maker is a Subsidiary of the Company, all amounts owing under the Loans
hereunder shall be immediately due and payable to the Holder and (y) in the
event the Maker is the Company, the amounts owing under the Loans hereunder
shall not be due and payable at any time; provided, however, that if such Event
of Default or event of default has been waived, cured or rescinded, such amounts
shall no longer be due and payable in the case of clause (x), and such amounts
may be paid in the case of clause (y). If the Holder is a Subsidiary of the
Company, then the Holder hereby agrees that if it receives any payments or
distributions on any Loan from the Company which is not payable pursuant to
clause (y) of the prior sentence after any Event of Default described in clauses
(i) or (ii) or any event of default described in clause (iii) above has
occurred, is continuing and has not been waived, cured or rescinded, it will pay
over and deliver forthwith to the Company all such payments and distributions.
<PAGE>
A-3
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments, Etc. No amendment or waiver of any
provision of this intercompany note, or consent to depart herefrom is permitted
at any time for any reason, except with the consent of the Holders of not less
than a majority in aggregate principal amount of the Outstanding Securities.
Section 3.02 Assignment. No party to this Agreement may assign, in
whole or in part, any of its rights and obligations under this intercompany
note, except to its legal successor in interest.
Section 3.03 Third Party Beneficiaries. The holders of the
Securities or any other Indebtedness ranking pari passu with or senior to, the
Securities, including without limitation, any Indebtedness incurred under the
Bank Credit Facility, shall be third party beneficiaries to this intercompany
note and shall have the right to enforce this intercompany note against the
Company or any of its Subsidiaries.
Section 3.04 Headings. Article and Section headings in this
intercompany note are included for convenience of reference only and shall not
constitute a part of this intercompany note for any other purpose.
Section 3.05 Entire Agreement. This intercompany note sets forth the
entire agreement of the parties with respect to its subject matter and
supersedes all previous understandings, written or oral, in respect thereof.
Section 3.06 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
<PAGE>
A-4
Section 3.07 Waivers. The Maker hereby waives presentment, demand
for payment, notice of protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement hereof
By:
<PAGE>
A-5
BORROWINGS, MATURITIES, AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Maturity Amount
Amount of of Principal Unpaid
Borrowing/ Borrowing/ Paid Principal Notation
Date Principal Principal or Prepaid Balance Made by
- ------ ----------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
[LETTERHEAD OF KIRKLAND & ELLIS]
June 26, 1996
Buckeye Cellulose Corporation
1001 Tillman Street
Memphis, Tennessee 38108
Re: Buckeye Cellulose Corporation
Registration Statement on Form S-3
Registration No. 333-05135
Ladies and Gentlemen:
We have acted as special counsel to Buckeye Cellulose Corporation, a
Delaware corporation (the "Company"), in connection with the proposed
registration by the Company of up to $100,000,000 of the Company's Senior
Subordinated Notes due 2008 (the "Notes") pursuant to a Registration Statement
on Form S-3 filed with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act") (such Registration
Statement, as amended or supplemented, is hereinafter referred to as the
"Registration Statement").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the Amended and Restated Certificate of Incorporation and
By-Laws of the Company, (ii) minutes and records of the corporate proceedings of
the Company with respect to the Notes, (iii) the Registration Statement and
exhibits thereto, (iv) the form of Indenture (the "Indenture") to be entered
into between the Company and Union Planters National Bank, as trustee, (v) the
form of underwriting agreement (the "Underwriting Agreement")to be entered into
among the Company, Salomon Brothers Inc and Merrill Lynch, Pierce, Fenner &
Smith Incorporated and (vi) such other documents and instruments as we have
deemed necessary for the expression of the opinions contained herein.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of
the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons
<PAGE>
Buckeye Cellulose Corporation
June 26, 1996
Page 2
signing on behalf of the parties thereto and the due authorization, execution
and delivery of all documents by the parties thereto other than the Company. As
to any facts material to the opinions expressed herein which we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company and others.
Our opinion expressed below is subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of Illinois, the
State of New York, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that when (i) the Registration Statement becomes effective under the Act, (ii)
the appropriate officers of the Company have taken all necessary action to fix
and approve the terms of the Notes, (iii) the Indenture has been duly qualified
under the Trust Indenture Act of 1939, as amended, and (iv) the Notes have been
duly executed and authenticated in accordance with the provisions of the
Indenture and duly delivered to the purchasers thereof in accordance with the
terms of the Underwriting Agreement in exchange for the consideration provided
for therein, the Notes will be validly issued and binding obligations of the
Company.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of
<PAGE>
Buckeye Cellulose Corporation
June 26, 1996
Page 3
Illinois, New York or Delaware or the federal law of the United states be
changed by legislative action, judicial decision or otherwise.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Notes.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<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 Amendment No. 2 to the Registration Statement (Form S-3) and related
Prospectus of Buckeye Cellulose Corporation for the registration of
$100,000,000 of principal amount of its Senior Subordinated Notes due 2008,
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 25, 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 $100,000,000 in Senior Subordinated Notes.
Dipl.-Ing Wolf Gadecke
Wirtschaftsprufer
Hamburg, Germany
June 25, 1996
<PAGE>
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 26, 1996
Raleigh, North Carolina
<PAGE>
Exhibit 25.1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B) (2)_______
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UNION PLANTERS NATIONAL BANK
(Exact name of trustee as specified in its charter)
62-0859006
(I.R.S. employer
identification No.)
6200 Poplar Avenue, Third Floor
Memphis, Tennessee 38119
(Address of principal executive offices) (Zip code)
Rosemary Clark
Vice President &
Corporate Trust Counsel
Union Planters National Bank
6200 Poplar Avenue, Third Floor
Memphis, Tennessee 38119
(901) 383-6980
(Name, Address and Telephone Number of Agent for Service)
BUCKEYE CELLULOSE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 62-1518973
(State or jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1001 Tillman Street 38108
Memphis, Tennessee
(Address of principal executive office) (Zip code)
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______% Senior Subordinated Notes due 2008
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<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation,
Washington, D.C.
Federal Reserve Bank, St. Louis, Missouri
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities of the
trustee:
All outstanding voting securities of the trustee are owned by Union
Planters Corporation, a registered bank holding company
incorporated under the laws of Tennessee in 1971 and headquartered
in Memphis, Tennessee ("Parent"). The following is information as
to all outstanding voting securities of Parent as of May 31, 1996.
Col. A Col. B
Title of Class Amount Outstanding
-------------- ------------------
Common Stock 46,101,589
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other indenture.
2
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$150,000,000 Buckeye Cellulose Corporation 8 1/2% Senior Subordinated
Notes due 2005 (hereinafter referred to as the "2005 Notes")
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310 (b) (1)
of the Act arises as a result of the trusteeship under any such other
indenture, including a statement as to how the indenture securities
will rank as compared with the securities issued under such other
indenture.
This issue of Notes is being issued on a pari passu basis with the 2005
Notes and with any future Senior Subordinated indebtedness. The
interests of the holders of the 2005 Notes and the interests of the
holders of this issue of Notes would be identical.
Item 5. Interlocking directorates and similar relationships with the obligor or
underwriters.
If the trustee or any of the directors or executive officers of the trustee is a
director, officer, partner, employee, appointee, or representative of the
obligor or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
None
Item 6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner, and executive
officer of the obligor:
Col. A Col. B Col. C Col. D
Name of owner Title of class Amount owned Percent of
- ------------- -------------- beneficially Voting secur-
------------ ities represented by
amount given
in Col. C
---------
Not Applicable
Item 7. Voting Securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the trustee
owned beneficially by each underwriter for the obligor and each director,
partner and executive officer of each such underwriter:
3
<PAGE>
Col. A Col. B Col. C Col. D
Name of owner Title of class Amount owned Percent of Voting
- ------------- -------------- beneficially securities represented
------------ by amount given
----------------------
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Col. A Col. B Col. C Col. D
Title of Class Whether the secur- Amount owned bene- Percent of class
- -------------- ities are voting ficially or held as represented by amount
or nonvoting collateral security given in Col. C
securities for obligations in ---------------------
------------------ default by trustee
-------------------
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of an underwriter for the obligor, furnish the
following information as to each class of securities of such underwriter any of
which are so owned or held by the trustee:
Col. A Col. B Col. C Col. D
Title of issuer Amount Amount owned bene- Percent of class
and title of Outstanding ficially or held as represented by
classes ----------- collateral security amount given
- --------------- for obligations in in Col. C
default by trustee ----------------
-------------------
Not Applicable
4
<PAGE>
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security for obligations
in default voting securities of a person who, to the knowledge of the trustee
(1) owns 10 percent or more of the voting securities of the obligor or (2) is an
affiliate, other than a subsidiary, of the obligor, furnish the following
information as to the voting securities of such person:
Col. A Col. B Col. C Col. D
Title of issuer Amount Amount owned Percent of class
and title of Outstanding beneficially or represented by
classes ----------- held as collateral amount given in
- --------------- security for obliga- Col. C
tions in default ----------------
by trustee
--------------------
Not Applicable
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of a person who, to the knowledge of the trustee, owns
50 percent or more of the voting securities of the obligor, furnish the
following information as to each class of securities of such person any of which
are so owned or held by the trustee:
Col. A Col. B Col. C Col. D
Title of issuer Amount Amount owned Percent of
and title of Outstanding beneficially or class represented by
classes ----------- held as collateral amount given
- --------------- security for obliga- in Col. C
tions in default --------------------
by trustee
--------------------
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to the trustee,
furnish the following information:
Col. A Col. B Col. C
Nature of Amount Date
Indebtedness Outstanding Due
------------ ----------- ------
Not Applicable
5
<PAGE>
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
Not Applicable.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, or is trustee for
more than one outstanding series of securities under the indenture,
state whether there has been a default under any such indenture or
series, identify the indenture or series affected, and explain the
nature of any such default.
There have been no defaults.
Item 14. Affiliations with the Underwriters.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not Applicable
Item 15. Foreign Trustee
Identify the order or rule pursuant to which the foreign trustee is authorized
to at as sole trustee under indentures qualified or to be qualified under the
Act.
Not Applicable
Item 16. List of Exhibits
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee now in effect. *
2. A copy of the Certificate of Authority of the Trustee to Commence
Business. *
3. A copy of the Authorization of the Trustee to exercise Corporate Trust
Powers. *
4. A copy of the existing By-Laws of the Trustee. *
5. A copy of each Indenture referred to in Item 4, if the Obligor is in
default. Not Applicable.
6. The consent of the United States institutional trustee required by
Section 321(b) of the Act.
6
<PAGE>
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
* Exhibits 1, 2, 3, and 4 are herein incorporated by reference to exhibits
bearing identical numbers in Item 16 of the Form T-1 of Union Planters National
Bank filed as Exhibit 25.1 to the Registration Statement on Form S-1 of Buckeye
Cellulose Corporation filed with the Securities and Exchange Commission on
October 6, 1995 (Registration Number 33-97836).
NOTE
----
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers, or
any underwriter for the obligor, the undersigned Union Planters National Bank
has relied upon information furnished to it by the obligor or such underwriter
and the undersigned disclaims responsibility for the accuracy or completeness of
such information.
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Union Planters National Bank, a corporation organized and existing
under the laws of the United States of America, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Memphis, and State of Tennessee, on the 19th day
of June, 1996.
UNION PLANTERS NATIONAL BANK
(Trustee)
By: /s/ Rosemary Clark
------------------------
Rosemary Clark
Vice President and
Corporate Trust Counsel
7
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939 in connection with the sale by Buckeye Cellulose Corporation of its ___%
Senior Subordinated Notes due 2008, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
UNION PLANTERS NATIONAL BANK
(Trustee)
By: /s/ Rosemary Clark
------------------------
Rosemary Clark
Vice President and
Corporate Trust Counsel
Dated: June 19, 1996
T-1form
<PAGE>
EXHIBIT 7
The following is the latest report of condition of the Trustee at the close
of business on March 31, 1996, published in response to call made by the
Comptroller of the Currency of the United States of America, under Title 12,
United States Code, Section 161, U.S. Revised Statutes.
Reserve District No. 8
Charter No. 13349
<PAGE>
UNION PLANTERS NATIONAL BANK Call Date: 03/31/96 ST-BK: 47-1890 FFIEC 032
P.O. Box 387 Page RC- 1
MEMPHIS, TN 38147 Vendor ID: D CERT: 04979
9
Transmit Number: 08400008
Transmitted to EDS as 0082030 on 04/29/96 at 21:00:58 CST
Consolidated Report of Condition for Insured
Commercial and State-Chartered Savings Banks for March 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C300 (--
Dollar Amounts in Thousands
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<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions
(from Schedule RC-A): RCON
a. Noninterest-bearing balances and currency and ----
coin(1)............................................ 0081.. 140,274 1.a
b. Interest-bearing balances(2)....................... 0071.. 0 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B,
column A).......................................... 1754.. 0 2.a
b. Available-for-sale securities (from Schedule RC-B,
column D).......................................... 1773.. 465,152 2.b
3. Federal funds sold and securities purchased under
agreements to resell:
a. Federal funds sold................................. 0276.. 129,100 3.a
b. Securities purchased under agreements to resell.... 0277.. 0 3.b
4. Loans and lease financing receivables:
a. Loans and leases, net of RCON
unearned income (from ----
Schedule RC-C)............. 2122.. 1,293,325 ......... 4.a
b. LESS: Allowance for loan
and lease losses........... 3123.. 33,665 ......... 4.b
c. LESS: Allocated transfer
risk reserve............... 3128.. 0 ......... 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and
4.c)............................................... 2125.. 1,259,660 4.d
5. Trading assets (from Schedule RC-D)................... 3545.. 134,926 5.
6. Premises and fixed assets (including capitalized
leases)............................................... 2145.. 58,147 6.
7. Other real estate owned (from Schedule RC-M).......... 2150.. 125 7.
8. Investments in unconsolidated subsidiaries and
associated companies (from Schedule RC-M)............. 2130.. 0 8.
9. Customers' liability to this bank on acceptances
outstanding........................................... 2155.. 175 9.
10. Intangible assets (from Schedule RC-M)................ 2143.. 8,421 10.
11. Other assets (from Schedule RC-F)..................... 2160.. 59,445 11.
12. Total assets (sum of items 1 through 11).............. 2170.. 2,255,425 12.
</TABLE>
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(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading.
<PAGE>
UNION PLANTERS NATIONAL BANK Call Date: 03/31/96 ST-BK: 47-1890 FFIEC 032
P.O. Box 387 Page RC- 2
MEMPHIS, TN 38147 Vendor ID: D CERT: 04979
10
Transmit Number: 08400008
Transmitted to EDS as 0082030 on 4/29/96 at 21:00:58 CST
Schedule RC--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
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<S> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of columns A ----
and C from Schedule RC-E......................... 2200.. 1,322,854 13.a
RCON
----
(1) Noninterest-bearing(1)..... 6631.. 352,537 ......... 13.a.1
(2) Interest-bearing........... 6636.. 970,317 ......... 13.a.2
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs........................... .........
(1) Noninterest-bearing.......................... .........
(2) Interest-bearing............................. .........
14. Federal funds purchased and securities sold under
agreements to repurchase:
a. Federal funds purchased.......................... 0278.. 494,677 14.a
b. Securities sold under agreements to repurchase... 0279.. 40,063 14.b
15. a. Demand notes issued to the U.S. Treasury......... 2840.. 0 15.a
b. Trading liabilities (from Schedule RC-D)......... 3548.. 0 15.b
16. Other borrowed money:
a. With a remaining maturity of one year or less.... 2332.. 3,644 16.a
a. With a remaining maturity of more than one year.. 2333.. 148,781 16.b
17. Mortgage indebtedness and obligations under
capitalized leases.................................. 2910.. 950 17.
18. Bank's liability on acceptances executed and
outstanding......................................... 2920.. 175 18.
19. Subordinated notes and debentures................... 3200.. 0 19.
20. Other liabilities (from Schedule RC-G).............. 2930.. 30,809 20.
21. Total liabilities (sum of items 13 through 20)...... 2948.. 2,041,953 21.
22. Limited-life preferred stock and related surplus.... 3282.. 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus....... 3838.. 0 23.
24. Common stock........................................ 3230.. 18,047 24.
25. Surplus (exclude all surplus related to preferred
stock).............................................. 3839.. 113,050 25.
26. a. Undivided profits and capital reserves........... 3632.. 76,502 26.a
b. Net unrealized holding gains (losses) on
available-for-sale equity securities............. 8434.. 5,873 26.b
27. Cumulative foreign currency translation
adjustments......................................... .........
28. Total equity capital (sum of items 23 through 27)... 3210.. 213,472 28.
29. Total liabilities, limited-life preferred stock,
and equity capital (sum of items 21, 22, and 28).... 3300.. 2,255,425 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the
statement below that best describes the most
comprehensive level of auditing work performed for
the bank by independent external auditors as of any
date during 1991.................................... 6724.. 1 M.1
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
